EXHIBIT 2.10
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
NEXPRISE, INC.
INDIGO ACQUISITION CORPORATION,
INFOPRISE, INC.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, AND TIMELINE VENTURE INVESTORS I, LP
AS PRINCIPAL STOCKHOLDERS
AND
TIMELINE VENTURE MANAGEMENT, LLC, AS SECURITYHOLDERS' AGENT
February 4, 2002
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "AGREEMENT")
is made and entered into as of February 4, 2002 by and among NexPrise, Inc., a
Delaware corporation ("PARENT"), Indigo Acquisition Corporation, a Delaware
corporation ("MERGER SUB") and wholly owned subsidiary of Parent, InfoPrise,
Inc., a Delaware corporation (the "COMPANY"), ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and
Timeline Venture Investors I, LP, a Texas limited partnership, as "PRINCIPAL
STOCKHOLDERS" and Timeline Venture Management LLC, a California limited
liability company, as Securityholders' Agent.
RECITALS
A. The Boards of Directors of Company, Parent and Merger Sub believe it
is in the best interests of their respective companies and the stockholders of
their respective companies that Company and Merger Sub combine into a single
company through the statutory merger of Merger Sub with and into Company, with
the Company as the surviving corporation (the "MERGER") and, in furtherance
thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
Company Preferred Stock, $0.0001 par value ("COMPANY PREFERRED STOCK"), and
Company Common Stock, $0.0001 par value ("COMPANY COMMON STOCK") (collectively,
the Company Preferred Stock and Company Common Stock are referred to herein as
"COMPANY CAPITAL STOCK"), shall be converted into the right to receive the
Preferred Stock Merger Consideration or the Common Stock Merger Consideration,
as the case may be (as set forth in Section 1.6), upon the terms and subject to
the conditions set forth herein.
C. Company, Parent and Merger Sub desire to make certain representations
and warranties and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
1. The Merger.
1.1 The Merger. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("DELAWARE LAW"),
Merger Sub shall be merged with and into Company, the separate corporate
existence of Merger Sub shall cease and Company shall continue as the surviving
corporation. Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "CLOSING") shall take place as soon as practicable, but
no later than two (2) business days, after the satisfaction or waiver of each of
the conditions set forth in Section 6 hereof, or at such other time as the
parties hereto agree (the "CLOSING DATE"). The Closing shall take place at the
offices of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, or at such other location as the parties hereto agree. In connection with
the Closing, the parties hereto shall cause the Merger to be consummated by
filing a Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the relevant provisions of Delaware Law (the time of
such filing being the "EFFECTIVE TIME").
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1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of Company and Merger Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) The Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with
Delaware Law.
(b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. At the Effective Time, the directors and
officers of Merger Sub immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation, until their respective
successors are duly elected or appointed and qualified.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, Company or the holders
of any of the following securities:
(a) Conversion of Company Preferred Stock. Each share of Company
Preferred Stock issued and outstanding immediately prior to the Effective Time
(excluding Dissenting Shares (as defined below) and shares of Company Preferred
Stock converted to Company Common Stock prior to the Merger and exchanged) shall
be converted and exchanged into the right to receive the following (the
"PREFERRED STOCK MERGER CONSIDERATION"): that portion of the Convertible
Promissory Notes (as defined below) which is equal to the amount obtained by
dividing (a) $3,040,000 (the "PRINCIPAL AMOUNT") less any Company Liabilities
(as defined below) by (b) the aggregate number of shares of Company Preferred
Stock issued and outstanding immediately prior to the Effective Time (the
"PREFERRED EXCHANGE RATIO"). "CONVERTIBLE PROMISSORY NOTES" shall mean
convertible promissory notes in substantially the form attached hereto as
Exhibit A, in the maximum aggregate principal amount of the Principal Amount
less any Company Liabilities (as defined below), which shall be due and payable
together with accrued interest thereon on the fifth anniversary of the Closing
(the "NOTES MATURITY DATE"), shall bear interest at the rate of 6% per annum
(non-compounding) and which the principal amount shall be convertible into
shares of Parent Common Stock at a price of $1.25 per share, subject to
adjustment from time to time as provided below and in the Convertible Promissory
Notes. After the Closing Date, the principal amount of each Convertible
Promissory Note shall be reduced pro rata by any Damages according to the terms
of Section 8 hereof. "COMPANY LIABILITIES" shall mean all liabilities and
commitments of the Company (whether or not liquidated, matured, disputed or
contingent) in existence as of February 1, 2002 (but which shall not include
those liabilities and commitments specifically excluded on Schedule 1.6(a)) in
excess of any Cash Surplus (as defined below). Pro rata, for the purposes of
this Section 1.6(a), is the ratio of the number of shares of Company Preferred
Stock that each holder of Company Preferred Stock owns to the total number of
shares of Company Preferred Stock outstanding, each as measured immediately
prior to the Effective Time. For purposes of this paragraph, "CASH
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SURPLUS" shall equal the amount, if any, by which (x) the actual amount of cash
held by the Surviving Corporation on February 1, 2002 exceeds (y) $1,000,000.
(b) Conversion of Company Common Stock. Each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding any Dissenting Shares) shall be converted and exchanged into the
right to receive the following (the "COMMON STOCK MERGER CONSIDERATION"): that
number of validly issued, fully paid and nonassessable shares of the Common
Stock, $0.0002 par value, of Parent ("PARENT COMMON STOCK") which equal the
amount obtained by dividing (x) 2,096,748 by (y) the total number of shares of
Company Common Stock issued and any outstanding at the Effective Time plus those
number of shares of Company Common Stock issuable pursuant to any option or
convertible security not disclosed in Section 2.5 hereto (the "COMMON EXCHANGE
RATIO").
(c) Company Restricted Stock. Notwithstanding the foregoing, to
the extent that any holder of unvested shares of Company Common Stock subject to
a right of repurchase by the Company ("COMPANY RESTRICTED STOCK") outstanding
immediately prior to the Effective Time, and as to which after the Effective
Time Parent will be assigned such Company's rights pursuant to Section 5.20 of
this Agreement, and subject to the exchange of Certificates pursuant to Section
1.7 of this Agreement, that portion of the Common Stock Merger Consideration to
be issued in exchange for such shares of Company Restricted Stock shall bear an
appropriate legend identifying the existence of the right of repurchase to which
such shares of Company Restricted Stock were subject and the restriction on
transfer caused thereby.
(d) Company Stock Options. At the Effective Time, all options to
purchase Company Common Stock ("COMPANY OPTIONS") then outstanding under the
Company's 2000 Equity Incentive Plan and the 2000 Non-Employee Equity Incentive
Plan ("COMPANY STOCK OPTION PLANS") at the Effective Time shall be assumed by
Parent in accordance with Section 5.7. No Company's Options shall accelerate
solely as a result of the transactions contemplated by this Agreement, and
Parent shall have received in advance of the Effective Date waivers with respect
to any such Company Options that would provide for otherwise.
(e) Capital Stock of Merger Sub. At the Effective Time, each
share of Common Stock of Merger Sub ("MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock of the Surviving Corporation. Each stock certificate of Merger Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(f) Adjustments to Exchange Ratio. The Common Exchange Ratio and
the Preferred Exchange Ratio shall be adjusted to reflect fully the effect of
any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock occurring after the date
hereof and prior to the Effective Time.
(g) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof each holder of shares of Company
Common Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall receive from Parent an amount of cash (rounded
to the nearest whole cent) equal to the product of (i) such
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fraction, multiplied by (ii) the average per-share closing price of Parent
Common Stock on the Nasdaq National Market as of the last five trading days
prior to the Closing. The fractional share interests of each Company stockholder
shall be aggregated, so that no Company stockholder shall receive cash in
respect of fractional share interests in an amount greater than the value of one
full share of Parent Common Stock.
(h) Dissenters' Rights. Notwithstanding any provision of this
Agreement to the contrary, any shares of Company Common Stock or Company
Preferred Stock held by a holder who has demanded and perfected such holder's
right for appraisal of such shares in accordance with Section 262 of Delaware
Law and who, as of the Effective Time, has not effectively withdrawn or lost
such right to appraisal ("DISSENTING SHARES"), if any, shall not be converted
into either the Common Stock Merger Consideration or the Preferred Stock Merger
Consideration (collectively referred to herein as "MERGER CONSIDERATION") but
shall instead be converted into the right to receive such consideration as may
be determined to be due with respect to such Dissenting Shares pursuant to
Delaware Law. Company shall give Parent prompt notice of any demand received by
Company to require Company to purchase shares of Common Stock of Company, and
Parent shall have the right to direct and participate in all negotiations and
proceedings with respect to such demand. Company agrees that, except with the
prior written consent of Parent, or as required under the Delaware Law, it will
not voluntarily make any payment with respect to, or settle or offer to settle,
any such purchase demand. Each holder of Dissenting Shares ("DISSENTING
STOCKHOLDER") who, pursuant to the provisions of Delaware Law, becomes entitled
to payment of the fair value for shares of Company Capital Stock shall receive
payment therefor (but only after the value therefor shall have been agreed upon
or finally determined pursuant to such provisions). If, after the Effective
Time, any Dissenting Stockholder shall effectively withdraw or lose (through
failure to perfect or otherwise) his or her appraisal rights, Parent shall issue
and deliver, upon surrender by such stockholder of a certificate or certificates
representing shares of Company Capital Stock in accordance with Section 1.7
hereof, the portion of Merger Consideration, as applicable, to which such
stockholder would otherwise be entitled under this Section 1.6 and the
Certificate of Merger.
(i) Certificate Legends. The shares of Parent Common Stock and
the Convertible Promissory Notes to be issued pursuant to this Section 1 shall
not have been registered and shall be characterized as "restricted securities"
under the federal securities laws, and under such laws such shares may be resold
without registration under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), only in certain limited circumstances. Each certificate
evidencing shares of Parent Common Stock and each Convertible Promissory Note to
be issued pursuant to this Section 1 shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
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and any legends required by state securities laws.
1.7 Surrender of Certificates.
(a) Exchange Procedures. As soon as practicable after the
Effective Time, and upon receipt by the Surviving Corporation from each holder
of Company Capital Stock their certificate or certificates (the "CERTIFICATES")
for such Company Capital Stock and any information or documentation Parent
reasonably requires in connection with the exchange, the Surviving Corporation
shall cause to be issued and delivered to such holders either the Preferred
Stock Merger Consideration or the Common Stock Merger Consideration, as set
forth in Section 1.6 above.
(b) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
theretofore payable (but for the provisions of this Section 1.7(b)) with respect
to such shares of Parent Common Stock.
(c) Transfers of Ownership. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Company Capital Stock thereafter on the records of
the Company. If any certificate for shares of Parent Common Stock or Convertible
Promissory Note is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock or a Convertible Promissory Note in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(d) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, none of Parent, the Surviving Corporation or any other party
hereto shall be liable to any person for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(e) Dissenting Shares. The provisions of this Section 1.7 shall
also apply to Dissenting Shares that lose their status as such, except that the
obligations of Parent under this Section 1.7 shall commence on the date of loss
of such status and the holder of such shares shall be entitled to receive in
exchange for such shares the Preferred Stock Merger Consideration or Common
Stock Merger Consideration, whichever is applicable, to which such holder is
entitled pursuant to Section 1.6 hereof.
1.8 No Further Ownership Rights in Company Capital Stock. The
Preferred Stock Merger Consideration and Common Stock Merger Consideration
delivered upon the surrender for exchange of shares of Company Capital Stock in
accordance with the terms hereof
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(including any dividends, distributions or cash paid in lieu of fractional
shares) shall be deemed to have been issued in full satisfaction of all rights
pertaining to shares of Company Capital Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 1.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder thereof
such Preferred Stock Merger Consideration or Common Stock Merger Consideration,
as the case may be, (and dividends, distributions and cash in lieu of fractional
shares) as may be required pursuant to Section 1.6; provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Surviving Corporation with respect
to the Certificates alleged to have been lost, stolen or destroyed.
1.10 Taking of Necessary Action; Further Action. Each of Parent,
Merger Sub and Company will take all such reasonable and lawful action as may be
necessary or desirable in order to effectuate the Merger in accordance with this
Agreement as promptly as possible. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
Company and Merger Sub, the officers and directors of Company and Merger Sub are
fully authorized in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action, so long as such
action is not inconsistent with this Agreement.
2. Representations and Warranties of Company. Company represents and
warrants to Parent and Merger Sub that the statements contained in this Section
2 are true and correct, except as disclosed in a document of even date herewith
and delivered by Company to Parent referring to the representations and
warranties in this Agreement (the "COMPANY DISCLOSURE SCHEDULE"). The Company
Disclosure Schedule will be arranged in paragraphs corresponding to the numbered
and lettered paragraphs contained in this Section 2.
2.1 Organization, Standing and Power. Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Company has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
would have a Material Adverse Effect on Company. Company has delivered a true
and correct copy of the Certificate of Incorporation and Bylaws or other charter
documents, as applicable, of Company, each as amended to date, to Parent.
Company is not in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent organizational documents. Company is the
owner of all outstanding shares of capital stock of each of its subsidiaries
listed in Section 2.1 of the Disclosure Schedule and all such shares are duly
authorized, validly issued, fully paid and nonassessable. Except as set forth on
Schedule 2.1, Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
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2.2 Authority. Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby subject only to the approval of the Merger by Company's
stockholders as contemplated by Section 6.1(a). The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Company
subject only to the approval of the Merger by Company's stockholders as
contemplated by Section 6.1(a). The Board of Directors of Company has
unanimously (i) approved this Agreement and the Merger, (ii) determined that in
its opinion the Merger is in the best interests of the stockholders of Company
and is on terms that are fair to such stockholders and (iii) recommended that
the stockholders of Company approve this Agreement and the Merger. This
Agreement has been duly executed and delivered by Company and constitutes the
valid and binding obligation of Company enforceable against Company in
accordance with its terms, except that such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to creditors' rights generally, and is subject to general principles of equity.
