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Exhibit 2.4
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
among
GLOBESPAN, INC.
INDIGO ACQUISITION CORP.
and
ICOMPRESSION, INC.
Dated as of June 13, 2000
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TABLE OF CONTENTS
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PAGE
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ARTICLE I. DEFINITIONS............................................ 2
SECTION 1.01. Defined Terms.............................. 2
SECTION 1.02. Other Defined Terms........................ 5
ARTICLE II. THE MERGER............................................ 8
SECTION 2.01. The Merger................................. 8
SECTION 2.02. Effect of the Merger....................... 8
SECTION 2.03. Consummation of the Merger................. 8
SECTION 2.04. Charter, Bylaws, Directors and Officers.... 8
ARTICLE III. CONVERSION OF SECURITIES............................. 8
SECTION 3.01. Exchange Ratio............................. 8
SECTION 3.02. Conversion of Capital Stock of Acquisition
Corp....................................... 11
SECTION 3.03. Dissenting Shares.......................... 11
SECTION 3.04. Escrowed Shares............................ 11
SECTION 3.05. Surrender and Exchange of Shares........... 12
SECTION 3.06. Dissenting Shares After Payment of Fair
Value...................................... 13
SECTION 3.07. Closing of Stock Transfer Books............ 13
SECTION 3.08. Ancillary Agreements....................... 13
SECTION 3.09. No Further Ownership Rights................ 13
SECTION 3.10. Closing.................................... 13
SECTION 3.11. Change in Structure........................ 13
SECTION 3.12. Adjustment of Merger Consideration......... 13
SECTION 3.13. Fairness Hearing; Section 3(a)(10)
Exemption.................................. 14
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......... 14
SECTION 4.01. Organization and Qualification............. 14
SECTION 4.02. Authorization of Agreements;
Non-Contravention.......................... 15
SECTION 4.03. Capitalization............................. 16
SECTION 4.04. Financial Statements, Etc.................. 17
SECTION 4.05. Absence of Undisclosed Liabilities......... 17
SECTION 4.06. Absence of Certain Changes or Events....... 17
SECTION 4.07. Governmental Approvals..................... 20
SECTION 4.08. Litigation................................. 20
SECTION 4.09. Assets..................................... 20
SECTION 4.10. Real Property.............................. 21
SECTION 4.11. Intellectual Property...................... 22
SECTION 4.12. Labor Matters.............................. 24
SECTION 4.13. Taxes...................................... 25
SECTION 4.14. Compliance with Law; Permits............... 28
SECTION 4.15. Employee Benefit Plans..................... 28
SECTION 4.16. Environmental, Health and Safety Matters... 30
SECTION 4.17. Contracts.................................. 31
SECTION 4.18. Insurance.................................. 35
SECTION 4.19. Pending Transactions....................... 35
SECTION 4.20. Claims Against Officers and Directors...... 36
SECTION 4.21. Employees.................................. 36
SECTION 4.22. Customers, Suppliers, Etc.................. 36
SECTION 4.23. Accounts Receivable........................ 36
SECTION 4.24. Improper and Other Payments................ 37
SECTION 4.25. Brokers.................................... 37
SECTION 4.26. Transactions with Affiliates............... 37
SECTION 4.27. Year 2000 Compliance....................... 37
SECTION 4.28. Product Warranty; Product Liability........ 38
SECTION 4.29. Inventory.................................. 38
SECTION 4.30. Development Agreements..................... 38
SECTION 4.31. Disclosure................................. 39
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT............... 39
SECTION 5.01. Organization and Qualification............. 39
SECTION 5.02. Authorization of Agreements;
Non-Contravention.......................... 40
SECTION 5.03. Capitalization............................. 41
SECTION 5.04. Governmental Approvals..................... 41
SECTION 5.05. Brokers.................................... 42
SECTION 5.06. SEC Filings................................ 42
SECTION 5.07. Financial Statements....................... 42
SECTION 5.08. Litigation................................. 43
SECTION 5.09. Compliance with Laws....................... 43
SECTION 5.10. Investigation.............................. 43
SECTION 5.11. Disclosure................................. 43
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF ACQUISITION CORP.... 44
SECTION 6.01. Organization............................... 44
SECTION 6.02. Authorization of Agreements;
Non-Contravention.......................... 44
SECTION 6.03. Governmental Approvals..................... 45
SECTION 6.04. Brokers.................................... 45
ARTICLE VII. COVENANTS............................................ 45
SECTION 7.01. Covenants of the Company................... 45
SECTION 7.02. Covenants of Parent........................ 51
SECTION 7.03. Covenants of Parent and the Company........ 53
ARTICLE VIII. CONDITIONS TO THE MERGER............................ 56
SECTION 8.01. Conditions to the Obligation of the
Company to Effect the Merger............... 56
SECTION 8.02. Conditions to the Obligation of Parent and
Acquisition Corp. to Effect the Merger..... 57
ARTICLE IX. TERMINATION AND ABANDONMENT........................... 59
SECTION 9.01. Termination and Abandonment................ 59
SECTION 9.02. Effect of Termination...................... 61
ARTICLE X. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION........... 61
SECTION 10.01. Survival.................................. 61
SECTION 10.02. Indemnification from Escrow Shares
Deposited By All Shareholders............. 61
SECTION 10.03. Time and Value Limitations................ 62
ARTICLE XI. MISCELLANEOUS......................................... 62
SECTION 11.01. Expenses, Etc............................. 62
SECTION 11.02. Execution in Counterparts................. 62
SECTION 11.03. Notices................................... 62
SECTION 11.04. Waivers................................... 63
SECTION 11.05. Amendments, Supplements, Etc.............. 64
SECTION 11.06. Entire Agreement.......................... 64
SECTION 11.07. Applicable Law............................ 64
SECTION 11.08. Binding Effect, Benefits.................. 64
SECTION 11.09. Assignability............................. 65
SECTION 11.10. Severability.............................. 65
INDEX TO ITEMS AND EXHIBITS
ITEM DESCRIPTION
I Voting Agreement Shareholders
II Lock-up Shareholders
4.01(a) Jurisdictions
4.01(b) Beneficial Ownership
4.01(c) Subsidiaries
4.03(a) Capitalization of the Company
4.03(b) Capitalization of the Subsidiaries
4.04 Financial Statements
4.05 Certain Liabilities
4.06 Certain Changes or Events
4.08 Litigation
4.09 Liens
4.10(a) Owned Real Property
4.10(b) Leased Real Property
4.11 Intellectual Property Items
4.12 Labor Matters
4.13 Taxes
4.14 Permits
4.15 Employee Benefit Plans
4.16 Environmental Matters
4.17(a) Contracts
4.18 Insurance
4.22 Customers; Suppliers, etc.
4.23 Accounts Receivable
4.24 Improper Payments
4.26 Brokers
4.26 Transactions with Affiliates
4.27(c) Year 2000
4.28 Standard Terms
4.30 Development Agreements
5.03 Capitalization of Parent
5.05 Brokers
7.01(a)(iii) Employee Arrangements
7.01(i)(a) Employees-a
7.01(i)(b) Employees-b
7.02(b) Employee Matters
EXHIBIT DESCRIPTION
A Form of Lock-up Agreement
B Form of Noncompete Agreement
C Form of Escrow Agreement
D Form of Voting Agreement
E Form of Confidentiality Agreement
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION,
dated as of June 13, 2000, among GLOBESPAN, INC., a Delaware corporation
("Parent"), INDIGO ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of Parent ("Acquisition Corp."), and ICOMPRESSION, a California
corporation (the "Company"). The Company is sometimes referred to as the
"Surviving Corporation".
WHEREAS, Parent, Acquisition Corp. and the Company (i)
previously entered into an Agreement and Plan of Reorganization dated as of May
16, 2000 (the "Original Agreement") and (ii) desire to amend and restate the
Original Agreement; and
WHEREAS, Parent, Acquisition Corp. and the Company desire that
Acquisition Corp. merge with and into the Company (the "Merger"), upon the terms
and subject to the conditions set forth herein and in accordance with the
General Corporation Law of the State of Delaware (the "DGCL") and the General
Corporation Law of the State of California ("California Law"), with the result
that the Company shall continue as the surviving corporation and the separate
corporate existence of Acquisition Corp. shall cease; and
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, Parent, Acquisition Corp. and the Company desire that
at the Effective Time (as hereinafter defined), all outstanding shares of the
Company's Common Stock, $0.001 par value (the "Company Common Stock") (excluding
any Dissenting Shares (as hereinafter defined)) be converted into the right to
receive the number of shares of fully paid and nonassessable shares of Common
Stock, $.001 par value, of Parent ("Parent Common Stock"), as hereinafter
provided; and
WHEREAS, Parent, Acquisition Corp. and the Company desire that
at the Effective Time, each outstanding option to purchase one share of Company
Common Stock (each, a "Company Option") be converted into the number of Parent
Options (as hereinafter defined) as hereinafter provided; and
WHEREAS, Parent, Acquisition Corp. and the Company desire that
at the Effective Time, each outstanding warrant to purchase one share of Company
Common Stock or one share of Series E Stock (as hereinafter defined) outstanding
at the effective time (each, a "Company Warrant") be converted into the number
of Parent Warrants (as hereinafter defined) as hereinafter provided; and
WHEREAS, Parent, Acquisition Corp. and the Company desire that
at the Effective Time, all other rights to acquire any shares of Company Common
Stock issued and outstanding or in effect as of such time shall be converted
into Parent Common Stock as hereinafter provided; and
WHEREAS, Parent, Acquisition Corp. and the Company desire
that, immediately after the Effective Time and solely as a result of the Merger,
Parent will own all of the issued and outstanding capital stock of the Company;
and
WHEREAS, the respective Boards of Directors of Parent and
Acquisition Corp. have approved the Merger; and
WHEREAS, the Board of Directors of the Company has unanimously
approved this Agreement, the Escrow Agreement and the Merger; and
WHEREAS, concurrently with the execution of the Original
Agreement, the Shareholders listed on Schedule I hereto executed Voting
Agreements, substantially in the form attached hereto as Exhibit D, agreeing
among other things (i) to vote in favor of the Merger and the transactions
contemplated by this Agreement and (ii) to take all action necessary to waive
any notice or other time periods contemplated by any agreement that could result
in a delay of the date of the shareholders meeting required to approve the
transactions contemplated hereby or that could otherwise result in a delay of
the consummation of the transactions contemplated hereby (each, a "Voting
Agreement");
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants, agreements and conditions contained
herein, and in order to set forth the terms and conditions of the Merger and the
mode of carrying the same into effect, the parties hereto hereby agree as
follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the
following terms shall have the meanings specified below:
"AFFILIATE" with respect to any Person means any Person
controlling, controlled by or under common control with such Person;
notwithstanding the foregoing, a Principal Shareholder shall be deemed
to be an Affiliate of the Company.
"ANCILLARY AGREEMENTS" means the Escrow Agreement, the Lock-Up
Agreement and the Noncompete Agreement.
"COMPANY EMPLOYEE" means each employee of the Company and/or
any of the Subsidiaries who:
(i) at the Effective Time, is performing work duties for
the Company or any of the Subsidiaries or is absent by reason
of a scheduled day off;
(ii) at the Effective Time, is absent from work by reason
of a sick day (not covered under clause (iii) below) or a paid
vacation day, personal day or holiday;
(iii) at the Effective Time, is absent from work by
reason of a family or medical leave covered under Section 102
of the Family and Medical Leave Act of 1993; or
(iv) at the Effective Time, is absent from work due to
any other authorized leave under the policies or practices of
the Company or any of the Subsidiaries and such person returns
to work within the period permitted by such policies or
practices, but not later than 30 days after the Effective Time
or such later time as may be required by law.
"COMPANY PREFERRED STOCK" shall mean the Preferred Stock, no
par value of the Company, consisting of the Series A Preferred Stock,
no par value ("Series A Stock"), Series B Preferred Stock, no par value
("Series B Stock"), Series C Preferred Stock, no par value ("Series C
Stock"), Series D Preferred Stock, no par value ("Series D Stock"), and
Series E Preferred Stock, no par value ("Series E Stock"), of the
Company.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXECUTIVES" means each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇.
"FULLY DILUTED COMPANY COMMON STOCK" means, at any time, the
sum of (a) the number of shares of Company Common Stock issued and
outstanding as of such time, plus (b) the number of shares of Company
Preferred Stock issued and outstanding as of such time, on an as
converted to Company Common Stock basis, plus (c) the number of shares
of Company Common Stock issuable upon exercise or conversion of the
Company Options, plus (d) the number of shares of Company Common Stock
issuable upon exercise of the Company Warrants exercisable for Company
Common Stock, plus (e) the number of shares of Company Common Stock
issuable upon conversion of Series E Stock issuable upon exercise of
Company Warrants exercisable for Series E Stock, plus (f) the number of
shares of Company Common Stock issuable upon exercise or conversion of
any other rights to acquire any shares of Company Common Stock (or
securities convertible into same) issued and outstanding at the
Effective Time, on an as
converted to Company Common Stock basis.
"▇▇▇▇-▇▇▇▇▇ ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
"LIEN" means any mortgage, lien, pledge, security interest,
charge, claim, restriction or encumbrance of any nature whatsoever.
"LOCK-UP AGREEMENT" means the Lock-up Agreement among Parent
and each of the Lock-up Shareholders, substantially in the form of
Exhibit A hereto.
"LOCK-UP SHAREHOLDERS" means the Shareholders listed on
Schedule II hereto.
"MATERIAL ADVERSE EFFECT" means or refers to, with respect to
any entity, any adverse change, circumstance or effect that,
individually or in the aggregate with all other adverse changes,
circumstances and effects, is or is reasonably likely to be materially
adverse to the financial condition, properties, assets, liabilities,
material intellectual property rights, product development efforts,
business or operating results of such entity, and its subsidiaries if
any, taken as a whole, or to materially and adversely effect such
entity's ability to consummate the Merger, except (i) that a change in
the market price of a corporation's common stock shall not, in and of
itself, be deemed a "Material Adverse Effect" with respect to such
corporation and (ii) that a "Material Adverse Effect" with respect to a
corporation shall not include any adverse change, circumstance or
effect (a) resulting from the announcement of the Original Agreement;
(b) resulting from or relating to general business, economic or
industry conditions; or (c) relating to or resulting directly from
implementation of the transactions contemplated by this Agreement. For
purposes of Section 8.02(a), a Material Adverse Effect on the Company
shall mean any such adverse change, condition or effect, individually
or in the aggregate, that, directly or indirectly, results in, or could
reasonably be expected to result in, a liability or loss of $500,000 or
more to the Company.
"NONCOMPETE AGREEMENT" means the Noncompete Agreement between
Parent and each of the Executives and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in the form of
Exhibit B hereto.
"PERSON" means any individual, partnership, firm, corporation,
limited liability company, association, trust, unincorporated
organization or other entity, as well as any syndicate or group that
would be deemed to be a person under Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended.
"PRINCIPAL SHAREHOLDERS" means (i) the executive officers and
directors of the Company and (ii) each Shareholder who holds Company
Common Stock, Company Preferred Stock, Company Options and/or Company
Warrants representing in the aggregate ten percent (10%) or more of the
Fully Diluted Company Common Stock as of
the Effective Time.
"SHAREHOLDERS" at any time means the holders of Company Common
Stock, Company Preferred Stock and/or Company Warrants as of such time.
"SUBSIDIARY" or "SUBSIDIARIES" means any corporation or other
business entity a majority of whose outstanding equity securities is at
the time owned, directly or indirectly, by the Company and/or one or
more other Subsidiaries of the Company.
"TAX" and "TAXES" means (i) any net income, alternative or
add-on minimum tax, gross income, gross receipts, sales, use, AD
VALOREM, value added, transfer, gains, franchise, profits, license,
withholding on amounts paid or received, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or
windfall profit taxes, custom duties or other taxes, governmental fees
or other like assessments or charges of any kind whatsoever, together
with any interest or any penalty, addition to tax or additional amount
imposed by any governmental authority responsible for the imposition of
any such taxes (domestic or foreign) and (ii) liability of the Company
or any of the Subsidiaries for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for federal, state, local or
foreign Tax purposes, or being a party to any agreement or arrangement
whereby liability of the Company or any of the Subsidiaries for
payments of such amounts was determined or taken into account with
reference to the liability of any other Person for any period prior to,
or up to and including, the Effective Time, and (iii) liability of the
Company or any of the Subsidiaries with respect to the payment of any
amounts described in (i) as a result of any express or implied
obligation to indemnify any other Person.
SECTION 1.02. OTHER DEFINED TERMS. The following terms shall
have the meanings defined for such terms in the Sections set forth below:
TERM: SECTION:
Accounts Receivable 4.23
Acquisition Corp. Recitals
Acquisition Proposal 7.02(b)
Applicable Laws 4.14
California Fairness Hearing 3.13
California Law Recitals
CERCLA 4.16
Claims 10.02
Closing 3.10
Closing Date 3.10
Closing Price 3.01(a)(i)
Code Recitals
Commissioner 3.13
Company Recitals
Company Affiliated Group 4.13(c)
Company Certificate 3.01(c)
Company Common Stock Recitals
Company Financial Statements 4.05
Company Intellectual Property 4.11
Company Option Recitals
Company Warrant Recitals
Computer Systems 4.27
Confidentiality Agreement 7.02(b)
Development Agreements 4.30
DGCL Recitals
Dissenting Shares 3.03
DOJ 7.01(e)
Effective Time 2.03
Environmental Violation 4.16
ERISA Affiliates 4.15(a)
Escrow Agent 3.04
Escrow Agreement 3.04
Escrow Amount 3.04
Escrowed Shares 3.04
Exchange Act 5.04
Exchange Ratio 3.01(a)
FTC 7.01(e)
GAAP 4.05
Governmental Agency 4.07
Gross Stock Consideration 3.01(a)
H&Q 7.01(m)
Hazardous Materials 4.16
Information Statement 7.01(d)
Intellectual Property 4.11
Interim Balance Sheet 4.04
Major Customers 4.22
Major Suppliers 4.22
Merger Recitals
Net Stock Consideration 3.01(a)
Original Agreement Recitals
Parent Recitals
Parent Certificate 3.01(c)
Parent Common Stock Recitals
Parent Filings 5.06
Parent Indemnified Persons 10.02
Parent Option 3.01(b)(iii)
Parent Warrant 3.01(b)(iv)
Penalties 4.30
Permit Applications 4.31
Permits 4.14
Permitted Liens 4.09
Plans 4.15(a)
Protectable Intellectual Property 4.11
Representative 3.04
SEC 5.04
Securities Act 3.13
Series B Stock Closing Price 3.01(b)(i)
Series B Stock Preference Amount 3.01(b)(i)
Shareholders Meeting 7.01(d)
Surviving Corporation Recitals
Tax Returns 4.13
Transaction Expenses 11.01(a)
Transaction Fee Amount 7.01(m)
Voting Agreement Recitals
Year 2000 Compliant 4.28
ARTICLE II.
