EXHIBIT 10.01
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AGREEMENT AND PLAN OF MERGER
AMONG
SYMANTEC CORPORATION,
QUARTZ ACQUISITION CORP.,
POWERQUEST CORPORATION
AND
▇▇▇▇ ▇▇▇▇, AS REPRESENTATIVE
SEPTEMBER 23, 2003
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") is made and entered
into as of September 23, 2003 (the "AGREEMENT DATE") by and among Symantec
Corporation, a Delaware corporation ("ACQUIROR"), Quartz Acquisition Corp., a
Utah corporation and a wholly owned subsidiary of Acquiror ("MERGER SUB"),
PowerQuest Corporation, a Utah corporation (the "COMPANY"), and ▇▇▇▇ ▇▇▇▇, as
Representative (the "REPRESENTATIVE") (solely for the purposes of Article 11 and
other provisions hereof which reference said Representative).
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Merger Sub shall merge with and into the Company (the
"MERGER"), with the Company to be the surviving corporation of the Merger (the
"SURVIVING CORPORATION"), on the terms and subject to the conditions of this
Agreement and pursuant to Articles of Merger substantially in the form attached
hereto as Exhibit A (the "ARTICLES OF MERGER") and the applicable provisions of
the laws of the State of Utah.
B. The Boards of Directors of Acquiror, Merger Sub and the Company have
determined that the Merger is in the best interests of their respective
companies and stockholders and shareholders and have approved and declared
advisable this Agreement and the Merger. Acquiror, as the sole shareholder of
Merger Sub, has approved this Agreement and the Merger.
C. As an inducement to Acquiror's willingness to enter into this
Agreement, one or more of the Company Shareholders (as defined in Article 1)
listed on Exhibit B-1 will execute and deliver to Acquiror a Voting Agreement
substantially in the form attached hereto as Exhibit B-2 (the "VOTING
AGREEMENT") within 14 days after the Agreement Date.
D. Acquiror, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and to prescribe various conditions to the Merger.
Now, Therefore, in consideration of the foregoing and the mutual promises,
covenants and conditions contained herein, the parties hereby agree as follows:
ARTICLE 1
Certain Definitions
As used in this Agreement, the following terms shall have the meanings set
forth below (with the understanding that any payments made to a Company
Securityholder (as defined below) pursuant hereto shall be rounded to the
nearest whole cent).
"ACQUIROR ANCILLARY AGREEMENTS" means, collectively, each
certificate to be delivered on behalf of Acquiror by an officer or officers of
Acquiror at the Closing pursuant to Article 8 and each agreement or document
(other than this Agreement) that Acquiror is to enter into as a party thereto
pursuant to this Agreement.
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"ACQUIROR COMMON STOCK" means the Common Stock, par value $0.01 per
share, of Acquiror.
"ALTERNATIVE TRANSACTION" means: (A) any acquisition or purchase of
Company Capital Stock from the Company by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) representing more than a 20% voting interest in any class or series
of Company Capital Stock or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning Company Capital Stock representing 20% or more of the voting interest in
any class or series of Company Capital Stock or any merger, consolidation,
business combination or similar transaction involving the Company pursuant to
which the Company Shareholders immediately preceding such transaction hold less
than 80% of the equity interests in any class or series of capital stock of the
surviving or resulting entity of such transaction; (B) any sale, lease,
exchange, transfer, license, acquisition or disposition of a substantial portion
of the assets of the Company; (C) any sale, lease, exchange, transfer, license
or disposition to a third party of the Company Business; or (D) any initial
public offering of capital stock or other securities of the Company pursuant to
a registration statement filed under the Securities Act.
"APPLICABLE LAW" means, collectively, all foreign, federal, state,
local or municipal laws, statutes, ordinances, regulations, and rules, and all
orders, writs, injunctions, awards, judgments and decrees applicable to the
assets properties and business (and any regulations promulgated thereunder) of
the applicable entity.
"BALANCE SHEET DATE" means August 31, 2003, the date of the Company
Balance Sheet.
"BANKER MERGER EXPENSES" means all Merger Expenses for financial
advisors and investment bankers, but do not include up to $200,000 of
reimbursable expenses that will be paid to Deutsch Bank Securities Inc. prior to
Closing. Any Banker Merger Expenses not deducted in the calculation of the Total
Merger Consideration hereunder are collectively referred to as "INDEMNIFIABLE
MERGER EXPENSES" and shall constitute "Damages" for purposes of Section 11
without regard to the Basket (as defined in Section 11.3).
"CLOSING" means the closing of the transactions to consummate the
Merger.
"CLOSING DATE" means 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 last of the conditions set forth in Article 8 and Article 9 to be
satisfied or waived, or at such other time, date and location as the parties
hereto agree in writing.
"CLOSING FINANCIAL CERTIFICATE" means a certificate executed by the
Chief Financial Officer of the Company dated as of the Closing Date and
delivered within 14 days after the Closing Date, certifying (A) the amount of
Company Closing Assets and the amount of Company Closing Liabilities (with the
presentation of Company Closing Assets and Company Closing Liabilities being
made according to the line items for assets and liabilities as are set forth on
the Company Balance Sheet), and (B) the amount of Banker Merger Expenses and the
amount
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of Merger Expenses which are not Banker Merger Expenses. The Closing Financial
Certificate shall include a representation of the Company, certified by the
Chief Financial Officer of the Company, that such certificate includes all of
the Company Closing Assets, all of the Company Closing Liabilities, and all of
the Merger Expenses paid or payable at any time prior to, at or following the
Closing Date, it being the expressed intent of the Company and Acquiror that to
the maximum extent possible all the Banker Merger Expenses be deducted in the
calculation of the Total Merger Consideration and that there be no Indemnifiable
Merger Expenses.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY ANCILLARY AGREEMENTS" means, collectively, each certificate
to be delivered on behalf of the Company by an officer or officers of the
Company at the Closing pursuant to Article 9 and each agreement or document
(other than this Agreement) that the Company is to enter into as a party thereto
pursuant to this Agreement.
"COMPANY BALANCE SHEET" means the Company's unaudited balance sheet
as of August 31, 2003 included in the Company Financial Statements.
"COMPANY BUSINESS" means the business of the Company and its
Subsidiaries as presently conducted.
"COMPANY CAPITAL STOCK" means the capital stock of the Company.
"COMPANY CLOSING ASSETS" means all assets of the Company which would
be required to be set forth on the face of a balance sheet of the Company as of
the Closing Date prepared in accordance with GAAP (including the amount of cash,
if any, paid to Acquiror prior to the Closing Date pursuant to Section 5.11(e)).
"COMPANY CLOSING LIABILITIES" means all Liabilities of the Company
which would be required to be set forth on the face of a balance sheet of the
Company as of the Closing Date prepared in accordance with GAAP, provided that
the amount of Company Closing Liabilities shall exclude Liabilities as of the
Closing Date for the payment of Merger Expenses.
"COMPANY COMMON STOCK" means the Common Stock, no par value per
share, of the Company.
"COMPANY COMMON WARRANTS" means Company Warrants to purchase shares
of Company Common Stock.
"COMPANY FINANCIAL STATEMENTS" means (A) the Company's audited
consolidated balance sheets dated December 31, 2001 and 2002, (B) the Company's
audited consolidated statements of operations, statements of cash flows and
statements of changes in shareholders' equity for the years ended December 31,
2001 and 2002, (C) the Company Balance Sheet, (D) the Company's unaudited
consolidated statements of operations, statements of cash flows and statements
of changes in shareholders' equity for the eight months ended August 31, 2003,
and any notes to the foregoing financial statements.
"COMPANY OPTION PLAN" means the 1996 Stock Option Plan of the
Company.
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"COMPANY OPTIONHOLDERS" means the holders of Company Options.
"COMPANY OPTIONS" means options to purchase shares of Company
Capital Stock.
"COMPANY PREFERRED STOCK" means the Company Series A Stock and
Company Series C Stock.
"COMPANY REDEMPTION STOCK" means the 473,353 shares of Company
Common Stock subject to those certain Securities Purchase Agreements dated
August 30, 2000 and January 10, 2001 with the Company (the "COMPANY REDEMPTION
AGREEMENTS").
"COMPANY SECURITYHOLDERS" means the Company Shareholders, Company
Optionholders and Company Warrantholders, collectively.
"COMPANY SERIES A STOCK" means the Series A Convertible Preferred
Stock, par value $0.01 per share, of the Company.
"COMPANY SERIES C STOCK" means the Series C Redeemable Convertible
Participating Preferred Stock, par value $0.01 per share, of the Company.
"COMPANY SERIES C REPURCHASE WARRANTS" means Company Warrants to
purchase an aggregate of 1,521,740 shares of Company Series C Stock which
contain a provision that upon a Series C Liquidity Event (as defined therein),
the Company may repurchase such Company Warrants at a price of $5.75 per share
of stock subject to the warrant.
"COMPANY SHAREHOLDERS" means the holders of shares of Company
Capital Stock.
"COMPANY WARRANTHOLDERS" means the holders of Company Warrants.
"COMPANY WARRANTS" means warrants to purchase shares of Company
Capital Stock.
"CONTRACT" means any written or oral legally binding contract,
agreement, instrument, arrangement, commitment or undertaking (including leases,
licenses, mortgages, notes, guarantees, sublicenses, subcontracts and purchase
orders).
"DISSENTERS DEADLINE DATE" means the first date at or after the
Effective Time on which no holder of Company Capital Stock as of immediately
prior to the Effective Time has an opportunity to perfect dissenters' rights or
appraisal rights in accordance with Utah Law in connection with the Merger in
respect of any shares of Company Capital Stock.
"DISSENTING SHARES" means any shares of Company Capital Stock that
are issued and outstanding immediately prior to the Effective Time and in
respect of which dissenters' rights or appraisal rights shall have been
perfected prior to the Dissenters Deadline Date in accordance with Utah Law in
connection with the Merger.
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"DISSENTING SHARES EXCESS PAYMENTS" means any payment in respect of
Dissenting Shares in excess of the amount of cash that would have been issuable
pursuant to Section 2.1(b) in respect of such shares had they never been
Dissenting Shares. Dissenting Shares Excess Payments shall constitute "Damages"
for purposes of Section 11 without regard to the Basket.
"DOCUMENTATION" means, collectively, programmers' notes or logs,
source code annotations, user guides, manuals, instructions, software
architecture designs, layouts, any know-how, and any other designs, plans,
drawings, documentation, materials, supplier lists, software source code and
object code, net lists, photographs, development tools, blueprints, media,
memoranda and records that are primarily related to or otherwise necessary for
the use and exploitation of any products of the Company or its Subsidiaries,
whether in tangible or intangible form, whether owned by the Company or its
Subsidiaries or held by the Company or its Subsidiaries under any licenses or
sublicenses (or similar grants of rights).
"EFFECTIVE TIME" means the time of the filing of the Articles of
Merger (or such later time as may be mutually agreed in writing by the Company
and Acquiror and specified in the Articles of Merger).
"ENCUMBRANCE" means, with respect to any asset, any mortgage, deed
of trust, lien, pledge, charge, security interest, title retention device,
collateral assignment or other encumbrance of any kind in respect of such asset
(including any restriction on the voting of any security, any restriction on the
transfer of any security or other asset, any restriction on the receipt of any
income derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means any entity which is a member of: (A) a
"controlled group of corporations," as defined in Section 414(b) of the Code;
(B) a group of entities under "common control," as defined in Section 414(c) of
the Code; or (C) an "affiliated service group," as defined in Section 414(m) of
the Code, or treasury regulations promulgated under Section 414(o) of the Code,
any of which includes the Company.
"ESCROW CASH" means an amount of cash equal to $15,000,750.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FULLY-DILUTED COMPANY COMMON STOCK" means the sum, without
duplication, of (A) the aggregate number of shares of Company Common Stock
(other than Company Redemption Stock) that are issued and outstanding
immediately prior to the Effective Time, (B) the aggregate number of shares of
Company Common Stock issuable upon the conversion of shares of Company Series A
Stock and Company Series C Stock issued and outstanding immediately prior to the
Effective Time, (C) the aggregate number of shares of Company Common Stock
issuable upon the exercise of Company Options, Company Warrants or other direct
or indirect rights to acquire shares of Company Common Stock that are issued and
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outstanding immediately prior to the Effective Time (whether or not then vested
or exercisable), calculated on a Treasury Stock Basis, and (D) the aggregate
number of shares of Company Common Stock issuable upon the conversion of shares
of Company Preferred Stock issuable upon the exercise of Company Warrants (other
than Company Series C Repurchase Warrants) or other direct or indirect rights to
acquire shares of Company Preferred Stock that are issued and outstanding
immediately prior to the Effective Time (whether or not then vested or
exercisable), calculated on a Treasury Stock Basis. For the avoidance of doubt,
no shares of Company Redemption Stock or Company Series C Repurchase Warrants
shall be factored into the calculation of the Fully-Diluted Company Common
Stock. For the avoidance of doubt, no Company Capital Stock, Company Options or
Company Warrants which shall be canceled pursuant to Section 2.1(d) shall be
factored into the calculation of Fully-Diluted Company Common Stock.
"FULLY-DILUTED COMPANY SERIES C STOCK" means the sum, without
duplication, of (A) the aggregate number of shares of Company Series C Stock
that are issued and outstanding immediately prior to the Effective Time and (B)
the aggregate number of shares of Company Series C Stock issuable upon the
exercise of any Company Warrants (other than Company Series C Repurchase
Warrants) or other direct or indirect rights to acquire shares of Company Series
C Stock that are issued and outstanding immediately prior to the Effective Time
(whether or not then vested or exercisable), calculated on a Treasury Stock
Basis. For the avoidance of doubt, no Company Series C Repurchase Warrants shall
be factored into the calculation of the Fully-Diluted Company Series C Stock.
"GAAP" means United States generally accepted accounting principles
applied on a consistent basis.
"GENERAL CONVERSION NUMBER" means the quotient obtained by dividing
(A) the Total Remaining Merger Consideration by (B) the Fully-Diluted Company
Common Stock.
"GOVERNMENTAL AUTHORITY" means any court or tribunal, governmental
or regulatory body, administrative agency, commission or other governmental
authority.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"INTELLECTUAL PROPERTY" means, collectively, all worldwide
industrial and intellectual property rights, including patents, patent
applications, patent rights, trademarks, trademark registrations and
applications therefor, trade dress rights, trade names, service marks, service
▇▇▇▇ registrations and applications therefor, Internet domain names, Internet
and World Wide Web URLs or addresses, copyrights, copyright registrations and
applications therefor, mask work rights, mask work registrations and
applications therefor, franchises, licenses, inventions, trade secrets,
know-how, customer lists, supplier lists, proprietary processes and formulae,
technology, software source code and object code, algorithms, net lists,
architectures, structures, screen displays, photographs, images, layouts,
development tools, designs, blueprints, specifications, technical drawings (or
similar information in electronic format) and all documentation and media
constituting, describing or relating to the foregoing, including manuals,
programmers' notes, memoranda and records.
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"KNOWLEDGE" of the Company means the knowledge of a particular fact,
circumstance, event or other matter in question of any of ▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ (collectively, the "ENTITY REPRESENTATIVES"). Any such Entity
Representative will be deemed to have knowledge of a particular fact,
circumstance, event or other matter if such fact, circumstance, event or other
matter would reasonably be expected to be known by an individual who has the
duties and responsibilities of such Entity Representative in the customary
performance of such duties and responsibilities.
"LIABILITIES" means debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured, determined or
determinable, known or unknown, including those arising under any law, action or
governmental order and those arising under any Contract.
"MATERIAL ADVERSE CHANGE" and "MATERIAL ADVERSE EFFECT" when used in
connection with an entity means any change, event, circumstance, condition or
effect (regardless of whether or not such change, event, circumstance, condition
or effect is inconsistent with the representations or warranties made by such
entity in this Agreement) that is or is reasonably likely to be, individually or
in the aggregate, materially adverse in relation to the condition (financial or
otherwise), capitalization, properties, assets (including intangible assets),
liabilities, business, employees, operations or results of operations of such
entity and its subsidiaries, taken as a whole, except to the extent that any
such change, event, circumstance, condition or effect directly results from: (A)
changes in general economic conditions (provided that such changes do not affect
such entity disproportionately as compared to such entity's competitors); (B)
changes affecting the industry generally in which such entity operates (provided
that such changes do not affect such entity disproportionately as compared to
such entity's competitors); or (C) the direct effect of the public announcement
or pendency of the transactions contemplated hereby on customers or suppliers of
such entity.
"MERGER EXPENSES" means all costs and expenses incurred by the
Company in connection with the Merger and this Agreement and the transactions
contemplated hereby, including any fees and expenses of legal counsel, financial
advisors, investment bankers (including Banker Merger Expenses) and accountants.
"MERGER SUB ANCILLARY AGREEMENTS" means, collectively, each
certificate to be delivered on behalf of Merger Sub by an officer or officers of
Merger Sub at the Closing pursuant to Article 8 and each agreement or document
(other than this Agreement) that Merger Sub is to enter into as a party thereto
pursuant to this Agreement.
"MERGER SUB COMMON STOCK" means the Common Stock, par value $0.01
per share, of Merger Sub.
"PERMITTED ENCUMBRANCES" means: (A) statutory liens for taxes that
are not yet due and payable; (B) statutory liens to secure obligations to
landlords, lessors or renters under leases or rental agreements; (C) deposits or
pledges made in connection with, or to secure payment of, workers' compensation,
unemployment insurance or similar programs mandated by
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Applicable Law; and (D) statutory liens in favor of carriers, warehousemen,
mechanics and materialmen, to secure claims for labor, materials or supplies and
other like liens.
"PERSON" means any individual, corporation, company, limited
liability company, partnership, limited liability partnership, trust, estate,
proprietorship, joint venture, association, organization, entity or Governmental
Authority.
"REDEMPTION STOCK CONVERSION NUMBER" means $8.04.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES C CONVERSION NUMBER" means the sum of (A) the quotient
obtained by dividing (1) the Total Series C Preference Consideration by (2) the
Fully-Diluted Company Series C Stock, plus (B) the General Conversion Number.
"SERIES C REPURCHASE WARRANT CONVERSION NUMBER" means $5.75.
"SPREADSHEET" means a spreadsheet in form reasonably acceptable to
Acquiror, which spreadsheet shall be dated as of the Closing Date and shall set
forth, as of the Closing Date and immediately prior to the Effective Time, the
following factual information relating to holders of Company Capital Stock,
Company Options and Company Warrants: (A) the names of all the Company
Shareholders, Company Optionholders and Company Warrantholders and their
respective addresses and where available, taxpayer identification numbers; (B)
the number and kind of shares of Company Capital Stock held by, or subject to
the Company Options or Company Warrants held by, such Persons and, in the case
of outstanding shares, the respective certificate numbers; (C) the exercise
price per share in effect for each Company Option and Company Warrant; (D) the
calculation of the Fully-Diluted Company Common Stock, Fully-Diluted Company
Series C Stock, General Conversion Number, Series C Conversion Number, Total
Merger Consideration, Total Series C Preference Consideration, Total Series C
Repurchase Warrant Consideration and Total Remaining Merger Consideration; (E)
the amount of cash issuable to each Company Shareholder, Company Optionholder
and Company Warrantholder in exchange for the Company Capital Stock, Company
Options and Company Warrants held by such Persons (and amount of cash required
to be deducted and withheld from such Persons for taxes); and (F) the interest
in dollar and percentage terms of each Company Shareholder, Company Optionholder
and Company Warrantholder in the Escrow Cash.
"SUBSIDIARY" of an entity means a corporation or other business
entity in which such entity owns, directly or indirectly, at least a 50%
interest or that is otherwise, directly or indirectly, controlled by such
entity.
"TAX" (and, with correlative meaning, "TAXES") means (A) any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other tax, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental entity
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responsible for the imposition of any such tax (domestic or foreign), (B) any
liability for the payment of any amounts of the type described in clause (A) of
this sentence as a result of being a member of an affiliated, consolidated,
combined, unitary or aggregate group for any taxable period, and (C) any
liability for the payment of any amounts of the type described in clause (A) or
(B) of this sentence as a result of being a transferee of or successor to any
Person or as a result of any express or implied obligation to indemnify any
other Person.
"TOTAL COMPANY REDEMPTION STOCK CONSIDERATION" means $3,805,758.12,
which equals the product obtained by multiplying (A) the 473,353 shares of
Company Redemption Stock by (B) the per share redemption price of $8.04
specified in the Company Redemption Agreements.
"TOTAL MERGER CONSIDERATION" means $150,007,500, less the amount of
Banker Merger Expenses. Notwithstanding any other provision hereof, in no event
shall the aggregate amount of cash paid by Acquiror to the holders of Company
Capital Stock, Company Options and Company Warrants pursuant to the terms hereof
exceed the Total Merger Consideration.
"TOTAL SERIES C PREFERENCE CONSIDERATION" means the product obtained
by multiplying (A) the Fully-Diluted Company Series C Stock by (B) $5.75.
"TOTAL SERIES C REPURCHASE WARRANT CONSIDERATION" means the product
obtained by multiplying (A) the number of shares of Company Series C Stock
subject to the Company Series C Repurchase Warrants that are issued and
outstanding immediately prior to the Effective Time (whether or not then vested
or exercisable) (calculated without regard to the Treasury Stock Basis) by (B)
$5.75.
"TOTAL REMAINING MERGER CONSIDERATION" means (A) the Total Merger
Consideration, less (B) the Total Company Redemption Stock Consideration, less
(C) the Total Series C Preference Consideration, and less (D) the Total Series C
Repurchase Warrant Consideration.
"TREASURY STOCK BASIS" means a calculation method which assumes that
options and warrants are exercised when the exercise price is below the fair
market value of the underlying security and that the proceeds from exercise are
used by the Company to purchase the underlying security for the treasury. For
the avoidance of doubt, when making such calculation, (A) the fair market value
of Company Common Stock (other than Company Redemption Stock) shall equal the
General Conversion Number and (B) the fair market value of Company Series C
Stock not subject to Company Series C Repurchase Warrants shall equal the Series
C Conversion Number.
"UNVESTED COMPANY OPTIONS" means any Company Options that are
unvested or subject to a repurchase option, vesting schedule or any other
condition providing that such Company Option or the shares subject thereto may
be forfeited to or repurchased by the Company upon any termination of the
relevant relationship (including employment or directorship) of the Company with
the holder (or prior holder thereof) under the terms of any Contract with the
Company (including any stock option agreement or stock option exercise
agreement).
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"UNVESTED COMPANY SHARES" means any shares of Company Capital Stock
that are unvested or subject to a repurchase option, vesting schedule or any
other condition providing that such shares may be forfeited to or repurchased by
the Company upon any termination of the relevant relationship (including
employment or directorship) of the Company with the holder (or prior holder
thereof) under the terms of any Contract with the Company (including any
restricted stock purchase agreement, stock option agreement or stock option
exercise agreement).
"UNVESTED COMPANY WARRANTS" means any Company Warrants that are
unvested or subject to a repurchase option, vesting schedule or any other
condition providing that such Company Warrant or the shares subject thereto may
be forfeited to or repurchased by the Company upon any termination of the
relevant relationship (including employment or directorship) of the Company with
the holder (or prior holder thereof) under the terms of any Contract with the
Company (including any warrant purchase agreement or warrant exercise
agreement).
"UTAH LAW" means the Revised Business Corporation Act of the
State of Utah.
Other capitalized terms defined elsewhere in this Agreement and not
defined in this Article 1 shall have the meanings assigned to such terms in this
Agreement.
