Agreement and Plan of Merger by and among INTERNAP NETWORK SERVICES CORPORATION, IVY ACQUISITION CORP. and VITALSTREAM HOLDINGS, INC.
Exhibit
2.1
by
and among
INTERNAP
NETWORK SERVICES CORPORATION,
IVY
ACQUISITION CORP.
and
VITALSTREAM
HOLDINGS, INC.
October
12, 2006
TABLE
OF CONTENTS
Page
ARTICLE
I
THE MERGER
|
1.1
|
The
Merger
|
|
1.2
|
Effective
Time; Closing
|
|
1.3
|
Effect
of the Merger
|
|
1.4
|
Articles
of Incorporation; Bylaws
|
|
1.5
|
Directors
and Officers
|
|
1.6
|
Effect
on Capital Stock
|
|
1.7
|
Surrender
of Certificates
|
|
1.8
|
No
Further Ownership Rights in Company Common Stock
|
|
1.9
|
Lost,
Stolen or Destroyed Certificates
|
|
1.10
|
Taking
of Necessary Action; Further Action
|
ARTICLE
II REPRESENTATIONS AND WARRANTIES OF COMPANY
|
2.1
|
Company
Organization and Qualification.
|
|
2.2
|
Company
Power and Authority; Enforceability of this Agreement.
|
|
2.3
|
Company
Capitalization.
|
|
2.4
|
Obligations
With Respect to Company Capital Stock.
|
|
2.5
|
Company
Subsidiaries and Investments.
|
|
2.6
|
Company
SEC Reports; Compliance with OTCBB and NGM; Company Financial
Statements.
|
|
2.7
|
Absence
of Certain Changes or Events
|
|
2.8
|
Company
Books and Records
|
|
2.9
|
Company
Taxes.
|
|
2.10
|
Title
and Operation of Company Properties.
|
|
2.11
|
Company
Intellectual Property.
|
|
2.12
|
Company
Employees; Location and Compensation
|
|
2.13
|
Company
Employee Benefit Plans.
|
|
2.14
|
Company
Labor.
|
|
2.15
|
Company
Litigation
|
|
2.16
|
Compliance
with Laws by Company.
|
|
2.17
|
Environmental
Matters of Company
|
|
2.18
|
Company
Contracts.
|
|
2.19
|
Company
Authority; Non-Contravention.
|
|
2.20
|
Company
Customer Contracts
|
|
2.21
|
Company
Brokers’ and Finders’ Fees
|
|
2.22
|
Opinion
of Company’s Financial Advisor
|
|
2.23
|
Company
Insurance
|
|
2.24
|
Company
Corporate Controls
|
|
2.25
|
Transactions
with Affiliates of Company.
|
|
2.26
|
Copies
of Documents
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
|
3.1
|
Organization
and Qualification of Parent and Merger Sub.
|
|
3.2
|
Power
and Authority of Parent and Merger Sub; Enforceability of this
Agreement.
|
|
3.3
|
Parent
Capitalization.
|
|
3.4
|
Obligations
With Respect to Parent Capital Stock.
|
|
3.5
|
Parent
SEC Reports; Compliance with AMEX and NGM; Parent Financial
Statements.
|
|
3.6
|
Absence
of Certain Changes or Events
|
|
3.7
|
Parent
Books and Records
|
|
3.8
|
Parent
Taxes.
|
|
3.9
|
Parent
Litigation
|
|
3.10
|
Environmental
Matters of Parent.
|
|
3.11
|
Parent
Authority; Non-Contravention.
|
|
3.12
|
Opinion
of Parent’s Financial Advisor
|
ARTICLE
IV CONDUCT PRIOR TO THE EFFECTIVE TIME
|
4.1
|
Conduct
of Business by Company
|
|
4.2
|
Conduct
of Business by Parent
|
ARTICLE
V
ADDITIONAL AGREEMENTS
|
5.1
|
Joint
Proxy Statement, Registration Statement and Filings
|
|
5.2
|
Meeting
of Company Stockholders; Conditions to Change of Recommendation;
Superior
Proposal; Notification.
|
|
5.3
|
No
Solicitation
|
|
5.4
|
Meeting
of Parent Stockholders.
|
|
5.5
|
Confidentiality;
Access to Information
|
|
5.6
|
Public
Disclosure
|
|
5.7
|
Reasonable
Efforts; Notification
|
|
5.8
|
Third
Party Consents
|
|
5.9
|
Indemnification
of Directors
|
|
5.10
|
Stockholder
Litigation
|
|
5.11
|
Section
16(b)
|
|
5.12
|
Tax-Free
Qualification.
|
|
5.13
|
Tax
Representation Letters
|
|
5.14
|
Section
280G Matters
|
|
5.15
|
Company
Affiliates
|
|
5.16
|
Voting
Agreements
|
|
5.17
|
Employment
Agreements
|
|
5.18
|
Noncompetition
Agreements
|
ARTICLE
VI CONDITIONS TO THE MERGER
|
6.1
|
Conditions
to Obligations of Each Party to Effect the Merger
|
|
6.2
|
Additional
Conditions to Obligations of Company
|
|
6.3
|
Additional
Conditions to the Obligations of Parent and Merger Sub
|
ARTICLE
VII TERMINATION, AMENDMENT AND WAIVER
|
7.1
|
Termination
|
|
7.2
|
Notice
of Termination Effect of Termination
|
|
7.3
|
Fees
and Expenses
|
|
7.4
|
Amendment
|
|
7.5
|
Extension;
Waiver
|
ARTICLE
VIII GENERAL PROVISIONS
|
8.1
|
Non-Survival
of Representations and Warranties
|
|
8.2
|
Notices
|
|
8.3
|
Interpretation;
Certain Defined Terms
|
|
8.4
|
Counterparts
|
|
8.5
|
Entire
Agreement; Third Party Beneficiaries
|
|
8.6
|
Severability
|
|
8.7
|
Other
Remedies; Specific Performance
|
|
8.8
|
Governing
Law
|
|
8.9
|
Rules
of Construction
|
|
8.10
|
Assignment
|
|
8.11
|
Attorney’s
Fees
|
|
8.12
|
Taxes
|
|
8.13
|
Waiver
Of Jury Trial
|
Index
of
Exhibits
Exhibit
A Affiliate
Agreement
This
Agreement and Plan of Merger (this “Agreement”)
is
made and entered into as of October 12, 2006, among Internap Network Services
Corporation, a Delaware corporation (“Parent”),
Ivy
Acquisition Corp., a Nevada corporation and a wholly owned subsidiary of
Parent
(“Merger
Sub”),
and
VitalStream Holdings, Inc., a Nevada corporation (“Company”).
Recitals
The
respective Boards of Directors of Parent, Merger Sub and Company have approved
this Agreement, and declared advisable the merger of Merger Sub with and
into
Company (the “Merger”)
upon
the terms and subject to the conditions of this Agreement and in accordance
with
the Nevada Revised Statutes Chapter 78 and Chapter 92A (collectively,
“Nevada
Corporate Law”).
In
consideration of the foregoing and the representations, warranties, covenants
and agreements set forth in this Agreement, the parties agree as
follows:
ARTICLE
I
THE
MERGER
1.1 The
Merger
.
Upon the terms and subject to the conditions of this Agreement and the
applicable provisions of Nevada Corporate Law, at the Effective Time, 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
of the Merger (the “Surviving
Corporation”).
1.2 Effective
Time; Closing
.
Subject to the provisions of this Agreement, the parties hereto shall cause
the
Merger to be consummated by filing articles of merger, in such appropriate
form
as determined by the parties, with the Secretary of State of the State
of Nevada
in accordance with the relevant provisions of Nevada Corporate Law (the
“Articles
of Merger”)
(the
time of such filing (or such later time as may be agreed in writing by
Company
and Parent and specified in the Articles of Merger) being the “Effective
Time”)
as
soon as practicable following satisfaction or waiver of the conditions
set forth
in Article VI. The closing of the Merger (the “Closing”)
shall
take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, located at ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, at a time and
date to
be specified by the parties, which shall be no later than the second business
day after the satisfaction or waiver of the conditions set forth in Article
VI,
or at such other time, date and location as the parties hereto agree in
writing
(the “Closing
Date”).
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 Nevada Corporate Law. Without
limiting the generality of the foregoing, 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 Articles
of Incorporation; Bylaws
.
(a) At
the
Effective Time, the Articles of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time shall become the Articles of
Incorporation of the Surviving Corporation, except that the name of Company,
as
the Surviving Corporation, shall be “Vine, Inc.” and Article FIRST of the
Articles of Incorporation shall read in its entirety as follows: “The name of
the corporation is “VitalStream Holdings, Inc.”
(b) At
the
Effective Time, the Bylaws of Merger Sub as in effect immediately prior
to the
Effective Time shall become the Bylaws of the Surviving
Corporation.
1.5 Directors
and Officers
.
The initial directors of the Surviving Corporation shall be the directors
of
Merger Sub immediately prior to the Effective Time, until their respective
successors are duly elected or appointed and qualified. The initial officers
of
the Surviving Corporation shall be the officers of Merger Sub immediately
prior
to the Effective Time, until their respective successors are duly
appointed.
1.6 Effect
on Capital Stock
.
Subject to the terms and conditions of this Agreement, at the Effective
Time, by
virtue of the Merger and without any action on the part of Parent, Merger
Sub,
the Company or holders of any shares of capital stock of the Company, the
following shall occur:
(a) Company
Common Stock.
Each
share of common stock, par value $0.001 per share, of the Company (the
“Company
Common Stock”)
issued
and outstanding immediately prior to the Effective Time (the “Shares”),
other
than shares of Company Common Stock to be canceled pursuant to
Section 1.6(b), shall be automatically converted into and become
exchangeable for 0.5132 (the “Exchange
Ratio”)
shares
of common stock, par value $0.001 per share, of Parent (the “Parent
Common Stock”)
(the
shares of Parent Common Stock into which each share of Company Common Stock
is
to be converted, the “Merger
Consideration”)
upon
the surrender of the certificate representing such shares of Company Common
Stock in the manner provided in Section 1.7 (or in the case of a lost,
stolen or destroyed certificate, upon delivery of an affidavit (and bond,
if
required) in the manner provided in Section 1.9). As of the Effective Time,
all shares of Company Common Stock shall no longer be outstanding, shall
be
canceled and extinguished and shall cease to exist and (i) each certificate
(a
“Certificate”)
formerly representing any of such shares of Company Common Stock, other
than
shares of Company Common Stock to be canceled pursuant to Section 1.6(b),
and (ii) each uncertificated share of Company Common Stock registered to
a
holder on the stock transfer books of the Company, other than shares of
Company
Common Stock to be canceled pursuant to Section 1.6(b), shall thereafter
represent only the right to the Merger Consideration and the right, if
any, to
receive pursuant to Section 1.7(g) cash in lieu of fractional shares into
which
such shares of Company Common Stock have been converted pursuant to this
Section
1.6(a) and any distribution or dividend pursuant to Section 1.7(h), in
each case
without interest.
(b) Cancellation
of Company-Owned and Parent-Owned Stock.
Each
share of Company Common Stock held by Company, any Company Subsidiaries,
Merger
Sub, Parent or any Parent Subsidiaries immediately prior to the Effective
Time
shall be canceled and extinguished without any conversion thereof.
(c) Capital
Stock of Merger Sub.
Each
share of common stock, par value $0.001 per share, of Merger Sub (“Merger
Sub Common Stock”),
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of
common
stock, par value $0.001 per share, of the Surviving Corporation. Following
the
Effective Time, each certificate evidencing ownership of shares of common
stock
of Merger Sub shall evidence ownership of such shares of capital stock
of the
Surviving Corporation.
(d) Employee
Stock Options.
(i) At
the
Effective Time, each outstanding option to purchase Company Shares (a
“Company
Option”)
under
the Company Plans identified in Section 2.12 of the Company Disclosure
Letter as
being the only Company Plans pursuant to which shares of Company Common
Stock
may be issued or benefits measured by the value of shares of Company Common
Stock may be obtained (the “Company
Stock Plans”),
whether vested or unvested, shall be converted into an option to acquire
a
number of shares of Parent Common Stock equal to the product (rounded up
to the
nearest whole number) of (x) the number of shares of Company Common Stock
subject to the Company Option immediately prior to the Effective Time and
(y)
the Exchange Ratio, at an exercise price per share (rounded down to the
nearest
whole cent) equal to (A) the exercise price per share of such Company Option
immediately prior to the Effective Time divided by (B) the Exchange Ratio;
provided, however, that the exercise price and the number of shares of
Parent
Common Stock purchasable pursuant to the Company Options shall be determined
in
a manner consistent with the requirements that must be met for Company
Options
to avoid classification as "deferred compensation" subject to Section 409A
of
the Internal Revenue Code of 1986, as amended (the “Code”);
provided, further, that in the case of any Company Option to which Section
422
of the Code applies, the exercise price and the number of shares of Parent
Common Stock purchasable pursuant to such option shall be determined in
accordance with the foregoing, subject to such adjustments as are necessary
in
order to satisfy the requirements of Section 424(a) of the Code. Except
as
specifically provided above, following the Effective Time, each Company
Option
shall continue to be governed by the same terms and conditions as were
applicable under such Company Option immediately prior to the Effective
Time. At
or prior to the Effective Time, Company shall take all such action necessary
to
adopt appropriate amendments to the Company Stock Plans, including using
its
reasonable best efforts in accordance with Section 5.2 to cause its stockholders
to approve such amendments, to the extent necessary to effectuate the provisions
of this Section 1.6(d), and the Board of Directors of the Company shall
adopt
such other appropriate resolutions as may be necessary to effectuate the
provisions of this Section 1.6(d). At or prior to the Effective Time, Parent
shall take all actions as are necessary for the assumption of the Company
Stock
Plans pursuant to this Section 1.6(d), including the issuance (subject
to
Section 1.6(d)(ii)) and listing of Parent Common Stock as necessary to
effect
the transactions contemplated by this Section 1.6(d).
(ii) Parent
shall file with the Securities and Exchange Commission (the “SEC”),
within 5 business days following the Effective Time, a registration statement
on
Form S-8 (or any successor form), registering under the Securities Act
of 1933,
as amended (the “Securities
Act”),
options to purchase shares of, and shares of, Parent Common Stock issued
under
the Company Stock Plan, and shall use its commercially reasonable efforts
to
maintain the effectiveness of such registration statement (and to maintain
the
current status of the prospectus or prospectuses contained therein and
comply
with any applicable state securities or “blue sky” laws) for so long as awards
granted under the Company Stock Plans remain outstanding. As soon as reasonably
practicable after the registration of such interests or shares, as applicable,
Parent shall deliver to the holders of Company Options by any permissible
method
appropriate notices setting forth such holders’ rights pursuant to the
respective Company Stock Plans and agreements evidencing the grants of
such
Company Options, and stating that such Company Options and agreements have
been
assumed by Parent in accordance with the applicable terms.
(iii) Without
limiting the applicability of Sections 1.6(d)(i) and (ii), the Company
shall
take all necessary action to ensure that the Surviving Corporation will
not be
bound at the Effective Time by any options, or other rights, awards or
arrangements under the Company Stock Plans that would entitle any Person
after
the Effective Time to acquire any shares of Company Common Stock or to
receive
any payments in respect thereof with respect to exercises or conversions
occurring following the Effective Time. At or prior to the Effective Time,
Company shall take all such action necessary to adopt appropriate amendments
to
the Company Stock Plans, including using its reasonable best efforts in
accordance with Section 5.2 to cause its stockholders to approve such
amendments, to the extent necessary to effectuate the provisions of this
Section
1.6(d)(iii), and the Board of Directors of the Company shall adopt such
other
appropriate resolutions as may be necessary to effectuate the provisions
of this
Section 1.6(d)(iii).
(e) Warrants.
At the
Effective Time, each outstanding and unexercised warrant to purchase shares
of
Company Common Stock (each, a “Company
Warrant”),
whether or not exercisable or vested as of such date, shall be
canceled.
1.7 Surrender
of Certificates
.
(a) Paying
Agent.
At or
before the Effective Time, Parent shall select, and enter into an agreement
with, an institution reasonably acceptable to Company to act as the paying
agent
(the “Paying
Agent”)
in the
Merger. Parent shall make available to the Paying Agent for payment in
accordance with this Article I, and at or promptly after (but no more than
three
business days) the Effective Time, Parent shall deposit or cause to be
deposited
with the Paying Agent (i) certificates representing the shares of Parent
Common
Stock to be exchanged for shares of Company Common Stock, other than shares
of
Company Common Stock to be canceled pursuant to Section 1.6(b), in respect
of the aggregate Merger Consideration to be issued in the Merger and (ii)
any
cash payable pursuant to Section 1.7(g) in lieu of fractional shares and
dividends or other distributions payable pursuant to Section 1.7(h). Such
certificates for shares of Parent Common Stock, together with the amount
of any
cash payable pursuant to Section 1.7(g) in lieu of fractional shares and
dividends or other distributions payable pursuant to Section 1.7(h) shall
hereinafter be referred to as the “Merger
Fund.”
With
respect to the amount of cash to be deposited to satisfy its obligation
under
Section 1.7(g), Parent shall only be required to make a reasonable estimate
of
the amount of such cash that will be necessary; provided, however, that
Parent
shall use reasonable efforts to cause the Paying Agent to agree to notify
Parent
at any point when the amount of cash so paid to the Paying Agent to satisfy
Parent's obligations pursuant to Section 1.7(g) reasonably appears to be
inadequate, and Parent shall, upon receipt of such notice, timely deliver
to the
Paying Agent such additional cash amounts as it may deem reasonably necessary
for such purpose.
(b) Exchange
Procedures.
Promptly after the Effective Time, Parent shall cause the Paying Agent
to mail
to each holder of record (as of the Effective Time) of a Certificate that
immediately prior to the Effective Time represented outstanding shares
of
Company Common Stock whose shares were converted into the right to receive
the
Merger Consideration pursuant to Section 1.6(a), (i) a letter of
transmittal in customary form (which shall specify that delivery shall
be
effected, and risk of loss and title to the Certificates shall pass, only
upon
delivery of the Certificates to the Paying Agent and shall be in such form
and
have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for receipt of the Merger Consideration. Upon surrender of Certificates
for cancellation to the Paying Agent or to such other agent or agents as
may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto and such
other
documents as may reasonably be required by the Paying Agent, the holder
of such
Certificates shall be entitled to receive in exchange therefor the Merger
Consideration to which such holder is entitled pursuant to Section 1.6(a),
and the Certificates so surrendered shall forthwith be canceled. Until
so
surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, to evidence the ownership of
the
right to receive the Merger Consideration attributable thereto.
(c) Transfer
of Ownership.
If any
portion of the Merger Consideration is to be paid to a Person other than
the
Person in whose name the surrendered Certificates are registered, it will
be a
condition of payment thereof that the Certificates so surrendered will
be
properly endorsed and otherwise in proper form for transfer and that the
Persons
requesting such payment will have paid to Parent or any agent designated
by it
any transfer or other Taxes (as defined in Section 2.7) required by reason
of the payment of the Merger Consideration in any name other than that
of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Parent or Paying Agent that such Tax has been paid or is
not
payable.
(d) Required
Withholding.
Each of
the Paying Agent and the Surviving Corporation shall be entitled to deduct
and
withhold from any consideration payable or otherwise deliverable pursuant
to
this Agreement to any holder or former holder of Company Common Stock such
amounts as may be required to be deducted or withheld therefrom under the
Code
or under any provision of state, local or foreign tax law or under any
other
applicable Legal Requirement (as defined in Section 2.2(c)). To the extent
such amounts are so deducted or withheld, such amounts shall be treated
for the
purpose of Parent satisfying its obligation to deliver the Merger Consideration
under this Agreement as having been paid to the Person to whom such amounts
would otherwise have been paid.
(e) No
Liability.
Notwithstanding anything to the contrary in this Section 1.7, neither the
Paying Agent, Parent, the Surviving Corporation nor any party hereto shall
be
liable to a holder of shares of Company Common Stock for any amount properly
paid to a public official pursuant to any applicable abandoned property,
escheat
or similar law.
(f) Termination
of Merger Fund.
Any
portion of the Merger Fund (including the proceeds of any investments thereof
and any shares of Parent Common Stock) that remains undistributed to the
holders
of Certificates 180 days after the Effective Time shall, at the request
of the
instruction of Parent, be delivered to Parent. Any holders of the Certificates
who have not surrendered such Certificates in compliance with this
Section 1.7 shall after such delivery to Parent look only to Parent for
delivery of any shares of Parent Common Stock and payment of any cash,
dividends
and other distributions in respect thereof payable or deliverable pursuant
to
Sections 1.6(a), 1.7(g) or 1.7(h), in each case without any interest
thereon. Any such portion of the Merger Fund remaining unclaimed by holders
of
shares of Company Common Stock immediately prior to such time as such amounts
would otherwise escheat to or become property of any Governmental Entity
(as
defined in Section 2.4) shall, to the extent permitted by applicable Legal
Requirements, become the property of Parent free and clear of any claims
or
interest of any Person previously entitled thereto.
(g) Fractional
Shares.
Any
other provision of this Agreement to the contrary notwithstanding, no fractional
shares of Parent Common Stock shall be issued. Any holder of shares of
Company
Common Stock entitled to receive a fractional share of Parent Common Stock
but
for this Section 1.7(g) shall be entitled to receive an amount in cash
(without
interest) determined by multiplying such fraction (rounded to the nearest
one-hundredth of a share) by the average of the closing price of a share
of
Parent Common Stock, as reported in the Wall Street Journal, New York City
edition, for the five trading days ending on the trading day immediately
prior
to the Effective Time.
(h) Distributions
with Respect to Unexchanged Shares; Voting.
(i) Whenever
a dividend or other distribution is declared by Parent in respect of Parent
Common Stock, the record date for which is at or after the Effective Time,
that
declaration shall include dividends or other distributions in respect of
all
shares of Parent Common Stock issuable pursuant to this Agreement. No dividends
or other distributions in respect of such Parent Common Stock shall be
paid to
any holder of any unsurrendered Certificate until such Certificate is
surrendered for exchange in accordance with this Article I (or in compliance
with the provisions of Section 1.9 of this Agreement, as applicable). Subject
to
the effect of applicable Legal Requirements, following surrender of any
such
Certificate, there shall be issued and/or paid to the holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (A) at the time of such surrender, the dividends or other
distributions with a record date at or after the Effective Time and a payment
date on or prior to the date of issuance of such whole shares of Parent
Common
Stock and not previously paid with respect to such shares and (B) at the
appropriate payment date, the dividends or other distributions payable
with
respect to such whole shares of Parent Common Stock with a record date
at or
after the Effective Time but with a payment date subsequent to
surrender.
(ii) After
the
Effective Time, registered holders of unsurrendered Certificates shall
be
entitled to receive notice of, and vote at, any meeting of Parent’s stockholders
with a record date at or after the Effective Time at any meeting of Parent’s
stockholders with a record date at or after the Effective Time the number
of
whole shares of Parent Common Stock represented by such Certificates, as
the
case may be, regardless of whether such holders have surrendered their
Certificates or delivered duly executed transmittal materials.
1.8 No
Further Ownership Rights in Company Common Stock
.
All Merger Consideration paid upon the surrender for payment of shares
of
Company Common Stock in accordance with the terms hereof shall be deemed
to have
been issued in full satisfaction of all rights pertaining to such shares
of
Company Common Stock, and there shall be no further registration of transfers
on
the records of the Surviving Corporation of shares of Company Common Stock.
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 Article I.
1.9 Lost,
Stolen or Destroyed Certificates
.
If any Certificate shall have been lost, stolen or destroyed, upon the
making of
an affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Paying Agent, the posting by such
Person
of a bond, in such reasonable amount as the Surviving Corporation may direct,
as
indemnity against any claim that may be made against it with respect to
such
Certificate, the Paying Agent shall pay, in exchange for such lost, stolen
or
destroyed Certificate, the Merger Consideration (including payment for
fractional shares set forth in Section 1.7(g) hereof) to be paid in respect
of
the Shares represented by such Certificate, as contemplated by this
Article I.
1.10 Taking
of Necessary Action; Further Action
.
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 will take all such lawful
and
necessary action. Parent shall cause Merger Sub to perform all of its
obligations relating to this Agreement and the transactions contemplated
hereby.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Company
hereby represents and warrants to Parent and Merger Sub that, subject to
the
exceptions specifically disclosed in the disclosure letter (referencing
the
appropriate section and paragraph numbers) delivered by Company to Parent
dated
as of the date hereof (the “Company
Disclosure Letter”),
which
exceptions shall be deemed to be representations and warranties as if made
hereunder, the following statements are true and correct as of the date
hereof,
except where another date is specified, and will be true and correct as
of the
Closing Date, except where another date (including "as of the date hereof"
is
specified in the representation or warranty (for the avoidance of doubt,
if any
section in the Company Disclosure Letter discloses an item or information
in
such a way as to make its relevance to the disclosure required by another
section of the Company Disclosure Letter readily apparent based on the
substance
of such disclosure, such matter shall be deemed to have been disclosed
in such
other section of the Company Disclosure Letter, notwithstanding the
omission):
2.1 Company
Organization and Qualification.
(a) Company
is a corporation duly organized, validly existing and in good standing
under the
laws of the State of Nevada and has all requisite corporate power and authority
to own and operate its properties and to conduct its business as it is
currently
being conducted. Company is duly qualified or licensed to do business and
is in
good standing, or local law equivalent, in each jurisdiction in which the
nature
of its business or the ownership or leasing of its properties or operations
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so qualified or licensed or to be in good standing,
or
local law equivalent, would not, individually or in the aggregate, have
a
Material Adverse Effect on Company.