THE MERGER
SECTION 2.01. THE MERGER. Subject to the terms and conditions
of this Agreement, at the Effective Time, in accordance with this Agreement,
the DGCL and California Law, Acquisition Corp. shall be merged with and into
the Company, the separate corporate existence of Acquisition Corp. shall cease,
and the Company shall continue as the surviving corporation and shall continue
to be governed by California Law.
SECTION 2.02. EFFECT OF THE MERGER. The Merger shall have the
effects set forth in Section 259 of the DGCL and Section 1107 of the California
Law.
SECTION 2.03. CONSUMMATION OF THE MERGER. As soon as
practicable after the satisfaction or waiver of the conditions to the
obligations of the parties to effect the Merger set forth herein, provided
that this Agreement has not been terminated previously, the parties hereto
will cause the Merger to be consummated by filing with the Secretary of State
of the State of Delaware a properly executed certificate of merger in
accordance with the DGCL and the filing with the Secretary of State of the
State of California a properly executed Agreement of Merger in accordance
with California Law, with the Merger then to become effective on the date
that both of such filings are made (the first such date, the "Effective
Time").
SECTION 2.04. CHARTER, BYLAWS, DIRECTORS AND OFFICERS. As of
the Effective Time, the Articles of Incorporation of the Surviving
Corporation shall be amended and restated as determined by Parent, until
thereafter amended in accordance with the provisions thereof and as provided
by California Law. The Bylaws of the Surviving Corporation from and after the
Effective Time shall be amended and restated as determined by Parent,
continuing until thereafter amended in accordance with the provisions thereof
and the Articles of Incorporation of the Surviving Corporation and as
provided by California Law. The initial directors and officers, respectively,
of the Surviving Corporation shall be (i) the directors of Acquisition Corp.
immediately prior to the Effective Time and (ii) the officers of the Company
immediately prior to the Effective Time, respectively, in each case until
their removal or until their respective successors are duly elected and
qualified.
ARTICLE III.
CONVERSION OF SECURITIES
SECTION 3.01. EXCHANGE RATIO.
(a) CERTAIN DEFINITIONS.
(i) "CLOSING PRICE" means the average closing price per share
of Parent Common Stock on the NASDAQ National Market for the five
trading day period ending at 4:00 p.m. New York time on the day
preceding the date of the Effective Time, as reported in the WALL
STREET JOURNAL.
(ii) "EXCHANGE RATIO" means the number of shares of Parent
Common Stock equal to the quotient obtained by dividing (x) the Net
Stock Consideration by (y) the Fully Diluted Company Common Stock.
(iii) "GROSS STOCK CONSIDERATION" means 4,043,000 shares of
Parent Common Stock.
(iv) "NET STOCK CONSIDERATION" means the Gross Stock
Consideration less the Series B Stock Preference Amount.
(v) "SERIES B STOCK PREFERENCE AMOUNT" has the meaning in
Section 3.01(b)(i) below.
(b) CONVERSION. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
(i) SERIES B STOCK. Each share of Series B Stock issued and
outstanding immediately prior to the Effective Time (other than
Dissenting Shares) shall be converted into the right to receive (x) a
fraction of a share of Parent Common Stock equal in value to $0.625
plus all declared but unpaid dividends on the Series B Stock (with
Parent Common Stock valued for this purpose at the average of the
closing price per share of Parent Common Stock (the "Series B Stock
Closing Price") on the NASDAQ National Market for the 30-day period
ending at 4:00 p.m. New York time three (3) days preceding the
Effective Time, as reported in the WALL STREET JOURNAL) (collectively,
the "Series B Stock Preference Amount"); and (y) the Exchange Ratio.
(ii) COMMON STOCK. Each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (including each
share of Company Common Stock deemed issued as a result of the
conversion of Series A Stock, Series C Stock, Series D Stock and Series
E Stock into Company Common Stock immediately prior to the Effective
Time) (other than Dissenting Shares) shall be converted into the
Exchange Ratio.
(iii) STOCK OPTIONS. Each outstanding Company Option will,
without any further action on the part of any holder thereof, be
assumed and converted into an option (each, a "Parent Option" and
collectively, the "Parent Options") to purchase that number of shares
of Parent Common Stock as is equal to the number of shares of Company
Common Stock subject to the Company Option multiplied by the Exchange
Ratio (rounded down to the nearest whole share), at an exercise price
per share of Parent Common Stock equal to the exercise price per share
of Company Common Stock of such Company Option immediately prior to the
Effective Time divided by the Exchange Ratio (rounded up to the nearest
whole cent). Except as provided above, the term, exercisability,
vesting schedule, status as an "incentive stock option" under Section
422 of the Code, if applicable, and all other terms and conditions of
the Company Options will otherwise continue unamended with respect to
the Parent Options. Continuous employment with the Company will be
credited to an optionee of the Company for purposes of determining the
number of Shares of Parent Common Stock subject to exercise under an
exchanged Company Option after the Effective Time.
(iv) WARRANTS. Each Company Warrant outstanding immediately
prior to the Effective Time that does not by its terms terminate at the
Effective Time shall be assumed and converted into a warrant (each, a
"Parent Warrant" and collectively, the "Parent Warrants") to purchase
that number of shares of Parent Common Stock as is equal to that number
of shares of Company Common Stock subject to the Company Warrant (or in
the case of Company Warrants to purchase Series E Stock, the number of
shares of Company Common Stock issuable upon conversion of that number
of shares of Series E Stock subject to the Company Warrant) multiplied
by the Exchange Ratio (rounded down to the nearest whole share), at an
exercise price per share of Parent Common Stock equal to the exercise
price per share of Company Common Stock subject to such Company Warrant
immediately prior to the Effective Time (or in the case of Company
Warrants to purchase Series E Stock, the exercise price per share of
Company Common Stock issuable upon conversion of Series E Stock
issuable under the Company Warrant immediately prior to the Effective
Time) divided by the Exchange Ratio (rounded up to the nearest cent).
Except as provided above, the terms and conditions of the Parent
Warrants will be the same as the Company Warrants.
(c) CALCULATION OF THE EXCHANGE RATIO. At the end of trading
on the day preceding the Effective Time, Parent shall deliver a certificate (the
"Parent Certificate") to the Company certifying as to the true and correct
Series B Stock Closing Price. On such day, following the receipt of the Parent
Certificate, the Chief Executive Officer and Chief Financial Officer of the
Company shall deliver a certificate (the "Company Certificate") to Parent and
Acquisition Corp. certifying in their capacity as such officers on behalf of the
Company as to the true and correct Series B Stock Preference Amount, the Net
Stock Consideration, the aggregate outstanding Fully Diluted Company Common
Stock, the Exchange Ratio, the total percentage of the Gross Stock Consideration
payable or issuable to each Shareholder and, subject to the second sentence of
Section 3.04, the total percentage of the Escrowed Shares to be delivered to the
Escrow Agent of behalf of each Shareholder. To the extent either Parent or the
Company disputes any calculations made by the other party in the Parent
Certificate or the Company Certificate, as the case may be, such parties shall
use reasonable efforts to promptly resolve any such dispute.
SECTION 3.02. CONVERSION OF CAPITAL STOCK OF ACQUISITION CORP.
At the Effective Time, each share of Common Stock of Acquisition Corp. issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger, automatically and without any action on the part of the holder thereof,
be converted into and become one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
SECTION 3.03. DISSENTING SHARES. Notwithstanding anything in
this Agreement to the contrary, shares of capital stock of the Company that are
outstanding immediately prior to the Effective Time and that are held by
Shareholders who have not voted such shares in favor of the approval and
adoption of this Agreement and who shall have delivered a written demand for
appraisal of such shares in accordance with California Law ("Dissenting Shares")
shall not be converted into or be exchangeable for the right to receive the
consideration provided in Section 3.01 hereof, but the holders of such shares
shall be entitled to payment of the appraised value of such shares in accordance
with the provisions of California Law; PROVIDED, HOWEVER, that (i) if any holder
of Dissenting Shares shall subsequently deliver a written withdrawal of his or
her demand for appraisal of such shares (with the written approval of the
Surviving Corporation), or (ii) if any holder fails to perfect or loses his or
her appraisal rights as provided in California Law, or (iii) if any holder of
Dissenting Shares fails to demand payment within the time period provided in
California Law, such holder shall forfeit the right to appraisal of such shares
and such shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Time, the right to receive the
consideration provided in Section 3.01 hereof, without any interest thereon.
SECTION 3.04. ESCROWED SHARES. At the Effective Time, the
Company shall deliver to the escrow agent (the "Escrow Agent") designated under
the Escrow Agreement (the "Escrow Agreement"), substantially in the form of
Exhibit C, a certificate or certificates representing an aggregate 400,000
shares of Parent Common Stock out of the Gross Stock Consideration (such amount
hereinafter referred to as the "Escrow Amount," and such shares are collectively
hereinafter referred to as the "Escrowed Shares") for the purposes of satisfying
indemnity obligations arising out of a breach by the Company of any of its
representations, warranties or covenants contained herein, all as more
particularly described in the Escrow Agreement. The Escrowed Shares shall be
deducted from the number of shares of Parent Common Stock to be issued to the
Shareholders in the Merger based on the percentages for such calculation set
forth in the Company Certificate (it being understood that no shares of Parent
Common Stock shall be deducted from the number of shares of Parent Common Stock
issued to (x) Shareholders in exchange for shares of Company Common Stock issued
to Shareholders as a result of the exercise of a Company Warrant after the date
of the Original Agreement and (y) Shareholders in exchange for shares of Company
Common Stock issued to Shareholders after the date of the Original Agreement in
accordance with Section 7.01(m)). In the event that the Merger is approved by
the Shareholders as provided herein, the Shareholders shall, without any further
act of any Shareholder, be deemed to have (i) consented to and approved the
appointment of ▇▇▇▇ ▇▇▇▇▇▇▇▇ as the representative of the Shareholders under the
Escrow Agreement (the "Representative") and as the attorney in fact and agent
for and on behalf of each Shareholder with respect to the subject matter under
the Escrow Agreement. Without limiting the generality of the foregoing, the
Representative shall have full power and authority on behalf of the Shareholders
to (a) interpret all of the terms and provisions of the Escrow Agreement; (b)
compromise or settle any claims asserted under the Escrow Agreement; (c)
authorize payments from the Escrow Fund (as defined in the Escrow Agreement), on
behalf of the Shareholders and (d) execute, deliver and perform the Escrow
Agreement. The Representative may be changed by the Shareholders from time to
time upon not less than ten (10) days' prior written notice to the Escrow Agent
and Parent; PROVIDED that a Representative may not be removed unless holders of
a majority in interest of the Escrow Fund agree to such removal and to the
identity of the substituted agent. No bond shall be required of the
Representative, and the Representative shall not receive compensation for his
services. The Representative shall not be liable for any act done or omitted
under the Escrow Agreement as Representative absent bad faith or gross
negligence. The Shareholders by or on whose behalf Escrowed Shares will be
contributed shall severally indemnify the Representative and hold the
Representative harmless against any loss, liability or expense incurred without
gross negligence or bad faith on the part of the Representative and arising out
of or in connection with the acceptance or administration of the
Representative's duties under the Escrow Agreement including the reasonable fees
and expenses of any legal counsel retained by the Representative.
SECTION 3.05. SURRENDER AND EXCHANGE OF SHARES.
(a) At the Closing, upon delivery by each Shareholder of the
certificate or certificates, duly endorsed, that prior thereto represented
shares of Company Common Stock or Company Preferred Stock, Parent shall, subject
to Section 3.04 hereof, deliver to each such surrendering Shareholder a
certificate representing the number of shares of Parent Common Stock that the
number of shares of Company Common Stock or Series B Stock represented by the
surrendered certificate were converted into under Section 3.01 hereof.
(b) If a certificate representing shares of the capital stock
of the Company has been lost, stolen or destroyed, and a replacement certificate
has not been issued as of the Effective Time, the holder of such certificate
shall submit an affidavit describing the lost, stolen or destroyed certificate,
the number of shares evidenced thereby and affirming the status of that
certificate in lieu of surrendering such certificate to Parent, which shall deem
such certificate canceled. Until so surrendered, each outstanding certificate
that, prior to the Effective Time, represented shares of the capital stock of
the Company that shall have been converted as aforesaid shall be deemed for all
corporate purposes, except as hereinafter provided, to evidence the ownership of
the consideration into which such shares have been so converted.
(c) No fractional shares of Parent Common Stock will be issued
in connection with the Merger, but in lieu thereof each holder of capital stock
of the Company who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock will receive from Parent, promptly after the delivery of
the certificates or affidavit, as the case may be, referenced
in paragraph (a) and (b) of this Section 3.05, an amount of cash equal to the
per share market value of Parent Common Stock (based on the closing sale price
of Parent Common Stock as quoted on the NASDAQ National Market on the date
before the Closing Date, as reported in the WALL STREET JOURNAL) multiplied by
the fraction of a share of Parent Common Stock to which such holder would
otherwise be entitled.
SECTION 3.06. DISSENTING SHARES AFTER PAYMENT OF FAIR VALUE.
Dissenting Shares, if any, after payment of fair value in respect thereto have
been made to dissenting Shareholders pursuant to California Law, shall be
canceled.
SECTION 3.07. CLOSING OF STOCK TRANSFER BOOKS. On and after
the Effective Time, there shall be no transfers on the stock transfer books of
the Company of shares of capital stock of the Company.
SECTION 3.08. ANCILLARY AGREEMENTS. At the Effective Time,
Parent and each Shareholder shall execute and deliver each of the Ancillary
Agreements to which the Company and each such Shareholder is a party.
SECTION 3.09. NO FURTHER OWNERSHIP RIGHTS. The Gross Stock
Consideration delivered upon the surrender for exchange of any certificate of
capital stock of the Company in accordance with the terms hereof shall be deemed
to have been delivered and paid in full satisfaction of all rights pertaining to
the shares of capital stock of the Company previously represented by such
certificate.
SECTION 3.10. CLOSING. Subject to the provisions of Article IX
hereof, the closing of the transactions contemplated by this Agreement (the
"Closing") and all actions specified in this Agreement to occur at the Closing
shall take place at the offices of Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol,
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 a.m., New York time, on the
second business day following the day on which the last of the conditions set
forth in Sections 9.01 and 9.02 (other than conditions which by their terms are
to be satisfied at the Closing) shall have been fulfilled or waived, or at such
other time and/or place and/or on such other date as Parent and the Company
shall agree (the date on which the Closing takes place, the "Closing Date").
SECTION 3.11. CHANGE IN STRUCTURE. Parent may at any time
change the method of effecting the combination with the Company (including
without limitation the provisions of this Article III) if and to the extent it
deems such change to be desirable, including without limitation to provide for a
merger of the Company directly into Parent, in which Parent is the surviving
corporation; provided, however, that no such change shall (A) alter or change
the amount of consideration to be issued to the Shareholders as provided for in
this Agreement, (B) materially impede consummation of the transactions
contemplated by this Agreement or (C) adversely affect the Company or the
Shareholders.
SECTION 3.12. ADJUSTMENT OF MERGER CONSIDERATION. In the event
of any change in the Parent Common Stock between the date of the Original
Agreement and the Effective Time by reason of any stock split, stock dividend,
subdivision, reclassification, combination, merger, consolidation, exchange of
Parent Common Stock or the like, the terms set forth in this Agreement shall be
appropriately adjusted.
SECTION 3.13. FAIRNESS HEARING; SECTION 3(A)(10) EXEMPTION.
The Merger will be subject to the approval of the California Commissioner of
Corporations (the "Commissioner") and the issuance by the Commissioner of a
permit authorizing the Merger after a fairness hearing (the "California Fairness
Hearing") to be conducted by the Commissioner in compliance with Section
3(a)(10) of the Securities Act of 1933, as amended (the "Securities Act").
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Acquisition
Corp. as of the date of the Original Agreement (and with respect to the
representations and warranties set forth in Sections 4.01, 4.02 and 4.07 as of
the date hereof) as follows, except as set forth in the Company Disclosure
Letter delivered to Parent concurrently with the execution of the Original
Agreement ("Company Disclosure Letter", and each reference to an "Item" in this
Article IV being a reference to that Item in the Company Disclosure Letter):
SECTION 4.01. ORGANIZATION AND QUALIFICATION.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
all requisite corporate power and authority to own or lease and operate its
properties and assets and to carry on its business as it is now being conducted.
The Company is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction in which the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary. Item 4.01(a) sets forth the jurisdictions in which the Company is so
qualified.
(b) Except as set forth on Item 4.01(b), the Company does not
own of record or beneficially, directly or indirectly, (i) any shares of capital
stock or securities convertible into capital stock of or interests in any
limited liability company or other corporation or (ii) any participating
interest in any partnership, joint venture or other non-corporate business
enterprise. The Company is not party to any contract to provide funds to or make
any investment (in the form of a loan, capital contribution or similar payment)
in any entity or enterprise that is not wholly owned by it.
(c) Item 4.01(c) sets forth the (i) name and jurisdiction of
incorporation of each Subsidiary, (ii) the number of shares of authorized
capital stock of each class of its capital stock, (iii) the number of issued and
outstanding shares of each class of its capital stock, the names of the holders
thereof and the number of shares held by each such holder. Each Subsidiary is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite power and authority to own or
lease and operate its properties and assets and to carry on its business as it
is now being conducted. Each Subsidiary is duly qualified to do business, and is
in good standing, in each jurisdiction in which the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary. Item 4.01(c) sets forth those jurisdictions in which each Subsidiary
is so qualified.
SECTION 4.02. AUTHORIZATION OF AGREEMENTS; NON-CONTRAVENTION.
(a) The execution and delivery by the Company of this Agreement and each
Ancillary Agreement to which the Company is a party, and the consummation by the
Company of the transactions contemplated hereby and thereby, have been duly
authorized by all requisite corporate action. This Agreement has been duly and
validly executed by the Company and, subject to due execution by the other
parties hereto, will constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting the enforcement of creditors' rights generally.
Each Ancillary Agreement to which the Company is party, when duly executed and
delivered in accordance with this Agreement, subject to due execution by any
other parties thereto, will constitute a legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting the enforcement of creditors' rights generally. No
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby.
(b) NON-CONTRAVENTION. The execution, delivery and performance
of this Agreement by the Company and each Ancillary Agreement to which the
Company is a party and the consummation of the transactions contemplated hereby
and thereby will not (i) conflict with any provision of the Articles of
Incorporation or Bylaws of the Company or the comparable charter or
organizational documents of any Subsidiary (in each case as in effect at the
Effective Time) (ii) except as set forth on Item 4.02(b), result (with the
giving of notice or the lapse of time or both) in any violation of or default or
loss of a benefit under, or permit the termination, cancellation or acceleration
of any obligation under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any Subsidiary under, or result in any
increased, additional or guaranteed rights or entitlements of any Person under,
any mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any Subsidiary or any
of their respective properties, other than any such violation, default, loss,
acceleration or Lien that would not materially adversely affect the ability of
the Company to
consummate the transactions contemplated hereby and which would not otherwise
have a Material Adverse Effect on the Company.