The execution and delivery of this Agreement by Company does not, and the
consummation of the transactions contemplated hereby will not conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any material obligation or loss of any material benefit under
(i) any provision of the Certificate of Incorporation or Bylaws of Company or
any of its subsidiaries, as amended, or (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Company or any of its subsidiaries or any of their properties or
assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("GOVERNMENTAL ENTITY") is
required by or with respect to Company or any of its subsidiaries in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger, together with the required officers' certificates, as provided in
Section 1.2; (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; and (iii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on Company and
would not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
2.3 Governmental Authorization. Company and each of its subsidiaries
have obtained each federal, state, county, local or foreign governmental
consent, license, permit, grant, or other authorization of a Governmental Entity
(i) pursuant to which Company or any of its subsidiaries currently operates or
holds any interest in any of its properties or (ii) that is required for the
operation of Company's or any of its subsidiaries' business or the holding of
any such interest and all of such authorizations are in full force and effect
except where the failure to obtain or have any such authorizations could not
reasonably be expected to have a Material Adverse Effect on Company.
2.4 Financial Statements. Company has delivered to Parent its
unaudited financial statements (balance sheet, statement of operations and
statement of cash flows) for each of the years ended 2000 and 2001
(collectively, the "FINANCIAL STATEMENTS"). The Financial Statements are
complete and correct in all material respects. The Financial Statements fairly
present the financial condition and operating results of Company as of the
dates, and for the periods, indicated therein.
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2.5 Capital Structure. The authorized capital stock of Company
consists of 30,000,000 shares of Company Common Stock, of which 3,145,123 shares
are issued and outstanding as of the date hereof, and 12,000,000 shares of
Company Preferred Stock, of which there are designated 3,250,000 shares of
Series A Preferred Stock, 3,040,000 of which are issued and outstanding as of
the date hereof. All outstanding shares of Company Common Stock and Company
Preferred Stock are duly authorized, validly issued, fully paid and
non-assessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof, and are not subject
to preemptive rights or rights of first refusal created by statute, the
Certificate of Incorporation or Bylaws of Company or any agreement to which
Company is a party or by which it is bound. There are 2,732,000 shares of Common
Stock reserved for issuance under the 2000 Equity Incentive Plan, of which
1,357,500 shares are subject to outstanding options and 1,374,500 shares were
reserved for future option grants. There are 100,000 shares of Company Common
Stock reserved for issuance under the 2000 Non-Employee Equity Incentive Plan,
of which 83,210 shares are subject to outstanding options and 16,790 shares were
reserved for future option grants. Company has delivered to Parent true and
complete copies of each form of agreement or stock option plan evidencing each
Company Option. Except for the rights created pursuant to this Agreement and the
rights disclosed in the preceding two sentences, there are no other options,
warrants, calls, rights, commitments or agreements of any character to which
Company is a party or by which it is bound obligating Company to issue, deliver,
sell, repurchase or redeem or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of Company Capital Stock or obligating Company to grant,
extend, accelerate the vesting of, change the price of, or otherwise amend or
enter into any such option, warrant, call, right, commitment or agreement. All
shares of Common Stock issuable upon conversion of the Preferred Stock or upon
exercise of the options described in this Section 2.5 will be, when issued
pursuant to the respective terms of such Preferred Stock or options, duly
authorized, validly issued, fully paid and nonassessable. There are no other
contracts, commitments or agreements relating to voting, purchase or sale of
Company's capital stock (i) between or among Company and any of its stockholders
and (ii) to Company's knowledge, between or among any of Company's stockholders,
except as contemplated by Section 5.18 of this Agreement. All shares of
outstanding Company Common Stock and Company Preferred Stock and rights to
acquire Company Capital Stock were issued in compliance with all applicable
federal and state securities laws.
2.6 Absence of Certain Changes. Since December 31, 2001, (the
"COMPANY BALANCE SHEET DATE"), except for the transactions contemplated by this
Agreement, Company has conducted its business in the ordinary course consistent
with past practice and there has not occurred: (i) any change, event or
condition (whether or not covered by insurance) that has resulted in, or might
reasonably be expected to result in, a Material Adverse Effect to Company; (ii)
any acquisition, sale or transfer of any material asset of Company or any of its
subsidiaries other than in the ordinary course of business and consistent with
past practice; (iii) any change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by Company or any
revaluation by Company of any of its or any of its subsidiaries' assets; (iv)
any declaration, setting aside, or payment of a dividend or other distribution
with respect to the shares of Company or any direct or indirect redemption,
purchase or other acquisition by Company of any of its shares of capital stock;
(v) any material contract entered into by Company or any of its subsidiaries,
other than in the ordinary course of business and as provided to Parent, or any
material amendment or termination of, or default under, any material contract to
which Company or any of its subsidiaries is a party or by which it is bound;
(vi) any amendment or change to the Certificate of Incorporation or Bylaws of
Company; (vii) any increase in or modification of the compensation or benefits
payable or to become payable by Company to any of its directors or employees; or
(viii) any negotiation or agreement by Company or any of its
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subsidiaries to do any of the things described in the preceding clauses (i)
through (vii) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement). At the Effective
Time, there will be no accrued but unpaid dividends on shares of Company's
Capital Stock.
2.7 Absence of Undisclosed Liabilities. Company has no commitments,
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet for the period ended December 31, 2001 (the "COMPANY BALANCE
SHEET"), (ii) those incurred in the ordinary course of business since the
Company Balance Sheet Date and consistent with past practice; and (iii) those
listed on Schedule 1.6.
2.8 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any Governmental
Entity, foreign or domestic, or, to the knowledge of Company or any of its
subsidiaries, threatened against Company or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such). There is no judgment, decree or order against Company
or any of its subsidiaries, or, to the knowledge of Company and its
subsidiaries, any of their respective directors or officers (in their capacities
as such). All litigation to which Company is a party (or, to the knowledge of
Company, threatened to become a party) is disclosed in the Company Disclosure
Schedule.
2.9 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Company or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any current or future business practice of
Company or any of its subsidiaries, any acquisition of property by Company or
any of its subsidiaries or the conduct of business by Company or any of its
subsidiaries as currently conducted or as proposed to be conducted by Company or
any of its subsidiaries.
2.10 Intellectual Property.
(a) For purposes of this Agreement, "INTELLECTUAL PROPERTY"
means:
(i) all issued patents, reissued or reexamined patents,
revivals of patents, utility models, certificates of invention, registrations of
patents and extensions thereof, regardless of country or formal name
(collectively, "ISSUED PATENTS");
(ii) all published or unpublished nonprovisional and
provisional patent applications, reexamination proceedings, invention
disclosures and records of invention (collectively "PATENT APPLICATIONS" and,
with the Issued Patents, the "PATENTS");
(iii) all copyrights, copyrightable works, semiconductor
topography and mask work rights, including all rights of authorship, use,
publication, reproduction, distribution, performance transformation, moral
rights and rights of ownership of copyrightable works, semiconductor topography
works and mask works, and all rights to register and obtain renewals and
extensions of registrations, together with all other interests accruing by
reason of international copyright, semiconductor topography and mask work
conventions (collectively, "COPYRIGHTS");
9
(iv) trademarks, registered trademarks, applications for
registration of trademarks, service marks and domain names, registered service
marks, applications for registration of service marks and domain names, trade
names, registered trade names and applications for registrations of trade names
(collectively, "TRADEMARKS");
(v) all technology, ideas, inventions, designs, proprietary
information, manufacturing and operating specifications, know-how, formulae,
trade secrets, technical data, computer programs, hardware, software and
processes; and
(vi) all other intangible assets, properties and rights
(whether or not appropriate steps have been taken to protect, under applicable
law, such other intangible assets, properties or rights).
(b) Company and its subsidiaries own and have good and
marketable title to, or possess legally enforceable rights to use, all
Intellectual Property used or currently proposed to be used (as disclosed in
writing to Parent) in the business of Company and its subsidiaries as currently
conducted or as proposed to be conducted (as disclosed in writing to Parent) by
Company and its subsidiaries. The Intellectual Property owned by and licensed to
Company collectively constitute all of the Intellectual Property necessary to
enable Company to conduct its business as such business is currently being
conducted. No current or former officer, director, stockholder, employee,
consultant or independent contractor has any right, claim or interest in or with
respect to any Intellectual Property. There is no unauthorized use, disclosure
or misappropriation of any Intellectual Property by any employee or, to
Company's knowledge, former employee of Company or any of its subsidiaries or,
to Company's knowledge, by any other third party. There are no royalties, fees
or other payments payable by Company to any Person under any written or oral
contract or understanding by reason of the ownership, use, sale or disposition
of Intellectual Property.
(c) With respect to each item of Intellectual Property
incorporated into any product of Company or otherwise used in the business of
Company (except "off the shelf" or other software widely available through
regular commercial distribution channels at a cost not exceeding $1,000 on
standard terms and conditions, as modified for Company's operations) ("COMPANY
INTELLECTUAL PROPERTY"), the Company Disclosure Schedule lists:
(i) all Patents and Patent Applications and all registered
Trademarks, and trademark applications and all registered Copyrights, including
the jurisdictions in which each such Intellectual Property has been issued or
registered or in which any such application for such issuance and registration
has been filed; and
(ii) the following agreements relating to each of the
products of Company or its subsidiaries (the "COMPANY PRODUCTS") or other
Company Intellectual Property: all (A) agreements granting any right to
distribute or sublicense a Company Product on any exclusive basis, (B) any
licenses of Intellectual Property to or from Company, (C) joint development
agreements, (D) any agreement by which Company grants any ownership right to or
use of any Company Intellectual Property owned by Company, (E) any order
relating to Intellectual Property, (F) any option relating to any Company
Intellectual Property, and (G) agreements pursuant to which any party is granted
any rights to access source code or to use source code to create derivative
works of Company Products.
(d) The Company Disclosure Schedule contains an accurate list as
of the date of this Agreement of all licenses, sublicenses and other agreements
to which Company or
10
its subsidiaries are a party and pursuant to which Company or its subsidiaries
are authorized to use any Intellectual Property owned by any third party,
excluding "off the shelf" or other software at a cost of $1,000 and widely
available through regular commercial distribution channels on standard terms and
conditions ("THIRD PARTY INTELLECTUAL PROPERTY").
(e) There is no unauthorized use, disclosure, infringement or
misappropriation of any Company Intellectual Property, including any Third Party
Intellectual Property by any third party, including any employee or former
employee of Company or any of its subsidiaries. Neither Company nor any of its
subsidiaries has entered into any agreement to indemnify any other person
against any charge of infringement of any Intellectual Property, other than
indemnification provisions contained in standard sales or agreements to end
users arising in the ordinary course of business, the forms of which have been
delivered to Parent or its counsel.
(f) Company is not in breach of any license, sublicense or other
agreement relating to the Company Intellectual Property or Third Party
Intellectual Property Rights. Neither the execution, delivery or performance of
this Agreement or any ancillary agreement contemplated hereby nor the
consummation of the Merger or any of the transactions contemplated by this
Agreement will contravene, conflict with or result in an infringement on the
Company's right to own or use any Company Intellectual Property, including any
Third Party Intellectual Property. There are no restrictions contained in any
agreement with a Third Party with respect to Parent's use of Company
Intellectual Property after the Effective Time.
(g) All Patents, registered Trademarks, registered service
marks, registered domain names and registered Copyrights held by Company are
valid and subsisting. All maintenance and annual fees have been fully paid and
all fees paid during prosecution and after issuance of any patent comprising or
relating to such item have been paid in the correct entity status amounts.
Company is not infringing, misappropriating or making unlawful use of, or
received any notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful use of any proprietary asset owned or used by any third party. There is
no proceeding pending or threatened, nor has any claim or demand been made,
which challenges the legality, validity, enforceability or ownership of any item
of Company Intellectual Property or Third Party Intellectual Property or alleges
a claim of infringement of any Patents, Trademarks, service marks, Copyrights or
violation of any trade secret or other proprietary right of any third party.
Company has not brought a proceeding alleging infringement of Company
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party.
(h) All current and former officers and employees of Company
have executed and delivered to Company an agreement regarding the protection of
proprietary information and the assignment to Company of any Intellectual
Property arising from services performed for Company by such persons, the form
of which has been supplied to Parent. All current and former consultants and
independent contractors to Company involved in the development, modification,
marketing and servicing of Company's products, and/or Company Intellectual
Property have executed and delivered to Company an agreement in the form
provided to Parent or its counsel regarding the protection of proprietary
information and the assignment to Company of any Intellectual Property arising
from services performed for Company by such persons. No employee or independent
contractor of Company is in violation of any term of any patent disclosure
agreement or employment contract or any other contract or agreement relating to
the relationship of any such employee or independent contractor with Company.
11
(i) Company has taken all commercially reasonable and customary
measures and precautions necessary to protect and maintain the confidentiality
of all Company Intellectual Property (except such Company Intellectual Property
whose value would be unimpaired by public disclosure) and otherwise to maintain
and protect the full value of all Intellectual Property it owns or uses. All
use, disclosure or appropriation of Intellectual Property not otherwise
protected by patents, patent applications or copyright ("CONFIDENTIAL
INFORMATION") owned by Company by or to a third party has been pursuant to the
terms of a written agreement between Company and such third party. All use,
disclosure or appropriation of Confidential Information not owned by Company has
been pursuant to the terms of a written agreement between Company and the owner
of such Confidential Information, or is otherwise lawful.