(b) Company
has delivered or made available to Parent true, correct and complete copies
of:
(i) the Articles of Incorporation and Bylaws of Company, in each case as
amended
to date (collectively, the “Company
Charter Documents”),
(ii)
its committee charters, codes of conduct or other comparable governing
documents, in each case as amended to date, (iii) all existing written
consents
and minutes of the meetings of Company’s Board of Directors and each committee
of its Board of Directors, and (iv) all the existing written consents and
minutes of the meetings of the Company Stockholders. Each such instrument
is in
full force and effect. Company is not in violation of any of the provisions
of
the Company Charter Documents.
2.2 Company
Power and Authority; Enforceability of this Agreement.
(a) Company
has all requisite corporate power and authority to execute and deliver
this
Agreement, and subject to obtaining the Company Stockholder Approval, to
perform
its obligations hereunder and to consummate the Merger and the other
transactions contemplated hereby. The Board of Directors of Company, at
a
meeting duly called and held at which all directors of Company were present
in
accordance with the Bylaws of Company, duly adopted resolutions (the
“Company
Board Approval”)
(i)
approving and declaring advisable this Agreement, the Merger and the other
transactions contemplated hereby, (ii) declaring that it is advisable and
making
a determination that it is in the best interest of Company and the Company
Stockholders that Company enter into this Agreement and consummate the
Merger on
the terms and subject to the conditions set forth in this Agreement, (iii)
making a determination that this Agreement is fair to Company and the Company
Stockholders, (iv) directing that this Agreement be submitted to a vote
for
adoption at a meeting of the Company Stockholders to be held as promptly
as
practicable as set forth in Section 5.2 hereof and (v) recommending that
the
Company Stockholders adopt and approve this Agreement, the Merger and the
other
transactions contemplated hereby, which resolutions have not been subsequently
rescinded, modified or withdrawn in any way except as permitted by Section
5.2
hereof. The execution, delivery and performance of this Agreement by Company
and
the consummation by Company of the transactions contemplated hereby have
been
duly and validly authorized by all necessary corporate action on the part
of
Company, subject to obtaining the Company Stockholder Approval (as defined
below). The affirmative vote of the holders of a majority of the issued
and
outstanding shares of the Company Common Stock as of the record date established
for the Company Stockholders’ Meeting, voting as a single class, in favor of
adopting this Agreement and of approving the Merger and the other transactions
contemplated hereby (the “Company
Stockholder Approval”),
is
the only vote of the holders of any class or series of Company’s capital stock
necessary to approve and adopt this Agreement, the Merger and the other
transactions contemplated hereby.
(b) The
Board
of Directors of Company has taken all action necessary to ensure that any
restrictions on business combinations applicable to Company shall not apply
to
the transactions contemplated by this Agreement. No state or foreign takeover
or
similar statute or regulation is applicable to this Agreement or the
transactions contemplated hereby.
(c) This
Agreement has been duly and validly executed and delivered by Company and,
assuming the due authorization, execution and delivery by Parent and Merger
Sub,
constitutes the valid and binding obligation of Company, enforceable against
Company in accordance with its terms, except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium
or
other similar laws, now or hereafter in effect, affecting creditors’ rights
generally, and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and
to the
discretion of the court before which any proceeding therefore may be brought.
2.3 Company
Capitalization.
(a) The
authorized capital stock of Company consists solely of 290,000,000 shares
of the
Company Common Stock and 10,000,000 shares of the Company Preferred Stock,
of
which 200,000 shares are designated as 1995 Series Preferred Stock, par
value
$0.001 per share (the “Company
1995 Series Preferred Stock”),
3,500
shares are designated as 1998 Series A Preferred Stock, par value $0.001
per
share (the “Company
1998 Series A Preferred Stock”),
1,000
shares are designated as 2003 Series A Preferred Stock, par value $0.001
per
share (the “Company
2003 Series A Preferred Stock”),
and
1,100 shares are designated as 2003 Series B Preferred Stock, par value
$0.001
per share (the “Company
2003 Series B Preferred Stock”
and
together with the Company 1995 Series Preferred Stock, the Company 1998
Series A
Preferred Stock, the Company 2003 Series A Preferred Stock and the Company
2003
Series B Preferred Stock, the “Company
Preferred Stock”),
and
(i) 23,224,272 shares of the Company Common Stock are issued and outstanding
as
of October 10, 2006, (ii) no shares of Company 1995 Series Preferred Stock
are
issued and outstanding, (iii) no shares of Company 1998 Series A Preferred
Stock
are issued and outstanding, (iv) no shares of Company 2003 Series A Preferred
Stock are issued and outstanding, (v) no shares of Company 2003 Series
B
Preferred Stock are issued and outstanding, and (vi) no shares of Company’s
capital stock are being held in Company’s treasury. Part 2.3(a) of the Company
Disclosure Letter sets forth a true, correct and complete list of the number
of
shares of the Company Common Stock held by each registered holder thereof
as of
October 10, 2006, and since such date Company has not issued any securities
(including derivative securities) except for any shares of the Company
Common
Stock issued upon exercise of Company Options outstanding under the Company
Stock Plans prior to such date. All outstanding shares of the Company Common
Stock and the Company Preferred Stock were duly authorized and validly
issued,
and are fully paid and nonassessable and not subject to or issued in violation
of any purchase option, call option, right of first refusal, pre-emptive
right,
subscription right or any similar right under the provisions of Nevada
Corporate
Law, the Company Charter Documents or any Contract to which Company is
a party
or by which it is bound. There are no accrued and unpaid dividends with
respect
to any outstanding shares of capital stock of Company or any Company Subsidiary.
(b) Company
has reserved 5,375,000 shares of the Company Common Stock for issuance
to
permitted grantees pursuant to the Company Stock Plans, of which (i) 1,325,114.5
shares of the Company Common Stock have been issued pursuant to option
exercises
as of the date hereof, (ii) 3,918,300.05 shares are subject to outstanding,
unexercised options, with a weighted-average exercise price of $5.23 as
of the
date hereof, and (iii) 131,585 shares remain available for issuance thereunder
as of the date hereof. Part 2.3(b) of the Company Disclosure Letter sets
forth
the following information with respect to each Company Option outstanding
as of
the date of this Agreement: (i) the name of the optionee; (ii) the
number of shares of the Company Common Stock subject to such Company Option;
(iii) the exercise price of such Company Option; (iv) the date on
which such Company Option was granted; (v) the vesting schedule of such
Company Option, and the extent to which such Company Option is vested as
of the
date of this Agreement; (vi) the date on which such Company Option expires;
and (vii) whether the exercisability or vesting of such Company Option will
be accelerated in any way by the transactions contemplated by this Agreement,
and the extent of any such acceleration. Company has made available to
Parent an
accurate and complete copy of the Company Stock Plans and the forms of
all stock
option agreements evidencing Company Options. There are no options outstanding
to purchase shares of the Company Common Stock other than pursuant to the
Company Stock Plans. All shares of the Company Common Stock subject to
issuance
as aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Other than as set forth on
Part
2.3(b) of the Company Disclosure Letter, there are no Contracts of any
character
to which Company is bound obligating Company to accelerate the vesting
of any
Company Option as a result of the transactions contemplated by this Agreement.
Other than as set forth on Part 2.3(b) of the Company Disclosure Letter,
there
are no outstanding or authorized stock appreciation, stock purchase, profit
participation, “phantom stock,” or other similar plans or Contracts with respect
to Company or any Company Subsidiary.
(c) All
outstanding shares of the Company Common Stock and the Company Preferred
Stock,
all outstanding Company Options, and all outstanding shares of capital
stock of
each Company Subsidiary have been issued and granted in compliance with
(i) all applicable federal, state and foreign securities laws and other
applicable Legal Requirements and (ii) all requirements set forth in
applicable agreements or instruments. For the purposes of this Agreement,
“Legal
Requirements”
means
any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, judgment, injunction, order, rule, regulation, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise put into
effect
by or under the authority of any Governmental Entity or the NGM.
2.4 Obligations
With Respect to Company Capital Stock.
(a) Except
as
described in Section 2.3 or set forth on Parts 2.3, 2.4(a) and 2.5 of the
Company Disclosure Letter, no capital stock of Company or any Company Subsidiary
or any security convertible or exchangeable into or exercisable for such
capital
stock, is issued, reserved for issuance or outstanding as of the date hereof.
Except as set forth on Part 2.3 or Part 2.4(a) of the Company
Disclosure Letter, there are no subscriptions, options, warrants, calls,
rights
(including preemptive rights), commitments or agreements of any kind to
which
Company or any Company Subsidiary is bound obligating Company or any Company
Subsidiary to issue, deliver or sell, or cause to be issued, delivered
or sold,
additional shares of capital stock of Company or any Company Subsidiary
or
obligating Company or any Company Subsidiary to grant, extend or accelerate
the
vesting of or otherwise amend or enter into any such subscriptions, options,
warrants, calls, rights (including preemptive rights), commitments or
agreements. There are no rights or obligations, contingent or otherwise
(including rights of first refusal in favor of Company), of Company or
any
Company Subsidiary, to repurchase, redeem or otherwise acquire any shares
of
capital stock of Company or any Company Subsidiary or any securities convertible
or exchangeable into or exercisable for such capital stock or to provide
funds
to or make any investment (in the form of a loan, capital contribution
or
otherwise) in any Company Subsidiary or any other Person. Neither Company
nor
any Company Subsidiary has any authorized, issued, or outstanding bonds,
debentures, notes or other indebtedness having the right to vote on any
matters
on which the Company Stockholders have the right to vote.
(b) Except
as
set forth on Part 2.4(b) of the Company Disclosure Letter, Company is not
a
party to or bound by any agreement with respect to the voting (including
voting
trusts, proxies, "poison pill" anti-takeover plans) registration under
the
Securities Act, or sale or transfer (including agreements related to pre-emptive
rights, rights of first refusal, co-sale rights or "drag-along" rights
but
excluding restrictions required by the Securities Act in connection with
private
placements of securities) of any securities of Company or any Company
Subsidiary. To the knowledge of Company, there are no agreements among
other
parties, to which Company is not a party and by which it is not bound,
with
respect to voting (including voting trusts and proxies) or sale or transfer
(including agreements relating to rights of first refusal, co-sale rights
or
"drag along" rights but excluding restrictions required by the Securities
Act in
connection with private placements of securities) of any securities of
Company
or any Company Subsidiary.
(c) The
Company Common Stock constitutes the only class of securities of Company
or
Company Subsidiaries registered or required to be registered under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”).
2.5 Company
Subsidiaries and Investments.
(a) Part
2.5
of the Company Disclosure Letter sets forth the name, jurisdiction of
organization and number of outstanding shares of each Company Subsidiary,
and
lists of all of the stockholders of each Company Subsidiary (indicating
the
number of shares owned by each such stockholder). Company or one of Company
Subsidiaries owns of record and beneficially holds valid title to all of
the
issued and outstanding shares of capital stock of each Company Subsidiary
as set
forth on Part 2.5 of the Company Disclosure Letter, and all such shares
(other
than directors’ qualifying shares in the case of foreign Subsidiaries, all of
which are set forth on Part 2.5 of the Company Disclosure Letter) are free
and
clear of Encumbrances. All of the outstanding shares of capital stock of
each
Company Subsidiary were duly authorized, validly issued, and are fully
paid and
nonassessable and there are no outstanding options, rights or agreements
of any
kind relating to the issuance, sale or transfer of any capital stock or
other
equity securities (or securities convertible into or exchangeable for securities
having such rights) of any Company Subsidiary to any Person except
Company.
(b) Each
Company Subsidiary is a corporation or limited liability entity and is
duly
incorporated or formed and organized, validly existing and in good standing
under the laws of its jurisdiction of organization, with the requisite
power and
authority to own its properties and to carry on its business as it is now
being
conducted. Each Company Subsidiary is duly qualified or licensed to do
business
and is in good standing, or local law equivalent, in each jurisdiction
in which
the nature of its business or the ownership or leasing of its properties
or
operations makes such qualification or licensing necessary, other than
in such
jurisdictions where the failure to be so qualified or licensed or to be
in good
standing, or local law equivalent, would not reasonably be expected to
have a
Material Adverse Effect on Company. Except as set forth on Part 2.5 of
the
Company Disclosure Letter, neither Company nor any Company Subsidiary has
a
place of business or permanent establishment outside of the United States.
Company has delivered, or made available to Parent true, correct and complete
copies of the following documents: (i) the Articles of Incorporation and
Bylaws (or similar organizational documents), in each case as amended,
of each
Company Subsidiary, (ii) all the existing written consents and minutes of
the meetings of the Boards of Directors of each Company Subsidiary and
each
committee of such Boards of Directors, and (iii) all the existing written
consents and minutes of the meetings of the stockholders of each Company
Subsidiary.
(c) Except
as
set forth on Part 2.5 of the Company Disclosure Letter, neither Company
nor any
Company Subsidiary owns any capital stock, any equity or partnership interest,
any joint venture or profit sharing interest or any other ownership or
proprietary interest in any Person.
2.6 Company
SEC Reports;
Compliance with OTCBB and NGM; Company Financial Statements.
(a) Company
has filed on a timely basis all reports, schedules, forms, statements and
other
documents required to be filed by Company with the SEC since April 23,
2002 (the
"Company
Commencement Date"),
including all exhibits thereto and all certifications and statements required
by
(x) Rule 13a-14 or 15d-14 under the Exchange Act, or (y) 18 U.S.C.
Section 1350 (Section 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002)
(collectively, the “Certifications”),
as
such documents since the time of filing may have been amended or supplemented
with the SEC (the “Company
SEC Reports”).
Since
the Company Commencement Date, there have been no comment letters or other
correspondence received by Company from the SEC (excluding letters related
to
confidential treatment applications and orders of effectiveness) or responses
to
such comment letters or other correspondence by or on behalf of Company
that
have not been provided to Parent, and the copies of such letters and responses
delivered or made available to Parent were true, correct and complete.
Company
maintains disclosure controls and procedures required by Rule 13a-15 or
15d-15 under the Exchange Act, and such controls and procedures are designed
to
ensure that material information relating to Company, including Company
Subsidiaries, required to be disclosed in the reports it files or submits
under
the Exchange Act is accumulated and communicated to Company’s principal
executive officer and principal financial officer to allow timely decisions
regarding financial disclosure. No Company Subsidiary is required to file
with
the SEC any report, schedule, form, statement or other document. As of
their
respective dates and except as subsequently corrected by amendment, the
Company
SEC Reports and all other filings that have been made by Company with the
SEC
complied in all material respects with the requirements of the Securities
Act or
the Exchange Act, as the case may be, and the rules and regulations of
the SEC
promulgated thereunder applicable to such Company SEC Reports, and Company
has
filed all exhibits required to be filed with the Company SEC Reports and
all
other filings that have been made by Company with the SEC, and all such
exhibits
were true, correct and complete in all material respects (except to the
extent
omissions were in reliance upon a confidential treatment request). The
Company
SEC Reports and all other filings that have been made by Company with the
SEC
(a) were and, in the case of Company SEC Reports and all other filings with
the SEC filed by Company after the date hereof, will be prepared in all
material
respects in accordance with the applicable requirements of the Securities
Act
and the Exchange Act, as the case may be, and (b) did not at the time they
were filed (or if amended or superseded by a filing prior to the date hereof,
then on the date of such filing), and in the case of such forms, reports
and
documents filed by Company with the SEC after the date hereof, will not
as of
the time they are filed, contain any untrue statement of a material fact
or omit
to state a material fact required to be stated in or necessary in order
to make
the statements in such documents, in light of the circumstances under which
they
were and will be made, not misleading; provided, however, that all of the
Certifications are each true and correct based upon the knowledge of the
officer(s) making such Certifications, as made. Company has filed all amendments
to the Company SEC Reports and all other filings that have been made by
Company
with the SEC as were required to be filed under applicable law. Company
was in
compliance with the requirements applicable to securities that are traded
on the
OTC Bulletin Board (the “OTCBB”)
when
its securities were traded on the OTCBB and is in compliance with the
requirements applicable to securities that are traded on the NGM and has
not,
since the Company Commencement Date, received any notice from the OTCBB
or the
NGM, asserting any non-compliance with such requirements. As used in
Sections 2.6 and 3.6 hereof, the term “file”
shall
be broadly construed to include any manner in which a document or information
is
furnished, supplied or otherwise made available in writing to the
SEC.
(b) Each
of
the consolidated financial statements (including, in each case, any related
notes thereto) contained in the Company SEC Reports, including each Company
SEC
Report filed after the date hereof until the Closing (the “Company
Financials”),
(i) complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto then in effect at the same time as such filing, (ii) was prepared
in accordance with United States generally accepted accounting principles
(“GAAP”)
applied on a consistent basis throughout the periods involved (except as
may be
indicated therein or in the notes thereto or, in the case of unaudited
interim
financial statements, as may be permitted by the SEC on Form 10-Q, 8-K
or any
successor form under the Exchange Act) and (iii) fairly presented in all
material respects the consolidated financial position of Company and Company
Subsidiaries that are required by GAAP to be consolidated therein and fairly
reflects its investment in any unconsolidated Subsidiary as of the respective
dates thereof and the consolidated results of their operations and cash
flows
for the periods indicated, except that the unaudited interim financial
statements may not contain footnotes and were or are subject to normal
and
recurring year-end adjustments. All Subsidiaries of Company that are required
by
GAAP to be consolidated in the Company Financials have been so consolidated.
The
balance sheet of Company contained in Company SEC Reports as of June 30,
2006 is
hereinafter referred to as the “Company
Balance Sheet.”
The
reserves reflected in the Company Financials have been calculated in accordance
with GAAP. Except as disclosed in the Company Balance Sheet, neither Company
nor
any Company Subsidiary has any liabilities required under GAAP to be set
forth
on a balance sheet (absolute, accrued, contingent or otherwise) which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Company and Company Subsidiaries taken
as a
whole, except for liabilities incurred since the date of the Company Balance
Sheet in the ordinary course of business consistent with past practices
and
liabilities incurred in connection with this Agreement. Neither Company
nor any
Company Subsidiary nor, to Company’s knowledge, any director, officer, employee,
auditor, accountant or representative of Company or Company Subsidiaries
has
received or otherwise had or obtained knowledge of any written complaint,
allegation, assertion or claim regarding the accounting or auditing practices,
procedures, methodologies or methods of Company or Company Subsidiaries
or their
respective internal accounting controls, including any complaint, allegation,
assertion or claim that Company or Company Subsidiaries has engaged in
questionable accounting or auditing practices; provided that if such event
arises after the date of this Agreement, Company shall provide Parent with
prompt written notice of such event. Part 2.6(b) of the Company Disclosure
Letter contains a description of all non-audit services performed by Company’s
auditors for Company and Company Subsidiaries since January 1, 2006 and
the
fees paid for such services. All such non-audit services were approved
as
required by Section 202 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002. In the
reasonable opinion of Company’s audit committee, the fees paid to and the
services performed by Company’s auditors relating to such non-audit services as
set forth on Part 2.6(b) of the Company Disclosure Letter do not impair
such auditor’s independence. Company has delivered or made available to Parent
true, correct and complete copies of all policies, manuals and other documents
promulgating Company’s internal accounting controls. Since the Company
Commencement Date, no attorney representing Company or any Company Subsidiary,
whether or not employed by Company or Company Subsidiaries, has reported
evidence of a violation of securities laws, breach of fiduciary duty or
similar
violation by Company or any of its officers, directors, employees or agents
to
Company’s Board of Directors or any committee thereof or to any director or
officer of Company; provided that if such event arises after the date of
this
Agreement, Company shall provide Parent with prompt written notice of such
event.
(c) Neither
Company nor any Company Subsidiary is a party to, or has any commitment
to
become a party to, any joint venture, partnership agreement or any similar
Contract (including any Contract relating to any transaction, arrangement
or
relationship between or among Company or any Company Subsidiary, on the
one
hand, and any unconsolidated affiliate, including any structured finance,
special purpose or limited purpose Person, on the other hand) where the
purpose
or intended effect of such arrangement is to avoid disclosure of any material
transaction involving Company or any Company Subsidiary in the Company
Financials.
2.7 Absence
of Certain Changes or Events
.
Except as contemplated by this Agreement, since the date of the Company
Balance
Sheet, Company and Company Subsidiaries have conducted their respective
businesses in all material respects in the ordinary course of business.
Since
the date of the Company Balance Sheet, there has not been:
(a) a
Material Adverse Effect on Company;
(b) (i) any
split, combination or reclassification of any capital stock, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the shares of
capital
stock, or any purchase, redemption or other acquisition of any of the shares
of
capital stock or any other securities or other partnership interests or
any
options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from employees or consultants following
their
termination pursuant to the terms of their pre-existing stock option or
purchase
agreements, or (iii) any amendment of any material term of any outstanding
security;
(c) any
(i) any disposing or impairment of or permitting to lapse of any Company IP
Rights that would be material and adverse to Company or outside the ordinary
course of business, (ii) disposing of or disclosing (except as necessary in
the conduct of its business) to any Person other than representatives of
Parent
any trade secret or other Intellectual Property Rights not theretofore
a matter
of public knowledge to any party that is not subject to a nondisclosure
or
similar agreement, or (iii) any material change to Company’s or any Company
Subsidiary’s rights to use Intellectual Property Rights licensed from a third
party, except, in the case of (i) through (iii) in the aggregate, as would
not be material to Company and Company Subsidiaries, taken as a
whole;
(d) any
sale,
transfer, or other disposition of any material properties or assets (whether
real, personal or mixed, tangible or intangible) except in the ordinary
course
of business consistent with past practices;
(e) (i) any
assumption, guarantee, endorsement or liability otherwise incurred (whether
directly, contingently or otherwise) for the obligations of any other Person
other than those of Company or Company Subsidiaries, or (ii) any making of
any loan, advance or capital contribution to or investment in any Person,
including any director, officer or other affiliate of Company, other than
advances to employees for travel and other reimbursable expenses in the
ordinary
course of business;
(f) (i) any
material Tax election or material change in any Tax election, any material
change in annual Tax accounting period or method of Tax accounting other
than as
required by applicable laws or regulations, any filing of any material
amended
Tax Returns, any entering into of a closing agreement, settlement of or
consent
to any Tax claim, any surrendering of any right to claim a material refund
of
Taxes, or any consent to any extension or waiver of the statutory period
of
limitation applicable to any material Tax claim, (ii) any material change
in any method of accounting, method of accounting principles or practice,
except
for any such change required by reason of a concurrent change in GAAP or
compliance with the applicable requirements of the rules and regulations
promulgated by the SEC, or (iii) any revaluation of any material assets,
including, without limitation, writing-off notes or accounts receivable
other
than in the ordinary course of business;
(g) any
loss
of, or receipt of written notice of any intention to cancel or otherwise
terminate, any identified Contract that would be reasonably likely, individually
or in the aggregate, to be material to Company other than in the ordinary
course
of business consistent with past practices and other than threatened
terminations of any identified Contract where Company has cured the underlying
cause of the threat and such Contract still remains in full force and
effect;
(h) as
of the
date hereof, (i) any increase or change in any compensation, benefits or
bonus paid or made payable to any of their executive officers or directors,
or
employees earning more than $100,000 in base salary annually, or any increase
in
severance or termination pay, or any material modification or amendment
of any
currently effective employment, severance, termination or indemnification
agreement or any agreement or policy the benefits of which are contingent,
or
the terms of which are materially altered, upon the occurrence of a transaction
involving Company of the nature contemplated hereby or (ii) any action
taken to accelerate, amend or change the period of vesting or exercisability
of
options or restricted stock, or reprice Company Options granted under the
Company Stock Plans or authorization of cash payments in exchange for any
Company Options granted under the Company Stock Plans; or
(i) any
agreement, whether in writing or otherwise, to take any action described
in this
Section 2.7.
2.8 Company
Books and Records
.
All accounts, books, ledgers and official and other records material to
Company’s business maintained by Company or Company Subsidiaries have been
properly and accurately kept in all material respects, and there are no
material
inaccuracies or discrepancies contained or reflected therein. Company or
Company
Subsidiaries have under their control or possession all material records,
systems, data or information used in Company’s business, and neither Company nor
any Company Subsidiary uses any third party provider for records storage,
except
duplicate backup storage tapes which are maintained at a secure location
and
readily accessible by Company and Company Subsidiaries.
2.9 Company
Taxes.
(a) Company
and each Company Subsidiary have timely filed, or caused to be filed, taking
into account any valid extensions of due dates, completely and accurately,
in
all material respects, all federal, state, local and foreign returns, estimates,
information statements and reports relating to Taxes (“Tax
Returns”)
required to be filed by or on behalf of Company and each Company Subsidiary
with
any Tax authority. Such Tax Returns are true, correct and complete in all
material respects. Company and each Company Subsidiary have paid all Taxes
required to be paid.
(b) Company
and Company Subsidiaries have collected all sales, use, goods and services
or
other commodity Taxes required to be collected and remitted or will remit
the
same to the appropriate Tax authority within the prescribed time periods.
Company and each Company Subsidiary have timely withheld or paid all federal
and
state income Taxes, Taxes pursuant to the Federal Insurance Contribution
Act
(“FICA”),
Taxes
pursuant to the Federal Unemployment Tax Act and other Taxes required to
be
withheld or paid by Company and each Company Subsidiary with respect to
any of
its employees, former employees, directors, officers, residents and
non-residents or third parties.
(c) Neither
Company nor any Company Subsidiary has been delinquent in the payment of
any Tax
nor is there any Tax deficiency outstanding, proposed or assessed against
Company or any Company Subsidiary, nor has Company or any Company Subsidiary
executed any unexpired waiver of any statute of limitations on or extending
the
period for the assessment or collection of any Tax.