SECTION 4.03. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
Fifty Million (50,000,000) shares of Company Common Stock and Twenty Eight
Million (28,000,000) shares of Preferred Stock, One Million Six Hundred
(1,600,000) of which are designated as "Series A Preferred Stock," Three Million
Two Hundred Thousand (3,200,000) of which are designated as "Series B Preferred
Stock," Four Million Five Hundred Thousand (4,500,000) of which are designated
as "Series C Preferred Stock," Nine Million (9,000,000) of which are designated
as "Series D Preferred Stock," and Seven Million Five Hundred Thousand
(7,500,000) of which are designated as "Series E Preferred Stock." The number of
outstanding shares is 15,656,688 shares of Company Common Stock; One Million Six
Hundred Thousand (1,600,000) shares of Series A Stock; One Million Six Hundred
Thousand (1,600,000) shares of Series B Stock, Three Million Nine Hundred Ninety
Thousand (3,990,000) shares of Series C Stock, Eight Million Eight Hundred Fifty
Nine Thousand Six Hundred Forty Nine (8,859,649) shares of Series D Stock and
Four Million Seven Hundred Seventy Seven Thousand Seventy (4,777,070) shares of
Series E Stock, each of which shares is validly issued, fully paid and
nonassessable, and, except for shares of stock previously repurchased from ▇▇▇
▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and departing employees, no other shares of capital stock of
the Company have ever been issued. Except as set forth on Item 4.03(a), no
subscription, warrant, option, convertible security, stock appreciation or other
right (contingent or other) to purchase or acquire any shares of any class of
capital stock of the Company is authorized or outstanding and there is not any
commitment of the Company to issue any shares, warrants, options or other such
rights or to distribute to holders of any class of its capital stock any
evidences of indebtedness or assets. Except as set forth on Item 4.03(a), the
Company does not have any obligation (contingent or other) to purchase, redeem
or otherwise acquire any shares of its capital stock or any interest therein or
to pay any dividend or make any other distribution in respect thereof. Item
4.03(a) sets forth a complete and correct list as of the date of the Original
Agreement of the holders of record of the Company Common Stock, the Company
Preferred Stock and the holders of all options or other rights to purchase
capital stock of the Company, including by name of the holder the number of
shares or the number of shares obtainable on exercise of options or rights held.
(b) The authorized capital stock and the number of issued and
outstanding shares of capital stock of each of the Subsidiaries is set forth on
Item 4.03(b). All of such issued and outstanding shares of capital stock are
validly issued and outstanding, fully paid and nonassessable, and no other
shares of capital stock of any of the Subsidiaries have ever been issued. Except
as set forth on Item 4.03(b), no subscription, warrant, option, convertible
security, stock appreciation or other right (contingent or other) to purchase or
acquire any shares of any class of capital stock of any of the Subsidiaries is
authorized or outstanding and there is not any commitment of any of the
Subsidiaries to issue any shares, warrants, options or other such rights or to
distribute to holders of any class of its capital stock any evidences of
indebtedness or assets. Except as set forth on Item 4.03(b), none of the
Subsidiaries has any obligation (contingent or other) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof. Item 4.03(b)
sets forth a complete and correct list as of the date of the Original Agreement
of the holders of record of the shares of capital stock of each Subsidiary and
the holders of all options or other rights to purchase capital stock of each
Subsidiary, including by name of the holder the number of shares or the number
of shares obtainable on exercise of options or rights held.
SECTION 4.04. FINANCIAL STATEMENTS, ETC. The Company has
previously furnished to Parent (i) the unaudited consolidated balance sheet of
the Company and the Subsidiaries as of December 31, 1999 and the related
unaudited consolidated statements of operations, stockholders' equity and cash
flows for the year then ended and (ii) the unaudited consolidated balance sheet
of the Company and the Subsidiaries as of February 29, 2000 (the "Interim
Balance Sheet"), and the related unaudited consolidated statements of
operations, stockholders' equity and cash flows for the two months then ended
(collectively, the "Company Financial Statements"). The Company Financial
Statements are attached hereto as Item 4.04. The Company Financial Statements
were prepared from the books and records of the Company and the Subsidiaries and
present fairly in all respects the consolidated financial position of the
Company and the Subsidiaries as of the respective dates specified therein and
the consolidated results of operations of the Company and the Subsidiaries for
the respective periods then ended, and were prepared in conformity with
generally accepted accounting principles in the United States ("GAAP")
consistently applied, subject in the case of interim financial statements to the
absence of certain footnote disclosures and normal year-end audit adjustments
(the effect of which will not, individually or in the aggregate, be materially
adverse).
SECTION 4.05. ABSENCE OF UNDISCLOSED LIABILITIES. Except to
the extent set forth on Item 4.05, neither the Company nor any of the
Subsidiaries has any liabilities or obligations of any kind or nature, whether
known or unknown or secured or unsecured (whether absolute, accrued, contingent
or otherwise, and whether due or to become due) of a nature customarily accrued,
reserved against or disclosed on the face of a corporate balance sheet prepared
in conformity with GAAP or which would have a Material Adverse Effect on the
Company.
SECTION 4.06. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
set forth on Item 4.06, or as otherwise expressly stated in this Agreement or as
expressly excluded from the restrictions set forth in Section 7.01(a), since the
date of the Interim Balance Sheet, neither the Company nor any of the
Subsidiaries has:
(i) issued, sold or otherwise disposed of any stock, bonds or
other securities, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange or exercise)
any stock (except on exercise or conversion of outstanding options,
warrants or Company Preferred Stock);
(ii) declared, set aside or made any payment or distribution
to shareholders (whether in cash or in kind) or purchased or redeemed
any shares of its capital stock or other securities;
(iii) entered into, adopted, amended or terminated any bonus,
profit sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, perfor ▇▇▇▇▇ unit, pension,
retirement, deferred compensation, employment, severance or other
employee benefit plan, agreement, trust, fund or other arrangement for
the benefit of any director, officer or employee (other than option
grants in the ordinary course of business consistent with past
practice), or increased in any manner the compensation or fringe
benefits of any director or officer, or increased the compensation or
fringe benefits of any officer consultant, employee or director other
than in the ordinary course of business consistent with past practice,
or made any payment of a cash bonus to any director or officer or to
any employee of, or consultant or agent to, the Company or any of the
Subsidiaries or made any other material change in the terms or
conditions of employment;
(iv) announced any plan or legally binding commitment to
create any employee benefit plan, program or arrangement or to amend or
modify in any material respect any existing employee benefit plan,
program or arrangement;
(v) eliminated the vesting conditions or otherwise accelerated
the payment of any compensation, including any stock options;
(vi) incurred any obligation or liability (fixed or
contingent), in an amount, individually or in the aggregate, greater
than or equal to $10,000, to be paid or fulfilled by the Company or any
Subsidiary except normal trade or business obligations incurred in the
ordinary course of business and consistent with past practice, none of
which individually or in the aggregate would have a Material Adverse
Effect on the Company, or incurred any indebtedness for money borrowed
which is to be repaid by the Company or any Subsidiary;
(vii) mortgaged, pledged or subjected to any Lien any of its
assets, whether tangible or intangible;
(viii) transferred, leased or otherwise disposed of any of its
assets, whether tangible or intangible, except for fair consideration
in the ordinary course of business and consistent with past practice,
or acquired, any assets or properties, except for fair consideration in
the ordinary course of business and consistent with past practice;
(ix) made any investment (including, without limitation, by
purchase of stock or securities, contributions to capital, property
transfers or otherwise), loan or advance, in
an amount, individually or in the aggregate, greater than or equal to
$10,000 in any Person;
(x) canceled or compromised any debt or claim, in an amount,
individually or in the aggregate, greater than or equal to $10,000,
owed to it other than in the ordinary course of business consistent
with past practice;
(xi) waived or released any rights of material value held by
it, including, without limitation, any Intellectual Property;
(xii) transferred or granted any rights under or with respect
to any Intellectual Property, or permitted any license, permit or other
form of authorization relating to an Intellectual Property to lapse and
no party has accelerated, terminated, cancelled or modified any
agreement or contract involving more than $10,000 to which the Company
or any Subsidiary is a party;
(xiii) made any loan, or entered any transaction with, any of
its directors, officers and employees outside the ordinary course of
business;
(xiv) suffered any casualty loss or damage in an amount,
individually or in the aggregate, greater than or equal to $10,000
(whether or not such loss or damage shall have been covered by
insurance) which affects the Company in any material respect;
(xv) changed the method of accounting or accounting principle
or practice by the Company or any Subsidiary, or re-evaluated any of
the assets of the Company;
(xvi) entered into any material agreement, contract, lease or
license other than in the ordinary course of business which in any way
binds the Company or any Subsidiary to pay consideration, or provide
goods or services, in an amount, individually or in the aggregate,
greater than or equal to $10,000 and no party has accelerated,
terminated, cancelled or modified any agreement or contract involving
more than $10,000 to which the Company or any Subsidiary is a party;
(xvii) written down or written off of the value of any assets
other than in the ordinary course of business;
(xviii) altered any term of any outstanding security of the
Company or any Subsidiary;
(xix) entered into any agreement or arrangement to take any
action which, if taken prior to the date of the Original Agreement,
would have made any representation or warranty set forth in the
Original Agreement materially untrue or incorrect as of the date when
made unless otherwise disclosed;
(xx) (1) failed to maintain in full force and effect
substantially the same level and type of insurance coverage as in
effect on December 31, 1999 or (2) changed or suffered a change in any
insurance coverage or the issuance of any insurance policy, except in
the ordinary course of business consistent with past practice;
(xxi) suffered any event, occurrence, development or state of
circumstances or facts which, individually or in the aggregate, has
had, or will have, a Material Adverse Effect on the Company; or
(xxii) to the extent not otherwise set forth herein, taken any
action described in Section 7.01 hereof.
SECTION 4.07. GOVERNMENTAL APPROVALS. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
federal, state, municipal or foreign governmental agency, public body, court,
tribunal, arbitrator, mediator or other authority (each a "Governmental Agency")
having jurisdiction over the Company or any of the Subsidiaries is required to
be made or obtained by the Company or any Subsidiary in connection with the
execution and delivery of this Agreement by the Company and each Ancillary
Agreement to which the Company is a party or the consummation by the Company of
the transactions contemplated hereby or thereby, except for compliance by the
Company with the ▇▇▇▇-▇▇▇▇▇ Act.
SECTION 4.08. LITIGATION. Except as set forth on Item 4.08,
(i) there is no action, suit, dispute, investigation, proceeding or claim
pending or, to the Company's knowledge, threatened against or affecting the
Company or any of the Subsidiaries, or their respective properties or rights
before any Governmental Agency, and the Company is not aware of any facts or
circumstances which may give rise to any such action, suit, dispute,
investigation, proceeding or claim which, if adversely decided, is reasonably
likely to result in liability, individually or in the aggregate, to the Company
equal to or greater than $50,000, (ii) there is no suit or claim by the Company
or any Subsidiary pending, or which the Company or any Subsidiary intends to
initiate, against any other Person, (iii) there are no suits, investigations,
proceedings or threatened litigation pending against the Company or any
Subsidiary involving intellectual property rights, (iv) the Company has no
knowledge of any assertions, claims or notices of infringement, unlawful
acquisition or other potentially litigable activities related to any
intellectual property rights of any party, (v) neither the Company nor any of
the Subsidiaries is subject to any order, judgment, decree, injunction,
stipulation, or consent order of or with any Governmental Agency, and (vi)
neither the Company nor any of the Subsidiaries has entered into any agreement
to settle or compromise any proceeding pending or threatened against it. No such
pending or threatened actions, suits or proceedings would limit the ability of
the Company to consummate the transactions contemplated hereby or by the
Ancillary Agreements to which the Company is a party or have a Material Adverse
Effect on the Company.
SECTION 4.09. ASSETS.
(a) The Company and the Subsidiaries have good and marketable
title to all assets of any nature whatsoever reflected in the Company Financial
Statements or acquired after February 29, 2000; in each case, free and clear of
any Liens, except (i) as disclosed in Item 4.09, (ii) Liens for current taxes
not yet due, (iii) mechanic's and materialmen's and other similar Liens which
may have arisen in the ordinary course of business and which, individually or in
the aggregate, would not have a Material Adverse Effect, and (iv) Liens securing
indebtedness reflected in the Company Financial Statements (collectively,
"Permitted Liens"). All assets used by the Company and the Subsidiaries in the
operation of their respective businesses are reflected in the Company Financial
Statements to the extent GAAP requires the same to be reflected.
(b) All tangible personal property, fixtures, machinery and
equipment of the Company and the Subsidiaries are free from material defects,
have been maintained in accordance with normal industry practice, are in good
operating condition and repair (ordinary wear and tear excepted) and are
suitable for the purposes for which they are being used.
(c) This Section 4.09 does not relate to real property or
interests in real property, such items being the subject of Section 4.10.
SECTION 4.10. REAL PROPERTY.
(a) Item 4.10(a) lists and describes briefly all real property
owned by the Company or any of the Subsidiaries. With respect to each such
parcel of owned real property,
(i) the Company or its Subsidiary has good and marketable
title to the parcel of real property, free and clear of any Lien,
easement, covenant, or other restriction, except (1) as disclosed in
Item 4.10(a), (2) Permitted Liens, (3) recorded easements, covenants,
and other restrictions, and (4) utility easements, building
restrictions, zoning restrictions, and other easements and restrictions
existing generally with respect to properties of a similar character
which do not affect the current use, occupancy, or value, or the
marketability of title, of the property subject thereto;
(ii) there are no pending or threatened condemnation
proceedings, law suits, or administrative actions relating to the
property, or other matters affecting the current use, occupancy, or
value thereof;
(iii) the legal description for the property contained in the
deed thereof describes such property fully and adequately, the
buildings and improvements are located within the boundary lines of the
described property, are not in violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties
or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure"
classifications), and do not encroach on any easement which may burden
the land;
(iv) except as set forth on Item 4.10(a)(iv), there are no
leases, subleases, licenses, concessions, or other agreements, written
or oral, granting to any party or parties the right of use or occupancy
of any portion of the real property, and there are no parties in
possession of the real property, other than tenants under any leases
disclosed on Item 4.10(a)(iv); and
(v) there are no outstanding options or rights of first
refusal to purchase the real property, or any portion thereof of
interest therein.
(b) Item 4.10(b) lists and describes all real property leased
or subleased to the Company or any of the Subsidiaries. The Company has
delivered to Parent correct and complete copies of the leases and
subleases with respect to the real property listed in Item 4.10(b).
With respect to each lease and sublease listed in Item 4.10(b):
(i) neither the Company nor any of the Subsidiaries has
assigned, transferred conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold; and
(ii) except as set forth on Item 4.10(b) no lease or sublease
contains a change of control provision which requires the Company or a
Subsidiary to obtain the consent of a landlord or overlandlord in
connection with the consummation of the transaction contemplated
hereby.
SECTION 4.11. INTELLECTUAL PROPERTY.
(a) "Intellectual Property" of any Person shall mean any or
all of the following and all rights in, arising out of, or associated therewith
anywhere in the world held by such Person and not otherwise in the public
domain: (1) all United States, international and foreign patents and
applications therefor (including provisional applications) and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (2) all inventions (whether patentable or not),
patterns, drawings, blueprints, specifications, products in development,
processes, applications, circuits, invention disclosures, improvements, trade
secrets, confidential information, proprietary information, know how, mask works
(and all information contained in a mask but not yet fixed in a chip),
technology, technical data and customer lists, and all documentation relating to
any of the foregoing; (3) all copyrights, copyright registrations and
applications therefor; (4) all industrial designs and any registrations and
applications therefor throughout the world; (5) all trade names, logos, common
law trademarks and service marks; trademark and service ▇▇▇▇ registrations and
applications therefor and all goodwill associated therewith throughout the
world; (6) all databases and data collections and all rights therein throughout
the world; (7) all software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded; (8) all permits, privileges or royalties; (9) all domain
names and internet
addresses; (10) any similar, corresponding or equivalent rights to any of the
foregoing and (11) all documentation related to any of the foregoing.
(b) Item 4.11(b)(i) lists all Intellectual Property used by
the Company and the Subsidiaries (the "Company Intellectual Property"). Schedule
4.11(b)(ii) lists all Intellectual Property owned by, or filed in the name of,
the Company or any of its Subsidiaries (the "Protectable Intellectual
Property").
(c) Except as set forth on Item 4.11(c), the Company (1) owns
each item of Protectable Intellectual Property, free and clear of any Liens, (2)
has good title or assignable license to use each item of the Company
Intellectual Property, free and clear of any Liens, (3) is the exclusive owner
of or has the assignable permission of the owner to use all trademarks and trade
names used in connection with the operation or conduct of the Company, including
the sale of any products or the provision of any services by the Company and (4)
owns exclusively, and has good title to, all copyrighted works that are Company
products or other works of authorship that the Company otherwise purports to
own.
(d) To the extent that any work, invention or material has
been developed or created by a third party for the Company, the Company has a
written agreement with such third party with respect thereto and the Company
thereby has obtained ownership of, and is the exclusive owner of, all
Intellectual Property in such work, material or invention by operation of law or
by valid assignment.
(e) Neither the Company nor any Subsidiary has transferred
ownership of, or granted any exclusive license with respect to, any Company
Intellectual Property or Protectable Intellectual Property, to any third party.
(f) The operations of the Company and the Subsidiaries,
including the design, development, manufacture, license and sale of the products
(including products currently under development) or services provided by the
Company, are not the subject of any litigation and do not (1) infringe or
misappropriate the Intellectual Property of any other Person, (2) violate the
rights of any Person (including rights to privacy or publicity), or (3)
constitute unfair competition or trade practices under the laws of any
jurisdiction, and none of the Company or any Subsidiary has received written or
oral notice from any person claiming that such operation or any act, product or
service of the Company infringes or misappropriates the Intellectual Property of
any third party, violates the rights of any Person or constitutes unfair
competition or trade practices under the laws of any jurisdiction.
(g) The Company and each Subsidiary owns or has the exclusive
right to use all Intellectual Property and Protectable Intellectual Property
used by the Company or such Subsidiary in or necessary to the Company's or such
Subsidiary's conduct of its business, including, without limitation, in the
design, development, manufacture, license and sale of all products currently
manufactured (either directly or under contract) or sold by the Company or such
Subsidiary or under development by the Company or
such Subsidiary, in the use and sale by customers thereof, and in the
performance of all services provided or contemplated to be provided by the
Company or such Subsidiary.
(h) Each item of the Protectable Intellectual Property is
valid and subsisting, all necessary registration, maintenance and renewal fees
in connection with such Protectable Intellectual Property have been paid and all
necessary documents and certificates in connection with such Protectable
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the Untied States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Protectable Intellectual
Property.
(i) There are no contracts, licenses and agreements between
the Company or any Subsidiary and any other Person with respect to the Company
Intellectual Property or Protectable Intellectual Property under which there is
any dispute known to the Company regarding the scope of such agreement, or
performance under such agreement including with respect to any payments to be
made or received by the Company or any Subsidiary thereunder.