ARTICLE 2
The Merger
2.1 Conversion of Shares.
(a) Conversion of Merger Sub Common Stock. At the Effective Time,
each share of Merger Sub Common Stock that is issued and outstanding immediately
prior to the Effective Time shall be converted into 100,000 validly issued,
fully paid and nonassessable shares of Common Stock, no par value per share, of
the Surviving Corporation, and the shares of the Surviving Corporation into
which the shares of Merger Sub Common Stock are so converted shall be the only
shares of Company Common Stock that are issued and outstanding immediately after
the Effective Time.
(b) Conversion of Company Capital Stock, Company Options and Company
Warrants.
(i) Company Common Stock. Subject to the terms and conditions
of this Agreement, at the Effective Time, each share of Company Common Stock
(including Company Common Stock issued upon conversion of Company Preferred
Stock before the Effective Time in accordance with Applicable Law, the Company's
Articles of Incorporation and applicable Contracts, each as in effect on the
date of such conversion) that is issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without the need for any
further action on the part of the holder thereof (except as expressly provided
herein), be converted into and represent the right to receive an amount of cash,
without interest, equal to (A) the General Conversion Number (in the case of
Company Common Stock which is not Company Redemption Stock) or (B) the
Redemption Stock Conversion Number (in the case of Company Redemption Stock).
The amount of cash each Company Shareholder is entitled to receive for the
shares of Company Common Stock held by such Company Shareholder shall be
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rounded to the nearest cent and computed after aggregating cash amounts for all
shares of Company Common Stock held by such Company Shareholder. The preceding
provisions of this Section 2.1(b)(i) are subject to the provisions of Section
2.1(c) (regarding rights of holders of Dissenting Shares), and Section 2.3
(regarding the withholding of Escrow Cash).
(ii) Company Series A Stock. Subject to the terms and
conditions of this Agreement, at the Effective Time, each share of Company
Series A Stock that is issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without the need for any further action
on the part of the holder thereof (except as expressly provided herein), be
converted into and represent the right to receive an amount of cash, without
interest, equal to the product obtained by multiplying (A) the total number of
shares of Company Common Stock issuable upon conversion of such share of Company
Series A Stock by (B) the General Conversion Number. The amount of cash each
Company Shareholder is entitled to receive for the shares of Company Series A
Stock held by such Company Shareholder shall be rounded to the nearest cent and
computed after aggregating cash amounts for all shares of Company Series A Stock
held by such Company Shareholder. The preceding provisions of this Section
2.1(b)(ii) are subject to the provisions of Section 2.1(c) (regarding rights of
holders of Dissenting Shares) and Section 2.3 (regarding the withholding of
Escrow Cash).
(iii) Company Series C Stock. Subject to the terms and
conditions of this Agreement, at the Effective Time, each share of Company
Series C Stock that is issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without the need for any further action
on the part of the holder thereof (except as expressly provided herein), be
converted into and represent the right to receive an amount of cash, without
interest, equal to the Series C Conversion Number. The amount of cash each
Company Shareholder is entitled to receive for the shares of Company Series C
Stock held by such Company Shareholder shall be rounded to the nearest cent and
computed after aggregating cash amounts for all shares of Company Series C Stock
held by such Company Shareholder. The preceding provisions of this Section
2.1(b)(iii) are subject to the provisions of Section 2.1(c) (regarding rights of
holders of Dissenting Shares) and Section 2.3 (regarding the withholding of
Escrow Cash).
(iv) Company Options. Subject to the terms and conditions of
this Agreement, at the Effective Time, each Company Option that is issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without the need for any further action on the part of the holder
thereof (except as expressly provided herein), be converted into and represent
the right to receive an amount of cash, without interest, equal to the product
of (A) the number of shares of Company Common Stock subject to such Company
Option multiplied by (B) (the General Conversion Number, less the exercise price
per share attributable to such Company Option); provided, however, that the
Surviving Corporation and Acquiror shall be entitled to deduct and withhold from
such payment made to the holder of a Company Option the amount of withholding
for taxes required to be deducted and withheld as a result of the transactions
contemplated by this Section 2.1(b)(iv). The amount of cash each Company
Optionholder is entitled to receive for the Company Options held by such Company
Optionholder shall be rounded to the nearest cent and computed after aggregating
cash amounts for Company Options held by such Company Optionholder. The
preceding provisions of this Section 2.1(b)(iv) are subject to the provisions of
Section 2.3 (regarding the withholding of Escrow Cash).
11
(v) Company Warrants. Subject to the terms and conditions of
this Agreement, at the Effective Time, each Company Warrant that is issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without the need for any further action on the part of the holder
thereof (except as expressly provided herein), be converted into and represent
the right to receive an amount of cash, without interest, equal to the product
of (A) the number of shares of Company Capital Stock subject to such Company
Warrant multiplied by (B) ((1) the General Conversion Number (in the case of
Company Warrants exercisable for Company Common Stock), (2) the Series C
Conversion Number (in the case of Company Warrants other than Company Series C
Repurchase Warrants exercisable for Company Series C Stock), or (3) the Series C
Repurchase Warrant Conversion Number (in the case of Company Series C Repurchase
Warrants), as applicable, less the exercise price per share attributable to such
Company Warrant (provided, no deduction for such exercise price shall be made
for Company Series C Repurchase Warrants)); provided, however, that the
Surviving Corporation and Acquiror shall be entitled to deduct and withhold from
such payment made to the holder of a Company Warrant the amount of withholding
for taxes required to be deducted and withheld as a result of the transactions
contemplated by this Section 2.1(b)(v). The amount of cash each Company
Warrantholder is entitled to receive for the Company Warrants held by such
Company Warrantholder shall be rounded to the nearest cent and computed after
aggregating cash amounts for all Company Warrants held by such Company
Warrantholder. The preceding provisions of this Section 2.1(b)(v) are subject to
the provisions of Section 2.3 (regarding the withholding of Escrow Cash).
(c) Dissenting Shares. As more fully set forth in Section 7.3,
holders of shares of Company Capital Stock who have complied with all
requirements for perfecting dissenters' rights, as set forth in Utah Law, shall
be entitled to their rights under Utah Law with respect to such shares.
(d) Cancellation of Certain Stock, Option and Warrants.
Notwithstanding Section 2.1(b), (1) each share of Company Capital Stock held by
the Company or any of its Subsidiaries immediately prior to the Effective Time,
(2) each Company Option with an exercise price per share equal to or greater
than the General Conversion Number, and (3) each Company Warrant with an
exercise price per share equal to or greater than the General Conversion Number
(or Series C Conversion Number in the case of Company Warrants other than
Company Series C Repurchase Warrants exercisable for Company Series C Stock),
shall each be cancelled and extinguished without any conversion thereof or
payment therefor.
2.2 Company Options, Company Warrants and Other Rights Not Assumed.
Acquiror is not assuming, and shall not assume, any obligations or Liabilities
under (a) the Company Option Plan, (b) any outstanding Company Options, (c) any
outstanding Company Warrants, or (d) any other direct or indirect rights to
acquire shares of Company Capital Stock (other than to make the payments
contemplated by Section 2.1(b)). On the Closing Date, the Company Plan, the
Company Options, the Company Warrants and any other direct or indirect rights to
acquire shares of Company Capital Stock shall be terminated without further
obligation or Liability of the Company, Acquiror or the Surviving Corporation
(other than to make the payments contemplated by Section 2.1(b)). Acquiror shall
not substitute any equivalent option, warrant or right for any such terminated
Company Option, Company Warrant or right.
12
2.3 Escrow. At the Effective Time, Acquiror shall withhold the Escrow Cash
from the cash payable pursuant to Section 2.1(b) to the Company Shareholders,
Company Optionholders and Company Warrantholders as of immediately prior to the
Effective Time (other than holders of solely shares of Company Capital Stock
which constitute and remain Dissenting Shares) ("EFFECTIVE TIME HOLDERS"), on a
pro rata basis (based upon the amount of cash each such holder is entitled to
receive pursuant to Section 2.1(b) with respect to its shares of Company Capital
Stock (other than Dissenting Shares), Company Options and Company Warrants
relative to the amount of cash all such holders are entitled to receive pursuant
to Section 2.1(b) with respect to their shares of Company Capital Stock (other
than Dissenting Shares), Company Options and Company Warrants) ("PRO RATA
SHARE"). Prior to the Closing, Acquiror, the Representative and ▇▇▇▇▇ Fargo
Bank, N.A. (the "ESCROW AGENT") shall enter into an escrow agreement
substantially in the form attached hereto as Exhibit C (the "ESCROW AGREEMENT").
Within three business days after the Closing Date, Acquiror shall cause the
Escrow Cash to be deposited with the Escrow Agent. The Escrow Agent shall hold
the Escrow Cash as security for the indemnification rights under Article 11.
2.4 Effects of the Merger. At and upon the Effective Time:
(a) the separate existence of Merger Sub shall cease and Merger Sub
shall be merged with and into the Company, and the Company shall be the
surviving corporation of the Merger pursuant to the terms of this Agreement and
the Articles of Merger;
(b) the Articles of Incorporation of the Surviving Corporation shall
be amended in its entirety to read as set forth in the Articles of Merger;
(c) the Bylaws of the Surviving Corporation shall be amended in
their entirety to read as the Bylaws of Merger Sub;
(d) the officers of Merger Sub immediately prior to the Effective
Time shall be appointed as the officers of the Surviving Corporation immediately
after the Effective Time until their respective successors are duly appointed;
(e) the members of the Board of Directors of Merger Sub immediately
prior to the Effective Time shall be appointed as the members of the Board of
Directors of the Surviving Corporation immediately after the Effective Time
until their respective successors are duly elected or appointed and qualified;
and
(f) the Merger shall, from and after the Effective Time, have all of
the effects provided by Utah Law.
2.5 Tax Consequences and Withholding.
(a) The parties intend that the Merger shall be treated as a taxable
purchase of securities of the Company pursuant to the Code. However, Acquiror
makes no representations or warranties to the Company or to any Company
Shareholder, Company Optionholder or holder of Company Warrants regarding (1)
the tax treatment of the Merger or (2) any of the tax consequences to the
Company or any Company Shareholder, Company Optionholder or Company
Warrantholder of this Agreement, the Merger or any of the other transactions or
13
agreements contemplated hereby. The Company and, by virtue of the Company
Shareholders approving the Merger, this Agreement and the other transactions or
agreements contemplated hereby, the Company Shareholders acknowledge that the
Company and the Company Shareholders are relying solely on their own tax
advisors in connection with the Merger, this Agreement and the other
transactions or agreements contemplated hereby.
(b) Acquiror or Acquiror's agent shall be entitled to deduct and
withhold from the Total Merger Consideration or other payment otherwise payable
pursuant to this Agreement to any Company Shareholder, Company Optionholder or
Company Warrantholder, the amounts required to be deducted and withheld under
the Code, or any provision of state, local or foreign tax law, with respect to
the making of such payment. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the Company Shareholder, Company Optionholder or Company
Warrantholder in respect of whom such deduction and withholding was made.
2.6 Further Assurances. If, at any time before or after the Effective
Time, Acquiror reasonably believes or is advised that any further instruments,
deeds, assignments or assurances are reasonably necessary or desirable to
consummate the Merger or to carry out the purposes and intent of this Agreement
at or after the Effective Time, then the Company, Acquiror, the Surviving
Corporation and their respective officers and directors shall execute and
deliver all such proper deeds, assignments, instruments and assurances and do
all other things reasonably necessary or desirable to consummate the Merger and
to carry out the purposes and intent of this Agreement.
ARTICLE 3
Representations and Warranties of the Company
Subject to the exceptions set forth in a numbered or lettered section of
the disclosure letter of the Company addressed to Acquiror, dated as of the
Agreement Date and delivered to Acquiror concurrently with the parties'
execution of this Agreement (the "COMPANY DISCLOSURE LETTER") referencing a
representation or warranty herein (each of which exceptions, in order to be
effective, shall clearly indicate the section and, if applicable, the subsection
of this Article 3 to which it relates (unless and to the extent the relevance to
other representations and warranties is reasonably apparent from the face of the
disclosed exception), and each of which exceptions shall also be deemed to be
representations and warranties made by the Company under this Article 3), the
Company represents and warrants to Acquiror as follows:
3.1 Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Utah. The Company has the corporate power and authority to own, operate and
lease its properties and to carry on the Company Business. The Company is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary (each such jurisdiction being listed on Schedule 3.1 of the Company
Disclosure Letter), except where the failure to so qualify would not reasonably
be expected to have a Material Adverse Effect on the Company. The Company has
delivered to Acquiror's legal counsel true and complete copies of
14
the currently effective Articles of Incorporation and Bylaws of the Company,
each as amended to date. The Company is not in violation of its Articles of
Incorporation or Bylaws, each as amended to date.
3.2 Subsidiaries. Schedule 3.2 of the Company Disclosure Letter sets forth
a true, correct and complete list of each Subsidiary. Each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization and has continuously been in good standing
under the laws of its jurisdiction of organization at all times since its
inception. Each Subsidiary has the corporate power and authority to own, operate
and lease its properties and to carry on its business as presently conducted.
Each Subsidiary is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary (each such jurisdiction being listed on
Schedule 3.2 of the Company Disclosure Letter), except where the failure to so
qualify would not reasonably be expected to have a Material Adverse Effect on
such Subsidiary. The Company has delivered to Acquiror's legal counsel true and
complete copies of the currently effective Articles of Incorporation and Bylaws
(or other comparable charter documents) of each Subsidiary, each as amended to
date. Each Subsidiary is not in violation of its Articles of Incorporation or
Bylaws (or other comparable charter documents), each as amended to date. The
Company is the owner of all of the issued and outstanding shares of capital
stock of each Subsidiary and all such shares are duly authorized, validly
issued, fully paid and nonassessable. All of the issued and outstanding shares
of capital stock of each Subsidiary are owned by the Company free and clear of
all Encumbrances and are not subject to any preemptive right or right of first
refusal created by statute, the Articles of Incorporation and Bylaws (or other
comparable charter documents), as applicable, of such Subsidiary or any
agreement to which such Subsidiary is a party or by which it is bound. There are
no stock appreciation rights, options, warrants, calls, rights, commitments,
conversion privileges or preemptive or other rights or agreements outstanding to
purchase or otherwise acquire any shares of capital stock of a Subsidiary or any
securities or debt convertible into or exchangeable for capital stock of a
Subsidiary or obligating the Company or any Subsidiary to grant, extend or enter
into any such option, warrant, call, right, commitment, conversion privilege or
preemptive or other right or agreement. Other than the Subsidiaries set forth in
Schedule 3.2, the Company does not have any Subsidiary or any equity or
ownership interest (or any interest convertible or exchangeable or exercisable
for, any equity or ownership interest), whether direct or indirect, in any
Person. The Company is not obligated to make nor is it bound by any agreement or
obligation to make any investment in or capital contribution in or on behalf of
any other Person.
3.3 Power, Authorization and Validity.
(a) Power and Authority. Subject to approval of the Merger and the
adoption of this Agreement by (i) holders of a majority of the outstanding
shares of Company Common Stock and Company Preferred Stock (voting together as a
single voting class on an as-converted to Company Common Stock basis), (ii)
holders of a majority of the outstanding shares of Company Series A Stock
(voting as a separate voting class), and (iii) holders of a majority of the
outstanding shares of Company Series C Stock (voting as a separate voting class)
(the "COMPANY SHAREHOLDER APPROVAL"), the Company has all requisite corporate
power and authority to enter into, execute, deliver and perform its obligations
under this Agreement and
15
each of the Company Ancillary Agreements and to consummate the Merger. The
Merger and the execution, delivery and performance by the Company of this
Agreement, each of the Company Ancillary Agreements and all other agreements,
transactions and actions contemplated hereby or thereby, have been duly and
validly approved and authorized by the Company's Board of Directors.
(b) No Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority, or any
other Person, governmental or otherwise, is necessary or required to be made or
obtained by the Company to enable the Company to lawfully execute and deliver,
enter into, and perform its obligations under this Agreement and each of the
Company Ancillary Agreements or to consummate the Merger (including the consent
of any Person required to be obtained in order to keep any Contract between such
Person and the Company in effect following the Merger or to provide that the
Company is not in breach or violation of any such Contract following the
Merger), except for (i) the filing of the Articles of Merger with the Utah
Department of Commerce, Division of Corporations and Commercial Code, (ii) such
filings and notifications as may be required to be made by the Company in
connection with the Merger under the HSR Act and the expiration or early
termination of applicable waiting periods under the HSR Act, and (iii) the
Company Shareholder Approval.
(c) Enforceability. This Agreement has been duly executed and
delivered by the Company. This Agreement and each of the Company Ancillary
Agreements are, or when executed by the Company shall be, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to the effect of (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to rights of creditors generally and (ii) rules of law and
equity governing specific performance, injunctive relief and other equitable
remedies.
3.4 Capitalization of the Company.
(a) Authorized and Outstanding Capital Stock of the Company. The
authorized capital stock of the Company consists solely of 45,627,549 shares of
Company Common Stock, 1,981,144 shares of Company Series A Stock and 2,391,307
shares of Company Series C Stock. A total of 16,248,040 shares of Company Common
Stock, 247,644 shares of Company Series A Stock and 841,314 shares of Company
Series C Stock are issued and outstanding as of the Agreement Date. Each share
of Company Series A Stock is convertible into twelve shares of Company Common
Stock and each share of Company Series C Stock is convertible into one share of
Company Common Stock. All issued and outstanding shares of Company Preferred
Stock converted into shares of Company Common Stock prior to the Effective Time
shall have been converted in accordance with Applicable Law, the Company's
Articles of Incorporation and applicable Contracts. The numbers and kind of
issued and outstanding shares of Company Capital Stock (and the applicable
conversion ratios for Company Preferred Stock) held by each Company Shareholder
as of the Agreement Date are set forth on Schedule 3.4(a) of the Company
Disclosure Letter, and no shares of Company Capital Stock are issued or
outstanding as of the Agreement Date that are not set forth on Schedule 3.4(a)
of the Company Disclosure Letter and no such shares shall be issued or
outstanding as of the Closing Date that are not set forth on Schedule 3.4(a) of
the Company Disclosure Letter except for shares
16
of Company Capital Stock issued pursuant to the exercise of outstanding Company
Options listed on Schedule 3.4(b)-1 of the Company Disclosure Letter or Company
Warrants listed on Schedule 3.4(b)-2 of the Company Disclosure Letter or
pursuant to the conversion of outstanding shares of Company Preferred Stock. The
Company holds no treasury shares. All issued and outstanding shares of Company
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, were not issued in violation of and are not subject to any right
of rescission, right of first refusal or preemptive right, and have been
offered, issued, sold and delivered by the Company in compliance with all
requirements of Applicable Law and all requirements set forth in applicable
Contracts. There is no Liability for dividends accrued and unpaid by the
Company.
(b) Options, Warrants and Rights. The Company has reserved an
aggregate of 8,941,285 shares of Company Common Stock for issuance pursuant to
the Company Option Plan (including shares subject to outstanding Company
Options). A total of 5,530,089 shares of Company Common Stock are subject to
outstanding Company Options as of the Agreement Date and as of the Closing Date,
except for Company Options that are exercised in accordance with their terms.
Schedule 3.4(b)-1 of the Company Disclosure Letter sets forth, for each Company
Option, (i) the name of the holder of such Company Option, (ii) the exercise
price per share of such Company Option, (iii) the number of shares covered by
such Company Option, (iv) the vesting schedule for such Company Option, (v) the
extent such Company Option is vested as of the Agreement Date, (vi) whether such
Company Option is an incentive stock option or non-statutory stock option under
the Code, (vii) whether the exercisability of such Company Option shall be
accelerated in any manner by any of the transactions contemplated by this
Agreement or upon any other event or condition and the extent of acceleration,
if any, and (viii) whether such Company Option was granted under the Company
Option Plan. The terms of the Company Option Plan permit the conversion of
Company Options into cash as provided in this Agreement, without the consent or
approval of the holders of such Company Options, the Company Shareholders or
otherwise and without acceleration of the exercise schedule or vesting
provisions in effect for such Company Options. Schedule 3.4(b)-2 of the Company
Disclosure Letter sets forth, for each Company Warrant, (i) the name of the
holder of such Company Warrant, (ii) the exercise price per share of such
Company Warrant, (iii) the number and kind of shares covered by such Company
Warrant, (iv) the vesting schedule for such Company Warrant, (v) the extent such
Company Warrant is vested as of the Agreement Date, (vi) whether such Company
Warrant was issued in connection with the performance of services, and (vii)
whether the exercisability of such Company Warrant shall be accelerated in any
manner by any of the transactions contemplated by this Agreement or upon any
other event or condition and the extent of acceleration, if any. True and
correct copies of the Company Option Plan, the standard agreement under the
Company Option Plan, each agreement for each Company Option that does not
conform to the standard agreement under the Company Option Plan and each Company
Warrant have been delivered by the Company to Acquiror's legal counsel. All
Company Options and Company Warrants have been issued and granted in compliance
with Applicable Law and all requirements set forth in applicable Contracts. On
the Closing Date, the Company Plan, the Company Options, the Company Warrants
and any other direct or indirect rights to acquire shares of Company Capital
Stock shall be terminated without further obligation or Liability of the
Company, Acquiror or the Surviving Corporation (other than the obligations of
Acquiror to make the payments contemplated by Section 2.1(b)).
17
(c) No Other Rights. Except for Company Options and Company Warrants
and the conversion rights of the Company Preferred Stock, there are no stock
appreciation rights, options, warrants, calls, rights, commitments, conversion
privileges or preemptive or other rights or Contracts outstanding to purchase or
otherwise acquire any shares of Company Capital Stock or any securities or debt
convertible into or exchangeable for Company Capital Stock or obligating the
Company to grant, extend or enter into any such option, warrant, call, right,
commitment, conversion privilege or preemptive or other right or Contract. There
are no voting agreements (other than the Voting Agreements), registration
rights, rights of first refusal, preemptive rights, co-sale rights or other
restrictions applicable to any outstanding securities of the Company.
(d) Spreadsheet. The Spreadsheet, as delivered by the Company to
Acquiror, shall be true, correct and complete in all respects.
3.5 No Conflict. Neither the execution and delivery of this Agreement or
any of the Company Ancillary Agreements by the Company, nor the consummation of
the Merger or any other transaction contemplated hereby or thereby, shall
conflict with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, or constitute a default under:
(a) any provision of the Articles of Incorporation or Bylaws (or other
comparable charter documents) of the Company or any Subsidiary, each as
currently in effect; (b) any Applicable Law applicable to the Company, any
Subsidiary or any of their respective assets or properties; (c) any Contract to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective assets or properties are bound; or (d) any
privacy policy of the Company or any Subsidiary. Neither the Company's entering
into this Agreement nor the consummation of the Merger or the transactions
contemplated thereby shall give rise to, or trigger the application of, any
rights of any third party that would come into effect upon the consummation of
the Merger.