(d) Since
January 1, 2002, none of the Tax Returns of Company or any Company Subsidiary
have ever been audited by the IRS or any other Governmental Entity. No
examination of any Tax Return of Company or any Company Subsidiary is currently
in progress, and neither Company nor any Company Subsidiary has received
written
notice of any (i) pending or proposed audit or examination, (ii) request
for information regarding Tax matters, or (iii) notice of deficiency or
prepared adjustment for any amount of Tax proposed, asserted, or assessed
by any
Tax authority against Company or any Company Subsidiary, and Company does
not
expect any authority to assess any additional Taxes for any period for
which Tax
Returns have been filed.
(e) Company
has no liability for unpaid Taxes which has not been accrued for or reserved
on
the Company Balance Sheet in accordance with GAAP, whether asserted or
unasserted, contingent or otherwise, which is material to Company, other
than
any liability for unpaid Taxes that may have accrued since the date of
the
Company Balance Sheet in connection with the operation of the business
of
Company and Company Subsidiaries in the ordinary course. The amount set
up as an
accrual for Taxes (aside from any reserve for deferred Taxes established
to
reflect timing differences between book and tax income) in the Company
Balance
Sheet is sufficient for the payment of all unpaid Taxes of Company and
any
Company Subsidiary, whether or not disputed, for all periods ended on or
prior
to the date hereof.
(f) Company
has delivered or made available to Parent or its legal counsel or accountants
true, correct and complete copies of all Tax Returns for Company and Company
Subsidiaries filed for all periods since December 31, 2002, and all such
filings
were true, correct and complete in all material respects when made.
(g) There
are
(and immediately following the Effective Time there will be) no Encumbrances
on
the assets of Company relating to or attributable to Taxes other than
Encumbrances for Taxes not yet due and payable. There is no basis for the
assertion of any claim relating or attributable to Taxes that, if adversely
determined, would result in any Encumbrance for Taxes on the assets of
Company.
(h) Neither
Company nor any Company Subsidiary has (a) been a member of an affiliated
group (within the meaning of Code §1504(a)) filing a consolidated federal income
Tax Return (other than a group the common parent of which was Company)
or any
combined, consolidated or unitary state or local or foreign income Tax
Return,
(b) been a party to any Tax sharing, indemnification or allocation
agreement, nor does Company owe any amount under any such agreement
(c) liability for the Taxes of any Person under Treas. Reg. § 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee
or
successor, by Contract, or otherwise or (d) been a party to any joint
venture, partnership or other agreement that could be treated as a partnership
for Tax purposes.
(i) Neither
Company nor any Company Subsidiary has constituted either a “distributing
corporation” or a “controlled corporation” in a distribution of stock intended
or purported to be governed by Section 355 or Section 361 of the
Code.
(j) Neither
Company nor any Company Subsidiary has engaged in a transaction that is
the same
as or substantially similar to one of the types of transactions that the
IRS has
determined to be a tax avoidance transaction and identified by notice,
regulation, or other form of published guidance as a listed transaction,
as set
forth in Treas. Reg. § 1.6011-4(b)(2).
(k) Neither
Company nor any Company Subsidiary is obligated to make any payments or
is a
party to any agreement that under certain circumstances could obligate
it to
make any payments that will not be deductible under Section 280G or Section
162(m) of the Code or under similar provisions of foreign, state, or local
law.
(l) Company
and each Company Subsidiary has complied in all material respects with
all
applicable laws relating to accounting and Tax matters, intercompany
transactions and transfer pricing, except where the failure to comply would
not
reasonably be expected to have a Material Adverse Effect on Company. Neither
Company nor any Company Subsidiary has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Neither
Company nor any Company Subsidiary will be required to include any item
of
income in, or exclude any item of deduction from, taxable income for any
taxable
period (or portion thereof) ending after the date hereof as a result of
any:
(i) change
in
method of accounting for a taxable period beginning or ending on or prior
to the
date hereof;
(ii) “closing
agreement” as described in Section 7121 of the Code (or any corresponding or
similar provision of state, local or foreign income Tax law) executed on
or
prior to the date hereof;
(iii) intercompany
transaction or excess loss account described in Treasury Regulations under
Section 1502 of the Code (or any corresponding or similar provision of
state,
local or foreign income Tax law);
(iv) installment
sale or open transaction disposition made on or prior to the date hereof;
or
(v) prepaid
amount received on or prior to the date hereof.
(m)
Except
as would not have a Material Adverse Effect on Company, Company and Company
Subsidiaries have complied with all registration, reporting, collection,
and
remittance requirements in respect of all federal and provincial sales
tax
legislation, including, but not limited to the Excise Tax Act and the Retail
Sales Act.
2.10 Title
and Operation of Company Properties.
(a) Company
and Company Subsidiaries have good and valid title to, or enforceable leasehold
interests in, or valid rights under Contract to use, all the properties
and
assets owned or used by it or them (real and personal, tangible and intangible),
in each case free and clear of all Encumbrances, except for Company Permitted
Encumbrances. The property and equipment owned or otherwise contracted
for by
Company and Company Subsidiaries are in a state of good maintenance and
repair
(ordinary wear and tear excepted) and are adequate and suitable for the
purposes
for which they are presently being used. “Company
Permitted Encumbrances”
mean
all (i) Encumbrances for Taxes not yet payable or being contested in good
faith
and by proper proceedings diligently pursued and for which an adequate
reserve
has been made, (ii) Encumbrances upon equipment granted in connection with
the
purchase, lease or financing of such equipment provided that such Encumbrance
attaches only to the equipment purchased, leased or financed with the proceeds
secured thereby, (iii) carriers’, warehousemen’s, mechanics’ and materialmen’s
Encumbrances arising in the ordinary course of business securing sums which
are
not past due, (iv) Encumbrances of landlords which are inchoate arising
solely
by operation of law with respect to the Company Real Property Leases, (v)
Encumbrances on PINs and equipment held by providers thereof arising in
the
ordinary course of business for sums not yet past due or being contested
in good
faith and by proper proceedings diligently pursued and for which an adequate
reserve has been made, (vi) with respect to real property, any zoning laws
and
ordinances or recorded easements and (vii) those Encumbrances set forth
on
Part 2.10(a) of the Company Disclosure Letter.
(b) Neither
Company nor any Company Subsidiary owns any real property (including ground
leases) or holds any option or right of first refusal or first offer to
acquire
any real property, and neither Company nor any Company Subsidiary is obligated
by Contract or otherwise to purchase any real property.
(c) Part 2.10(c)
of the Company Disclosure Letter contains a true, complete and correct
list of
each real property lease, sublease, license or other occupancy agreement,
including any modification, amendment or supplement thereto and any other
related document or agreement that is currently in effect and has been
executed
or entered into by Company or any Company Subsidiary (including any of
the
foregoing which Company or any Company Subsidiary has subleased or assigned
to
another Person and as to which Company or such Subsidiary remains liable)
(each,
a “Company
Real Property Lease”).
Company and Company Subsidiaries hold the leasehold estate on each Company
Real
Property Lease free and clear of all Encumbrances, except for Company Permitted
Encumbrances and any mortgagees’ Encumbrances on the real property in which such
leasehold estate is located. The real property leased by Company and Company
Subsidiaries is in a state of good maintenance and repair and is adequate
and
suitable for the purposes for which it is presently being used, and, to
the
knowledge of Company, there are no material repair or restoration works
needed
in connection with any of the leased real properties which Company or any
Company Subsidiary are responsible to make. Company or one of Company
Subsidiaries is in physical possession and actual and exclusive occupation
of
the whole of each of its leased properties. Except as set forth on
Part 2.10(c) of the Company Disclosure Letter, neither Company nor any
Company Subsidiary owes any brokerage commission with respect to any Company
Real Property Lease.
2.11 Company
Intellectual Property.
(a) Company
and the Company Subsidiaries own or have the valid right or license to
use in
the manner used by Company and the Company Subsidiaries all IP Assets and
Intellectual Property Rights used by, or necessary to the operation of
the
business of, Company and the Company Subsidiaries. Such IP Assets and
Intellectual Property Rights used by Company and the Company Subsidiaries
are
sufficient for the conduct of the business of Company and the Company
Subsidiaries as currently conducted and as currently planned to be conducted.
The consummation of the Merger and the other transactions contemplated
by this
Agreement and any ancillary agreements will not result in any termination
or
other material restriction being imposed on any Company IP Assets or Company
IP
Rights.
(b) Except
as
otherwise set forth on Part 2.11(b) of the Company Disclosure Letter there
are
no royalties, honoraria, fees or other payments payable by Company and
the
Company Subsidiaries to any Person (other than salaries payable to employees,
consultants and independent contractors not contingent on or related to
use of
their work product) as a result of the use, possession or ownership of
any
Company IP Assets, or any Company IP Rights, and none will become payable
as a
result of the consummation of the transactions contemplated by this
Agreement.
(c) To
the
knowledge of Company, neither the operation of the business of Company
and the
Company Subsidiaries, nor any product or service of Company and the Company
Subsidiaries, nor the use of any Company IP Asset or the use or exercise
of any
Company IP Rights, infringes or misappropriates, or has infringed or
misappropriated, any Intellectual Property Right of any other Person. There
is
no pending, or, to the knowledge of Company, threatened, claim or litigation
against Company or any Company Subsidiary contesting the validity, ownership
or
other right of Company in any Company IP Asset or any Company IP Right
nor, to
Company’s knowledge, is there any legitimate basis for any such claim. Company
and the Company Subsidiaries have not received any written notice asserting
that
the use, exercise, sale, license or disposition, or any proposed use, exercise,
sale, license or disposition, of any Company IP Asset or any Company IP
Right,
or any business practice or product or service of Company and the Company
Subsidiaries, conflicts, or will conflict with, any Intellectual Property
Right
of any other Person nor, to Company’s knowledge, is there any legitimate basis
for any such assertion.
(d) The
Company IP Assets and Company IP Rights owned by Company and the Company
Subsidiaries do not contain any derivative works or other materials not
owned in
their entirety by Company and the Company Subsidiaries. Company and the
Company
Subsidiaries have granted no third party any exclusive rights with respect
to
any Company IP Assets or Company IP Rights.
(e) To
Company’s knowledge, no current or former employee, consultant or independent
contractor of Company or the Company Subsidiaries: (i) is in material violation
of any term or covenant of any Contract relating to employment, patent
disclosure, invention assignment, non-disclosure or non-competition or
any other
Contract with any other party by virtue of such employee’s, consultant’s or
independent contractor’s being employed by, or performing services for, Company
or the Company Subsidiaries or using Intellectual Property Rights of others
without permission; or (ii) has developed any IP Assets or Intellectual
Property
Rights for Company or the Company Subsidiaries that is subject to any agreement
under which such employee, consultant or independent contractor has assigned
or
otherwise granted to any Person (other than Company) any rights in or to
such IP
Assets or Intellectual Property Rights.
(f) Company
and the Company Subsidiaries have taken all appropriate steps to protect,
preserve and maintain the secrecy and confidentiality of their respective
confidential information, including trade secrets, and to preserve and
maintain
all of their respective interests and rights in Company IP Assets and the
Company IP Rights owned by Company or any Company Subsidiary. Company and
the
Company Subsidiaries have adequately maintained all trade secrets and copyrights
included in the Company IP Rights owned by Company or any Company Subsidiary.
Company and the Company Subsidiaries have secured valid written assignments
of
all rights in or to any Company IP Assets and Company IP Rights owned by
Company
or any Company Subsidiary pursuant to valid "work for hire" agreements
from all
of Company’s and the Company Subsidiaries’ current and former employees,
consultants and independent contractors who were involved in, or who contributed
to, the creation or development of any such Company IP Assets or Company
IP
Rights, which agreements comply in all material respects with all applicable
Legal Requirements. To Company’s knowledge, no current or former director,
officer, employee, consultant or independent contractor of Company or the
Company Subsidiaries has any right, license, claim or interest whatsoever
in or
with respect to any Company IP Assets or Company IP Rights.
(g) Part
2.11(g) of the Company Disclosure Letter contains a true and complete list
of
(i) all registrations made in any and all jurisdictions throughout the
world by
or on behalf of Company and the Company Subsidiaries of any Company IP
Rights,
and (ii) all applications, registrations, filings and other formal written
governmental actions made or taken pursuant to applicable laws by Company
and
the Company Subsidiaries to secure, perfect, protect or maintain its interest
in
Company IP Rights, including all patent applications, copyright applications,
and applications for registration of trademarks and service marks (collectively,
the “Registered Company IP Rights”). All Registered Company IP Rights are valid,
enforceable and subsisting, and all necessary registration, maintenance
and
renewal fees that have become due in connection with the Registered Company
IP
Rights have been paid and all necessary documents and articles in connection
with the Registered Company IP Rights have been filed with the relevant
patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of obtaining and maintaining
the Registered Company IP Rights. There are no facts or circumstances that
would
render any Registered Company IP Rights invalid or unenforceable. Without
limiting the foregoing, there are no information, materials, facts or
circumstances, including any information or fact that would constitute
prior
art, that would render any of the Registered Company IP Rights invalid
or
unenforceable, or would adversely effect any pending application for any
Registered Company IP Rights.
(h) Company
and the Company Subsidiaries possess all right, title and interest in and
to all
Company IP Assets and Company IP Rights owned by Company or any Company
Subsidiary, free and clear of all Encumbrances and licenses (other than
non-exclusive licenses granted to customers and resellers in the ordinary
course
of business and licenses and rights listed on Part 2.11(h) of the Company
Disclosure Letter), other than Permitted Encumbrances. Without limiting
the
foregoing, Company represents and warrants that the Company IP Assets owned
by
the Company include without limitation all EONStreams components and the
internal elements of its FastAim, EasyImpressions and MediaConsole products,
and
Company possesses sole ownership with respect thereto.
(i) To
Company’s knowledge, there is no current or past unauthorized use, disclosure,
infringement or misappropriation of any Company IP Asset or Company IP
Rights
owned by Company or any Company Subsidiary by any Person, including any
employee
or former employee of Company or the Company Subsidiaries.
(j) No
(i)
government funding, or (ii) facilities of a university, college, other
educational institution or research center; was used in the development
of any
Company IP Assets or Company IP Rights owned by the Company or the Company
Subsidiaries. To the Company's knowledge, no current or former employee,
consultant or independent contractor of Company or the Company Subsidiaries
who
was involved in, or who contributed to, the creation or development of
any
Company IP Assets or Company IP Rights owned by Company or any Company
Subsidiary, has performed services for the government, any university,
college
or other educational institution or any research center during a period
of time
during which such employee, consultant or independent contractor was also
performing services for Company or the Company Subsidiaries. No university,
college, other educational institution or research center has any right,
title
or interest in or to any Company IP Rights owned by Company or any Company
Subsidiary.
(k) Except
as
set forth on Part 2.11(k) of the Company Disclosure Letter the Company
IP Assets
owned by the Company and the Company Subsidiaries do not contain any Publicly
Available Software or any Harmful Code.
2.12 Company
Employees; Location and Compensation
.
Part 2.12 of the Company Disclosure Letter is a true, complete and correct
list as of the date hereof showing (a)(i) the names and positions of all
employees and consultants of Company and Company Subsidiaries, (ii) the
principal offices where such employees and consultants work, (iii) a statement
of the current annual salary, and the annual salary, bonus and incentive
compensation paid or payable to such individuals, and a statement of the
projected bonus and incentive compensation payable with respect to the
fiscal
year ending December 31, 2006, and the fringe benefits of such employees
and consultants not generally available to all employees of Company and
Company
Subsidiaries; (b) the names of all retired employees, if any, of Company
or
Company Subsidiaries who are receiving or entitled to receive any healthcare
or
life insurance benefits or any payments from Company or any of Company
Subsidiaries not covered by any pension plan to which Company or any of
Company
Subsidiaries is a party, their ages and current unfunded pension rate,
if any;
and (c) a description of the current severance and vacation policy of Company
and Company Subsidiaries. Other than as set forth in the Company Disclosure
Letter, neither Company nor any Company Subsidiary has, because of past
practices or previous commitments with respect to its employees, established
any
rights on the part of any of its employees to additional compensation with
respect to any period after the Closing Date (other than wage increases
in the
ordinary course of business).
2.13 Company
Employee Benefit Plans.
(a) Part 2.13(a)
of the Company Disclosure Letter lists (a) all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974,
as amended (“ERISA”));
(b)
all “specified fringe benefit plans” (as defined in Section 6039D(d)(1) of the
Code); (c) all “nonqualified deferred compensation plans” (as defined in
Sections 409A(d)(1) or 3121(v)(2)(C) of the Code); and (d) all bonus, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance, termination, unemployment, disability, bonus, stock
options, stock appreciation rights or other forms of incentive compensation,
health, vision, dental or other insurance, or other benefit plans, programs
or
arrangements, or other Contracts; whether covering one Person or more than
one
Person, and whether or not subject to any of the provisions of ERISA, which
are
or have been maintained, contributed to or sponsored by Company or any
ERISA
Affiliate for the benefit of any employee, independent contractor, agent,
director or stockholder of Company or any ERISA Affiliate or for the benefit
of
any spouse, dependents or beneficiaries of such Persons, other than Social
Security, Medicare and state unemployment programs to which Company and
the
Company Subsidiaries are required by statute to contribute (each item listed
on
Part 2.13(a) of the Company Disclosure Letter being referred to herein
individually, as a “Company
Plan”
and
collectively, as the “Company
Plans”).
Company has delivered or made available to Parent, to the extent applicable,
a
true, complete and correct copy of: (i) each written Company Plan and
descriptions of any unwritten Company Plan (including all amendments thereto
whether or not such amendments are currently effective); (ii) each summary
plan
description and summary of material modifications relating to a Company
Plan (if
applicable); (iii) each trust agreement or other funding arrangement with
respect to each Company Plan, including insurance Contracts (if applicable);
(iv) the three most recently filed IRS Form 5500 relating to each Company
Plan
(if applicable); (v) the most recently received IRS determination letter
for
each Company Plan (if applicable); (vi) the three most recently prepared
actuarial reports and financial statements in connection with each Company
Plan
(if applicable); (vii) all policies pertaining to fiduciary liability insurance
covering the fiduciaries of any Company Plan, and all bonds pertaining
to any
Company Plan (if applicable); (viii) all nondiscrimination test results
required
under the Code for any Company Plan for the prior three years; and (ix)
all
material rulings, opinion letters, information letters, advisory opinions
or
other correspondence to or from or issued by the IRS, the United States
Department of Labor or the Pension Benefit Guaranty Corporation with respect
to
any Company Plan. Except as set forth on Part 2.13(a) of the Company
Disclosure Letter, neither Company nor any Company Subsidiary has made
any
commitment, (A) to create or cause to exist any Company Plan not set forth
on
Part 2.13(a) of the Company Disclosure Letter or (B) except as necessary to
comply with changes in applicable Legal Requirements, to modify, change
or
terminate any Company Plan.
(b) Except
as
set forth on Part 2.13(b) of the Company Disclosure Letter, neither Company
nor any ERISA Affiliate has maintained, established, sponsored, contributed
to,
or participated in any (a) multi-employer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA), (b) multiple employer plan subject
to Sections 4063 and 4064 of ERISA, (c) multiple employer plan (within the
meaning of Section 413(c) of the Code), (d) multiple employer welfare
arrangement (within the meaning of Section 3(40)(A) of ERISA), (e) plan
subject to the minimum funding requirements of Part 3 of Subtitle B of
Title I
of ERISA or Section 412 of the Code, or (f) plan subject to Title IV of
ERISA, nor does Company or any ERISA Affiliate have any obligations or
liabilities, including withdrawal or successor liabilities, regarding any
such
plan. As used herein, the term “ERISA
Affiliate”
means
any Person that, together with Company or Parent, as the case may be, is
considered a “single employer” pursuant to Section 4001(b) of ERISA or Sections
414(b), (c), (m) or (o) of the Code. None of the Company Plans cover Employees
providing services outside the United States.
(c) Except
as
set forth on Part 2.13(c) of the Company Disclosure Letter, Company and
Company Subsidiaries have expressly reserved the right, in all Company
Plan
documents provided to employees, former employees, officers, directors
and other
participants and beneficiaries, to amend, modify or terminate at any time
such
Company Plans, and Company is not aware of any fact, event or condition
that
could reasonably be expected to restrict or impair such right.
(d) Each
Company Plan is now and has been operated in accordance with the requirements
of
all applicable laws, including ERISA, the Health Insurance Portability
and
Accountability Act of 1996 and the Code, and the regulations and authorities
published thereunder. Company and Company Subsidiaries performed all material
obligations required to be performed by them under, are not in any material
respect in default under or in violation of, and Company has no knowledge
of any
material default or violation by any party to, any Company Plan. No legal
action, suit, audit, investigation or claim is pending or to the knowledge
of
Company is threatened, with respect to any Company Plan (other than claims
for
benefits in the ordinary course of business), and no fact, event or condition
exists that would be reasonably likely to provide a legal basis for any
such
action, suit, audit, investigation or claim. All material reports, disclosures,
notices and filings with respect to such Company Plans required to be made
to
employees, participants, beneficiaries, alternate payees and any Governmental
Entity have been timely made or an extension has been timely
obtained.
(e) Each
Company Plan which is intended to be qualified under Section 401(a) of
the Code
is so qualified and has been so qualified during the period from its adoption
to
date, and each trust established in connection with any Company Plan which
is
intended to be exempt from federal income taxation under Section 501(a)
of the
Code is so exempt. Each Company Plan intended to be qualified under
Section 401(a) of the Code and each trust intended to be exempt from
federal income taxation under Section 501(a) of the Code has received
either (i) a determination letter from the IRS that it is so qualified
or exempt
as applicable or (ii) an opinion letter from the IRS as to the qualified
form of
its plan documents. No fact or event has occurred or condition exists since
the
date of such determination letter from the IRS which would be reasonably
likely
to adversely affect the qualified status of any such Company Plan or the
exempt
status of any such trust and which cannot be corrected pursuant to IRS
Revenue
Procedure 2006-27 (including any subsequent authority modifying or superseding
such Revenue Procedure), and to the extent such fact or event has occurred
or
such condition exists which can be corrected pursuant to such Revenue Procedure,
all material facts and circumstances relating to such fact, event or condition
have been set forth on Part 2.13(e) of the Company Disclosure
Letter.
(f) There
has
been no prohibited transaction (within the meaning of Section 406 of ERISA
or
Section 4975 of the Code) with respect to any Company Plan. Neither Company
nor
any Company Subsidiary has incurred or failed to pay any liability for
any
excise tax arising under Sections 4971, 4972, 4975, 4976, 4977, 4978, 4979,
4980, 4980B, 4980D or 4980E of the Code or any civil penalty arising under
Sections 502(i) or 502(l) of ERISA, and no fact, event or condition exists
which
could give rise to any such liability. Neither Company nor any ERISA Affiliate
has incurred any liability under, arising out of or by operation of Title
IV of
ERISA and, no fact, event or condition exists which could give rise to
any such
liability. No complete or partial termination of an “employee pension benefit
plan” within the meaning of Section 3(2) of ERISA has occurred within the five
years preceding the date hereof with respect to any Company Plan maintained
by
Company or any ERISA Affiliate.
(g) All
contributions, premiums or payments required to be made, paid or accrued
with
respect to any Company Plan have been made, paid or accrued on or before
their
due dates, including extensions thereof. All such contributions have been
fully
deducted for income tax purposes and no such deduction has been challenged
or
disallowed by any Governmental Entity and no fact or event exists which
could
give rise to any such challenge or disallowance.
(h) With
respect to each Company Plan that is a nonqualified deferred compensation
plan
within the meaning of Section 409A of the Code, (i) such Company Plan has
been
operated in good faith compliance with the provisions of Section 409A of
the
Code and Notice 2005 1 since January 1, 2005 if it was not terminated on
or
before December 31, 2005, (ii) such Company Plan has not been “materially
modified” (within the meaning of Section 885(d)(2)(B) of the American Jobs
Creation Act of 2004 and any applicable guidance issued thereunder) since
October 3, 2004, in a manner which would cause amounts deferred in taxable
years
beginning before January 1, 2005, under such plan to be subject to Section
409A
of the Code if such plan was in existence prior to October 3, 2004, and
(iii) no
event has occurred and no condition exists, that could subject any Person
to any
tax, fine, penalty or other liability under Section 409A of the Code
(“409A
Liability”).
None
of the transactions contemplated by this Agreement could, directly or
indirectly, subject any Person to any 409A Liability.
(i) Except
as
set forth on Part 2.13(i) of the Company Disclosure Letter (a) each of the
employees of Company and any Company Subsidiary is employed at will, (b)
none of
the Company Plans, or any employment agreement or other Contract to which
Company or any Company Subsidiary is a party or bound, (i) provides for
the
payment of or obligates Company or any Company Subsidiary to pay separation,
severance, termination, as deferred compensation, consulting, post termination
or similar type benefits to any Person as a result of any transaction
contemplated by this Agreement or as a result of a “change in control,” within
the meaning of such term under Section 280G of the Code, or (ii) obligates
Company or any Company Subsidiary to pay separation, severance, termination
or
similar type benefits solely as a result of any transaction contemplated
by this
Agreement or as a result of a “change in control,” within the meaning of such
term under Section 280G of the Code, and (c) the consummation of the
transactions contemplated by this Agreement will not, alone or together
with any
other event, (A) entitle any Person to bonus pay, golden parachute payment,
severance pay, unemployment compensation or any other payment from Company
or
any Company Subsidiary, (B) accelerate the time of payment or vesting,
or
increase the amount of compensation or benefits due to any such Person
from
Company or any Company Subsidiary, or (C) result in any forgiveness of
indebtedness from Company or any Company Subsidiary.