(j) To the best of the Company's knowledge, no Person is
infringing or misappropriating any of the Company Intellectual Property or
Protectable Intellectual Property.
(k) The Company has taken all steps that are required to
protect the Company's and the Subsidiaries' rights in confidential information
and trade secrets of the Company and each Subsidiary or provided by any third
party to the Company or a Subsidiary.
(l) There are no proceedings or actions instituted by the
Company or a Subsidiary or of which the Company has received written notice
before any Governmental Agency (including the United States Patent and Trademark
Office or equivalent authority anywhere in the world) related to any Company
Intellectual Property or Protectable Intellectual Property.
(m) No Intellectual Property or product or service of the
Company or a Subsidiary is subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or a Subsidiary or may affect the
validity, use or enforceability of such Intellectual Property.
(n) Except as set forth on Item 4.11(a), all current and
former employees of the Company have executed the standard intellectual property
assignment agreement of the Company, a copy of which has been provided to Parent
prior to the date of the Original Agreement.
(o) No (1) product, service or publication of the Company or a
Subsidiary, (2) material published or distributed by the Company or a Subsidiary
or (3) conduct or statement of, or attributable to, the Company or a Subsidiary
constitutes obscene material or a defamatory
statement or material.
SECTION 4.12. LABOR MATTERS.
(i) Neither the Company nor any of the Subsidiaries is or has
been a party to any collective bargaining or union agreement, and no
such agreement is or has been applicable to any employees of the
Company or any of the Subsidiaries.
(ii) There are not any controversies between the Company or
any of the Subsidiaries and any of such employees that might be
expected to affect the conduct of the Company's business, or any
unresolved labor union grievances or unfair labor practice or labor
arbitration proceedings pending, or, to the Company's knowledge,
threatened relating to the Company's business.
(iii) There is no pending or, to the Company's knowledge,
threatened litigation between the Company, on the one hand, and current
or former officers or employees, on the other hand, including without
limitation, any claims for wrongful termination, breach of any express
or implied contract of employment or for violation of equal employment
opportunity laws, except for claims previously settled as to which a
copy of the settlement agreement has been provided to Parent.
(iv) There are no labor unions or other organizations
representing or purporting to represent any employees of the Company or
any of the Subsidiaries and there are not any organizational efforts
currently being made or threatened involving any of such employees.
(v) There is, and during the past two years there has been, no
labor strike, dispute, work stoppage or lockout pending, or, to the
knowledge of the Company, threatened, against or affecting the Company
or a Subsidiary.
(vi) Except as set forth on Item 4.12, the Company and the
Subsidiaries are in material compliance in all respects with all laws
and regulations or other legal or contractual requirements regarding
the terms and conditions of employment of employees, former employees
or prospective employees or other labor related matters, including,
without limitation, laws, rules, regulations, orders, rulings,
conciliation agreements, decrees, judgments and awards relating to
wages, hours, the payment of social security and similar taxes, equal
employment opportunity, employment discrimination, fair labor standards
and occupational health and safety, wrongful discharge or violation of
the personal rights of employees, former employees or prospective
employees.
(vii) Neither the Company nor any of the Subsidiaries is
liable for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing.
(viii) None of the Company or the Subsidiaries has received
notice during the past two years of the intent of any governmental
entity responsible for the enforcement of labor or employment laws to
conduct an investigation of the Company or a Subsidiary and no such
investigation is in progress.
(ix) Item 4.12 (x) sets forth the immigration status of each
Company Employee working in the United States who is not a United
States citizen and (y) describes any Company Employee whose immigration
status may be adversely affected by any of the transactions
contemplated by this Agreement.
SECTION 4.13. TAXES.
(a) Except as set forth on Item 4.13, each of the Company, the
Subsidiaries and any affiliated, combined or unitary group of which any such
entity is or was a member has (A) timely filed all Federal and all state, local
and foreign returns, declarations, reports, estimates, information returns and
statements ("Tax Returns") required to be filed by it in respect of any Taxes,
(B) timely paid all Taxes that are due and payable with respect to the periods
covered by the Tax Returns referred to in clause (A), (C) established reserves
that are adequate for the payment of all Taxes not yet due and payable with
respect to the results of operations of the Company and the Subsidiaries prior
to the Effective Time, and (D) complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and has timely withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over.
(b) Except as set forth on Item 4.13, the period of assessment
under applicable law, after giving effect to extensions or waivers, with respect
to the Tax Returns of the Company or any of the Subsidiaries has expired for all
of the taxable years of the Company and such Subsidiaries. Item 4.13 indicates
those Tax Returns of the Company and the subsidiaries that either have been
audited or are currently the subject of an audit. Except as set forth on Item
4.13, there is no dispute or claim (including any anticipated claim) concerning
any Taxes of the Company or any of the Subsidiaries either (i) claimed or raised
by any authority in writing or (ii) as to which the Company or any of its
affiliates has knowledge after due inquiry.
(c) The Company has never been an includible member of an
"affiliated group" (within the meaning of Section 1504 of the Code) other than
the "affiliated group" of which the Company is currently the parent (the
"Company Affiliated Group"). For all periods of its existence, the Company
Affiliated Group has been entitled to report its income on consolidated federal
income tax returns filed on behalf of the Company Affiliated Group and, for such
periods, all federal income tax returns required to be filed by the Company
Affiliated Group have been (or will be) duly and timely filed on a consolidated
basis. Except as set forth on Item 4.13 , all other Tax Returns of the Company
and the Subsidiaries have been filed on a separate company, non-combined,
non-consolidated and non-unitary basis.
(d) Except as set forth in Item 4.13, neither the Company nor
any of the Subsidiaries has (i) received or is the subject of an application for
a tax ruling or entered into a legally binding agreement (such as a closing
agreement) with a taxing authority, which ruling or agreement could have an
effect on the Taxes of the Company or any of the Subsidiaries after the
Effective Time, or (ii) filed any election or caused any deemed election under
Section 338 of the Code.
(e) Except as set forth in Item 4.13, (i) no extensions of
time have been granted to the Company or any of the Subsidiaries to file any Tax
Return required by applicable law to be filed by it prior to the Effective Time,
which have expired, or will expire, before the Effective Time without such Tax
Return having been filed, (ii) no deficiency or adjustment for any Taxes of the
Company or any of the Subsidiaries has been proposed, asserted or assessed in
writing, and no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are pending with regard to any such Taxes of
the Company or any of the Subsidiaries, (iii) no waiver or consent extending any
statute of limitations for the assessment or collection of any Taxes has been
executed by the Company or any of the Subsidiaries, nor have any requests for
such waivers or consents been proposed in writing and (iv) neither the Company
nor any of the Subsidiaries owns or leases any interest in real property in any
jurisdiction in which a Tax will be payable with respect to such interest in
real property as a result of the transactions contemplated hereby.
(f) Except as set forth in Item 4.13, the Company is not and
has never been a party to any tax-sharing or allocation agreements, arrangements
or understandings, whether written or oral.
(g) Except as set forth in Item 4.13, neither the Company nor
any of the Subsidiaries is a party to any agreement, contract or arrangement
that would result, by reason of the consummation of any of the transactions
contemplated herein, separately or in the aggregate, in the payment of any
"excess parachute payments" by the Company or any of the Subsidiaries within the
meaning of Section 280G of the Code.
(h) Neither the Company nor any of the Subsidiaries is
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a voluntary change in accounting method (nor has any taxing
authority proposed in writing any such adjustment or change of accounting
method).
(i) Except as set forth in Item 4.13 (i), no power of attorney
has been granted by or with respect to the Company or any of the Subsidiaries
with respect to any matter relating to Taxes.
(j) Neither the Company nor any of the Subsidiaries has filed
a consent pursuant to Section 341(f) of the Code (or any predecessor provision).
(k) No written claim, or to the Company's knowledge, no other
claim has ever been made by any governmental authority in a jurisdiction where
the Company or any of the Subsidiaries does not file Tax Returns that the
Company or any such Subsidiary is or may be subject to taxation by that
jurisdiction.
(l) The Company has previously delivered or made available to
Parent complete and accurate copies of each of: (i) all audit reports, letter
rulings and technical advice memoranda relating to federal, state and local
Taxes due from or with respect to the Company and each of the Subsidiaries, (ii)
the federal, state, local and foreign Tax Returns filed by the Company and each
of the Subsidiaries and (iii) any closing agreements entered into by the Company
or any of the of the Subsidiaries with any taxing authority.
(m) None of the assets of the Company or any Subsidiary is
required to be treated as being owned by any other Person pursuant to the "safe
harbor" leasing provision of Section 168(f)(8) of the Internal Revenue Code of
1954, as in effect prior to the repeal thereof.
(n) The Company is not and has not been at any time over the
last five years a "U.S. real property holding corporation" (as defined in
Section 897(c)(2) of the Code).
SECTION 4.14. COMPLIANCE WITH LAW; PERMITS. Neither the
Company nor any of the Subsidiaries is in any material respect in default under
or in violation of (i) any order or decree of any Governmental Agency or (ii)
any laws, ordinances, governmental rules or regulations to which the Company or
any Subsidiary or any of their respective properties or assets is subject
("Applicable Laws"). Item 4.14 sets forth a list of all material permits,
authorizations, approvals, registrations, variances and licenses ("Permits")
issued to or used by the Company or any of the Subsidiaries in connection with
the conduct of its business. Such Permits constitute all Permits necessary for
the Company or the Subsidiaries to own, use and maintain their properties and
assets or required for the conduct of its business in substantially the same
manner as it is currently conducted. Each Permit listed on Item 4.14 is in full
force and effect and no proceeding is pending or, to the knowledge of the
Company, threatened, to modify, suspend, revoke or otherwise limit any of such
Permits and no administrative or governmental actions have been taken or, to the
knowledge of the Company, threatened, in connection with the expiration or
renewal of any of such Permits. Except as set forth on Item 4.14, neither the
Company or any of the Subsidiaries will be required, as a result of the
consummation of the transactions contemplated hereby, to obtain or renew any
Permits. Except as set forth on Item 4.14, none of the Company or any Subsidiary
has received any written communication during the past two years from a
governmental entity that alleges that the Company or a Subsidiary is not in
compliance in any material respect with any Applicable Laws or Permits.
SECTION 4.15. EMPLOYEE BENEFIT PLANS.
(a) Item 4.15 sets forth a complete and accurate list of each
plan, program,
arrangement, agreement or commitment that is an employment, consulting or
deferred compensation agreement, or an executive compensation, incentive bonus
or other bonus, employee pension, profit-sharing, savings, retirement, stock
option, stock purchase, severance pay, life, health, disability or accident
insurance plan, or vacation or other employee benefit plan, program,
arrangement, agreement or commitment ("Plans"), including, without limitation,
each employee benefit plan (as defined under Section 3(3) of ERISA), maintained
by the Company or any of the Subsidiaries or any Person that, together with
Company or any Subsidiary, would be treated as a single employer under Title IV
of ERISA or Section 414 of the Code (collectively, the "ERISA Affiliates") or to
which any ERISA Affiliate contributes or has any obligation to contribute to, or
has or may have any liability (including, without limitation, a liability
arising out of an indemnification, guarantee, hold harmless or similar
agreement). Each Plan is identified on Item 4.15, to the extent applicable, as
one or more of the following: an "employee pension plan" (as defined in Section
3(2)(A) of ERISA), an "employee welfare plan" (as defined in Section 3(l) of
ERISA), or as a plan intended to be qualified under Section 401 of the Code.
(b) Each Plan has been administered in all material respects
in accordance with its terms. The Company and each of the Subsidiaries have
complied, and currently are in compliance, in all material respects with all
laws and regulations applicable to the Plans, including, without limitation,
ERISA and the Code.
(c) Except as set forth on Item 4.15, no ERISA Affiliate has
maintained, adopted or established, contributed to or been required to
contribute to, or otherwise participated in or been required to participate in,
any employee benefit plan or other program or arrangement subject to Title IV of
ERISA (including, without limitation, a "multi-employer plan" (as defined in
Section 3(37) of ERISA) and a defined benefit plan (as defined in Section 3(35)
of ERISA)).
(d) Except as set forth on Item 4.15, neither the Company nor
any of the Subsidiaries provides or may be required to provide and no Plan,
other than a Plan that is an employee pension benefit plan (within the meaning
of Section 3(2)(A) of ERISA), provides or may be required to provide benefits,
including, without limitation, death, health or medical benefits (whether or not
insured), with respect to current or former employees of the Company or any of
the Subsidiaries beyond their retirement or other termination of service with
the Company or the Subsidiaries (other than (A) coverage mandated by applicable
law, (B) deferred compensation benefits accrued as liabilities on the books of
the Company or the Subsidiaries, or (C) benefits the full cost of which is borne
by the current or former employee (or his or her beneficiary)). No ERISA
Affiliate maintains any Plan under which any employee or former employee of any
of the ERISA Affiliates may receive medical benefits which cannot be modified or
terminated by the ERISA Affiliates at any time without the consent of any
person, and no employees or former employees of the ERISA Affiliates will have
any claim in respect of prospectively accrued benefits as of the Effective Time.
(e) Except as set forth on Item 4.15, the transactions
contemplated hereby will not result in (i) any portion of any amount paid or
payable by the Company to a "disqualified
individual" (within the meaning of Section 280G(c) of the Code and the
regulations promulgated thereunder), whether paid or payable in cash, securities
of the Company or otherwise and whether considered alone or in conjunction with
any other amount paid or payable to such a "disqualified individual," being an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the Code
and the regulations promulgated thereunder, (ii) any employee of the Company or
any of the Subsidiaries being entitled to severance pay, unemployment
compensation, or any other payment, (iii) an acceleration of the time of payment
or vesting, or an increase in the amount of compensation due to any such
employee or former employee or (iv) any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available.
(f) No ERISA Affiliate has incurred any material liability
with respect to any Plan under ERISA (including, without limitation, Title I or
Title IV thereof, other than liability for premiums due to the Pension Benefit
Guaranty Corporation), the Code or other applicable law, which has not been
satisfied in full or been accrued on the consolidated balance sheet of the
Company and the Subsidiaries as of December 31, 1999 pending full satisfaction,
and no event has occurred, and there exists no condition or set of
circumstances, which could result in the imposition of any liability under
ERISA, the Code or other applicable law with respect to any Plan.
(g) With respect to each Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been paid
to date under the insurance policy have been paid.
(h) None of the ERISA Affiliates has made any contribution to
any Plan that may be subject to any excise tax under Section 4972 of the Code.
(i) With respect to any Plan, there has not been any act or
omission by the Company or any of its ERISA Affiliates that has given rise to or
could give rise to any fines, penalties or related charges under ERISA or the
Code for which the Company or any of its ERISA Affiliates could be liable.
(j) No actions, suits, proceedings, complaints, charges,
hearings, inquiries or investigations (other than routine benefit claims), by or
before any state, local or federal court, arbitral body, administrative agency,
or governmental or regulatory authority, are pending or threatened against or
relating to any Plan, or any fiduciary thereof, and to the knowledge of the
Company, there is no basis for any such actions, suits, proceedings, complaints,
charges, hearings, inquiries or investigations.
(k) The Company has timely deposited and transmitted all
amounts withheld from employees for contributions or premium payments for each
Plan into the appropriate trusts or accounts.
(l) Each Plan that allows loans to plan participants has been
operated in accordance with its terms, the plan's written loan policy and all
applicable laws. In addition, all outstanding loans from such Plans are current
as of the Closing Date, and there are no loans in default.
SECTION 4.16. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. (a)
Except as set forth on Item 4.16:
(i) During the period that the Company or any Subsidiary has
leased or owned its properties or leased, owned or operated any
facilities, there have been no disposals, releases or threatened
releases of Hazardous Materials on, from or under any such properties
or facilities that would have or is reasonably likely to have a
Material Adverse Effect on the Company. The Company has no knowledge of
any presence, disposals, releases or threatened releases of Hazardous
Materials on, from or under any of such properties or facilities, which
may have occurred prior to the Company or any Subsidiary having taken
possession of any of such properties or facilities which might
reasonably be expected to have a Material Adverse Effect on the
Company. For purposes of this Agreement, the terms "DISPOSAL,"
"RELEASE," and "THREATENED RELEASE" have the definitions assigned
thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA"). For purposes of this Agreement, "HAZARDOUS MATERIALS" means
any hazardous or toxic substance, material or waste which is or becomes
prior to the Closing Date, regulated under, or defined as a "hazardous
substance," "radioactive substance," "pollutant," "contaminant," "toxic
chemical," "hazardous material," "toxic substance" or "hazardous
chemical" under (i) CERCLA; (ii) the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Section 11001 ET SEQ.; (iii) the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, ET SEQ.; (iv) the
Toxic Substances Control Act, 15 Section 2601 ET SEQ.; (v) the
Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 ET
SEQ.; (vi) regulations promulgated under any of the above statutes; or
(vii) any other applicable federal, state or local statute, ordinance,
rule or regulation that has a scope or purpose similar to those
identified above.
(ii) None of the properties or facilities currently leased or
owned by the Company or any Subsidiary or any properties or facilities
previously leased or owned by the Company or any Subsidiary is in
violation (an "Environmental Violation") of any federal, state or local
law, ordinance, regulation or order relating to industrial hygiene or
to the environmental conditions on, under or about such properties or
facilities, including, but not limited to, soil and ground water
condition, which violation would have or is reasonably likely to have a
Material Adverse Effect on the Company.
(iii) During the Company's or any Subsidiary's occupancy of
any properties or facilities owned or leased at any time by the Company
or any Subsidiary, none of the Company, any Subsidiary, or to the
Company's knowledge, any third party, has used,
generated, manufactured, released or stored on, under or about such
properties and facilities or transported to or from such properties and
facilities any Hazardous Materials that would have or is reasonably
likely to have a Material Adverse Effect on the Company.
(iv) During the time that the Company or any Subsidiary has
owned or leased the properties and facilities currently occupied by it
or any properties and facilities previously occupied by the Company or
any Subsidiary, there has been no material litigation, proceeding or
administrative action brought or threatened against the Company or any
Subsidiary, or any material settlement reached by the Company or any
Subsidiary with any party or parties alleging an Environmental
Violation or the presence, disposal, release or threatened release of
any Hazardous Materials on, from or under any of such properties or
facilities.
(b) The Company has provided Parent with copies of all
environmental assess ment or audit reports and other similar studies or analyses
relating to any property occupied by the Company or a Subsidiary.
SECTION 4.17. CONTRACTS.