3.6 Litigation.
(a) There is no action, suit, arbitration, mediation, proceeding,
claim or investigation pending against the Company or any Subsidiary (or to the
knowledge of the Company, against any officer, director, employee or agent of
the Company or any Subsidiary in their capacity as such or relating to their
employment, services or relationship with the Company or such Subsidiary) before
any Governmental Authority, arbitrator or mediator, nor, to the knowledge of the
Company, has any such action, suit, arbitration, mediation, proceeding, claim or
investigation been threatened. There is no judgment, decree, injunction, rule or
order of any Governmental Authority, arbitrator or mediator outstanding against
the Company or any Subsidiary. To the Company's knowledge, there is no basis for
any person to assert a claim against the Company based upon: (a) the Company's
entering into this Agreement or any Company Ancillary Agreement or consummating
the Merger or any of the transactions contemplated by this Agreement or any
Company Ancillary Agreement; or (b) a claim of ownership of, or options,
warrants or other rights to acquire ownership of, any shares of Company Capital
Stock or any rights as a Company Securityholder, including any option, warrant,
preemptive right or right to notice or to vote, other than the rights of the
Company Shareholders with respect to the Company Stock shown as being owned by
such Persons on Schedule 3.4(a) of the Company Disclosure Letter, the rights of
Company Optionholders with
18
respect to the Company Options shown as being owned by such Persons on Schedule
3.4(b)-1 of the Company Disclosure Letter, and the rights of Company
Warrantholders with respect to the Company Warrants shown as being owned by such
Persons on Schedule 3.4(b)-2 of the Company Disclosure Letter. Neither the
Company nor any Subsidiary has any action, suit, arbitration, mediation,
proceeding, claim or investigation pending against any Governmental Authority or
other Person.
(b) To the knowledge of the Company, there is no current basis for
any claim by a Company Indemnified Party (as defined in Section 6.5(a)) for
indemnification under Section 6.5(a).
3.7 Taxes. The Company and each Subsidiary (and any consolidated,
combined, unitary or aggregate group for tax purposes of which the Company or
any Subsidiary is or has been a member), (a) has properly completed and timely
filed all foreign, federal, state, local and municipal tax and information
returns (the "RETURNS") required to be filed by it, (b) has timely paid all
taxes required to be paid by it for which payment was due, (c) has established
an adequate accrual or reserve in accordance with GAAP for the payment of all
taxes payable in respect of the periods or portions thereof prior to the Balance
Sheet Date (which accrual or reserve as of the Balance Sheet Date is fully
reflected on the Company Balance Sheet), (d) has made (or will make on a timely
basis) all estimated tax payments required to be made, and (e) has no Liability
for taxes in excess of the amount so paid or accruals or reserves so established
except for taxes subsequent to the Balance Sheet Date incurred in the ordinary
course of business. All such Returns are true, correct and complete, and the
Company has provided Acquiror with true and correct copies of such Returns.
Neither the Company nor any Subsidiary is delinquent in the payment of any tax
or in the filing of any Returns, and no deficiencies for any tax have been
threatened, claimed, proposed or assessed against the Company of any Subsidiary
or any of their respective officers, employees or agents of the Company in their
capacity as such. Neither the Company nor any Subsidiary has received any
written notification from the Internal Revenue Service or any other taxing
authority regarding any material issues that (a) are currently pending before
the Internal Revenue Service or any other taxing agency or authority (including
any sales or use taxing authority) regarding the Company, or (b) have been
raised by the Internal Revenue Service or other taxing agency or authority and
not yet finally resolved. To the knowledge of the Company, no Return of the
Company or any Subsidiary is under audit by the Internal Revenue Service or any
other taxing agency or authority. Any such past audits have been completed and
fully resolved to the satisfaction of the applicable taxing agency or authority
conducting such audit and all taxes determined by such audit to be due from the
Company or any Subsidiary have been paid in full to the applicable taxing
agencies or authorities. No tax liens are currently in effect against any of the
assets of the Company or any Subsidiary other than liens that arise by operation
of law for taxes not yet due and payable. There is not in effect any waiver by
the Company or any Subsidiary of any statute of limitations with respect to any
taxes nor has the Company or any Subsidiary agreed to any extension of time for
filing any Return that has not been filed. Neither the Company nor any
Subsidiary has consented to extend to a date later than the Agreement Date the
period in which any tax may be assessed or collected by any taxing agency or
authority. The Company and each Subsidiary have complied (and until the Closing
Date will comply) with all Applicable Law relating to the payment and
withholding of taxes (including withholding of taxes pursuant to Sections 1441,
1442, 1445 and 1446 of the Code or similar provisions under any foreign law),
have, within the
19
time and in the manner prescribed by law, withheld from employee wages and paid
over to the proper taxing agencies and authorities all amounts required to be so
withheld and paid over under all Applicable Law (including Federal Insurance
Contribution Act, Medicare, Federal Unemployment Tax Act and relevant state
income and employment tax withholding laws), including federal and state income
taxes, and have timely filed all withholding tax Returns. Neither the Company
nor any Subsidiary is a party to or bound by any tax sharing, tax indemnity, or
tax allocation agreement nor does the Company or any Subsidiary have any
liability or potential liability to another party under any such agreement.
Neither the Company nor any Subsidiary has filed any disclosures under Section
6662 of the Code or comparable provisions of state, local or foreign law to
prevent the imposition of penalties with respect to any tax reporting position
taken on any Return. Neither the Company nor any Subsidiary has consummated, has
participated in, or is currently participating in any transaction which was or
is a "tax shelter" transaction as defined in Sections 6662, 6011, 6012 or 6111
of the Code or the Treasury Regulations promulgated thereunder. Neither the
Company nor any Subsidiary has ever been a member of a consolidated, combined,
unitary or aggregate group of which the Company was not the ultimate parent
corporation. Neither the Company nor any Subsidiary has any liability for the
taxes of any Person (other than the Company or any Subsidiary) under Section
1.1502-6 of the Treasury Regulations (or any similar provision of state, local
or foreign law) as a transferee or successor, by contract or otherwise. Neither
the Company, any Subsidiary, nor any "dual resident corporation" (within the
meaning of Section 1503(d) of the Code) in which either the Company or any
Subsidiary is considered to hold an interest, has incurred a dual consolidated
loss within the meaning of Section 1503 of the Code. Each of the Company and
each Subsidiary has in its possession official foreign government receipts for
any taxes paid by it to any foreign tax agencies and authorities. Neither the
Company nor any Subsidiary has been or will be required to include any material
adjustment in taxable income for any tax period (or portion thereof) ending
after the Closing Date pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign tax laws as a result of
transactions, events or accounting methods employed prior to the Merger. Neither
the Company nor any Subsidiary has filed any election under Section 341(f) of
the Code. Neither the Company nor any Subsidiary is a "personal holding company"
within the meaning of the Code. Neither the Company nor any Subsidiary has ever
been a "United States real property holding corporation" within the meaning of
Section 897 of the Code, and the Company and each Subsidiary has filed with the
Internal Revenue Service all statements, if any, which are required under
Section 1.897-2(h) of the Treasury Regulations. There is currently no limitation
on the utilization of net operating losses, capital losses, built-in losses, tax
credits or similar items of the Company under Sections 269, 382, 383, 384 or
1502 of the Code (and any comparable provisions of foreign, state, local or
municipal law). Neither the Company nor any Subsidiary has constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (a) in the
two years prior to the Agreement Date or (b) in a distribution that would
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
3.8 Company Financial Statements. Schedule 3.8 of the Company Disclosure
Letter includes the Company Financial Statements. The Company Financial
Statements: (a) are derived from and are in accordance with the books and
records of the Company; (b) fairly present the consolidated financial condition
of the Company and its Subsidiaries at the dates
20
therein indicated and the consolidated results of operations and cash flows of
the Company and its Subsidiaries for the periods therein specified (subject, in
the case of unaudited interim period financial statements, to normal recurring
year-end audit adjustments, none of which individually or in the aggregate will
be material in amount); and (c) have been prepared in accordance with GAAP
applied on a basis consistent with prior periods (except that the unaudited
financial statements do not have notes thereto). The Company and its
Subsidiaries have no Liability, except for those (a) shown on the Company
Balance Sheet and (b) that were incurred after the Balance Sheet Date in the
ordinary course of the Company's business consistent with its past practices,
that (i) do not result from any breach of Contract, tort or violation of law and
(ii) are not required to be set forth in the Balance Sheet under GAAP. All
reserves established by the Company that are set forth in or reflected in the
Company Balance Sheet have been established in accordance with GAAP. The Closing
Financial Certificate, as delivered by the Company to Acquiror, shall be true,
correct and complete in all respects.
3.9 Title to Properties. The Company and each Subsidiary has good and
marketable title to all of their respective assets and properties (including
those shown on the Company Balance Sheet), free and clear of all Encumbrances,
other than Permitted Encumbrances. The Company and each Subsidiary owns or has
the right to use under a valid lease or license the assets and properties used
in the conduct of the Company Business. All machinery, vehicles, equipment and
other tangible personal property owned or leased by the Company or any
Subsidiary or used in the Company Business are in good condition and repair,
normal wear and tear excepted. All leases of real or personal property to which
the Company or any Subsidiary is a party are fully effective and afford the
Company or such Subsidiary valid leasehold possession of the real or personal
property that is the subject of the lease without material disruption. Neither
the Company nor any Subsidiary owns any real property.
3.10 Absence of Certain Changes. Since the Balance Sheet Date, the Company
and each Subsidiary has operated its business in the ordinary course consistent
with its past practices, and since such date there has not been with respect to
the Company or any Subsidiary any:
(a) Material Adverse Change or any change, event, circumstance,
condition or effect that would reasonably be expected to result in a Material
Adverse Change;
(b) amendment or change in its Articles of Incorporation or Bylaws
(or other comparable charter documents);
(c) incurrence, creation or assumption of (i) any Encumbrance on any
of its assets or properties (other than Permitted Encumbrances), (ii) any
Liability for borrowed money (other than normal advances to employees for bona
fide expenses that are incurred in the ordinary course of business consistent
with its past practices and properly documented), or (iii) any Liability as a
guarantor or surety with respect to the obligations of others;
(d) payment or discharge of any Encumbrance on any of its assets or
properties, or payment or discharge of any of its Liabilities, in each case that
was not either shown on the Company Balance Sheet or incurred in the ordinary
course of its business consistent with its past practices after the Balance
Sheet Date;
21
(e) purchase, license, sale, grant, assignment or other disposition
or transfer, or any agreement or other arrangement for the purchase, license,
sale, assignment or other disposition or transfer, of any of its assets
(including Company IP Rights (as defined in Section 3.13(a)) and other
intangible assets), properties or goodwill other than the sale or non-exclusive
license of its products to its customers in the ordinary course of its business
consistent with its past practices;
(f) damage, destruction or loss of any material property or material
asset, whether or not covered by insurance;
(g) declaration, setting aside or payment of any dividend on, or the
making of any other distribution in respect of, its capital stock, or any split,
combination or recapitalization of its capital stock or any direct or indirect
redemption, purchase or other acquisition of any of its capital stock or any
change in any rights, preferences, privileges or restrictions of any of its
outstanding securities (other than repurchases of stock in accordance with the
Company Option Plan or applicable Contracts in connection with the termination
of service of employees or other service providers);
(h) except as required by Applicable Law, change or increase in the
compensation payable or to become payable to any of its officers, directors,
employees or agents, or in any bonus, pension, severance, retention, insurance
or other benefit payment or arrangement made to or with any of such officers,
directors, employees or agents (other than increases in the base salaries of
employees who are not officers in an amount that does not exceed 10% of such
base salaries);
(i) hiring or termination of any executive officer, any termination
of employment of a material number of employees, or any labor dispute or claim
of unfair labor practices;
(j) Liability incurred by it to any of its officers, directors or
shareholders, except for normal and customary compensation and expense
allowances payable to officers in the ordinary course of its business consistent
with its past practices;
(k) making by it of any loan, advance or capital contribution to, or
any investment in, any of its officers, directors or shareholders or any firm or
business enterprise in which any such person had a direct or indirect material
interest at the time of such loan, advance, capital contribution or investment;
(l) entering into, amendment of, relinquishment, termination or
nonrenewal by it of any Contract (or any other right or obligation) other than
in the ordinary course of its business consistent with its past practices, any
default by it under such Contract (or other right or obligation), or any written
indication or assertion by the other party thereto of any material problems with
its services or performance under such Contract (or other right or obligation)
or such other party's desire to so amend, relinquish, terminate or not renew any
such Contract (or other right or obligation);
(m) material change in the manner in which it extends discounts,
credits or warranties to customers or otherwise deals with its customers;
22
(n) entering into by it prior to the Agreement Date of any
transaction or Contract that by its terms requires or contemplates a current
and/or future financial commitment, expense (inclusive of overhead expense) or
obligation on its part that involves in excess of $25,000 or that is not entered
into in the ordinary course of its business consistent with its past practices,
or the conduct of any business or operations other than in the ordinary course
of its business consistent with its past practices;
(o) except for the Letter Agreement between Acquiror and the Company
dated August 15, 2003 relating to the transactions contemplated by this
Agreement, making or entering into any Contract with respect to any acquisition,
sale or transfer of any material asset of the Company or any Subsidiary (other
than the sale or license of products or services in the ordinary course of its
business consistent with its past practices);
(p) except as required by GAAP, any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates or revenue recognition policies) or any revaluation of any of its assets;
(q) any deferral of the payment of any accounts payable other than
in the ordinary course of business, consistent with past practices, or in an
amount in excess of $10,000, or any discount, accommodation or other concession
made other than in the ordinary course of business, consistent with past
practices, in order to accelerate or induce the collection of any receivable; or
(r) announcement of, any negotiation by or any entry into any
Contract to do any of the things described in the preceding clauses (a) through
(q) (other than negotiations and agreements with Acquiror and its
representatives regarding the transactions contemplated by this Agreement).
3.11 Contracts, Agreements, Arrangements, Commitments and Undertakings.
Schedules 3.11(a)-(r) of the Company Disclosure Letter set forth a list of each
of the following Contracts to which the Company or any Subsidiary is a party or
to which the Company or any Subsidiary or any of their respective assets or
properties is bound, in each case, as of the Agreement Date (each a "COMPANY
MATERIAL CONTRACT"):
(a) any Contract providing for payments (whether fixed, contingent
or otherwise) by or to it in an aggregate amount of $50,000 or more during the
calendar year ended December 31, 2002 or during the eight month period ended
August 31, 2003;
(b) any dealer, distributor, OEM (original equipment manufacturer),
VAR (value added reseller), sales representative or similar Contract under which
any third party is authorized to sell, sublicense, lease, distribute, market or
take orders for any of its products, services or technology and which involves
payments (whether fixed, contingent or otherwise) by or to it in an aggregate
amount of $50,000 or more during the calendar year ended December 31, 2002 or
during the eight month period ended August 31, 2003;
(c) any Contract providing for the development of any software,
content (including textual content and visual, photographic or graphics
content), technology or intellectual property for (or for the benefit or use of)
it, or providing for the purchase by or
23
license to (or for the benefit or use of) it of any software, content (including
textual content and visual, photographic or graphics content), technology or
intellectual property, which software, content, technology or intellectual
property is in any manner used or incorporated (or is contemplated by it to be
used or incorporated) in connection with any aspect or element of any product,
service or technology of it (other than shrink wrap and other software licenses
generally available to the public at a per copy license fee of less than $1,000
per copy);
(d) any joint venture or partnership Contract that has involved, or
is reasonably expected to involve, a sharing of revenues, profits, cash flows,
expenses or losses with any other party or a payment of royalties to any other
party;
(e) any Contract for or relating to the employment by it of any
director, officer, employee or consultant or any other type of Contract with any
of its officers, employees or consultants that is not immediately terminable by
it without cost or other Liability, including any Contract requiring it to make
a payment to any director, officer, employee or consultant on account of the
Merger or any transaction contemplated by this Agreement;
(f) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other Contract for or with respect
to the borrowing of money, a line of credit, any currency exchange, commodities
or other hedging arrangement, or a leasing transaction of a type required to be
capitalized in accordance with GAAP;
(g) any lease or other contract, agreement, arrangement, commitment
or undertaking under which it is lessee of or holds or operates any items of
tangible personal property or real property owned by any third party, in each
case, providing for payments by it of greater than $10,000 per year;
(h) any Contract that restricts it from (1) engaging in any aspect
of its business, (2) participating or competing in any line of business, market
or geographic area, (3) freely setting prices for its products, services or
technologies (including most favored customer pricing provisions), or (4)
soliciting potential employees, consultants, contractors or other suppliers or
customers;
(i) any Contract that grants any exclusive rights, rights of
refusal, rights of first negotiation or similar rights to any Person;
(j) any Company IP Rights Agreement (as defined in Section 3.13(b))
which involves payments (whether fixed, contingent or otherwise) by or to it in
an aggregate amount of $50,000 or more during the calendar year ended December
31, 2002 or during the eight month period ended August 31, 2003 or which is
otherwise material to it;
(k) any Contract relating to the sale, issuance, grant, exercise,
award, purchase, repurchase or redemption of any shares of its capital stock or
other securities or any options, warrants or other rights to purchase or
otherwise acquire any such shares of capital stock, other securities or options,
warrants or other rights therefor, except for those Contracts in substantially
the form of the standard agreements evidencing the grant or exercise of
incentive stock options or non-statutory stock options under the Company Option
Plan;
24
(l) any Contract with any labor union or any collective bargaining
agreement with its employees;
(m) any Contract of guarantee, support, assumption or endorsement
of, or any similar commitment with respect to, the obligations, liabilities
(whether accrued, absolute, contingent or otherwise) or indebtedness of any
other Person;
(n) any Contract providing for indemnification or warranting by it
(other than pursuant to its standard customer agreements, the forms of which are
included in Schedule 3.11(n));
(o) any Contract in which its officers, directors, employees or
shareholders or any member of their immediate families is directly or indirectly
interested (whether as a party or otherwise);
(p) any Contract pursuant to which it has acquired a business or
entity, or substantially all of the assets of a business or entity, whether by
way of merger, consolidation, purchase of stock, purchase of assets, license or
otherwise;
(q) any Contract with a Governmental Authority; or
(r) any other Contract that is material to it or its business,
operations, financial condition, properties or assets.
A true and complete copy of each agreement or document, including
any amendments thereto, required by these subsections (a)-(r) of this Section
3.11 to be listed on Schedule 3.11 of the Company Disclosure Letter has been
delivered to Acquiror's legal counsel. All Company Material Contracts are in
written form.
3.12 No Default; No Restrictions.
(a) Each of the Company Material Contracts is in full force and
effect. There exists no default or event of default or event, occurrence,
condition or fact, with respect to the Company or any Subsidiary or to the
knowledge of the Company, with respect to any other contracting party, which,
with the giving of notice, the lapse of time or the happening of any other event
or conditions, would reasonably be expected to (i) become a default or event of
default under any Company Material Contract or (ii) give any third party (1) the
right to declare a default or exercise any remedy under any Company Material
Contract, (2) the right to a rebate, chargeback, refund, credit, penalty or
change in delivery schedule under any Company Material Contract, (3) the right
to accelerate the maturity or performance of any obligation of the Company or
any of its Subsidiaries under any Company Material Contract, or (4) the right to
cancel, terminate or modify any Company Material Contract. The Company has not
received any written notice or other communication regarding any actual or
possible violation or breach of or default under, or intention to cancel or
modify, any Company Material Contract. The consummation of the Merger and other
transactions contemplated hereby by the Company shall not require the consent,
release, waiver or approval of any third party to any Company Material Contract
(including the consent of any party required to be obtained in order to keep any
Company Material Contract between such party and the Company or a Subsidiary in
effect
25
following the Merger). Neither the Company nor any of its Subsidiaries has any
Liability for renegotiation of government contracts or subcontracts.
(b) Except as listed in Schedule 3.11(h) of the Company Disclosure
Letter, neither the Company nor any Subsidiary is a party to, and no asset or
property of the Company or any Subsidiary is bound or affected by, any judgment,
injunction, order, decree, Contract (noncompete or otherwise) that restricts or
prohibits the Company or any Subsidiary or, following the Effective Time, the
Surviving Corporation or Acquiror, from freely engaging in the Company Business
or from competing anywhere in the world (including any judgments, injunctions,
orders, decrees, Contracts restricting the geographic area in which the Company
or any Subsidiary may sell, license, market, distribute or support any products
or technology or provide services or restricting the markets, customers or
industries that the Company or any Subsidiary may address in operating the
Company Business or restricting the prices which the Company or any Subsidiary
may charge for its products, technology or services (including most favored
customer pricing provisions)), or includes any grants by the Company or any
Subsidiary of exclusive rights or licenses, rights of refusal, rights of first
negotiation or similar rights.
3.13 Intellectual Property.
(a) The Company and each Subsidiary owns or has the valid right or
license to use all Intellectual Property used in the conduct of the Company
Business, and to the extent that it does any of the following, to make, have
made, offer for sale, sell, import, copy, distribute, display, perform,
transmit, and create derivative works of any third party's Intellectual Property
used in the conduct of the Company Business (such ownership and rights being
hereinafter collectively referred to as the "COMPANY IP RIGHTS"). As used in
this Agreement, "COMPANY-OWNED IP RIGHTS" means Company IP Rights that are owned
by the Company or any Subsidiary; and "COMPANY-LICENSED IP RIGHTS" means Company
IP Rights that are licensed to the Company or any Subsidiary by a third party.
(b) Neither the execution, delivery and performance of this
Agreement or the Company Ancillary Agreements nor the consummation of the Merger
and the other transactions contemplated by this Agreement and/or by the Company
Ancillary Agreements shall, in accordance with their terms: (i) constitute a
material breach of or default under any instrument, license or other Contract
governing any Company IP Right (collectively, the "COMPANY IP RIGHTS
AGREEMENTS"); (ii) cause the forfeiture or termination of, or give rise to a
right of forfeiture or termination of, any Company IP Right; or (iii) materially
impair the right of the Company or the Surviving Corporation or any Subsidiary
to exercise any Company IP Right or portion thereof. Except as set forth in
Schedule 3.13(b) of the Company Disclosure Letter, there are no royalties,
honoraria, fees or other payments payable by the Company or any Subsidiary to
any third person (other than salaries payable to employees and independent
contractors not contingent on or related to use of their work product) as a
result of the ownership, use, possession, license-in, sale, marketing,
advertising or disposition of any Company IP Rights by the Company or any
Subsidiary to the extent necessary for the conduct of the Company Business and
none shall become payable as a result of the consummation of the transactions
contemplated by this Agreement. After the Closing, all Company-Owned IP Rights
will be fully transferable, alienable or licensable by the Surviving Corporation
without restriction and without payment of
26
any kind to any third party (but shall remain subject to pre-existing licenses
to third parties of such rights).
(c) Schedule 3.13(c) of the Company Disclosure Letter sets forth a
list (by name and version number) of each of the products and services currently
produced, manufactured, marketed, licensed, sold or distributed by the Company
and its Subsidiaries and each product and service currently under development by
the Company or any Subsidiary (each a "COMPANY PRODUCT OR SERVICE"). Neither the
operation of the Company Business nor the use, development, manufacture,
marketing, license, sale or distribution of any Company Product or Service
currently licensed, utilized, sold, provided or distributed by the Company or
any Subsidiary (i) violates any license or other Contract between the Company or
such Subsidiary and any third party, or (ii) infringes or misappropriates or
will infringe or misappropriate any Intellectual Property right of any other
party (unless such activities would not constitute infringement or
misappropriation but for a post-Closing change or modification made by Acquiror
to the Company Business or such Company Product or Service). Neither the use,
development, manufacture, marketing, license, sale or distribution of any
Company Product or Service currently under development by Company or any
Subsidiary, (i) violates any Contract between Company or such Subsidiary and any
third party, or (ii) infringes or misappropriates, or will infringe or
misappropriate, any Intellectual Property rights of any other party (unless such
activities would not constitute infringement or misappropriation but for a
post-Closing change or modification made by Acquiror to such Company Product or
Service under development). There is no pending, or to the knowledge of the
Company, threatened, claim or litigation contesting the validity, ownership or
right of the Company or any Subsidiary to exercise any Company IP Right, nor to
the knowledge of the Company, is there any legitimate basis for any such claim,
nor has the Company or any Subsidiary received any written notice asserting that
any Company IP Right or the proposed use, sale, license or disposition thereof
conflicts with or infringes the rights of any other party, nor to the knowledge
of the Company, is there any legitimate basis for any such assertion. Neither
the Company nor any Subsidiary has received any written notice from any third
party requesting that the Company or any Subsidiary enter into a license under
any third party patents. None of the Company-Owned IP Rights, the Company
Products or Services, the Company or any of its Subsidiaries, or (to the
knowledge of the Company) the Company-Licensed IP Rights, is subject to any
proceeding or outstanding order or stipulation (i) restricting in any manner the
use, distribution, transfer, or licensing by the Company or any of its
Subsidiaries of any Company-Owned IP Rights, any Company-Licensed IP Rights or
any Company Product or Service, or which may affect the validity, use or
enforceability of any such Company-Owned IP Rights, Company-Licensed IP Rights
or Company Product or Service, or (ii) restricting the conduct of the Company
Business in order to accommodate Intellectual Property rights of a third party.
(d) No current or former employee, consultant or independent
contractor of the Company: (i) is to the knowledge of the Company, in material
violation of any term or covenant of any employment contract, patent disclosure
agreement, invention assignment agreement, nondisclosure agreement,
noncompetition agreement or any other Contract with any other party by virtue of
such employee's, consultant's or independent contractor's being employed by, or
performing services for, the Company or any Subsidiary or using trade secrets or
proprietary information of others without permission; or (ii) has developed any
technology, software or other copyrightable, patentable or otherwise proprietary
work for the Company or
27
any Subsidiary that is subject to any Contract under which such employee,
consultant or independent contractor has assigned or otherwise granted to any
third party any rights (including Intellectual Property) in or to such
technology, software or other copyrightable, patentable or otherwise proprietary
work. To the knowledge of the Company, neither the employment of any employee of
the Company or any Subsidiary, nor the use by the Company or any Subsidiary of
the services of any consultant or independent contractor subjects the Company or
such Subsidiary to any Liability to any third party (including for improperly
soliciting such employee, consultant or independent contractor to work for the
Company or such Subsidiary).
(e) The Company and each Subsidiary has taken commercially
reasonable steps to protect, preserve and maintain the secrecy and
confidentiality of the Company IP Rights and to preserve and maintain all the
Company's and its Subsidiaries' interests, proprietary rights and trade secrets
in the Company IP Rights. All current and former officers, employees,
consultants and independent contractors of the Company and any Subsidiary having
access to proprietary information and inventions of the Company or such
Subsidiary have executed and delivered to the Company or such Subsidiary an
agreement regarding the protection of such proprietary information and the
assignment of inventions to the Company or such Subsidiary (and, in the case of
proprietary information of the Company's or such Subsidiary's customers and
business partners, to the extent required by such customers and business
partners); and copies of all such agreements have been delivered to Acquiror's
legal counsel. The Company has secured valid written assignments from all of the
Company's and its Subsidiaries' current and former consultants, independent
contractors and employees who were involved in, or who contributed to, the
creation or development of any Company-Owned IP Rights, of the rights to such
contributions that may be owned by such persons or that the Company does not
already own by operation of law. No current or former employee, officer,
director, consultant or independent contractor of the Company or any Subsidiary
has any right, license, claim or interest whatsoever in or with respect to any
Company-Owned IP Rights. To the extent that any technology, software or
Intellectual Property developed or otherwise owned by a third party is
incorporated into, integrated or bundled with, or used by the Company or its
Subsidiaries in the development, manufacture or compilation of any of the
Company Products or Services ("THIRD PARTY PRODUCT TECHNOLOGY"), a list and
description of all such Third Party Product Technology is set forth on Schedule
3.13(e) of the Company Disclosure Letter.
(f) Schedule 3.13(f) of the Company Disclosure Letter contains a
true and complete list of (i) all worldwide registrations made by or on behalf
of the Company or any Subsidiary of any patents, copyrights, mask works,
trademarks, service marks, Internet domain names or Internet or World Wide Web
URLs with any Governmental Authority or quasi-governmental authority, including
Internet domain name registries, (ii) all applications, registrations, filings
and other formal written governmental actions made or taken pursuant to
Applicable Law by the Company or any Subsidiary to secure, perfect or protect
its interest in the Company-Owned IP Rights, including all patent applications,
copyright applications, mask work applications and applications for registration
of trademarks and service marks, and where applicable the jurisdiction in which
each of the items of the Company-Owned IP Rights has been applied for, filed,
issued or registered, and (iii) all inter parties proceedings or actions before
any court or tribunal (including the United States Patent and Trademark Office)
or equivalent authority anywhere else in the world) related to any of the
Company-Owned IP Rights. All registered patents, trademarks, service marks,
Internet domain names, Internet or World Wide
28
Web URLs or addresses, copyrights and mask work rights that are Company-Owned IP
Rights are valid and subsisting, and the Company or such Subsidiary is the
record owner thereof. The Company and its Subsidiaries are the exclusive owner
of all trademarks and trade names used in connection with the operation or
conduct of the Company Business, including the sale, licensing, distribution or
provision of any Company Products or Services by the Company or any of its
Subsidiaries. The Company owns exclusively, and has good title to, all
copyrighted works that are included or incorporated into Company Products or
Services or which the Company or any of its Subsidiaries otherwise purports to
own.
(g) The Company and its Subsidiaries own all right, title and
interest in and to all Company-Owned IP Rights free and clear of all
Encumbrances (other than Permitted Encumbrances) and licenses (other than
licenses and rights listed in Schedule 3.13(h)-1 of the Company Disclosure
Letter and licenses granted by it under standard customer agreements, the forms
of which are included in Schedule 3.11(m) of the Company Disclosure Letter).
(h) Schedule 3.13(h)-1 of the Company Disclosure Letter contains a
true and complete list of all licenses, sublicenses and other Contracts as to
which the Company or any Subsidiary is a party and pursuant to which any Person
is authorized to use any Company-Owned IP Rights and which involves payments
(whether fixed, contingent or otherwise) by or to it in an aggregate amount of
$50,000 or more during the year ended December 31, 2002 or during the eight
month period ended August 31, 2003 or which is otherwise material to it. All
licenses, sublicenses and other Contracts as to which the Company or any
Subsidiary is a party and pursuant to which any Person is authorized to use any
Company-Owned IP Rights which are not listed on Schedule 3.13(h)-1 of the
Company Disclosure Letter are in the form of standard customer agreements, the
forms of which are included in Schedule 3.11(m) of the Company Disclosure
Letter. Schedule 3.13(h)-2 of the Company Disclosure Letter contains a true and
complete list of all licenses, sublicenses and other Contracts as to which the
Company or any Subsidiary is a party and pursuant to which the Company or any
Subsidiary is authorized to use any Company-Licensed IP Rights. None of the
licenses or other Contracts listed in Schedule 3.13(h)-1 of the Company
Disclosure Letter grants any third party exclusive rights to or under any
Company-Owned IP Rights or grants any third party the right to sublicense any of
such Company-Owned IP Rights. Since January 1, 2001, neither the Company nor any
of its Subsidiaries has transferred ownership of any Intellectual Property that
is or was owned by the Company or any of its Subsidiaries, to any third party
(except for licenses of products to customers), or knowingly permitted the
Company's and its Subsidiaries' rights in such Intellectual Property to lapse or
enter the public domain (other than through the expiration of registered
Intellectual Property at the end of its statutory term).
(i) Neither the Company nor any Subsidiary nor any other party
acting on its behalf has disclosed or delivered to any party, or permitted the
disclosure or delivery to any escrow agent or other party of, any Company Source
Code (as defined below). To the knowledge of the Company, no event has occurred,
and no circumstance or condition exists, that (with or without notice or lapse
of time, or both) shall, or would reasonably be expected to, result in the
disclosure or delivery by the Company or any Subsidiary or any other party
acting on its behalf to any party of any Company Source Code. Schedule 3.13(i)
of the Company Disclosure Letter identifies each Contract pursuant to which the
Company or any Subsidiary has deposited, or is or may be required to deposit,
with an escrow agent or other party, any Company Source
29
Code and further describes whether the execution of this Agreement or the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, in and of itself, would reasonably be expected to result in the
release from escrow of any Company Source Code. As used in this Section 3.13(i),
"COMPANY SOURCE CODE" means, collectively, any human readable software source
code, or any material portion or aspect of the software source code, or any
material proprietary information or algorithm contained in or relating to any
software source code, that constitutes Company-Owned IP Rights or any other
Company Product or Service marketed or currently proposed to be marketed by the
Company or any Subsidiary.
(j) To the knowledge of the Company, there is no unauthorized use,
disclosure, infringement or misappropriation of any Company IP Rights by any
third party, including any employee or former employee of the Company or any
Subsidiary. Neither the Company nor any Subsidiary has agreed to indemnify any
person for any infringement of any Intellectual Property of any third party by
any Company Product or Service that has been sold, licensed to third parties,
leased to third parties, supplied, marketed, distributed or provided by the
Company or any Subsidiary.
(k) All software developed by the Company or any Subsidiary and
licensed by the Company or any Subsidiary to customers and all Company Products
or Services provided by or through the Company or any Subsidiary to customers on
or prior to the Closing Date conform in all material respects (to the extent
required in Contracts with such customers) to applicable contractual
commitments, express and implied warranties, product specifications and product
Documentation and to any representations provided to customers, and neither the
Company nor any Subsidiary has any material Liability (and, to the knowledge of
the Company, there is no legitimate basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim or demand
against the Company or any Subsidiary giving rise to any material Liability
relating to the foregoing Contracts) for replacement or repair thereof or other
damages in connection therewith in excess of any reserves therefor reflected on
the Company Balance Sheet. Except as set forth on Schedule 3.13(k) of the
Company Disclosure Letter, the Company has made available to Acquiror all
Documentation and notes relating to the testing of the Company Products or
Services and plans and specifications for Company Products or Services currently
under development by the Company. The Company has a policy and procedure for
tracking material bugs, errors and defects of which it becomes aware in any
Company Products or Services, and maintains a database covering the foregoing.
For all software used by the Company and its Subsidiaries in providing Company
Products or Services, or in developing or making available any of the Company
Products or Services, the Company and its Subsidiaries have implemented any and
all security patches or upgrades that are generally available for that software.
(l) No government funding, facilities of a university, college,
other educational institution or research center, or funding from third parties
(other than funds received in consideration for Company Capital Stock) was used
in the development of the Company Products or Services, computer software
programs or applications owned by the Company or any Subsidiary. To the
knowledge of the Company, no current or former employee, consultant or
independent contractor of the Company or any Subsidiary who was involved in, or
who contributed to, the creation or development of any Company-Owned IP Rights
has performed services for the government, for a university, college or other
educational institution or for a
30
research center during a period of time during which such employee, consultant
or independent contractor was also performing services for the Company or any
Subsidiary.
(m) No software covered by any Company-Owned IP Right or
constituting any Company Product or Service has been distributed in whole or in
part or used, or is being used in conjunction with any Public Software. As used
in this Section 3.13(m), "PUBLIC SOFTWARE" means any software that (i) contains,
or is derived in any manner (in whole or in part) from, any software that is
distributed as free software, open source software (e.g., Linux) or (ii)
requires as a condition of its use, modification or distribution that it be
disclosed or distributed in source code form or made available at no charge.
Public Software includes without limitation software licensed under the GNU's
General Public License (GPL) or Lesser/Library GPL, the Mozilla Public License,
the Netscape Public License, the Sun Community Source License, the Sun Industry
Standards License, the BSD License, and the Apache License.
3.14 Compliance with Laws.
(a) The Company and each Subsidiary has materially complied and is
in material compliance with all Applicable Law.
(b) All materials, products and services distributed or marketed by
the Company and each Subsidiary have at all times made all material disclosures
to users or customers required by Applicable Law, and none of such disclosures
made or contained in any such materials have been inaccurate, misleading or
deceptive in any material respect.
(c) The Company and each Subsidiary holds all material permits,
licenses and approvals from, and has made all material filings with, government
(and quasi-governmental) agencies and authorities, that are necessary and/or
legally required to be held by it to conduct the Company Business without any
violation of Applicable Law ("GOVERNMENTAL PERMITS"), and all such Governmental
Permits are valid and in full force and effect. Neither the Company nor any
Subsidiary has received any written notice or other communication from any
Governmental Authority regarding (i) any actual or possible violation of law or
any Governmental Permit or any failure to comply with any term or requirement of
any Governmental Permit or (ii) any actual or possible revocation, withdrawal,
suspension, cancellation, termination or modification of any Governmental
Permit.
(d) Neither the Company nor any Subsidiary nor, to the knowledge of
the Company, any director, officer, agent or employee of the Company or any
Subsidiary has, for or on behalf of the Company or any Subsidiary, (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or (iii) made any other payment in violation
of Applicable Law.
3.15 Certain Transactions and Agreements. None of the officers and
directors of the Company or any Subsidiary and, to the knowledge of the Company,
none of the employees or shareholders of the Company or any Subsidiary, nor, to
the knowledge of the Company, any immediate family member of an officer,
director, employee or shareholder of the Company or
31
any Subsidiary, has any direct ownership interest in any firm or corporation
that competes with, or does business with, or has any contractual arrangement
with, the Company or any Subsidiary (except with respect to any interest in less
than 5% of the stock of any corporation whose stock is publicly traded). To the
Company's knowledge, none of the officers, directors, employees or shareholders
of the Company or any Subsidiary, nor any member of their immediate families,
has any indirect ownership interest in any firm or corporation that competes
with, or does business with, or has any contractual arrangement with, the
Company or any Subsidiary (except with respect to any interest in less than 5%
of the stock of any corporation whose stock is publicly traded). None of said
officers, directors, employees or shareholders or any member of their immediate
families, is a party to, or otherwise directly or indirectly interested in, any
Contract with the Company or any Subsidiary, except for normal compensation for
services as an officer, director or employee thereof that have been disclosed to
Acquiror. None of said officers, directors, employees, shareholders or immediate
family members has any interest in any property, real or personal, tangible or
intangible (including any Company IP Rights or any other Intellectual Property),
that is used in, or that pertains to, the Company Business, except for the
rights of a shareholder under Applicable Law.
3.16 Employees, ERISA and Other Compliance.
(a) The Company and each Subsidiary is in compliance in all material
respects with all Applicable Law and Contracts relating to employment,
employment practices, immigration, wages, hours, and terms and conditions of
employment, including employee compensation matters, and has correctly
classified employees as exempt employees and nonexempt employees under the Fair
Labor Standards Act. A complete list of all employees, officers and consultants
of the Company and its Subsidiaries and their current title and/or job
description and compensation (base compensation and bonuses) is set forth on
Schedule 3.16(a) of the Company Disclosure Letter. All employees of the Company
or any of its Subsidiaries are legally permitted to be employed by the Company
or such Subsidiary in the jurisdiction in which such employee is employed in
their current job capacities for the maximum period allowed under Applicable
Law. All independent contractors providing services to the Company or any of its
Subsidiaries have been properly classified as independent contractors for
purposes of federal and applicable state tax laws, laws applicable to employee
benefits and other Applicable Law. The Company does not have any employment or
consulting Contracts currently in effect that are not terminable at will (other
than agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions).
(b) Neither the Company nor any Subsidiary (i) to the knowledge of
the Company, is now, or has ever been, subject to a union organizing effort,
(ii) is subject to any collective bargaining agreement with respect to any of
its employees, (iii) is subject to any other Contract with any trade or labor
union, employees' association or similar organization, and (iv) has any current
material labor disputes. The Company and its Subsidiaries each has good labor
relations, and the Company has no knowledge of any facts indicating that the
consummation of the Merger or any of the other transactions contemplated hereby
shall have a material adverse effect on such labor relations, and has no
knowledge that any of its key employees intends to leave their employ.
32
(c) The Company has no pension plan which constitutes, or has since
the enactment of ERISA, constituted, a "multiemployer plan" as defined in
Section 3(37) of ERISA. No pension plan of the Company is subject to Title IV of
ERISA.
(d) (i) Schedule 3.16(d) of the Company Disclosure Letter lists each
employment, consulting, severance or other similar Contract, each "employee
benefit plan" as defined in Section 3(3) of ERISA and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, severance benefits,
disability benefits, death benefits, hospitalization benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits for
employees, consultants or directors that is entered into, maintained or
contributed to by the Company, any Subsidiary or any ERISA Affiliate and covers
any employee or former employee of the Company or any Subsidiary. Such
Contracts, plans and arrangements as are described in this Section 3.16(d) are
hereinafter collectively referred to as "COMPANY BENEFIT ARRANGEMENTS".
(ii) Each Company Benefit Arrangement has been maintained in
compliance in all material respects with its terms and with the requirements
prescribed by any and all Applicable Law that is applicable to such Company
Benefit Arrangement. Unless otherwise indicated in Schedule 3.16(d) of the
Company Disclosure Letter, with respect to each such Company Benefit Arrangement
that is an "employee pension benefit plan" as defined in Section 3(2) of ERISA
that is intended to qualify under Section 401(a) of the Code, the Company either
(1) has received a favorable opinion, advisory, notification and/or
determination letter, as applicable, that such plan satisfied the requirements
of the Uruguay Round Agreements Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996
and the Taxpayer Relief Act of 1997 (collectively referred to as "GUST"), the
Tax Reform Act of 1986, the IRS Restructuring and Reform Act of 1998 and the
Community Renewal Tax Relief Act of 2000 (a copy of which letter(s) have been
delivered to Acquiror and its counsel), and nothing has occurred since the
issuance of such opinion, advisory, notification and/or determination letter, as
applicable, which would reasonably be expected to cause the loss of the
tax-qualified status of such Company Benefit Arrangement, or (2) the Company has
applied timely to the Internal Revenue Service for such letter or has a
remaining period of time to apply for such letter. No Company Benefit
Arrangement shall be subject to any surrender fees or services fees upon
termination other than the normal and reasonable administrative fees associated
with the termination of benefit plans.
(iii) The Company has delivered to Acquiror and its legal
counsel a complete and correct copy and description of each current Company
Benefit Arrangement, including current trust documents, insurance policies and
contracts, employee booklets, summary plan descriptions, summary of material
modifications and other authorizing documents, and any material employee
communications relating thereto.
(iv) The Company has timely filed and delivered to Acquiror
and its legal counsel the three most recent annual reports (Form 5500) for each
Company Benefit Arrangement that is subject to ERISA and Code reporting
requirements.
33
(v) No suit, administrative proceeding, action or other
litigation has been brought, or to the knowledge of the Company, is threatened
in writing against or with respect to any Company Benefit Arrangement (other
than claims for benefits under such Company Benefit Arrangement which are
routine and uncontested), including any audit or inquiry by the Internal Revenue
Service or the U.S. Department of Labor. Neither the Company nor any Subsidiary
has ever been a participant in any "prohibited transaction" within the meaning
of Section 406 of ERISA with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA) that the Company or such Subsidiary sponsors
as employer or in which the Company or such Subsidiary participates as an
employer which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a) of ERISA) or
that would be reasonably likely to result in an excise tax under the Code.
(vi) All contributions due from the Company with respect to
any of the Company Benefit Arrangements have been made or have been accrued on
the Company's financial statements (including the Company Financial Statements),
and no further contributions shall be due or shall have accrued thereunder as of
the Closing Date (other than contributions accrued in the ordinary course of
business, consistent with past practices, after the Balance Sheet Date as a
result of the operations of the Company and its Subsidiaries after the Balance
Sheet Date).
(vii) All individuals who, pursuant to the terms of any
Company Benefit Arrangement, are entitled to participate in any Company Benefit
Arrangement, are currently participating in such Company Benefit Arrangement or
have been offered an opportunity to do so and have declined in writing.
(viii) The Company shall not have any material Liability to
any employee or to any organization or any other entity as a result of the
termination of any employee leasing arrangement.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company relating to, or change in
employee participation or coverage under, any Company Benefit Arrangement that
would increase materially the expense of maintaining such Company Benefit
Arrangement above the level of the expense incurred in respect thereof during
the calendar year 2002 (other than increased insurance premiums).
(f) Each Company Benefit Arrangement, to the extent applicable, is
in compliance, in all material respects, with the continuation coverage
requirements of Section 4980B of the Code, Sections 601 through 608 of ERISA,
the Americans with Disabilities Act of 1990, as amended, and the regulations
thereunder, the Health Insurance Portability and Accountability Act of 1996, as
amended, the Women's Health and Cancer Rights Act of 1998, and the Family
Medical Leave Act of 1993, as amended, and the regulations thereunder, as such
requirements affect the Company and its employees. There are no outstanding,
uncorrected violations under the Consolidation Omnibus Budget Reconciliation Act
of 1985, as amended, with respect to any of the Company Benefit Arrangements,
covered employees or qualified beneficiaries that would be reasonably likely to
result in a Material Adverse Effect on the Company, any Subsidiary or Acquiror.
34
(g) No benefit payable or that may become payable by the Company or
any Subsidiary pursuant to any Company Benefit Arrangement or as a result of, in
connection with or arising under this Agreement or the Articles of Merger shall
constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Code)
that is subject to the imposition of an excise tax under Section 4999 of the
Code or that would not be deductible by reason of Section 280G of the Code.
Unless otherwise indicated in Schedule 3.16(g) of the Company Disclosure Letter,
neither the Company or any Subsidiary is a party to any: (i) Contract with any
executive officer or other key employee thereof (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company in the nature of the Merger or any of the
other transactions contemplated by this Agreement or any Company Ancillary
Agreement, (B) providing any term of employment or compensation guarantee, or
(C) providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such termination of
employment other than as required by COBRA (or similar state laws), vacation pay
cash-outs or other arrangements governed by ERISA; or (ii) Contract or plan,
including any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which shall be increased, or the vesting
of benefits of which shall be accelerated, by the occurrence of the Merger or
any of the other transactions contemplated by this Agreement, or any event
subsequent to the Merger such as the termination of employment of any person, or
the value of any of the benefits of which shall be calculated on the basis of
any of the transactions contemplated by this Agreement. Neither the Company nor
any of its Subsidiaries has any obligation to pay any material amount or provide
any material benefit to any former employee or officer, other than obligations
(i) for which the Company has established a reserve for such amount on the
Company Balance Sheet and (ii) pursuant to Contracts entered into after the
Balance Sheet Date and disclosed on Schedule 3.16(g) of the Company Disclosure
Letter.
(h) Each compensation and benefit plan that has been established or
maintained, or that is required to be maintained or contributed to by the law or
applicable custom or rule of the relevant jurisdiction, outside of the United
States (each such plan, a "FOREIGN PLAN") is listed in Schedule 3.16(h) of the
Company Disclosure Letter. As regards each Foreign Plan, (i) such Foreign Plan
is in material compliance with the provisions of the laws of each jurisdiction
in which such Foreign Plan is maintained, to the extent those laws are
applicable to such Foreign Plan, (ii) all material contributions to, and
material payments from, such Foreign Plan which may have been required to be
made in accordance with the terms of such Foreign Plan, and, when applicable,
the law of the jurisdiction in which such Foreign Plan is maintained, have been
timely made or shall be made by the Closing Date, and all such contributions to
such Foreign Plan, and all payments under such Foreign Plan, for any period
ending before the Closing Date that are not yet, but will be, required to be
made, are reflected as an accrued liability on the Company Balance Sheet, (iii)
the Company, each Subsidiary, and each ERISA Affiliate has materially complied
with all applicable reporting and notice requirements, and such Foreign Plan has
obtained from the Governmental Entity having jurisdiction with respect to such
Foreign Plan any required determinations, if any, that such Foreign Plan is in
compliance with the laws of the relevant jurisdiction if such determinations are
required in order to give effect to such Foreign Plan, (iv) such Foreign Plan
has been administered in all material respects at all times in accordance with
its terms and applicable law and regulations, (v) to the knowledge of the
Company, there are no pending investigations by any governmental body involving
such Foreign Plan, and no pending claims (except for claims for benefits payable
in the normal
35
operation of such Foreign Plan), suits or proceedings against such Foreign Plan
or asserting any rights or claims to benefits under such Foreign Plan, (vi) the
consummation of the transactions contemplated by this Agreement will not by
itself create or otherwise result in any liability with respect to such Foreign
Plan other than the triggering of payment to participants, and (vii) except as
required by applicable laws, no condition exists that would prevent the Company
or any of its Subsidiaries from terminating or amending any Foreign Plan at any
time for any reason in accordance with the terms of each such Foreign Plan
(other than normal and reasonable expenses typically incurred in a termination
event).
(i) In the past two years, there has been no "mass layoff,"
"employment loss," or "plant closing" as defined by the Workers Adjustment and
Retraining Notification Act (the "WARN ACT") in respect of the Company.
(j) No amount of cash shall be payable in connection with the Merger
to (i) ▇▇▇▇ ▇▇▇▇ pursuant to the Stock Option Agreement between the Company and
▇▇. ▇▇▇▇ dated November 6, 2000, as amended April 24, 2003, for the difference
between the Minimum Payment (as defined in such agreement) and the Value (as
defined in such agreement) of ▇▇. ▇▇▇▇'▇ Company Options and (ii) ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ pursuant to the Stock Option Agreement between the Company and ▇▇.
▇▇▇▇▇▇▇▇▇▇▇ dated June 6, 2001, as amended on April 24, 2003, for the difference
between the Minimum Payment (as defined in such agreement) and the Value (as
defined in such agreement) of ▇▇. ▇▇▇▇▇▇▇▇▇▇▇'▇ Company Options.
3.17 Corporate Documents. The Company has delivered to Acquiror's legal
counsel for examination all documents listed in the Company Disclosure Letter
(including any Schedule thereto) or in any other exhibit or schedule called for
by this Agreement, including the following: (a) copies of the Articles of
Incorporation and Bylaws (or other comparable charter documents), each as
currently in effect, of the Company and each Subsidiary; (b) except as set forth
on Schedule 3.17 of the Company Disclosure Letter, the minute books containing
all records of all proceedings, consents, actions and meetings of the Board of
Directors and any committees thereof and shareholders of the Company and each
Subsidiary; (c) the stock ledger, option ledger and warrant ledger and journal
reflecting all stock issuances and transfers and all grants of options and
warrants relating to the Company; and (d) all permits, orders and consents
issued by, and filings (including all applications for such permits, orders and
consents) by the Company with, any regulatory agency with respect to any
securities of the Company which are in the possession of the Company or its
Subsidiaries.
3.18 No Brokers. Neither the Company nor any affiliate of the Company is
obligated for the payment of any fees or expenses of any investment banker,
broker, finder or similar party in connection with the origin, negotiation or
execution of this Agreement or in connection with the Merger or any other
transaction contemplated by this Agreement, except amounts payable to Deutsche
Bank Securities Inc. in connection with the Merger. Neither Acquiror nor the
Surviving Corporation shall incur any Liability, either directly or indirectly,
to any such investment banker, broker, finder or similar party as a result of
this Agreement or the Merger.
36
3.19 Books and Records.
(a) The books, records and accounts of the Company and its
Subsidiaries (i) are in all material respects true, complete and correct, (ii)
have been maintained in accordance with good business practices on a basis
consistent with prior years, and (iii) accurately and fairly reflect the basis
for the Company Financial Statements.
(b) The Company has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary (1) to permit
preparation of financial statements in conformity with GAAP or any other
criteria applicable to such statements and (2) to maintain accountability for
assets; and (iii) the amount recorded for assets on the Company's books and
records is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
3.20 Insurance. The Company and its Subsidiaries maintain the policies of
insurance and bonds set forth in Schedule 3.20 of the Company Disclosure Letter.
The Company and its Subsidiaries maintain all legally required insurance.
Schedule 3.20 sets forth the name of the insurer under each such policy and
bond, the type of policy or bond, the coverage amount and any applicable
deductible as of the date hereof as well all material claims made under such
policies and bonds since January 1, 2002. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been timely paid, and the
Company and each Subsidiary is otherwise in compliance with the terms of such
policies and bonds. All such policies and bonds remain in full force and effect,
and the Company has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies or bonds. Each of the
Company and each Subsidiary has delivered to Acquiror correct and complete
copies of all such policies of insurance and bonds issued at the request or for
the benefit of the Company or any Subsidiary.
3.21 Environmental Matters.
(a) The Company, each Subsidiary and their respective predecessors
and affiliates are in material compliance with all Environmental Laws (as
defined below), which compliance includes the possession by the Company or such
Subsidiary of all permits and other governmental authorizations required under
Environmental Laws and compliance with the terms and conditions thereof. Neither
the Company nor any Subsidiary has received any written notice or other
communication, whether from a Governmental Authority, citizens groups, employee
or otherwise, that alleges that the Company is not in compliance with any
Environmental Law. To the knowledge of the Company, no current or prior owner of
any property leased or possessed by the Company or such Subsidiary has received
any written notice or other communication, whether from a Governmental
Authority, citizens group, employee or otherwise, that alleges that such current
or prior owner or the Company or such Subsidiary is not in compliance with any
Environmental Law.
37
(b) For purposes of this Section 3.21: (i) "ENVIRONMENTAL LAW" means
any federal, state or local statute, law, regulation or other legal requirement
relating to pollution or protection of human health or the environment
(including ambient air, surface water, ground water, land surface or subsurface
strata), including any law or regulation relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern;
and (ii) "MATERIALS OF ENVIRONMENTAL CONCERN" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other substance that is currently regulated by an Environmental Law or that is
otherwise a danger to health, reproduction or the environment.
3.22 No Existing Discussions. Neither the Company nor any Subsidiary nor
any director, officer, shareholder, employee or agent (or any investment banker,
broker, finder or similar party) of the Company or any Subsidiary is engaged,
directly or indirectly, in any discussions or negotiations with any third party
relating to any Alternative Transaction.
3.23 Customers and Suppliers.
(a) Neither the Company nor any Subsidiary has any outstanding
material disputes concerning its products and/or services with any customer or
distributor who, in the year ended December 31, 2002 or the eight months ended
August 31, 2003, was one of the 20 largest sources of revenues for the Company
and its Subsidiaries, based on amounts paid or payable (each, a "SIGNIFICANT
CUSTOMER"), and the Company has no knowledge of any material dissatisfaction on
the part of any Significant Customer with respect to Company Products or
Services. Each Significant Customer is listed on Schedule 3.23(a) of the Company
Disclosure Letter. Since January 1, 2002, neither the Company nor any of its
Subsidiaries has received any notice (whether written or oral) from any
Significant Customer that such customer shall not continue as a customer of the
Company (or the Surviving Corporation or Acquiror) after the Closing or that
such customer intends to terminate or materially modify existing Contracts with
the Company (or the Surviving Corporation or Acquiror). The Company has not had
any of its products returned by a purchaser thereof except for normal warranty
returns consistent with past history and those returns that would not result in
a reversal of any revenue by the Company.
(b) Neither the Company nor any Subsidiary has any outstanding
material dispute concerning products and/or services provided by any supplier
who, in the year ended December 31, 2002 or the eight months ended August 31,
2003 was one of the 10 largest suppliers of products and/or services to the
Company, based on amounts paid or payable (each, a "SIGNIFICANT SUPPLIER"), and
the Company has no knowledge of any material dissatisfaction on the part of any
Significant Supplier. Each Significant Supplier is listed on Schedule 3.23(b) of
the Company Disclosure Letter. Since January 1, 2002, neither the Company nor
any of its Subsidiaries has received any written notice from any Significant
Supplier that such supplier shall not continue as a supplier to the Company (or
the Surviving Corporation or Acquiror) after the Closing or that such supplier
intends to terminate or materially modify existing Contracts with the Company
(or the Surviving Corporation or Acquiror). The Company and its Subsidiaries
have access to all products and services reasonably necessary to carry on the
Company Businesses, on the terms set forth in applicable Contracts for such
products and
38
services, and the Company has no knowledge of any reason why it will not
continue to have such access on such terms.
3.24 Privacy. Neither the Company nor any Subsidiary has collected any
personally identifiable information from any third parties. The Company and each
Subsidiary has provided adequate notice of its privacy practices in its privacy
policy or policies, which policy or policies (and the periods such policy or
policies have been in effect) are set forth in Schedule 3.24 of the Company
Disclosure Letter. The Company's and its Subsidiaries' privacy policies are and
have been available on the Company Websites (as defined below) at all times
during the periods indicated on Schedule 3.24 of the Company Disclosure Letter.
The Company's and its Subsidiaries' privacy practices conform, and at all times
have conformed, in all material respects to their respective privacy policies.
The Company and each Subsidiary has complied with all Applicable Law relating to
(a) the privacy of users of the Company Products or Services and all Internet
websites owned, maintained or operated by the Company and its Subsidiaries
(collectively, the "COMPANY WEBSITES"), and (b) the collection, storage and
transfer of any personally identifiable information collected by the Company and
its Subsidiaries or by third parties having authorized access to the Company's
and its Subsidiaries' records. The Company's and its Subsidiaries' privacy
policies conform, and at all times have conformed, to all of the Company's and
its Subsidiaries' contractual commitments to their customers and the viewers of
the Company Websites. Each of the Company Websites and all materials distributed
or marketed by the Company and its Subsidiaries have at all times made all
disclosures to users or customers required by Applicable Law, and none of such
disclosures made or contained in any Company Website or in any such materials
have been inaccurate, misleading or deceptive or in violation of any Applicable
Law. No claims have been asserted or, to the knowledge of the Company, are
threatened against the Company or any of its Subsidiaries by any person or
entity alleging a violation of such person's or entity's privacy, personal or
confidentiality rights under the privacy policies of the Company or its
Subsidiaries. With respect to all personal and user information described in
this Section 3.24, the Company and its Subsidiaries have at all times taken all
steps reasonably necessary (including, without limitation, implementing and
monitoring compliance with adequate measures with respect to technical and
physical security) to ensure that the information is protected against loss and
against unauthorized access, use, modification, disclosure or other misuse. To
the knowledge of the Company, there has been no unauthorized access to or other
misuse of that information.
3.25 Accounts Receivable. The accounts receivable shown on the Company
Balance Sheet arose in the ordinary course of business, consistent with past
practices, represented bona fide claims against debtors for sales and other
charges. Allowances for doubtful accounts and warranty returns have been
prepared in accordance with GAAP consistently applied and in accordance with the
Company's and its Subsidiaries' past practices. The accounts receivable of the
Company and its Subsidiaries arising after the Balance Sheet Date and before the
Closing Date arose or shall arise in the ordinary course of business, consistent
with past practices, represented or shall represent bona fide claims against
debtors for sales and other charges. None of the accounts receivable of the
Company and its Subsidiaries is subject to any claim of offset, recoupment,
setoff or counter-claim, and the Company has no knowledge of any specific facts
or circumstances (whether asserted or unasserted) that could give rise to any
such claim. No material amount of accounts receivable is contingent upon the
performance by the Company or any Subsidiary of any obligation or Contract other
than normal warranty repair and replacement.
39
No Person has any lien on any of such accounts receivable, and no agreement for
deduction or discount has been made with respect to any of such accounts
receivable. Schedule 3.25 of the Company Disclosure Letter sets forth as of the
Balance Sheet Date an aging of the Company's and its Subsidiaries' accounts
receivable in the aggregate and by customer, and indicates the amounts of
allowances for doubtful accounts and warranty returns. Schedule 3.25 of the
Company Disclosure Letter sets forth as of the Balance Sheet Date such amounts
of accounts receivable of the Company which are subject to asserted warranty
claims by customers and reasonably detailed information regarding asserted
warranty claims made within the last year, including the type and amounts of
such claims.
3.26 Inventory. The inventories shown on the Company Balance Sheet (net of
any reserve on the Company Balance Sheet) or thereafter acquired by the Company
or any Subsidiary, consisted of items of a quantity and quality usable or
salable in the ordinary course of business. Since the Balance Sheet Date, the
Company and each Subsidiary has continued to replenish inventories in a normal
and customary manner consistent with past practices. Neither the Company nor any
Subsidiary has received written notice that it will experience in the
foreseeable future any difficulty in obtaining, in the desired quantity and
quality and at a reasonable price and upon reasonable terms and conditions, the
raw materials, supplies or component products required for the manufacture,
assembly or production of its products.
3.27 Disclosure. This Agreement (including its exhibits and schedules and
the Company Disclosure Letter), taken together, does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances under which such statements were made, not misleading. The Entity
Representatives collectively have administrative or operational duties and
responsibilities with respect to each of the matters addressed by the
representations and warranties of the Company set forth in this Article 3.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Subject to the exceptions set forth in a numbered or lettered section of
the disclosure letter of the Acquiror addressed to the Company, dated as of the
Agreement Date and delivered to the Company concurrently with the parties'
execution of this Agreement (the "ACQUIROR DISCLOSURE LETTER" (if any))
referencing a representation or warranty herein (each of which exceptions, in
order to be effective, shall clearly indicate the section and, if applicable,
the subsection of this Article 4 to which it relates (unless and to the extent
the relevance to other representations and warranties is reasonably apparent
from the face of the disclosed exception), and each of which exceptions shall
also be deemed to be representations and warranties made by Acquiror and Merger
Sub under this Article 4), Acquiror and Merger Sub represent and warrant to the
Company as follows:
4.1 Organization and Good Standing. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as presently
proposed to be conducted. Merger Sub is a
40
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah. Each of Acquiror and Merger Sub is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not individually or in the
aggregate be material to Acquiror's or Merger Sub's ability to consummate the
Merger or to perform their respective obligations under this Agreement, the
Acquiror Ancillary Agreements and the Merger Sub Ancillary Agreements. Acquiror
has made available to the Company true and complete copies of the currently
effective Certificate of Incorporation or Articles of Incorporation, as
applicable, and Bylaws of Acquiror and Merger Sub, each as amended to date.
Neither Acquiror nor Merger Sub is in violation of its Certificate of
Incorporation or Articles of Incorporation, as applicable, or Bylaws, each as
amended to date.
4.2 Power, Authorization and Validity.
(a) Power and Authority. Acquiror has all requisite corporate power
and authority to enter into, execute, deliver and perform its obligations under
this Agreement and each of the Acquiror Ancillary Agreements and to consummate
the Merger. The execution, delivery and performance by Acquiror of this
Agreement, each of the Acquiror Ancillary Agreements and all other agreements,
transactions and actions contemplated hereby or thereby have been duly and
validly approved and authorized by all necessary corporate action on the part of
Acquiror. Merger Sub has all requisite corporate power and authority to enter
into, execute, deliver and perform its obligations under this Agreement and each
of the Merger Sub Ancillary Agreements and to consummate the Merger. The
execution, delivery and performance by Merger Sub of this Agreement, each of the
Merger Sub Ancillary Agreements and all other agreements, transactions and
actions contemplated hereby or thereby have been duly and validly approved and
authorized by all necessary corporate action on the part of Merger Sub.
(b) No Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority, or any
other Person, governmental or otherwise, is necessary or required to be made or
obtained by Acquiror or Merger Sub to enable Acquiror and Merger Sub to lawfully
execute and deliver, enter into, and perform its obligations under this
Agreement, each of the Acquiror Ancillary Agreements and each of the Merger Sub
Ancillary Agreements or to consummate the Merger, except for: (i) the filing by
Acquiror of such reports and information with the SEC under the Exchange Act,
and the rules and regulations promulgated by the SEC thereunder, as may be
required in connection with this Agreement, the Merger and the other
transactions contemplated by this Agreement; (ii) such filings and notifications
as may be required to be made by Acquiror in connection with the Merger under
the HSR Act and the expiration or early termination of applicable waiting
periods under the HSR Act; and (iii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings, if any, that if not
made or obtained by Acquiror or Merger Sub would not be material to Acquiror's
or Merger Sub's ability to consummate the Merger or to perform their respective
obligations under this Agreement, the Acquiror Ancillary Agreements and the
Merger Sub Ancillary Agreements.
(c) Enforceability. This Agreement has been duly executed and
delivered by Acquiror and Merger Sub. This Agreement and each of the Acquiror
Ancillary Agreements are,
41
or when executed by Acquiror shall be, valid and binding obligations of
Acquiror, enforceable against Acquiror in accordance with their respective
terms, subject to the effect of (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to rights of creditors generally and (ii) rules of law and equity
governing specific performance, injunctive relief and other equitable remedies.
This Agreement and each of the Merger Sub Ancillary Agreements are, or when
executed by Merger Sub shall be, valid and binding obligations of Merger Sub,
enforceable against Merger Sub in accordance with their respective terms,
subject to the effect of (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to rights
of creditors generally and (ii) rules of law and equity governing specific
performance, injunctive relief and other equitable remedies.
4.3 No Conflict. Neither the execution and delivery of this Agreement, any
of the Acquiror Ancillary Agreements or any of the Merger Sub Ancillary
Agreements by Acquiror or Merger Sub, nor the consummation of the Merger or any
other transaction contemplated hereby or thereby, shall conflict with, or (with
or without notice or lapse of time, or both) result in a termination, breach,
impairment or violation of, or constitute a default under: (a) any provision of
the Certificate of Incorporation or Articles of Incorporation, as applicable, or
Bylaws of Acquiror or Merger Sub, each as currently in effect; (b) any
Applicable Law applicable to Acquiror, Merger Sub or any of their respective
material assets or properties; or (c) any Contract to which Acquiror or Merger
Sub is a party or by which Acquiror or Merger Sub or any of their respective
material assets or properties are bound, except in the cases of clauses (b) and
(c) where such conflict, termination, breach, impairment, violation or default
would not be material to Acquiror's or Merger Sub's ability to consummate the
Merger or to perform their respective obligations under this Agreement, the
Acquiror Ancillary Agreements and the Merger Sub Ancillary Agreements.
ARTICLE 5
COMPANY COVENANTS
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10, the Company covenants and agrees with
Acquiror as follows:
5.1 Advice of Changes. The Company shall promptly advise Acquiror in
writing of (a) any event occurring subsequent to the Agreement Date that would
render any representation or warranty of the Company contained in Article 3
untrue or inaccurate such that the condition set forth in Section 9.1 would not
be satisfied, (b) any breach of any covenant or obligation of the Company
pursuant to this Agreement or any Company Ancillary Agreement such that the
condition set forth in Section 9.2 would not be satisfied, (c) any Material
Adverse Change in the Company, or (d) any change, event, circumstance, condition
or effect that would reasonably be expected to result in a Material Adverse
Effect on the Company or cause any of the conditions set forth in Article 9 not
to be satisfied; provided, however, that the delivery of any notice pursuant to
this Section 5.1 shall not be deemed to amend or supplement the Company
Disclosure Letter.
42
5.2 Maintenance of Business.
(a) The Company shall, and shall cause each Subsidiary to, use its
commercially reasonable efforts to carry on and preserve the Company Business
and its business relationships with customers, advertisers, suppliers, employees
and others with whom the Company or any Subsidiary has contractual relations. If
the Company becomes aware of a material deterioration in the relationship with
any key customer, key advertiser, key supplier or key employee, it shall
promptly bring such information to Acquiror's attention in writing and, if
requested by Acquiror, shall exert commercially reasonable efforts to promptly
restore the relationship.
(b) The Company shall, and shall cause each Subsidiary to, (i) pay
all of its debts and taxes when due, subject to good faith disputes over such
debts or taxes and (ii) pay or perform its other Liabilities when due.
(c) The Company shall, and shall cause each Subsidiary to, use its
commercially reasonable efforts to assure that each of its Contracts (other than
with Acquiror) entered into after the Agreement Date will not require the
procurement of any consent, waiver or novation or provide for any material
change in the obligations of any party in connection with, or terminate as a
result of the consummation of, the Merger.
5.3 Conduct of Business. The Company shall, and shall cause each
Subsidiary to, continue to conduct the Company Business in the ordinary and
usual course consistent with its past practices, and the Company shall not, and
shall not permit any Subsidiary to, without Acquiror's prior written consent:
(a) incur any indebtedness for borrowed money (including pursuant to
that certain Credit and Security Agreement between the Company and ▇▇▇▇▇ Fargo
Business Credit, Inc. dated September 1, 1998, as amended) or guarantee any such
indebtedness of another Person or issue or sell any debt securities or guarantee
any debt securities of another Person;
(b) (i) lend any money, other than reasonable and normal advances to
employees for bona fide expenses that are incurred in the ordinary course of
business consistent with its past practices (provided that no proceeds of any
such advances are used directly or indirectly to purchase shares of Company
Capital Stock), (ii) make any investments in or capital contributions to, any
Person, (iii) forgive or discharge in whole or in part any outstanding loans or
advances, or (iv) prepay any indebtedness;
(c) enter into any Company Material Contract, violate, terminate,
amend or otherwise modify or waive any of the material terms of any Company
Material Contract, or enter into any material transaction or take any other
action not in the ordinary course of business consistent with its past
practices;
(d) place or agree to the placement of any Encumbrance (other than a
Permitted Encumbrance) on any of its assets or properties;
43
(e) sell, lease, license, transfer or dispose of any assets material
to the Company Business (except for sales or licenses of products in the
ordinary course of business consistent with its past practices);
(f) enter into any Contract involving in excess of $10,000 for the
purchase, sale or lease of any property, whether real or personal, tangible or
intangible (except as set forth on Schedule 5.3(f) to the Company Disclosure
Letter);
(g) (i) pay any bonus, increased salary, severance or special
remuneration to any officer, director, employee or consultant (except pursuant
to Contracts disclosed in writing to Acquiror prior to the Agreement Date and
listed on Schedule 5.3(g) of the Company Disclosure Letter), (ii) amend or enter
into any employment or consulting Contract with any such person (other than the
hiring of an "at will" employee for annual compensation not in excess of $50,000
or to fill an open position set forth on Schedule 5.3(g) of the Company
Disclosure Letter), or (iii) adopt or amend any employee or compensation benefit
plan, including any stock purchase, stock issuance or stock option plan, or
amend any compensation, benefit, entitlement, grant or award provided or made
under any such plan (except in each case as required under ERISA or as necessary
to maintain the qualified status of such plan under the Code);
(h) change any of its accounting methods, unless required by GAAP;
(i) declare, set aside or pay any cash or stock dividend or other
distribution (whether in cash, stock or property) in respect of its capital
stock, or redeem, repurchase or otherwise acquire any of its capital stock or
other securities (except for (i) the repurchase of stock from its employees,
directors, consultants or contractors in connection with the termination of
their services at the original purchase price of such stock or (ii) the
repurchase of stock using proceeds from the exercise of Company Options or
Company Warrants after the Agreement Date), or pay or distribute any cash or
property to any of its shareholders or securityholders or make any other cash
payment to any of its shareholders or securityholders;
(j) terminate, waive or release any material right or claim;
(k) issue, sell, create or authorize any shares of its capital stock
of any class or series or any other of its securities, or issue, grant or create
any warrants, obligations, subscriptions, options, convertible securities, or
other commitments to issue shares of its capital stock or any securities that
are potentially exchangeable for, or convertible into, shares of its capital
stock, other than: (i) the issuance of shares of Company Common Stock pursuant
to the exercise of Company Options or Company Warrants outstanding on the
Agreement Date; and (ii) the issuance pursuant to the Company Option Plan of
Company Options to purchase up to 50,000 shares of Company Common Stock
remaining available for issuance pursuant to the Company Option Plan between the
Agreement Date and the Closing Date, provided that such options (1) are issued
in the ordinary course of business consistent with past practices at exercise
prices at least equal to the fair market value of Company Common Stock on the
date of grant, and (2) are issued solely to individuals who become employees of
the Company after the Agreement Date or as otherwise approved by Acquiror in
writing;
44
(l) subdivide, split, combine or reverse split the outstanding
shares of its capital stock of any class or series or enter into any
recapitalization affecting the number of outstanding shares of its capital stock
of any class or series or affecting any other of its securities;
(m) merge, consolidate or reorganize with, acquire, or enter into
any other business combination with any corporation, partnership, limited
liability company or any other entity (other than Acquiror or Merger Sub),
acquire a substantial portion of the assets of any such entity, or enter into
any negotiations, discussions or agreement for such purpose;
(n) amend its Articles of Incorporation or Bylaws or other
comparable charter documents (other than the amendment to the Company's Articles
of Incorporation contemplated by Section 9.11 and the amendment of the Company's
Bylaws contemplated by Section 5.11(e));
(o) license any of its technology or Intellectual Property (except
for licenses under its standard customer agreement made in the ordinary course
of business consistent with its past practices), or acquire any Intellectual
Property (or any license thereto) from any third party (other than shrink wrap
and other licenses of software generally available to the public at a per copy
license fee of less than $1,000 per copy);
(p) materially change any insurance coverage;
(q) (i) agree to any audit assessment by any taxing authority, (ii)
file any Return or amendment to any Return unless copies of such Return or
amendment have first been delivered to Acquiror for its review at a reasonable
time prior to filing, (iii) except as required by applicable law, make or change
any material election in respect of taxes or adopt or change any material
accounting method in respect of taxes, or (iv) enter into any closing agreement,
settle any claim or assessment in respect of taxes, or consent to any extension
or waiver of the limitation period applicable to any claim or assessment in
respect of taxes;
(r) modify or change the exercise or conversion rights or exercise
or purchase prices of any of its capital stock, any of its stock options,
warrants or other securities, or accelerate or otherwise modify (i) the right to
exercise any option, warrant or other right to purchase any of its capital stock
or other securities or (ii) the vesting or release of any shares of its capital
stock or other securities from any repurchase options or rights of refusal held
by it or any other party or any other restrictions (other than the acceleration
of vesting contemplated by Section 5.15);
(s) (i) initiate any litigation, action, suit, proceeding, claim or
arbitration (other than for the routine collection of bills) or (ii) settle or
agree to settle any litigation, action, suit, proceeding, claim or arbitration
(except where the settlement amount does not exceed $10,000 and does not involve
injunctive or other equitable relief);
(t) (i) pay, discharge or satisfy, in an amount in excess of $10,000
in any one case or $25,000 in the aggregate, any Liability arising otherwise
than in the ordinary course of business, other than (1) the payment, discharge
or satisfaction of Liabilities reflected or reserved against in the Company
Balance Sheet and (2) the payment, discharge or satisfaction of Merger Expenses,
or (ii) make any capital expenditures, capital additions or capital improvements
except
45
in the ordinary course of business consistent with its past practices or as set
forth on Schedule 5.3(t) to the Company Disclosure Letter;
(u) materially change the manner in which it extends warranties,
discounts or credits to customers;
(v) (i) agree to do any of the things described in the preceding
clauses (a)-(v), (ii) take or agree to take any action which would reasonably be
expected to make any of the Company's representations or warranties contained in
this Agreement materially untrue or incorrect, or (iii) take or agree to take
any action which would reasonably be expected to prevent the Company from
performing or cause the Company not to perform one or more covenants required
hereunder to be performed by the Company.
5.4 Regulatory Approvals. The Company shall, and shall cause each
Subsidiary to, promptly execute and file, or join in the execution and filing
of, any application, notification (including any notification or provision of
information, if any, that may be required under the HSR Act) or other document
that may be necessary in order to obtain the authorization, approval or consent
of any Governmental Authority, whether federal, state, local or foreign, which
may be required in connection with the consummation of the Merger and the other
transactions contemplated by this Agreement or any Company Ancillary Agreement.
The Company shall use commercially reasonable efforts to obtain, and to
cooperate with Acquiror to promptly obtain, all such authorizations, approvals
and consents and shall pay any associated filing fees payable by the Company
with respect to such authorizations, approvals and consents. The Company shall
promptly inform Acquiror of any material communication between the Company and
any Governmental Authority regarding any of the transactions contemplated
hereby. If the Company or any affiliate of the Company receives any formal or
informal request for supplemental information or documentary material from any
Governmental Authority with respect to the transactions contemplated hereby,
then the Company shall make, or cause to be made, as soon as reasonably
practicable, a response in compliance with such request. The Company shall
direct, in its sole discretion, the making of such response, but shall consider
in good faith the views of the Acquiror.
5.5 Necessary Consents. The Company shall use its commercially reasonable
efforts to obtain prior to Closing such written consents and authorizations of
third parties, give notices to third parties and take such other actions as may
be necessary or appropriate in order to effect the consummation of the Merger
and the other transactions contemplated by this Agreement, to enable the
Surviving Corporation (or Acquiror) to carry on the Company Business immediately
after the Effective Time and to keep in effect and avoid the breach, violation
of, termination of, or adverse change to the Contracts to which the Company or
any Subsidiary is a party or is bound or by which any of their respective assets
is bound which are set forth on Schedule 5.5 of the Company Disclosure Letter.
5.6 Litigation. The Company shall notify Acquiror in writing promptly
after learning of any material claim, action, suit, arbitration, mediation,
proceeding or investigation by or before any court, arbitrator or arbitration
panel, board or governmental agency, initiated by or against it, or known by the
Company or any Subsidiary to be threatened against the Company or any Subsidiary
or any of their respective officers, directors, employees or shareholders in
their
46
capacity as such (other than claims for benefits under Company Benefit
Arrangement which are routine and uncontested).
5.7 No Other Negotiations.
(a) The Company shall not, and shall not authorize, encourage or
permit any Subsidiary or any of their respective officers, directors, employees,
shareholders, affiliates, agents, advisors (including any attorneys, financial
advisors, investment bankers or accountants) or other representatives
(collectively, "COMPANY REPRESENTATIVES") to, directly or indirectly: (i)
solicit, initiate, or knowingly encourage, facilitate or induce the making,
submission or announcement of any inquiry, offer or proposal from any Person
(other than Acquiror) concerning any Alternative Transaction; (ii) furnish any
nonpublic information regarding the Company or its Subsidiaries to any Person
(other than Acquiror and its agents and advisors) in connection with or in
response to any inquiry, offer or proposal for or regarding any Alternative
Transaction (other than to respond to such inquiry, offer or proposal by
indicating that the Company is subject to a binding "no shop" covenant); (iii)
enter into, participate in, maintain or continue any discussions or negotiations
with any Person (other than Acquiror and its agents and advisors) with respect
to any Alternative Transaction (other than to respond to such inquiry, offer or
proposal by indicating that the Company is subject to a binding "no shop"
covenant); (iv) otherwise knowingly cooperate with, facilitate or encourage any
effort or attempt by any Person (other than Acquiror and its agents and
advisors) to effect any Alternative Transaction; or (v) execute, enter into or
become bound by any letter of intent, memorandum of understanding, other
Contract or understanding between the Company and any Person (other than
Acquiror) that is related to, provides for or concerns any Alternative
Transaction. If any Company Representative, whether in his or her capacity as
such or in any other capacity, takes any action that the Company is obligated
pursuant to this Section 5.7(a) to cause such Company Representative not to
take, then the Company shall be deemed for all purposes of this Agreement to
have breached this Section 5.7(a).
(b) The Company shall immediately notify Acquiror after receipt by
the Company and/or any Subsidiary (or, to the Company's knowledge, by any of the
Company Representatives) of (i) any inquiry, offer or proposal that constitutes
an Alternative Transaction, or (ii) any request for nonpublic information
relating to the Company or any Subsidiary or for access to any of the
properties, books or records of the Company or any Subsidiary by any Person or
Persons other than Acquiror which the Company reasonably expects to lead to an
inquiry, offer or proposal that constitutes an Alternative Transaction (which
notice shall identify the Person or Persons making such inquiry, offer, proposal
or request). The Company shall keep Acquiror fully informed of the status and
details of any such inquiry, offer or proposal and any written correspondence or
communications related thereto and shall provide to Acquiror a correct and
complete copy of such inquiry, offer or proposal and any amendments, written
correspondence and communications related thereto. The Company shall provide
Acquiror with 48 hours prior notice (or such lesser prior notice as is provided
to the members of the Board of Directors of the Company) of any meeting of the
Board of Directors of the Company at which the Board of Directors of the Company
is reasonably expected to consider any Alternative Transaction. The Company
shall immediately cease and cause to be terminated any and all existing
activities, discussions and negotiations with any Persons conducted heretofore
with respect to an Alternative Transaction.
47
5.8 Access to Information. The Company shall allow Acquiror and its agents
and advisors access at reasonable times to the files, books, records,
technology, Contracts, personnel and offices of the Company and its
Subsidiaries, including any and all information relating to the Company's and
its Subsidiaries' taxes, Contracts, Liabilities, financial condition and real,
personal and intangible property (including source code), subject to the terms
of the Mutual Non-Disclosure Agreement between the Company and Acquiror dated
March 26, 2003 (the "MUTUAL NDA") and except as otherwise set forth on Schedule
5.8 to the Company Disclosure Letter. The Company shall cause its and its
Subsidiaries' accountants to cooperate with Acquiror and Acquiror's agents and
advisors (provided that, prior to any disclosure to such agents or advisors,
such agents or advisors have entered into a confidentiality agreement with
substantially similar restrictions as included in the Mutual NDA to restrict the
use and disclosure of the Company's and its Subsidiaries' confidential
information) in making available all financial information reasonably requested
by Acquiror and its agents and advisors, including the right to examine all
working papers pertaining to all financial statements prepared or audited by
such accountants.
5.9 Satisfaction of Conditions Precedent. The Company shall use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent set forth in Article 9, and the Company shall use
commercially reasonable efforts to cause the Merger and the other transactions
contemplated by this Agreement to be consummated in accordance with the terms of
this Agreement.
5.10 Company Benefit Arrangements. The Company's Board of Directors shall
adopt resolutions authorizing the termination of the 401(k) Plan and the Company
shall execute an amendment to the 401(k) Plan that is sufficient to assure
compliance with all applicable requirements of the Code and regulations
thereunder so that the tax-qualified status of the 401(k) Plan shall be
maintained at the time of its termination.
5.11 Approval of the Company Shareholders.
(a) The Company shall take all action necessary in accordance with
this Agreement, the Utah Law, and the Articles of Incorporation and Bylaws of
the Company to call, notice, convene, hold and conduct a meeting of the Company
Shareholders (the "COMPANY SHAREHOLDERS MEETING") for the purpose of voting upon
approval of the Merger and adoption of this Agreement. The Company shall hold
the Company Shareholders Meeting as soon as practicable and in no event later
than 30 days following the Agreement Date. The Company shall consult with
Acquiror regarding the date of the Company Shareholders Meeting and shall not
postpone or adjourn (other than for the absence of a quorum and postponements
and adjournments not to exceed five business days in the aggregate necessary for
the sole purpose of obtaining additional votes in order to obtain the requisite
vote of the Company Shareholders necessary to approve the Merger and adopt this
Agreement) the Company Shareholders Meeting without the prior written consent of
Acquiror. The Company shall use its commercially reasonable efforts to solicit
from the Company Shareholders proxies to be voted on the approval of the Merger
and adoption of this Agreement. The Company's obligation to call, give notice
of, convene, hold and conduct the Company Shareholders Meeting in accordance
with this Section 5.11(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to the Company of any
Alternative Transaction. The Company shall exercise commercially reasonable
efforts to take all other action necessary to secure the
48
vote or consent of the Company Shareholders required to effect each of the
transactions contemplated by this Agreement.
(b) The Company's Board of Directors shall recommend that the
Company Shareholders vote in favor of the approval of the Merger and adoption of
this Agreement at the Company Shareholders Meeting. Neither the Company's Board
of Directors nor any committee thereof shall withdraw, amend or modify, or
propose or resolve to withdraw, amend or modify, in a manner adverse to
Acquiror, the recommendation of the Company's Board of Directors that the
Company Shareholders vote in favor of and approve the Merger and adopt this
Agreement.
(c) The Company shall obtain and deliver to Acquiror, prior to the
mailing or delivery to the Company Shareholders of the proxy statement for the
Company Shareholders Meeting (the "COMPANY PROXY STATEMENT"), a Parachute
Payment Waiver substantially in the form attached hereto as Exhibit D
("PARACHUTE PAYMENT WAIVER") from each Person who the Company and Acquiror
reasonably agree is, with respect to the Company, any Subsidiary and/or any
ERISA Affiliate, a "disqualified individual" (within the meaning of Section 280G
of the Code and the regulations promulgated thereunder), as determined
immediately prior to the initiation of the requisite shareholder approval
procedure under Section 5.11(d), and who the Company and Acquiror reasonably
agree might otherwise receive, have received, or have the right or entitlement
to receive a parachute payment under Section 280G of the Code (such Persons
being set forth on Schedule 5.11(c) of the Company Disclosure Letter).
(d) The Company shall include in the Company Proxy Statement a
proposal to be voted on by the Company Shareholders as is required by the terms
of Section 280G(b)(5)(B) of the Code (the "280G PROPOSAL") so as to render the
parachute payment provisions of Section 280G of the Code inapplicable to any and
all payments and/or benefits provided pursuant to Contracts or arrangements
that, in the absence of the executed Parachute Payment Waivers by the affected
Persons under Section 5.11(c), might otherwise result, separately or in the
aggregate, in the payment of any amount and/or the provision of any benefit that
would not be deductible by reason of Section 280G of the Code, with such
shareholder approval to be obtained in a manner which satisfies all applicable
requirements of such Section 280G(b)(5)(B) of the Code and the proposed Treasury
Regulations thereunder, including Q-7 of Section 1.280G-1 of such proposed
Treasury Regulations.
(e) On the Agreement Date, the Company shall take all corporate
action on the part of its board of directors and shareholders necessary to amend
its Bylaws such that the Control Shares Acquisition Act of the State of Utah
does not apply to control share acquisitions of shares of the Company, including
pursuant to the Voting Agreement and Proxy (as defined in the Voting Agreement).
Within 14 days after the Agreement Date, the Company shall deliver to Acquiror a
Voting Agreement and Proxy executed by any one or more Company Shareholders
listed on Exhibit B-1, owning as of the date of their respective entry into the
Voting Agreement and Proxy, an aggregate number of shares of Company Capital
Stock equal to not less than: (i) a majority of the outstanding Company Series A
Stock, (ii) a majority of the outstanding Company Series C Stock, and (iii) 70%
of the aggregate voting power, on an as-converted-to-Company-Common-Stock basis,
of the outstanding Company Capital Stock, and in the event that the Company
fails to do so, then the Company shall, within 16 days after the Agreement Date,
pay $4,500,000 to Acquiror in immediately available funds by check or wire
transfer. The Company
49
acknowledges its awareness of the provisions of the Voting Agreement and, to the
extent permitted by law, shall recognize, and shall not contest, the voting by
Acquiror of the Subject Shares (as defined in the Voting Agreement) through the
use of the Proxy, in accordance with the terms of the Voting Agreement and the
Proxy, at the Company Shareholders Meeting.
5.12 Notices to Company Securityholders and Employees.
(a) The Company shall timely provide to holders of Company Capital
Stock, Company Options and Company Warrants all advance notices required to be
given to such holders in connection with this Agreement, the Merger and the
transactions contemplated by this Agreement under the Company Option Plan, the
Company Warrants or other applicable Contracts.
(b) The Company shall give all notices and other information
required to be given by the Company to the employees of the Company or any
Subsidiary, any collective bargaining unit representing any group of employees
of the Company or any Subsidiary, and any applicable Governmental Authority
under the WARN Act, the National Labor Relations Act, as amended, the Code,
COBRA and other Applicable Law in connection with the transactions contemplated
by this Agreement or other applicable Contracts.
5.13 Closing Financial Certificate. At least two business days prior to
the Closing Date, the Company shall deliver a draft of the Closing Financial
Certificate to Acquiror. The Company shall cause such draft certificate to be
derived from the books and records of the Company. In preparing such
certificate, the Company shall use its commercially reasonable efforts to
reflect the dollar amount of all the Company Closing Assets, Company Closing
Liabilities and Merger Expenses then known or reasonably calculable. Without
limiting the generality or effect of the provisions of Section 5.8, the Company
shall provide to Acquiror, promptly after Acquiror's request, copies of the
documents or instruments evidencing the amounts set forth on any such draft or
final certificate to the extent such documents or instruments have not already
been provided.
5.14 Acceleration of Unvested Securities. On the Closing Date, the Company
shall accelerate in full the vesting of all outstanding Unvested Company Shares,
Unvested Company Options and Unvested Company Warrants, it being understood that
all such accelerated securities shall be factored into the calculation of the
Fully-Diluted Company Common Stock, the Fully-Diluted Company Series C Stock and
the number of shares of Company Series C Stock subject to the Company Series C
Repurchase Warrants (unless otherwise expressly excluded by the wording of the
definition of Fully-Diluted Company Common Stock or Fully-Diluted Company Series
C Stock).
ARTICLE 6
ACQUIROR COVENANTS
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10, Acquiror covenants and agrees with the
Company as follows:
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6.1 Advice of Changes. Acquiror shall promptly advise the Company in
writing of (a) any event occurring subsequent to the Agreement Date that would
render any representation or warranty of Acquiror or Merger Sub contained in
Article 4 untrue or inaccurate such that the condition set forth in Section 8.1
would not be satisfied and (b) any breach of any covenant or obligation of
Acquiror or Merger Sub pursuant to this Agreement, any Acquiror Ancillary
Agreement or any Merger Sub Ancillary Agreement such that the condition set
forth in Section 8.2 would not be satisfied.
6.2 Regulatory Approvals. Acquiror shall promptly execute and file, or
join in the execution and filing of, any application, notification (including
any notification or provision of information, if any, that may be required under
the HSR Act) or other document that may be necessary in order to obtain the
authorization, approval or consent of any Governmental Authority, whether
foreign, federal, state, local or municipal, which may be required in connection
with the consummation of the Merger and the other transactions contemplated by
this Agreement, any Acquiror Ancillary Agreement or any Merger Sub Ancillary
Agreement. Acquiror shall use commercially reasonable efforts to obtain all such
authorizations, approvals and consents and shall pay any associated filing fees
payable by Acquiror with respect to such authorizations, approvals and consents.
Acquiror shall promptly inform the Company of any material communication between
Acquiror and any Governmental Authority regarding any of the transactions
contemplated hereby. If Acquiror or any affiliate of Acquiror receives any
formal or informal request for supplemental information or documentary material
from any Governmental Authority with respect to the transactions contemplated
hereby, then Acquiror shall make, or cause to be made, as soon as reasonably
practicable, a response in compliance with such request. Acquiror shall direct,
in its sole discretion, the making of such response, but shall consider in good
faith the views of the Company. Notwithstanding anything in this Agreement to
the contrary, if any administrative or judicial action or proceeding is
instituted (or threatened in writing to be instituted) challenging any
transaction contemplated by this Agreement as violative of any Applicable Law,
it is expressly understood and agreed that neither Acquiror nor any of its
Subsidiaries or affiliates shall be under any obligation to: (a) litigate or
contest any administrative or judicial action or proceeding or any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent; or (b) make proposals, execute or carry out agreements or submit to
orders providing for (i) the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories
of assets of Acquiror, any of its Subsidiaries or affiliates or the Company or
any of its Subsidiaries, or the holding separate of the shares of Company Common
Stock or (ii) the imposition of any limitation on the ability of Acquiror or any
of its Subsidiaries or affiliates to freely conduct their business or own such
assets or to acquire, hold or exercise full rights of ownership of the shares of
Company Capital Stock.
6.3 Satisfaction of Conditions Precedent. Acquiror shall use its
commercially reasonable efforts to satisfy or cause to be satisfied all of the
conditions precedent that are set forth in Article 8, and Acquiror shall use its
commercially reasonable efforts to cause the Merger and the other transactions
contemplated by this Agreement to be consummated in accordance with the terms of
this Agreement.
Acquiror also covenants and agrees with the Company as follows:
51
6.4 Employee Benefit Matters. As promptly as reasonably practicable after
the Effective Time, Acquirer shall enroll those persons who were employees of
the Company or its Subsidiaries immediately prior to the Effective Time and who
remain employees of the Surviving Corporation or its Subsidiaries or become
employees of Acquiror following the Effective Time ("CONTINUING EMPLOYEES") in
Acquiror's employee benefit plans for which such employees are eligible (the
"ACQUIROR PLANS"), including its severance plan, medical plan, dental plan, life
insurance plan and disability plan, to the extent permitted by the terms of the
applicable Acquiror Plans on substantially similar terms applicable to employees
of Acquiror who are similarly situated based on levels of responsibility.
Without limiting the generality of the foregoing, Acquiror shall recognize the
prior service with the Company of each of the Continuing Employees in connection
with Acquiror's PTO policy and severance plan, for purposes of eligibility,
vesting and levels of benefits. Notwithstanding anything in this Section 6.4 to
the contrary, this Section 6.4 shall not operate to (a) duplicate any benefit
provided to any Continuing Employee or to fund any such benefit, (b) require
Acquiror to continue to maintain any employee benefit plan in effect following
the Effective Time for Acquiror's employees, including the Continuing Employees,
or (c) be construed to mean the employment of the Continuing Employees is not
terminable by Acquirer at will at any time, with or without cause, for any
reason or no reason.
6.5 Indemnification of Company Directors and Officers.
(a) If the Merger is consummated, then until the sixth anniversary
of the Effective Time, Acquiror will cause the Surviving Corporation to fulfill
and honor in all respects the obligations of the Company to its directors and
officers as of immediately prior to the Effective Time (the "COMPANY INDEMNIFIED
PARTIES") pursuant to any indemnification provisions under the Company's
Articles of Incorporation or Bylaws as in effect on the Agreement Date and
pursuant to any indemnification agreements between the Company and such Company
Indemnified Parties existing as of the Agreement Date (the "COMPANY
INDEMNIFICATION PROVISIONS"), with respect to claims arising out of acts or
omissions occurring at or prior to the Effective Time which are asserted after
the Effective Time. In connection therewith Acquiror will cause the Surviving
Corporation to advance expenses to the Company Indemnified Parties as incurred
to the fullest extent provided for under the Company Indemnification Provisions,
provided the person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification. Any claims for indemnification made under this
Section 6.5(a) on or prior to the sixth anniversary of the Effective Time shall
survive such anniversary until the final resolution thereof. However, the
foregoing covenants under this Section 6.5(a) shall not apply to (i) any claim
or matter that relates to a willful or intentional breach of a representation,
warranty or covenant made by the Company in connection with this Agreement or
the transactions contemplated hereby or made by a the Company Shareholder in
connection with the Voting Agreement or (ii) any claim based on a claim for
indemnification made by an Acquiror Indemnified Person pursuant to Section 11.
In the event of breach of the representation set forth in Section 3.6(b), this
Section 6.5(a) shall be terminated with respect to any claim not disclosed in
Schedule 3.6(b).
(b) For a period of six years after the Effective Time, Acquiror
will cause the Surviving Corporation to maintain in effect directors' and
officers' liability insurance covering
52
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy on terms comparable to those applicable to
the current directors and officers of the Company; provided, however, that in no
event will Acquiror or the Surviving Corporation be required to expend in excess
of 150% of the annual premium currently paid by the Company for such coverage
(or such coverage as is available for such 150% of such annual premium).
(c) This Section 6.5 shall survive the consummation of the Merger,
is intended to benefit each Company Indemnified Party, shall be binding on all
successors and assigns of the Surviving Corporation and Acquiror, and shall be
enforceable by the Company Indemnified Parties.
ARTICLE 7
CLOSING MATTERS
7.1 The Closing. Subject to termination of this Agreement as provided in
Article 10, the Closing shall take place at the offices of Fenwick & West LLP,
Silicon Valley Center, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, on the
Closing Date. Concurrently with the Closing or at such later date and time as
may be mutually agreed in writing by the Company and Acquiror, the Articles of
Merger shall be filed with the Utah Department of Commerce, Division of
Corporations and Commercial Code in accordance with the Utah Law.
7.2 Exchange.
(a) At the Effective Time, all outstanding Company Capital Stock,
Company Options and Company Warrants shall, by virtue of the Merger and without
further action, cease to exist, and all such securities shall be converted into
the right to receive from Acquiror the cash amount to which the holder thereof
is entitled pursuant to Section 2.1(b), subject to the provisions of Section
2.1(c) (regarding rights of holders of Dissenting Shares), and Section 2.3
(regarding the withholding of the Escrow Cash).
(b) Within three business days after the Closing Date, Acquiror
shall make available to Equiserve Trust Company, N.A. (the "EXCHANGE AGENT")
cash in an amount sufficient to permit the payment of the cash amounts to which
the Company Securityholders are entitled pursuant to Section 2.1(b), subject to
the provisions of Section 2.1(c) (regarding rights of holders of Dissenting
Shares), and Section 2.3 (regarding the withholding of the Escrow Cash). As soon
as practicable after the Closing Date (and in any event no later than three
business days after the Closing Date), the Acquiror shall cause to be mailed to
each holder of record of Company Capital Stock, Company Options or Company
Warrants that were outstanding immediately prior to the Effective Time (the
certificates or instruments evidencing such securities being "COMPANY
CERTIFICATES") and which were converted into the right to receive cash pursuant
to Section 2.1(b) the following: (i) a letter of transmittal in substantially
the form attached hereto as Exhibit E ("LETTER OF TRANSMITTAL") (which shall
specify that delivery shall be effected, and risk of loss and title to the
Company Certificates shall pass, only upon delivery of the Company Certificates
to the Exchange Agent); and (ii) instructions for use in effecting the surrender
of the Company Certificates in exchange for the cash amounts specified in
Article 2. Upon surrender of a Company Certificate for cancellation or upon
delivery of an affidavit of lost certificate and an indemnity in form and
substance reasonably satisfactory to Acquiror and the
53
Exchange Agent (the "AFFIDAVIT") (together with any required Form W-9 or Form
W-8) to the Exchange Agent, together with such Letter of Transmittal, duly
completed and validly executed in accordance with the instructions thereto, the
Exchange Agent shall pay by check to each tendering holder of a Company
Certificate or an Affidavit (each, a "TENDERING COMPANY HOLDER") the cash
amounts to which such Tendering Company Holder is entitled pursuant to Section
2.1(b), subject to the provisions of Section 2.1(c) (regarding rights of holders
of Dissenting Shares), and Section 2.3 (regarding the withholding of the Escrow
Cash).
(c) After the Effective Time, there shall be no further registration
of transfers on the stock transfer books of the Company or its transfer agent of
any Company Capital Stock, Company Options or Company Warrants that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, any Company Certificates or Affidavits are presented for any reason, they
shall be cancelled and exchanged as provided in this Section 7.2.
(d) Until Company Certificates are surrendered or an Affidavit is
delivered pursuant to Section 7.2(b), such Company Certificates shall be deemed,
for all purposes, to evidence ownership of the amount of cash which Company
Capital Stock, Company Options or Company Warrants shall have been converted
pursuant to Section 2.1(b), subject to the provisions of Section 2.1(c)
(regarding rights of holders of Dissenting Shares), and Section 2.3 (regarding
the withholding of the Escrow Cash).
7.3 Dissenting Shares. If, in connection with the Merger, holders of
Company Capital Stock are entitled to dissenters' rights pursuant to the Utah
Law, any Dissenting Shares shall not be converted into a right to receive cash
as provided in Section 2.1(b), but shall be converted into the right to receive
such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to the Utah Law. Each holder of Dissenting Shares
who, pursuant to the provisions of the Utah Law, becomes entitled to payment of
the fair value of such shares shall receive payment therefor in accordance with
Utah Law (but only after the value therefor shall have been agreed upon or
finally determined pursuant to Utah Law). In the event that any Company
Shareholder fails to make an effective demand for payment or fails to perfect
its dissenters' rights as to its shares of Company Capital Stock or any
Dissenting Shares shall otherwise lose their status as Dissenting Shares, then
any such shares shall immediately be converted into the right to receive the
consideration issuable pursuant to Article 2 in respect of such shares had such
shares never been Dissenting Shares, and Acquiror shall issue and deliver to the
holder thereof, at (or as promptly as reasonably practicable after) the
applicable time or times specified in Section 7.2, following the satisfaction of
the applicable conditions set forth in Section 7.2, the cash, without interest
thereon, to which such Company Shareholder would have been entitled under
Section 2.1(b) with respect to such shares, subject to the provisions of Section
2.3 (regarding the withholding of the Escrow Cash). The Company shall give
Acquiror prompt notice (and in no event more than two business days) of any
demand received by the Company for appraisal of Company Capital Stock or notice
of exercise of a Company Shareholder's dissenters' rights, and Acquiror shall
(after consultation with the Company) have the right to control all negotiations
and proceedings with respect to any such demand. The Company agrees that, except
with Acquiror's prior written consent, it shall not voluntarily make any payment
or offer to make any payment with respect to, or settle or offer to settle, any
such demand for appraisal or exercise of dissenters' rights.
54
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The Company's obligations to consummate the Merger and take the other
actions required to be taken by the Company at the Closing are subject to the
fulfillment or satisfaction as of the Closing, of each of the following
conditions (it being understood that (a) any one or more of the following
conditions may be waived by the Company in a writing signed on behalf of the
Company and (b) by proceeding with the Closing, the Company shall be deemed to
have waived any of such conditions that remain unfulfilled or unsatisfied):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Acquiror and Merger Sub set forth in Article 4 (a) that are
qualified as to materiality shall be true and correct and (b) that are not
qualified as to materiality shall be true and correct in all material respects,
in each case on and as of the Closing with the same force and effect as if they
had been made on the Closing Date (except for any such representations or
warranties that by their terms speak only as of a specific date or dates, in
which case such representations and warranties that are qualified as to
materiality shall be true and correct, and such representations and warranties
that are not qualified as to materiality shall be true and correct in all
material respects, on and as of such specified date or dates), except to the
extent the failure of such representations and warranties to be so true and
correct does not have a material adverse effect on Acquiror's or Merger Sub's
ability to consummate the Merger or to perform their respective obligations
under this Agreement, the Acquiror Ancillary Agreements and the Merger Sub
Ancillary Agreements, and at the Closing the Company shall have received a
certificate to such effect executed by an officer of Acquiror.
8.2 Covenants. Acquiror shall have performed and complied in all material
respects with all of its covenants contained in Article 6 on or before the
Closing (to the extent that such covenants require performance by Acquiror on or
before the Closing), except to the extent the failure to so perform and comply
with such covenants does not have a material adverse effect on Acquiror's
ability to consummate the Merger or to perform its obligations under this
Agreement and the Acquiror Ancillary Agreements, and at the Closing the Company
shall have received a certificate to such effect executed by an officer of
Acquiror.
8.3 Compliance with Law; No Legal Restraints; No Litigation. There shall
not be issued, enacted or adopted, or threatened in writing by any Governmental
Authority, any order, decree, temporary, preliminary or permanent injunction,
legislative enactment, statute, regulation, action or proceeding, or any
judgment or ruling by any Governmental Authority that prohibits or renders
illegal or imposes limitations on the Merger or any other material transaction
contemplated by this Agreement. No litigation or proceeding shall be threatened
or pending for the purpose or with the probable effect of enjoining or
preventing the consummation of the Merger or any of the other material
transactions contemplated by this Agreement.
8.4 Government Consents; HSR Compliance. There shall have been obtained at
or prior to the Closing Date such permits or authorizations, and there shall
have been taken all such other actions by any Governmental Authority or other
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, as may be required to lawfully consummate the Merger. All
applicable waiting periods under the HSR Act shall have expired
55
or early termination of such waiting periods shall have been granted by both the
Federal Trade Commission and the United States Department of Justice without any
condition or requirement requiring or calling for the disposition or divestiture
of any product or other asset of the Company by Acquiror or the Company.
8.5 Escrow Agreement. The Escrow Agreement shall have been executed and
delivered by Acquiror, the Escrow Agent and the Representative.
8.6 Company Shareholder Approvals. The Merger and this Agreement shall
have been duly and validly approved and adopted, as required by Utah Law and the
Company's Articles of Incorporation and Bylaws, each as in effect on the date of
such approval and adoption, by the requisite vote of the Company Shareholders.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB
Acquiror's and Merger Sub's obligations to consummate the Merger and take
the other actions required to be taken by them at the Closing are subject to the
fulfillment or satisfaction, as of the Closing, of each of the following
conditions (it being understood that (a) any one or more of the following
conditions may be waived by Acquiror and Merger Sub in a writing signed by
Acquiror and (b) by proceeding with the Closing, Acquiror and Merger Sub shall
be deemed to have waived any of such conditions that remains unfulfilled or
unsatisfied, provided, any such waiver shall not affect in any way the rights of
Acquiror Indemnified Person to seek indemnification pursuant to the terms of
Article 11 hereof):
9.1 Accuracy of Representations and Warranties. The representations and
warranties of the Company set forth in Article 3 shall be true and correct in
all respects on and as of the Closing with the same force and effect as if they
had been made on the Closing Date (except for any such representations or
warranties that by their terms speak only as of a specific date or dates, in
which case such representations and warranties shall be true and correct, in all
respects, on and as of such specified date or dates); provided, however, that
the foregoing condition shall be deemed to have been satisfied even if such
representations or warranties are not so true and correct so long as the failure
of such representations or warranties to be so true and correct (determined
without regard to any materiality standard contained in such representations or
warranties), individually or in the aggregate, does not constitute a Material
Adverse Change with respect to the Company; provided further, that satisfaction
of the foregoing condition pursuant to the immediately preceding clause shall
not affect in any way the rights of Acquiror Indemnified Person to seek
indemnification pursuant to the terms of Article 11 hereof for Damages arising
out of the failure of any representation or warranty to be so true and correct.
At the Closing Acquiror shall have received a certificate to the foregoing
effect executed by the Company's President or Chief Executive Officer.
9.2 Covenants. The Company shall have performed and complied in all
material respects with all of its covenants contained in Article 5 at or before
the Closing (to the extent that such covenants require performance by the
Company at or before the Closing), and at the Closing Acquiror shall have
received a certificate to such effect executed by the Company's President or
Chief Executive Officer.
56
9.3 No Material Adverse Change. There shall not have been any Material
Adverse Change in the Company, whether or not resulting from a breach in any
representation, warranty or covenant in this Agreement, and at the Closing
Acquiror shall have received a certificate to such effect executed by the
Company's President or Chief Executive Officer.
9.4 Compliance with Law; No Legal Restraints; No Litigation. There shall
not be issued, enacted or adopted, or threatened in writing by any Governmental
Authority, any order, decree, temporary, preliminary or permanent injunction,
legislative enactment, statute, regulation, action, proceeding, or any judgment
or ruling by any Governmental Authority that prohibits or renders illegal or
imposes limitations on: (a) the Merger or any other material transaction
contemplated by this Agreement; or (b) Acquiror's right (or the right of any
Subsidiary of Acquiror) to own, retain, use or operate any of its products,
services, properties or assets (including equity, properties or assets of the
Company) or conduct the Company Business on or after consummation of the Merger
or seeking a disposition or divestiture of any such properties or assets. No
litigation or proceeding shall be threatened or pending for the purpose or with
the probable effect of enjoining or preventing the consummation of any of the
transactions contemplated by this Agreement, or that would be reasonably
expected to have a Material Adverse Effect on the Company or Acquiror.
9.5 Government Consents; HSR Compliance. There shall have been obtained at
or prior to the Closing Date such permits or authorizations, and there shall
have been taken all such other actions by any Governmental Authority or other
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, as may be required to consummate the Merger. All
applicable waiting periods under the HSR Act shall have expired or early
termination of such waiting periods shall have been granted by both the Federal
Trade Commission and the United States Department of Justice without any
condition or requirement requiring or calling for the disposition or divestiture
of any product or other asset of the Company by Acquiror or the Company.
9.6 Opinion of Company's Legal Counsel. Acquiror shall have received from
Stoel Rives LLP, legal counsel to the Company, an opinion opining to the matters
set forth in Exhibit F.
9.7 Consents. Acquiror shall have received duly executed copies of all
third party consents, approvals, assignments, notices, waivers, authorizations
or other certificates necessary to provide for the continuation in full force
and effect of the Contracts set forth on Schedule 5.5 of the Company Disclosure
Letter following the Merger without modification or amendment of the terms of
such Contracts.
9.8 Company Shareholder Approvals. The Merger and this Agreement shall
have been duly and validly approved and adopted, as required by Utah Law and the
Company's Articles of Incorporation and Bylaws, each as in effect on the date of
such approval and adoption, by the requisite vote of the Company Shareholders.
The number of Dissenting Shares shall not exceed 10% of all the Company Capital
Stock (on an as-converted to Company Common Stock basis) outstanding as of
immediately prior to the Effective Time.
9.9 Reserved.
57
9.10 Acknowledgements of Holders of Company Redemption Stock, Company
Options and Company Warrants. Holders of Company Redemption Stock, Company
Options and Company Warrants set forth on Schedule 9.10 of the Company
Disclosure Letter shall have executed an acknowledgement to the effect that (a)
in connection with the Merger, such holders are entitled to only the payments
contemplated by Section 2.1(b) in exchange for their Company Redemption Stock,
Company Options and Company Warrants and (b) on the Closing Date, such Company
Options and Company Warrants shall terminate without further obligation or
Liability of the Company, Acquiror or the Surviving Corporation (other than to
make the payments contemplated by Section 2.1(b)).
9.11 Termination, Modification or Satisfaction of Company Shareholder
Documents and Rights. Each of the Series C Preferred Stock and Warrant Purchase
Agreement dated as of October 24, 2001, Amended and Restated Investor Rights
Agreement dated as of October 24, 2001, Amended and Restated Voting Agreement
dated as of October 24, 2001, Amended and Restated Co-Sale Agreement dated as of
October 24, 2001, Extension and Escrow Agreement dated as of June 21, 2001, Put
Right Termination Agreement dated as of June 21, 2001, Redemption Rights
Agreement entered into as of April 23, 1999, and Agreement dated July 30, 1999
by and among the Company, Chicago Venture Partners, L.P. and PowerQuest Funding,
L.L.C. shall have been terminated, effective as of the Closing, in accordance
with their respective terms and there shall be no continuing obligations of the
Company thereunder. The Articles of Incorporation of the Company shall have been
amended by all necessary corporate action to exempt the Merger and other
transactions contemplated by this Agreement from application of the liquidation
preference provisions of such Articles of Incorporation.
9.12 Resignations of Directors and Officers. The persons holding the
positions of a director or officer of the Company and each Subsidiary, in office
immediately prior to the Effective Time, shall have resigned from such positions
in writing effective as of the Effective Time.
9.13 Closing Financial Certificate. Acquiror shall have received the draft
Closing Financial Certificate from the Company as required by Section 5.13, the
draft Closing Financial Certificate shall indicate that the difference obtained
by subtracting the amount of Company Closing Liabilities from the amount of
Company Closing Assets is in excess of a positive amount of $6,600,000;
provided, however, that such receipt shall not be deemed to be an agreement by
Acquiror that the draft Closing Financial Certificate is accurate and shall not
diminish Acquiror's remedies hereunder if the draft Closing Financial
Certificate is not accurate.
9.14 Spreadsheet. Acquiror shall have received the Spreadsheet from the
Company; provided, however, that such receipt shall not be deemed to be an
agreement by Acquiror that the Spreadsheet is accurate and shall not diminish
Acquiror's remedies hereunder if the Spreadsheet is not accurate.
9.15 Section 280G Approval. The 280G Proposal shall have been subject to a
vote by the Company Shareholders as required by Section 5.11(d), and, as
required by Section 5.11(c), each "disqualified individual" set forth on
Schedule 5.11(c) of the Company Disclosure Letter shall have agreed pursuant to
the Parachute Payment Waiver to, and shall, forfeit any payments
58
that would be non-deductible if the shareholder approval described in Section
5.11(d) is not obtained.
9.16 Company Good Standing Certificates. Acquiror shall have received a
certificate from the State of Utah and each other State in which the Company or
any Subsidiary is qualified to do business as a foreign corporation certifying
that the Company or such Subsidiary is in good standing and that all applicable
taxes and fees of the Company or such Subsidiary have been paid.
9.17 Termination of Company Benefit Arrangements. The Company shall have
delivered (a) a true, correct and complete copy of resolutions adopted by the
Board of Directors of the Company, certified by the Secretary of the Company,
authorizing the termination of the Company's 401(k) Plan, and (b) an amendment
to the 401(k) Plan, executed by the Company, that is sufficient to assure
compliance with all applicable requirements of the Code and regulations
thereunder so that the tax-qualified status of the 401(k) Plan shall be
maintained at the time of its termination.
9.18 Acceleration of Unvested Securities. The vesting of all outstanding
Unvested Company Shares, Unvested Company Options and Unvested Company Warrants
shall have been accelerated in full by the Company as of the Closing Date.
9.19 Escrow Agreement. The Escrow Agreement shall have been executed and
delivered by the Escrow Agent and the Representative.
9.20 FIRPTA. Acquiror, as agent for the shareholders of the Company, shall
have received a properly executed Foreign Investment and Real Property Tax Act
of 1980 Notification Letter, in form and substance reasonably satisfactory to
Acquiror, which states that shares of Company Capital Stock do not constitute
"United States real property interests" under Section 897(c) of the Code, for
purposes of satisfying Acquiror's obligations under Treasury Regulation Section
1.1445-2(c)(3).
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to the Effective Time by the mutual written consent of Acquiror
and the Company.
10.2 Unilateral Termination.
(a) Either Acquiror or the Company, by giving written notice to the
other, may terminate this Agreement if a court of competent jurisdiction or
other Governmental Authority shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger or any
other material transaction contemplated by this Agreement.
(b) Either Acquiror or the Company, by giving written notice to the
other, may terminate this Agreement if the Merger shall not have been
consummated by midnight Pacific Time on December 31, 2003; provided, however,
that the right to terminate this
59
Agreement pursuant to this Section 10.2(b) shall not be available to any party
whose breach of a representation or warranty or covenant made under this
Agreement by such party results in the failure of any condition set forth in
Article 8 or Article 9 to be fulfilled or satisfied on or before such date.
(c) Either Acquiror or the Company may terminate this Agreement at
any time prior to the Effective Time if (a) the other has committed a breach of
(i) any of its representations and warranties under Article 3 or Article 4, as
applicable, or (ii) any of its covenants under Article 5 or Article 6, as
applicable, and has not cured such breach within ten business days after the
party seeking to terminate this Agreement has given the other party written
notice of such breach and its intention to terminate this Agreement pursuant to
this Section 10.2(c) (provided, however, that no such cure period shall be
available or applicable to any such breach which by its nature cannot be cured)
and (b) if not cured on or prior to the Closing Date, such breach would result
in the failure of any of the conditions set forth in Article 9 or Article 8, as
applicable, to be fulfilled or satisfied; provided, however, that the right to
terminate this Agreement under this Section 10.2(c) shall not be available to a
party if the party is at that time in material breach of this Agreement.
(d) Either Acquiror or the Company, by giving written notice to the
other, may terminate this Agreement if any required approval of the Company
Shareholders approving the Merger and adopting this Agreement shall not have
been obtained by reason of the failure to obtain the required vote upon a vote
held at a duly noticed and held meeting of shareholders (or at any adjournment
thereof) within 30 days following the Agreement Date; provided, however, that
the right to terminate this Agreement under this Section 10.2(d) shall not be
available to the Company where the failure to obtain shareholder approval shall
have been caused by the action or failure to act of the Company and such action
or failure to act constitutes a breach by the Company of this Agreement.
(e) Acquiror, by giving written notice to the Company, may terminate
this Agreement if (i) the Company's Board of Directors shall have for any reason
recommended, endorsed, accepted or agreed to an Alternative Transaction or shall
have resolved to do any of the foregoing, (ii) the Company shall have materially
breached or be deemed to have materially breached Section 5.7 (No Other
Negotiations), (iii) the Company shall have for any reason failed to call,
convene and hold the Company Shareholders Meeting (or submit to the vote of the
Company Shareholders at the Company Shareholders Meeting the approval of the
Merger and adoption of this Agreement) within 30 days following the Agreement
Date, (iv) if an inquiry, offer or proposal for an Alternative Transaction shall
have been made and the Company's Board of Directors of the Company in connection
therewith, does not within five business days of such occurrence reconfirm its
approval and recommendation of this Agreement and the transactions contemplated
hereby and reject such Alternative Transaction, or (v) the Company fails to
timely make any payment due under Section 5.11(e).
10.3 Effect of Termination. In the event of termination of this Agreement
as provided in Section 10.2, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Acquiror, Merger Sub or
the Company or their respective officers, directors, shareholders or affiliates;
provided, however, that (i) the provisions of this Section 10.3 (Effect of
Termination) and Article 12 (Miscellaneous) shall remain in full force
60
and effect and survive any termination of this Agreement, (ii) nothing herein
shall relieve any party hereto from liability in connection with any material
breach of any of such party's representations, warranties or covenants contained
herein (including any failure on the part of the Company to timely make any
payment due under Section 5.11(e)), (iii) in the event that this Agreement is
terminated pursuant to Sections 10.1, 10.2(a) or 10.2(b) or terminated by the
Company pursuant to Section 10.2(c), then Acquiror shall, within two business
days of any such termination, pay $25,000 to the Company in immediately
available funds by check or wire transfer.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
AND REMEDIES; CONTINUING COVENANTS
11.1 Survival. If the Merger is consummated, the representations and
warranties of the Company contained in this Agreement and the other agreements,
certificates and documents contemplated hereby shall survive the Effective Time
and remain in full force and effect, regardless of any investigation or
disclosure made by or on behalf of any of the parties to this Agreement, until
the one year anniversary of the Effective Time; provided, however, that no right
to indemnification pursuant to Article 11 in respect of any claim based upon any
failure of a representation or warranty to be true and correct that is set forth
in a Notice of Claim delivered prior to the expiration date of such
representation or warranty shall be affected by the expiration of such
representation or warranty; and provided, further, that such expiration shall
not affect the rights of any Acquiror Indemnified Person under Article 11 or
otherwise to seek recovery of Damages arising out of any fraud, willful breach
or intentional misrepresentation by the Company or any Subsidiary until the
expiration of the applicable statute of limitations. If the Merger is
consummated, the representations and warranties of Acquiror contained in this
Agreement and the other agreements, certificates and documents contemplated
hereby shall expire and be of no further force or effect as of the Effective
Time. If the Merger is consummated, all covenants of the parties (including the
covenants set forth in Article 5 and Article 6) shall expire and be of no
further force or effect as of the Effective Time, except to the extent such
covenants provide that they are to be performed after the Effective Time;
provided, however, that no right to indemnification pursuant to Article 11 in
respect of any claim based upon any breach of a covenant shall be affected by
the expiration of such covenant.
11.2 Agreement to Indemnify. Acquiror and its officers, directors, agents,
representatives, stockholders and employees, and each person, if any, who
controls or may control Acquiror within the meaning of the Securities Act or the
Exchange Act (each hereinafter referred to individually as an "ACQUIROR
INDEMNIFIED PERSON" and collectively as "ACQUIROR INDEMNIFIED PERSONS") shall be
indemnified and held harmless from and against any and all losses, reductions in
value, costs, damages, Liabilities and expenses (including reasonable attorneys'
fees, other professionals' and experts' fees, costs of investigation and court
costs), calculated net of actual recoveries under existing insurance policies
(net of any applicable collection costs and reserves, deductibles, premium
adjustments and retrospectively rated premiums) (hereinafter collectively
referred to as "DAMAGES"), arising from assessments, taxes, claims, demands,
assertions of liability, or actual or threatened actions, suits or proceedings
(whether civil, criminal, administrative or investigative) directly or
indirectly arising out of, resulting from or in connection with: (i) any failure
of any representation or warranty made by
61
the Company in this Agreement or the Company Disclosure Letter (including the
schedules thereto) to be true and correct as of the date of this Agreement and
as of the Closing Date (as though such representation or warranty were made as
of the Closing Date, except in the case of representations and warranties which
by their terms speak only as of a specific date or dates); (ii) any failure of
any certification, representation or warranty made by the Company in any
certificate delivered to Acquiror pursuant to any provision of this Agreement
(other than the Closing Financial Certificate) to be true and correct as of the
date such certificate is delivered to Acquiror; (iii) any breach of or default
in connection with any of the covenants or agreements made by the Company in
this Agreement or the Company Disclosure Letter (including the schedules
thereto); (iv) any inaccuracies in the Spreadsheet or in the draft Closing
Financial Certificate resulting in the excess of Company Closing Assets over
Company Closing Liabilities as set forth in the Closing Financial Certificate to
be less than $6,600,000; (v) any Indemnifiable Merger Expenses; or (vi) any
Dissenting Shares Excess Payments.
11.3 Limitations.
(a) If the Merger is consummated, recovery from the Escrow Cash
shall be the sole and exclusive remedy under this Agreement for the matters
listed in the foregoing clauses (i)-(vi) of Section 11.2, except in the case of
fraud, willful breach or intentional misrepresentation by the Company or any
Subsidiary. Nothing in this Agreement shall limit the liability (i) of the
Company for any breach of any representation, warranty, covenant or agreement if
the Merger is not consummated or (ii) of any Company Shareholder in connection
with any breach by such Person of any Voting Agreement to which it is a party.
(b) Notwithstanding anything contained herein to the contrary, no
Acquiror Indemnified Person may receive any Escrow Cash in respect of any claim
for indemnification that is made pursuant to clauses (i)-(ii) of Section 11.2
and does not involve fraud, willful breach or intentional misrepresentation by
the Company or any Subsidiary unless and until Damages in an aggregate amount
greater than $250,000 (the "BASKET") have been incurred, paid or properly
accrued, in which case the Acquiror Indemnified Persons may make claims for
indemnification for all Damages in excess of the amount of the Basket. In
determining the amount of any Damages in respect of the failure of any
representation or warranty to be true and correct as of any particular date, any
materiality standard contained in such representation or warranty shall be
disregarded.
11.4 Appointment of Representative.
(a) By voting in favor of the Merger or participating in the
conversion of Company Common Stock, Company Options or Company Warrants, each
Effective Time Holder approves the designation of and designates the
Representative as the representative of the Effective Time Holders and as the
attorney-in-fact and agent for and on behalf of each Effective Time Holder with
respect to claims for indemnification under this Article 11 and the taking by
the Representative of any and all actions and the making of any decisions
required or permitted to be taken by the Representative under this Agreement,
including the exercise of the power to: (a) give and receive notices and
communications to or from Acquiror (on behalf of itself of any other Acquiror
Indemnified Person) and/or the Escrow Agent relating to this Agreement, the
Escrow Agreement or any of the transactions and other matters contemplated
hereby or thereby
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(except to the extent that this Agreement or the Escrow Agreement expressly
contemplates that any such notice or communication shall be given or received by
such holders individually); (b) authorize the release or delivery to Acquiror of
the Escrow Cash in satisfaction of indemnification claims by Acquiror or any
other Acquiror Indemnified Person pursuant to this Article 11 (including by not
objecting to such claims); (c) agree to, object to, negotiate, resolve, enter
into settlements and compromises of, demand litigation of, and comply with
orders of courts with respect to, (i) indemnification claims by Acquiror or any
other Acquiror Indemnified Person pursuant to this Article 11 or (ii) any
dispute between any Acquiror Indemnified Person and any such holder, in each
case relating to this Agreement, the Escrow Agreement or any of the transactions
and other matters contemplated hereby or thereby; and (d) take all actions
necessary or appropriate in the judgment of the Representative for the
accomplishment of the foregoing. The Representative shall have authority and
power to act on behalf of each Effective Time Holder with respect to the
disposition, settlement or other handling of all claims under this Article 11
and all rights or obligations arising under this Article 11. The Effective Time
Holders shall be bound by all actions taken and documents executed by the
Representative in connection with this Article 11, and Acquiror and other
Acquiror Indemnified Persons shall be entitled to rely on any action or decision
of the Representative. The individual serving as the Representative may be
replaced from time to time by the holders of a majority in interest of the
Escrow Cash then on deposit with the Escrow Agent upon not less than ten days
prior written notice to Acquiror. No bond shall be required of the
Representative, and the Representative shall receive no compensation for his
services. Notices or communications to or from the Representative shall
constitute notice to or from each of the Effective Time Holders.
(b) In performing the functions specified in this Agreement, the
Representative shall not be liable to any Effective Time Holder in the absence
of gross negligence or willful misconduct on the part of the Representative.
Each Effective Time Holder shall severally (based on each such holder's Pro Rata
Share), and not jointly, indemnify and hold harmless the Representative from and
against any loss, liability or expense incurred without gross negligence or
willful misconduct on the part of the Representative and arising out of or in
connection with the acceptance or administration of his duties hereunder,
including any out-of-pocket costs and expenses and legal fees and other legal
costs reasonably incurred by the Representative. If not paid directly to the
Representative by the Effective Time Holders, such losses, liabilities or
expenses may be recovered by the Representative from Escrow Cash otherwise
distributable to the Effective Time Holders (and not distributed or
distributable to any Acquiror Indemnified Person or subject to a pending
indemnification claim of any Acquiror Indemnified Person) following the one year
anniversary of the Effective Time pursuant to the terms hereof and of the Escrow
Agreement, at the time of distribution, and such recovery will be made from the
Effective Time Holders according to their respective Pro Rata Shares.
11.5 Notice of Claim. As used herein, the term "CLAIM" means a claim for
indemnification of Acquiror or any other Acquiror Indemnified Person for Damages
under this Article 11. Acquiror may give notice of a Claim under this Agreement,
whether for its own Damages or for Damages incurred by any other Acquiror
Indemnified Person, and Acquiror shall give written notice of a Claim executed
by an officer of Acquiror (a "NOTICE OF CLAIM") to the Representative (with a
copy to the Escrow Agent if the Claim involves recovery against the Escrow Cash)
promptly after Acquiror becomes aware of the existence of any potential claim by
63
an Acquiror Indemnified Person for indemnification from the Effective Time
Holders under this Article 11, arising from or relating to:
(a) Any matter specified in Section 11.2; or
(b) the assertion, whether orally or in writing, against Acquiror or
any other Acquiror Indemnified Person of a claim, demand, suit, action,
arbitration, investigation, inquiry or proceeding brought by a third party
against Acquiror or such other Acquiror Indemnified Person (in each such case, a
"THIRD-PARTY CLAIM") that is based on, arises out of or relates to any matter
specified in Section 11.2.
The period during which claims may be initiated (the "CLAIMS PERIOD") for
indemnification from the Escrow Cash shall commence at the Effective Time and
terminate at the one year anniversary of the Effective Time. The Claims Period
for indemnification from and against Damages arising out of, resulting from or
in connection with fraud, willful breach or intentional misrepresentation by the
Company or any Subsidiary shall commence at the Effective Time and terminate
upon the expiration of the applicable statute of limitations. Notwithstanding
anything contained herein to the contrary, any Claims for Damages specified in
any Notice of Claim delivered to the Representative prior to expiration of the
applicable Claims Period with respect to facts and circumstances existing prior
to expiration of the applicable Claims Period shall remain outstanding until
such Claims for Damages have been resolved or satisfied, notwithstanding the
expiration of such Claims Period. Until the expiration of the applicable Claims
Period, no delay on the part of Acquiror in giving the Representative a Notice
of Claim shall relieve the Representative or any Effective Time Holder from any
of its obligations under this Article 11 unless (and then only to the extent
that) the Representative or the Effective Time Holders are materially prejudiced
thereby.
11.6 Defense of Third-Party Claims.
(a) Acquiror shall determine and conduct the defense or settlement
of any Third-Party Claim, and the costs and expenses incurred by Acquiror in
connection with such defense or settlement (including reasonable attorneys'
fees, other professionals' and experts' fees and court or arbitration costs)
shall be included in the Damages for which Acquiror may seek indemnification
pursuant to a Claim made by any Acquiror Indemnified Person hereunder.
(b) The Representative shall have the right to receive copies of all
pleadings, notices and communications with respect to the Third-Party Claim to
the extent that receipt of such documents by the Representative does not affect
any privilege relating to the Acquiror Indemnified Person and may participate
in, but not to determine or conduct, any defense of the Third-Party Claim or
settlement negotiations with respect to the Third-Party Claim.
(c) In the event that Acquiror settles any Third-Party Claim without
the written consent of the Representative, then the Representative shall be
entitled to contest the reasonableness of settling such Third-Party Claim,
taking into account the facts and circumstances of the Third-Party Claim. In the
event that a court determines that the amount paid in settlement of such
Third-Party Claim was unreasonable given the facts and circumstances of such
Third-Party Claim, then Acquiror shall be entitled to recover from the Escrow
Cash only
64
such amount of Damages incurred in connection with settlement of such
Third-Party Claim as the court determines is reasonable. In the event that a
court determines that the amount paid in settlement of such Third-Party Claim
was reasonable given the facts and circumstances of such Third-Party Claim, then
Acquiror shall be entitled to recover the total amount of all Damages incurred
in connection with settlement of such Third-Party Claim from the Escrow Cash and
the Representative shall have no power or authority to object under any
provision of this Article 11 to such recovery. In the event that the
Representative has consented to the settlement of a Third-Party Claim, then
Acquiror shall be entitled to recover the total amount of all Damages incurred
in connection with settlement of such Third-Party Claim from the Escrow Cash and
the Representative shall have no power or authority to object under any
provision of this Article 11 to such recovery.
11.7 Contents of Notice of Claim. Each Notice of Claim by Acquiror given
pursuant to Section 11.5 shall contain the following information:
(a) that Acquiror or another Acquiror Indemnified Person has
directly or indirectly incurred, paid or properly accrued (in accordance with
GAAP) or, in good faith, believes it shall have to directly or indirectly incur,
pay or accrue (in accordance with GAAP), Damages in an aggregate stated amount
arising from such Claim (which amount may be the amount of damages claimed by a
third party in an action brought against any Acquiror Indemnified Person based
on alleged facts, which if true, would give rise to liability for Damages to
such Acquiror Indemnified Person under this Article 11); and
(b) a brief description, in reasonable detail (to the extent
reasonably available to Acquiror), of the facts, circumstances or events giving
rise to the alleged Damages based on Acquiror's good faith belief thereof,
including the identity and address of any third-party claimant (to the extent
reasonably available to Acquiror) and copies of any formal demand or complaint,
the amount of Damages, the date each such item was incurred, paid or properly
accrued, or the basis for such anticipated liability, and the specific nature of
the breach to which such item is related.
11.8 Resolution of Notice of Claim. Each Notice of Claim given by Acquiror
shall be resolved as follows:
(a) Uncontested Claims. If, within 15 business days after a Notice
of Claim is received by the Representative, the Representative does not contest
such Notice of Claim in writing to Acquiror as provided in Section 11.8(b), the
Representative shall be conclusively deemed to have consented, on behalf of all
Effective Time Holders, to the recovery by the Acquiror Indemnified Person of
the full amount of Damages specified in the Notice of Claim in accordance with
this Article 11, including the forfeiture of Escrow Cash, and, without further
notice, to have stipulated to the entry of a final judgment for damages against
the Effective Time Holders for such amount in any court having jurisdiction over
the matter where venue is proper.
(b) Contested Claims. If the Representative gives Acquiror written
notice contesting all or any portion of a Notice of Claim (a "CONTESTED CLAIM")
(with a copy to the Escrow Agent) within the 15 business day period specified in
Section 11.8(a), then such Contested Claim shall be resolved by either (i) a
written settlement agreement executed by
65
Acquiror and the Representative (a copy of which shall be furnished to the
Escrow Agent) or (ii) in the absence of such a written settlement agreement
within 30 business days following receipt by Acquiror of the written notice from
the Representative, by binding litigation between Acquiror and the
Representative in accordance with the terms and provisions of Section 11.8(c).
(c) Litigation of Contested Claims. Either Acquiror or the
Representative may bring suit in the courts of the State of California and the
Federal courts of the United States of America located within the County of Los
Angeles in the State of California to resolve the Contested Claim. Regardless of
which party brings suit to resolve a matter, Acquiror shall bear the burden of
proof by a preponderance of the evidence that Acquiror or other Acquiror
Indemnified Persons are entitled to indemnification pursuant to this Article 11.
The decision of the trial court as to the validity and amount of any claim in
such Notice of Claim shall be nonappealable, binding and conclusive upon the
parties to this Agreement and the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Cash in accordance therewith. Judgment upon any award rendered by the trial
court may be entered in any court having jurisdiction. For purposes of this
Section 11.8(c), in any suit hereunder in which any claim or the amount thereof
stated in the Notice of Claim is at issue, Acquiror shall be deemed to be the
non-prevailing party unless the trial court awards Acquiror more than one-half
of the amount in dispute; otherwise, the Representative and Effective Time
Holders shall be deemed to be the non-prevailing party. The non-prevailing party
to a suit shall pay its own expenses and the expenses, including attorneys' fees
and costs, reasonably incurred by the other party to the suit.
11.9 Release of Remaining Escrow Cash. Within five business days following
the expiration of the Claims Period, Acquiror shall instruct the Escrow Agent to
deliver to the Effective Time Holders all of the remaining Escrow Cash (if any)
in excess of any amount of Escrow Cash that is necessary to satisfy all
unresolved, unsatisfied or disputed claims for Damages specified in any Notice
of Claim delivered to the Representative before the expiration of the Claims
Period. If any Claims are unresolved, unsatisfied or disputed as of the
expiration of the Claims Period, then the Escrow Agent shall retain possession
and custody of that amount of Escrow Cash that equals the total maximum amount
of Damages then being claimed by Acquiror Indemnified Persons in all such
unresolved, unsatisfied or disputed Claims, and as soon as all such Claims have
been resolved, the Escrow Agent shall deliver to the Effective Time Holders all
remaining Escrow Cash (if any) not required to satisfy such Claims.
11.10 Tax Consequences of Indemnification Payments. All payments (if any)
made to an Acquiror Indemnified Person pursuant to any indemnification
obligations under this Article 11 will be treated as adjustments to the purchase
price for tax purposes and such agreed treatment will govern for purposes of
this Agreement, unless otherwise required by law.
ARTICLE 12
MISCELLANEOUS
12.1 Governing Law. The internal laws of the State of California,
irrespective of its conflicts of law principles, shall govern the validity of
this Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto; provided, however,
that issues involving the consummation and effects of the Merger shall be
66
governed by the laws of the State of Utah. The parties hereto hereby irrevocably
submit to the exclusive jurisdiction of the courts of the State of California
and the Federal courts of the United States of America located within the County
of Los Angeles in the State of California solely in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby and thereby (including resolution of disputes under Section
11.8(c)), and hereby waive, and agree not to assert, as a defense in any action,
suit or proceeding for the interpretation or enforcement hereof or thereof, that
it is not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in said courts or that the venue thereof may not
be appropriate or that this Agreement or any such document may not be enforced
in or by such courts, and the parties hereto irrevocably agree that all claims
with respect to such action or proceeding shall be heard and determined in such
a California State or Federal court. The parties hereby consent to and grant any
such court jurisdiction over the person of such parties and over the subject
matter of such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
12.9 or in such other manner as may be permitted by Applicable Law, shall be
valid and sufficient service thereof. With respect to any particular action,
suit or proceeding, venue shall lie solely in Los Angeles County, California.
12.2 Assignment; Binding Upon Successors and Assigns. This Agreement shall
inure to the benefit of the successors and assigns of Acquiror, including any
successor to, or assignee of, all or substantially all of the business and
assets of Acquiror. Except as set forth in the preceding sentence, no party
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other parties hereto. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Any assignment in violation of this provision
shall be void.
12.3 Severability. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or unenforceable,
then the remainder of this Agreement and the application of such provision to
other persons or circumstances shall be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that shall achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original as regards any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all parties reflected hereon as signatories.
12.5 Other Remedies. Except as otherwise expressly provided herein, any
and all remedies herein expressly conferred upon a party hereunder shall be
deemed cumulative with and not exclusive of any other remedy conferred hereby or
by law on such party, and the exercise of any one remedy shall not preclude the
exercise of any other. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is
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accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any State
having jurisdiction.
12.6 Amendments and Waivers. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof
shall not be deemed to constitute a waiver of any other default or any
succeeding breach or default. This Agreement may be amended by the parties
hereto as provided in this Section 12.6 at any time before or after adoption of
this Agreement by the Company Shareholders, but, after such adoption, no
amendment shall be made which by Applicable Law requires the further approval of
the Company Shareholders without obtaining such further approval. At any time
prior to the Effective Time, each of Company and Acquiror, by action taken by
its Board of Directors, may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the other, (b)
waive any inaccuracies in the representations and warranties made to it
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements or conditions for its benefit contained
herein. No such waiver or extension shall be effective unless signed in writing
by the party against whom such waiver or extension is asserted. The failure of
any party to enforce any of the provisions hereof shall not be construed to be a
waiver of the right of such party thereafter to enforce such provisions.
12.7 Expenses. Except as expressly provided otherwise herein, whether or
not the Merger is successfully consummated, each party shall bear its respective
legal, auditors', investment bankers' and financial advisors' fees and other
expenses incurred with respect to this Agreement, the Merger and the
transactions contemplated hereby.
12.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party shall be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including costs, expenses and fees on any appeal). The
prevailing party shall be entitled to recover its costs of suit, regardless of
whether such suit proceeds to final judgment.
12.9 Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be either hand delivered in
person, sent by facsimile, sent by certified or registered first-class mail,
postage pre-paid, or sent by nationally recognized express courier service. Such
notices and other communications shall be effective upon receipt if hand
delivered or sent by facsimile, three business days after mailing if sent by
mail, and one business day after dispatch if sent by express courier, to the
following addresses, or such other addresses as any party may notify the other
parties in accordance with this Section 12.9:
If to Acquiror or Merger Sub:
Symantec Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
68
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. V.P. and General
Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fenwick & West LLP
Silicon Valley Center
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
PowerQuest Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇. K
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
Facsimile No.:
Telephone No.:
with a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Representative:
▇▇▇▇ ▇▇▇▇
c/o Chicago Venture Partners, LP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
69
with a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
12.10 Interpretation; Rules of Construction. When a reference is made in
this Agreement to Exhibits, Sections or Articles, such reference shall be to an
Exhibit to, Section of or Article of this Agreement, respectively, unless
otherwise indicated. The words "include", "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation". The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. The parties hereto agree that they have been represented by legal
counsel during the negotiation and execution of this Agreement and, therefore,
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in an agreement or other document shall be construed
against the party drafting such agreement or document.
12.11 Third Party Beneficiary Rights. No provisions of this Agreement are
intended, nor shall be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
employee, affiliate, shareholder, partner or any party hereto or any other
Person unless specifically provided otherwise herein and, except as so provided,
all provisions hereof shall be personal solely between the parties to this
Agreement; except that Section 6.5 is intended to benefit the Company
Indemnified Persons and Article 11 is intended to benefit the Acquiror
Indemnified Persons.
12.12 Public Announcement. Upon execution of this Agreement, Acquiror and
the Company shall issue a press release approved by both parties announcing the
Merger. Thereafter, Acquiror may issue such press releases, and make such other
disclosures regarding the Merger, as it determines are required under applicable
securities laws or regulatory rules. Prior to the publication of such initial
and mutually agreed press release, neither party shall make any public
announcement relating to this Agreement or the transactions contemplated hereby
(except as may be required by law) and the Company shall inform its officers,
directors, employees, shareholders and agents who are aware of the transactions
contemplated hereby of prohibitions against trading in shares of Acquiror Common
Stock imposed by federal and state securities laws.
12.13 Confidentiality. The Company and Acquiror each confirm that they
have entered into the Mutual NDA and that they are each bound by, and shall
abide by, the provisions of such Mutual NDA; provided, however, that Acquiror
shall not be bound by such Mutual NDA after the Closing. If this Agreement is
terminated, the Mutual NDA shall remain in full force and effect, and all copies
of documents containing confidential information of a disclosing party shall be
returned by the receiving party to the disclosing party or be destroyed, as
provided in the Mutual NDA.
70
12.14 Entire Agreement. This Agreement, the exhibits and schedules hereto,
the Company Ancillary Agreements, the Acquiror Ancillary Agreements and the
Merger Sub Ancillary Agreements constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect hereto other than the Mutual NDA. The express terms hereof
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
12.15 U.S. Federal Income Tax Non-Confidentiality. Notwithstanding
anything provided herein, and any express or implied claims of exclusivity or
proprietary rights, all parties to this Agreement hereby agree and acknowledge
that each of them (and each of their employees, representatives or other agents)
is authorized to disclose to any and all persons, beginning immediately upon
commencement of their discussions and without limitation of any kind, the U.S.
federal or state income tax treatment and tax structure of the transactions
contemplated by this Agreement, and all materials of any kind (including
opinions or other tax analyses) that are provided by either party to the other
relating to such U.S. federal income tax treatment and tax structure, except to
the extent that such disclosure is subject to restrictions reasonably necessary
to comply with applicable securities laws.
12.16 Waiver of Jury Trial. EACH OF ACQUIROR, MERGER SUB, THE COMPANY AND
THE REPRESENTATIVE HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
ACQUIROR, MERGER SUB, THE COMPANY AND THE REPRESENTATIVE IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
[SIGNATURE PAGE NEXT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SYMANTEC CORPORATION POWERQUEST CORPORATION
By: By:
---------------------------------- --------------------------------
Name: Name:
-------------------------------- ------------------------------
Title: Title:
-------------------------------- -----------------------------
--------------------------------
QUARTZ ACQUISITION CORP. REPRESENTATIVE
By: By:
---------------------------------- --------------------------------
Name: Name:
-------------------------------- ------------------------------
Title:
-------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
LIST OF EXHIBITS
Exhibit A Form of Articles of Merger
Exhibit B-1 List of Signatories to Voting Agreement
Exhibit B-2 Form of Voting Agreement
Exhibit C Form of Escrow Agreement
Exhibit D Form of Parachute Payment Waiver
Exhibit E Form of Letter of Transmittal
Exhibit F Matters to be Covered in the Opinion of Stoel Rives LLP