2.14 Company
Labor.
(a) Company
and Company Subsidiaries have materially complied with all applicable laws
related to the employment of labor, including provisions thereof relating
to
wages, hours, equal employment opportunity, collective bargaining,
non-discrimination, and withholding and payment of social security and
other
Taxes. There are no actions, suits, claims, charges, labor disputes or
grievances pending, or to Company’s knowledge, threatened involving Company or
any Company Subsidiary and any of their respective employees. There are
no
complaints, charges, lawsuits, arbitrations or other proceedings pending,
or to
Company’s knowledge, threatened by or on behalf of any present or former
employee of Company or any Company Subsidiary alleging any claim for material
damages including breach of any express or implied contract of employment,
wrongful termination, infliction of emotional distress or violation of
any
federal, state or local statutes or regulations concerning terms and conditions
of employment, including wages and hours, employee safety, termination
of
employment and/or workplace discrimination and harassment; provided that
if such
event arises after the date of this Agreement, Company shall provide Parent
with
prompt written notice of such event. There has been (i) no labor union
organizing or, to Company’s knowledge, attempting to organize any employees of
Company or any Company Subsidiary into one or more collective bargaining
units,
or (ii) no labor dispute, strike, work slowdown, work stoppage or lock out
or other collective labor action by or with respect to any employees of
Company
or any Company Subsidiary, or, to the knowledge of Company, threatened
against
or affecting Company or any Company Subsidiary. Neither Company nor any
Company
Subsidiary is presently, nor has it been in the past, a party to, or bound
by,
any collective bargaining agreements or other agreement with any labor
organization applicable to the employees of Company or any Company Subsidiary
and no such agreement is currently being negotiated.
(b) To
the
knowledge of Company, (i) no employee of Company or any Company Subsidiary
has provided or is providing information to any law enforcement agency
regarding
the commission or possible commission of any crime or the violation or
possible
violation of any applicable law involving Company or any Company Subsidiary;
provided that if such event arises after the date of this Agreement, Company
shall provide Parent with prompt written notice of such event, and
(ii) neither Company nor any Company Subsidiary nor any officer, employee,
contractor, subcontractor or agent of Company or any Company Subsidiary
has
discharged, demoted, suspended, threatened, harassed or in any other manner
discriminated against an employee of Company or any Company Subsidiary
in the
terms and conditions of employment because of any act of such employee
described
in 18 U.S.C. Section 1514A(a).
(c) Neither
Company nor any Company Subsidiary has effectuated (i) a “plant closing” as
defined in the WARN Act, affecting any site of employment or one or more
facilities or operating units within any site of employment or facility
of
Company or any Company Subsidiary, or (ii) a “mass layoff” (as defined in
the WARN Act) affecting any site of employment or facility of Company or
any
Company Subsidiary; nor has Company or any Company Subsidiary engaged in
layoffs
or employment terminations sufficient in number to trigger application
of any
similar state, local or foreign law or regulation similar to the WARN Act
that
is applicable to Company or any Company Subsidiary. To Company’s knowledge,
neither Company’s nor any Company Subsidiary’s employees has suffered an
“employment loss” (as defined in the WARN Act) in the ninety (90) days prior to
the date of this Agreement.
2.15 Company
Litigation
.
Except as set forth on Part 2.15 of the Company Disclosure Letter, there
is no
claim, action, suit, proceeding at law or in equity by any Person, or any
arbitration or any administrative or other proceeding by or before (or
to the
knowledge of Company, any investigation, inquiry or subpoena by) any
Governmental Entity, pending or, to the knowledge of Company, threatened
against
Company or any Company Subsidiary with respect to this Agreement or the
transactions contemplated hereby, or otherwise against (or, to the knowledge
of
Company, affecting) Company or any Company Subsidiary or their respective
properties or assets. Neither Company nor any Company Subsidiary is subject
to
any order entered in any lawsuit or proceeding that would have a Material
Adverse Effect on Company or would prevent the consummation of the transactions
contemplated by this Agreement. There has not been since January 1, 2003,
nor
are there currently, any internal investigations or inquiries being conducted
by
Company, Company Subsidiaries, their respective Boards of Directors or
other
equivalent management bodies or any third party or Governmental Entity
or at the
request of any of the foregoing concerning any financial, accounting, Tax,
conflict of interest, self dealing, fraudulent or deceptive conduct or
other
misfeasance or malfeasance matters.
2.16 Compliance
with Laws
by
Company.
(a) Each
of
Company and Company Subsidiaries are, and Company’s business has been conducted
in compliance with all Legal Requirements applicable to Company or such
Subsidiary or by which Company or any of its properties is bound or affected,
except in each case where the failure to so comply would not be material
with
respect to Company. No investigation or review by any Governmental Entity
is
pending or, to Company’s knowledge, has been threatened against Company or
Company Subsidiaries in a writing delivered to Company.
(b) Company
and Company Subsidiaries have all permits, licenses, variances, exemptions,
orders and approvals required by any Governmental Entity that are material
to
the operation of the business of Company and Company Subsidiaries as currently
conducted and the use of their respective properties and assets as presently
operated or used (collectively, the “Company
Permits”),
and
are in material compliance with the terms of the Company Permits. All of
the
Company Permits are in full force and effect. No action or claim is pending,
nor
to the knowledge of Company is threatened, to involve or terminate any
Company
Permits or declare any such Company Permit invalid in any material respect.
2.17 Environmental
Matters
of
Company
(a) Except
as
would not reasonably be expected to have a Material Adverse Effect on
Company:
(i) each
of
Company and Company Subsidiaries possesses all Environmental Permits necessary
to conduct its businesses and operations as now being conducted, and each
such
Environmental Permit is in full force and effect; none of Company or Company
Subsidiaries has received written notification from any Governmental Entity
that
any such Environmental Permits will be modified, suspended or
revoked;
(ii) each
of
Company and Company Subsidiaries is in compliance with all applicable
Environmental Laws and the terms and conditions of all Environmental Permits,
and none of Company or any Company Subsidiary has received written notification
from any Governmental Entity or other Person that alleges that Company
or any
Company Subsidiary has violated or is, or may be, liable under any Environmental
Law;
(iii) there
are
no past or pending or, to the knowledge of Company, threatened Environmental
Claims (A) against Company or any Company Subsidiary or (B) against any
Person
whose liability for any Environmental Claim Company or any Company Subsidiary
has retained or assumed either by Contract or by operation of law, and
none of
Company or any Company Subsidiary has contractually retained or assumed
any
liabilities that could reasonably be expected to provide the basis for
any
Environmental Claim;
(iv) to
the
knowledge of Company, there have been no Releases of any Hazardous Materials
at,
from, in, to, on or under any real properties currently or previously owned,
leased, or utilized by Company or any Company Subsidiary or their predecessors
or Affiliates that could reasonably be expected to form the basis of any
Environmental Claim against Company or any Company Subsidiary; and
(v) neither
Company nor any Company Subsidiary or their predecessors or Affiliates
transported or arranged for the transportation, treatment, storage, handling
or
disposal of any Hazardous Materials to any off site location that could
reasonably be anticipated to result in an Environmental Claim.
(b) To
the
knowledge of Company, there are no (i) underground storage tanks, active
or
abandoned, (ii) polychlorinated biphenyl containing equipment or (iii)
asbestos
containing material within the leasehold of any site or building utilized
by
Company or any Company Subsidiary.
(c) There
have been no environmental investigations, studies, tests, audits, reviewed
or
other analyses conducted by, on behalf of, or which are in the possession
of,
Company or any Company Subsidiary that have not been delivered or made
available
to Parent.
2.18 Company
Contracts.
(a) Company
has delivered or made available to Parent true, correct and complete copies
(and
all exhibits and schedules thereto and all amendments, modifications and
supplements thereof) of the following Contracts, and all of such Contracts
in
existence on the date hereof are listed on Part 2.18 of the Company Disclosure
Letter, in each case only if such Contract either (x) by its terms requires,
or
is reasonably likely to require, payment to, or by, Company or the Company
Subsidiaries of at least $50,000 over the stated minimum term of the Contract
or
(y) is material to the business of Company and the Company Subsidiaries
(it
being understood that any Contract described in clauses (iv), (vii), (ix),
(x),
(xi), (xiii) or (xvi) are deemed to be material to the business of the
Company
and the Company Subsidiaries (the “Company
Contracts”):
(i) any
distributor, supplier, sales, advertising, agency or manufacturer’s
representative Contract;
(ii) any
license agreement or other written or oral agreement or permission pursuant
to
which Company has granted to any third party with respect to any IP Assets
or
Intellectual Property Rights (other than pursuant to Company's standard
customer
agreements in the ordinary course of business);
(iii) any
license, sublicense, agreement or other permission pursuant to which Company
uses or otherwise possesses the IP Assets or Intellectual Property Rights
of any
third party;
(iv) any
Contract of Company or any Company Subsidiaries containing any material
support
or maintenance obligation on the part of Company or any Company Subsidiaries
outside of the ordinary course of business;
(v) all
Contracts with any customer of the business of the Company and the Company
Subsidiaries (provided that for customers that have executed a standard
form of
agreement, a copy of such form agreement and a list of the customers that
have
so executed such form agreement shall be sufficient);
(vi) all
Contracts of Company or any Company Subsidiaries relating to indebtedness
of
Company or any Company Subsidiaries
(vii) any
agreement pursuant to which any other party is granted exclusive marketing
or
other exclusive rights of any type or scope with respect to any of products
or
services of Company or any Company Subsidiaries;
(viii) any
continuing Contract for the purchase of materials, supplies, equipment,
services
or capital expenditures by Company or the Company Subsidiaries involving
in the
case of any such Contract more than fifty thousand dollars ($50,000) over
the
life of the Contract;
(ix) all
Contracts of Company or any of the Company Subsidiaries that involve the
sale or
purchase of any assets of Company or any of the Company Subsidiaries, other
than
in the ordinary course of business;
(x) any
Contract pursuant to which Company has any material ownership or participation
interest in any corporation, partnership, joint venture, strategic alliance
or
other business enterprise other than Company’s Subsidiaries;
(xi) all
Contracts of Company whereby Company or any Company Subsidiaries is restricted
by any “standstill” or similar obligations;
(xii) any
trust
indenture, mortgage, promissory note, loan agreement or other Contract
for the
borrowing of money, any currency exchange, commodities or other hedging
arrangement or any leasing transaction of the type required to be capitalized
in
accordance with generally accepted accounting principles;
(xiii) any
Contract limiting the freedom of Company to engage in any line of business
or to
compete with any other Person;
(xiv) any
Contract pursuant to which Company is a lessor of any machinery, equipment,
motor vehicles, office furniture, fixtures or other personal property that
is
material to the business of the Company and Company Subsidiaries, taken
as a
whole;
(xv) all
Company Real Property Leases;
(xvi) any
Contract with an officer, director employee, Affiliate or any other Person
with
whom Company does not deal at arm’s length (other than standard form offer
letters under which the officer, director or employee's relationship with
Company or the Company Subsidiaries is terminable at will and which letter
does
not contain any severance provisions or obligations on the part of Company
or
any Company Subsidiary extending beyond termination of employment or other
relationship with Company);
(xvii) all
Contracts pursuant to which Company or any Company Subsidiaries has any
obligations or liabilities (whether absolute, accrued, contingent or otherwise),
as guarantor, surety, co-signer, endorser, co-maker, or otherwise in respect
of
any obligation of any Person, or any capital maintenance or similar agreements
or arrangements; and
(xviii) all
Contracts that are otherwise material to the business of the Company or
any
Company Subsidiaries.
(b) Each
Company Contract is in full force and effect and constitutes a legal, valid
and
binding agreement of Company or a Company Subsidiary, as applicable, enforceable
in accordance with its terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium
or
other similar laws, now or hereafter in effect, affecting creditors’ rights
generally, and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and
to the
discretion of the court before which any proceeding therefore may be brought.
Company or a Company Subsidiary, as applicable, have performed all of their
obligations (except those that have not yet become due) under, and is not
in
material violation or breach of or default under, any such Company Contract.
To
the knowledge of Company, the other parties to each Company Contract have
performed all of their obligations (except those that have not yet become
due)
under, and are not in material violation or breach of or default under,
any such
Company Contract.
2.19 Company
Authority; Non-Contravention.
(a) The
execution and delivery of this Agreement by Company does not, and the
performance of this Agreement by Company will not (i) subject to obtaining
the Company Stockholder Approval, conflict with or violate the Company
Charter
Documents or the equivalent organizational documents of any Company Subsidiary,
(ii) subject to obtaining the Company Stockholder Approval and compliance
with the requirements set forth in this Section 5.1 hereof, conflict with
or violate any Legal Requirement applicable to Company or by which Company
or
any Company Subsidiary or any of their respective assets and properties
are
bound or affected, or (iii) subject to obtaining the Company Necessary
Consents, result in any breach of or constitute a default (or an event
that with
notice or lapse of time or both would become a default) under, or give
to others
any rights of termination, amendment, acceleration or cancellation of,
or result
in the creation of an Encumbrance on any of the properties or assets of
Company
or any Company Subsidiary pursuant to, any Contract to which Company or
any
Company Subsidiary is a party or by which Company or any of its properties
or
assets are bound or affected. Part 2.19 of the Company Disclosure Letter
list
all consents, waivers and approvals under any of Contracts or any Legal
Requirements applicable to Company or Company Subsidiaries that are required
to
be obtained in connection with the consummation of the transactions contemplated
hereby, which, if individually or in the aggregate are not obtained, would
result in a material loss of benefits to, or adversely effect the operations
or
condition of, Company, or the Surviving Corporation as a result of the
Merger or
adversely affect the ability of Company to consummate the Merger (“Company
Necessary Consents”).
(b) 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, foreign or domestic (“Governmental
Entity”)
or
other Person, is required to be obtained or made by Company in connection
with
the execution and delivery of this Agreement or the consummation of the
Merger,
except for (i) the filing of the Articles of Merger with the Secretary of
State of the State of Nevada and appropriate documents with the relevant
authorities of other states in which Company is qualified to do business,
(ii) the filing of the Proxy Statement with the Securities and Exchange
Commission (“SEC”)
in
accordance with the Exchange Act, (iii) the Company Necessary Consents and
(iv) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not have a Material Adverse
Effect on Company with respect to Company, Parent or the Surviving Corporation
or adversely effect the ability of the parties hereto to consummate the
Merger
within the time frame the Merger would otherwise be consummated in the
absence
of such requirement.
2.20 Company
Customer Contracts
.
Part 2.20 of the Company Disclosure Letter lists the customers of Company
that
have contributed no less than 61% of Company’s consolidated revenue for the
current fiscal year to date (“Key
Company Customers”),
together with a summary of the revenue derived from each such Key Company
Customer. Neither Company nor any Company Subsidiary has received any written
or
oral indication or assertion from any Key Company Customer since January
1, 2006
that there has been any material problem with the service Company provides
to
such Key Company Customers or that a Key Company Customer desires to decrease
services pursuant to, terminate, relinquish or not renew any Key Company
Customer Contract. To Company’s knowledge, no facts or circumstances exist with
respect to any Key Company Customer(s) that would reasonably be expected
to
cause such Key Company Customer(s) to cease use of Company’s products or
services, which would materially and adversely affect Company's revenues
for any
future period.
2.21 Company
Brokers’ and Finders’ Fees
.
Other than as disclosed in Part 2.21 of the Company Disclosure Letter,
Company
has not incurred, nor will it incur, directly or indirectly, any liability
for
brokerage or finders’ fees or agents’ commissions or any similar charges in
connection with this Agreement or any transaction contemplated
hereby.
2.22 Opinion
of Company’s Financial Advisor
.
Company has received the written opinion of RBC Capital Markets Corporation,
to
the effect that, as of the date of such opinion, the Merger Consideration
was
fair to the Company Stockholders from a financial point of view, and a
true and
complete copy of such opinion has been delivered to Parent.
2.23 Company
Insurance
.
Copies of all material insurance policies have been made available to Parent.
All such policies are in full force and effect, all premiums due and payable
thereon have been paid, and no notice of cancellation or termination has
been
received with respect to any such material policy which has not been replaced on
substantially similar terms prior to the date of such cancellation. There
is no
material claim pending under any such material policies as to which coverage
has
been questioned, denied or disputed.
2.24 Company
Corporate Controls
.
Neither Company, any Company Subsidiary nor any of their respective directors,
managers, stockholders, members, officers, agents, employees or consultants
or
any other Person while acting on behalf of Company or any Company Subsidiary,
has, directly or indirectly: (a) used any funds of Company or any Company
Subsidiary for unlawful contributions, gifts, or other unlawful expenses
relating to political activity; (b) made any unlawful payment to foreign
or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from the funds of Company or any Company Subsidiary;
(c)
established or maintained any unlawful or unrecorded fund of monies or
other
assets of Company or any Company Subsidiary; (d) made or caused to be made
any
false or fictitious entry on Company’s or any Company Subsidiary’s books or
records; (e) participated in any racketeering activity involving Company
or any
Company Subsidiary; or (f) made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment, or other payment of a similar or comparable
nature, to any Person, private or public, regardless of form, whether in
money,
property, or services, to obtain favorable treatment in securing business
for
Company or any Company Subsidiary or to obtain special concessions, or
to pay
for favorable treatment for business secured by Company or any Company
Subsidiary or for special concessions already obtained, and neither Company
nor
any Company Subsidiary has participated in any illegal boycott or other
similar
illegal practices affecting any of its actual or potential
customers.
2.25 Transactions
with Affiliates
of
Company.
(a) Except
as
set forth in the Company SEC Reports filed prior to the date hereof, there
have
been no transactions, agreements, arrangements or understandings between
Company
or any Company Subsidiary, on the one hand, and their respective affiliates,
on
the other hand, that would be required to be disclosed under Item 404 of
Regulation S-K under the Securities Act (except for amounts due as normal
salaries and bonuses and in reimbursements of ordinary expenses).
(b) Except
as
set forth in the Company SEC Reports filed prior to the date hereof, to
Company’s knowledge, (i) no officer of Company or any Company Subsidiary
owns, directly or indirectly, any interest in (excepting not more than
one
percent (1%) stock holdings for investment purposes in securities of
publicly-held and traded companies) or is an officer, director, employee
or
consultant of any Person which is a competitor, lessor, lessee, customer
or
supplier of Company, and (ii) no officer or director of Company or any
Company Subsidiary (x) has made, on behalf of Company or any Company
Subsidiary any payment or commitment to pay any commission, fee or other
amount
to, or to purchase or obtain or otherwise contract to purchase or obtain
any
goods or services from, any other Person of which any officer or director
of
Company or any Company Subsidiary or, to Company’s knowledge, a relative of any
of the foregoing, is a partner or stockholder (except stock holdings solely
for
investment purposes in securities of publicly held and traded companies),
or
(y) owes any money to Company or any Company Subsidiary (except for
reimbursement of advances in the ordinary course of business consistent
with
past practices).
(c) Since
June 30, 2006, Company has not, directly or indirectly, including through
any
Company Subsidiary, extended or maintained credit, arranged for the extension
of
credit, or renewed an extension of credit, in the form of a personal loan
to or
for any director or executive officer of Company.
2.26 Copies
of Documents
.
Company has caused to be made available for inspection by Parent and its
advisers, true, correct and complete copies of all documents referred to
in this
Article II or in the Company Disclosure Letter under this Article
II.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent
and Merger Sub represent and warrant to Company, that, subject to the exceptions
specifically disclosed in the disclosure letter (referencing the appropriate
section and paragraph numbers) delivered by Parent and Merger Sub to Company
dated as of the date hereof (the “Parent
Disclosure Letter”),
which
exceptions shall be deemed to be representations and warranties as if made
hereunder, the following statements are true and correct as of the date
hereof,
except where another date is specified, and will be true and correct as
of the
Closing Date, except where another date (including "as of the date hereof"
is
specified in the representation or warranty (for the avoidance of doubt,
if any
section in the Parent Disclosure Letter discloses an item or information
in such
a way as to make its relevance to the disclosure required by another section
of
the Company Disclosure Letter readily apparent based on the substance of
such
disclosure, such matter shall be deemed to have been disclosed in such
other
section of the Parent Disclosure Letter, notwithstanding the
omission):
3.1 Organization
and Qualification of Parent and Merger Sub.
(a) Parent
is
a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware and has all requisite corporate power and
authority to own and operate its properties and to conduct its business
as it is
currently being conducted. Parent is duly qualified or licensed to do business
and is in good standing, or local law equivalent, in each jurisdiction
in which
the nature of its business or the ownership or leasing of its properties
or
operations makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so qualified or licensed or to be
in good
standing, or local law equivalent, would not, individually or in the aggregate,
have a Material Adverse Effect on Parent.
(b) Merger
Sub is a corporation duly organized, validly existing and in good standing
under
the laws of the State of Nevada. Merger Sub was formed solely for the purpose
of
engaging in the transactions contemplated hereby and has not engaged in
any
other business activities and has conducted its operations only as contemplated
hereby. Merger Sub has not incurred, directly or indirectly, any material
liabilities or obligations except those in connection with its organization
or
with the negotiation and execution of this Agreement and the performance
of the
transactions contemplated hereby.
3.2 Power
and Authority of Parent and Merger Sub; Enforceability of this
Agreement.
(a) Each
of
Parent and Merger Sub has all requisite corporate power and authority to
execute
and deliver this Agreement, and subject to obtaining the Parent Stockholder
Approval, to perform its obligations hereunder and to consummate the Merger
and
the other transactions contemplated hereby. The Board of Directors of Parent,
at
a meeting duly called and held at which all directors of Parent were present
in
accordance with the Bylaws of Parent, duly adopted resolutions (the
“Parent
Board Approval”)
(i)
approving and declaring advisable this Agreement, the Merger and the other
transactions contemplated hereby, (ii) declaring that it is advisable and
making
a determination that it is in the best interest of Parent and the Parent
Stockholders that Parent enter into this Agreement and consummate the Merger
on
the terms and subject to the conditions set forth in this Agreement, (iii)
making a determination that this Agreement is fair to Parent and the Parent
Stockholders, (iv) directing that this Agreement be submitted to a vote
for
adoption at a meeting of the Parent Stockholders to be held as promptly
as
practicable as set forth in Section 5.4 hereof and (v) recommending that
the
Parent Stockholders adopt and approve this Agreement, the Merger and the
other
transactions contemplated hereby. The Board of Directors of Merger Sub
has
approved this Agreement, the Merger and the other transactions contemplated
hereby. The execution, delivery and performance of this Agreement by Parent
and
the consummation by Parent of the transactions contemplated hereby have
been
duly and validly authorized by all necessary corporate action on the part
of
Parent, subject to obtaining the Parent Stockholder Approval. The affirmative
vote of the holders of a majority of the issued and outstanding shares
of the
Parent Common Stock as of the record date established for the Parent
Stockholders’ Meeting, voting as a single class, in favor of adopting this
Agreement and of approving the Merger and the other transactions contemplated
hereby (the “Parent
Stockholder Approval”),
is
the only vote of the holders of any class or series of Parent’s capital stock
necessary to approve and adopt this Agreement, the Merger and the other
transactions contemplated hereby.
(b) The
Board
of Directors of Parent and Merger Sub has taken all action necessary to
ensure
that any restrictions on business combinations applicable to Parent shall
not
apply to the transactions contemplated by this Agreement. No state or foreign
takeover or similar statute or regulation is applicable to this Agreement
or the
transactions contemplated hereby.
(c) This
Agreement has been duly and validly executed and delivered by Parent and
Merger
Sub and, assuming the due authorization, execution and delivery by Company,
constitutes the valid and binding obligation of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms,
except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors’ rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought.
3.3 Parent
Capitalization.
(a) The
authorized capital stock of Parent consists solely of 600,000,000 shares
of the
Parent Common Stock and 200,000,000 shares of the preferred stock, par
value
$0.001 per share (the “Parent
Preferred Stock”),
of
which 3,500 shares are designated as Series A Convertible Preferred Stock,
par
value $0.001 per share (the “Parent
Series A Preferred Stock”).
(i)
35,182,081 shares of the Parent Common Stock are issued and outstanding
as of
October 2, 2006, (ii) no shares of Parent Series A Preferred Stock are
issued
and outstanding as of the date hereof, and (iii) no shares of Parent’s capital
stock are being held in Parent’s treasury as of the date hereof. Part 3.3(a) of
the Parent Disclosure Letter sets forth a true, correct and complete list
of the
number of shares of the Parent Common Stock held by each registered holder
thereof as of October 2, 2006. All outstanding shares of the Parent Common
Stock
and the Parent Preferred Stock were duly authorized and validly issued,
and are
fully paid and nonassessable and not subject to or issued in violation
of any
purchase option, call option, right of first refusal, pre-emptive right,
subscription right or any similar right under the provisions of Delaware
General
Corporation Law (“DGCL”),
the
Parent Charter Documents or any Contract to which Parent is a party or
by which
it is bound. There are no accrued and unpaid dividends with respect to
any
outstanding shares of capital stock of Parent or any Parent Subsidiary.
(b) As
of the
date hereof, Parent has reserved 8,971,131 shares of the Parent Common
Stock for
issuance to permitted grantees pursuant to the equity-based compensation
plans
included as exhibits to Parent’s Annual Report on Form 10-K for the year ended
December 31, 2005 (the “Parent
Stock Plans”)
of
which (i) 2,303,771 shares of the Parent Common Stock have been issued
pursuant
to option exercises, (ii) 2,916,792 shares are subject to outstanding,
unexercised options for Parent Company Stock, with a weighted-average exercise
price of $10.86, (iii) 669,729 shares have been issued pursuant to restricted
stock awards, and (iv) 3,074,982 shares remain available for issuance
thereunder. Parent has made available to Company an accurate and complete
copy
of the Parent Stock Plans and the forms of all stock option agreements
evidencing Parent Options. There are no options outstanding to purchase
shares
of the Parent Common Stock other than pursuant to the Parent Stock Plans.