(a) Item 4.17(a) lists the following contracts, agreements and
arrangements relating to the Company and/or any of the Subsidiaries:
(i) any contract or arrangement with a sales representative,
distributor, dealer, broker, sales agency, advertising agency or other
Person engaged in sales, distribution or promotional activities, or any
contract to act as one of the foregoing on behalf of any Person, which
is not terminable by the Company on 30 or fewer days' notice without
material penalties;
(ii) except as expressly excluded from the restrictions set
forth in Section 7.01(a) (with respect to contracts or arrangements
entered into after the date of the Original Agreement), any contract or
arrangement of any nature which involves the payment of cash or other
property, which has an aggregate future liability to any Person (other
than the Company or any Subsidiary) in excess of $50,000 or which
involves any unperformed commitment by the Company or any Subsidiary to
any third party;
(iii) any contract or arrangement pursuant to which the
Company or any Subsidiary has made or will make loans or advances, or
has or will have incurred indebtedness for borrowed money or become a
guarantor or surety or pledged its credit on or otherwise become
responsible with respect to any undertaking of another (except for the
negotiation or collection of negotiable instruments in transactions in
the ordinary course of business) in excess of $50,000;
(iv) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement, loan commitment or other contract or
arrangement relating to the borrowing of funds, an extension of credit
or financing or a leasing transaction of a type required to be
capitalized in accordance with Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board;
(v) any contract or arrangement involving a partnership, joint
venture or other cooperative undertaking;
(vi) any contract or arrangement containing any
non-competition provisions or other restrictions with respect to the
geographical area of operations or scope or type of business of the
Company or any of the Subsidiaries;
(vii) any power of attorney or agency agreement or arrangement
with any person pursuant to which such person is granted the authority
to act for or on behalf of the Company or any of the Subsidiaries, or
the Company or the Subsidiaries is granted the authority to act for or
on behalf of any person;
(viii) any contract not yet executed or fully performed and
relating to any acquisition or disposition of the Company or any
predecessor in interest of the Company, or any acquisition or
disposition of any Subsidiary, division, line of business, or real
property;
(ix) all collective bargaining agreements, employment and
consulting agreements (whether written or oral), independent contractor
agreements (whether written or oral), executive compensation plans
(whether written or oral), bonus plans, deferred compensation
agreements, employee pension plans or retirement plans, employee profit
sharing plans, employee stock purchase and stock option plans, group
life insurance, hospitalization insurance or other similar plans or
arrangements (whether written or oral) maintained for or providing
benefits to employees of, or independent contractors or other agents of
the Company;
(x) any lease for real or personal property;
(xi) except (x) as expressly excluded from the restrictions
set forth in Section 7.01(a), (y) for any nondisclosure agreements with
vendors and customers (in each case other than competitors of Parent)
in the ordinary course of business relating to information concerning
the Company and (z) for employee confidentiality agreements with new
employees, in each case with respect to agreements entered into after
the date of the Original Agreement, any agreement concerning
confidentiality, including, but not limited to, non-disclosure
agreements and employee confidentiality agreements;
(xii) any agreement under which it has loaned or advanced any
amount to any
of its directors, officers, and employees outside the ordinary course
of business;
(xiii) any agreement under which the consequences of default
or termination could have a Material Adverse Effect on the Company;
(xiv) any contract containing a provision limiting the
Company's rights under such contract upon a change of control of the
Company;
(xv) except as expressly excluded from the restrictions set
forth in Section 7.01(a) (with respect to agreements entered into after
the date of the Original Agreement), any continuing contract for the
future purchase, sale, development or manufacture of products,
material, supplies, equipment, software or services requiring payment
to or from the Company or any of the Subsidiaries (i) in an amount in
excess of $50,000 per annum which is not terminable on 120 days or less
notice without material cost or other liability at, or at any time
after, the Effective Time or in which the Company or such Subsidiary
has granted or received manufacturing rights or most favored nations
pricing provisions rights relating to any product, group of products or
territory, or (ii)(A) in which the Company or such Subsidiary has
granted or received rights to any Intellectual Property (B) which
require consent or are otherwise terminable upon a change of control of
the Company or (C) in which the Company or such Subsidiary has granted
exclusive market rights relating to any product, group of products or
territory;
(xvi) contract providing for the development of software for,
or license of software to, the Company or any Subsidiary , or other
contracts regarding software or other Intellectual Property used or
incorporated in one or more of the products of the Company or any
Subsidiary (other than software licensed to the Company or any
Subsidiary from a third party as to which the Company or such
Subsidiary has a fully-paid perpetual license to use and distribute as
the Company or such Subsidiary is currently doing without any material
restrictions or limitations, or that is generally available to the
public from such third party at a per copy license fee of less than
$5,000, but including any site or corporate license and each agreement
providing for either the delivery of source code or the escrow of
source code for the benefit of the licensee or any original equipment
manufacturer, distribution or other agreement that requires the Company
or any Subsidiary to perform any ongoing development of software
including updates and error corrections);
(xvii) agreement or arrangement for the sale of any assets,
properties or rights having a value in excess of $50,000, other than in
the ordinary course of business consistent with past practice;
(xviii) except as expressly excluded from the restrictions set
forth in Section 7.01(a) (with respect to agreements, contracts or
commitments entered into after the date of the Original Agreement), any
agreement, contract or commitment by the Company or
any Subsidiary relating to material capital expenditures or involving
future obligations in excess of $50,000, other than those listed in the
Company Financial Statements;
(xix) any voting trust or shareholders agreement known to the
Company between or among the Company or any Subsidiary and
Shareholders;
(xx) any tax sharing or tax indemnification agreement between
or among the Company or any Subsidiary;
(xxi) except as set forth in Item 4.17(b), any agreement or
contract providing for indemnification by the Company or any Subsidiary
to any third party;
(xxii) any agreement required to be set forth on Item 4.02(b);
(xxiii) any employee assignment agreement;
(xxiv) any residual intellectual property agreement; and
(xxv) any contract not specified above that is material to the
Company or any of the Subsidiaries.
(b) Except as set forth in Item 4.17(b), there is no contract,
agreement, arrangement or understanding that would entitle any of the
Shareholders to seek indemnification from the Company or any Subsidiary.
(c) Except as set forth on Item 4.17(a), nothing contained in
any contract, agreement or arrangement set forth (or required to be set forth)
on Item 4.17(a) limits or impairs the Company's or any Subsidiary's rights to
use its Intellectual Property or to engage in the business in which it is
currently, or intends to be, engaged.
(d) The Company has delivered to Parent complete and accurate
copies of the contracts, agreements or arrangements set forth on Item 4.17(a).
Each such contract, agreement and arrangement is legal, valid, binding,
enforceable, and in full force and effect in all material respects. None of the
Company, any Subsidiary, or to the Company's knowledge, any other party is in
violation, breach or default under any such contract, agreement or arrangement,
and no event has occurred which, with notice or lapse of time, would constitute
a material breach or default or permit termination, modification, or
acceleration thereunder. No party to any such contract, agreement or arrangement
has notified the Company or any Subsidiary that it has repudiated any provision
thereof. There are no disputes, oral agreements, or forbearance programs in
effect as to any such contract, agreement or arrangement; and except as set
forth on Item 4.17(a), neither the Company nor any Subsidiary has received
notice of any cancellation or termination of, or of any threat to cancel or
terminate, any such contracts, agreements or arrangements or expects the
consummation of the transactions contemplated hereby to result in
such notice.
SECTION 4.18. INSURANCE.
The Company and the Subsidiaries maintain and at all times
since January 1, 1998 have maintained fire and casualty, general liability,
business interruption, product liability, sprinkler and water damage and any
other insurance that the Company believes or believed to be reasonably prudent
for its business. Item 4.18 contains a list of all such insurance policies
presently in effect, and correct and complete copies of all such policies along
with a history of claims made under such policies have been provided to Parent.
The Company and the Subsidiaries have fully paid all payments required under the
terms of each of the foregoing insurance policies and neither the Company nor
any of the Subsidiary has received notice of intent to cancel any of the
foregoing insurance policies.
Except as set forth in Item 4.18, the Company does not have
any knowledge of any state of facts or the occurrence of any event, which
reasonably might (i) form the basis for any claim against the Company or any of
the Subsidiaries not reasonably expected to be fully covered by the insurance
policies referred to on Item 4.18, and which exceeds $25,000 in liability, or
(ii) increase the insurance premiums paid by the Company or any Subsidiary, in
excess of $25,000 per annum in the aggregate, or affect the availability of the
insurance coverage listed on Item 4.18 on substantially the same terms as now in
effect.
SECTION 4.19. PENDING TRANSACTIONS. Except for this Agreement
and the transactions contemplated hereby, neither the Company nor any of the
Subsidiaries is a party to or bound by any agreement, negotiation, discussion,
commitment or undertaking with respect to a merger or consolidation with, or an
acquisition of any material property and assets of, any other Person or the
sale, lease or exchange of any material properties and assets to any other
Person.
SECTION 4.20. CLAIMS AGAINST OFFICERS AND DIRECTORS. Except as
disclosed in Item 4.20 there are no pending or, to the knowledge of the Company,
threatened claims against any director, officer, employee or agent of the
Company or any of the Subsidiaries or any other Person which could give rise to
any claim from any director, officer, employee or agent of the Company or any of
the Subsidiaries or any other Person for indemnification from the Company or any
of the Subsidiaries.
SECTION 4.21. EMPLOYEES. All directors, officers, employees,
and independent contractors of the Company and the Subsidiaries are under
written obligation to the Company and such Subsidiaries to maintain in
confidence all confidential or proprietary information acquired by them in the
course of their employment or contract and to assign to the Company and such
Subsidiaries all inventions and know-how made by them within the scope of their
employment or contract. No Company Employee has given formal or informal notice
to the Company of an intention to resign, presently or as a result of the
transactions contemplated by this Agreement.
SECTION 4.22. CUSTOMERS, SUPPLIERS, ETC. The Company has
provided Parent with information concerning (i) the largest customers of the
Company and the Subsidiaries (in terms of aggregate revenues to the Company and
the Subsidiaries during the fiscal year ended December 31, 1999) representing in
the aggregate 95% of the revenues received by the Company and the Subsidiaries
in respect of such fiscal year (such customers being referred to herein as the
"Major Customers") and (ii) the largest suppliers of the Company and the
Subsidiaries (in terms of aggregate charges to the Company and the Subsidiaries
during the fiscal year ended December 31, 1999) representing in the aggregate
95% of the charges to the Company and the Subsidiaries in respect of such fiscal
year (such suppliers being referred to herein as the "Major Suppliers"). Except
to the extent set forth in Item 4.22, since December 31, 1998, there has not
been any adverse change in the business relationship with any Major Customer,
(x) the Company has received no material customer complaints concerning its
products and/or services nor has it had any of its products returned by a
purchaser thereof other than for minor, non-recurring warranty problems, and (y)
there has been no material dispute between the Company or any of the
Subsidiaries and any Major Customer or Major Supplier and the Company has
received no notice that any Major Customer intends to materially reduce its
purchases from the Company or any of the Subsidiaries or that any Major Supplier
intends to materially reduce its sale of goods or services to the Company or any
of the Subsidiaries.
SECTION 4.23. ACCOUNTS RECEIVABLE. Except as disclosed on Item
4.23 or in the Company Financial Statements, (i) each account receivable of the
Company and the Subsidiaries (collectively, the "Accounts Receivable")
represents a sale made in the ordinary course of business other than to
Affiliates of the Company and which arose pursuant to an enforceable written
contract for a bona fide sale of goods or for services performed, and the
Company and the Subsidiaries have performed all of their respective obligations
to produce the goods or perform the services to which such Accounts Receivable
relates, and (ii) except to the extent reserved for in the Company Financial
Statements, no Account Receivable is subject to any claim for reduction,
counterclaim, set-off, recoupment or other claim for credit, allowances or
adjustments by the obligor thereof. To the Company's knowledge, all Accounts
Receivable are good and collectible at the aggregate recorded amounts thereof,
net of applicable reserves for doubtful accounts reflected in the Company
Financial Statements. Since December 31, 1999, there have not been any
write-offs as uncollectible of any Accounts Receivable.
SECTION 4.24. IMPROPER AND OTHER PAYMENTS. Except as set forth
on Item 4.24, neither the Company nor any of the Subsidiaries, nor any director,
officer, employee, agent or representative of the Company or any of the
Subsidiaries, nor any person acting on behalf of any of them, has (i) made, paid
or received any bribes, kickbacks or other similar payments to or from any
Person, whether lawful or unlawful, (ii) made any unlawful contributions,
directly or indirectly, to a domestic or foreign political party or candidate,
or (iii) made any improper foreign payment (as defined in the Foreign Corrupt
Practices Act).
SECTION 4.25. BROKERS. Except as set forth on Item 4.25,
neither the Company nor any of the Subsidiaries has used any broker or finder in
connection with the transactions
contemplated hereby, and neither the Company nor any of the Subsidiaries has or
will have any liability or otherwise suffer or incur any loss as a result of or
in connection with any brokerage or finder's fee or other commission of any
Person retained by the Company, any of the Subsidiaries or the Shareholders in
connection with any of the transactions contemplated by this Agreement.
SECTION 4.26. TRANSACTIONS WITH AFFILIATES. Except for the
items set forth on Item 4.26, (i) there are no agreements between any of the
Company's Affiliates, on the one hand, and the Company, on the other hand, for
the provision of goods or services to or by the Company or any Subsidiary;
(ii) no Affiliates of the Company have been involved in any other business
arrangement or relationship with, or pertaining to, the Company or any
Subsidiary within the past twelve months; (iii) there are no facilities occupied
in whole or in part by the Company or any Subsidiary, and no other property,
assets, franchises, licenses or rights used by the Company or any Subsidiary,
that are owned, leased by or to, or occupied by any Affiliate of the Company;
and (iv) no Affiliate of the Company owns any asset, tangible or intangible,
which is used by the Company or any Subsidiary.
SECTION 4.27. YEAR 2000 COMPLIANCE. (a) There is no failure
to be Year 2000 Compliant of any computer software or hardware owned, used,
licensed or sold by the Company or any Subsidiary, including, without
limitation, computer hardware systems, software applications, firmware,
microchips, equipment containing embedded microchips and other embedded systems
that are used by the Company or any Subsidiary, or the software, hardware,
firmware and other technology which constitutes part of the products and
services manufactured, marketed or sold by the Company or any Subsidiary,
licensed by the Company or any Subsidiary to third parties (the "Computer
Systems").
(b) For purposes of this Agreement, "Year 2000 Compliant"
means that (1) neither performance nor functionality of the Computer Systems is
affected by dates prior to, during and after the year 2000; (2) no value for any
then-current date will cause any interruption in operation; (3) date-based
functionality must behave consistently for dates prior to, during and after year
2000; and (4) in all interfaces and data storage, the century in any date must
be specified either explicitly or by unambiguous algorithms or inferencing
rules.
(c) Except as set forth on Item 4.27(c), neither the Company
nor any Subsidiary has provided any written guarantee or warranty for any
product sold or licensed, or service provided by the Company or any Subsidiary
to the effect that such product or service (x) complies with or accounts for the
fact of the arrival of the year 2000, (y) will not be adversely affected with
respect to functionality, interoperability, performance or volume capacity
(including, without limitation, the processing and reporting of data) by virtue
of the arrival of the year 2000 or (z) is otherwise Year 2000 Compliant.
SECTION 4.28. PRODUCT WARRANTY; PRODUCT LIABILITY. (a) All
of the products manufactured, sold, leased, and delivered by the Company and
the Subsidiaries have conformed in all respects with all applicable contractual
commitments and all express and implied
warranties, and the Company and the Subsidiaries have no material liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) for replacement or repair thereof or other
damages in connection therewith. None of the products manufactured, sold,
leased, or delivered by the Company and the Subsidiaries are subject to any
guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions of sale or lease. Item 4.28 includes copies of the standard terms and
conditions of sale or lease for the Company and the Subsidiaries (containing
applicable guaranty, warranty, and indemnity provisions).
(b) None of the Company or the Subsidiaries has any liability,
and there is no basis for any present or future action, cause of action, suit
(in contract, tort or otherwise), proceeding, hearing, inquiry, investigation,
charge, complaint, claim, or demand by or before any Governmental Agency,
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any product manufactured, sold, leased or
delivered by the Company or any of the Subsidiaries.
SECTION 4.29. INVENTORY. The inventory of the Company and the
Subsidiaries consists of raw materials and supplies, manufactured and processed
parts, work in process and finished goods, all of which is merchantable and fit
for the purpose for which it was procured or manufactured, and none of which is
slow-moving, obsolete, damaged or defective, subject only to the reserve for
inventory writedown set forth in the Interim Balance Sheet (rather than in any
notes thereto) as adjusted for operations and transactions through the Closing
Date in accordance with the past custom and practice of the Company. Such
inventory is generally of a quality and quantity usable and salable at customary
gross margins and with customary markdowns consistent in all material respects
with past practice in the ordinary course of business.
SECTION 4.30. DEVELOPMENT AGREEMENTS. Item 4.30 sets forth a
list of all contracts, agreements or arrangements relating to the design,
testing and implementation of any software, firmware or hardware program,
product or project (hereinafter referred to as "Development Agreements") to
which the Company or any of the Subsidiaries is a party. Except as set forth on
Item 4.30, the Company and the Subsidiaries have satisfied, or will satisfy, in
all material respects, all requirements, including but not limited to any
minimum production and development schedule, set forth in any Development
Agreement and neither the Company nor any of the Subsidiaries is in material
default (nor has any event occurred which, with the giving of notice or passage
of time would result in an event of material default) under any Development
Agreement. Except as set forth on Item 4.30, no amounts ("Penalties") are owed
by the Company or any of the Subsidiaries, and no such Penalties are reasonably
anticipated by the Company or any of the Subsidiaries to be owed, due to the
failure of the Company or any of the Subsidiaries to satisfy any requirements
under any Development Agreement, by the Company or any of the Subsidiaries to
any third party with whom the Company or any of the Subsidiaries has entered
into a Development Agreement. Item 4.30 also sets forth a list of all Penalties
which are owed, or are reasonably anticipated by the Company or any of the
Subsidiaries to be owed, by
any of them pursuant to any Development Agreement.
SECTION 4.31. DISCLOSURE. The information supplied by the
Company for inclusion in the Notice of Hearing, Information Statement and permit
application (the "Permit Application") prepared in connection with the
California Fairness Hearing (collectively, the "Hearing Materials") shall not as
of the respective dates thereof (and in the case of the Information Statement,
the date it is first mailed to the Shareholders, the date of the Shareholders
Meeting and at the Effective Time) contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information
supplied by Parent which is contained in any of the Hearing Materials.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to the Company as of the date
of the Original Agreement (and with respect to the representations and
warranties set forth in Sections 5.01, 5.02 and 5.04 as of the date hereof) as
follows, except as set forth in the Parent Disclosure Letter delivered to the
Company concurrently with the execution of the Original Agreement ("Parent
Disclosure Letter", and each reference to an "Item" in this Article V being a
reference to that Item in the Parent Disclosure Letter):
SECTION 5.01. ORGANIZATION AND QUALIFICATION. Parent is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own or lease and operate its properties and assets and to carry on
its business as it is now being conducted. Parent is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect on Parent.
SECTION 5.02. AUTHORIZATION OF AGREEMENTS; NON-CONTRAVENTION.