(j) No product liability claims have been communicated in
writing to or, to Company's knowledge, threatened against Company.
(k) A complete list of each of the Company Products and
Company's proprietary software ("COMPANY SOFTWARE"), together with a brief
description of each, is set forth in Schedule 2.10. The Company Software and
Company Products conform in all material respects with any specification,
documentation, performance standard, representation or statement provided with
respect thereto by or on behalf of Company.
(l) Company is not subject to any proceeding or outstanding
decree, order, judgment, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Company, or which may affect the validity, use
or enforceability of such Company Intellectual Property. Company is not subject
to any agreement which restricts in any material respect the use, transfer, or
licensing by Company of the Company Intellectual Property or Company Products.
2.11 Interested Party Transactions. Neither Company nor any of its
subsidiaries is indebted to any director, officer, employee or agent of Company
or any of its subsidiaries (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses), and no such person is
indebted to Company or any of its subsidiaries. There have been no transactions
during the two year period ended December 31, 2001 which would require
disclosure if Company were subject to disclosure under Item 404 of Regulation
S-K under the Securities Act.
2.12 Minute Books. The minute books of Company and its subsidiaries
made available to Parent contain a complete and accurate summary of all meetings
of directors and stockholders or actions by written consent since the time of
incorporation of Company and the respective subsidiaries through the date of
this Agreement, and reflect all transactions referred to in such minutes
accurately in all material respects.
2.13 Complete Copies of Materials. Each document which has been
delivered by Company to Parent or its counsel in connection with their legal and
accounting review of Company and its subsidiaries is true and complete in all
material respects.
2.14 Material Contracts. All the Material Contracts and agreements
to which Company is a party are listed in Schedule 2.14 hereto. With respect to
each agreement so listed: (i) the agreement is legal, valid, binding and
enforceable and in full force and effect with respect to Company, and to
Company's knowledge is legal, valid, binding, enforceable and in full force and
effect with respect to each other party thereto, in either case subject to the
effect of
12
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity; (ii) the
agreement will continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing, subject to the effect of bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and except as the availability of equitable remedies
may be limited by general principles of equity; and (iii) neither the Company
nor, to Company's knowledge, any other party, is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
of default by Company or, to Company's knowledge, by any such other party, or
permit termination, modification or acceleration, under the agreement. Company
is not a party to any oral contract, agreement or other arrangement. "MATERIAL
CONTRACT" means any contract, agreement or commitment to which Company is a
party (i) with expected receipts or expenditures in excess of $1,000, (ii)
required to be listed pursuant to Section 2.10(c)(ii) or Section 2.10(d), (iii)
requiring Company to indemnify any Person, (iv) granting any exclusive rights to
any party, (v) evidencing indebtedness for borrowed or loaned money of $1,000 or
more, including guarantees of such indebtedness, or (vi) which, if breached by
Company in such a manner as would (A) permit any other party to cancel or
terminate the same (with or without notice of passage of time) or (B) provide a
basis for any other party to claim money damages (either individually or in the
aggregate with all other such claims under that contract) from Company or (C)
give rise to a right of acceleration of any material obligation or loss of any
material benefit under any such contract, agreement or commitment, would
reasonably be expected to have a Material Adverse Effect on Company.
2.15 Inventory. The Company has no inventory.
2.16 Accounts Receivable. Subject to any reserves set forth in the
Financial Statements, the accounts receivable shown on the Financial Statements
are valid and genuine, have arisen solely out of bona fide sales and deliveries
of goods, performance of services, and other business transactions in the
ordinary course of business consistent with past practices in each case with
persons other than affiliates, are not subject to any prior assignment, lien or
security interest and are not subject to valid defenses, set-offs or counter
claims. The accounts receivable will be collected in accordance with their terms
at their recorded amounts, subject only to the reserve for doubtful accounts on
the Financial Statements.
2.17 Customers and Suppliers. As of the date hereof, no customer and
no supplier of Company has canceled or otherwise terminated, or made any written
threat to Company to cancel or otherwise terminate its relationship with Company
or has at any time on or after the Company Balance Sheet, decreased materially
its services or supplies to Company in the case of any such supplier, or its
usage of the services or products of Company in the case of such customer, and
to Company's knowledge, no such supplier or customer has indicated either orally
or in writing that it will cancel or otherwise terminate its relationship with
Company or to decrease materially its services or supplies to Company or its
usage of the services or products of Company, as the case may be. Company has
not knowingly breached, so as to provide a benefit to Company that was not
intended by the parties, any agreement with, or engaged in any fraudulent
conduct with respect to, any customer or supplier of Company.
2.18 Employees and Consultants. The Company Disclosure Schedule
contains a list of the names of all employees (including, without limitation,
part-time employees, temporary employees and leased employees) and their
respective salaries or wages, other compensation and dates of employment and
positions and other commitments (overt or implied)
13
to same, including, but not limited to, commissions, bonuses, etc. The Company
Disclosure Schedule also contains a list of the names of all independent
contractors and consultants of Company.
2.19 Title to Property. Company and its subsidiaries have good and
marketable title to all of their respective properties, interests in properties
and assets, real and personal, reflected in the Company Balance Sheet or
acquired after the Company Balance Sheet Date (except properties, interests in
properties and assets sold or otherwise disposed of since the Company Balance
Sheet Date in the ordinary course of business), or with respect to leased
properties and assets, valid leasehold interests therein, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any kind or character,
except (i) the lien of income current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties and (iii) liens securing debt which is reflected on the Company
Balance Sheet. The plants, property and equipment of Company and its
subsidiaries that are used in the operations of their businesses are in all
material respects in good operating condition and repair, subject to normal wear
and tear. All leases to which Company is a party are in full force and effect
and are valid, binding and enforceable in accordance with their respective
terms, except as such enforceability may be limited by (i) bankruptcy laws and
other similar laws affecting creditors' rights generally and (ii) general
principles of equity, regardless of whether asserted in a proceeding in equity
or at law. True and correct copies of all such leases have been provided to
Parent. Company owns no real property.
2.20 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "ENVIRONMENTAL LAWS" shall mean any applicable foreign,
federal, state or local governmental laws (including common laws), statutes,
ordinances, codes, regulations, rules, policies, permits, licenses,
certificates, approvals, judgments, decrees, orders, directives, or requirements
that pertain to the protection of the environment, protection of public health
and safety, or protection of worker health and safety, or that pertain to the
handling, use, manufacturing, processing, storage, treatment, transportation,
discharge, release, emission, disposal, re-use, recycling, or other contact or
involvement with Hazardous Materials (defined below), including, without
limitation, the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601, et seq., as amended ("CERCLA"),
and the federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., as amended ("RCRA").
(ii) "HAZARDOUS MATERIALS" shall mean any material,
chemical, compound, substance, mixture, or by-product that is identified,
defined, designated, listed, restricted or otherwise regulated under
Environmental Laws (defined above) as a "hazardous constituent," "hazardous
substance," "hazardous material," "acutely hazardous material," "extremely
hazardous material," "hazardous waste," "hazardous waste constituent," "acutely
hazardous waste," "extremely hazardous waste," "infectious waste," "medical
waste," "biomedical waste," "pollutant," "toxic pollutant," or "contaminant," or
any other formulation or terminology intended to classify or identify
substances, constituents, materials, or wastes by reason of properties that are
deleterious to the environment, natural resources, worker health and safety, or
public health and safety, including, without limitation, ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, and reproductive toxicity.
The term "Hazardous Materials"
14
shall include, without limitation, any "hazardous substances" as defined,
listed, designated or regulated under CERCLA, any "hazardous wastes" or "solid
wastes" as defined, listed, designated or regulated under RCRA, any asbestos or
asbestos-containing materials, any polychlorinated biphenyls, and any petroleum
or hydrocarbonic substance, fraction, distillate, or by-product.
(b) Company is and has been in compliance with all Environmental
Laws relating to the properties or facilities used, leased, or occupied by
Company at any time (collectively, "COMPANY'S FACILITIES;" such properties or
facilities currently used, leased, or occupied by Company are defined herein as
"COMPANY'S CURRENT FACILITIES"), and no discharge, emission, release, leak, or
spill of Hazardous Materials has occurred at any of Company's Facilities which
may or will give rise to liability of Company under Environmental Laws. To
Company's knowledge, there are no Hazardous Materials (including, but not
limited to, asbestos) present in the surface waters, structures, groundwaters,
or soils of or beneath any of Company's Current Facilities. To Company's
knowledge, there neither are nor have been any aboveground or underground
storage tanks for Hazardous Materials at Company's Current Facilities. To
Company's knowledge, no Company employee or other person has claimed that
Company is liable for alleged injury or illness resulting from an alleged
exposure to a Hazardous Material. No civil, criminal or administrative action,
proceeding or investigation is pending against Company, or to Company's
knowledge, threatened against Company, with respect to Hazardous Materials or
Environmental Laws, and Company is not aware of any facts or circumstances which
could form the basis for assertion of a claim against Company or which could
form the basis for liability of Company, regarding Hazardous Materials or
regarding actual or potential non-compliance with Environmental Laws.
2.21 Taxes. As used in this Agreement, the terms "TAX" and,
collectively, "TAXES" mean any and all federal, state and local taxes of any
country, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, stamp transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(a) Company has prepared and timely filed all returns,
estimates, information statements and reports required to be filed with any
taxing authority ("RETURNS") relating to any and all Taxes concerning or
attributable to Company or its operations with respect to Taxes for any period
ending on or before the Closing Date and such Returns are true and correct in
all material respects and have been completed in accordance with applicable law.
(b) Company, as of the Closing Date: (i) will have paid all
Taxes shown to be payable on such Returns covered by Section 2.21(a) and (ii)
will have withheld with respect to its employees all Taxes required to be
withheld.
(c) There is no Tax deficiency outstanding or assessed or, to
Company's knowledge, proposed against Company that is not reflected as a
liability on the Company Balance Sheet nor has Company executed any agreements
or waivers extending any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(d) Company has no liabilities for unpaid Taxes that have not
been accrued for or reserved on the Company Balance Sheet, whether asserted or
unasserted,
15
contingent or otherwise and Company has no knowledge of any basis for the
assertion of any such liability attributable to Company, its assets or
operations.
(e) Company is not a party to any tax-sharing agreement or
similar arrangement with any other party, and Company has not assumed to pay any
Tax obligations of, or with respect to any transaction relating to, any other
person or agreed to indemnify any other person with respect to any Tax.
(f) Company's Returns have never been audited by a government or
taxing authority, nor is any such audit in process or pending, and Company has
not been notified of any request for such an audit or other examination.
(g) Company has never been a member of an affiliated group of
corporations filing a consolidated federal income tax return.
(h) Company has disclosed to Parent (i) any Tax exemption, Tax
holiday or other Tax sharing arrangement that Company has in any jurisdiction,
including the nature, amount and lengths of such Tax exemption, Tax holiday or
other Tax-sharing arrangement and (ii) any expatriate tax programs or policies
affecting Company. Company is in compliance with all terms and conditions
required to maintain such Tax exemption, Tax holiday or other Tax-sharing
arrangement or order of any governmental entity and the consummation of the
transactions contemplated hereby will not have any adverse effect on the
continuing validity and effectiveness of any such Tax exemption, Tax holiday or
other Tax-sharing arrangement or order.
(i) Company has made available to Parent copies of all Returns
filed for all periods since its inception.
(j) Company has not filed any consent agreement under Section
341(f) of the Internal Revenue Code (hereinafter referred to as the "CODE") or
agreed to have Section 341(f)(4) apply to any disposition of assets owned by
Company.
(k) Company has not been at any time a United States Real
Property Holding Corporation within the meaning of Section 897(c)(2) of the
Code.
(l) Company is not a party to any contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Company that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 464 or 162(m) of the Code by Company or
Merger Sub as an expense under applicable law.
2.22 Employee Benefit Plans.
(a) Schedule 2.22 contains a complete and accurate list of each
plan, program, policy, practice, contract, agreement or other arrangement
providing for employment, compensation, retirement, deferred compensation,
loans, severance, separation, relocation, repatriation, expatriation, visas,
work permits, termination pay, performance awards, bonus, incentive, stock
option, stock purchase, stock bonus, phantom stock, stock appreciation right,
supplemental retirement, fringe benefits, cafeteria benefits, or other benefits,
whether written or unwritten, including, without limitation, each "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")
16
which is or has been sponsored, maintained, contributed to, or required to be
contributed to by Company, any subsidiary of Company and, with respect to any
such plans which are subject to Code Section 401(a), any trade or business
(whether or not incorporated) which is or, at any relevant time, was treated as
a single employer with Company within the meaning of Section 414(b), (c),(m) or
(o) of the Code, (an "ERISA AFFILIATE") for the benefit of any person who
performs or who has performed services for Company or with respect to which
Company, any subsidiary, or ERISA Affiliate has or may have any liability
(including, without limitation, contingent liability) or obligation
(collectively, the "Company Employee Plans"). Company has no employees,
consultants or contractors outside of the United States nor has ever had
employees, consultants or contractors outside of the United States.
(b) Documents. Company has furnished to Parent true and complete
copies of documents embodying each of the Company Employee Plans and related
plan documents, including (without limitation) trust documents, group annuity
contracts, plan amendments, insurance policies or contracts, participant
agreements, employee booklets, administrative service agreements, summary plan
descriptions, compliance and nondiscrimination tests for the last three plan
years, standard COBRA forms and related notices, registration statements and
prospectuses, and, to the extent still in its possession, any material employee
communications relating thereto. With respect to each Company Employee Plan
which is subject to ERISA reporting requirements, Company has provided copies of
the Form 5500 reports filed for the last five plan years. Company has furnished
Parent with the most recent Internal Revenue Service determination or opinion
letter issued with respect to each such Company Employee Plan, and nothing has
occurred since the issuance of each such letter which could reasonably be
expected to cause the loss of the tax-qualified status of any Company Employee
Plan subject to Code Section 401(a).