All
shares of the Parent Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant
to
which they are issuable, will be duly authorized, validly issued, fully
paid and
nonassessable. There are no Contracts of any character to which Parent
is bound
obligating Parent to accelerate the vesting of any Parent Option as a result
of
the transactions contemplated by this Agreement. Except for the Parent
Stock
Plans, there are no outstanding or authorized stock appreciation, stock
purchase, profit participation, “phantom stock,” or other similar plans or
Contracts with respect to Parent or any Parent Subsidiary.
(c) All
outstanding shares of the Parent Common Stock and the Parent Preferred
Stock,
all outstanding Parent Options, and all outstanding shares of capital stock
of
each Parent Subsidiary have been issued and granted in compliance with
(i) all
applicable federal, state and foreign securities laws and other applicable
Legal
Requirements and (ii) all requirements set forth in applicable agreements
or
instruments.
3.4 Obligations
With Respect to Parent Capital Stock.
(a) Except
as
described in Section 3.3 or set forth in the Parent Disclosure Letter,
no
capital stock of Parent or any security convertible or exchangeable into
or
exercisable for such capital stock, is issued, reserved for issuance or
outstanding as of the date hereof. Except as set forth in the Parent Disclosure
Letter, there are no subscriptions, options, warrants, calls, rights (including
preemptive rights), commitments or agreements of any kind to which Parent
is
bound obligating Parent or any Parent Subsidiary to issue, deliver or sell,
or
cause to be issued, delivered or sold, additional shares of capital stock
of
Parent or any Parent Subsidiary or obligating Parent or any Parent Subsidiary
to
grant, extend or accelerate the vesting of or otherwise amend or enter
into any
such subscriptions, options, warrants, calls, rights (including preemptive
rights), commitments or agreements. There are no rights or obligations,
contingent or otherwise (including rights of first refusal in favor of
Parent),
of Parent or any Parent Subsidiary, to repurchase, redeem or otherwise
acquire
any shares of capital stock of Parent or any Parent Subsidiary or any securities
convertible or exchangeable into or exercisable for such capital stock
or to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in Parent. Parent has no authorized, issued,
or
outstanding bonds, debentures, notes or other indebtedness having the right
to
vote on any matters on which the Parent Stockholders have the right to
vote.
(b) Except
as
set forth on Part 3.4(b) of the Parent Disclosure Letter, Parent is not
a party
to or bound by any agreement with respect to the voting (including voting
trusts, proxies, "poison pill" anti-takeover plans) registration under
the
Securities Act, or sale or transfer (including agreements related to pre-emptive
rights, rights of first refusal, co-sale rights or "drag-along" rights
but
excluding restrictions required by the Securities Act in connection with
private
placements of securities) of any securities of Parent. To the knowledge
of
Parent, there are no agreements among other parties, to which Parent is
not a
party and by which it is not bound, with respect to voting (including voting
trusts and proxies) or sale or transfer (including agreements relating
to rights
of first refusal, co-sale rights or "drag along" rights but excluding
restrictions required by the Securities Act in connection with private
placements of securities) of any securities of Parent.
(c) The
Parent Common Stock constitutes the only class of securities of Parent
registered or required to be registered under the Exchange Act.
3.5 Parent
SEC Reports; Compliance with AMEX and NGM; Parent Financial
Statements.
(a) Parent
has filed on a timely basis all reports, schedules, forms, statements and
other
documents required to be filed by Parent with the SEC since January 1,
2005 (the
"Parent
Commencement Date"),
including all exhibits thereto and all Certifications, as such documents
since
the time of filing may have been amended or supplemented with the SEC (the
“Parent
SEC Reports”).
For
Parent’s Exchange Act periodic report filings since the fourth quarter of 2005,
there have been no comment letters or other correspondence received by
Parent
(excluding letters related to confidential treatment applications and orders
of
effectiveness) from the SEC or other correspondence by or on behalf of
Parent to
the SEC that have not been provided to Company and the copies of such letters
and responses delivered to or made available to Company were true and complete
copies. Parent maintains disclosure controls and procedures required by
Rule
13a-15 or 15d-15 under the Exchange Act, and such controls and procedures
are
designed to ensure that material information relating to Parent, including
Parent Subsidiaries, required to be disclosed in the reports it files or
submits
under the Exchange Act is accumulated and communicated to Parent’s principal
executive officer and principal financial officer to allow timely decisions
regarding financial disclosure. No Parent Subsidiary is required to file
with
the SEC any report, schedule, form, statement or other document. As of
their
respective dates and except as subsequently corrected by amendment, the
Parent
SEC Reports and all other filings that have been made by Parent with the
SEC
complied in all material respects with the requirements of the Securities
Act or
the Exchange Act, as the case may be, and the rules and regulations of
the SEC
promulgated thereunder applicable to such Parent SEC Reports, and Parent
has
filed all exhibits required to be filed with the Parent SEC Reports and
all
other filings that have been made by Parent with the SEC, and all such
exhibits
were true, correct and complete in all material respects (except to the
extent
omissions were in reliance upon a confidential treatment request). The
Parent
SEC Reports and all other filings that have been made by Parent with the
SEC (a)
were and, in the case of Parent SEC Reports and all other filings with
the SEC
filed by Parent after the date hereof, will be prepared in all material
respects
in accordance with the applicable requirements of the Securities Act and
the
Exchange Act, as the case may be, and (b) did not at the time they were
filed
(or if amended or superseded by a filing prior to the date hereof, then
on the
date of such filing), and in the case of such forms, reports and documents
filed
by Parent with the SEC after the date hereof, will not as of the time they
are
filed, contain any untrue statement of a material fact or omit to state
a
material fact required to be stated in or necessary in order to make the
statements in such documents, in light of the circumstances under which
they
were and will be made, not misleading; provided, however, that all of the
Certifications are each true and correct based upon the knowledge of the
officer(s) making such Certifications, as made. Parent has filed all amendments
to the Parent SEC Reports and all other filings that have been made by
Parent
with the SEC as were required to be filed under applicable law. Parent
was in
material compliance with the requirements applicable to securities that
are
traded on the American Stock Exchange (the “AMEX”)
when
its securities were traded on the AMEX and is in material compliance with
the
requirements applicable to securities that are traded on the NGM and has
not,
since the Parent Commencement Date, received any notice from the AMEX or
the
NGM, asserting any non compliance with such requirements.
(b) Each
of
the consolidated financial statements (including, in each case, any related
notes thereto) contained in the Parent SEC Reports, including each Parent
SEC
Report filed after the date hereof until the Closing (the “Parent
Financials”),
(i)
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto then in effect at the same time as such filing, (ii) was prepared
in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated therein or in the notes thereto or,
in the
case of unaudited interim financial statements, as may be permitted by
the SEC
on Form 10-Q, 8-K or any successor form under the Exchange Act) and (iii)
fairly
presented in all material respects the consolidated financial position
of Parent
and Parent Subsidiaries that are required by GAAP to be consolidated therein
and
fairly reflects its investment in any unconsolidated Subsidiary as of the
respective dates thereof and the consolidated results of their operations
and
cash flows for the periods indicated, except that the unaudited interim
financial statements may not contain footnotes and were or are subject
to normal
and recurring year-end adjustments. All Subsidiaries of Parent that are
required
by GAAP to be consolidated in the Parent Financials have been so consolidated.
The balance sheet of Parent contained in Parent SEC Reports as of June
30, 2006
is hereinafter referred to as the “Parent
Balance Sheet.”
The
reserves reflected in the Parent Financials have been calculated in accordance
with GAAP. Except as disclosed in the Parent Balance Sheet, neither Parent
nor
any Parent Subsidiary has any liabilities required under GAAP to be set
forth on
a balance sheet (absolute, accrued, contingent or otherwise) which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Parent and Parent Subsidiaries taken
as a
whole, except for liabilities incurred since the date of the Parent Balance
Sheet in the ordinary course of business consistent with past practices
and
liabilities incurred in connection with this Agreement. Neither Parent
nor any
Parent Subsidiary nor, to Parent’s knowledge, any director, officer, employee,
auditor, accountant or representative of Parent or Parent Subsidiaries
has
received or otherwise had or obtained knowledge of any written complaint,
allegation, assertion or claim regarding the accounting or auditing practices,
procedures, methodologies or methods of Parent or Parent Subsidiaries or
their
respective internal accounting controls, including any complaint, allegation,
assertion or claim that Parent or Parent Subsidiaries has engaged in
questionable accounting or auditing practices; provided that if such event
arises after the date of this Agreement, Parent shall provide Company with
prompt written notice of such event. Since the Parent Commencement Date,
no
attorney representing Parent or any Parent Subsidiary, whether or not employed
by Parent or Parent Subsidiaries, has reported evidence of a violation
of
securities laws, breach of fiduciary duty or similar violation by Parent
or any
of its officers, directors, employees or agents to Parent’s Board of Directors
or any committee thereof or to any director or officer of Parent; provided
that
if such event arises after the date of this Agreement, Parent shall provide
Company with prompt written notice of such event.
(c) Neither
Parent nor any Parent Subsidiary is a party to, or has any commitment to
become
a party to, any joint venture, partnership agreement or any similar Contract
(including any Contract relating to any transaction, arrangement or relationship
between or among Parent or any Parent Subsidiary, on the one hand, and
any
unconsolidated affiliate, including any structured finance, special purpose
or
limited purpose Person, on the other hand) where the purpose or intended
effect
of such arrangement is to avoid disclosure of any material transaction
involving
Parent or any Parent Subsidiary in the Parent Financials.
3.6 Absence
of Certain Changes or Events
.
Except as contemplated by this Agreement, since the date of the Parent
Balance
Sheet, Parent and Parent Subsidiaries, taken as a whole, have conducted
their
businesses in all material respects in the ordinary course of business.
Since
the date of the Parent Balance Sheet, there has not been:
(a) a
Material Adverse Effect on Parent;
(b) (i)
any
split, combination or reclassification of any capital stock (other than
a
1-for-10 reverse stock split effected on July 10, 2006), (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether
in
cash, stock or property) in respect of, any of the shares of capital stock,
or
any purchase, redemption or other acquisition of any of the shares of capital
stock or any other securities or other partnership interests or any options,
warrants, calls or rights to acquire any such shares or other securities
except
for repurchases from employees or consultants following their termination
pursuant to the terms of their pre-existing stock option or purchase agreements,
or (iii) any amendment of any material term of any outstanding security;
(c) any
sale,
transfer, or other disposition of any material properties or assets (whether
real, personal or mixed, tangible or intangible) except in the ordinary
course
of business consistent with past practices;
(d) (i)
any
assumption, guarantee, endorsement or liability otherwise incurred (whether
directly, contingently or otherwise) for the obligations of any other Person
other than those of Parent or Parent Subsidiaries, or (ii) any making of
any
loan, advance or capital contribution to or investment in any Person, including
any director, officer or other affiliate of Parent, other than advances
to
employees for travel and other reimbursable expenses in the ordinary course
of
business;
(e) (i)
any
material Tax election or material change in any Tax election, any material
change in annual Tax accounting period or method of Tax accounting other
than as
required by applicable laws or regulations, any filing of any material
amended
Tax Returns, any entering into of a closing agreement, settlement of or
consent
to any Tax claim, any surrendering of any right to claim a material refund
of
Taxes, or any consent to any extension or waiver of the statutory period
of
limitation applicable to any material Tax claim, (ii) any material change
in any
method of accounting, method of accounting principles or practice, except
for
any such change required by reason of a concurrent change in GAAP or compliance
with the applicable requirements of the rules and regulations promulgated
by the
SEC, or (iii) any revaluation of any material assets, including, without
limitation, writing off notes or accounts receivable other than in the
ordinary
course of business;
(f)
As of
the date hereof, any loss of, or receipt of written notice of any intention
to
cancel or otherwise terminate, any contract or agreement that would be
reasonably likely, individually or in the aggregate, to be material to
the
Parent other than in the ordinary course of business consistent with past
practices and other than threatened terminations for breach of any contract
or
agreement where Parent has cured the underlying cause of the threat and
such
contract or agreement still remains in full force and effect; or
(g) any
agreement, whether in writing or otherwise, to take any action described
in this
Section 3.7.
3.7 Parent
Books and Records
.
All accounts, books, ledgers and official and other records material to
Parent’s
business maintained by Parent or Parent Subsidiaries have been properly
and
accurately kept in all material respects, and there are no material inaccuracies
or discrepancies contained or reflected therein. Parent or Parent Subsidiaries
have under their control or possession all material records, systems, data
or
information used in Parent’s business, and neither Parent nor any Parent
Subsidiary uses any third party provider for records storage, except duplicate
backup storage tapes which are maintained at a secure location and readily
accessible by Parent and Parent Subsidiaries.
3.8 Parent
Taxes.
(a) Parent
and each Parent Subsidiary have timely filed, or caused to be filed, taking
into
account any valid extensions of due dates, completely and accurately, in
all
material respects, all Tax Returns required to be filed by or on behalf
of
Parent and each Parent Subsidiary with any Tax authority. Such Tax Returns
are
true, correct and complete in all material respects. Parent and each Parent
Subsidiary have paid all Taxes due and owing by Parent and each Parent
Subsidiary.
(b) Parent
and Parent Subsidiaries have collected all sales, use, goods and services
or
other commodity Taxes required to be collected and remitted or will remit
the
same to the appropriate Tax authority within the prescribed time periods.
Parent
and each Parent Subsidiary have timely withheld or paid all federal and
state
income Taxes, Taxes pursuant to the FICA, Taxes pursuant to the Federal
Unemployment Tax Act and other Taxes required to be withheld or paid by
Parent
and each Parent Subsidiary with respect to any of their respective employees,
former employees, directors, officers, residents and non-residents or third
parties.
(c) There
is
no Tax deficiency outstanding, proposed or assessed against Parent or any
Parent
Subsidiary, nor has Parent or any Parent Subsidiary executed any unexpired
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(d) No
examination of any Tax Return of Parent or any Parent Subsidiary is currently
in
progress, and neither Parent nor any Parent Subsidiary has received written
notice of any (i) pending or proposed audit or examination, (ii) request
for
information regarding Tax matters, or (iii) notice of deficiency or prepared
adjustment for any amount of Tax proposed, asserted, or assessed by any
Tax
authority against Parent or any Parent Subsidiary, and Parent does not
expect
any authority to assess any additional Taxes for any period for which Tax
Returns have been filed.
(e) Parent
has no liability for unpaid Taxes which has not been accrued for or reserved
on
the Parent Balance Sheet in accordance with GAAP, whether asserted or
unasserted, contingent or otherwise, which is material to Parent, other
than any
liability for unpaid Taxes that may have accrued since the date of the
Parent
Balance Sheet in connection with the operation of the business of Parent
and
Parent Subsidiaries in the ordinary course. The amount set up as an accrual
for
Taxes (aside from any reserve for deferred Taxes established to reflect
timing
differences between book and tax income) in the Parent Balance Sheet is
sufficient for the payment of all unpaid Taxes of Parent and any Parent
Subsidiary, whether or not disputed, for all periods ended on or prior
to the
date hereof.
(f) Parent
has delivered or made available to Company or its legal counsel or accountants
true, correct and complete copies of all Tax Returns for Parent and Parent
Subsidiaries filed for all periods since the fiscal year ended December
31,
2002, and all such filings were true, correct and complete in all material
respects when made.
(g) There
are
(and immediately following the Effective Time there will be) no Encumbrances
on
the assets of Parent relating to or attributable to Taxes other than
Encumbrances for Taxes not yet due and payable. There is no basis for the
assertion of any claim relating or attributable to Taxes that, if adversely
determined, would result in any Encumbrance for Taxes on the assets of
Parent.
3.9 Parent
Litigation
.
Except as set forth on Part 3.9 of the Parent Disclosure Letter, there
is no
claim, action, suit, proceeding at law or in equity by any Person, or any
arbitration or any administrative or other proceeding by or before (or
to the
knowledge of Parent, any investigation, inquiry or subpoena by) any Governmental
Entity, pending or, to the knowledge of Parent, threatened against Parent
or any
Parent Subsidiary with respect to this Agreement or the transactions
contemplated hereby, or otherwise against (or, to the knowledge of Parent,
affecting) Parent or any Parent Subsidiary or their respective properties
or
assets. Neither Parent nor any Parent Subsidiary is subject to any order
entered
in any lawsuit or proceeding that would have a Material Adverse Effect
on Parent
or would prevent the consummation of the transactions contemplated by this
Agreement. There are no current internal investigations or inquiries being
conducted by Parent, Parent Subsidiaries, their respective Boards of Directors
or other equivalent management bodies or any third party or Governmental
Entity
or at the request of any of the foregoing concerning any financial, accounting,
Tax, conflict of interest, self dealing, fraudulent or deceptive conduct
or
other misfeasance or malfeasance matters.
3.10 Parent
Properties.
Parent
and the Parent Subsidiaries have valid rights (excluding Intellectual Property
Rights, which are addressed exclusively in Section 3.13) to use the tangible
assets used by it or them in the delivery of services by Parent and the
Parent
Subsidiaries to their customers. The property and equipment owned or otherwise
contracted for by Parent and Parent Subsidiaries used by Parent and the
Parent
Subsidiaries for services that are currently sold and provided by Parent
or
Parent Subsidiaries to customers are adequate and suitable for the purposes
for
which they are presently being used, except for instances that would not
have a
Material Adverse Effect on Parent.
3.11 Compliance
with Laws by Parent.
Each of
Parent and Parent Subsidiaries are, and Parent’s business has been conducted in
compliance with all Legal Requirements applicable to Parent or such Subsidiary
or by which Parent or any of its properties is bound or affected, except
in each
case where the failure to so comply would not have a Material Adverse Effect
with respect to Parent. No investigation or review by any Governmental
Entity
(other than any taxing authority) is pending or, to Parent’s knowledge, has been
threatened against Parent or Parent Subsidiaries in a writing delivered
to
Parent.
3.12 Parent
Customer Contracts
.
Parent has previously delivered to Company a true and correct list of the
twenty
customers of Parent and the Parent Subsidiaries that have generated the
most
revenue for Parent and the Parent Subsidiaries for the period commencing
January
1, 2006 and ending on June 30, 2006, together with such revenue derived
from
each such customer during such period.
3.13 Parent
Intellectual Property.
Except
as would not reasonably be expected to have a Material Adverse Effect on
Parent:
(a) To
the
knowledge of Parent, Parent and the Parent Subsidiaries own or have the
valid
right or license to use in the manner used by Parent and the Parent
Subsidiaries, all IP Assets and Intellectual Property Rights used by, or
necessary to the operation of the business of, Parent and the Parent
Subsidiaries as currently conducted.
(b) There
is
no pending, or, to the knowledge of Parent, threatened, claim or litigation
contesting the validity, ownership or right of Parent in any Parent IP
Asset.
3.14 Environmental
Matters of Parent.
Except
as would not reasonably be expected to have a Material Adverse Effect on
Parent:
(a) there
are
no past or pending or, to the knowledge of Parent, threatened Environmental
Claims (i) against Parent or any Parent Subsidiary or (ii) against any
Person
whose liability for any Environmental Claim Parent or any Parent Subsidiary
has
retained or assumed either by Contract or by operation of law, and none
of
Parent or any Parent Subsidiary has contractually retained or assumed any
liabilities that could reasonably be expected to provide the basis for
any
Environmental Claim; and
(b) to
the
knowledge of Parent, there have been no Releases of any Hazardous Materials
at,
from, in, to, on or under any real properties currently or previously owned,
leased, or utilized by Parent or any Parent Subsidiary or their predecessors
or
Affiliates that could reasonably be expected to form the basis of any
Environmental Claim against Parent or any Parent Subsidiary.
3.15 Parent
Authority; Non-Contravention.
(a) The
execution and delivery of this Agreement by Parent does not, and the performance
of this Agreement by Parent will not (i) subject to obtaining the Parent
Stockholder Approval, conflict with or violate the Parent Charter Documents
or
the equivalent organizational documents of any Parent Subsidiary, (ii)
subject
to obtaining the Parent Stockholder Approval and compliance with the
requirements set forth in Section 5.1 hereof, conflict with or violate
any Legal
Requirement applicable to Parent or by which Parent or any Parent Subsidiary
or
any of their respective assets and properties are bound or affected, or
(iii)
subject to obtaining the Parent Necessary Consents, result in any breach
of or
constitute a default (or an event that with notice or lapse of time or
both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of
an
Encumbrance on any of the properties or assets of Parent or any Parent
Subsidiary pursuant to, any Contract to which Parent or any Parent Subsidiary
is
a party or by which Parent or any of its properties or assets are bound
or
affected that would have a Material Adverse Effect on Parent. Part 3.15
of the
Parent Disclosure Letter list all consents, waivers and approvals under
any of
Contracts or any Legal Requirements applicable to Parent that are required
to be
obtained in connection with the consummation of the transactions contemplated
hereby, which, if individually or in the aggregate are not obtained, would
have
a Material Adverse Effect on Parent or the Surviving Corporation as a result
of
the Merger or adversely affect the ability of Parent to consummate the
Merger
(“Parent
Necessary Consents”).
(b) No
consent, approval, order or authorization of, or registration, declaration
or
filing with any Governmental Entity or other Person, is required to be
obtained
or made by Parent in connection with the execution and delivery of this
Agreement or the consummation of the Merger, except for (i) the filing
of the
Articles of Merger with the Secretary of State of the State of Nevada and
appropriate documents with the relevant authorities of other states in
which
Parent is qualified to do business, (ii) the filing of the Proxy Statement
with
the SEC in accordance with the Exchange Act, (iii) the Parent Necessary
Consents
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 with respect to Parent, Company or the Surviving Corporation
or
adversely effect the ability of the parties hereto to consummate the Merger
within the time frame the Merger would otherwise be consummated in the
absence
of such requirement.
3.16 Opinion
of Parent’s Financial Advisor
.
Parent has received the written opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC,
to the
effect that, as of the date of such opinion, the Merger Consideration was
fair
to Parent from a financial point of view, and a true and complete copy
of such
opinion has been delivered to Company.
ARTICLE
IV
CONDUCT
PRIOR TO THE EFFECTIVE TIME
4.1 Conduct
of Business by Company
.
During the period from the date of this Agreement and continuing until
the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Company shall, except to the extent that Parent shall otherwise
consent in writing, carry on its business in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted and in
compliance in all material respects with all applicable Legal Requirements,
pay
its debts and Taxes when due subject to good faith disputes over such debts
or
Taxes, pay or perform other material obligations when due, and use its
commercially reasonable efforts consistent with past practices and policies
to
(i) preserve intact its present business organization, (ii) keep
available the services of its present officers and employees, and
(iii) preserve its relationships with customers, suppliers, licensors,
licensees, and others with which it has business dealings. In addition,
Company
will promptly notify Parent of any event that would reasonably be expected
to
have a Material Adverse Effect on Company.