(a) The execution and delivery by Parent of this Agreement and each Ancillary
Agreement to which Parent is a party, and the consummation by Parent of the
transactions contemplated hereby and thereby, have been duly authorized by all
requisite corporate action. Without limiting the foregoing, the execution,
delivery and performance of this Agreement and the Ancillary Agreements have
been duly and validly approved and authorized by Parent's Board of Directors and
Acquisition Corp.'s Board of Directors, as applicable, and no other corporate
approvals or proceedings on the part of Parent or Acquisition Corp. or the
respective shareholders of either
thereof are necessary to authorize this Agreement, the Merger, the issuance of
Parent Common Stock in connection with the Merger and the transactions
contemplated hereby. This Agreement has been duly and validly executed by Parent
and, subject to due execution by any other parties thereto, will constitute the
legal, valid and binding obligation of Parent, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws of general application affecting the enforcement
of creditors' rights generally. Each Ancillary Agreement to which Parent is
party, when duly executed and delivered in accordance with this Agreement,
subject to due execution by any other parties thereto, will constitute a legal,
valid and binding obligation of Parent, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws of general application affecting the enforcement
of creditors' rights generally. No other corporate proceedings on the part of
Parent are necessary to authorize this Agreement, the Ancillary Agreements or
the transactions contemplated hereby or thereby.
(b) NON-CONTRAVENTION. The execution, delivery and performance
of this Agreement by the Parent and each Ancillary Agreement to which the Parent
is a party and the consummation of the transactions contemplated hereby and
thereby will not (i) conflict with any provision of the Certificate of
Incorporation or Bylaws of the Parent (in each case as in effect at the
Effective Time) (ii) result (with the giving of notice or the lapse of time or
both) in any violation of or default or loss of a benefit under, or result in
the creation of any Lien upon any of the properties or assets of the Parent
under, or result in any increased, additional or guaranteed rights or
entitlements of any Person under, or permit the termination, cancellation or
acceleration of any obligation under, any mortgage, indenture, lease, agreement
or other instrument, permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Parent or any of its properties, other than any such violation, default, loss,
acceleration or Lien that would not materially adversely affect the ability of
the Parent to consummate the transactions contemplated hereby and which would
not otherwise have a Material Adverse Effect on the Parent.
SECTION 5.03. CAPITALIZATION.
(a) The authorized capital stock of Parent consists of
100,000,000 of Parent Common Stock. As of December 31, 1999 (but adjusted to
account for the three-for-one stock split effected on February 28, 2000),
60,334,678 shares of Parent Common Stock were issued and outstanding, all of
which were duly and validly issued, fully paid and nonassessable. Except as set
forth on Item 5.03, and except for options to purchase an aggregate 8,749,593
shares of Parent Common Stock granted pursuant to the stock option plans of
Parent, as of the date of the Original Agreement there are no subscription,
warrant, option, convertible security, stock appreciation or other right
(contingent or other) to purchase or acquire, or any securities convertible into
or exchangeable for, any shares of any class of capital stock of Parent
authorized or outstanding and as of the date of the Original Agreement there is
not any commitment of Parent or any such subsidiary to issue any shares,
warrants, options or other such rights or to distribute to holders of any class
of its capital stock any evidences of indebtedness or assets. As
of the date of the Original Agreement, neither Parent nor any of its
subsidiaries has any obligation (contingent or other) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or to make any other distribution in respect thereof.
(b) Parent has provided to the Company true, complete and
correct copies of Parent's Certificate of Incorporation and Bylaws, in each
case, as in effect on the date of the Original Agreement.
(c) The shares of Parent Common Stock to be issued pursuant to
this Agreement have been duly authorized, and upon issuance to the Shareholders
entitled to receive such shares, will be validly issued and outstanding, fully
paid and nonassessable, and will be free of any Liens other than (i) those
created or suffered to exist by the Shareholder to whom any such shares are
issued and (ii) restrictions on transfer imposed by this Agreement, the Lock-Up
Agreements on the Lock-up Shareholders, and the resale restrictions on
affiliates of the Company set forth in Rule 145 promulgated under the Securities
Act and any applicable state securities laws.
SECTION 5.04. GOVERNMENTAL APPROVALS. No consent, approval,
order or authorization of, or registration, declaration or filing with any
Government Agency having jurisdiction over the Parent is required to be made or
obtained by the Parent in connection with the execution and delivery of this
Agreement by the Parent and each Ancillary Agreement to which the Parent is a
party or the consummation by the Parent of the transactions contemplated hereby
or thereby, except for (a) compliance by the Parent with the ▇▇▇▇-▇▇▇▇▇ Act; (b)
the filing by Parent of such reports and information with the Securities
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (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; (c) such other
filings as may be required by the NASDAQ National Market with respect to the
Merger and the other transactions contemplated by this Agreement, and the
issuance of the shares of Parent Common Stock to be issued by Parent in the
Merger; and (d) such other filings, if any, as may be required in order for
Parent to comply with applicable federal and state securities laws.
SECTION 5.05. BROKERS. Except as set forth on Item 5.05, the
Parent has not used any broker or finder in connection with the transactions
contemplated hereby, and the Parent has not and will not have any liability or
otherwise suffer or incur any loss as a result of or in connection with any
brokerage or finder's fee or other commission of any Person retained by the
Parent in connection with any of the transactions contemplated by this
Agreement.
SECTION 5.06. SEC FILINGS. Parent has provided to the Company
true and complete copies of (i) the Annual Report of Parent on Form 10-K for the
year ended December 31, 1999, (ii) its proxy and information statements relating
to meetings of, or actions taken without a meeting by, the stockholders of
Parent subsequent to September 30, 1999 and
(iii) all other reports, statements and registration statements filed by Parent
with the SEC subsequent to December 31, 1999 (collectively, the "Parent
Filings"). The Parent Filings (including, without limitation, any financial
statements or schedules included therein) (i) were prepared in all material
respects in compliance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time of filing (or if
amended, supplemented or superceded by a filing prior to the date of the
Original Agreement, on the date of that filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Parent is current in
all filings required to be made by it with the SEC under applicable law.
SECTION 5.07. FINANCIAL STATEMENTS. The consolidated financial
statements of Parent included in Parent Filings have been prepared in accordance
with GAAP consistently applied and consistent with prior periods, subject, in
the case of unaudited interim consolidated financial statements, to year-end
adjustments (which consist of normal recurring accruals) and the absence of
certain footnote disclosures. The consolidated balance sheets of Parent included
in the Parent Filings fairly present the financial position of Parent as of
their respective dates, and the related consolidated statements of operations,
stockholders' equity and cash flows included in the Parent Filings fairly
present the results of operations of Parent for the respective periods then
ended, subject, in the case of unaudited interim financial statements, to
year-end adjustments (which consist of normal recurring accruals) and the
absence of certain footnote disclosures. Except for liabilities or obligations
that are accrued or reserved against in Parent's financial statements (or
reflected in the notes thereto) included in the Parent's Filings made prior to
the date of the Original Agreement or that were incurred subsequent to September
30, 1999 in the ordinary course of business and consistent with past practice,
none of Parent and its subsidiaries has any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of a nature required by GAAP to be
reflected in a consolidated balance sheet (or reflected in the notes thereto) or
which would have a Material Adverse Effect on the Parent. Parent has not
suffered any event, occurrence, development or state of circumstances or facts
which has had a Material Adverse Effect on the Parent subsequent to December 31,
1999.
SECTION 5.08. LITIGATION. Except as disclosed in the Parent
Filings, there is no suit, claim, action, proceeding or, to the knowledge of
Parent, investigation, pending nor, to the knowledge of Parent, threatened,
against or affecting Parent or any of its material subsidiaries that
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect on Parent or to materially prevent or delay the consummation of
the transactions contemplated by this Agreement, nor is there any judgment,
order, decree, injunction, statute, law, ordinance, rule or regulation of any
judicial, regulatory or other governmental body or arbitrator outstanding
against, or, to the knowledge of Parent, investigation by any judicial,
regulatory or other governmental body involving, Parent or any of its material
subsidiaries that individually or in the aggregate would have a Material Adverse
Effect on Parent.
SECTION 5.09. COMPLIANCE WITH LAWS. Except for noncompliance
that would
not have a Material Adverse Effect on Parent, Parent has complied and is in
compliance, in all material respects, with all applicable laws, ordinances,
regulations and rules, and all orders, writs, injunctions, awards, judgments and
decrees, applicable to Parent or to the assets, properties and business thereof.
Parent has received all permits and approvals from, and has made all filings
with, government agencies and authorities, that are necessary to the conduct of
its business as presently conducted except where the failure to receive such
permit or approval or make such filing would not have a Material Adverse Effect
on Parent.
SECTION 5.10. INVESTIGATION. Without limiting the
representations of the Company or Parent's ability to rely thereon, Parent
acknowledges that: (a) Parent is effecting the Merger based solely on the
results of its inspections and investigations, and not on any representation or
warranty of the Company not expressly set forth in this Agreement; and (b)
Parent has conducted its own independent review and analysis of the business,
operations, assets, liabilities, results of operations, financial condition,
software, technology and prospects of the Company and acknowledges that Parent
has been provided all requested access to the personnel, properties, premises
and records of the Company for such purposes.
SECTION 5.11. DISCLOSURE. The information supplied by Parent
for inclusion in the Hearing Materials shall not as of the respective dates
thereof (and in the case of the Information Statement, the date it is first
mailed to the Shareholders, the date of the Shareholders Meeting, and at the
Effective Time) contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. Notwithstanding the foregoing, Parent makes no representation or
warranty with respect to any information supplied by the Company which is
contained in any of the Hearing Materials.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION CORP.
Acquisition Corp. represents and warrants to the Company as of
the date of the Original Agreement (and with respect to the representations and
warranties set forth in Sections 6.01, 6.02 and 6.03 as of the date hereof) as
follows:
SECTION 6.01. ORGANIZATION. Acquisition Corp. is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has not engaged in any business other than in connection
with its formation and the negotiation of this Agreement.
SECTION 6.02. AUTHORIZATION OF AGREEMENTS; NON-CONTRAVENTION.
(a) The execution and delivery by Acquisition Corp. of this Agreement and each
Ancillary Agreement to
which Acquisition Corp. is a party, and the consummation by Acquisition Corp. of
the transactions contemplated hereby and thereby, have been duly authorized by
all requisite corporate action. This Agreement has been duly and validly
executed by Acquisition Corp. and, subject to due execution by any other parties
hereto, will constitute the legal, valid and binding obligation of Acquisition
Corp., enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting the enforcement of creditors' rights generally.
Each Ancillary Agreement to which Acquisition Corp. is party, when duly executed
and delivered in accordance with this Agreement, subject to due execution by any
other parties thereto, will constitute a legal, valid and binding obligation of
Acquisition Corp., enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization and moratorium laws and other
laws of general application affecting the enforcement of creditors' rights
generally. No other corporate proceedings on the part of Acquisition Corp. are
necessary to authorize this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby.
(b) NON-CONTRAVENTION. The execution, delivery and performance
of this Agreement by Acquisition Corp. and each Ancillary Agreement to which
Acquisition Corp. is a party and the consummation of the transactions
contemplated hereby and thereby will not (i) conflict with any provision of the
Certificate of Incorporation or Bylaws of Acquisition Corp. (in each case as in
effect at the Effective Time) (ii) result (with the giving of notice or the
lapse of time or both) in any violation of or default or loss of a benefit
under, or result in the creation of any Lien upon any of the properties or
assets of Acquisition Corp. under, or result in any increased, additional or
guaranteed rights or entitlements of any Person under, or permit the
termination, cancellation or acceleration of any obligation under, any mortgage,
indenture, lease, agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Acquisition Corp. or any of its properties, other than
any such violation, default, loss, acceleration or Lien that would not
materially adversely affect the ability of Acquisition Corp. to consummate the
transactions contemplated hereby and which would not otherwise have a Material
Adverse Effect on Acquisition Corp.
SECTION 6.03. GOVERNMENTAL APPROVALS. No consent, approval,
order or authorization of, or registration, declaration or filing with any
Governmental Agency having jurisdiction over Acquisition Corp. is required to be
made or obtained by Acquisition Corp. in connection with the execution and
delivery of this Agreement by Acquisition Corp. and each Ancillary Agreement to
which Acquisition Corp. is a party or the consummation by Acquisition Corp. of
the transactions contemplated hereby or thereby, except for (a) compliance by
Acquisition Corp. with the ▇▇▇▇-▇▇▇▇▇ Act; (b) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware as required under
the DGCL to effect the Merger; and (c) the filing of the Agreement of Merger
with the Secretary of State of the State of California as required under
California Law to effect the Merger.
SECTION 6.04. BROKERS. Except as set forth on Item 6.04,
Acquisition Corp. has
not used any broker or finder in connection with the transactions contemplated
hereby, and Acquisition Corp. does not have and will not have any liability or
otherwise suffer or incur any loss as a result of or in connection with any
brokerage or finder's fee or other commission of any Person retained by
Acquisition Corp. in connection with any of the transactions contemplated by
this Agreement.
ARTICLE VII.
COVENANTS
SECTION 7.01. COVENANTS OF THE COMPANY.
(a) CONDUCT OF THE COMPANY'S BUSINESS. The Company covenants
and agrees that, from and after the date of the Original Agreement and prior to
the Effective Time, unless Parent shall otherwise consent in writing or as
otherwise expressly contemplated by this Agreement:
(i) the business of the Company and the Subsidiaries shall be
conducted only in, and the Company shall not, and shall not permit any
Subsidiary to, take any action except in, the ordinary course of
business consistent with past practice and each of the Company and the
Subsidiaries shall use reasonable efforts to preserve intact its
present business organization, keep available the services of its
current officers and employees, maintain its assets (other than those
permitted to be disposed of hereunder) in good repair and condition,
maintain its books of account and records in the usual, regular and
ordinary manner and preserve its goodwill and ongoing business;
(ii) the Company shall not, and shall not permit any
Subsidiary to, directly or indirectly do any of the following: (1)
issue, sell, pledge, dispose of or encumber (A) any capital stock of
the Company or any of the Subsidiaries (except (x) upon exercise or
conversion of outstanding options, warrants or Company Preferred Stock
or (y) as contemplated by Section 7.01(m)), or (B) any property or
assets (including Intellectual Property) of the Company or any of the
Subsidiaries, except inventory and immaterial assets in the ordinary
course of business consistent with past practice; (2) amend or propose
to amend its Articles of Incorporation or Bylaws; (3) split, combine or
reclassify any outstanding shares of its capital stock, or declare, set
aside or pay any dividend payable in cash, stock, property or otherwise
with respect to such shares (except for any dividends paid in the
ordinary course to the Company or to any Subsidiary); (4) redeem,
purchase, acquire or offer to acquire any shares of its capital stock;
or (5) enter into any contract, agreement, commitment or arrangement
with respect to any of the matters set forth in this paragraph (ii);
(iii) the Company shall not, and shall not permit any
Subsidiary to, (1) enter
into, adopt, amend or terminate any bonus, profit sharing,
compensation, termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit plan,
agreement, trust, fund or other arrangement for the benefit of any
director, officer or employee or consultant, or increase in any manner
the compensation or fringe benefits of any employee, consultant,
director or officer, or increase the compensation or fringe benefits of
any executive officer other than in the ordinary course of business
consistent with past practice, or make any payment of a cash bonus to
any director or officer or to any employee of, or consultant or agent
to, the Company or any of the Subsidiaries, other than pursuant to
existing agreements listed on Item 7.01(a)(iii) of the Company
Disclosure Letter, or make any other material change in the terms or
conditions of employment (but nothing in the clause shall prohibit pay
raises upon regularly scheduled reviews or option grants in each case
in the ordinary course of business consistent with past practice); (2)
announce any plan or legally binding commitment to create any employee
benefit plan, program or arrangement or to amend or modify in any
material respect any existing employee benefit plan, program or
arrangement; (3) eliminate the vesting conditions or otherwise
accelerate the payment of any compensation, including any stock options
(except for automatic acceleration of vesting pursuant to the Company
Option Plan and existing restricted stock purchase agreements disclosed
to Parent prior to the date of the Original Agreement); (4) incur any
obligation or liability (fixed or contingent) to be paid or fulfilled
by the Company or any Subsidiary (other than Transaction Expenses not
in the aggregate greater than the Transaction Fee Amount) except normal
trade or business obligations incurred in the ordinary course of
business and consistent with past practice, none of which individually
or in the aggregate would have a Material Adverse Effect on the
Company, or incur any indebtedness for money borrowed which is to be
repaid by the Company; (5) mortgage, pledge or subject to any lien,
security interest, charge or other encumbrance any of its assets,
whether tangible or intangible; (6) transfer, lease or otherwise
dispose of any of its assets, whether tangible or intangible, except
for fair consideration in the ordinary course of business and
consistent with past practice, or acquired, any assets or properties,
except for fair consideration in the ordinary course of business and
consistent with past practice; (7) make any investment of a capital
nature, whether by purchase of stock or securities, contributions to
capital, property transfers or otherwise, in any other partnership,
corporation or other entity, or purchase any property or assets; (8)
cancel or compromise any debt or claim owed to it other than in the
ordinary course of business consistent with past practice; (9) waive,
abandon or release any rights of material value held by it, including,
without limitation, any Intellectual Property; (10) transfer or grant
any rights under or with respect to any Intellectual Property (except
for product sales or software licenses in the ordinary course
consistent with past practice), or permit any license, permit or other
form of authorization relating to an Intellectual Property to lapse;
(11) make any loan, advance or capital contribution to or investment in
any Person (other than for travel and similar expenses in the ordinary
course of business); (12) change the method of accounting or accounting
principle or practice by the Company, or re-evaluated any of the assets
of the
Company; (13) except with respect to the payment of Transaction
Expenses not in the aggregate greater than the Transaction Fee Amount,
enter into any material agreement, contract, lease or license other
than in the ordinary course of business which in any way binds the
Company to pay consideration, or provide goods or services; (14) enter
into any nondisclosure agreements with vendors and customers relating
to information concerning such vendor or customer or any nondisclosure
agreement with any competitor of Parent relating to information
concerning the Company; or (15) to the extent not otherwise set forth
herein, take any action described in Section 4.06 hereof;
(iv) the Company shall, and shall cause the Subsidiaries to,
use commercially reasonable efforts to the extent not prohibited by the
foregoing provisions of this Section 7.01(a), to maintain its
relationships with its suppliers and customers, clients, and others
having business dealings with it, and if and as requested by Parent or
Acquisition Corp.;
(v) the Company shall, and shall cause the Subsidiaries to,
use commercially reasonable efforts to make reasonable arrangements for
representatives of Parent or Acquisition Corp. to meet with customers
and suppliers of the Company or any of the Subsidiaries, and the
Company shall schedule, and the management of the Company shall
participate in, meetings of representatives of Parent or Acquisition
Corp. with employees of the Company or any of the Subsidiaries; and
(vi) the Company shall provide to Parent a draft of any
Federal income Tax return or material state, local or foreign Tax
return (other than state or local sales and use taxes) required to be
filed on behalf of the Company or any Subsidiary between the date of
the Original Agreement and the Effective Time at least 15 days prior to
the date on which such return is due and shall not file any such return
without the consent of Parent, such consent not to be unreasonably
withheld or delayed, unless such filing is required by law.