(c) Compliance. (i) Each Company Employee Plan has been
administered in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have, in the aggregate, a
Material Adverse Effect, and Company and each subsidiary or ERISA Affiliate have
performed all material obligations required to be performed by them under, are
not in material respect in default under or violation of and have no knowledge
of any material default or violation by any other party to, any of the Company
Employee Plans; (ii) any Company Employee Plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal Revenue Service
a favorable determination letter as to its qualified status under the Code,
including all amendments to the Code which are currently effective, or has time
remaining to apply under applicable Treasury Regulations or Internal Revenue
Service pronouncements for a determination or opinion letter and to make any
amendments necessary to obtain a favorable determination or opinion letter;
(iii) none of the Company Employee Plans promises or provides retiree medical or
other retiree welfare benefits to any person; (iv) there has been no "prohibited
transaction," as such term is defined in Section 406 of ERISA or Section 4975 of
the Code, with respect to any Company Employee Plan; (v) none of Company, any
subsidiary or any ERISA Affiliate is subject to any liability or penalty under
Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any
Company Employee Plan; (vi) all contributions required to be made by Company,
any subsidiary or ERISA Affiliate to any Company Employee Plan have been paid or
accrued; (vii) with respect to each Company Employee Plan, no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such event for which
the thirty (30) day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 or
ERISA has occurred; (viii) each Company Employee Plan subject to ERISA, has
prepared in good faith and timely filed all requisite governmental reports
(which were true and correct as of
17
the date filed) and has properly and timely filed and distributed or posted all
notices and reports to employees required to be filed, distributed or posted
with respect to each such Company Employee Plan; (ix) no suit, administrative
proceeding, action or other litigation has been brought, or to the knowledge of
Company is threatened, against or with respect to any such Company Employee
Plan, including any audit or inquiry by the IRS or United States Department of
Labor; and (x) there has been no amendment to, written interpretation or
announcement by Company, any subsidiary or ERISA Affiliate which would
materially increase the expense of maintaining any Company Employee Plan above
the level of expense incurred with respect to that Plan for the most recent
fiscal year included in Company's financial statements.
(d) No Title IV or Multiemployer Plan. None of Company, any
subsidiary or any ERISA Affiliate has ever maintained, established, sponsored,
participated in, contributed to, or is obligated to contribute to, or otherwise
incurred any obligation or liability (including, without limitation, any
contingent liability) under any "multiemployer plan" (as defined in Section
3(37) of ERISA) or to any "pension plan" (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA or Section 412 of the Code. None of Company, any
subsidiary or any ERISA Affiliate has any actual or potential withdrawal
liability (including, without limitation, any contingent liability) for any
complete or partial withdrawal (as defined in Sections 4203 and 4205 of ERISA)
from any multiemployer plan.
(e) COBRA, FMLA, HIPAA, CANCER RIGHTS. With respect to each
Company Employee Plan, Company and each of its United States subsidiaries have
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
regulations thereunder or any state law governing health care coverage extension
or continuation; (ii) the applicable requirements of the Family and Medical
Leave Act of 1993 and the regulations thereunder; (iii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996
("HIPAA"); and (iv) the applicable requirements of the Cancer Rights Act of
1998, except to the extent that such failure to comply would not in the
aggregate have a Material Adverse Effect. Company has no material unsatisfied
obligations to any employees, former employees, or qualified beneficiaries
pursuant to COBRA, HIPAA, or any state law governing health care coverage
extension or continuation.
(f) Effect of Transaction. The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or other service provider of Company, any subsidiary or any ERISA
Affiliate to severance benefits or any other payment (including, without
limitation, unemployment compensation, golden parachute, bonus or benefits under
any Company Employee Plan), except as expressly provided in this Agreement or
(ii) accelerate the time of payment or vesting of any such benefits or increase
the amount of compensation due any such employee or service provider. No benefit
payable or which may become payable by Company pursuant to any Company Employee
Plan or as a result of or arising under this Agreement shall constitute an
"EXCESS PARACHUTE PAYMENT" (as defined in Section 280G(b)(1) of the Code) which
is subject to the imposition of an excise Tax under Section 4999 of the Code or
the deduction for which would be disallowed by reason of Section 280G of the
Code. Each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
material liability to Parent or Company (other than ordinary administration
expenses typically incurred in a termination event).
2.23 Employee Matters. Company is in compliance with all currently
applicable laws and regulations respecting terms and conditions of employment
including,
18
without limitation, applicant and employee background checking, immigration
laws, discrimination laws, verification of employment eligibility, employee
leave laws, classification of workers as employees and independent contractors,
wage and hour laws, and occupational safety and health laws. There are no
proceedings pending or, to Company's knowledge, reasonably expected or
threatened, between Company, on the one hand, and any or all of its current or
former employees, on the other hand, including, but not limited to, any claims
for actual or alleged harassment or discrimination based on race, national
origin, age, sex, sexual orientation, religion, disability, or similar tortious
conduct, breach of contract, wrongful termination, defamation, intentional or
negligent infliction of emotional distress, interference with contract or
interference with actual or prospective economic disadvantage. There are no
claims pending, or, to Company's knowledge, reasonably expected or threatened,
against Company under any workers' compensation or long term disability plan or
policy. Company has no material unsatisfied obligations to any employees, former
employees, or qualified beneficiaries pursuant to COBRA, HIPAA, or any state law
governing health care coverage extension or continuation. Company is not a party
to any collective bargaining agreement or other labor union contract, nor does
Company know of any activities or proceedings of any labor union to organize its
employees. Company has provided all employees with all wages, benefits,
relocation benefits, stock options, bonuses and incentives, and all other
compensation which became due and payable through the date of this Agreement.
2.24 Insurance. Company maintains general liability insurance and
such policy has been provided to Parent. All premiums due and payable under such
policy as of the date of this Agreement have been paid. There is no material
claim pending under such policy as to which coverage has been questioned, denied
or disputed by the underwriters of such policy. Company has no knowledge of any
threatened termination of, or premium increase with respect to, such policy.
2.25 Compliance With Laws. Each of Company and its subsidiaries has
complied with, is not in violation of and has not received any notices of
violation with respect to, any federal state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business.
2.26 Brokers' and Finders' Fee. No broker, finder or investment
banker is entitled to brokerage or finders' fees or agents' commissions or
investment bankers' fees or any similar charges in connection with the Merger,
this Agreement or any transaction contemplated hereby.
2.27 Representations Complete. None of the representations or
warranties made by the Company herein or in any Schedule or Exhibit hereto,
including the Company Disclosure Schedule, or certificate furnished by Company
pursuant to this Agreement or any written statement furnished to Parent pursuant
hereto or in connection with the transactions contemplated hereby, when all such
documents are read together in their entirety, contain, or will contain at the
Effective Time any untrue statement of a material fact, or omits or will omit at
the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading; provided, however, that for purposes of this
representation, any document attached hereto and any document specifically
referenced in the Company Disclosure Schedule as a "Superseding Document" (even
if not attached hereto) that provides information inconsistent with or in
addition to any other written statement furnished to Parent in connection with
the transaction contemplated hereby, shall be deemed to supersede any other
document or written statement furnished to Parent with respect to such
inconsistent or additional information.
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3. Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub represent and warrant to Company that the statements contained in
this Section 3 are true and correct.
3.1 Organization, Standing and Power. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of Parent and Merger Sub has the
corporate power to own its properties and to carry on its business as now being
conducted and as proposed to be conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on Parent.
Neither Parent nor Merger Sub is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws or equivalent organizational documents.
3.2 Authority. Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been, or will
have been by the Closing, duly authorized by all necessary corporate action on
the part of Parent and Merger Sub. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes the valid and binding
obligations of Parent and Merger Sub. The execution and delivery of this
Agreement do not and the consummation of the transactions contemplated hereby
will not conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
a material benefit under (i) any provision of the Certificate of Incorporation
or Bylaws of Parent or any of its subsidiaries, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its subsidiaries or
their properties or assets. No consent, approval, order or authorization of or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Parent or any of its subsidiaries in connection with the
execution and delivery of this Agreement by Parent and Merger Sub or the
consummation by Parent and Merger Sub of the transactions contemplated hereby,
except for (i) the filing of the Certificate of Merger with the Delaware
Secretary of State (ii) any filings as may be required under applicable state
securities laws and the securities laws of any foreign country, (iii) the filing
with the NASDAQ National Market of a Notification Form for Listing of Additional
Shares with respect to the shares of Parent Common Stock issuable upon
conversion of the Company Common Stock in the Merger, upon conversion of the
Convertible Promissory Notes and upon exercise of options under the Company
Stock Option Plans assumed by Parent, and (iv) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Parent and would not prevent,
materially alter or delay any of the transactions contemplated by this
Agreement.
3.3 SEC Documents; Parent Financial Statements. Parent has furnished
or made available to the Company complete copies of all reports or registration
statements filed by it with the Securities and Exchange Commission ("SEC") under
the Securities Exchange Act of 1934 (the "EXCHANGE ACT") for all periods
subsequent to September 30, 2000 all in the form so filed (all of the foregoing
being collectively referred to as the "PARENT SEC DOCUMENTS").
3.4 Capital Structure. The authorized capital stock of Parent
consists of 175,000,000 shares of Common Stock, $.0002 par value, and 2,500,000
shares of Preferred ▇▇▇▇▇, ▇.▇▇▇▇ par value, of which there were issued and
outstanding as of the close of business on January 24, 2002, approximately
46,223,239 shares of Common Stock and no shares of Preferred
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Stock. There are no other outstanding shares of capital stock or voting
securities of Parent other than shares of Parent Common Stock issued after
January 24, 2002 upon the exercise of options issued under the Parent Stock Plan
(the "PARENT STOCK PLAN"), or the Parent Directors Stock Plan (the "PARENT
DIRECTORS' PLAN"), or shares of Parent Common Stock issued under the Parent
Employee Stock Purchase Plan (the "PARENT EMPLOYEE STOCK PURCHASE PLAN"), and
other than those certain convertible subordinated notes due 2007 as set forth in
Parent's SEC Documents. The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, of which 100 shares are issued and outstanding and
are held by Parent. All outstanding shares of Parent and Merger Sub have been
duly authorized, validly issued, fully paid and are nonassessable.
3.5 Interim Operations of Merger Sub. Merger Sub was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement,
has engaged in no other business activities and has conducted its operations
only as contemplated by this Agreement.
3.6 Valid Issuance. The Convertible Promissory Notes, the Parent
Common Stock issuable upon conversion of the Convertible Promissory Notes, and
the Parent Common Stock issuable pursuant to this Agreement (the "SECURITIES")
will, when issued in accordance with this Agreement, be validly issued, fully
paid and nonassessable; provided, however, that the Securities may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.
3.7 Brokers' and Finders' Fee. No broker, finder or investment
banker is entitled to brokerage or finders' fees or agents' commissions or
investment bankers' fees or any similar charges in connection with the Merger,
this Agreement or any transaction contemplated hereby.
3.8 Representations Complete. None of the representations or
warranties made by Parent or Merger Sub herein or in any Schedule hereto or
certificate furnished by Parent or Merger Sub pursuant to this Agreement, or the
Parent SEC Documents, or any written statement furnished to Company pursuant
hereto or in connection with the transactions contemplated hereby, when all such
documents are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact or omits or will omit at
the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading; provided, however, that for purposes of this
representation, any document attached hereto that provides information
inconsistent with or in addition to any other written statement furnished to
Company in connection with the transactions contemplated hereby, shall be deemed
to supersede any other document or written statement furnished to Company with
respect to such inconsistent or additional information.
4. Conduct Prior To The Effective Time.
4.1 Conduct of Business of Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Company agrees (except to the extent expressly
contemplated by this Agreement or as consented to in writing by the other), to
carry on its and its subsidiaries' business in the usual regular and ordinary
course in substantially the same manner as heretofore conducted; to pay and to
cause its subsidiaries to pay debts and Taxes when due subject (i) to good faith
disputes over such debts or Taxes and (ii) in the case of Taxes of Company or
any of its
21
subsidiaries, to Parent's consent to the filing of Tax Returns if applicable; to
pay or perform other obligations when due, and to use all reasonable efforts to
preserve intact its present business organizations, keep available the services
of its and its subsidiaries' present officers and key employees and preserve its
and its subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it or its
subsidiaries, to the end that its and its subsidiaries' goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Company agrees to promptly
notify the Parent of (x) any event or occurrence not in the ordinary course of
its or its subsidiaries' business, and of any event which could have a Material
Adverse Effect and (y) any change in its capitalization as set forth in Section
2.5 with respect to the Company. Without limiting the foregoing, except as
expressly contemplated by this Agreement or the Company Disclosure Schedule,
Company shall not do, cause or permit any of the following, or allow, cause or
permit any of its subsidiaries to do, cause or permit any of the following,
without the prior written consent of Parent:
(a) Charter Documents. Cause or permit any amendments to its
Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it or its subsidiaries;
(c) Stock Option Plans, Etc. Accelerate, amend or change the
period of exercisability or vesting of options or other rights granted under its
stock plans or authorize cash payments in exchange for any options or other
rights granted under any of such plans;
(d) Material Contracts. Enter into any Material Contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its Material Contracts, other than in the ordinary course of business
consistent with past practice;
(e) Issuance of Securities. Issue, deliver or sell or authorize
or propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options as of the date of this Agreement;
(f) Intellectual Property. Transfer to any person or entity any
rights to its Intellectual Property other than in the ordinary course of
business consistent with past practice;
(g) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of Company Products or
Company Intellectual Property;
22
(h) Dispositions. Sell, lease, license or otherwise dispose of
or encumber any of its properties or assets with a value or cost exceeding
$10,000, either individually or in the aggregate;
(i) Indebtedness. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(j) Agreements. Enter into, terminate or amend, in a manner
which will adversely affect the business of Company (i) any agreement involving
an obligation to pay or the right to receive $1,000 or more, (ii) any agreement
relating to the license, transfer or other disposition or acquisition of
Intellectual Property rights or rights to market or sell Company Products, or
(iii) any other agreement which would be a Material Contract;
(k) Payment of Obligations. Pay, discharge or satisfy in an
amount in excess of $1,000 in the aggregate, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) arising
other than in the ordinary course of business, other than the payment, discharge
or satisfaction of liabilities reflected or reserved against in the Company
Financial Statements;
(l) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business and
consistent with past practice;
(m) Insurance. Reduce the amount of the insurance coverage
specified in Section 2.24;
(n) Termination or Waiver. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(o) Employee Benefit Plans; New Hires; Pay Increases. Amend any
Company Employee Plan or adopt any plan that would constitute a Company Employee
Plan except as contemplated by Section 2.22 or hire any new officer level
employee, pay any special bonus, special remuneration or special noncash benefit
(except payments and benefits made pursuant to written agreements outstanding on
the date hereof, or increase the benefits, salaries or wage rates of its
employees except in the ordinary course of business in accordance with its
standard past practice;
(p) Severance Arrangements. Grant any severance or termination
pay or benefits (i) to any director or officer or (ii) to any other employee
except payments made pursuant to written agreements outstanding on the date
hereof and disclosed on the Company Disclosure Schedule;
(q) Lawsuits. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the impairment of a valuable aspect of
its business, provided that it consults with Parent prior to the filing of such
a suit, or (iii) for a breach of this Agreement;
(r) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization
23
or division thereof or otherwise acquire or agree to acquire any assets which
are material individually or in the aggregate, to its and its
parent's/subsidiaries' business, taken as a whole;
(s) Taxes. Other than in the ordinary course of business, make
or change any election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any Tax Return or any amendment to a Tax
Return, enter into any closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(t) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business;
(u) Expenditures. Make any expenditure outside of the ordinary
course of business and consistent with past practice, other than any attorneys
fees paid to counsel to the Company in an amount not to exceed $50,000, and any
attorneys fees paid to counsel to Parent for the opinion contemplated by Section
6.3(f) herein, as such expenditures are contemplated by Section 1.6(a) of the
Company Disclosure Schedule (under the table entitled "Monthly Expenses"); or
(v) Other. Take or agree in writing or otherwise to take, any of
the actions described in Sections 4.1(a) through (t) above, or any action which
would cause a breach of its representations or warranties contained in this
Agreement or prevent it from performing or cause it not to perform its covenants
hereunder.
4.2 Conduct of Business of Parent. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Parent agrees to promptly notify the Company of
(x) any event or occurrence not in the ordinary course of its or its
subsidiaries' business, and of any event which could have a Material Adverse
Effect and (y) any change in its capitalization as set forth in Section 3.4 with
respect to the Parent. Except as expressly contemplated by this Agreement,
Parent shall not do, cause or permit any action which could reasonably be
expected to have a Material Adverse Effect on Parent without the prior consent
of Company, which consent shall not be unreasonably withheld.
4.3 No Solicitation.
(a) From and after the date of this Agreement until the
Effective Time, Company shall not, directly or indirectly through any officer,
director, employee, representative or agent of Company or otherwise, (i)
solicit, initiate, or encourage any inquiries or proposals that constitute, or
could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, share exchange, business combination, sale of all or
substantially all assets, sale of shares of capital stock or similar
transactions involving Company other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in this
Agreement as an "ACQUISITION PROPOSAL"), (ii) engage or participate in
negotiations or discussions concerning, or provide any non-public information to
any person or entity relating to, any Acquisition Proposal, or (iii) agree to,
enter into, accept, approve or recommend any Acquisition Proposal. Company
represents and warrants that it has the legal right to terminate any pending
discussions or negotiations relating to an Acquisition Proposal without payment
of any fee or other penalty.
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(b) Company shall notify Parent immediately (and no later than
24 hours) after receipt by Company (or its advisors) of any Acquisition Proposal
or any request for nonpublic information in connection with an Acquisition
Proposal or for access to the properties, books or records of Company by any
person or entity that informs Company that it is considering making, or has
made, an Acquisition Proposal. Such notice shall be made orally and in writing
and shall indicate in reasonable detail the identity of the offeror and the
terms and conditions of such proposal, inquiry or contact.
5. Additional Agreements.
5.1 Approval of Stockholders. Company shall promptly after the date
hereof take all action necessary in accordance with Delaware Law and its
Certificate of Incorporation and Bylaws to obtain the written consent of the
stockholders of the issued and outstanding Company Capital Stock (the "COMPANY
STOCKHOLDERS") approving the Merger as soon as practicable. Company shall use
its commercially reasonable efforts to solicit from the Company Stockholders
written consents in favor of the Merger and shall take all other action
necessary or advisable to secure the vote or consent of the Company Stockholders
required to effect the Merger.
5.2 Sale of Shares Under the Securities Laws. The parties hereto
acknowledge and agree that the securities issuable to the Company Stockholders
pursuant to Section 1.6 hereof, shall constitute "restricted securities" within
the Securities Act, and shall bear the legends set forth in Section 1.6(i). It
is acknowledged and understood that Parent is relying on certain written
representations made by each Company Stockholder. Company will use its best
efforts to cause each Company Stockholder to execute and deliver to Parent an
Investor Representation Statement in the form attached hereto as Exhibit B.
5.3 Access to Information. Company and Parent shall afford each
other and each other's accountants, counsel and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to (i) all properties, personnel books, contracts, commitments
and records, and (ii) all other information concerning the business, properties
and personnel of Company and Parent and as the other party may reasonably
request.
(a) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Parent and Company shall confer on a
regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations.
(b) No information or knowledge obtained in any investigation
pursuant to this Section 5.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 Confidentiality. The parties acknowledge that Parent and Company
have previously executed a non-disclosure agreement dated as of January 3, 2002
(the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement is hereby
incorporated herein by reference and shall continue in full force and effect in
accordance with its terms.
5.5 Public Disclosure. Unless otherwise permitted by this Agreement,
Parent and Company shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the
25
transactions contemplated hereby, and neither shall issue any such press release
or make any such statement or disclosure without the prior approval of the other
(which approval shall not be unreasonably withheld), except as may be required
by law, regulation or by obligations pursuant to any listing agreement with any
national securities exchange or with the NASD.
5.6 Regulatory Approval: Further Assurances.
(a) Each party shall use all reasonable efforts to file, as
promptly as practicable after the date of this Agreement, all notices, reports
and other documents required to be filed by such party with any Governmental
Body with respect to the Merger and the other transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body.
(b) Parent and Company shall use all reasonable efforts to take,
or cause to be taken, all actions necessary to effectuate the Merger and make
effective the other transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, each party to this Agreement (i) shall
make all filings (if any) and give all notices (if any) required to be made and
given by such party in connection with the Merger and the other transactions
contemplated by this Agreement, (ii) shall use all reasonable efforts to obtain
each consent (if any) required to be obtained (pursuant to any applicable legal
requirement or contract, or otherwise) by such party in connection with the
Merger or any of the other transactions contemplated by this Agreement, and
(iii) shall use all reasonable efforts to lift any restraint, injunction or
other legal bar to the Merger. Company shall promptly deliver to Parent a copy
of each such filing made, each such notice given and each such consent obtained
by Company during the period prior to the Effective Time. Each party hereto, at
the reasonable request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.7 Company Options. At the Effective Time, each Company Option,
whether vested or unvested, will be assumed by Parent. Section 5.7 of the
Company Disclosure Schedule hereto sets forth a true and complete list as of the
date hereof of all holders of Company Options, including the number of shares of
Company Common Stock subject to each such option, the exercise or vesting
schedule, the exercise price per share and the term of each such option. On the
Closing Date, Company shall deliver to Parent an updated Section 5.7 of the
Company Disclosure Schedule hereto current as of such date. Each such option so
assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Company Stock Option Plans
and/or any other document governing such option immediately prior to the
Effective Time, except that (i) such option will be exercisable for that number
of whole shares of Parent Common Stock equal to the product of the number of
shares of Company Common Stock that were issuable upon exercise of such option
immediately prior to the Effective Time multiplied by the Common Exchange Ratio
and rounded down to the nearest whole number of shares of Parent Common Stock,
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
option was exercisable immediately prior to the Effective Time by the Common
Exchange Ratio, rounded up to the nearest whole tenth of a cent and (iii) any
restriction on the exercisability of such Company Option shall continue in full
force and effect, and the term, exercisability, vesting schedule and other
provisions of such Company Option shall remain unchanged. Consistent with the
terms of the Company Stock Option Plans and the documents governing the
outstanding options under such Plans, the Merger will not terminate any of the
26
outstanding options under the Company Stock Option Plans or accelerate the
exercisability or vesting of such options or the shares of Parent Common Stock
which will be subject to those options upon the Parent's assumption of the
options in the Merger. It is the intention of the parties that the options so
assumed by Parent following the Effective Time will remain incentive stock
options as defined in Section 422 of the Code to the extent such options
qualified as incentive stock options prior to the Effective Time. Within 20
business days after the Effective Time, Parent will issue to each person who,
immediately prior to the Effective Time was a holder of an outstanding option
under the Company Stock Option Plans a document in form and substance
satisfactory to Company evidencing the foregoing assumption of such option by
Parent.
5.8 Form S-8. Parent agrees to file, no later than 45 days after the
Closing, a registration statement on Form S-8 covering the shares of Parent
Common Stock issuable pursuant to outstanding options under the Company Stock
Option Plans assumed by Parent. Company shall cooperate with and assist Parent
in the preparation of such registration statement.
5.9 Legal Requirements. Each of Parent, Merger Sub and Company will,
and will cause their respective subsidiaries to, take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon such
other party in connection with the consummation of the transactions contemplated
by this Agreement and will take all reasonable actions necessary to obtain (and
will cooperate with the other parties hereto in obtaining) any consent,
approval, order or authorization of or any registration, declaration or filing
with, any Governmental Entity or other person, required to be obtained or made
in connection with the taking of any action contemplated by this Agreement.
5.10 Blue Sky Laws. Parent shall take such steps as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock in connection with the
Merger. Company shall use its commercially reasonable efforts to assist Parent
as may be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Parent
Common Stock in connection with the Merger.
5.11 Nonaccredited Stockholders. Prior to the Closing, Company shall
not take any action, including the granting of employee stock options, that
would cause the number of Company Stockholders who are not "accredited
investors" pursuant to Regulation D promulgated under the Securities Act of
1933, as amended, to increase to more than 35 during the term of this Agreement.
5.12 Listing of Additional Shares. Prior to the Effective Time,
Parent shall file with the NASDAQ National Market a Notification Form for
Listing of Additional Shares with respect to the shares of Parent Common Stock
issued in the Merger and issuable upon conversion of the Convertible Promissory
Notes. Parent shall use commercially reasonable efforts to ensure that such
shares are listed on the NASDAQ National Market, or the principal exchange the
Parent Common Stock is traded on.
5.13 Employees. Company will use reasonable commercial efforts in
consultation with Parent to retain existing employees of Company through the
Effective Time and following the Merger. Company shall use its reasonable
efforts (i) to cause each of such employees set forth in Schedule 5.13(a) to
execute an Offer Letter in the form attached hereto as
27
Exhibit C, and (ii) to cause each person set forth on Schedule 5.13(b) to
execute an Employment Agreement, which shall include non-competition and
non-solicitation provisions, in the form set forth as Exhibit D and (iii) to
cause each continuing Company employee to execute and deliver to an Assignment
of Inventions and Non-Disclosure Agreement in the form provided by Parent.
5.14 Employee Benefits. Employees of the Company who continue in
service with the Parent or the Surviving Corporation following the Effective
Time shall be eligible to receive benefits consistent with the Parent's standard
human resources policies. Parent will or will cause the Surviving Corporation to
give full credit under such policies for prior service at the Company for
purposes of eligibility, vesting, benefit accrual, and determination of the
level benefits.
5.15 Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense.
5.16 Subsequent Investment Rights; S-3 Registration; Piggyback
Registration Rights.
(a) Right of Purchase. At the Effective Time, Parent grants to
each Company Stockholder, so long as such Company Stockholder shall own, of
record, any Parent Common Stock issued to such Company Stockholder in connection
with the Merger or have the right to acquire from Parent upon conversion of a
Convertible Promissory Note any such Parent Common Stock (the "MERGER STOCK"),
the right to purchase all or part of such Company Stockholder's pro rata share
of New Securities (as defined below) which Parent, from time to time, proposes
to sell and issue to any person or entities (each an "ADDITIONAL INVESTOR"). A
pro rata share, for purposes of this preemptive right, is the ratio of the
number of shares of Merger Stock Company Stockholder owns or has the right to
acquire to the total number of shares of Parent Common Stock then outstanding
(assuming conversion of all outstanding Convertible Promissory Notes).
(i) Definition of New Securities. "NEW SECURITIES" shall
mean any capital stock of Company, whether now authorized or not, and any
rights, options or warrants to purchase capital stock, and securities of any
type whatsoever that are, or may become convertible into or exchangeable for
capital stock, issued on or after the Effective Date; provided that the term
"New Securities" does not include: (i) shares of the capital stock of Parent, or
options or warrants therefore, issued to employees, consultants, officers or
directors of Parent pursuant to any stock plans of Parent or agreements approved
by Parent's Board of Directors; (ii) securities issued in connection with
acquisition transactions of any kind; (iii) securities issued to financial
institutions or lessors in connection with commercial credit arrangements,
equipment financings or similar transactions; (iv) any shares of capital stock
of Parent issued upon conversion of convertible securities; (v) securities
issued in connection with a public offering; (vi) securities issued pursuant to
currently outstanding options; and (vii) stock splits, stock dividends or like
transactions.
(ii) Notice from the Company. In the event Parent proposes
to undertake an issuance of New Securities, it shall give each Company
Stockholder entitled to a right hereunder written notice of its intention,
describing the type of New Securities and the price and the terms upon which
Parent proposes to issue the same. Such Company Stockholder shall have ten (10)
business days from the date any such notice is given to agree to purchase up to
its pro rata share of such New Securities for the price and upon the terms
specified in the notice by
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giving written notice to Parent and stating therein the quantity of New
Securities to be purchased. Nothing contained herein shall prevent Parent from
closing the sale of New Securities to any purchaser in any planned transaction
which is the reason for any Company Stockholder having the right to purchase
stock as provided herein prior to expiration of any notice or other period
applicable to any existing Investor; provided, however, that any such sale to a
purchaser shall not adversely affect a Company Stockholder's right to purchase
such Company Stockholder's pro rata share of the New Securities as provided in
this Section 5.17.
(b) S-3 Registration. Six months following the Effective Time
or, if Parent is not currently eligible to use Form S-3 (or any successor form
to Form S-3), as soon as practicable following Parent's eligibility to use such
form, Parent will:
(i) Promptly give written notice of the proposed
registration, qualification or compliance to all Company Stockholders holding
any Merger Stock; and
(ii) Use reasonable commercial efforts to effect all such
registrations, qualifications and compliances (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualifications under the applicable blue sky or other state securities laws and
appropriate compliance with exemptive regulations issued under the Securities
Act and any other governmental requirements or regulations) as would permit or
facilitate the sale and distribution of all or of the Company Stockholders'
Merger Stock, and keep such registration statement effective pursuant to Rule
415 under the Securities Act of 1933 at all times until such date as is the
earlier of (x) two years from the Effective Time; or (y) the date on which all
of the Merger Stock has been sold; provided, however that Parent shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 5.16(b):
(A) In any jurisdiction in which the Parent would be
required to qualify to do business or execute a general consent to service of
process in effecting such registration, qualification or compliance;
(B) If Parent has already effected one (1) registration
on Form S-3 (or any successor form to Form S-3) for the Company Stockholders
pursuant to this Section 5.16(b); or
(C) If, after the Parent gives the notice specified in
Section 5.16(b)(i), the aggregate public offering price of all Merger Stock to
be sold by Company Stockholders in such registered offering is less than Five
Hundred Thousand Dollars ($500,000);
Subject to the foregoing clauses (A) through (C), if the
Parent shall furnish to such Company Stockholders a certificate signed by the
President of the Parent stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Parent and its stockholders
for such registration statement to be filed at the time filing would be required
and it is therefore essential to defer the filing of such registration
statement, the Parent shall have the right to defer such filing for a period of
not more than one hundred twenty (120) days after receipt of the request of the
Company Stockholders holding any Merger Stock, and provided, further, that the
Parent shall not defer its obligation in this manner more than once in any
twelve (12) month period. If Parent fails to file such registration statement
initially upon its eligibility to use Form S-3 (or any successor form to Form
S-3), Parent shall not be liable for any damages therefrom, but any Company
Stockholder may, by written notice, send to Parent a
29
request for such registration, upon which Parent shall effect such registration
as soon as practicable thereafter. Notwithstanding the foregoing, in no event
shall Parent be obligated hereunder to incur any costs or expenses exceeding
that which would reasonably be expected to be incurred in connection with a
registration statement on Form S-3 due to any changes in the Form S-3, filing
fees with respect thereto or otherwise; provided, however, that periodic
increases in filing fees by the SEC from time to time shall be deemed to be
reasonably expected.
(c) Piggyback Registrations. The Parent shall notify the Company
Stockholders holding any Merger Stock in writing at least thirty (30) days prior
to filing any registration statement on Forms ▇-▇, ▇-▇ or S-3 (or any successor
forms) under the Securities Act (except with respect to the Form S-3 filed in
accordance with Section 5.16(b) above) for purposes of effecting a public
offering of any shares of Parent Common Stock and will afford each such Company
Stockholder an opportunity to include in such registration statement all or any
part of any Merger Stock then held by such Company Stockholder subject to the
underwriter cut-back rights set forth in Section 5.16(b)(i) below. Each Company
Stockholder desiring to include in any such registration statement all or any
part of any Merger Stock held by such Company Stockholder shall, within ten (10)
days after receipt of the above-described notice from the Parent, so notify the
Parent in writing, and in such notice shall inform the Parent of the number of
shares of Merger Stock such Company Stockholder wishes to include in such
registration statement. If a Company Stockholder decides not to include all of
his Merger Stock in any registration statement thereafter filed by the Parent,
such Company Stockholder shall nevertheless continue to have the right to
include any Merger Stock in any subsequent registration statement or
registration statements on Forms ▇-▇, ▇-▇ or S-3 (or any successor forms) as may
be filed by the Parent with respect to offerings of its securities, all upon the
terms and conditions set forth herein.
(i) Underwriting. If a registration statement under which
the Parent gives notice under this Section 5.16(c) is for an underwritten
offering, then the Parent shall so advise the Company Stockholders of Merger
Stock. In such event, the right of any such Company Stockholder's Merger Stock
to be included in a registration pursuant to this Section 5.16(c) shall be
conditioned upon such Company Stockholder's participation in such underwriting
and the inclusion of such Company Stockholder's Merger Stock in the underwriting
to the extent provided herein. All Company Stockholders proposing to distribute
their Merger Stock through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriter(s)
selected for such underwriting. Notwithstanding any other provision of this
Agreement, if the managing underwriter(s) determine(s) in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may reduce the number of shares
(including Merger Stock) from the registration and the underwriting, and the
number of shares that may be included in the registration and the underwriting
shall be allocated, first, to the Parent, and second, to each of the Company
Stockholders requesting inclusion of their Merger Stock in such registration
statement on a pro rata basis based on the total number of Merger Stock then
held by each such Company Stockholder. If any Company Stockholder disapproves of
the terms of any such underwriting, such Company Stockholder may elect to
withdraw therefrom by written notice to the Parent and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Merger Stock excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration. For any
Company Stockholder which is a partnership, limited liability company or
corporation, the partners, retired partners, members, retired members and
stockholders of such Company Stockholder, or the estates and family members of
any such partners, retired partners, members and retired members and any trusts
for the benefit of any of the foregoing persons shall be deemed to be a single
"Holder", and any pro rata reduction with respect to such "Holder" shall be
based upon the aggregate amount of shares
30
carrying registration rights owned by all entities and individuals included in
such "Holder," as defined in this sentence.
(d) Expenses. The Parent shall pay all expenses incurred in
connection with a registration pursuant to Sections 5.16(b) and (c) (excluding
underwriters' and brokers' discounts and commissions and the fees and
disbursements of special counsel for the Company Stockholders), including,
without limitation all federal and "blue sky" registration and qualification
fees, printers' and accounting fees, and fees and disbursements of counsel for
the Parent.
(e) Termination. Any subsequent investment rights, S-3
registration rights and piggyback registration rights granted pursuant to this
Section 5.16 shall terminate with respect to any Company Stockholder (i) upon
the end of the Notes Maturity Date (as defined in Section 1.6(a) above); or (ii)
upon a change of control event wherein the stockholders of Parent immediately
prior to such event do not retain immediately after the event direct or indirect
beneficial ownership of more than fifty percent (50%) of the total combined
voting power of the outstanding voting stock of Parent. Any subsequent
investment rights granted pursuant to this Section 5.16 may be waived with
respect to any transaction as to all Company Stockholders by a vote of the
majority holders of the Merger Stock.
5.17 Indemnification.
(a) The Company shall, and from and after the Effective Time of
the Merger, the Parent and the Surviving Corporation shall indemnify, defend and
hold harmless the present and former officers, directors and employees of the
Company (collectively, the "INDEMNIFIED PARTIES") against all losses, expenses,
claims, judgments, damages, liabilities or amounts that are paid in settlement
of, with the approval of the Parent and the Surviving Corporation (which
approval shall not be unreasonably withheld), or otherwise in connection with,
any claim, action, suit, judgment, proceeding or investigation (a "CLAIM"),
based in whole or in part on the fact that such person is or was such a
director, officer or employee and arising out of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), in each case to the fullest extent
permitted under Delaware Law (and shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted under Delaware Law), provided, however, that Parent's
indemnification obligation hereunder shall not exceed $1,000,000.
(b) Without limiting the foregoing, in the event any Claim is
brought against any Indemnified Party (whether arising before or after the
Effective Time) after the Effective Time (i) the Indemnified Parties may retain
their regularly engaged independent legal counsel as of the date of this
Agreement, or other independent legal counsel satisfactory to them provided that
such other counsel shall be reasonably acceptable to Parent and Surviving
Corporation, (ii) Parent and Surviving Corporation shall pay all reasonable fees
and expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received, and (iii) Parent and Surviving Corporation will use its
reasonable efforts to assist in the vigorous defense of any such matter,
provided that Parent and Surviving Corporation shall not be liable for any
settlement of any Claim effected without its written consent, which consent
shall not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 5.17, promptly upon learning of any such
Claim, shall notify the Parent and Surviving Corporation (although the failure
so to notify the Parent and Surviving Corporation shall not relieve the Parent
and Surviving Corporation from any liability which the Parent and Surviving
31
Corporation may have under this Section 5.17, except to the extent such failure
prejudices the Parent and Surviving Corporation). The Indemnified Parties as a
group may retain one law firm (in addition to local counsel) to represent them
with respect to each such matter unless there is, under applicable standards of
professional conduct (as reasonably determined by counsel to such Indemnified
Parties) a conflict on any significant issue between the position of any two or
more of such Indemnified Parties, in which event, an additional counsel may be
retained by such Indemnified Parties.
(c) From and after the Effective Time, the Parent and Surviving
Corporation will fulfill, assume and honor in all respects the obligations of
the Company pursuant to the Company's Certificate of Incorporation and any
indemnification agreement between the Company and any of the Company's officers
and directors existing and in force as of the Effective Time.
(d) This Section 5.17 is intended to be for the benefit of, and
shall be enforceable by, the Indemnified Parties referred to herein, their heirs
and personal representatives and shall be binding on the Parent and the
Surviving Corporation, the Parent and the Surviving Corporation's obligations
pursuant to this Section 5.17 and its and their successors and permitted
assigns.
5.18 Disposition of Company Capital Stock, Voting, Etc. From and
after the date hereof, and unless this Agreement is terminated in accordance
with Section 7, the Principal Stockholders shall:
(a) not transfer, sell or assign to any person or entity, or
agree in any manner to transfer, sell or assign to any person or entity, or
pledge, encumber, deposit in a voting trust or grant a proxy with respect to any
shares of Company Capital Stock currently or hereafter owned or controlled by
the Principal Stockholder without the prior written consent of Parent;
(b) not solicit or enter into any agreement or arrangement with
any person or entity with respect to any transfer, sale or assignment of any
Company Capital Stock, except transfers, sales or assignments specifically
contemplated by this Agreement; and
(c) vote the shares of Company Capital Stock currently or
hereafter owned or controlled by the Principal Stockholder in favor of approval
of the Merger and the adoption and approval of this Agreement including all
actions contemplated thereby, and against any merger other than the Merger, or
any consolidation, sale of assets, reorganization, recapitalization, liquidation
or winding up of the Company in any case, at every meeting of stockholders of
the Company called therefor and at every adjournment or postponement thereof (or
in connection with any written consent in lieu of a meeting relating to any such
transaction).
5.19 Payment of Legal Fees. Company agrees that on or prior to the
Closing Date it shall pay the fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to
the Company, incurred in connection with the transactions contemplated by the
Agreement.
5.20 Assignment of Restricted Stock Purchase Rights. With respect to
the Restricted Stock Purchase Agreements entered into between the Company and
▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇, respectively, which such agreements shall be amended
and restated in accordance with Section 6.2(j) hereof, Company hereby assigns to
Parent, effective at the Effective Time, Company's right, pursuant to Section 2
of each such Amended and Restated Restricted Stock
32
Purchase Agreement, to repurchase unvested shares of common stock issued
pursuant to such agreement.
5.21 Operation of Contracts. Parent shall comply with the covenants
set forth in Schedule 5.21 with respect to the operation of certain contracts
listed thereon.
6. Conditions to the Merger.
6.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Stockholder Approval. This Agreement and the Merger shall be
approved and adopted by the stockholders of the Company by the requisite vote
under applicable law and the Company's Certificate of Incorporation.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be and remain in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending, which would have a Material
Adverse Effect on either Parent or on Parent combined with the Surviving
Corporation after the Effective Time, nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
(c) Governmental Approval. Parent, Company and Merger Sub and
their respective subsidiaries shall have timely obtained from each Governmental
Entity (as defined above) all approvals, waivers and consents, if any, necessary
for consummation of or in connection with the Merger and the several
transactions contemplated hereby, including such approvals, waivers and consents
as may be required under the Securities Act and under state Blue Sky laws, other
than any Form D filings, and filings and approvals relating to the Merger or
affecting Parent's ownership of Company or any of its properties if failure to
obtain such approval, waiver or consent would not have a Material Adverse Effect
on Parent after the Effective Time or are regularly made after the closing of a
merger transaction.
(d) No Governmental Litigation. There shall not be pending or
threatened any legal proceeding in which a Governmental Body is or is threatened
to become a party or is otherwise involved, and neither Parent nor Company shall
have received any communication from any Governmental Body in which such
Governmental Body indicates the probability of commencing any legal proceeding
or taking any other action: (a) challenging or seeking to restrain or prohibit
the consummation of the Merger; (b) relating to the Merger and seeking to obtain
from Parent or any of its subsidiaries, or Company, any damages or other relief
that would be material to Parent; (c) seeking to prohibit or limit in any
material respect Parent's ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of Company; or (d)
which would materially and adversely affect the right of Parent or Company to
own the assets or operate the business of Company.
33
(e) No Other Litigation. There shall not be pending any legal
proceeding: (a) challenging or seeking to restrain or prohibit the consummation
of the Merger or any of the other transactions contemplated by this Agreement;
(b) relating to the Merger and seeking to obtain from Parent or any of its
subsidiaries, or Company, any damages or other relief that would be material to
Parent; (c) seeking to prohibit or limit in any material respect Parent's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of Company; or (d) which would affect
adversely the right of Parent or Company to own the assets or operate the
business of Company.
6.2 Additional Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Parent:
(a) Representations, Warranties and Covenants. The
representations and warranties of Company in this Agreement shall be true and
correct in all material respects (without regard to any qualification as to
materiality contained in such representation or warranty) on and as of the date
of this Agreement and on and as of the Closing as though such representations
and warranties were made on and as of such time (except for such representations
and warranties that speak specifically as of the date hereof or as of another
date, which shall be true and correct as of such date).
(b) Performance of Obligations. Company shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by it as of the
Closing.
(c) Certificate of Officers. Parent and Merger Sub shall have
received a certificate executed on behalf of Company by the chief executive
officer and treasurer of Company certifying that the conditions set forth in
Section 6.2(a) and Section 6.2(b) have been satisfied.
(d) Third Party Consents. All consents or approvals required to
be obtained by the Company in connection with the Merger and the other
transactions contemplated by this Agreement shall have been obtained and shall
be in full force and effect.
(e) No Material Adverse Change. There shall not have occurred
any material adverse change in the financial condition, properties, assets
(including intangible assets), liabilities, business, operations, results of
operations or prospects of Company and its subsidiaries, taken as a whole.
(f) Investor Representation Statement; Number of Stockholders.
Each of the Company Stockholders shall have delivered to Parent a signed
Investor Representation Statement in substantially the form attached hereto as
Exhibit B and each such Statement shall be in full force and effect, and there
shall be no more than thirty-five (35) Company Stockholders who are (A) U.S.
persons as defined under Regulation S under the Securities Act ("U.S. Person")
and (B) not "accredited investors" as defined in Rule 501 under the Securities
Act.
(g) Offer Letters and Employment Agreements. The employees of
Company set forth on Schedule 5.13(a) shall not have indicated that they will
not accept employment with the Surviving Corporation pursuant to the terms of an
offer letter substantially
34
in the form attached hereto as Exhibit C, as applicable, and the individuals set
forth on Schedule 5.13(b) shall have entered into Employment Agreements
substantially in the form attached as Exhibit D.
(h) Dissenters' Rights. Not more than five percent (5%) of the
Company Capital Stock outstanding immediately prior to the Effective Time shall
be eligible as Dissenters' Shares.
(i) Waiver of Liquidation Preference. The Company shall have
received waivers from each of the holders of issued and outstanding Company
Preferred Stock ("COMPANY PREFERRED STOCKHOLDERS") as to receipt of the full
liquidation preference to which they may be entitled under the Company's Amended
and Restated Certificate of Incorporation.
(j) Amended and Restated Restricted Stock Purchase Agreements.
Each of ▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇ shall have entered into Amended and Restated
Restricted Stock Purchase Agreements, in substantially the form attached hereto
as Exhibit E.
6.3 Additional Conditions to Obligations of Company. The obligations
of Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Company:
(a) Representations, Warranties and Covenants. The
representations and warranties of Parent and Merger Sub in this Agreement shall
be true and correct in all material respects on and as of the date of this
Agreement and on and as of the Closing as though such representations and
warranties were made on and as of such time (except for such representations and
warranties that speak specifically as of the date hereof or as of another date,
which shall be true and correct as of such date).
(b) Performance of Obligations. Parent and Merger Sub shall have
performed and complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
them as of the Closing.
(c) Certificate of Officers. Company shall have received a
certificate executed on behalf of Parent and Merger Sub by the chief executive
officer and any other proper officer of Parent and Merger Sub, respectively,
certifying that the conditions set forth in Sections 6.3(a) and 6.3(b) have been
satisfied.
(d) Third Party Consents. All consents or approvals required to
be obtained by the Parent in connection with the Merger and the other
transactions contemplated by this Agreement shall have been obtained and shall
be in full force and effect.
(e) No Material Adverse Change. There shall not have occurred
any material adverse change in the financial condition, properties, assets
(including intangible assets), liabilities, business, operations, results of
operations or prospects of Parent and its subsidiaries, taken as a whole.
(f) Opinion. Counsel for Parent shall have delivered to Company
an opinion in the form attached hereto as Exhibit F.
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7. Termination, Amendment and Waiver.
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time (with respect to Section 7.1(b) through Section 7.1(d), by
written notice by the terminating party to the other party):
(a) by the mutual written consent of Parent and Company;
(b) by either Parent or Company if the Merger shall not have
been consummated by March 31, 2002, provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date;
(c) by either Parent or Company if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, except, if the party relying on such order, decree or ruling or other
action has not complied with its obligations under this Agreement;
(d) by Parent or Company, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement, which breach (i) causes the conditions set forth in
Section 6.1 or 6.2 (in the case of termination by Parent) or Section 6.1 or 6.3
(in the case of termination by Company) not to be satisfied and (ii) shall not
have been cured within ten (10) business days following receipt by the breaching
party of written notice of such breach from the other party.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, there shall be no liability or obligation
on the part of Parent, Company, Sub or their respective officers, directors, or
stockholders, except to the extent that such termination results from the
willful breach by a party of any of its representations, warranties or covenants
set forth in this Agreement; provided that the provisions of Section 7.1 shall
remain in full force and effect and survive any termination of this Agreement.
7.3 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
8. Indemnification.
8.1 Survival of Warranties. All representations and warranties made
by Parent and Company herein, or in any certificate, schedule or exhibit
delivered pursuant hereto,
36
shall survive the Closing and continue in full force and effect until the first
anniversary of the Closing Date (sometimes referred to herein as the
"TERMINATION DATE").
(a) Company Indemnification: Subject to the limitations set
forth in this Section 8, the Company Preferred Stockholders will indemnify and
hold harmless Parent and the Surviving Corporation and its respective officers,
directors, agents, attorneys and employees, and each person, if any, who
controls or may control Parent or the Surviving Corporation within the meaning
of the Securities Act (hereinafter referred to individually as a "PARENT
INDEMNIFIED PERSON" and collectively as "PARENT INDEMNIFIED PERSONS") from and
against any and all losses, costs, damages, liabilities and expenses arising
from claims, demands, actions, causes of action, including, without limitation,
legal fees, (collectively, "DAMAGES") arising out of any misrepresentation or
breach of or default in connection with any of the representations, warranties,
covenants and agreements given or made by Company in this Agreement, the Company
Disclosure Schedules or any exhibit or schedule to this Agreement.
Notwithstanding the foregoing, in no event shall the liability of any Company
Preferred Stockholder exceed the amount of the Preferred Stock Merger
Consideration actually received in accordance with the terms of this Agreement;
provided, however, that there shall be no limit on the liability of a Company
Preferred Stockholder in the event of fraud or intentional breach or
misrepresentation made by such Company Preferred Stockholder. Nothing herein
shall limit the liability of the Company for any breach of any representation,
warranty or covenant if the Merger does not close.
(b) Parent Indemnification: Subject to the limitations set forth
in this Section 8, the Parent will indemnify and hold harmless the Company
Stockholders (hereinafter referred to individually as a "COMPANY INDEMNIFIED
PERSON" and collectively as "COMPANY INDEMNIFIED PERSONS") from and against any
and all Damages arising out of any misrepresentation or breach of or default in
connection with any of the representations, warranties, covenants and agreements
given or made by Parent or Merger Sub in this Agreement or any exhibit or
schedule to this Agreement. Notwithstanding the foregoing, in no event shall the
liability of the Parent exceed the sum of the Preferred Stock Merger
Consideration; provided, however, that there shall be no limit on the liability
of the Parent in the event of fraud or intentional breach or misrepresentation.
Nothing herein shall limit the liability of Parent for any breach of any
representation, warranty or covenant if the Merger does not close.
8.2 Claims by Parent Indemnitees.
(a) In the event that Parent wishes to make a claim for Damages
under this Section 8, Parent shall give a written notice (the "PARENT NOTICE")
to the Securityholders' Agent (as defined below). The Parent Notice shall (i)
specify in reasonable detail the nature of the claim being made and (ii) state
the aggregate dollar amount of such claim. Upon receipt of such Notice, and
subject to the provisions set forth in this Section 8, the Company Preferred
Stockholders shall deliver to Parent as promptly as practicable that portion, on
a pro rata basis in accordance with their interest thereof, of the face value of
the Convertible Promissory Notes in an amount equal to the Damages, or Parent
shall reduce from escrow, as set forth in Section 2.2 of the Convertible
Promissory Notes, shares of Parent Common Stock issuable upon conversion
thereof, equal to such Damages; provided, however that any Company Preferred
Stockholder may satisfy its share of such Damages by surrendering the pro rata
portion of the face value of the Convertible Promissory Notes in an amount equal
to the Damages; provided further, that any Company Preferred Stockholder shall
have the right to satisfy its pro rata share of such Damages by making a cash
payment, rather than a reduction to, or surrender of, the Convertible Promissory
Note.
37
(b) If the Company Preferred Stockholders wish to object to the
allowance of the claim made in a Parent Notice, the Securityholders' Agent on
behalf of such stockholders shall deliver a written objection (the "COMPANY
OBJECTION") in accordance with the notice provisions set forth in Section 9.1 to
Parent within thirty (30) calendar days after receipt of such Parent Notice by
the Securityholders' Agent expressing such Company Objection and explaining it
in reasonable detail and in good faith the basis therefor. Following receipt by
Parent of the Securityholders' Agent Company Objection, if any, Parent and the
Securityholders' Agent shall promptly meet to agree on the rights of the
respective parties with respect to each of such claims. If the Securityholders'
Agent and Parent should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties. The Company Preferred Stockholders
shall, if agreed in such memorandum, make payment for claims or other
disposition as agreed in such memorandum (subject to the limitations set forth
in this Section 8) and such performance shall satisfy all of the Company
Preferred Stockholders' obligations as to such claim. Any dispute between Parent
and the Securityholders' Agent on behalf of the Company Preferred Stockholders
shall be resolved in accordance with Section 8.4 hereof and the other applicable
provisions of this Agreement.
(c) Any amount of the Convertible Promissory Notes and shares of
Parent Common Stock issuable upon conversion thereof to be issued to Parent and
held by the Securityholders' Agent in connection with any claim pending pursuant
to this Section 8 shall continue to be held until a final settlement of such
claim has been reached (a "FINAL DETERMINATION"), as determined by Parent and
Securityholders' Agent on behalf of the Company Preferred Stockholders pursuant
to Section 8.4 of this Agreement. Within five (5) business days following
receipt by the Parent of a written agreement executed by the Securityholders'
Agent and Parent regarding the final settlement or resolution of a Parent
Notice, the Securityholders' Agent shall provide to the Parent that amount of
the Convertible Promissory Notes (or shares issued upon conversion thereof)
directed as such as evidenced in the written agreement. The remainder of any
amount covered by a Parent Notice not required to be provided to Parent after a
Final Determination shall continue to be held by the Securityholders' Agent.
8.3 Claims by Company Indemnitees.
(a) In the event a Company Stockholder wishes to make a claim
for Damages under this Section 8, the Securityholders' Agent shall give a
written notice (the "COMPANY NOTICE") to the Parent. The Company Notice shall
(i) specify in reasonable detail the nature of the claim being made and (ii)
state the aggregate dollar amount of such claim. Upon receipt of such Notice,
and subject to the provisions set forth in this Section 8, the Parent shall
deliver to the Securityholders' Agent (for distribution to the Company
Stockholders) as promptly as practicable that portion, on a pro rata basis in
accordance with their interest thereof, of an amount equal to such Damages.
(b) If Parent wishes to object to the allowance of the claim
made in a Company Notice, the Parent shall deliver a written objection (the
"PARENT OBJECTION") in accordance with the notice provisions set forth in
Section 9.1 to the Securityholders' Agent within thirty (30) calendar days after
receipt of such Company Notice by Parent expressing such Parent Objection and
explaining it in reasonable detail and in good faith the basis therefor.
Following receipt by the Securityholders' Agent of the Parent Objection, if any,
Parent and the Securityholders' Agent shall promptly meet to agree on the rights
of the respective parties with respect to each of such claims. If the
Securityholders' Agent and Parent should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties. The Parent shall,
if agreed in such memorandum, make payment for claims or other disposition as
38
agreed in such memorandum (subject to the limitations set forth in this Section
8) and such performance shall satisfy all of Parent's obligations as to such
claim. Any dispute between Parent and the Securityholders' Agent on behalf of
the Company Stockholders shall be resolved in accordance with Section 8.4 hereof
and the other applicable provisions of this Agreement.
8.4 Resolution of Conflicts and Arbitration.
(a) If no agreement can be reached after good faith negotiation
between the parties pursuant to Sections 8.2 and 8.3, either Parent or the
Securityholders' Agent may, by written notice to the other, demand arbitration
of the matter unless the amount of the Damages is at issue in pending litigation
with a third party, in which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration; and in either such
event the matter shall be settled by arbitration conducted by one arbitrator.
Parent and the Securityholders' Agent shall agree on the arbitrator, provided
that if Parent and the Securityholders' Agent cannot agree on such arbitrator,
either Parent or Securityholders' Agent can request that Judicial Arbitration
and Mediation Services ("JAMS") select the arbitrator. The arbitrator shall set
a limited time period and establish procedures designed to reduce the cost and
time for discovery while allowing the parties an opportunity, adequate in the
sole judgment of the arbitrator, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrator shall
rule upon motions to compel or limit discovery and shall have the authority to
impose sanctions, including attorneys' fees and costs, to the same extent as a
court of competent law or equity, should the arbitrator determine that discovery
was sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of the arbitrator
shall be written, shall be in accordance with applicable law and with this
Agreement, and shall be supported by written findings of fact and conclusion of
law which shall set forth the basis for the decision of the arbitrator. The
decision of the arbitrator as to the validity and amount of any claim in such
Company Notice or Parent Notice shall be binding and conclusive upon the parties
to this Agreement, and notwithstanding anything in Section 8 hereof, the Parent
and the Securityholders' Agent shall be entitled to act in accordance with such
decision.
(b) Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration shall be held in
San Diego County, California under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 8.4(b), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Company Notice or Parent Notice is at issue, the party seeking indemnification
shall be deemed to be the Non-Prevailing Party unless the arbitrators award the
party seeking indemnification more than one-half (1/2) of the amount in dispute,
plus any amounts not in dispute; otherwise, the person against whom
indemnification is sought shall be deemed to be the Non-Prevailing Party. The
Non-Prevailing Party to an arbitration shall pay its own expenses, the fees of
the arbitrator, any administrative fee of JAMS, and the expenses, including
attorneys' fees and costs, reasonably incurred by the other party to the
arbitration.
8.5 Securityholders' Agent.
(a) Timeline Venture Management, LLC, a California limited
liability company, shall be constituted and appointed as agent
("SECURITYHOLDERS' AGENT") for and on behalf of the Company Stockholders to give
and receive notices and communications, to authorize payment to Parent and
Surviving Corporation pursuant to Section 8 in satisfaction of Indemnification
Claims, to object to such deliveries and to make claims on behalf of the Company
Stockholders pursuant to Section 8, to agree to, negotiate, enter into
settlements and
39
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to Indemnification Claims, to resolve any
Indemnification Claims and to take all actions necessary or appropriate in the
judgment of the Securityholders' Agent for the accomplishment of the foregoing.
Such agency may be changed by the holders of a majority in interest of the
Convertible Promissory Notes, and the shares issuable upon conversion thereof,
from time to time upon not less than 10 days' prior written notice to Parent. No
bond shall be required of the Securityholders' Agent, and the Securityholders'
Agent shall receive no compensation for his services. Notices or communications
to or from the Securityholders' Agent shall constitute notice to or from each of
the Company Stockholders.
(b) The Securityholders' Agent shall not be liable for any act
done or omitted hereunder as Securityholders' Agent while acting in good faith
and in the exercise of reasonable judgment and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good faith. The
Company Stockholders shall severally indemnify the Securityholders' Agent and
hold him harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Securityholders' Agent and arising
out of or in connection with the acceptance or administration of his duties
hereunder.
(c) The Securityholders' Agent shall have reasonable access to
information about Company and the reasonable assistance of Company's officers
and employees for purposes of performing his duties and exercising his rights
hereunder, provided that the Securityholders' Agent shall treat confidentially
and not disclose any nonpublic information from or about Company to anyone
(except on a need to know basis to individuals who agree to treat such
information confidentially).
8.6 Actions of the Securityholders' Agent. A decision, act, consent
or instruction of the Securityholders' Agent shall constitute a decision of all
Company Stockholders and shall be final, binding and conclusive upon each such
Company Stockholder, and Parent may rely upon any decision, act, consent or
instruction of the Securityholders' Agent as being the decision, act, consent or
instruction of each and every such Company Stockholder. The Parent is hereby
relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the
Securityholders' Agent.
8.7 Third-Party Claims. In the event Parent becomes aware of a
third-party claim which Parent believes may result in a demand against the
Convertible Promissory Notes, and shares of Parent Common Stock issuable upon
conversion thereof, Parent shall notify the Securityholders' Agent of such
claim, and the Securityholders' Agent and the Company Preferred Stockholders who
have an interest in the Convertible Promissory Notes, and shares of Parent
Common Stock issuable upon conversion thereof, shall be entitled, at their
expense, to participate in any defense of such claim with the consent of Parent
which shall not be unreasonably withheld. Parent shall have the right, in its
reasonable discretion, to settle any such claim for an amount not to exceed
$100,000 and Parent agrees to negotiate in good faith to reduce such $100,000
amount. In the event that the Securityholders' Agent has consented to any such
settlement, the Securityholders' Agent shall have no power or authority to
object under the provisions of this Section 8 to the amount of any claim by
Parent against the Convertible Promissory Notes, and shares of Parent Common
Stock issuable upon conversion thereof, for indemnity with respect to such
settlement.
40
9. General Provisions.
9.1 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed duly delivered if delivered personally (upon
receipt), or three (3) business days after being mailed by registered or
certified mail, postage prepaid (return receipt requested), or one (1) business
day after it is sent by commercial overnight courier service, or upon
transmission, if sent via facsimile (with confirmation of receipt) to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
(a) if to Parent or Merger Sub, to:
NexPrise, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Company, to:
InfoPrise, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to Securityholders' Agent, to:
41
Timeline Venture Management, LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇-▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
9.2 Definitions. In this Agreement any reference to any event,
change, condition or effect being "MATERIAL" with respect to any entity or group
of entities means any material event, change, condition or effect related to the
financial condition, properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity or
group of entities. In this Agreement any reference to a "MATERIAL ADVERSE
EFFECT" with respect to any entity or group of entities means any event, change
or effect that is materially adverse to the financial condition, properties,
assets, liabilities, business, operations, results of operations or prospects of
such entity and its subsidiaries, taken as a whole. In this Agreement any
reference to a party's "KNOWLEDGE" means such party's actual knowledge after
reasonable inquiry of officers, directors and other employees of such party
reasonably believed to have knowledge of such matters.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Company Disclosure Schedule, (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof except for the
Confidentiality Agreement, which shall continue in full force and effect, and
shall survive any termination of this Agreement or the Closing, in accordance
with its terms; (b) are not intended to confer upon any other person any rights
or remedies hereunder, and shall not be assigned by operation of law or
otherwise without the written consent of the other party.
9.5 Severability. In the event that any provision of this Agreement,
or the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
42
9.6 Remedies Cumulative. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of California applicable to parties
residing in California, without regard applicable principles of conflicts of
law.
9.8 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
43
IN WITNESS WHEREOF, Company, Parent and Merger Sub and Securityholders'
Agent have, and with respect to Section 5.18 herein, the Principal Stockholders
have, caused this Agreement to be executed and delivered by each of them or
their respective officers thereunto duly authorized, all as of the date first
written above.
INFOPRISE, INC. NEXPRISE, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------- -----------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer Title: President and Chief Executive
Officer
SECURITYHOLDERS' AGENT: INDIGO ACQUISITION CORPORATION
TIMELINE VENTURE MANAGEMENT, LLC, a
California limited liability company By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
PRINCIPAL STOCKHOLDERS:
▇▇▇ ▇▇▇▇▇▇ TIMELINE VENTURE INVESTORS I, LP
a Texas limited partnership
/s/ ▇▇▇ ▇▇▇▇▇▇
-----------------------------------
By: Timeline Ventures, L.P.,
▇▇▇ ▇▇▇▇▇▇ a Texas limited partnership
/s/ ▇▇▇ ▇▇▇▇▇▇ By: Michael JK, Inc.,
----------------------------------- a Texas corporation, general
partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
By: Shri Investment Advisers,
Inc., a California corporation,
general partner
By: /s/ Dev ▇▇▇▇▇▇▇▇▇▇▇
----------------------------
Name: Dev ▇▇▇▇▇▇▇▇▇▇▇,
Title: Chief Executive Officer
TABLE OF CONTENTS
Page
----
1. The Merger....................................................................1
1.1 The Merger.............................................................1
1.2 Closing; Effective Time................................................1
1.3 Effect of the Merger...................................................2
1.4 Certificate of Incorporation; Bylaws...................................2
1.5 Directors and Officers.................................................2
1.6 Effect on Capital Stock................................................2
1.7 Surrender of Certificates..............................................5
1.8 No Further Ownership Rights in Company Capital Stock...................5
1.9 Lost, Stolen or Destroyed Certificates.................................6
1.10 Taking of Necessary Action; Further Action.............................6
2. Representations and Warranties of Company.....................................6
2.1 Organization, Standing and Power.......................................6
2.2 Authority..............................................................7
2.3 Governmental Authorization.............................................7
2.4 Financial Statements...................................................7
2.5 Capital Structure......................................................8
2.6 Absence of Certain Changes.............................................8
2.7 Absence of Undisclosed Liabilities.....................................9
2.8 Litigation.............................................................9
2.9 Restrictions on Business Activities....................................9
2.10 Intellectual Property..................................................9
2.11 Interested Party Transactions.........................................12
2.12 Minute Books..........................................................12
2.13 Complete Copies of Materials..........................................12
2.14 Material Contracts....................................................12
2.15 Inventory.............................................................13
2.16 Accounts Receivable...................................................13
2.17 Customers and Suppliers...............................................13
2.18 Employees and Consultants.............................................13
2.19 Title to Property.....................................................14
2.20 Environmental Matters.................................................14
2.21 Taxes.................................................................15
2.22 Employee Benefit Plans................................................16
2.23 Employee Matters......................................................18
2.24 Insurance.............................................................19
2.25 Compliance With Laws..................................................19
2.26 Brokers' and Finders' Fee.............................................19
2.27 Representations Complete..............................................19
3. Representations and Warranties of Parent and Merger Sub......................20
3.1 Organization, Standing and Power......................................20
3.2 Authority.............................................................20
3.3 SEC Documents; Parent Financial Statements............................20
3.4 Capital Structure.....................................................20
3.5 Interim Operations of Merger Sub......................................21
3.6 Valid Issuance........................................................21
3.7 Brokers' and Finders' Fee.............................................21
i
TABLE OF CONTENTS
(continued)
Page
----
3.8 Representations Complete..............................................21
4. Conduct Prior To The Effective Time..........................................21
4.1 Conduct of Business of Company........................................21
4.2 Conduct of Business of Parent.........................................24
4.3 No Solicitation.......................................................24
5. Additional Agreements........................................................25
5.1 Approval of Stockholders..............................................25
5.2 Sale of Shares Under the Securities Laws..............................25
5.3 Access to Information.................................................25
5.4 Confidentiality.......................................................25
5.5 Public Disclosure.....................................................25
5.6 Regulatory Approval: Further Assurances..............................26
5.7 Company Options.......................................................26
5.8 Form S-8..............................................................27
5.9 Legal Requirements....................................................27
5.10 Blue Sky Laws.........................................................27
5.11 Nonaccredited Stockholders............................................27
5.12 Listing of Additional Shares..........................................27
5.13 Employees.............................................................27
5.14 Employee Benefits.....................................................28
5.15 Expenses..............................................................28
5.16 Subsequent Investment Rights; S-3 Registration; Piggyback Registration
Rights................................................................28
5.17 Indemnification.......................................................31
5.18 Disposition of Company Capital Stock, Voting, Etc.....................32
5.19 Payment of Legal Fees.................................................32
5.20 Assignment of Restricted Stock Purchase Rights........................32
5.21 Operation of Contracts................................................33
6. Conditions to the Merger.....................................................33
6.1 Conditions to Obligations of Each Party to Effect the Merger..........33
6.2 Additional Conditions to the Obligations of Parent and Merger Sub.....34
6.3 Additional Conditions to Obligations of Company.......................35
7. Termination, Amendment and Waiver............................................36
7.1 Termination...........................................................36
7.2 Effect of Termination.................................................36
7.3 Amendment.............................................................36
7.4 Extension; Waiver.....................................................36
8. Indemnification..............................................................36
8.1 Survival of Warranties................................................36
8.2 Claims by Parent Indemnitees..........................................37
8.3 Claims by Company Indemnitees.........................................38
8.4 Resolution of Conflicts and Arbitration...............................39
8.5 Securityholders' Agent................................................39
8.6 Actions of the Securityholders' Agent.................................40
ii
TABLE OF CONTENTS
(continued)
Page
----
8.7 Third-Party Claims....................................................40
9. General Provisions...........................................................41
9.1 Notices...............................................................41
9.2 Definitions...........................................................42
9.3 Counterparts..........................................................42
9.4 Entire Agreement; Nonassignability; Parties in Interest...............42
9.5 Severability..........................................................42
9.6 Remedies Cumulative...................................................43
9.7 Governing Law.........................................................43
9.8 Rules of Construction.................................................43
iii