In
addition, without limiting the generality of the foregoing, except as expressly
contemplated by this Agreement or provided in Part 4.1 of the Company Disclosure
Letter, without the prior written consent of Parent, during the period
from the
date of this Agreement and continuing until the earlier of the termination
of
this Agreement pursuant to its terms or the Effective Time, Company shall
not do
any of the following and shall not permit any Company Subsidiaries to do
any of
the following:
(a) Waive
any
stock repurchase rights, accelerate, amend or change the period of
exercisability of options or restricted stock, or reprice options granted
under
any Company Stock Plan, except as contemplated under Section 1.6(d) of
this
Agreement;
(b) Grant
any
severance or termination pay to any employee except pursuant to written
agreements in effect, or policies existing, on the date hereof and as disclosed
in the Company Disclosure Letter, or adopt any new severance plan or
policies;
(c) (i) Transfer
or license to any Person or entity or otherwise extend, amend or modify
in any
material respect any rights to the Company IP Rights, other than with respect
to
non-exclusive licenses in the ordinary course of business and consistent
with
past practice; (ii) disclose to any Person, other than Company employees
and representatives of Parent not subject to a nondisclosure agreement,
any
material trade secret except in the ordinary course of business consistent
with
past practices; (iii) transfer, modify or terminate any agreement pursuant
to which the Company has licensed Intellectual Property Rights from any
Person
except in the ordinary course of business consistent with past practices
and
which would be immaterial to the business of the Company; and (iv) disclose
any source code to any third party except in the ordinary course of business
consistent with past practices;
(d) Declare,
set aside or pay any dividends on or make any other distributions (whether
in
cash, stock, equity securities or property) in respect of any capital stock
or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock;
(e) Purchase,
redeem or otherwise acquire, directly or indirectly, any shares of capital
stock
of Company or the Company Subsidiaries, except repurchases of unvested
shares at
cost in connection with the termination of the employment relationship
with any
employee pursuant to stock option or other agreements in effect on the
date
hereof;
(f) Issue,
deliver, sell, authorize, pledge or otherwise encumber any shares of capital
stock or any securities convertible into shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into shares of capital stock, or enter
into
other agreements or commitments of any character obligating it to issue
any such
shares or convertible securities, other than the issuance, delivery and
sale of
shares of Company Common Stock pursuant to the exercise of Company Stock
Options
or Company Warrants outstanding as of the date of this Agreement;
(g) Cause,
permit or propose any amendments to its Articles of Incorporation, Bylaws
or
other charter documents (or similar governing instruments of any of Company
Subsidiaries);
(h) Incur
or
prepay any indebtedness for borrowed money, guarantee any such indebtedness
of
another Person, issue, sell or repurchase any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Company,
enter
into any “keep well” or other Contract to maintain any financial statement
condition or enter into any arrangement having the economic effect of any
of the
foregoing, other than borrowings under Company’s existing Loan and Security
Agreement with Comerica Bank (and any renewals or extensions thereof on
substantially the same terms as in effect on the date hereof), in any case
with
an aggregate loan amount not to exceed $6 million in the ordinary course
of
business consistent with past practices;
(i) Make
any
loans, advances or capital contributions to, or investments in, any other
Person, other than to any direct or indirect wholly owned Company
Subsidiary;
(j) (i)
Adopt
or amend any employee benefit plan or employee stock purchase or employee
stock
option plan, (ii) enter into any employment contract or collective bargaining
agreement, other than an offer letter on Company's standard form that is
terminable at will without severance or other continuing obligation following
termination of employment, (iii) pay any special bonus or special remuneration
to any officer, director or employee (other than year-end bonuses in accordance
with Company's existing bonus plan or program approved by Company's Board
of
Directors, (iv) increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its officers, directors,
employees or consultants, (v) make any other change in the compensation or
benefits payable or to become payable to any of its employees, agents or
consultants, or members of the board of directors of the Company,
(vi) enter into or amend any employment, severance, consulting, termination
or other agreement or employee benefit plan or make any loans to any of
its
directors, officers, employees, affiliates, agents or consultants,
(vii) make any change in its existing borrowing or lending arrangements for
or on behalf of any of such directors, officers, employees, agents, consultants,
(viii) pay or make any accrual or arrangement for payment of any pension,
retirement allowance or other employee benefit pursuant to any existing
plan,
agreement or arrangement to any officer, director, employee or affiliate
or pay
or agree to pay or make any accrual or arrangement for payment to any officers,
directors, employees or affiliates of any amount relating to unused vacation
days, except payments and accruals made in the ordinary course of business
consistent with past practices, (ix) offer, grant or issue any stock
options or take any action to accelerate, amend or change the period of
vesting
or exercisability of options or restricted stock, or reprice options granted
under any employee, consultant, director or other stock plans or authorize
cash
payments in exchange for any options granted under any of such plans,
(x) hire or terminate any officer (other than terminations for cause) or
encourage any officer or employee to resign, or materially increase or
decrease
the number of employees, or (xi) amend in any material respect any such
existing plan, agreement or arrangement in a manner inconsistent with the
foregoing;
(k) Make
any
capital expenditures in excess of amounts specifically allocated for capital
expenditures in the Company’s 2006 operating budget approved by its Board of
Directors (a copy of which budget specifically setting forth such capital
expenditures has been provided to Parent);
(l) Permit
to
be cancelled or terminated, without reasonable efforts to maintain coverage,
or
cancel or terminate any insurance policy naming it as a beneficiary or
loss
payee, unless such policy is replaced by a policy with comparable coverage,
or
otherwise fail to maintain insurance at less than current levels or otherwise
in
a manner consistent with past practices in all material respects;
(m) (i) Modify
or amend in any material respect or terminate any of the Company Contracts,
other than in the ordinary course of business consistent with past practices,
(ii) waive, release or assign any material rights or claims under any of
the Company Contracts, other than in the ordinary course of business consistent
with past practices, (iii) enter into any material commitment or
transaction, including entering into any material purchase, sale or lease
of
assets or real estate, (iv) enter into any material strategic alliance,
material joint development or joint marketing agreement, or (v) enter into
any agreement pursuant to which Parent or the Surviving Corporation or
any
Parent Subsidiary, or the Company or any Company Subsidiary will be subject
to
any exclusivity, noncompetition, nonsolicitation, most favored nations
or other
similar restriction or requirement on their respective businesses following
the
Closing;
(n) Fail
to
make in a timely manner any filings with the SEC required under the Securities
Act or the Exchange Act or the rules and regulations promulgated thereunder
(subject to extension pursuant to Section 12b-25 under the Exchange
Act);
(o) (i) Make
any change in any material method of accounting, method of accounting principles
or practice, except for such change required by reason of a concurrent
change in
GAAP or compliance with the applicable requirements of the rules and regulations
promulgated by the SEC, (ii) make any Tax election or change any Tax
election already made, adopt any Tax accounting method, except for such
changes
required by applicable Legal Requirements, rule or regulation, change any
Tax
accounting method, except for such changes required by applicable Legal
Requirements, rule or regulation, enter into any closing agreement or settle
any
claim or assessment relating to Taxes other than settlements or assessments
the
result of which would not be material to the Company and the Company
Subsidiaries, taken as a whole, or consent to any claim or assessment relating
to Taxes or any waiver of the statute of limitations for any such claim
or
assessment, (iii) file any material federal or state income Tax return
without Parent’s review and consent, which shall not be unreasonably withheld,
or (iv) revalue any of its material assets, except as required by GAAP,
applicable accounting requirements or the published rules and regulations
of the
SEC with respect thereto in effect during the periods involved other than
in the
ordinary course of business consistent with past practices;
(p) Pay,
discharge or satisfy any material claims, material liabilities or material
obligations (whether absolute, accrued, contingent or otherwise), other
than
(i) the payment, discharge or satisfaction of any such claims, liabilities
or obligations in the ordinary course of business consistent with past
practices, (ii) the settlement of claims that do not require a monetary
payment in excess of $50,000 or restrictions on the Company’s business or
(iii) claims, liabilities or obligations reflected or reserved against in,
or contemplated by, the consolidated financial statements (or the notes
thereto);
(q) (i) Adopt
a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization (other than the
Merger),
(ii) acquire or agree to acquire by purchasing any equity interest in or a
material portion or all of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or
division thereof, or, except in the ordinary course of business consistent
with
past practices, otherwise acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the Company and the Company
Subsidiaries, taken as a whole, or (iii) sell, transfer, lease, mortgage,
pledge, license exclusively, encumber, or otherwise dispose of, any of
its
properties or assets that are material, individually or in the aggregate,
to the
Company and the Company Subsidiaries, taken as a whole;
(r) Take
any
action that would, or is reasonably likely to, result in any of the conditions
to the Merger set forth in Article VI not being satisfied, or would make
many
representation or warranty of the Company contained herein inaccurate in
any
material respect at, or as of any time prior to, the Effective Time, or
that
would impair the ability of the Company to consummate the Merger in accordance
with the terms hereof or materially delay such consummation;
(s) (A) Commence
any litigation (except actions commenced in the ordinary course of business
against third parties) or (B) except in the ordinary course of business
consistent with past practices or as required by applicable Legal Requirements,
seek a judicial order or decree or settle any litigation, it being understood
that any settlement of litigation involving the payment by the Company
or any
Company Subsidiary of an amount in excess of $100,000 is not in the ordinary
course of business;
(t) Take
any
action, or permit any Company Subsidiary to take any action, that would
prevent
the Merger from qualifying as a “reorganization” within the meaning of Section
368(a) of the Code; or
(u) Agree
in
writing or otherwise commit to take any of the actions described in
Section 4.1(a) through (t) above.
4.2 Conduct
of Business by Parent
.
During the period from the date of this Agreement and continuing until
the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Parent shall, except to the extent that Company shall otherwise
consent in writing, carry on its business in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted and in
compliance in all material respects with all applicable Legal Requirements,
pay
its debts and Taxes when due subject to good faith disputes over such debts
or
Taxes, pay or perform other material obligations when due, and use its
commercially reasonable efforts consistent with past practices and policies
to
(i) preserve intact its present business organization, (ii) keep
available the services of its present officers and employees, and
(iii) preserve its relationships with customers, suppliers, licensors,
licensees, and others with which it has business dealings. In addition,
Parent
will promptly notify Company of any event that would reasonably be expected
to
have a Material Adverse Effect on Parent.
In
addition, without limiting the generality of the foregoing, except as expressly
contemplated by this Agreement or provided in Part 4.2 of the Parent Disclosure
Letter, without the prior written consent of Company, during the period
from the
date of this Agreement and continuing until the earlier of the termination
of
this Agreement pursuant to its terms or the Effective Time, Parent shall
not do
any of the following and shall not permit any Parent Subsidiaries to do
any of
the following:
(a) Declare,
set aside or pay any dividends on or make any other distributions (whether
in
cash, stock, equity securities or property) in respect of any capital stock
or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock;
(b) Purchase,
redeem or otherwise acquire, directly or indirectly, any shares of capital
stock
of Parent or the Parent Subsidiaries, except repurchases of unvested shares
at
cost in connection with the termination of the employment relationship
with any
employee pursuant to stock option or other agreements in effect on the
date
hereof;
(c) Cause,
permit or propose any amendments to its Certificate of Incorporation, Bylaws
or
other charter documents (or similar governing instruments of any of Parent
Subsidiaries) in a manner that would reasonably be likely to prevent or
materially delay or impair the Merger; provided that any amendment to its
Certificate of Incorporation to increase the number of authorized shares
of any
class or series of capital stock of Parent shall in no way be restricted
by the
foregoing;
(d) Fail
to
make in a timely manner any filings with the SEC required under the Securities
Act or the Exchange Act or the rules and regulations promulgated thereunder
(subject to extension pursuant to Section 12b-25 under the Exchange
Act);
(e) (i)
Adopt
a plan of complete or partial liquidation, dissolution, consolidation,
restructuring, recapitalization or other reorganization, (ii) adopt any
plan of
merger in which Parent’s corporate existence would cease or all of its
outstanding capital stock would be converted into cash, property or other
securities, or (iii) sell, transfer, lease, mortgage, pledge, license
exclusively, or otherwise dispose of, all or substantially all of the assets
of
Parent and the Parent Subsidiaries, taken as a whole;
(f) Issue,
deliver, sell, authorize, pledge or otherwise encumber any shares of capital
stock or any securities convertible into shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into shares of capital stock, or enter
into
other agreements or commitments of any character obligating it to issue
any such
shares or convertible securities, other than (i) the issuance, delivery
and sale
of shares of Parent Common Stock pursuant to the exercise of Parent Stock
Options or Parent Warrants; (ii) the grant of options with respect to,
or the
issuance of, the remaining shares of Parent Common Stock authorized on
the date
hereof under Parent Stock Plans in the ordinary course of business; and
(iii)
other issuances of securities in the ordinary course of business;
(g) Incur
any
indebtedness for borrowed money other than to fund the normal business
operations of Parent and the Parent Subsidiaries;
(h) Take
any
action that would, or is reasonably likely to, result in any of the conditions
to the Merger set forth in Article VI not being satisfied, or would make
many
representation or warranty of Parent or Merger Sub contained herein inaccurate,
which inaccuracy would constitute or represent a Material Adverse Effect
on
Parent and the Parent Subsidiaries, taken as a whole, or that would impair
the
ability of the Parent or Merger Sub to consummate the Merger in accordance
with
the terms hereof or materially delay such consummation;
(i) Take
any
action, or permit any Parent Subsidiary to take any action, that would
prevent
the Merger from qualifying as a “reorganization” within the meaning of Section
368(a) of the Code; or
(j) Agree
in
writing or otherwise commit to take any of the actions described in
Section 4.2(a) through (g) above.
ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1 Joint
Proxy Statement, Registration Statement and Filings
.
(a) As
promptly as practicable after the execution of this Agreement, Company
and
Parent shall prepare and file with the SEC preliminary joint proxy materials
relating to the Company Stockholder Approval and Parent Stockholder Approval,
and Parent shall prepare and file with the SEC a registration statement
on Form
S-4 in connection with the issuance of shares of Parent Common Stock in
the
Merger (such joint proxy materials are referred to herein as the “Joint
Proxy Statement”
and
such registration statement, including the Joint Proxy Statement that
constitutes a part thereof, is referred to herein as the “Registration
Statement”).
Each
of Company and Parent shall use its reasonable best efforts to respond
as
promptly as practicable to any comments of the SEC with respect to the
Joint
Proxy Statement and the Registration Statement. Parent and Company each
shall
use its reasonable best efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such
filing.
At the earliest practicable time following (i) the Registration Statement
being
declared effective under the Securities Act and (ii) the later of
(A) receipt and resolution of SEC comments with respect to the Joint Proxy
Statement and (B) the expiration of the 10-day waiting period provided in
Rule 14a-6(a) promulgated under the Exchange Act with respect to the Joint
Proxy
Statement, Company and Parent shall file a definitive Joint Proxy Statement
with
the SEC and cause the Joint Proxy Statement to be mailed to their respective
stockholders. Company and Parent shall also use their respective reasonable
best
efforts to satisfy prior to the effective date of the Registration Statement
all
necessary state securities law or "blue sky" notice requirements in connection
with the Merger and to consummate the other transactions contemplated by
this
Agreement and will pay all expenses incident thereto.
(b) Each
of
Company and Parent shall furnish all information concerning such Person
to the
other as may be reasonably requested in connection with the preparation,
filing
and distribution of the Joint Proxy Statement and the Registration Statement.
Company and Parent each agrees that none of the information supplied or
to be
supplied by it or on its behalf for inclusion or incorporation by reference
in
(i) the Registration Statement will, at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue statement
of a
material fact or omit to state any material fact required to be stated
therein
or necessary to make the statements therein, in light of the circumstances
under
which they were made, not misleading, and (ii) the Joint Proxy Statement
and any
amendment or supplement thereto will, at the date of mailing to stockholders
and
at the times of the Company Stockholders Meeting and the Parent Stockholders
Meeting, contain any untrue statement of a material fact or omit to state
any
material fact required to be stated therein or necessary in order to make
the
statements therein, in light of the circumstances under which they were
made,
not misleading. Company and Parent shall cause the Registration Statement
to
comply as to form in all material respects with the applicable provisions
of the
Securities Act and the rules and regulations thereunder.
(c) Each
of
Company and Parent shall promptly notify the other party upon the receipt
of any
comments from the SEC or its staff or any request from the SEC or its staff
for
amendments or supplements to the Joint Proxy Statement or Registration
Statement
and shall provide the other party with copies of all correspondence between
it
and its representatives, on the one hand, and the SEC and its staff, on
the
other hand, and shall provide the other party with an opportunity to review
and
comment on such correspondence or responses. If at any time prior to the
Company
Stockholders Meeting or Parent Stockholders Meeting, any information relating
to
the Company, Parent or any of their respective affiliates, officers or
directors, should be discovered by the Company or Parent that (i) should
be set
forth in an amendment or supplement to the Joint Proxy Statement, so that
the
Joint Proxy Statement shall not contain any untrue statement of a material
fact
or omit to state any material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under
which
they are made, not misleading or (ii) should be set forth in an amendment
or
supplement to the Registration Statement, so that the Registration Statement
shall not contain any untrue statement of a material fact or omit to state
any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the party that discovers such information shall promptly notify
the
other parties hereto and an appropriate amendment or supplement describing
such
information shall be filed with the SEC and, to the extent required by
applicable Legal Requirements, disseminated to the stockholders of Company
and
Parent.
(d) As
promptly as practicable after the date of this Agreement, each of Company
and
Parent will prepare and file any filings required to be filed by any other
federal, state or foreign laws relating to the Merger and the transactions
contemplated by this Agreement (collectively, the “Filings”).
Without limitation, Filings shall include all filings required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
“HSR
Act”).
The
Company and Parent shall provide such assistance, information and cooperation
to
each other as is reasonably required to obtain any such nonactions, waivers,
consents, approvals, orders and authorizations. Each of Company and Parent
shall
notify the other promptly (i) upon the occurrence of any event which is
required to be set forth in an amendment or supplement to any Filing,
(ii) upon the receipt of any comments from any Governmental Entity in
connection with any Filing, and (iii) upon any request by any Governmental
Entity for amendments or supplements to any Filings or for additional
information. Each of Company and Parent shall supply the other with copies
of
all correspondence between such party or any of its representatives, on
the one
hand, and a Governmental Entity, on the other hand, with respect to any
Filing.
Except where prohibited by applicable Legal Requirements (i) each of
Company and Parent shall consult with the other party prior to taking a
position
with respect to any Filing, shall permit the other party to review and
discuss
in advance, and consider in good faith the views of such other party in
connection with any analyses, appearances, presentations, memoranda, briefs,
white papers, arguments, opinions and proposals before making or submitting
any
of the foregoing to any Governmental Entity in connection with any
investigations or proceedings in connection with any Filing, and (ii) each
of Company and Parent shall coordinate with the other party in preparing
and
exchanging such information and promptly provide the other (and its counsel)
with copies of all filings, presentations or submissions (and a summary
of any
oral presentations) made by such party with any Governmental Entity in
connection with any Filing; provided that
with
respect to any such filing, presentation or submission, each of Parent
and
Company need not supply the other (or its counsel) with copies (or in case
of
oral presentations, a summary) to the extent that any law, treaty, rule
or
regulation of any Governmental Entity applicable to such party requires
such
party or its subsidiaries to restrict or prohibit access to any such properties
or information or where such properties or information is subject to the
attorney-client privilege (it being understood that the participation and
cooperation contemplated herein is not intended to constitute, nor shall
be
deemed to constitute, any form of direct or indirect waiver of the
attorney-client privilege maintained by any party hereto). Each of Company
and
Parent will cause all documents that it is responsible for filing with
any
Governmental Entity under this Section 5.1(d) to comply in all material
respects
with all applicable Legal Requirements.
5.2 Meeting
of Company Stockholders;
Conditions to Change of Recommendation; Superior Proposal;
Notification.
(a) Company
shall take all action necessary in accordance with the Nevada Corporate
Law,
governing rules of the NGM and its Articles of Incorporation and Bylaws
to
convene and hold the Company Stockholders’ Meeting, to be held as promptly as
practicable, for the purpose of voting upon approval and adoption of this
Agreement, approval of the Merger and any other approvals reasonably related
thereto. Unless the Board of Directors of Company has made a Change of
Recommendation pursuant to Section 5.2(c). Company will use its reasonable
best
efforts to solicit from its stockholders proxies in favor of the adoption
and
approval of this Agreement, the approval of the Merger and any other approvals
reasonably related thereto and will take all other action necessary or
advisable
to obtain such approvals and to secure the vote of its stockholders, in
each
case. Company (i) shall consult with Parent regarding the date of the
Company Stockholders Meeting, and (ii) shall not postpone or adjourn the
Company Stockholders Meeting without the prior written consent of Parent;
provided, however, that Company may adjourn or postpone the Company Stockholders
Meeting to the extent necessary to ensure that any necessary (which
determination shall not be made before consulting with Parent) supplement
or
amendment to the Joint Proxy Statement is provided to the Company's stockholders
in advance of a vote on the Merger and this Agreement or, if as of the
time for
which the Company Stockholders Meeting is originally scheduled there are
insufficient shares of Company Common Stock represented (either in Person
or by
proxy) to constitute a quorum necessary to conduct the business of the
Company
Stockholders Meeting. Company shall call, notice, convene, hold and conduct
the
Company Stockholders’ Meeting, and solicit proxies in connection with the
Company Stockholders’ Meeting, in compliance with the Nevada Corporate Law, its
Articles of Incorporation and Bylaws, the rules of the NGM and all other
applicable Legal Requirements. Company’s obligation to call, give notice of,
convene and hold the Company Stockholders Meeting in accordance with this
Section 5.2(a)
shall
not be limited to or otherwise affected by the commencement, disclosure,
announcement or submission to Company of any Acquisition Proposal or Superior
Proposal or by any Change of Recommendation.
(b) Unless
the Board of Directors of Company has made a Change of Recommendation pursuant
to Section 5.2(c):
(i) the Board of Directors of Company shall recommend that Company’s
stockholders vote in favor of and adopt and approve this Agreement and
approve
the Merger at the Company Stockholders’ Meeting; (ii) the Joint Proxy
Statement shall include a statement to the effect that the Board of Directors
of
Company has recommended that Company’s stockholders vote in favor of and adopt
and approve this Agreement and the Merger at the Company Stockholders’ Meeting;
and (iii) neither the Board of Directors of Company nor any committee
thereof shall withdraw, amend or modify, or propose or resolve to withdraw,
amend or modify in a manner adverse to Parent, the recommendation of the
Board
of Directors of Company that Company’s stockholders vote in favor of and adopt
and approve this Agreement and the Merger.
(c) Nothing
in this Agreement shall prevent the Board of Directors of Company, in response
to the receipt of a Superior Proposal, from withholding, withdrawing, amending
or modifying its recommendation in favor of the Merger, and, in the case
of a
Superior Proposal that is a tender or exchange offer made directly to its
stockholders, may recommend that its stockholders accept the tender or
exchange
offer (any of the foregoing actions, whether by the Board of Directors of
Company or a committee thereof, a “Change
of Recommendation”),
if
all of the following conditions in clauses (i) through (viii) are
met:
(i) Company
shall provide Parent with at least two business days prior notice (or such
lesser prior notice as provided to the members of Company’s Board of Directors)
of any meeting of Company’s Board of Directors at which Company’s Board of
Directors is reasonably expected to consider any Acquisition Proposal to
determine whether such Acquisition Proposal is a Superior Proposal;
(ii) a
Superior Proposal (as defined below) is made to Company and is not
withdrawn;
(iii) both
the
Company Stockholder Meeting and the Parent Stockholder Meeting have not
occurred; provided,
however
that if
either meeting is adjourned in accordance with Section 5.2(a) or 5.4(a),
as
applicable, then such meeting shall not be deemed to have occurred for
purposes
of this clause (iii);
(iv) Company
shall have provided written notice to Parent (a “Notice
of Superior Proposal”)
advising Parent that Company has received a Superior Proposal and that
it
intends to effect a Change of Recommendation and the manner in which it
intends
to do so, specifying all of the material terms and conditions of such Superior
Proposal and identifying the Person, entity or group making such Superior
Proposal;
(v) Company
shall have provided to Parent a copy of all written materials delivered
after
the date of this Agreement to the Person or group making the Superior Proposal
in connection with such Superior Proposal, and made available to Parent
all
materials and information made available to the Person or group making
the
Superior Proposal in connection with such Superior Proposal, together with
a
complete list identifying all such materials and information;
(vi) Parent
shall not have, within five business days of Parent’s receipt of the Notice of
Superior Proposal, made an offer that Company’s Board of Directors by a majority
vote determines in its good faith judgment (after consultation with a reputable
U.S. financial advisor) to be at least as favorable to Company’s stockholders as
such Superior Proposal (it being agreed that the Board of Directors of
Company
shall convene a meeting to consider any such offer by Parent promptly following
the receipt thereof), and that the Board of Directors of Company will not
withhold, withdraw, amend or modify its recommendation to the Company's
stockholders in favor of approval and adoption of this Agreement and approval
of
the Merger for five business days after receipt by Parent of the Notice
of
Superior Proposal;
(vii) the
Board
of Directors of Company concludes in good faith, after consultation with
its
outside legal counsel, that, in light of such Superior Proposal and any
offer
made by Parent pursuant to Section 5.2(c)(vi), the failure to effect a
Change of
Recommendation would be a breach of its fiduciary obligations to Company’s
stockholders under applicable Legal Requirements; and
(viii) Company
shall have complied in all material respects with Sections 5.1,
5.2
and
5.3.
(d) Nothing
contained in this Agreement shall limit Company’s obligation to call, give
notice of, hold and convene the Company Stockholders’ Meeting (regardless of the
commencement, disclosure, announcement or submission to the Board of Directors
of the Company of any Acquisition Proposal or of any Change of Recommendation).
Company shall not submit to the vote of its stockholders for a vote any
Acquisition Proposal or propose or agree to do so at or prior to the Company
Stockholders Meeting.
(e) For
purposes of this Agreement, “Superior
Proposal” shall
mean a bona fide binding written offer that has not been solicited by the
Company following the date of this Agreement and is made by a Person to
acquire,
directly or indirectly, pursuant to a tender offer, exchange offer, merger,
consolidation or other business combination, all or in excess of 50% of
the
assets of Company or in excess of 50% of the outstanding voting securities
of
Company and as a result of which the stockholders of Company immediately
preceding such transaction would cease to hold at least 50% of the equity
interests in the surviving or resulting entity of such transaction or any
direct
or indirect parent or subsidiary thereof, on terms that the Board of Directors
of Company concludes in good faith, after consultation with its outside
financial advisors, to be (i) more favorable to Company’s stockholders from
a financial point of view than the terms of the Merger, taking into account
all
the terms and conditions of such proposal and this Agreement (including
any
proposal by either party to amend the terms of this Agreement) and the
Person
making the offer, and (ii) reasonably capable of being consummated;
provided,
however,
that
any such offer shall not be deemed to be a Superior Proposal if any financing
required to consummate the transaction contemplated by such offer is not
committed or if there is a general due diligence condition to the parties’
obligations to consummate the transaction that is the subject of the Superior
Proposal.
(f) Nothing
contained in this Agreement shall prohibit Company or its Board of Directors
from taking and disclosing to its stockholders a position contemplated by
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act; provided,
however,
that
Company shall not effect a Change of Recommendation unless specifically
permitted pursuant to Section 5.2(c).
(g) For
purposes of this Agreement, “Acquisition
Proposal”
shall
mean any offer or proposal (other than an offer or proposal by Parent)
relating
to, or involving: (A) any acquisition or purchase from Company by any
Person or “group” (as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) of more than a 15% interest in the
total
outstanding voting securities of Company or any of its subsidiaries or
any
tender offer or exchange offer that if consummated would result in any
Person or
“group” (as defined under Section 13(d) of the Exchange Act and the rules
and regulations thereunder) beneficially owning 15% or more of the total
outstanding voting securities of Company or any of its subsidiaries or
any
merger, consolidation, business combination or similar transaction involving
Company pursuant to which the stockholders of Company immediately preceding
such
transaction hold less than 85% of the equity interests in the surviving
or
resulting entity of such transaction; (B) any sale, lease (other than in
the
ordinary course of business), exchange, transfer, license (other than in
the
ordinary course of business), acquisition, or disposition of more than
15% of
the assets of Company; or (C) any liquidation, dissolution, recapitalization
or
other significant corporate reorganization of Company.