(b) INQUIRIES AND NEGOTIATIONS.
(i) From and after the date of the Original Agreement until
the Effective Time, the Company and the Subsidiaries shall not, and
shall not permit their respective shareholders, officers, directors,
employees, representatives, bankers, investment bankers, agents and
Affiliates to, directly or indirectly, (1) solicit, initiate, continue
or engage in discussions or negotiations with any Person, encourage
submission of any inquiries, proposals or offers by, or take any other
action intended or designed to facilitate the efforts of any Person,
other than Parent, relating to the possible acquisition of the Company
or any of the Subsidiaries (whether by way of arrangement,
amalgamation, take-over bid, tender offer, purchase of capital stock,
purchase of assets or otherwise) or any material portion of its or
their capital stock or assets (with any such efforts by any such
Person, including a firm proposal to make such an acquisition, to be
referred to as an "Acquisition Proposal"), (2) provide information with
respect to the Company or any of
the Subsidiaries, or afford any access to the properties, books or
records of the Company or any of the Subsidiaries, to any Person, other
than Parent, relating to a possible Acquisition Proposal by any Person
other than Parent, (3) make or authorize any statement, recommendation
or solicitation in support of any possible Acquisition Proposal by any
Person, other than by Parent, or (4) enter into an agreement with any
Person, other than Parent, providing for a possible Acquisition
Proposal.
(ii) If the Company or any of the Subsidiaries receives after
the date of the Original Agreement any unsolicited offer or proposal to
enter negotiations relating to an Acquisition Proposal, or any request
for non-public information relating to the Company or any of the
Subsidiaries in connection with any Acquisition Proposal, the Company
shall immediately notify Parent thereof, in writing, including
information as to the identity of the party making any such offer
proposal or request and the specific terms of such offer proposal or
request, as the case may be. Immediately upon receipt by the Company or
a Subsidiary, the Company shall immediately provide Parent with a true
and complete copy of any Acquisition Proposal or other written
communication concerning a possible Acquisition Proposal received from
such third party.
(iii) The Company ceased and caused to be terminated all
existing discussions and negotiations with all parties (other than
Parent) conducted prior to the date of the Original Agreement with
respect to any of the foregoing, including, without limitation, all
discussions and negotiations with third parties regarding the issuance
of securities of the Company or other investment(s) in the Company by
such third parties whether or not such investments would result in a
change of control of the Company. The Company agrees not to release any
third party from any confidentiality agreement with respect to any of
the foregoing to which the Company is a party.
(iv) The Company shall use commercially reasonable efforts to
ensure that the Shareholders, officers, directors, employees, agents
and Affiliates of the Company or any of the Subsidiaries and any
bankers, investment bankers or other agents, advisors or
representatives retained by the Company are aware of the restrictions
described in this Section 7.01(b), and shall be responsible for any
breach of this Section 7.01(b) by the Shareholders, such bankers,
investment bankers, officers, directors, employees, agents, advisors,
representatives or Affiliates.
(v) Nothing in this Section 7.01(b) shall prohibit the Company
from informing the Shareholders of any unsolicited Acquisition Proposal
if and as required by directors' fiduciary duties under California Law;
but this clause shall not permit directors to change their
recommendation in favor of the Merger or to engage in any discussions
or negotiations with respect to such Acquisition Proposal.
(c) NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent and Acquisition Corp. of (i) the occurrence, or failure
to occur, of any event that the
Company believes would be likely to cause any of its representations or
warranties contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of the Original Agreement to the
Effective Time and (ii) any failure of the Company or any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that failure to give such notice shall not constitute a waiver of any defense
that may be validly asserted.
(d) SHAREHOLDER APPROVAL. The Company will either hold a
special meeting of the Shareholders or distribute to the Shareholders a written
consent (the "Shareholders Meeting") at the earliest practicable date (not to
exceed 10 days) following the California Fairness Hearing to submit this
Agreement, the Merger and related matters for the consideration and approval of
the Shareholders, which approval will be recommended by the Company's Board of
Directors. The Company shall provide to Parent reasonable opportunity to review
and comment on any Hearing Materials and any other material (collectively, the
"Information Statement") proposed to be mailed to the Shareholders in connection
with the foregoing approval.
(e) REGULATORY APPROVALS. The Company will promptly execute
and file, or join in the execution and filing of any application or other
document that may be necessary in order to obtain the authorization, approval or
consent of any Governmental Agency, which may be required, or which Parent may
request, in connection with the consummation of the transactions contemplated by
this Agreement. The Company will use reasonable efforts to promptly obtain all
such authorizations, approvals and consents. Without limiting the generality of
the foregoing, the Company shall respond as promptly as practicable to any
inquiries or requests for additional information or documentation received from
the Commissioner regarding the California Fairness Hearing and, as promptly as
practicable after the execution of the Original Agreement, shall file with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "DOJ"), a pre-merger notification report under the
▇▇▇▇-▇▇▇▇▇ Act.
(f) NECESSARY CONSENTS. Between the date of the Original
Agreement and the Effective Time, the Company will use its best efforts to
obtain such written consents and take such other actions as may be necessary or
appropriate to allow the consummation of the transactions contemplated hereby
and to allow the Company to carry on its business after the Effective Time.
(g) SATISFACTION OF CONDITIONS PRECEDENT. Between the date of
the Original Agreement and the Effective Time, the Company will use reasonable
efforts to satisfy or cause to be satisfied all the conditions precedent that
are set forth in Article VIII and the Company will use reasonable efforts to
cause the Merger and the other transactions contemplated by this Agreement to be
consummated and shall take such reasonable steps as are appropriate so that the
representations and warranties of the Company in this Agreement remain complete
and correct on and as of the Closing Date.
(h) INSURANCE POLICIES. Neither the Company nor any of the
Subsidiaries shall take, or omit to take, any action which would cause any of
the insurance policies disclosed in Section 4.18 above to cease to be in full
force and effect immediately following the Closing.
(i) EMPLOYEE RETENTION ARRANGEMENTS. The Company agrees that
it will implement the employee retention arrangements in accordance with Section
7.02(h). Between the date of the Original Agreement and the Effective Time, the
Company shall use its best efforts to assist Parent in its efforts to enter into
employment acceptance letters with all the Company Employees and to ensure that
all the Company Employees listed on Item 7.01(i)(a) and 90% of the Company
Employees listed on Item 7.01(i)(b) remain as employees of the Company at least
through the Effective Time, including without limitation, honoring the terms of
the employee retention programs previously disclosed to Parent.
(j) ANCILLARY AGREEMENTS. The Company shall execute and
deliver the Ancillary Agreements to which the Company is a party at or
immediately prior to the Effective Time.
(k) COMPANY AUDITORS. The Company will use reasonable efforts
to cause its management and its independent auditors to facilitate on a timely
basis (1) the preparation of financial statements (including, without
limitation, pro forma financial statements if required) as required by Parent to
comply with applicable rules and regulations of the SEC and (2) the delivery of
such representations, reports and consents from the Company's independent
accountants as may be reasonably requested by Parent or its accountants.
(l) WARRANTS. The Company shall use its best efforts to cause
all of the holders of the Company Warrants to exercise the Company Warrants in
accordance with the terms thereof prior to the Effective Time.
(m) TRANSACTION FEES. On the day preceding the date of the
Effective Time, (i) in consideration of the obligations of the Company pursuant
to that certain letter agreement dated October 28, 1999 between ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ("H&Q") and the Company (as supplemented by that certain letter dated May
10, 2000 from H&Q to the Company), the Company shall issue to H&Q such number of
shares of Company Common Stock such that H&Q shall receive 40,000 shares of
Parent Common Stock in the Merger pursuant to 3.01(b)(ii) and (ii) in
consideration of Fenwick & West LLP's representation of the Company with respect
to the transactions contemplated by this Agreement, the Company shall issue to
Fenwick & West LLP such number of shares of Company Common Stock such that
Fenwick & West LLP shall receive 3,000 shares of Parent Common Stock in the
Merger pursuant to Section 3.01(b)(ii) (such amounts in clauses (i) and (ii),
together with $250,000 in cash payable to Fenwick & West LLP, the "Transaction
Fee Amount"). Notwithstanding Section 11.01, at the Closing Parent shall pay (or
cause the Company to pay) the cash portion of the Transaction Fee Amount to
Fenwick & West LLP.
SECTION 7.02. COVENANTS OF PARENT.
(a) ESTABLISHMENT OF ESCROW. As soon as practicable after the
Effective Time, the Escrow Amount, without any act of any Shareholder, will be
deposited with the Escrow Agent (plus a proportionate share of any additional
shares of Parent Common Stock as may be issued upon any stock splits, stock
dividends or recapitalizations effected by Parent following the Effective Time),
such deposit to constitute the Escrow Fund to be governed by the terms of the
Escrow Agreement. The portion of the Escrow Amount contributed on behalf of each
Shareholder shall be in proportion to the aggregate number of shares of Parent
Common Stock which such holder would otherwise be entitled under Section 3.02.
Upon the termination of the Escrow, as set forth in the Escrow Agreement, the
certificates representing the Escrowed Shares will, without any further action
by the Shareholders, be released in proportion to their respective contributions
to the Escrow Fund and Parent will use commercially reasonable efforts to have
the shares delivered to the Shareholders promptly after such termination.
(b) EMPLOYEE MATTERS. Parent agrees that, as of the Effective
Time, except as set forth in Item 7.02(b), it shall cause the Surviving
Corporation to continue to employ all of the employees of the Company and the
Subsidiaries who are Company Employees and who execute the confidentiality
agreement in the form attached as Exhibit E (the "Confidentiality Agreement"),
it being understood that nothing in this Agreement shall be deemed to create any
employment status other than employment at will. Employees who continue as
employees of the Surviving Corporation or any of the Subsidiaries shall be
entitled to participate in all employee benefit plans maintained by Parent or
the Surviving Corporation for employees of the Surviving Corporation generally,
it being understood and agreed, however, that nothing in this Section 7.02(b)
shall require Parent (i) to provide or continue for the benefit of any employees
any Plan currently maintained by the Company or any Subsidiary thereof or (ii)
to maintain the organizational structure of the Company as in effect on the date
of the Original Agreement.
(c) ADVICE OF CHANGES. Between the date of the Original
Agreement and the Effective Time, Parent will promptly advise the Company in
writing (a) of any event occurring subsequent to the date of the Original
Agreement which becomes known to Parent that would render any representation or
warranty of Parent or Acquisition Corp. contained in this Agreement, if made on
or as of the date of such event or the Closing Date, untrue or inaccurate in any
material respect, (b) of any Material Adverse Effect on Parent or Acquisition
Corp. which becomes known to Parent, and (c) of any material breach by Parent or
Acquisition Corp. of any covenant or agreement contained in this Agreement.
(d) REGULATORY APPROVALS. Parent will promptly execute and
file, or join in the execution and filing, of any application or other document
that may be necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign that may be
reasonably required, or that the Company may reasonably request, in connection
with the consummation of the transactions contemplated by this Agreement. Parent
will use its reasonable efforts to promptly obtain all such authorizations,
approvals and consents. Without limiting the generality of the foregoing, Parent
shall respond as promptly as practicable
to any inquiries or requests for additional information or documentation
received from the Commissioner regarding the California Fairness Hearing to the
extent any such request relates to Parent or its subsidiaries and, as promptly
as practicable after the execution of the Original Agreement, shall file with
the FTC and the DOJ, a pre-merger notification report under the ▇▇▇▇-▇▇▇▇▇ Act.
(e) NECESSARY CONSENTS. Between the date of the Original
Agreement and the Effective Time, Parent will use its best efforts to obtain
such written consents and take such other actions as may be necessary or
appropriate to allow the consummation of the transactions contemplated hereby.
(f) SATISFACTION OF CONDITIONS PRECEDENT. Between the date of
the Original Agreement and the Effective Time, Parent will use its reasonable
efforts to satisfy or cause to be satisfied all the conditions precedent that
are set forth in Article VIII, and Parent will use its reasonable efforts to
cause the Merger and the other transactions contemplated by this Agreement to be
consummated and shall take such reasonable steps as are appropriate so that the
representations and warranties of Parent in this Agreement remain complete and
correct on and as of the Closing Date.
(g) ISSUANCE AND LISTING OF PARENT COMMON STOCK. Parent hereby
covenants that all Parent Common Stock issued in connection with the Merger,
will, when issued, be validly issued, fully paid and non-assessable.
(h) ACQUISITION OPTION PLAN. Within six months of the Closing
Date, Parent shall issue stock options and/or restricted stock grants to Company
Employees selected by Parent in its sole discretion for 1,000,000 shares of
Parent Common Stock having terms to be determined by Parent in its sole
discretion and at fair market value exercise prices, of which at least 800,000
of such stock options and/or restricted stock grants shall be issued within 30
days of the Closing Date. The parties hereto acknowledge and agree that options
will be granted to employees of the Company only if such employees execute and
deliver to Parent the documentation described in Section 8.02(e) below.
(i) LISTING OF STOCK. Parent shall use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued in connection
with the Merger to be approved for listing on the NASDAQ National Market on or
prior to the Closing Date, subject to official notice of issuance.
(j) FORM S-8. Prior to the Closing, Parent shall prepare and
file with the SEC and all applicable state securities jurisdictions a
registration statement on Form S-8 (or, if suitable, an amendment to its
existing registration statement on Form S-8) or another appropriate form of
registration statement registering under the Securities Act the issuance of
Parent Common Stock to holders of Parent Options upon exercise of such options.
(k) COOPERATION IN OBTAINING NECESSARY CONSENTS. Parent will
cooperate with the Company as reasonably requested by the Company in order to
assist the Company to obtain such written consents as are contemplated by
Section 7.01(e) hereof; provided, however, that such cooperation shall not
include any requirements of Parent or any of its Affiliates to expend money,
commence or participate in any litigation or offer or grant any accommodation
(financial or otherwise) or any third party.
SECTION 7.03. COVENANTS OF PARENT AND THE COMPANY.
(a) ACCESS TO INFORMATION.
(i) Each of Parent and the Company shall, and shall cause its
respective subsidiaries, officers, directors, employees,
representatives, advisors and agents to, afford, from the date of the
Original Agreement to the Effective Time, the officers, employees,
representatives, advisors and agents of the other party complete access
at all reasonable times to its officers, directors, employees,
representatives, advisors, agents, properties, books, records and
workpapers, and shall furnish each other party all financial, operating
and other information and data as Parent or Company, through its
officers, employees or agents, may reasonably request and shall
promptly furnish to the other monthly operating and financial reports
in such form as Parent or the Company shall reasonably request.
(ii) The Company, at least three business days prior to the
Effective Date, shall deliver to Parent a list setting forth the names
and locations of each bank or other financial institution at which the
Company and the Subsidiaries has an account (giving the account
numbers) or safe deposit box and the names of all persons authorized to
draw thereon or have access thereto.
(iii) If this Agreement is terminated prior to the Effective
Time, each of the parties hereto shall, and shall cause its officers,
employees, representatives, advisors and agents to, deliver to the
other party, or if requested, destroy, all confidential documents, work
papers and other materials, and all copies thereof, obtained by it or
on its behalf from such other party as a result of this Agreement or in
connection herewith, whether so obtained before or after the execution
and delivery of the Original Agreement.
(iv) Each of the parties hereto and its officers and employees
shall not disclose or use any information so obtained, except as
required by applicable law or legal process without the prior written
consent of the other party; PROVIDED that any such information may be
disclosed to a party's financial advisors, accountants, counsel and
other representatives, and lenders and regulatory authorities whose
approvals are required hereunder, as may be appropriate or required in
connection with the transactions contemplated hereby, but only if such
Persons shall be specifically informed by such party of the
confidential nature of such information and agree to comply with the
restrictions contained herein, and to preserve the confidentiality of
any such information obtained. The agreements contained in this Section
7.03(a) do not apply to information that (i) is or becomes generally
available to the public other than as a result of a disclosure by a
receiving party or its representatives, (ii) becomes available to a
party on a non-confidential basis from a source not bound by any duty
of confidentiality to the other party or (iii) is independently
developed by a receiving party without reference to any confidential
information.
(v) No investigation pursuant to this Section 7.03(a) shall
affect, add to or subtract from any representations or warranties of
the parties hereto or the conditions to the obligations of the parties
hereto to effect the Merger.
(b) FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings; PROVIDED that the foregoing shall not require Parent
to agree to make, or to require the Company or any of the Subsidiaries to make,
any divestiture of a significant asset in order to obtain any waiver, consent or
approval or to incur any material liability or expense.
(c) PUBLIC ANNOUNCEMENTS. Neither the Company nor Parent shall
issue, or permit their respective shareholders, officers or employees to issue,
any press release or make any public statements with respect to this Agreement
or the Original Agreement or the transactions contemplated hereby or thereby,
without the prior written consent of the Parent or the Company, as the case may
be, except as may be required by law or the rules and regulations of any
national securities exchange or which is requested or required by any regulatory
body which asserts jurisdiction over such party, in which case such party (or
parties) shall be allowed to make such disclosure provided that the party (or
parties) making such disclosure shall notify the other party (or parties) as
promptly as practicable.
(d) INFORMATION STATEMENT; PERMIT APPLICATION.
(i) As soon as practicable after the execution of the Original
Agreement, the Company shall prepare, with the cooperation of Parent,
the Information Statement for the shareholders of the Company to
approve this Agreement and the transactions contemplated hereby. The
Information Statement shall constitute a disclosure document for the
offer and issuance of the shares of Parent Common Stock to be received
by the Shareholders in the Merger. Parent and the Company shall each
use reasonable commercial efforts to cause the Information Statement to
comply with applicable federal and state securities laws requirements.
Each of Parent and the Company agrees to provide promptly to the other
such information concerning its business and financial
statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in
the Information Statement, or in any amendments or supplements thereto.
The Company will promptly advise Parent, and Parent will promptly
advise the Company, in writing if at any time prior to the Effective
Time either the Company or Parent shall obtain knowledge of any facts
that might make it necessary or appropriate to amend or supplement the
Information Statement in order to make the statements contained or
incorporated by reference therein not misleading or to comply with
applicable law. The Information Statement shall contain the
recommendation of the Board of Directors of Company that the
Shareholders approve the Merger and this Agreement and the conclusion
of the Board of Directors of the Company that the terms and conditions
of the Merger are advisable and fair and reasonable to the
Shareholders. Anything to the contrary contained herein
notwithstanding, the Company shall not include in the Information
Statement any information with respect to Parent or its affiliates or
associates, the form and content of which information shall not have
been approved by Parent prior to such inclusion.