5.3 No
Solicitation
.
From
and
after the date of this Agreement until the Effective Time or termination
of this
Agreement pursuant to Article VII, Company shall not, nor shall it authorize
or
permit the Company Subsidiaries or any of its or their respective officers,
directors, affiliates or employees or any investment banker, attorney,
advisor
or other agent or representative retained by any of them to, directly or
indirectly, (i) solicit, initiate, seek, entertain, encourage, facilitate,
support or induce the making, submission or announcement of any Acquisition
Proposal, (ii) continue or participate in any discussions or negotiations
regarding, or furnish to any Person any information with respect to, or
take any
other action to facilitate any inquiries or the making of any proposal
that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal,
(iii) engage or participate in discussions with any Person with respect to
any Acquisition Proposal, except as necessary to ascertain the terms of
and
understand any Acquisition Proposal and to decline to engage or participate
in
such discussions by referring to the existence of these provisions,
(iv) approve, endorse or recommend any Acquisition Proposal, except as
specifically provided in Section 5.2(c), or (v) enter into any letter
of intent or any other Contract contemplating or otherwise relating to
any
Acquisition Proposal; provided,
however,
that
this Section 5.3
shall
not prohibit Company from engaging in discussions or negotiations regarding
or
furnishing information to the party making an unsolicited, written, bona
fide
Acquisition Proposal so long as, and only to the extent that, (A) Company’s
Board of Directors in good faith after consultation with its outside financial
and legal advisors, concludes that such Acquisition Proposal is, or would
reasonably be expected to result in, a Superior Proposal, (B) neither Company
nor any representative of Company or the Company Subsidiaries acting under
its
authority shall have violated any of the restrictions set forth in this
Section 5.3,
(C) the Board of Directors of Company concludes in good faith, after
consultation with its outside financial and legal counsel, that such action
is
required in order for the Board of Directors of Company to comply with
its
fiduciary obligations to Company’s stockholders under applicable Legal
Requirements, (D) at least two business days prior to entering into
discussions or negotiations (other than preliminary discussions permitted
above)
with, or furnishing information to, such party, Company gives Parent written
notice of the identity of such Person, entity or group and all of the material
terms and conditions of such Acquisition Proposal and of Company’s intention to
take action with respect to such Person, entity or group, and Company receives
from such Person or group an executed confidentiality agreement containing
terms
no less favorable to Company as the Confidentiality Agreement, (E) Company
gives Parent at least two business days advance notice of its intent to
furnish
such nonpublic information or enter into such discussions, and
(F) contemporaneously with furnishing any such information to such Person
or group, Company furnishes such information to Parent (to the extent such
information has not been previously furnished by Company to Parent). Company
shall,
and
shall
cause its respective officers, directors, controlled affiliates or employees
or
any investment banker, attorney, advisor or other agent or representative
retained by any of them to, immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with
respect
to any Acquisition Proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in this Section 5.3 by any
officer, director or controlled affiliate of Company or any Company Subsidiaries
or any investment banker, attorney, advisor or other agent or representative
of
Company or any Company Subsidiaries shall be deemed to be a breach of this
Section 5.3 by Company.
In
addition to the obligations of Company set forth in this Section 5.3,
Company shall, as promptly as practicable, and in any event within
24 hours, advise Parent orally and in writing of any Acquisition Proposal,
request for information which Company reasonably believes would lead to
an
Acquisition Proposal or any inquiry with respect to or which could reasonably
be
expected to lead to any Acquisition Proposal, the material terms and conditions
of such Acquisition Proposal, request or inquiry, the identity of the Person
or
group making any such Acquisition Proposal, request or inquiry and copies
of all
written materials sent or provided to Company by or on behalf of any Person
or
group or provided to such Person or group by or on behalf of Company after
the
date of this Agreement. Company shall keep Parent informed in all material
respects of the status and details (including material amendments or proposed
amendments) of any such Acquisition Proposal, request or inquiry. In addition
to
the foregoing, Company shall provide Parent with at least two business
days
prior written notice of a meeting of Company’s Board of Directors at which
Company’s Board of Directors is reasonably expected to consider an Acquisition
Proposal or recommend a Superior Proposal to its stockholders and, together
with
such notice, a copy of the documentation relating to such Superior
Proposal.
5.4 Meeting
of Parent Stockholders.
(a) Parent
shall take all action necessary in accordance with the DGCL, governing
rules of
the NGM and its Certificate of Incorporation and Bylaws to convene and
hold the
Parent Stockholders’ Meeting, to be held as promptly as practicable, for the
purpose of voting upon approval and adoption of this Agreement, approval
of the
Merger and any other approvals reasonably related thereto. Parent (i) shall
consult with Company regarding the date of the Parent Stockholders Meeting,
and
(ii) shall not postpone or adjourn the Parent Stockholders Meeting without
the prior written consent of Company; provided, however, that Parent may
adjourn
or postpone the Parent Stockholders Meeting to the extent necessary to
ensure
that any necessary (which determination shall not be made before consulting
with
Company) supplement or amendment to the Joint Proxy Statement is provided
to the
Parent's stockholders in advance of a vote on the Merger and this Agreement
or,
if as of the time for which the Parent Stockholders Meeting is originally
scheduled there are insufficient shares of Parent Common Stock represented
(either in Person or by proxy) to constitute a quorum necessary to conduct
the
business of the Parent Stockholders Meeting. Parent shall call, notice,
convene,
hold and conduct the Parent Stockholders’ Meeting, and solicit proxies in
connection with the Parent Stockholders’ Meeting, in compliance with the DGCL,
its Articles of Incorporation and Bylaws, the rules of the NGM and all
other
applicable Legal Requirements.
(b) (i)
The
Board of Directors of Parent shall recommend that Parent’s stockholders vote in
favor of and adopt and approve this Agreement and approve the Merger at
the
Parent Stockholders’ Meeting; (ii) the Joint Proxy Statement shall include
a statement to the effect that the Board of Directors of Parent has recommended
that Parent’s stockholders vote in favor of and adopt and approve this Agreement
and the Merger at the Parent Stockholders’ Meeting; and (iii) neither the
Board of Directors of Parent nor any committee thereof shall withdraw,
amend or
modify, or propose or resolve to withdraw, amend or modify in a manner
adverse
to Company, the recommendation of the Board of Directors of Parent that
Parent’s
stockholders vote in favor of and adopt and approve this Agreement and
the
Merger.
5.5 Confidentiality;
Access to Information
.
(a) The
parties acknowledge that Company and Parent have previously executed the
Confidentiality Agreement, which will continue in full force and effect
in
accordance with its terms.
(b) Access
to Information.
Company
will afford Parent and its accountants, counsel and other representatives
reasonable access to the properties, books, records and personnel of Company
during the period prior to the Effective Time to obtain all information
concerning the business, properties, results of operations and personnel
of
Company, as Parent may reasonably request. Parent will afford Company and
its
accountants, counsel and other representatives reasonable access to the
properties, books, records and personnel of Parent during the period prior
to
the Effective Time to obtain all information concerning the business,
properties, results of operations and personnel of Parent, as Company may
reasonably request. No information or knowledge obtained in any investigation
pursuant to this Section 5.5 will 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.
5.6 Public
Disclosure
.
Parent and Company shall consult with each other, and to the extent reasonably
practicable, agree, before issuing any press release or otherwise making
any
public statement with respect to the Merger or this Agreement and shall
not
issue any such press release or make any such public statement prior to
such
consultation, except as may be required by applicable Legal Requirements
or any
listing agreement with the NGM. The parties have agreed to the text of
the joint
press release announcing the signing of this Agreement.
5.7 Reasonable
Efforts; Notification
.
(a) Upon
the
terms and subject to the conditions set forth in this Agreement, each of
the
parties agrees to use all commercially reasonable efforts to take, or cause
to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper
or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using commercially reasonable efforts to accomplish
the
following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VI to be satisfied, (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
and (iii) the execution or delivery of any additional instruments necessary
to consummate the transactions contemplated by, and to fully carry out
the
purposes of, this Agreement. Notwithstanding anything in this Agreement
to the
contrary, neither Parent nor any of its affiliates shall be under any obligation
(i) to make proposals, execute or carry out agreements or submit to orders
providing for the sale or other disposition or holding separate (through
the
establishment of a trust or otherwise) of any assets or categories of assets
of
Parent, any of its affiliates or Company or the holding separate of the
shares
of Company Common Stock (or shares of stock of the Surviving Corporation),
or
(ii) imposing or seeking to impose or confirm any limitation or regulation
on the ability of Parent or any of its subsidiaries or affiliates to freely
conduct their business or own such assets or to acquire, hold or exercise
full
rights of ownership of the shares of Company Common Stock (or shares of
stock of
the Surviving Corporation).
(b) Each
of
Company and Parent shall give prompt notice to the other of (i) any notice
or other communication from any Person alleging that the consent of such
Person
is or may be required in connection with the Merger (other than a Company
Necessary Consent or Parent Necessary Consent), (ii) any notice or other
communication from any Governmental Entity in connection with the Merger,
(iii) any litigation relating to, involving or otherwise affecting Company,
Parent or their respective subsidiaries that relates to or may reasonably
be
expected to affect, the consummation of the Merger. Company shall give
prompt
notice to Parent of any representation or warranty made by it contained
in this
Agreement becoming untrue or inaccurate, or any failure of Company to comply
with or satisfy any covenant, condition or agreement to be complied with
or
satisfied by it under this Agreement, in each case, such that the conditions
set
forth in Section 6.3 would not be satisfied, provided,
however,
that no
such notification shall affect the representations, warranties, covenants
or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. Parent shall give prompt notice to Company of any
representation or warranty made by it or Merger Sub contained in this Agreement
becoming untrue or inaccurate, or any failure of Parent or Merger Sub to
comply
with or satisfy any covenant, condition or agreement to be complied with
or
satisfied by it under this Agreement, in each case, such that the conditions
set
forth in Section 6.2 would not be satisfied, provided,
however,
that no
such notification shall affect the representations, warranties, covenants
or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) In
order
to facilitate the integration of the operations of Parent and Company and
to
permit the coordination of their related operations on a timely basis,
and in an
effort to accelerate the earliest time possible following the Effective
Time the
benefits expected to be realized by the parties as a result of the Merger,
Company shall use its commercially reasonable efforts to consult with Parent
on
material strategic and operational matters to the extent such consultation
is
not in violation of applicable Legal Requirements, including laws regarding
exchange of information and other laws regarding competition.
5.8 Third
Party Consents
.
As soon as practicable following the date hereof, (i) Company shall use its
commercially reasonable efforts to obtain the Company Necessary Consents,
and
(ii) Parent shall use its commercially reasonable efforts to obtain the
Parent Necessary Consents.
5.9 Indemnification
of Directors
.
Parent and Merger Sub agree to cause the Articles of Incorporation and
Bylaws of
the Surviving Corporation to contain the provisions with respect to exculpation
and indemnification of directors of Company, and advancement of expenses
in
connection therewith, set forth in the Articles of Incorporation and Bylaws
of
Company on the date of this Agreement (except that such provisions shall
specifically confirm that the obligation to advance expenses applies to
former
directors and officers), which provisions shall not be amended for a period
of
three years after the Effective Time (unless such amendment is required
by
applicable Legal Requirements and except for amendments that do not adversely
affect the rights of persons who at the Effective Time were serving or
had
previously served as directors or officers of Company).
5.10 Stockholder
Litigation
.
Until the earlier of termination of this Agreement in accordance with its
terms
or the Effective Time, Company shall give Parent the opportunity to participate
in the defense or settlement of any stockholder litigation against Company
or
members of its Board of Directors relating to this Agreement and the
transactions contemplated hereby or otherwise and shall not settle any
such
litigation without Parent’s prior written consent.
5.11 Section
16(b)
.
The Board of Directors of each of Company and Parent shall, prior to the
Effective Time, take all such actions as may be necessary or appropriate
pursuant to Rule 16b-3(d) and Rule 16b-3(e) under the Exchange Act to exempt
from Section 16 of the Exchange Act (i) the disposition of shares of Company
Common Stock and "derivative securities" (as defined in Rule 16a-1(c) under
the
Exchange Act) with respect to shares of Company Common Stock and (ii) the
acquisition of Parent Common Stock and derivative securities with respect
to
Parent Common Stock pursuant to the terms of this Agreement by officers
and
directors of Company subject to the reporting requirements of Section 16(a)
of
the Exchange Act or by employees or directors of Company who may become
an
officer or director of Parent subject to the reporting requirements of
Section
16(a) of the Exchange Act.
5.12 Tax-Free
Qualification.
(a) Each
of
Company and Parent shall use its reasonable best efforts to and to cause
each of
its Subsidiaries to, (i) cause the Merger to qualify as a "reorganization"
within the meaning of Section 368(a) of the Code and (ii) obtain the opinions
of
counsel referred to in Sections 6.2(f) and 6.3(e) of this
Agreement.
(b) From
and
after the Effective Time, Parent shall not take any action that is reasonably
likely to cause the Merger to fail to qualify as a "reorganization" within
the
meaning of Section 368(a) of the Code, including any action that is reasonably
likely to cause the Merger to fail to satisfy the "continuity of business
enterprise" requirement described in Treasury Regulation ss.1.368-1(d).
If the
opinion conditions contained in Sections 6.2(e) and 6.3(d) of this Agreement
have been satisfied, each of the Company and Parent shall report the Merger
for
U.S. federal income tax purposes as a "reorganization" within the meaning
of
Section 368(a) of the Code.
5.13 Tax
Representation Letters
.
Company shall use its reasonable best efforts to deliver to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇ LLP and to ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ & ▇▇▇▇▇▇▇▇
a
"Tax
Representation Letter," dated as of the Closing Date and signed by an officer
of
Company, containing representations of Company, and Parent shall use its
reasonable best efforts to deliver to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP and to
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ & ▇▇▇▇▇▇▇▇ a "Tax Representation Letter," dated as
of the Closing Date and signed by an officer of Parent, containing
representations of Parent, in each case as shall be reasonably necessary
or
appropriate to enable ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP to render the opinion
described in Section 6.3(d) of this Agreement and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
&
▇▇▇▇▇▇▇▇ to render the opinion described in Section 6.2(e) of this
Agreement.
5.14 Company
Affiliates
.
Company shall, prior to the Company Stockholders Meeting, deliver to Parent
a
list identifying all persons who, to the knowledge of Company, may be deemed
as
of the date of the Company Stockholders Meeting to be affiliates of Company
for
purposes of Rule 145 under the Securities Act and such list shall be updated
as
necessary to reflect changes from the date thereof until the Company
Stockholders Meeting. Company shall use its reasonable best efforts to
cause
each Person identified on such list to deliver to Parent, not later than
the
date of Company Stockholders Meeting, a written agreement substantially
in the
form attached as Exhibit
A
hereto.
5.15 Voting
Agreements
.
Concurrently with the execution of this Agreement, Company has delivered
to
Parent voting agreements, in form and substance reasonably acceptable to
Parent,
executed by the stockholders of the Company set forth on Part 5.15 of the
Company Disclosure Letter.
5.16 Employment
Agreements
.
Concurrently with the execution of this Agreement, Company has delivered
to
Parent employment agreements, in form and substance reasonably acceptable
to
Parent, executed by the persons named on Part 5.16 of the Company Disclosure
Letter, which employment agreements are expressly conditioned upon the
consummation of the Merger and shall become effective only upon the Effective
Time.
5.17 Noncompetition
Agreements
.
Concurrently with the execution of this Agreement, Company has delivered
to
Parent noncompetition agreements, in form and substance reasonably acceptable
to
Parent, executed by the persons named on Part 5.17 of the Company Disclosure
Letter, which noncompetition agreements are expressly conditioned upon
the
consummation of the Merger and shall become effective only upon the Effective
Time.
ARTICLE
VI
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 effect the
Merger
shall be subject to the satisfaction at or prior to the Closing Date of
the
following conditions:
(a) Stockholder
Approval.
This
Agreement shall have been approved and adopted, and the Merger shall have
been
approved, by the requisite vote of (i) the stockholders of Company under
applicable Legal Requirements and the Company Charter Documents and (ii)
the
stockholders of Parent under applicable Legal Requirements and the Parent
Charter Documents.
(b) Joint
Proxy Statement.
No stop
order or similar proceeding in respect of the Joint Proxy Statement shall
have
been initiated or threatened in writing by the SEC.
(c) Registration
Statement.
The
Registration Statement shall have become effective under the Securities
Act. No
stop order suspending the effectiveness of the Registration Statement shall
have
been issued.
(d) NGM
Listing.
The
shares of Parent Common Stock issuable to the Company stockholders pursuant
to
the Merger shall have been authorized for listing on the NGM upon official
notice of issuance.
(e) No
Order.
No
Governmental Entity shall have enacted, issued, promulgated, enforced or
entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect
and which
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(f) Governmental
Approvals.
Approvals from each Governmental Entity (if any) necessary for consummation
of
the transactions contemplated by this Agreement shall have been obtained,
and
any waiting period applicable to the consummation of the Merger under the
HSR
Act shall have expired or been terminated.
6.2 Additional
Conditions to Obligations of Company
.
The obligation of Company to consummate and effect the Merger shall be
subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by
Company:
(a) Representations
and Warranties.
Each
representation and warranty of Parent and Merger Sub contained in this
Agreement
shall be true and correct in all material respects (except for any statements
in
a representation or warranty that expressly include a standard of Material
Adverse Effect, which statements shall be true and correct in all respects
giving effect to such standard) as of the date of this Agreement and as
of the
Closing Date with the same force and effect as if made on the Closing Date,
except that those representations and warranties which address matters
only as
of a particular date (including the date of this Agreement) shall have
been true
and correct in all material respects (except for any statements in a
representation or warranty that expressly include a qualification standard
of
Material Adverse Effect, which statements shall be true and correct in
all
respects giving effect to either of such qualification standard) as of
such
date; provided, however, each of Parent and Merger Sub shall provide supplements
to the Parent Disclosure Letter as may be necessary to update the
representations and warranties contained in Article III solely for the
purpose
of determining whether an event has occurred between the date hereof and
the
Effective Time that would reasonably be expected to have a Material Adverse
Effect on Parent (it being understood that, for purposes of determining
the
accuracy of such representations and warranties, any update of or
modification to the Parent Disclosure Letter made or purported to have
been made
after the execution of this Agreement shall be disregarded); provided,
however,
that notwithstanding anything herein to the contrary, the condition set
forth in
this Section 6.2(a) shall be deemed to have been satisfied even if any
representations and warranties of Parent and Merger Sub are not so true
and
correct unless the failure of such representations and warranties to be
so true
and correct has had or would have a Material Adverse Effect on Parent.
Company
shall have received a certificate with respect to the foregoing signed
on behalf
of Parent by the Chief Executive Officer and Chief Financial Officer of
Parent.
(b) Agreements
and Covenants.
Parent
and Merger Sub shall have performed or complied in all material respects
with
all agreements and covenants required by this Agreement to be performed
or
complied with by them on or prior to the Closing Date, and Company shall
have
received a certificate to such effect signed on behalf of Parent by the
Chief
Executive Officer and Chief Financial Officer of Parent.
(c) Material
Adverse Effect.
No
Material Adverse Effect with respect to Parent shall have occurred since
the
date of this Agreement and be continuing, and Company shall have received
a
certificate to such effect signed on behalf of Parent by the Chief Executive
Officer and Chief Financial Officer of Parent.
(d) Parent
Necessary Consents.
Parent
and Merger Sub shall have obtained all Parent Necessary Consents.
(e) Tax
Opinion.
Company
shall have received the written opinion of ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ &
▇▇▇▇▇▇▇▇, counsel to Company, or other counsel reasonably satisfactory
to
Company, dated the Closing Date, to the effect that the Merger will be
treated
for Federal income tax purposes as a reorganization within the meaning
of
Section 368(a) of the Code. In rendering such opinion, counsel to Company
shall
be entitled to rely upon assumptions, representations, warranties and covenants,
including those contained in this Agreement and in the Tax Representation
Letters described in Section 5.13 of this Agreement.
6.3 Additional
Conditions to the Obligations of Parent and Merger Sub
.
The obligations of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of
each of
the following conditions, any of which may be waived, in writing, exclusively
by
Parent:
(a) Representations
and Warranties.
Each
representation and warranty of Company contained in this Agreement shall
be true
and correct in all material respects (except for any statements in a
representation or warranty that expressly include a standard of Material
Adverse
Effect, which statements shall be true and correct in all respects giving
effect
to such standard) as of the date of this Agreement and as of the Closing
Date
with the same force and effect as if made on the Closing Date, except that
those
representations and warranties which address matters only as of a particular
date (including the date of this Agreement) shall have been true and correct
in
all material respects (except for any statements in a representation or
warranty
that expressly include a qualification standard of Material Adverse Effect,
which statements shall be true and correct in all respects giving effect
to
either of such qualification standard) as of such date; provided, however,
Company shall provide supplements to the Company Disclosure Letter as may
be
necessary to update the representations and warranties contained in Article
II
solely for the purpose of determining whether an event has occurred between
the
date hereof and the Effective Time that would reasonably be expected to
have a
Material Adverse Effect on Company (it being understood that, for purposes
of
determining the accuracy of such representations and warranties, any update
of or modification to the Company Disclosure Letter made or purported to
have
been made after the execution of this Agreement shall be disregarded);
provided,
however, that notwithstanding anything herein to the contrary, the condition
set
forth in this Section 6.3(a) shall be deemed to have been satisfied even
if any
representations and warranties of Company are not so true and correct unless
the
failure of such representations and warranties to be so true and correct
has had
our would have a Material Adverse Effect on Company. Parent shall have
received
a certificate with respect to the foregoing signed on behalf of Company
by the
Chief Executive Officer and Chief Financial Officer of Company.
(b) Agreements
and Covenants.
Company
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with
by it
at or prior to the Closing Date, and Parent shall have received a certificate
to
such effect signed on behalf of Company by the Chief Executive Officer
and Chief
Financial Officer of Company.
(c) Material
Adverse Effect.
No
Material Adverse Effect with respect to Company shall have occurred since
the
date of this Agreement and be continuing, and Parent shall have received
a
certificate to such effect signed on behalf of Company by the Chief Executive
Officer and Chief Financial Officer of Company.
(d) Tax
Opinion.
Parent
shall have received the written opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP,
counsel to Parent, or other counsel reasonably satisfactory to Parent,
dated the
Closing Date, to the effect that the Merger will be treated for Federal
income
tax purposes as a reorganization within the meaning of Section 368(a) of
the
Code. In rendering such opinion, counsel to Parent shall be entitled to
rely
upon assumptions, representations, warranties and covenants, including
those
contained in this Agreement and in the Tax Representation Letters described
in
Section 5.13 of this Agreement.
(e) No
Restraints.
There
shall not be instituted, pending or threatened any action, proceeding or
hearing
before any Governmental Entity (i) seeking to restrain, prohibit, regulate
or otherwise interfere with the ownership or operation by Parent or any
of its
subsidiaries of all or any portion of the business of Company or any of
its
subsidiaries or of Parent or any of its subsidiaries or to compel Parent
or any
of its subsidiaries to dispose of or hold separate all or any portion of
the
business or assets of Company or any of its subsidiaries or of Parent or
any of
its subsidiaries, (ii) seeking to impose or confirm limitations or
regulations on the ability of Parent or any of its subsidiaries effectively
to
exercise full rights of ownership of the shares of Company Common Stock
(or
shares of stock of the Surviving Corporation) including the right to vote
any
such shares on any matters properly presented to stockholders or freely
conduct
Company’s business or (iii) seeking to require divestiture by Parent or any
of its subsidiaries of any such assets or shares.
(f) Consents.
Company
shall have obtained all Company Necessary Consents, which consents shall
have
been obtained on terms that are not reasonably likely to materially affect
the
ownership or operations of the business by Parent.
(g) Resignation
of Directors.
Parent
shall have received a written resignation from each of the directors of
Company
effective as of the Effective Time.
(h) Termination
of Company Stock Plans.
Parent
shall have received from the Company evidence that the Company's rights
to grant
additional awards under the Company Stock Plans have been terminated, effective
immediately prior to the Effective Time and conditioned upon the Effective
Time
occurring.
ARTICLE
VII
TERMINATION,
AMENDMENT AND WAIVER
7.1 Termination
.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after the requisite approvals of the stockholders of
Company
or Parent:
(a) by
mutual
written consent duly authorized by the Boards of Directors of Parent and
Company;
(b) by
either
Company or Parent if the Merger shall not have been consummated by March
31,
2007 (the “Outside
Date”)
for
any reason; provided,
however,
that
the Outside Date shall be April 30, 2007 if the Merger shall not have been
consummated by March 31, 2007 solely by reason of (i) the failure of the
Registration Statement being declared effective under the Securities Act
in a
timely manner, (ii) the failure to resolve all SEC comments with respect
to the
Joint Proxy Statement in a timely manner, or (iii) the failure to obtain
all
approvals from each Governmental Entity (if any) necessary for consummation
of
the transactions contemplated by this Agreement; and provided
further, however,
that the
right to terminate this Agreement under this Section 7.1(b)
shall
not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to occur on
or
before such date and such action or failure to act constitutes a breach
of this
Agreement;
(c) by
Parent
if a Governmental Entity shall have issued a final and nonappealable order,
decree or ruling with respect to any of the items set forth in
Section 6.3(e);
(d) by
either
Company or Parent, if the approval and adoption of this Agreement and the
approval of the Merger by the stockholders of Company shall not have been
obtained by reason of the failure to obtain the required vote at a meeting
of
Company stockholders duly convened therefore or at any adjournment thereof;
provided,
however,
that
the right to terminate this Agreement under this Section 7.1(d) shall not
be available to Company where the failure to obtain Company stockholder
approval
shall have been caused by the action or failure to act of Company and such
action or failure to act constitutes a material breach by Company of this
Agreement;
(e) by
either
Company or Parent, if the approval and adoption of this Agreement and the
approval of the Merger by the stockholders of Parent shall not have been
obtained by reason of the failure to obtain the required vote at a meeting
of
Parent stockholders duly convened therefore or at any adjournment thereof;
provided,
however,
that
the right to terminate this Agreement under this Section 7.1(e) shall not
be available to Parent where the failure to obtain Parent stockholder approval
shall have been caused by the action or failure to act of Parent and such
action
or failure to act constitutes a material breach by Parent of this
Agreement;
(f) by
Parent
if a Company Triggering Event (as defined below) shall have
occurred;
(g) by
Company if a Parent Triggering Event (as defined below) shall have
occurred;
(h) by
Company, either (i) upon a breach of any representation, warranty, covenant
or
agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either
case
such that the conditions set forth in Section 6.2(a)
or
Section 6.2(b)
would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, or (ii) if a Material
Adverse Effect with respect to Parent shall have occurred; provided that
if such
inaccuracy in Parent’s or Merger Sub's representations and warranties or breach
by Parent or Merger Sub, or if such Material Adverse Effect with respect
to
Parent, is curable by Parent through the exercise of its commercially reasonable
efforts, then Company may not terminate this Agreement under this
Section 7.1(h) for 20 days after delivery of written notice from Company to
Parent of such breach, provided Parent continues to exercise commercially
reasonable efforts to cure such breach or Material Adverse Effect with
respect
to Parent (it being understood that Company may not terminate this Agreement
pursuant to this Section 7.1(h) if such breach by Parent or Merger Sub
or
Material Adverse Effect with respect to Parent is cured during such 20-day
period, or if Company shall have materially breached this Agreement);
or
(i) by
Parent, either (i) upon a breach of any representation, warranty, covenant
or agreement on the part of Company set forth in this Agreement or if any
representation or warranty of Company shall have become untrue, in either
case
such that the conditions set forth in Section 6.3(a)
or
Section 6.3(b)
would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, or (ii) if a Material
Adverse Effect with respect to Company shall have occurred; provided that
if such
inaccuracy in Company’s representations and warranties or breach by Company, or
if such Material Adverse Effect with respect to Company, is curable by
Company
through the exercise of its commercially reasonable efforts, then Parent
may not
terminate this Agreement under this Section 7.1(i)
for 20
days after delivery of written notice from Parent to Company of such breach,
provided Company continues to exercise commercially reasonable efforts
to cure
such breach or Material Adverse Effect with respect to Company (it being
understood that Parent may not terminate this Agreement pursuant to this
Section
7.1(i) if such breach by Company or Material Adverse Effect with respect
to
Company is cured during such 20-day period, or if Parent shall have materially
breached this Agreement).
Each
of
the above termination rights is an independent right that is not exclusive
of
any other termination right or other right herein.
For
the
purposes of this Agreement, a “Company Triggering
Event”
shall
be deemed to have occurred if: (i) the Board of Directors of Company (or
any committee thereof) shall for any reason effected a Change of Recommendation;
(ii) Company shall have failed to include in the Joint Proxy Statement the
recommendation of Company’s Board of Directors in favor of the adoption and
approval of this Agreement and the approval of the Merger; (iii) the Board
of Directors of Company fails to reaffirm (publicly, if so requested by
Parent)
its recommendation in favor of the adoption and approval of the Agreement
and
the approval of the Merger within 10 business days after Parent requests
in
writing that such recommendation be reaffirmed; (iv) the Board of Directors
of Company (or any committee thereof) shall have approved or recommended
any
Acquisition Proposal; (v) Company shall have entered into any non-binding
letter of intent, memorandum of understanding, term sheet or Contract with
respect to any Acquisition Proposal; (vi) Company shall have materially
breached any of the provisions of Sections 5.2
or
5.3;
or
(vii) a tender or exchange offer relating to securities of Company shall
have been commenced by a Person unaffiliated with Parent, and Company shall
not
have sent to its security holders pursuant to Rule 14e-2 promulgated under
the
Securities Act, within 10 business days after such tender or exchange offer
is
first published sent or given, a statement disclosing that Company recommends
rejection of such tender or exchange offer.
7.2 Notice
of Termination Effect of Termination
.
Any proper termination of this Agreement under Section 7.1
above
will be effective immediately upon the delivery of written notice of the
terminating party to the other parties hereto. In the event of the termination
of this Agreement as provided in Section 7.1,
this
Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2,
Section 7.3
and
Article VIII, each of which shall survive the termination of this Agreement,
and
(ii) nothing herein shall relieve any party from liability for fraud in
connection with, or any willful breach of, this Agreement. No termination
of
this Agreement shall affect the obligations of the parties contained in
the
Confidentiality Agreement, all of which obligations shall survive termination
of
this Agreement in accordance with their terms.
7.3 Fees
and Expenses
.
(a) General.
Except
as set forth in this Section 7.3,
all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated.
(b) Termination
Fee.
In the
event that (i) this Agreement is terminated by Parent pursuant to
Section 7.1(f) or (ii) (A) this Agreement is terminated pursuant
to Section 7.1(b) (other than a termination by Company if any action or
failure to act by Parent or Merger Sub is the principal cause of the failure
of
the Merger to occur on or before the Outside Date), 7.1(d), or 7.1(i),
and
(B) at or prior to such termination but after the date hereof, there shall
exist or have been publicly proposed a bona fide Acquisition Proposal relating
to a Company Acquisition and within 12 months after such termination, Company
shall enter into a letter of intent or definitive agreement with respect
to any
Company Acquisition or any Company Acquisition shall be consummated, then,
in
the case of clause (i), promptly, but in no event later than two (2)
business days after the date of such termination, or in the case of
clause (ii), concurrently with the execution of a definitive agreement with
respect to, or the consummation of, as applicable, such Company Acquisition,
Company shall pay to Parent $8,000,000 in
cash
plus the amount of any transaction expenses of Parent incurred theretofore
(the
“Termination
Fee”).
Company acknowledges that the agreements contained in this Section 7.3(b)
are an integral part of the transactions contemplated by this Agreement,
the
amount of, and the basis for payment of, the Termination Fee are reasonable
and
appropriate in all respects, and that, without these agreements, Parent
would
not enter into this Agreement. Accordingly, if Company fails to pay in
a timely
manner the Termination Fee due pursuant to this Section 7.3(b), and, in
order to obtain such payment, Parent makes a claim that results in a judgment
against Company for the amounts set forth in this Section 7.3(b), Company
shall pay to Parent its reasonable costs and expenses (including reasonable
attorneys’ fees and expenses) in connection with such suit, together with
interest on the amounts set forth in this Section 7.3(b) at the prime rate
of Bank of America, N.A. in effect on the date such payment was required
to be
made. Payment of the fees described in this Section 7.3(b) shall be in
lieu of
damages incurred in the event of breach of this Agreement other than for
any
willful breaches of this Agreement. For the purposes of this Agreement,
“Company
Acquisition”
shall
mean any of the following transactions (other than the transactions contemplated
by this Agreement): (A) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Company pursuant to which the stockholders of Company immediately preceding
such
transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (B) a sale or other
disposition by Company of assets representing in excess of 50% of the aggregate
fair market value of Company’s business immediately prior to such sale, or
(C) the acquisition by any Person or group (including by way of a tender
offer or an exchange offer or issuance by Company), directly or indirectly,
of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 50% of the voting power of the then outstanding
shares
of capital stock of Company.
7.4 Amendment
.
Subject to applicable Legal Requirements, this Agreement may be amended
by the
parties hereto, by action taken or authorized by their respective Boards
of
Directors, at any time before or after approval of the matters presented
in
connection with the Merger by the stockholders of Company. This Agreement
may
not be amended except by execution of an instrument in writing signed on
behalf
of each of Parent, Merger Sub and Company.
7.5 Extension;
Waiver
.
At any time prior to the Effective Time any party hereto 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 made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions for the benefit of
such
party 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 an instrument in
writing
signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE
VIII
GENERAL
PROVISIONS
8.1 Non-Survival
of Representations and Warranties
.
The representations and warranties of Company, Parent and Merger Sub contained
in this Agreement shall terminate at the Effective Time, and only the covenants
that by their terms expressly survive the Effective Time shall survive
the
Effective Time.
8.2 Notices
.
All notices and other communications hereunder shall be in writing and
shall be
deemed duly given (i) on the date of delivery if delivered personally,
(ii) on the date of confirmation of receipt (or, the first business day
following such receipt if the date is not a business day) of transmission
by
facsimile, (iii) on the date of confirmation of receipt (or, the first
business day following such receipt if the date is not a business day)
if
delivered by a nationally recognized courier service, or (iv) on the date
of receipt or refusal (if delivery is refused) if delivered by registered
or
United States certified mail (postage prepaid, return receipt requested).
Subject to the foregoing, all notices hereunder shall be delivered as set
forth
below, or pursuant to such other instructions as may be designated in writing
by
the party to receive such notice:
(a) if
to
Parent or Merger Sub, to:
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
Chief Executive Officer
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if
to
Company, to:
VitalStream
Holdings, Inc.
▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Chief Executive Officer
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with
copies to:
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation;
Certain Defined Terms
.
(a) Generally.
When a
reference is made in this Agreement to Exhibits, such reference shall be
to an
Exhibit to this Agreement unless otherwise indicated. When a reference
is made
in this Agreement to Articles or Sections, such reference shall be to an
Article
or a Section of this Agreement unless otherwise indicated. The words
“include,”
“includes”
and
“including”
when
used herein shall be deemed in each case to be followed by the words
“without
limitation.”
The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement. When reference is made herein to “the
business of”
an
entity, such reference shall be deemed to include the business of all direct
and
indirect subsidiaries of such entity.
(b) “Affiliate”
shall
mean, as applied to any Person, (a) each other Person directly or
indirectly controlling, controlled by or under common control with, that
Person,
and (b) as to a corporation, each director and officer thereof, and as to a
partnership, each general partner thereof, and as to a limited liability
company, each managing member or similarly authorized Person thereof. For
the
purposes of this definition, “control”
(including with correlative meanings, the terms “controlling,” “controlled by,”
and “under common control with”) as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of
the
management and policies of that Person, whether through ownership of voting
securities or by contract or otherwise;
(c) “Company
IP Assets”
shall
mean, all IP Assets licensed, used, owned or purported to be owned by Company
or
any Company Subsidiaries in the operation of the business of Company and
Company
Subsidiaries or constituting or included within any product or services
of
Company or the Company Subsidiaries.
(d) “Company IP
Rights” shall
mean all Intellectual Property Rights licensed, used, owned or purported
to be
owned by Company or the Company Subsidiaries, regardless of whether such
rights
are practiced or exercised by Company or the Company Subsidiaries;
(e) “Company
Stockholders”
shall
mean the holders of the Company Common Stock as of the applicable reference
date.
(f) “Company
Subsidiary”
shall
mean each Subsidiary of Company.
(g) “Confidentiality
Agreement”
shall
mean that certain Confidentiality Agreement, by and between Company and
Parent,
in effect as of the date hereof.
(h) “Contract”
shall
mean a loan or credit agreement, bond, debenture, note, mortgage, indenture,
guarantee, lease, insurance policy, benefit plan or other contract, commitment,
agreement, instrument, obligation, binding arrangement, binding understanding,
binding undertaking, license or sublicense, whether oral or written, that
has
not been terminated and that contains any continuing obligation or liability
of
a party, including any invoice, purchase order or account set-up form made
or
issued in the ordinary course of business.
(i) “Employee”
shall
mean any current employee or consultant of a Person;
(j) “Employee
Agreement”
shall
mean each management, employment, severance, consulting, relocation,
repatriation, expatriation, visas, work permit or similar agreement or
contract
between any Employee and his or her employer;
(k) “Encumbrances”
shall
mean any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, claim, infringement, interference, option, right of first
refusal
to purchase, preemptive right, community property interest or restriction
of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security (other than arising under securities laws,
any
restriction on transfer of a security) or other asset (other than a Contract,
license or similar document)), any restriction on the receipt of any income
derived from any asset, any restriction on the use of any owned asset and
any
restriction on the possession, exercise or transfer of any other ownership
attribute of any asset);
(l) “Environmental
Claims”
shall
mean any and all actions, orders, decrees, suits, demands, directives,
claims,
Encumbrances, investigations, proceedings or notices of violation by any
Governmental Entity or other Person alleging responsibility or liability
arising
out of, based on or related to (1) the presence, Release or threatened
Release
of, or exposure to, any Hazardous Materials at any location or (2) circumstances
forming the basis of any violation or alleged violation of any Environmental
Law;
(m) “Environmental
Laws”
shall
mean all Laws, rules, regulations, orders, decrees, applicable common law,
judgments or binding agreements issued, promulgated or entered into by
or with
any Governmental Entity with applicable authority over such matters relating
to
pollution or protection of the environment;
(n) “Environmental
Permits”
shall
mean all permits, licenses, registrations and other authorizations required
under applicable Environmental Laws;
(o) “Hazardous
Materials”
shall
mean all hazardous, toxic, explosive or radioactive substances, wastes
or other
pollutants, including petroleum or petroleum distillates, asbestos,
polychlorinated biphenyls, radon gas and all other substances or wastes
of any
nature regulated pursuant to any Environmental Law;
(p) “ERISA”
shall
mean the Employee Retirement Income Security Act of 1974, as
amended;
(q) “Harmful
Code”
shall
mean any program routine, device or other feature, including a virus, worm,
trojan horse, malicious logic or trap door, that is designed to delete,
disable,
interfere with, perform unauthorized modifications to, or provide unauthorized
access to the software.
(r) “Intellectual
Property Rights”
shall
mean, collectively, all of the following rights in any and all jurisdictions
throughout the world, whether or not filed, perfected, registered or recorded
and whether now or hereafter existing, filed, issued or acquired:
(i) issued patents, pending patent applications, patent disclosures, and
patent rights, including any and all continuations, continuations-in-part,
divisionals, provisionals, reissues, reexaminations, utility, model and
design
patents or any extensions thereof, inventions, invention disclosures,
discoveries and improvements, whether patentable or not; (ii) works of
authorship and rights associated with works of authorship, including copyrights,
copyright applications and copyright registrations; (iii) Moral Rights;
(iv) rights in trademarks, trademark registrations, and applications
therefor, trade names, service marks, service names, logos, or trade dress
(collectively, “Marks”),
and
any goodwill symbolized by such Marks; (v) rights relating to trade secrets
(including those trade secrets defined in the Uniform Trade Secrets Act
and
under corresponding foreign statutory and common law), confidential business,
technical and know-how information; (vi) Internet domain names, World Wide
Web URLs or addresses, any goodwill associated therewith and any other
rights
relating thereto granted by any governmental or quasi-governmental authority,
including Internet domain name registrars; (vii) claims, causes of action,
defenses, and rights to ▇▇▇ for past infringement relating to the enforcement
of
any of the foregoing; (viii) any goodwill symbolized by or associated with
any of the foregoing; and (ix) all other intellectual or proprietary rights
in
any and all jurisdiction throughout the world;
(s) “IP
Assets”
shall
mean all tangible technology or information of a technical nature,
documentation, manuals, memoranda, records, customer lists, supplier lists,
proprietary processes, formulae, software source code and object code,
software
libraries, data bases, software utilities, programming and knowledge base
structures, optimization, organization and compilation techniques, programmers’
notes, flowcharts, diagrams, algorithms, screen displays, graphical interfaces,
photographs, images, layouts, development tools, designs, blueprints,
specifications, technical drawings, applications, methodologies, techniques,
ideas, solutions, processes, concepts, or procedures, hardware and machinery.
(t) “IRS”
shall
mean the Internal Revenue Service;
(u) “Knowledge”
or
“knowledge”
shall
mean with respect to a party hereto, with respect to any matter in question,
that any of the officers (with respect to Company, only those officers
set forth
on Part 8.3 of the Company Disclosure Letter (the “Company Disclosure
Officers”),
and
with respect to Parent, only those officers set forth on Part 8.3 of the
Parent
Disclosure Letter (the “Parent Disclosure
Officers”))
or
directors of such party has actual knowledge of such matter. Without limitation,
any such Person will be deemed to have actual knowledge of a matter if
(i) such matter is reflected in one or more documents (whether written or
electronic, including e-mails sent to or by such individual) in, or that
have
been in, such individual’s possession, including personal files of such
individual or (ii) such matter is reflected in one or more documents
(whether written or electronic) contained in books and records of such
party
that would reasonably be expected to be reviewed by an individual who has
the
duties and responsibilities of such individual in the customary performance
of
such duties and responsibilities;
(v) “Liability”
shall
mean any direct or indirect liability, indebtedness, obligation, commitment,
expense, claim, deficiency, guaranty or endorsement of or by any Person
of any
type, known or unknown, and whether accrued, absolute, contingent, matured,
unmatured or other;
(w) “Material
Adverse Effect”
shall
mean, with respect to either Company or Parent, any effect or change that
would
be materially adverse to the business, operations, properties, condition
(financial or otherwise) or prospects of such party taken as a whole, or
on the
ability of such party to consummate timely the transactions contemplated
hereby;
provided that none of the following shall be deemed to constitute, and
none of
the following shall be taken into account in determining whether there
has been,
a Material Adverse Effect: (a) any adverse change, event, development, or
effect to the extent arising from (1) changes in general business or
economic conditions occurring after the date of this Agreement, including
such
conditions related to the business of such party but not unique for such
party,
(2) changes in national or international political or social conditions
occurring after the date of this Agreement, including engagement, continuation
or escalation by the United States in hostilities, whether or not pursuant
to
the declaration of a national emergency or war, or the occurrence of any
military or terrorist attack upon the United States or any of its territories,
possessions or diplomatic or consular offices or upon any military installation,
equipment or personnel of the United States, (3) any disruption in the
financial, banking, or securities markets, (4) changes resulting from the
execution, announcement or performance of this Agreement, (5) changes in
the trading prices of the Company Common Stock or the Parent Common Stock.
(x) “Moral
Rights
shall
mean any right to claim authorship to or to object to any distortion,
mutilation, or other modification or other derogatory action in relation
to a
work, whether or not such would be prejudicial to the author’s reputation, and
any similar right, existing under common or statutory law of any country
in the
world or under any treaty, regardless of whether or not such right is
denominated or generally referred to as a “moral right;”
(y) “Multiemployer
Plan”
shall
mean any “Pension Plan” which is a “multiemployer plan,” as defined in
Section 3(37) of ERISA;
(z) “Parent
IP Assets”
shall
mean, all IP Assets licensed, used, owned or purported to be owned by Parent
or
any Parent Subsidiaries in the operation of the business of Parent and
Parent
Subsidiaries or constituting or included within any product or services
of
Parent or the Parent Subsidiaries.
(aa) “Parent
IP Rights” shall
mean all Intellectual Property Rights licensed, used, owned or purported
to be
owned by Parent or the Parent Subsidiaries, regardless of whether such
rights
are practiced or exercised by Parent or the Parent Subsidiaries;
(bb) “Parent
Plan”
shall
mean any plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay, deferred
compensation, performance awards, stock or stock-related awards, fringe
benefits
or other employee benefits or remuneration of any kind, whether written
or
unwritten or otherwise, funded or unfunded, including without limitation,
each
“employee
benefit plan,”
within
the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which Parent
or
any Affiliate has or may have any liability or obligation;
(cc) “Parent
Stockholders”
shall
mean the holders of the Parent Common Stock as of the applicable reference
date.
(dd) “Parent
Subsidiary”
shall
mean each Subsidiary of Parent.
(ee) “Pension
Plan”
shall
mean each Company Plan which is an “employee pension benefit plan,” within the
meaning of Section 3(2) of ERISA;
(ff) “Person”
shall
mean any individual, corporation (including any non-profit corporation),
general
partnership, limited partnership, limited liability partnership, joint
venture,
estate, trust, company (including any limited liability company or joint
stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity;
(gg) “Publicly
Available Software”
shall
mean:
(i)
any
software that contains, or is derived in any manner (in whole or in part)
from,
any software that is distributed as free software, open source software
(e.g.
Linux) or similar licensing or distribution models;
(ii)
any
software that requires as a condition of use, modification and/or distribution
that such software or other software incorporated into, derived from or
distributed with such software: (A) be disclosed or distributed in source
code
form; (B) be licensed for the purpose of making derivative works; or (C)
be
redistributable at no charge; and
(iii)
software
licensed or distributed under any of the following licenses or distribution
models, or licenses or distribution models similar to any of the following:
(a)
GNU's General Public License (GPL) or Lesser/Library GPL (LGPL); (b) the
Artistic License (e.g., PERL); (c) the Mozilla Public License; (d) the
Netscape
Public License; (e) the Sun Community Source License (SCSL); (f) the Sun
Industry Source License (SISL); and (g) the Apache Software
License.
(hh) “Subsidiary”
of
a
specified entity will be any corporation, partnership, limited liability
company, joint venture or other legal entity of which the specified entity
(either alone or through or together with any other subsidiary) owns, directly
or indirectly, 50% or more of the stock or other equity or partnership
interests
the holders of which are generally entitled to vote for the election of
the
Board of Directors or other governing body of such corporation or other
legal
entity; and
(ii) “Tax”
or
“Taxes”
refers
to (i) any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities relating
to
taxes, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with
respect
to such amounts, (ii) any liability for payment of any amounts of the type
described in clause (i) as a result of being a member of an affiliated
consolidated, combined or unitary group, and (iii) any liability for
amounts of the type described in clauses (i) and (ii) as a result of any
express or implied obligation to indemnify another Person or as a result
of 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.
8.4 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 party, it being understood that all parties need not sign the same
counterpart.
8.5 Entire
Agreement; Third Party Beneficiaries
.
This Agreement, its Exhibits and the documents and instruments and other
agreements among the parties hereto as contemplated by or referred to herein,
including the Company Disclosure Letter and the Parent Disclosure Letter
(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,
it being understood that the Confidentiality Agreement shall continue in
full
force and effect until the Closing and shall survive any termination of
this
Agreement (all in accordance with the terms set forth therein); and (b)
are not
intended to confer upon any other Person any rights or remedies
hereunder.
8.6 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 greatest extent possible, the economic, business and other
purposes of such void or unenforceable provision.
8.7 Other
Remedies; Specific Performance
.
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. The parties hereto agree that irreparable damage would occur
in
the event that any of the provisions of this Agreement were not performed
in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction
or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any
state
having jurisdiction, this being in addition to any other remedy to which
they
are entitled at law or in equity.
8.8 Governing
Law
.
This Agreement shall be governed by and construed in accordance with the
laws of
the State of Delaware, regardless of the laws that might otherwise govern
under
applicable principles of conflicts of law thereof, except that with respect
to
matters mandatorily governed by Nevada Corporate Law, Nevada Corporate
Law shall
govern. Each of the Parties hereto irrevocably and unconditionally submits
to
the exclusive jurisdiction of either (a) the courts of the State of
Delaware or (b) any Federal court of the United States of America sitting
in the State of Delaware, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated
hereby
(and each agrees that no such action, suit or proceeding relating to this
Agreement shall be brought by it or any of its Affiliates except in such
courts). Each of the Parties further agrees that, to the fullest extent
permitted by applicable Legal Requirements, service of any process, summons,
notice or document by U.S. registered mail (postage prepaid, return receipt
requested) to such party’s respective address set forth in Section 9.4
shall be
effective service of process for any action, suit or proceeding in Delaware
with
respect to any matters to which it has submitted to jurisdiction as set
forth
above in the immediately preceding sentence. Each of the Parties irrevocably
and
unconditionally waives (and agrees not to plead or claim) any objection
to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (i) any court of the State of
Delaware or (ii) any Federal court of the United State of America sitting
in the State of Delaware, or that any such action, suit or proceeding brought
in
any such court has been brought in an inconvenient forum.
8.9 Rules
of Construction
.
The parties hereto agree that they have been represented by counsel during
the
negotiation and execution of this Agreement and, therefore, waive the
application of any Legal Requirements, 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.
8.10 Assignment
.
No party may assign either this Agreement or any of its rights, interests,
or
obligations hereunder without the prior written consent of the other parties
hereto. Subject to the preceding sentence, this Agreement shall be binding
upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Any purported assignment in violation
of this
Section shall be void.
8.11 Attorney’s
Fees
. If
any action or other proceeding relating to the enforcement of any provision
of
this Agreement is brought by any party hereto, the prevailing party shall
be
entitled to recover reasonable attorney’s fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be
entitled).
8.12 Taxes
.
Any Taxes payable in connection with the Merger or the other transactions
contemplated by this Agreement shall be paid by the party responsible therefor
under applicable Legal Requirements.
8.13 Waiver
Of Jury Trial
.
EACH OF PARENT, COMPANY AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE
ACTIONS OF PARENT, COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
*
* * *
*
EX
2.1
v5-Project_Napa_Merger_Agreement.doc
In
Witness Whereof, the parties hereto have caused this Agreement and Plan
of
Merger to be executed by their duly authorized respective officers as of
the
date first written above.
By /s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
President and Chief Executive Officer
IVY
ACQUISITION CORP.
By /s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
President and Chief Executive Officer
VITALSTREAM
HOLDINGS, INC.
By /s/
▇▇▇▇ ▇▇▇▇▇▇▇▇
Name:
▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
Chairman and Chief Executive Officer
[Signature
Page to Agreement and Plan of Merger]