(ii) As soon as practicable after the execution of the
Original Agreement, Parent shall prepare, with the cooperation of the
Company, the Notice of Hearing and the Permit Application. Parent and
the Company shall each use commercially reasonable efforts to cause the
Notice of Hearing and the Permit Application to comply with the
requirements of applicable federal and state laws. Each of Parent and
the Company agrees to provide promptly to the other such information
concerning its business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be
required or appropriate for inclusion in the Notice of Hearing and the
Permit Application, or in any amendments or supplements thereto. The
Company will promptly advise Parent, and Parent will promptly advise
the Company, in writing if at any time prior to the Effective Time
either the Company or Parent shall obtain knowledge or any facts that
might make it necessary or appropriate to amend or supplement the
Permit Application in order to make the statement contained or
incorporated by reference therein not misleading or to comply with
applicable law.
ARTICLE VII.
CONDITIONS TO THE MERGER
SECTION 8.01. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO
EFFECT THE MERGER. The obligation of the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Acquisition Corp. contained in this Agreement,
disregarding all qualifications and exceptions contained therein
relating to materiality or Material Adverse Effect or any
similar standard or qualification, shall be true and correct on and as
of the Closing Date as if made on and as of the Closing Date (other
than representations and warranties that address matters only as of a
particular date, which shall be true and correct as of such date),
except where the failure of such representations or warranties to be
true or correct could not have, individually or in the aggregate, a
Material Adverse Effect on Parent and Acquisition Corp., taken as a
whole. It is understood that, for purposes of determining the accuracy
of such representations and warranties, any update of or modification
to the Parent Disclosure Letter made or purported to have been made
after the execution of the Original Agreement shall be disregarded.
Company shall have received a certificate with respect to the foregoing
signed on behalf of Parent by the Chief Executive Officer or Chief
Financial Officer of Parent.
(b) PERFORMANCE. Parent and Acquisition Corp. shall have
performed and complied in all material respects with all covenants,
agreements and conditions contained herein required to be performed and
complied with by it prior to or at the Effective Time. The Company
shall have received a certificate with respect to the foregoing signed
on behalf of Parent by the Chief Executive Officer or Chief Financial
Officer of Parent.
(c) OPINION OF COUNSEL. The Company shall have received the
opinion of Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol, counsel to
Parent and Acquisition Corp., in customary form reasonably acceptable
to the Company.
(d) ANCILLARY AGREEMENTS. Each Ancillary Agreement shall have
been executed and delivered by each party thereto other than the
Company and the applicable Shareholders and said agreements shall be in
full force and effect as of the Closing Date.
(e) ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not have
occurred any event or change since the date of the Original Agreement
that has a Material Adverse Effect on Parent.
(f) COMPLIANCE WITH LAW. There shall be no order, injunction,
decree or ruling by any Governmental Agency or threat thereof, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger or this Agreement, that would prohibit or
render illegal the transactions contemplated by this Agreement.
(g) CONSENTS, WAIVERS, ETC. Parent shall have received all
written consents, assignments, waivers, authorizations or other
certificates necessary to provide for the continuation in full force
and effect of any and all material contracts and leases of Parent to
consummate the transactions contemplated hereby. Any waiting period
(and any extension thereof) under the ▇▇▇▇-▇▇▇▇▇ Act applicable to the
Merger contemplated hereby shall have expired or been terminated.
(h) SHAREHOLDER APPROVAL. The Merger and this Agreement shall
have been
approved and adopted by a majority of the Shareholders in accordance
with applicable law and the Bylaws and Articles of Incorporation of the
Company.
(i) NO LEGAL ACTION. No temporary restraining order,
preliminary injunction or permanent injunction or other order
preventing the consummation of the Merger or any other transaction
contemplated hereby shall have been issued by any Governmental Agency
and remain in effect, nor shall any proceeding seeking any of the
foregoing be pending.
(j) CALIFORNIA FAIRNESS HEARING. The California Fairness
Hearing contemplated by Section 3.13 shall have taken place in
compliance with Section 3(a)(10) of the Securities Act and the
Commissioner shall have issued a permit in conjunction with the Merger
such that the provisions of Section 3(a)(10) of the Securities Act
shall be applicable to the issuance of shares of Parent Common Stock in
the Merger.
SECTION 8.02. CONDITIONS TO THE OBLIGATION OF PARENT AND
ACQUISITION CORP. TO EFFECT THE MERGER. The obligation of Parent and Acquisition
Corp. to effect the Merger shall be subject to the fulfillment at or prior to
the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality
or Material Adverse Effect or any similar standard or qualification,
shall be true and correct on and as of the Closing Date as if made on
and as of the Closing Date (other than representations and warranties
that address matters only as of a particular date, which shall be true
and correct as of such date), except where the failure of such
representations or warranties to be true or correct could not have,
individually or in the aggregate, a Material Adverse Effect on the
Company. It is understood that, for purposes of determining the
accuracy of such representations and warranties, any update of or
modification to the Company Disclosure Letter made or purported to have
been made after the execution of the Original Agreement shall be
disregarded. Parent shall have received a certificate with respect to
the foregoing signed on behalf of the Company by the Chief Executive
Officer or Chief Financial Officer of the Company.
(b) PERFORMANCE. The Company shall have performed and complied
in all material respects with all agreements and conditions contained
herein required to be performed and complied with by them prior to or
at the Effective Time. Parent shall have received a certificate with
respect to the foregoing signed on behalf of the Company by the Chief
Executive Officer or Chief Financial Officer of the Company.
(c) NO LEGAL ACTION. No temporary restraining order,
preliminary injunction or permanent injunction or other order
preventing the consummation of the Merger or any other transaction
contemplated hereby shall have been issued by any Governmental Agency
and remain in effect, nor shall any proceeding seeking any of the
foregoing be
pending.
(d) OPINION OF COUNSEL. Parent shall have received the opinion
of Fenwick & West LLP, counsel to the Company, in customary form
reasonably acceptable to the Company.
(e) LOCK-UP AGREEMENTS; NONCOMPETE AGREEMENT; EMPLOYEE
RETENTION AND CONFIDENTIALITY AGREEMENTS. Each of the Lock-up
Shareholders shall have executed and delivered a Lock-up Agreement,
each of the Executives and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have executed and
delivered a Noncompete Agreement and all of the Company Employees
listed on Item 7.01(i)(a), and 90% of the Company Employees listed on
Item 7.01(i)(b) shall have accepted employment with Parent following
the Effective Time, and all employees of the Company shall have signed
a Confidentiality Agreement.
(f) ANCILLARY AGREEMENTS. Each Ancillary Agreement shall have
been executed and delivered by each party thereto other than Parent and
Acquisition Corp. and each such agreement shall be in full force and
effect as of the Closing Date.
(g) ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not have
occurred any event or change since the date of the Original Agreement
that has a Material Adverse Effect on the Company.
(h) COMPLIANCE WITH LAW. There shall be no order, injunction,
decree or ruling by any Governmental Agency or threat thereof, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger or this Agreement, that would prohibit or
render illegal the transactions contemplated by this Agreement.
(i) CONSENT, WAIVER, ETC. The Company shall have received all
written consents, assignments, waivers, authorizations or other
certificates necessary to provide for the continuation in full force
and effect of any and all material contracts and leases of the Company
to consummate the transactions contemplated hereby. Any waiting period
(and any extension thereof) under the ▇▇▇▇-▇▇▇▇▇ Act applicable to the
Merger contemplated hereby shall have expired or been terminated.
(j) COMPANY PREFERRED STOCK. Series A Stock, Series C Stock,
Series D Stock and Series E Stock shall have converted into Company
Common Stock immediately preceding the Effective Time.
(k) VOTING AGREEMENT. The Voting Agreements shall be in full
force and effect.
(l) RESIGNATION OF DIRECTORS. Each member of the Board of
Directors of the Company and of each Subsidiary of the Company shall
have delivered to Parent an
instrument resigning such person's position as of the Effective Time.
(m) DISSENTING SHAREHOLDERS. The Company shall not have
received on or prior to the Effective Time notice from the holders of
more than 5% of the Company Common Stock of their intention to exercise
rights of dissent under California Law or the DGCL.
(n) SHAREHOLDER APPROVAL. The Merger and this Agreement shall
have been approved and adopted by a majority of the Shareholders in
accordance with applicable law and the Bylaws and Articles of
Incorporation of the Company.
(o) CALIFORNIA FAIRNESS HEARING. The California Fairness
Hearing contemplated by Section 3.13 shall have taken place in
compliance with Section 3(a)(10) of the Securities Act and the
Commissioner shall have issued a permit in conjunction with the Merger
such that the provisions of Section 3(a)(10) of the Securities Act
shall be applicable to the issuance of shares of Parent Common Stock in
the Merger.
(p) TRANSACTION FEES. The Company shall have issued the shares
of Company Common Stock as contemplated by Section 7.01(m).
ARTICLE IX.
TERMINATION AND ABANDONMENT
SECTION 9.01. TERMINATION AND ABANDONMENT. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after approval by the Shareholders as follows:
(a) Parent and the Company may terminate this Agreement by
mutual written consent of the Board of Directors of each party at any
time prior to the Closing;
(b) Parent may terminate this Agreement by giving written
notice to the Company at any time prior to the Closing (A) in the event
the Company has breached any representation, warranty, or covenant, in
any material respects, contained in this Agreement, Parent has notified
the Company of the breach, and the breach has continued without cure
for a period of twenty days after the notice of breach or (B) if the
Closing shall not have occurred on or before the later of (x) June 30,
2000, or (y) the later of (I) unless the FTC or DOJ requests that the
waiting period under the ▇▇▇▇-▇▇▇▇▇ Act be extended more than once, the
date following the expiration or termination of any waiting period
under the ▇▇▇▇-▇▇▇▇▇ Act or (II) unless the Commissioner shall have
rejected the Permit Application, the 10th day following the date the
Commissioner shall have issued a permit in conjunction with the Merger
such that the provisions of Section 3(a)(10) of the
Securities Act shall be applicable to the issuance of Parent Common
Stock in the Merger, by reason of the failure of any condition
precedent under Section 8.02 hereof (unless the failure results
primarily from Parent itself breaching any representation, warranty or
covenant contained in this Agreement);
(c) the Company may terminate this Agreement by giving written
notice to Parent at any time prior to the Closing (A) in the event
Parent has breached any representation, warranty or covenant, in any
material respects, contained in this Agreement to an extent as would
make the condition in 8.02(a) or (b) unsatisfied, the Company has
notified Parent of the breach, and the breach has continued without
cure for a period of twenty days after the notice of breach or (B) if
the Closing shall not have occurred on or before the later of (x) June
30, 2000 or (y) the later of (I) unless the FTC or DOJ requests that
the waiting period under the ▇▇▇▇-▇▇▇▇▇ Act be extended more than once,
the date following the expiration or termination of any waiting period
under the ▇▇▇▇-▇▇▇▇▇ Act or (II) unless the Commissioner shall have
rejected the Permit Application, the 10th day following the date the
Commissioner shall have issued a permit in conjunction with the Merger
such that the provisions of Section 3(a)(10) of the Securities Act
shall be applicable to the issuance of Parent Common Stock in the
Merger, by reason of the failure of any condition precedent under
Section 8.01 hereof (unless the failure results primarily from the
Company itself breaching any representation, warranty or covenant
contained in this Agreement);
(d) Parent may terminate this Agreement by giving written
notice to the Company if any representation of the Company set forth in
this Agreement shall have become untrue, in such case which has or can
reasonably be expected to have a Material Adverse Effect on the Company
and the Subsidiaries, considered as a whole, and which the Company
fails to cure within 15 business days after written notice thereof from
Parent (except that no cure period shall be provided for a breach by
the Company which by its nature cannot be cured); and
(e) either Parent or the Company may terminate this Agreement
by giving written notice to the other at any time prior to the
Effective Time if a permanent injunction or other order by any United
States federal, provincial or state court shall have been issued and
shall have become final and nonappealable that would (i) make illegal
or otherwise restrain or prohibit the consummation of the Merger, (ii)
prohibit Parent's direct or indirect ownership or operation of all or
any material portion of the business or assets of the Company or any of
the Subsidiaries or (iii) compel Parent to dispose of or hold separate
all or any material portion of the business or assets of the Company or
any of the Subsidiaries.
SECTION 9.02. EFFECT OF TERMINATION. In the event of the
termination of this Agreement and the abandonment of the Merger pursuant to
Section 9.01, this Agreement shall thereafter become void and have no effect,
and no party hereto shall have any liability to any
other party hereto or its stockholders or directors or officers in respect
thereof, and each party shall be responsible for its own expenses; provided,
however, that if this Agreement is terminated by a party because of a breach of
this Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired; provided, further, that the provisions of
Sections 7.03(c), 9.02, 11.01, 11.07, 11.09 and 11.10 shall remain in full force
and effect and survive the termination of this Agreement.
ARTICLE X.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 10.01. SURVIVAL. All representations, warranties and
covenants of the Company contained in this Agreement will remain operative and
in full force and effect after the Closing regardless of any investigation made
by or on behalf of the parties to this Agreement and shall expire on the first
anniversary of the Closing. No claim for indemnification or breach of
representations, warranties or covenants shall be made unless Parent gives
written notice to the Representative in reasonable detail specifying the Claim
on or prior to the first anniversary of the Closing Date. All representations
and warranties of Parent contained in this Agreement will expire at Closing. All
covenants of Parent will survive the Closing.
SECTION 10.01. INDEMNIFICATION FROM ESCROW SHARES DEPOSITED BY
ALL SHAREHOLDERS. Subject to the limitations set forth in this Article X, from
and after the Effective Time, Parent and its subsidiaries (including, without
limitation, the Company after the consummation of the Merger) and their
respective officers, directors, agents and employees, and each Person, if any,
who controls or may control Parent within the meaning of the Securities Act
(hereinafter referred to individually as a "PARENT INDEMNIFIED PERSON" and
collectively as "PARENT INDEMNIFIED PERSONS") shall be indemnified and held
harmless from and against any and all claims, demands, actions, causes of
action, losses, costs, damages, liabilities and expenses including, without
limitation, reasonable legal fees and costs (collectively, "CLAIMS"):
(a) arising out of any breach by Company of the
representations, warranties or covenants given or made by Company in this
Agreement or in any certificate, document or instrument delivered by or on
behalf of the Company pursuant hereto.
(b) any and all actions, suits, claims or legal,
administrative, arbitrative, governmental or other proceedings or investigations
against any Parent Indemnified Person arising out of such breach.
SECTION 10.13. TIME AND VALUE LIMITATIONS. The provisions of
this Section 10.03 shall apply notwithstanding anything to the contrary in the
Escrow Agreement. With
respect to any Claim, the indemnification provided for in this Article X shall
not apply unless a Parent Indemnified Person gives written notice to the
Representative with respect to such Claim on or prior to the first anniversary
of the Closing Date; provided that if, prior to the expiration of a particular
representation, warranty or covenant, a Parent Indemnified Person makes a claim
for indemnification under either this Agreement or the Escrow Agreement with
respect to a misrepresentation or breach of such representation, warranty or
covenant, then such Parent Indemnified Person's rights to indemnification under
this Article X for such claim shall survive any expiration of such
representation, warranty or covenant. The indemnification provided for in this
Article X shall not apply unless the aggregate Claims for which one or more
Parent Indemnified Persons seeks indemnification exceeds $500,000 (the
"THRESHOLD"), after which recovery shall be from the first dollar without regard
to the Threshold. Escrow Shares shall be valued at the Closing Price for the
purposes of satisfying Claims.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01. EXPENSES, ETC. Whether or not the transactions
contemplated by this Agreement are consummated, neither the Company, on the one
hand, nor Parent and Acquisition Corp., on the other hand, shall have any
obligation to pay any of the fees and expenses of the other incident to the
negotiation, preparation and execution of this Agreement, including the fees and
expenses of counsel, accountants, investment bankers and other experts
(collectively, the "Transaction Expenses"), and Parent shall pay all such
Transaction Expenses incurred by Acquisition Corp. The Company represents and
warrants that the total of all Transaction Expenses incurred and to be incurred
by the Company and the Subsidiaries shall be equal to Transaction Fee Amount.
SECTION 11.02. EXECUTION IN COUNTERPARTS. For the convenience
of the parties, this Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 11.03. NOTICES. All notices that are required or may
be given pursuant to the terms of this Agreement shall be in writing and shall
be sufficient in all respects if given in writing and delivered by hand or
national overnight courier service, transmitted by telecopy or mailed by
registered or certified mail, postage prepaid, and shall be deemed given upon
receipt, as follows:
If to Parent to:
Globespan, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with copies to:
Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Company, to:
iCompression, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 11.04. WAIVERS. The Company, on the one hand, and
Parent and Acquisition Corp., on the other hand, may, by written notice to the
other, (i) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement; (ii) waive any inaccuracies in
the representations or warranties of the other contained in this Agreement or in
any document delivered pursuant to this Agreement; (iii) waive compliance with
any of the conditions of the other contained in this Agreement; or (iv) waive
performance of any of the obligations of the other under this Agreement. Except
as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements
contained in this Agreement. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
SECTION 11.05. AMENDMENTS, SUPPLEMENTS, ETC. This Agreement
may be amended or supplemented at any time; PROVIDED that after receipt of the
shareholder approval of the Agreement, there shall be no amendment that by law
requires further approval by the Shareholders without the further approval of
the Shareholders. Any such instrument must be in writing and signed by all of
the parties hereto.
SECTION 11.06. ENTIRE AGREEMENT. This Agreement and its Items
and Exhibits, and the documents to be executed or delivered at the Effective
Time in connection herewith, constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof. No representation, warranty, promise,
inducement or statement of intention has been made by any party that is not
embodied in this Agreement or such other documents, and none of the parties
shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement of intention not embodied herein or therein. As
used herein, the "knowledge" of the Company shall refer to the knowledge of each
director and executive officer of the Company and each of the Subsidiaries. An
individual will be deemed to have knowledge of a particular fact or other matter
if (a) such individual is actually aware of such fact or other matter or (b) a
prudent individual could be expected to discover or otherwise become aware of
such fact or other matter in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other matter. Directors
representing a Person on the Company's Board of Directors who are not and have
not been employees of the Company shall only be deemed to have actual knowledge
of any particular fact or other matter relating to the Company as to which any
officer or director of such Person has actual knowledge.
SECTION 11.07. APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to conflict of laws principles.
SECTION 11.08. BINDING EFFECT, BENEFITS. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. Except for the provisions of Article X
relating the indemnification, this Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 11.09. ASSIGNABILITY. Neither this Agreement, any of
the Ancillary Agreements nor any of the parties' rights hereunder or thereunder
shall be assignable by any party hereto prior to the Effective Time without the
prior written consent of the other parties
hereto, except that Acquisition Corp. may assign, in its sole discretion, any of
or all of its rights, interests and obligations under this Agreement to Parent
or to any direct or indirect wholly-owned subsidiary of Parent. After the
Effective Time, no assignment shall operate to release the original parties
hereto.
SECTION 11.10. SEVERABILITY. Any term or provision of this
Agreement that is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction.
[Remainder of page left intentionally blank]
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the day and year first above written.
GLOBESPAN, INC.
By /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
INDIGO ACQUISITION CORP.
By /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
ICOMPRESSION, INC.
By /S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer