EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
▇.▇. ▇▇▇▇▇▇▇ & COMPANY,
HORNET ACQUISITION CORPORATION,
YOUCENTRIC, INC.
AND
▇▇▇▇▇ ▇▇▇▇
AS STOCKHOLDER REPRESENTATIVE
DATED AS OF AUGUST 14, 2001
TABLE OF CONTENTS
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ARTICLE I THE MERGER..................................................................................................2
1.1 The Merger..........................................................................................2
1.2 Effective Time......................................................................................2
1.3 Effect of the Merger................................................................................2
1.4 Certificate of Incorporation; Bylaws of Surviving Corporation.......................................3
1.5 Directors and Officers of the Surviving Corporation.................................................3
1.6 Effect of Merger on the Capital Stock of the Constituent Corporations...............................3
1.7 Dissenting Shares..................................................................................10
1.8 Exchange Procedures; Surrender of Certificates.....................................................11
1.9 No Further Ownership Rights in Company Capital Stock...............................................12
1.10 Lost, Stolen or Destroyed Certificates.............................................................12
1.11 Tax and Accounting Consequences....................................................................13
1.12 Taking of Necessary Action; Further Action.........................................................13
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................................13
2.1 Organization of the Company........................................................................13
2.2 Company Capital Structure..........................................................................13
2.3 Subsidiaries.......................................................................................14
2.4 Authority..........................................................................................15
2.5 No Conflict........................................................................................15
2.6 Consents...........................................................................................15
2.7 Company Financial Statements.......................................................................16
2.8 No Undisclosed Liabilities.........................................................................16
2.9 No Changes.........................................................................................17
2.10 Tax and Other Returns and Reports..................................................................19
2.11 Restrictions on Business Activities................................................................21
2.12 Title to Properties; Absence of Liens and Encumbrances.............................................22
2.13 Intellectual Property..............................................................................23
2.14 Agreements, Contracts and Commitments..............................................................29
2.15 Interested Party Transactions......................................................................31
2.16 Compliance with Laws...............................................................................31
2.17 Litigation.........................................................................................31
2.18 Insurance..........................................................................................31
2.19 Notice of Fairness Hearing.........................................................................31
2.20 Registration Statement.............................................................................32
2.21 Company SEC Documents..............................................................................32
2.22 Accounts Receivable................................................................................32
2.23 Minute Books.......................................................................................32
2.24 Environmental Matters..............................................................................32
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TABLE OF CONTENTS
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2.25 Brokers' and Finders' Fees; Third Party Expenses...................................................33
2.26 Employee Matters and Benefit Plans.................................................................34
2.27 Employees..........................................................................................38
2.28 Governmental Authorization.........................................................................38
2.29 Complete Copy of Materials.........................................................................39
2.30 Representations Complete...........................................................................39
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..................................................39
3.1 Organization, Standing and Power...................................................................39
3.2 Authority..........................................................................................39
3.3 Parent Common Stock................................................................................39
3.4 SEC Filings; Parent Financial Statements...........................................................40
3.5 No Conflict........................................................................................40
3.6 Consents...........................................................................................40
3.7 Notice of Fairness Hearing.........................................................................41
3.8 Registration Statement.............................................................................41
3.9 Operations of Merger Sub...........................................................................41
3.10 Tax Matters........................................................................................41
3.11 Absence of Certain Changes or Events...............................................................41
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.......................................................................41
4.1 Conduct of Business of the Company.................................................................41
4.2 No Solicitation....................................................................................44
ARTICLE V ADDITIONAL AGREEMENTS......................................................................................45
5.1 Exemption from Registration or Registration Statement..............................................45
5.2 Meetings of Stockholders...........................................................................46
5.3 Access to Information..............................................................................47
5.4 Confidentiality....................................................................................48
5.5 Expenses...........................................................................................48
5.6 Public Disclosure..................................................................................48
5.7 Consents...........................................................................................48
5.8 FIRPTA Compliance..................................................................................48
5.9 Tax Matters........................................................................................48
5.10 Reasonable Efforts.................................................................................48
5.11 Notification of Certain Matters....................................................................49
5.12 Additional Documents and Further Assurances........................................................49
5.13 Company's Auditors.................................................................................49
5.14 New Employment Arrangements........................................................................49
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TABLE OF CONTENTS
(CONTINUED)
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5.15 Voting Agreement...................................................................................50
5.16 Stockholder Agreements.............................................................................50
5.17 Termination of 401(k) Plan.........................................................................50
5.18 Termination of Agreements..........................................................................51
5.19 Spreadsheet........................................................................................51
5.20 Officers and Directors.............................................................................51
5.21 S-8 Registration Statement.........................................................................52
5.22 Nasdaq National Market Listing.....................................................................52
5.23 Certain Litigation.................................................................................52
5.24 Termination of Certain Company Options.............................................................52
ARTICLE VI CONDITIONS TO THE MERGER..................................................................................52
6.1 Conditions to Obligations of Each Party to Effect the Merger.......................................52
6.2 Additional Conditions to Obligations of the Company................................................54
6.3 Additional Conditions to the Obligations of Parent and Merger Sub..................................54
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW.......................................................57
7.1 Survival of Representations and Warranties.........................................................57
7.2 Escrow Arrangements................................................................................57
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.......................................................................65
8.1 Termination........................................................................................65
8.2 Effect of Termination..............................................................................66
8.3 Amendment..........................................................................................66
8.4 Extension; Waiver..................................................................................67
ARTICLE IX GENERAL PROVISIONS........................................................................................67
9.1 Notices............................................................................................67
9.2 Interpretation.....................................................................................68
9.3 Counterparts.......................................................................................70
9.4 Entire Agreement...................................................................................70
9.5 Severability.......................................................................................70
9.6 Other Remedies.....................................................................................70
9.7 Specific Performance...............................................................................70
9.8 Governing Law......................................................................................70
9.9 Rules of Construction..............................................................................71
9.10 Assignment.........................................................................................71
9.11 Absence of Third Party Beneficiary Rights..........................................................71
9.12 Attorneys' Fees....................................................................................71
9.13 Waiver of Jury Trial...............................................................................71
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INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT DESCRIPTION
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Exhibit A Form of Voting Agreement
Exhibit B Form of Employment and Noncompetition Agreement
Exhibit C Form of Legal Opinion of Counsel to Parent and Merger Sub
Exhibit D Form of Legal Opinion of Counsel to the Company
Exhibit E Form of Stockholder Agreement
SCHEDULE DESCRIPTION
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1.6(b) Calculation of Exchange Ratios
1.6(g) Stock Certificate Legends
2.1 Required Foreign Qualifications Not Obtained
2.2(a) Capital Structure
2.2(b) Options and Warrants
2.3 Subsidiaries and Related Capital Structure
2.5 Conflicting Agreements
2.6 Required Consents
2.7 Financials
2.8 Liabilities Not On Current Balance Sheet
2.9 Certain Changes
2.10 Taxes
2.11 Restrictions on Business Activities
2.12(a) Description of Leased Properties
2.12(b) Real Property Leases
2.12(d) Permitted Liens
2.12(e) Equipment
2.13(b) Company Products
2.13(c) Intellectual Property Rights
2.13(d) Claims Against Intellectual Property Rights
2.13(f) Invalid Intellectual Property
2.13(i) Intellectual Property Rights
2.13(j) Third Party Intellectual Property Rights
2.13(l) Intellectual Property Rights
2.13(m) Intellectual Property Rights Developed by Third Parties
2.13(n) Company Intellectual Property
2.13(p) Third Party Software
2.13(t) Intellectual Property Rights Acquired from Third Parties
2.13(u) Material Intellectual Property Agreements
2.13(v) Disputed Contractual Obligations
2.13(x) Intellectual Property Confidentiality Agreements
2.13(y) Agreements Imposing Certain Restrictions
2.14(a) Certain Obligations
2.14(b) Top 15 Customers
2.14(c) Agreements Not in Full Force and Effect
2.15 Interested Party Transactions
2.17 Litigation
2.22(a) Accounts Receivable
2.22(b) Doubtful Accounts Receivable
2.25 Brokers Fees
2.26(b) Benefits Plans
2.26(d) Compliance
2.26(g) Post Employment Obligations
2.26(i)(i) Effect of Transaction
2.26(i)(ii) Section 280(G) Disclosure
2.26(k) Labor Disputes
2.27 Employees
4.1 Scheduled Items Regarding Conduct of Business
5.3 Disqualified Individuals
5.15 Key Employees
5.16 Voting Agreements
5.17 Rule 145 Affiliates
5.22 Officer and Director Indemnity
6.3(c) Consents Required for Closing
6.3(e) Agreements to be Terminated
6.3(f) Liens to be Terminated
6.3(h) Identified Employees
7.2(b) Agreements for which Threshold Amount is Inapplicable
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AGREEMENT AND PLAN OF REORGANIZATION
This
AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made
and entered into as of August 14, 2001 by and among ▇.▇. ▇▇▇▇▇▇▇ & Company, a
Delaware corporation ("PARENT"), Hornet Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent ("MERGER SUB"), YOUcentric,
Inc., a Delaware corporation (the "COMPANY"), and ▇▇▇▇▇ ▇▇▇▇ as stockholder
representative (the "STOCKHOLDER REPRESENTATIVE").
RECITALS
A. The Boards of Directors of each of Parent, the Company and Merger
Sub believe it is in the best interests of each company and their respective
stockholders that Parent acquire the Company through the statutory merger of the
Company with and into Merger Sub (the "MERGER") and, in furtherance thereof,
have approved the Merger, this Agreement and the transactions contemplated
hereby.
B. Pursuant to the Merger, among other things, (i) all of the capital
stock of the Company that is issued and outstanding immediately prior to the
Effective Time (the "COMPANY CAPITAL STOCK") shall be converted into the right
to receive the consideration set forth herein and (ii) certain outstanding
options to purchase Common Stock of the Company shall be assumed by Parent.
C. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in Article VII hereof.
D. As a condition and further inducement to Parent to enter into this
Agreement, certain stockholders of the Company have agreed to enter into a
Voting Agreement in the form attached hereto as Exhibit A (the "VOTING
Agreement"), certain key employees of the Company have agreed to enter into
Employment and Non-Competition Agreements substantially in the form attached
hereto as Exhibit B (the "EMPLOYMENT AND NON-COMPETITION AGREEMENTS"), and
certain stockholders of the Company have agreed to enter into Stockholder
Agreements substantially in the form attached hereto as Exhibit E (the
"STOCKHOLDER AGREEMENTS").
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
F. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
promises and representations set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby, the parties hereby agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger
(a) Surviving Corporation. At the Effective Time (as defined
in Section 1.2) and subject to and upon the terms and conditions of this
Agreement and the applicable provisions of the Delaware General Corporation Law
("DELAWARE LAW"), the Company shall be merged with and into Merger Sub, the
separate corporate existence of the Company shall cease, and Merger Sub shall
continue as the surviving corporation and as a wholly-owned subsidiary of
Parent. Merger Sub as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "SURVIVING CORPORATION."
(b) Change of Structure. Subject to the provisions of this
Section 1.1(b), Parent may, at its election, acquire the Company through a
merger of Merger Sub with and into the Company, in which the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation and as a wholly-owned subsidiary of Parent (the "REVERSE
TRIANGULAR MERGER"). If Parent so elects, the Company shall take such actions as
are reasonably requested by Parent to effect the Reverse Triangular Merger and
all references in this Agreement to the Surviving Corporation shall be to the
Company as the Surviving Corporation. Notwithstanding the foregoing, Parent
shall not effect the Reverse Triangular Merger if the Reverse Triangular Merger
would not constitute a reorganization within the meaning of Section 368(a) of
the Code.
1.2 Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Merger (the "CLOSING") will take
place as promptly as practicable, but no later than five (5) business days
following satisfaction or waiver of the conditions set forth in Article VI, at
the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, unless another place or time is agreed to in writing by Parent and
the Company. The date upon which the Closing actually occurs is herein referred
to as the "CLOSING DATE." On the Closing Date, the parties hereto shall cause
the Merger to be consummated by filing a Certificate of Merger with the
Secretary of State of Delaware (the "MERGER CERTIFICATE"), in accordance with
the applicable provisions of Delaware Law (the time of acceptance by the
Secretary of State of Delaware of such filing being referred to herein as the
"EFFECTIVE TIME").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
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1.4 Certificate of Incorporation; Bylaws of Surviving Corporation.
(a) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation; provided,
however, that Article I of the Certificate of Incorporation shall be amended to
read as follows: "The name of this corporation is ▇.▇. ▇▇▇▇▇▇▇ YOUcentric
Company."
(b) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers of the Surviving Corporation. Unless
otherwise determined by Parent prior to the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation. Unless
otherwise determined by Parent prior to the Effective Time, the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, each to hold office in accordance with the Bylaws
of the Surviving Corporation.
1.6 Effect of Merger on the Capital Stock of the Constituent
Corporations.
(a) Definitions.
(i) "AGGREGATE COMPANY COMMON NUMBER" shall mean the
sum of the aggregate number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time and the aggregate number of
shares of Company Common Stock issued or issuable upon the exercise or
conversion of all Company Options that will be assumed by Parent pursuant to
Section 1.6(d) and Company Warrants outstanding immediately prior to the
Effective Time.
(ii) "CASH CONSIDERATION" shall mean $1,000,000,
provided, however, that such amount may be increased, at the sole discretion of
Parent, up to an amount not to exceed $36 million or such lesser amount if
necessary to avoid jeopardizing the qualification of the Merger as a tax-free
reorganization with the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code, at any time prior to the Effective Time, and such increase, if any, shall
be offset by a corresponding reduction in the number of the Merger Shares based
on the Trading Price; provided, however, that to the extent the number of Merger
Shares would have exceeded 19.99% of the outstanding Parent Common Stock but for
the limitation thereon imposed hereinbelow, the Cash Consideration shall be
increased by an amount equal to the value of such excess on a dollar-for-dollar
basis. Notwithstanding anything in this Section 1.6 to the contrary, should the
aggregate bonuses payable pursuant to the Company's Management Incentive
Compensation Plan be less than $5,500,024, the Cash Consideration shall be
increased by the amount by which $1,000,000 exceeds the amount of such aggregate
bonuses which are payable in cash.
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(iii) "COMPANY CAPITAL STOCK" shall mean each
Outstanding Share of Company Common Stock and Company Preferred Stock.
(iv) "COMPANY CHARTER" shall mean the Company's
Amended and Restated Certificate of Incorporation immediately prior to the
Effective Time.
(v) "COMPANY COMMON STOCK" shall mean all Outstanding
Shares of Common Stock, par value $.001 per share, of the Company.
(vi) "COMPANY COMMON STOCK CASH CONSIDERATION" shall
mean the aggregate Cash Consideration to be distributed to holders of the
Outstanding Shares of Company Common Stock pursuant to this Agreement.
(vii) "COMPANY COMMON STOCK CASH CONSIDERATION PER
SHARE" shall mean the amount of Cash Consideration to be distributed to the
holder of each Outstanding Share of Company Common Stock pursuant to this
Agreement.
(viii) "COMPANY COMMON STOCK EXCHANGE RATIO" shall
mean the number of Merger Shares into which each Outstanding Share of Company
Common Stock will be converted pursuant to this Agreement.
(ix) "COMPANY COMMON STOCK MERGER CONSIDERATION"
shall mean the aggregate Merger Consideration to be distributed to the holders
of the Outstanding Shares of Company Common Stock pursuant to this Agreement.
(x) "COMPANY COMMON STOCK MERGER SHARES" shall mean
the Merger Shares to be distributed to the holders of the Outstanding Shares of
Company Common Stock pursuant to this Agreement.
(xi) "COMPANY OPTION EXCHANGE RATIO" shall mean the
ratio to be applied to the exercise price and number of shares issuable upon
exercise of Company Options assumed by Parent pursuant to Section 1.6(d).
(xii) "COMPANY OPTIONS" shall mean all issued and
outstanding options or other rights (including commitments to grant options or
other rights) to purchase or otherwise acquire (by payment of consideration,
conversion or otherwise) any Company Common Stock (whether or not vested) held
by any person or entity at the Effective Time, other than any Series A
Preferred, Series B Preferred, Series C Preferred or Company Warrants.
(xiii) "COMPANY PREFERRED STOCK" shall mean all
Outstanding Shares of Preferred Stock of the Company, par value $0.001 per
share.
(xiv) "COMPANY WARRANTS" shall mean any issued and
outstanding, at the Effective Time, warrant to purchase or otherwise acquire (by
payment of consideration, conversion or otherwise) shares of Company Capital
Stock identified on Schedule 2.2(b).
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(xv) "ESCROW AMOUNT" shall mean $10,750,000.
(xvi) "MANAGEMENT INCENTIVE COMPENSATION PLAN" shall
mean that certain incentive compensation plan adopted by the Company prior to
the date hereof to compensate certain employees and a consultant of the Company
in the event of a sale or acquisition of the Company.
(xvii) "MERGER CONSIDERATION" shall mean $80,499,976.
Notwithstanding anything in this Section 1.6 to the contrary, should the
aggregate bonuses payable pursuant to the Company's Management Incentive
Compensation Plan be less than $5,500,024, the Merger Consideration shall be
increased by the amount by which $5,500,024 exceeds the aggregate amount of such
bonuses.
(xviii) "MERGER SHARES" shall mean the number of
shares of Parent Common Stock equal to the quotient obtained by dividing (i) the
Merger Consideration less the Cash Consideration, by (ii) the Trading Price.
Notwithstanding anything in this Section 1.6 to the contrary, should the
aggregate bonuses payable pursuant to the Company's Management Incentive
Compensation Plan be less than $5,500,024, the Merger Shares shall be increased
by (i) the quotient obtained by dividing $3,500,024 by the Trading Price, less
(ii) the number of shares of Parent Common Stock to be distributed pursuant to
such plan. In no event shall the Merger Shares exceed 19.99% of the outstanding
Parent Common Stock between the date of this Agreement and the Effective Time.
(xix) "OUTSTANDING SHARES" shall mean the number of
shares of the Company's Common Stock or of the applicable series of Company
Preferred Stock outstanding immediately prior to the Effective Time.
(xx) "PARENT COMMON STOCK" shall mean shares of
Parent Common Stock, par value $0.01 per share.
(xxi) "SERIES A CASH CONSIDERATION" shall mean the
aggregate Cash Consideration to be distributed to holders of the Outstanding
Shares of Series A Preferred pursuant to this Agreement.
(xxii) "SERIES A CASH CONSIDERATION PER SHARE" shall
mean the amount of Cash Consideration to be distributed to the holder of each
Outstanding Share of Series A Preferred pursuant to this Agreement.
(xxiii) "SERIES A EXCHANGE RATIO" shall mean the
number of Merger Shares into which each share of Series A Preferred will be
converted pursuant to this Agreement.
(xxiv) "SERIES A LIQUIDATION PREFERENCE" shall mean
the aggregate liquidation preference for the Series A Preferred according to
Section 2 of the Company Charter.
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(xxv) "SERIES A LIQUIDATION PREFERENCE MANAGEMENT
INCENTIVE COMPENSATION REDUCTION" shall mean the aggregate reduction in the
Series A Liquidation Preference, according to Section 2(d) of the Company
Charter, resulting from the bonuses payable pursuant to the Company's Management
Incentive Compensation Plan.
(xxvi) "SERIES A MERGER CONSIDERATION" shall mean the
aggregate Merger Consideration to be distributed to the holders of the
Outstanding Shares of Series A Preferred pursuant to this Agreement.
(xxvii) "SERIES A MERGER SHARES" shall mean the
number of Merger Shares to be distributed to the holders of the Outstanding
Shares of Series A Preferred pursuant to this Agreement.
(xxviii) "SERIES A PARTICIPATION" shall mean the
portion of the aggregate Merger Consideration to be distributed to the holders
of the Outstanding Shares of Series A Preferred pursuant to this Agreement
pursuant to Section 2(b) of the Company Charter.
(xxix) "SERIES A PREFERRED" shall mean all
Outstanding Shares of Series A Preferred Stock, par value $0.001 per share, of
the Company.
(xxx) "SERIES B CASH CONSIDERATION" shall mean the
aggregate Cash Consideration to be distributed to holders of the Outstanding
Shares of Series B Preferred pursuant to this Agreement.
(xxxi) "SERIES B CASH CONSIDERATION PER SHARE" shall
mean the amount of Cash Consideration to be distributed to the holder of each
Outstanding Share of Series B Preferred pursuant to this Agreement.
(xxxii) "SERIES B EXCHANGE RATIO" shall mean the
number of Merger Shares into which each share of Series B Preferred will be
converted pursuant to this Agreement.
(xxxiii) "SERIES B LIQUIDATION PREFERENCE" shall mean
the aggregate liquidation preference for the Series B Preferred according to
Section 2 of the Company Charter.
(xxxiv) "SERIES B MANAGEMENT INCENTIVE COMPENSATION
REDUCTION" shall mean the aggregate reduction in the Series B Liquidation
Preference, according to Section 2(d) of the Company Charter, resulting from the
bonuses payable pursuant to the Company's Management Incentive Compensation
Plan.
(xxxv) "SERIES B MERGER CONSIDERATION" shall mean the
aggregate Merger Consideration to be distributed to the holders of the
Outstanding Shares of Series B Preferred pursuant to this Agreement.
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(xxxvi) "SERIES B MERGER SHARES" shall mean the
number of Merger Shares to be distributed to the holders of the Outstanding
Shares of Series B Preferred pursuant to this Agreement.
(xxxvii) "SERIES B PREFERRED" shall mean all
Outstanding Shares of Series B Preferred Stock, par value $0.001 per share, of
the Company.
(xxxviii) "SERIES C CASH CONSIDERATION" shall mean
the aggregate Cash Consideration to be distributed to holders of the Outstanding
Shares of Series C Preferred pursuant to this Agreement.
(xxxix) "SERIES C CASH CONSIDERATION PER SHARE" shall
mean the amount of Cash Consideration to be distributed to the holder of each
Outstanding Share of Series C Preferred pursuant to this Agreement.
(xl) "SERIES C EXCHANGE RATIO" shall mean the number
of Merger Shares into which each share of Series C Preferred will be converted
pursuant to this Agreement.
(xli) "SERIES C LIQUIDATION PREFERENCE" shall mean
the aggregate liquidation preference for the Series C Preferred pursuant to
Section 2 of the Company Charter.
(xlii) "SERIES C MANAGEMENT INCENTIVE COMPENSATION
REDUCTION" shall mean the aggregate reduction in the Series C Liquidation
Preference, according to Section 2(d) of the Company Charter, resulting from the
bonuses payable pursuant to the Company's Management Incentive Compensation
Plan.
(xliii) "SERIES C MERGER CONSIDERATION" shall mean
the aggregate Merger Consideration to be distributed to the holders of the
Outstanding Shares of Series C Preferred pursuant to this Agreement.
(xliv) "SERIES C MERGER SHARES" shall mean the number
of Merger Shares to be distributed to the holders of the Outstanding Shares of
Series C Preferred pursuant to this Agreement.
(xlv) "SERIES C PREFERRED" shall mean all Outstanding
Shares of Series C Preferred Stock, par value $0.001 per share, of the Company.
(xlvi) "TRADING PRICE" means the volume weighted
average trading price of a share of Parent Common Stock on the Nasdaq National
Market based on the sales price of every share of Parent Common Stock traded
during the ten (10) trading days immediately up to and including the date
preceding the Closing Date.
(b) Exchange Ratio; Consideration to be Paid. As of the
Effective Time, by virtue of the Merger and without any action on the part of
the Company, Merger Sub, Parent or any of their respective stockholders:
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(i) Each share of Company Capital Stock owned by the
Company or any direct or indirect wholly-owned subsidiary of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(ii) Subject to the escrow provisions set forth in
Article VII hereof, each issued and outstanding share of Company Capital Stock
other than shares for which dissenters' rights are perfected or as provided in
Section 1.6(b)(1), shall be converted into the right to receive from Parent,
Cash Consideration and Merger Shares which shall be allocated to the holders of
Company Capital Stock giving effect to the exercise of the Company Warrants and
the Company Options that are assumed by Parent pursuant to this Agreement,
whether vested or unvested, in accordance with the provisions of the Company
Charter. The methods for calculating the Company Common Stock Cash Consideration
Per Share, Company Common Stock Exchange Ratio, Series A Cash Consideration Per
Share, Series A Exchange Ratio, Series B Cash Consideration Per Share, Series B
Exchange Ratio, Series C Cash Consideration Per Share and Series C Exchange
Ratio in accordance with the Company Charter are set forth on Schedule 1.6(b).
The aggregate Cash Consideration to be issued to each stockholder of the Company
under this Section 1.6(b)(2) shall be calculated by aggregating all shares of
Company Common Stock and all shares of each series of Company Preferred Stock
held by each such stockholder, so that the Cash Consideration to be issued shall
be equal to (i) the Series A Cash Consideration Per Share multiplied by the
number of shares of Series A Preferred held by such stockholder, (ii) the Series
B Cash Consideration Per Share multiplied by the number of shares of Series B
Preferred held by such stockholder, (iii) the Series C Cash Consideration Per
Share multiplied by the number of shares of Series C Preferred held by such
stockholder, and (iv) the Company Common Stock Cash Consideration Per Share
multiplied by the number of shares of Company Common Stock held by such
stockholder, as the case may be. The aggregate Merger Shares to be issued to
each stockholder under this Section 1.6(b)(2) shall be calculated by
multiplying: (i) the Series A Exchange Ratio by the number of shares of Series A
Preferred held by such stockholder, (ii) the Series B Exchange Ratio by the
number of shares of Series B Preferred held by such stockholder, (iii) the
Series C Exchange Ratio by the number of shares of Series C Preferred held by
such stockholder, and (iv) the Company Common Stock Exchange Ratio by the number
of shares of Company Common Stock held by such stockholder, as the case may be,
with cash paid in lieu of any fractional share of Parent Common Stock pursuant
to Section 1.6(c).
(iii) Notwithstanding anything to the contrary
herein, the maximum amount of Cash Consideration and the maximum number of
shares of Parent Common Stock multiplied by the Trading Price to be issued
(including Parent Common Stock to be reserved for issuance upon exercise of all
of the Company Options) as consideration for all outstanding shares of Company
Capital Stock shall not exceed the Merger Consideration.
(c) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall be entitled to receive, without any
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interest, an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction multiplied by (ii) the Trading Price.
(d) Stock Options. At the Effective Time, each Company Option
then outstanding under the Company's 1999 Equity Compensation Plan, 2000 Equity
Compensation Plan and 2000 Non-Employee Director Stock Option Plan
(collectively, the "OPTION PLANS") or otherwise shall be assumed by Parent in
accordance with provisions described below:
(i) At the Effective Time, each then outstanding
Company Option pursuant to Option Plans or otherwise, whether vested or
unvested, shall be assumed by Parent; provided, however, that, prior to the
Effective Time, the Company shall take any and all necessary action to terminate
the Company Options set forth on Schedule 1.6(d), and such Company Options,
therefore, (A) shall not be assumed by Parent and (B) shall be of no further
force or effect at the Effective Time. Each Company Option so assumed by Parent
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the Option Plans and/or as provided in the
respective option agreements governing such Company Option immediately prior to
the Effective Time, except that (A) such Company Option shall be exercisable
(when vested) for that number of whole shares of Parent Common Stock equal to
the product of the number of shares of Company Common Stock that were issuable
upon exercise of such Company Option immediately prior to the Effective Time
multiplied by the Company Option Exchange Ratio, rounded to the nearest whole
number of shares of Parent Common Stock and (B) the per share exercise price for
the shares of Parent Common Stock issuable upon exercise of such assumed Company
Option shall be equal to the quotient determined by dividing the exercise price
per share of Company Common Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the Company Option Exchange Ratio,
rounded to the nearest whole cent.
(ii) It is the intention of the parties that the
Company Options assumed by Parent qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code, to the extent the
Company Options qualified as incentive stock options immediately prior to the
Effective Time.
(iii) Promptly following the Effective Time, Parent
will issue to each holder of an outstanding Company Option a document evidencing
the foregoing assumption of such Company Option by Parent.
(e) Capital Stock of Merger Sub. Each share of Common Stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares of Common
Stock of Merger Sub shall, as of the Effective Time, evidence ownership of such
shares of Common Stock of the Surviving Corporation.
(f) Rounding. All calculations made pursuant to this Agreement
shall be rounded to the nearest .00000001, with .000000005 being rounded up. All
such calculations shall be performed by the Company in accordance herewith.
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(g) Lock-Up. The shares of Parent Common Stock issuable under
this Agreement are subject to a lock-up restriction ("LOCK-UP") pursuant to
which no shares may be transferred except as provided below. With respect to the
total shares of Parent Common Stock received by each Company stockholder in the
Merger or held in the Escrow for such stockholder's benefit pursuant to the
terms of this Agreement, the Lock-Up shall lapse as to (i) up to 17% commencing
on the Closing, and (ii) up to an additional 20.75% on the last day of each
consecutive 30-day period following the Closing. Each Company stockholder shall
receive five certificates representing the shares of Parent Common Stock
deliverable to such stockholder pursuant to this Agreement and such certificates
shall bear legends substantially as set forth in Schedule 1.6(g) hereto.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has demanded
and perfected appraisal or dissenters' rights for such shares in accordance with
Delaware Law and who, as of the Effective Time, has not effectively withdrawn or
lost such appraisal or dissenters' rights ("DISSENTING SHARES") shall not be
converted into or represent a right to receive Parent Common Stock pursuant to
Section 1.6, but the holder thereof shall only be entitled to such rights as are
granted by Delaware Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock who is otherwise entitled to exercise
dissenters' rights under Delaware Law shall effectively withdraw or lose
(through failure to perfect or otherwise) such dissenters' rights, then, as of
the later of the Effective Time and the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive Parent Common Stock and payment for any fractional share as provided in
Section 1.6(c), without interest on the payment, if any, upon surrender of the
certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for the exercise of dissenters' rights in respect of any shares
of Company Capital Stock, withdrawals of such demands, and any other instruments
served pursuant to Delaware Law (including without limitation instruments
concerning appraisal or dissenters' rights) and received by the Company and (ii)
the opportunity to participate in all negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for the
exercise of dissenters' rights in respect of any shares of Company Capital Stock
or offer to settle or settle any such demands. Notwithstanding the foregoing, to
the extent that Parent or the Company (i) makes any payment or payments in
respect of any Dissenting Shares in excess of the consideration that otherwise
would have been payable in respect of such shares in accordance with this
Agreement or (ii) incurs any other costs or expenses in respect of any
Dissenting Shares (limited to an aggregate of $50,000, excluding payments for
such shares) (together "DISSENTING SHARE PAYMENTS"), Parent shall be entitled to
recover under the terms of Article VII hereof the amount of such Dissenting
Share Payments without regard to the Threshold Amount.
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1.8 Exchange Procedures; Surrender of Certificates.
(a) Exchange Agent. Parent's transfer agent shall serve as
Exchange Agent in the Merger.
(b) Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I, the aggregate Merger Shares issuable pursuant
to Section 1.6 hereof, the Cash Consideration payable pursuant to Section 1.6
hereof and the cash payable in lieu of fractional shares in exchange for the
outstanding shares of Company Capital Stock, none of which will be used or
distributed other than in accordance with the terms hereof; provided that, on
behalf of the holders of Company Capital Stock, Parent shall cause the Exchange
Agent to deposit into an escrow account a number of shares of Parent Common
Stock equal to the Escrow Amount out of the aggregate Merger Shares. The portion
of the Escrow Amount contributed on behalf of each holder of Company Capital
Stock shall be in proportion to the aggregate number of shares of Parent Common
Stock that such holder would otherwise be entitled to receive under Section 1.6
by virtue of ownership of outstanding shares of Company Capital Stock.
(c) Exchange Procedures. As soon as practicable after the
Effective Time, but not more than ten (10) business days after the Effective
Time, Parent shall cause the Exchange Agent to mail to each holder of record of
a certificate or certificates (the "CERTIFICATES") which immediately prior to
the Effective Time represented outstanding shares of Company Capital Stock and
which shares were converted into the right to receive shares of Parent Common
Stock pursuant to Section 1.6, (i) a letter of transmittal (which shall be in
customary form and 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 Exchange Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of a Certificate for cancellation
to the Exchange Agent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive within five business days
following the surrender of such certificate and a duly completed and validly
executed letter of transmittal in exchange therefor (i) certificates
representing the number of whole shares of Parent Common Stock (less the number
of shares of Parent Common Stock to be deposited in the Escrow Fund on such
holder's behalf pursuant to Article VII hereof), plus the Cash Consideration and
cash in lieu of fractional shares in accordance with Section 1.6(f), to which
such holder is entitled pursuant to Section 1.6, and (ii) any dividends or other
distributions, if any, to which holder is entitled pursuant to Section 1.8(d)
(the "ADDITIONAL PAYMENTS"), and the Certificate so surrendered shall forthwith
be canceled. As soon as practicable after the Effective Time, and subject to and
in accordance with the provisions of Article VII hereof, Parent shall cause to
be distributed to the Escrow Agent (as defined in Article VII) a certificate or
certificates representing that number of shares of Parent Common Stock equal to
the Escrow Amount, which certificate shall be registered in the name of the
Escrow Agent. Such shares shall be beneficially owned by the holders on whose
behalf such shares were deposited in the Escrow Fund and shall be available to
compensate Parent as provided in Article VII. From the Closing and until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Capital Stock will be deemed from and after the
Effective Time, for all corporate purposes, to represent solely (i) ownership of
the number of full shares of
-▇▇-
▇▇▇▇▇▇ ▇▇▇▇▇▇ Stock and Cash Consideration into which such shares of Company
Capital Stock shall have been so exchanged and (ii) the right to receive the
Additional Payments, if any.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock declared or
made with a record date after the Effective Time will be paid to the holder of
any unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Capital Stock for any amount properly paid in good faith to a public
official pursuant to any applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Company Capital Stock. All shares of
Parent Common Stock issued pursuant to the Merger upon the surrender for
exchange of shares of Company Capital 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 Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon receiving notice from the holder thereof
and upon the making of an affidavit of that fact by such holder, such shares of
Parent Common Stock, Cash Consideration, cash in lieu of fractional shares, and
the Additional Payments, if any; provided, however, that Parent may, in its
discretion and, as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably and customarily direct as indemnity against any claim
that may be
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made against Parent or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
1.11 Tax and Accounting Consequences. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code by reason of Section 368(a)(2)(D) of the Code.
The parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations. It is intended by the parties hereto that the Merger shall be
treated as a "purchase" for accounting purposes.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or reasonably 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 the Company and Merger Sub, the
officers and directors of the Company and Merger Sub are fully authorized in the
name of their respective corporations or otherwise to take, and will take, all
such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are clearly disclosed in the disclosure schedules
supplied by the Company to Parent attached hereto (the "COMPANY SCHEDULES") and
dated as of the date hereof as to matters identified in this Article II. Nothing
in the Company Schedules shall be deemed to disclose an exception to a
representation or warranty made herein, unless (i) such exception is identified
in the applicable Schedule or (ii) is identified in another Schedule and
cross-referenced in the applicable Schedule with reasonable specificity.
2.1 Organization of the Company. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. The Company
and each of its subsidiaries has the corporate power and authority to own its
properties and to carry on its business as now being conducted. Except as set
forth on Schedule 2.1 or where the failure to obtain the same would not have a
material adverse effect on the business, assets (whether tangible or
intangible), condition (financial or otherwise) or results of operation of the
Company and its subsidiaries, taken as a whole (hereinafter referred to as a
"COMPANY MATERIAL ADVERSE EFFECT"), the Company and each of its subsidiaries is
duly qualified to do business and in good standing as a foreign corporation in
each state or other jurisdiction in which it conducts business. The Company has
delivered a true and correct copy of its Certificate of Incorporation and
Bylaws, each as amended to date, to Parent.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
(i) 250,000,000 shares of authorized Common Stock of which 32,728,826 shares are
issued and outstanding, and
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110,455,496 shares of authorized Preferred Stock, consisting of 4,159,446 shares
of Series A Preferred, 4,159,446 shares of which are issued and outstanding,
2,911,900 shares of Series B Preferred, 2,572,376 shares of which are issued and
outstanding and 103,384,150 shares of Series C Preferred, 75,815,012 shares of
which are issued and outstanding. The number of shares of Company Common Stock
into which the Series A Preferred, the Series B Preferred and the Series C
Preferred is convertible is set forth in Schedule 2.2(a). Except as set forth in
the immediately preceding sentence, no shares of capital stock or other equity
securities of the Company are issued, reserved for issuance (except as set forth
in Section 2.2(b) below) or outstanding. The Company Capital Stock is held of
record by the persons, with the addresses of record and in the amounts set forth
on Schedule 2.2(a). All outstanding shares of Company Capital Stock are, and at
the Effective Time will be, duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound. None of the outstanding Company
Capital Stock or other securities of the Company was issued in violation of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "SECURITIES ACT") or any applicable state Blue Sky laws.
(b) In addition, there are currently issued and outstanding
options and warrants to purchase an aggregate of 25,576,043 shares of Company
Capital Stock issued to directors, employees and consultants pursuant to the
Option Plans. The Company Options are held by the persons and in the amounts set
forth on Schedule 2.2(b). Schedule 2.2(b) sets forth the vesting schedule for
all Company Options. Except as set forth on Schedule 2.2(b), there are no other
options, warrants, calls, rights, commitments or agreements of any character,
written or oral, to which the Company is a party or by which it is bound
obligating the Company to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of the Company or obligating the Company to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. Except as set
forth on Schedule 2.2(b), there are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or other similar rights with
respect to the Company. Except as set forth on Schedule 2.2(b) and as required
under Section 5.15, there are no voting trusts, proxies, or other agreements or
understandings with respect to the capital stock of the Company.
2.3 Subsidiaries. Except as set forth on Schedule 2.3, the Company does
not have and has never had any subsidiaries and does not otherwise own and has
never otherwise owned any shares of capital stock or any interest in, or
control, directly or indirectly, any other corporation, partnership,
association, joint venture or other business entity except for investment-grade
securities, bank, checking and money market accounts and other cash equivalent
investments. The authorized capital stock of each subsidiary, as well as the
issued and outstanding shares of capital stock of each subsidiary, is listed on
Schedule 2.3. Except as set forth on Schedule 2.3, all outstanding shares of the
capital stock of each subsidiary are, and at the Effective Time will be, duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, their respective charter documents or any
agreement of which the Company or any subsidiary is a party or
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by which it is bound. None of the outstanding shares of capital stock of any
subsidiary were issued in violation of the Securities Act or any applicable
state Blue Sky laws.
2.4 Authority. The Company has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, and no further action is required
on the part of the Company to authorize this Agreement and the transactions
contemplated hereby, subject only to the approval of this Agreement by the
Company's stockholders. The vote required by the stockholders of the Company to
duly approve the Merger and adopt this Agreement is the holders of a majority of
(i) the outstanding Company Common Stock and Preferred Stock (on an "as
converted" basis), voting together as a single class, (ii) the Preferred Stock
(on an "as converted" basis), voting together as a single class and (iii) a
majority of the outstanding Series C Preferred (on an "as converted" basis). No
vote of the holders of Series A Preferred or Series B Preferred as separate
classes is required to approve the Merger. This Agreement and the Merger have
been unanimously approved by the Board of Directors of the Company. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (b) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
2.5 No Conflict. Except as set forth on Schedule 2.5, the execution and
delivery by the Company of this Agreement, and the consummation of the
transactions contemplated hereby, will not conflict with or result in any
violation of or default under (with or without notice or lapse of time, or both)
or give rise to a right of termination, cancellation, modification or
acceleration of any obligation, payment of any benefit, or loss of any benefit
under (any such event, a "CONFLICT") (a) any provision of the Certificate of
Incorporation, Bylaws or other charter documents of the Company or any of its
subsidiaries, (b) any mortgage, indenture, lease, contract, covenant or other
agreement, instrument or commitment, permit, concession, franchise or license
(each a "CONTRACT" and collectively the "CONTRACTS") to which the Company or any
of its subsidiaries or any of their properties or assets (whether tangible or
intangible) is a party or, as the case may be, subject, or (c) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its subsidiaries or any of their properties (whether tangible
or intangible) or assets. Following the Effective Time, the Surviving
Corporation will be permitted to exercise all of its rights under the Contracts
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company or any of its subsidiaries
would otherwise be required to pay pursuant to the terms of such Contracts had
the transactions contemplated by this Agreement not occurred.
2.6 Consents. Except as set forth on Schedule 2.6, no consent, waiver,
approval, order or authorization of, or registration, declaration or filing with
any court, administrative agency or commission or other federal, state, county,
local or other foreign governmental authority,
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instrumentality, agency or commission of competent jurisdiction (each, a
"GOVERNMENTAL ENTITY") or any third party, including a party to any agreement
with the Company (so as not to trigger any Conflict), is required by or with
respect to the Company in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (a) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
securities laws and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR ACT") and other similar anti-trust requirements of foreign
governmental authorities, (b) the approval of the Company's stockholders, and
(c) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware. Any failure to receive a consent from any third party for an
agreement listed on Schedule 2.5 that is not listed on Schedule 6.3(c) will not
(either individually or in any combination) materially affect, after the
Effective Time, the ability of Parent or the Surviving Corporation to conduct
the business operated by the Company as currently conducted.
2.7 Company Financial Statements.
(a) Schedule 2.7 sets forth the Company's audited consolidated
balance sheet as of December 31, 2000 (the "BALANCE SHEET"), and the related
audited consolidated statements of operations, cash flows and shareholders'
deficiency for the fiscal year then ended, together with the report thereon of
Deloitte & Touche LLP, as well as the Company's unaudited consolidated balance
sheet as of June 30, 2001 (the "CURRENT BALANCE SHEET") and the related
unaudited consolidated statements of operations, cash flows and shareholders'
deficiency for the six-month period then ended (collectively, the "COMPANY
FINANCIAL STATEMENTS"). The Company Financial Statements are complete and
correct in all material respects and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a basis consistent
throughout the periods indicated and consistent with each other (except that the
unaudited financial statements do not contain footnotes and earnings per share
data). The Company Financial Statements present fairly in all material respects
the financial condition and operating results and cash flows of the Company as
of the dates and during the periods indicated therein.
(b) As of the date of this Agreement or August 10, 2001,
whichever is earlier, the Company has a Cash Balance of at least $15,500,000.
For purposes of this calculation, "CASH BALANCE" includes all cash, cash
equivalents, marketable securities, short-term investments and certificates of
deposit (including that certain certificate of deposit that the Company pledged
to secure obligations related to a certain office lease of the Company).
2.8 No Undisclosed Liabilities. Except (i) as set forth on Schedule 2.8
and (ii) for liabilities, indebtedness, obligations, expenses, claims,
deficiencies, guarantees or endorsements incurred in the ordinary course of
business consistent with past practices, neither the Company nor any subsidiary
has any liability, indebtedness, obligation, expense, claim, deficiency,
guaranty or endorsement of any type, whether accrued, absolute, contingent,
matured, unmatured or other (whether or not required to be reflected in
financial statements in accordance with GAAP), that, individually or in the
aggregate, has not been reflected or reserved against in the Current Balance
Sheet.
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2.9 No Changes. Except for expenses incurred in connection with this
Agreement and as set forth in Schedule 2.9, since December 31, 2000, there has
not been, occurred or arisen any:
(a) transaction by the Company or any of its subsidiaries in
excess of $25,000 in any one case except in the ordinary course of business as
conducted on that date and consistent with past practices;
(b) amendments or changes to the Certificate of Incorporation
or Bylaws of the Company or any of its subsidiaries;
(c) capital expenditure or commitment therefore by the Company
or any of its subsidiaries of $15,000 in any individual case or $25,000 in the
aggregate;
(d) payment, discharge or satisfaction, in any amount in
excess of $25,000 in any one case, of any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
payment, discharge or satisfaction in the ordinary course of business as
conducted on that date and consistent with past practices;
(e) destruction of, damage to or loss of any material assets,
business or customer of the Company or any of its subsidiaries (whether or not
covered by insurance);
(f) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action with respect to the Company or any of its
subsidiaries;
(g) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(h) change in any material election in respect of Taxes,
adoption or change in any accounting method in respect of Taxes, agreement or
settlement of any claim or assessment in respect of Taxes, or extension or
waiver of the limitation period applicable to any claim or assessment in respect
of Taxes;
(i) revaluation by the Company of any of its or any of its
subsidiaries' assets (whether tangible or intangible);
(j) declaration, setting aside or payment of a dividend or
other distribution with respect to the Company Capital Stock or any split,
combination or reclassification in respect of any shares of Company Capital
Stock, or any issuance or authorization of any issuance of any other securities
in respect of, in lieu of or in substitution for shares of Company Capital
Stock, or any direct or indirect redemption, repurchase or other acquisition by
the Company of any shares of Company Capital Stock (or options, warrants or
other rights convertible into, exercisable or exchangeable therefor), or any
issuance or sale, or contract to issue or sell any shares of Company Capital
Stock, or securities exchangeable, convertible or exercisable for, shares of
Company Capital Stock or any securities, warrants, options, or rights to
purchase any of the foregoing, other than Company Options which terminate in
accordance with their terms in connection with the Merger;
-17-
(k) increase in the base salary payable or to become payable
by the Company or any of its subsidiaries to any of their officers, directors,
employees or advisors, or the declaration, payment or commitment or obligation
of any kind for the payment of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement;
(l) any material agreement, contract, covenant, instrument,
lease, license or commitment to which the Company or any of its subsidiaries is
a party or by which they or any of their assets (whether tangible or intangible)
are bound or any termination (other than any contracts which have terminated by
their terms), extension, material amendment or modification of the terms of any
material agreement, contract, covenant, instrument, lease, license or commitment
to which the Company or any of its subsidiaries is a party or by which they or
any of their assets are bound;
(m) sale, lease, license or other disposition of any of the
assets or properties of the Company or any of its subsidiaries, except in the
ordinary course of business as conducted on that date and consistent with past
practices;
(n) loan by the Company to any person or entity, incurring by
the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, except for advances to employees
for travel and business expenses and extended payment terms offered to certain
customers in the ordinary course of business, consistent with past practices;
(o) waiver or release of any right or claim of the Company or
any subsidiary, including any write-off or other compromise of any account
receivable of the Company or any subsidiary;
(p) commencement, settlement or written notice or, to the
Company's Knowledge, any threat of commencement of any lawsuit or proceeding
against or other investigation of the Company or any subsidiary or their affairs
or any reasonable basis for any of the foregoing;
(q) notice of any claim of ownership by a third party of the
Company Intellectual Property (as defined in Section 2.13) or of infringement by
the Company of any third party's Intellectual Property rights;
(r) other than limited, end-user license agreements and
standard, non-exclusive development agreements entered into in the ordinary
course of business, consistent with past practices and on terms and conditions
substantially similar to the Company's standard, existing form agreements set
forth in Schedule 2.9(r), (i) sale or license of any Company Intellectual
Property or execution of any agreement with respect to the Company Intellectual
Property with any person or entity or with respect to the Intellectual Property
of any person or entity, (ii) purchase or license of any Intellectual Property
or execution of any agreement with respect to the Intellectual Property of any
person or entity, (iii) agreement with respect to the development of any
Intellectual Property with a third party, or (iv) change in pricing or royalties
set forth in existing contracts with its customers or licensees or in pricing or
royalties set forth in existing contracts with persons who have licensed
Intellectual Property to the Company;
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(s) agreement or material modification to any agreement
pursuant to which any other party was granted marketing, distribution,
development or similar rights of any type or scope with respect to any products
or technology of the Company or any of its subsidiaries;
(t) event or condition of any character that has or could
reasonably be expected to have a Company Material Adverse Effect; or
(u) commitment or agreement by any officer of the Company to
do any of the things described in the preceding clauses (a) through (t) (other
than negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement and those items disclosed on Schedule 2.9) from
the relevant date set forth in clauses (a) through (u).
2.10 Tax and Other Returns and Reports.
(a) Definitions Relating to Taxes.
For the purposes of this Agreement, (i) "TAX" or, collectively,
"TAXES", means (A) any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts,
(B) any liability for the payment of any amounts of the type described in clause
(A) of this Section 2.10(a)(i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period, and (C) any liability
for the payment of any amounts of the type described in clause (A) or (B) of
this Section 2.10(a)(i) as a result of any express or implied obligation to
indemnify any other 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.
(i) "Pre-closing Period" shall mean all tax periods
ending before the Effective Time and, with respect to any Tax Period including
the Effective Time, the portion thereof that ends the day before the Effective
Time.
(b) Tax Returns and Audits. Except as set forth in Schedule
2.10 and for liabilities reflected in or otherwise accrued for on the Current
Balance Sheet:
(i) The Company and each of its subsidiaries as of
the Effective Time will have prepared and filed on a timely basis, all required
federal, state, local and foreign returns, estimates, information statements and
reports due to be filed on or before the Effective Time, taking into account
extensions of time allowed for the filing thereof ("RETURNS") relating to any
and all Taxes concerning or attributable to the Company, its subsidiaries or
their operations, and such Returns are true, correct and complete and have been
completed in accordance with applicable law.
(ii) The Company and each of its subsidiaries as of
the Effective Time: (A) will have paid or accrued all Taxes it is required to
pay or accrue for any Pre-closing Period and
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(B) will have withheld with respect to its employees (and timely remitted to the
appropriate taxing authority) for any Pre-closing Period all federal and state
income taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) Neither the Company nor any of its subsidiaries
has been delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against the Company or any of its subsidiaries
of which the Company has heretofore been given notice, nor has the Company or
any of its subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of
the Company or any of its subsidiaries of which the Company has heretofore been
given notice is presently in progress, nor has the Company or any of its
subsidiaries been notified of any request for such an audit or other
examination.
(v) Neither the Company nor any of its subsidiaries
has any liabilities for unpaid Taxes with respect to any Pre-closing Period,
which have not been accrued or reserved against on the Current Balance Sheet,
whether asserted or unasserted, contingent or otherwise, and neither the Company
nor any of its subsidiaries has incurred any liability for Taxes since the date
of the Current Balance Sheet for any Pre-closing Period, other than in the
ordinary course of business.
(vi) The Company has provided to Parent access to
copies of all federal, foreign and state income and all state sales and use Tax
Returns for the Company and each of its subsidiaries filed for all periods since
its inception.
(vii) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims, security interests or
other encumbrances of any sort ("LIENS") on the assets of the Company or any of
its subsidiaries relating to or attributable to Taxes, other than Liens for
Taxes not yet due and payable.
(viii) The Company has no Knowledge of any basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or any of its
subsidiaries.
(ix) None of the Company's or any of its
subsidiaries' assets are treated as "tax-exempt use property" within the meaning
of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company or any of its subsidiaries that, individually or collectively, does give
rise to the payment of any amount that is not deductible by reason of the
limitations contained in Sections 404 or, to the Company's Knowledge, 162 of the
Code.
(xi) Neither the Company nor any of its subsidiaries
has filed any consent agreement under Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply to
-20-
any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company or any of its subsidiaries.
(xii) Neither the Company nor any of its subsidiaries
has (A) ever been a member of an affiliated group (within the meaning of Code
Section 1504(a)) filing a consolidated federal income Tax Return (other than a
group the common parent of which was Company), (B) ever been a party to a tax
sharing or allocation agreement (nor does the Company or any of its subsidiaries
owe any amount under any such agreement), (C) any liability for the Taxes of any
person (other than Company or any of its subsidiaries) under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or agreement, or otherwise and (D) ever
been a party to any joint venture, partnership or other arrangement that could
be treated as a partnership for Tax purposes.
(xiii) Neither the Company nor any of its
subsidiaries is, or has been at any time, a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code.
(xiv) The Company's and each of its subsidiaries' Tax
basis in its assets as of December 31, 2000, for purposes of determining its
future amortization, depreciation and other federal income Tax deductions is
accurately reflected on the Company's Tax books and records.
(xv) No adjustment relating to any Return filed by
the Company or any of its subsidiaries has been proposed formally or, to the
Knowledge of the Company, informally by any tax authority to the Company or any
of its subsidiaries or any representative thereof.
(xvi) Neither the Company nor any of its subsidiaries
has constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code (A) in the two years prior to the date of this Agreement
or (B) in a distribution which could otherwise constitute part of a "plan" or
"Series of related transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger.
(c) Tax Matters. Neither the Company nor any of its
subsidiaries has taken any action or, as of the date of this Agreement, to the
Company's Knowledge, is there any fact that would prevent the Merger from
qualifying as a tax-free reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
(d) Tax Liability. Liabilities with regard to matters
disclosed on Schedule 2.10 shall not exceed such amount as accrued for such
matters on the Current Balance Sheet.
2.11 Restrictions on Business Activities. Except as set forth on
Schedule 2.11, there is no agreement (noncompete or otherwise), commitment,
judgment, injunction, order or decree to which the Company or any of its
subsidiaries is a party or otherwise binding upon the Company or any of its
subsidiaries which has or reasonably would be expected to have the effect of
prohibiting or impairing any business practice (including, without limitation,
the licensing of any product) of the Company, any acquisition of property
(tangible or intangible) by the Company, the conduct of
-21-
business by the Company, or otherwise limiting the freedom of the Company to
engage in any line of business or to compete with any person. Except as set
forth on Schedule 2.11, without limiting the foregoing, neither the Company nor
any of its subsidiaries has entered into any agreement under which the Company
is restricted from selling, licensing or otherwise distributing or providing any
of its products or services to customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.12 Title to Properties; Absence of Liens and Encumbrances.
(a) Neither the Company nor any of its subsidiaries owns any
real property, nor has the Company or any of its subsidiaries ever owned any
real property. Schedule 2.12(a) sets forth a list of all real property currently
leased by the Company or any of its subsidiaries or otherwise used or occupied
by the Company or any of its subsidiaries for the operation of the Company's or
its subsidiaries' businesses (the "LEASED REAL PROPERTY"), the name of the
lessor, the date of the lease and each amendment thereto and, with respect to
any current lease, the current aggregate annual rental payable under any such
lease. All such current leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default).
(b) The Company has provided Parent true, correct and complete
copies of all leases, lease guaranties, subleases, agreements for the leasing,
use or occupancy of, or otherwise granting a right in or relating to the Leased
Real Property, including all amendments, terminations and modifications thereof
(the "LEASE AGREEMENTS"); and there are no other Lease Agreements for real
property affecting the real property or to which Company or any of its
subsidiaries is bound, other than those identified in Schedule 2.12(b). All such
Lease Agreements are valid and enforceable and not in default, no rentals are
past due, and no circumstance exists, which, with notice, the passage of time or
both, could constitute a default under any such Lease Agreement. Neither the
Company nor any of its subsidiaries has received any notice of a default,
alleged failure to perform, or any offset or counterclaim with respect to any
such Lease Agreement, which has not been fully remedied and withdrawn. Upon
obtaining the consents identified on Schedule 6.3(c), the Closing will not
affect the enforceability against any person of any material Lease Agreement or
the rights of the Company or any of its subsidiaries or the Surviving
Corporation to the continued use and possession of the real property for the
conduct of business as presently conducted.
(c) The Leased Real Property is in good operating condition
and repair, free from structural, physical and mechanical defects, and, to the
Company's Knowledge, is structurally sufficient and otherwise suitable for the
conduct of the business as presently conducted and is maintained in a manner
consistent with standards generally followed with respect to similar properties.
(d) The Company and each of its subsidiaries has good and
valid title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its tangible properties and assets, real, personal and
mixed, used or held for use in its business, free and clear of any Liens, except
(i) as reflected in the Current Balance Sheet, (ii) Liens for Taxes not yet due
and payable,
-22-
(iii) such imperfections of title and encumbrances, if any, which do not detract
from the value or interfere with the present use of the property subject thereto
or affected thereby and (iv) such Liens as set forth on Schedule 2.12(d).
(e) Schedule 2.12(e) lists all material items of equipment
(the "EQUIPMENT") owned or leased by the Company and each of its subsidiaries,
and such Equipment is (i) adequate for the conduct of the business of the
Company and each of its subsidiaries as currently conducted and as currently
contemplated to be conducted, and (ii) in good operating condition, regularly
and properly maintained, subject to normal wear and tear.
(f) The Company has sole and exclusive ownership, free and
clear of any Liens, of all customer lists, customer contact information,
customer correspondence and customer licensing and purchasing histories relating
to its current and former customers (the "CUSTOMER INFORMATION"). No person
other than the Company possesses any claims or rights with respect to use of the
Customer Information.
2.13 Intellectual Property.
(a) Definitions. For all purposes of this Agreement, the
following terms shall have the following respective meanings:
(i) "APPLICATION LAYER" means that portion of the
Software that collectively refers to a logical and physical application
datamodel and database, metadata database, business objects and business rules
represented in java (and written against a framework API), database mappings,
user interface elements such as freeform XHTML templates, images, etc.,
application property files, and online user help. The Application Layer can be
manipulated with the YOUrelate Customizer, Java development environments, and
HTML/XML authoring tools.
(ii) "FRAMEWORK LAYER" means that portion of the
Software that provides infrastructure services such as database connection
pooling, data retrieval, persistence, query capabilities, logic or rule
execution environment, even generation, alerts/notifications, state and session
management, messaging, XML interfaces and UI generation functionality.
(iii) "INTELLECTUAL PROPERTY" shall mean any or all
of the following: (A) works of authorship including, without limitation,
computer programs, algorithms, routines, source code and executable code,
whether embodied in software or otherwise, documentation, designs, files,
records and data; (B) inventions (whether or not patentable), improvements, and
technology; (C) proprietary and confidential information, including technical
data and customer and supplier lists, trade secrets, show how, know how and
techniques; (D) databases, data compilations and collections and technical data;
(E) processes, devices, prototypes, schematics, bread boards, net lists, mask
works, test methodologies and hardware development tools; (F) logos, trade
names, trade dress, trademarks, service marks, World Wide Web addresses, uniform
resource locators and domain names, tools, methods and processes; and (G) all
instantiations of the foregoing in any form and embodied in any media.
-23-
(iv) "INTELLECTUAL PROPERTY RIGHTS" shall mean any or
all of the following and all rights in, arising out of, or associated therewith:
(A) all United States and foreign patents and utility models and applications
therefor and all reissues, divisions, re-examinations, renewals, extensions,
provisionals, continuations and continuations-in-part thereof, and equivalent or
similar rights anywhere in the world in inventions and discoveries including
without limitation invention disclosures ("PATENTS"); (B) all trade secrets and
other rights in know-how and confidential or proprietary information; (C) all
copyrights, copyrights registrations and applications therefor and all other
rights corresponding thereto throughout the world ("COPYRIGHTS"); (D) all
industrial designs and any registrations and applications therefor throughout
the world; (E) mask works, mask work registrations and applications therefor,
and all other rights corresponding thereto throughout the world ("MASK WORKS");
(F) all rights in World Wide Web addresses, uniform resource locators and domain
names and applications and registrations therefor; (G) all rights in all trade
names, logos, common law trademarks and service marks, trademark and service
▇▇▇▇ registrations and applications therefor and all goodwill associated
therewith throughout the world ("TRADEMARKS"); (H) databases, data compilations
and collections and technical data ("DATABASE RIGHTS") and (i) any similar,
corresponding or equivalent rights to any of the foregoing anywhere in the
world.
(v) "COMPANY INTELLECTUAL PROPERTY" shall mean any
Intellectual Property and Intellectual Property Rights including the Company
Registered Intellectual Property Rights (as defined below) that are owned by, or
exclusively licensed to, the Company.
(vi) "REGISTERED INTELLECTUAL PROPERTY RIGHTS" shall
mean all United States, international and foreign: (A) Patents, including
applications therefor; (B) registered Trademarks, applications to register
Trademarks, including intent-to-use applications, or other registrations or
applications related to Trademarks; (C) Copyrights registrations and
applications to register Copyrights; (D) registered Mask Works and applications
to register Mask Works; and (E) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued by, filed with, or recorded by, any private, state, government or other
public legal authority at any time.
(b) Schedule 2.13(b) of the Disclosure Schedule contains a
complete and accurate list (by name and version number) of all products or
software of the Company or any of its subsidiaries (collectively, "COMPANY
PRODUCTS") (i) that have been sold, distributed or otherwise disposed of since
the date of the Company's incorporation, (ii) which the Company or any of its
subsidiaries is currently offering for sale, license or distribution, or (iii)
any products or service offerings under development.
(c) Schedule 2.13(c) of the Disclosure Schedule lists all
Registered Intellectual Property Rights owned by, filed in the name of, or
applied for, by the Company (the "COMPANY REGISTERED INTELLECTUAL PROPERTY
RIGHTS") and lists any proceedings or actions before any court or tribunal
(including the United States Patent and Trademark Office (the "PTO") or
equivalent authority anywhere in the world) related to any of the Company
Registered Intellectual Property Rights or Company Intellectual Property.
-24-
(d) Each Company Registered Intellectual Property Right is
currently in compliance with all formal legal requirements (including payment of
filing, examination and maintenance fees and proofs of use) and is valid and
subsisting. All necessary documents and certificates in connection with such
Company Registered Intellectual Property 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 perfecting,
prosecuting and maintaining such Registered Intellectual Property Rights. Except
as set forth on Schedule 2.13(d) of the Disclosure Schedule, there are no
actions that must be taken by the Company within one hundred twenty (120) days
of the Closing Date, including the payment of any registration, maintenance or
renewal fees or the filing of any responses to PTO office actions, documents,
applications or certificates for the purposes of obtaining, maintaining,
perfecting or preserving or renewing any Registered Intellectual Property
Rights. Company has not claimed any status in the application for or
registration of any Registered Intellectual Property Rights, including "small
business status," that would not be applicable to Purchaser.
(e) In each case in which the Company has acquired any
Intellectual Property or Intellectual Property Right from any person, the
Company has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in and to all such Intellectual Property and the
associated Intellectual Property Rights (including the right to seek past and
future damages with respect thereto) to the Company. To the maximum extent
provided for by, and in accordance with, applicable laws and regulations, the
Company has recorded each such assignment of a Registered Intellectual Property
Right assigned to the Company with the relevant Governmental Entity.
(f) Except as set forth on Schedule 2.13(f), the Company has
no Knowledge of any facts or circumstances that would render any Company
Intellectual Property invalid or unenforceable.
(g) All Company Intellectual Property will be fully
transferable, alienable or licensable by Surviving Corporation and/or Parent
without restriction and without payment of any kind to any third party.
(h) Each item of Company Intellectual Property is free and
clear of any liens or encumbrances, except for non-exclusive licenses granted to
end-user customers in the ordinary course of business. Except as set forth on
Schedule 2.13(f), the Company is the exclusive owner or exclusive licensee of
all Company Intellectual Property. Except as set forth on Schedule 2.13(f),
without limiting the generality of the foregoing, (i) the Company is the
exclusive owner of all Trademarks used in connection with the operation or
conduct of the business of the Company and its subsidiaries, including the sale,
distribution or provision of any Company Products by the Company or any of its
subsidiaries, (ii) the Company owns exclusively, and has good title to, all
Copyrighted works that are included or incorporated into Company Products or
which the Company or any of its subsidiaries otherwise purports to own, and
(iii) to the extent that any Patents would be infringed by any Company Products,
the Company is the exclusive owner of such Patents.
(i) Except as set forth on Schedule 2.13(i), the Company has
not (i) transferred ownership of, or granted any exclusive license of or right
to use, or authorized the retention of any
-25-
exclusive rights to use or joint ownership of, any Intellectual Property or
Intellectual Property Right that is or was Company Intellectual Property, to any
other person, or (ii) permitted Company's rights in such Company Intellectual
Property to lapse or enter the public domain.
(j) Except in the ordinary course of business of granting
licenses to end users of the Company Product or as set forth on Schedule
2.13(j), the Company Intellectual Property is not subject to any license of or
right to use such Company Intellectual Property.
(k) The Company Intellectual Property is not subject to a
covenant not to ▇▇▇ by Company or similar agreement by Company not to take
action to enforce its Intellectual Property Rights.
(l) Except as set forth on Schedule 2.13(l) of the Disclosure
Schedule, all Intellectual Property used in or necessary to the conduct of
Company's business as presently conducted or currently contemplated to be
conducted by the Company was written and created solely by either (i) employees
of the Company acting within the scope of their employment or (ii) by third
parties who have validly and irrevocably assigned all of their rights, including
Intellectual Property Rights therein, to the Company, and no third party owns or
has any rights to any of the Company Intellectual Property.
(m) Except as set forth on Schedule 2.13(m), to the extent
that any Intellectual Property or Intellectual Property Rights have been
developed or created by a third party for Company or any of its subsidiaries or
is incorporated into any of the Company Products or is necessary for the
provision of the Company Products, the Company has a written agreement with such
third party with respect thereto and Company thereby either (i) has obtained
ownership of, and is the exclusive owner of, or (ii) has obtained a perpetual,
non-terminable license (sufficient for the conduct of its business as currently
conducted and as proposed to be conducted) to all such third party's
Intellectual Property Rights in such work, material or invention by operation of
law or by valid assignment, to the fullest extent it is legally possible to do
so.
(n) Except as set forth on Schedule 2.13(n) of the Disclosure
Schedule, the Company Intellectual Property constitutes all the Intellectual
Property and Intellectual Property Rights used in and/or necessary to the
conduct of the business of the Company as it currently is conducted, and as it
is currently planned or contemplated to be conducted by the Company, including,
without limitation, the design, development, manufacture, use, import and sale
of Company Products.
(o) No person who has licensed any Intellectual Property or
Intellectual Property Rights to the Company has ownership rights or license
rights to improvements, enhancements or derivative works made by or for the
Company in such Intellectual Property or Intellectual Property Rights.
(p) Except as set forth on Schedule 2.13(p), the Company has
the right to use, pursuant to valid licenses, all software development tools,
library functions, compilers and all other third-party Software that are used in
the operation of the Company or that are required to create,
-26-
modify, compile, operate or support any software that is Company Intellectual
Property or is incorporated into any Company Product. Without limiting the
foregoing, no open source or public library software, including any version of
any software licensed pursuant to any GNU public license, was used in the
development or modification of any software that is or was Company Intellectual
Property or is incorporated into any Company Product.
(q) No government funding, facilities of a university,
college, other educational institution or research center or funding from third
parties was used in the development of any Company Intellectual Property. No
current or former employee, consultant or independent contractor of Company, who
was involved in, or who contributed to, the creation or development of any
Company Intellectual Property, has performed services for the government,
university, college, or other educational institution or research center during
a period of time during which such employee, consultant or independent
contractor was also performing services for Company.
(r) The operation of the business of the Company as it is
currently conducted, or is contemplated to be conducted, by the Company,
including but not limited to the design, development, use, import, branding,
advertising, promotion, marketing, manufacture and sale of Company Products does
not and will not when conducted by Parent and/or Surviving Corporation in
substantially the same manner following the Closing, infringe or misappropriate
any Intellectual Property Right of any person, violate any right of any person
(including any right to privacy or publicity), or constitute unfair competition
or trade practices under the laws of any jurisdiction, and the Company has not
received notice from any person claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of the Company infringes or misappropriates any
Intellectual Property Right of any person or constitutes unfair competition or
trade practices under the laws of any jurisdiction (nor does the Company have
knowledge of any basis therefor).
(s) No Company Intellectual Property, Company Product or
service of the Company is subject to any proceeding or outstanding decree,
order, judgment or settlement agreement or stipulation that restricts in any
manner the use, transfer or licensing thereof by the Company or may affect the
validity, use or enforceability of such Company Intellectual Property.
(t) Other than inbound "shrink-wrap" and similar
publicly-available commercial binary code end-user licenses and outbound
"shrink-wrap" licenses in the form set forth on Schedule 2.13(t), the contracts,
licenses and agreements listed in Schedule 2.13(t) lists all contracts, licenses
and agreements under which the Company has acquired any Intellectual Property or
Intellectual Property Rights. All such contracts are in full force and effect.
The Company is not in breach of nor has the Company failed to perform under, any
of the foregoing contracts, licenses or agreements and, to the Company's
Knowledge, no other party to any such contract, license or agreement is in
breach thereof or has failed to perform thereunder. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination or suspension of such
contracts, licenses and agreements. Following the Closing Date, both the Parent
and the Surviving Corporation will be permitted to exercise all of Company's
rights under such contracts, licenses and agreements to the same extent Company
and its subsidiaries would have
-27-
been able to had the transactions contemplated by this Agreement not occurred
and without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which Company would otherwise be required to
pay.
(u) Schedule 2.13(u) lists all material contracts, licenses
and agreements between the Company and any other person wherein or whereby the
Company has agreed to, or assumed, any obligation or duty to develop, assign
Intellectual Property Rights, warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any obligation or liability or provide a
right of rescission with respect to the infringement or misappropriation by the
Company or such other person of the Intellectual Property Rights of any person
other than the Company.
(v) Except as set forth on Schedule 2.13(v), there are no
contracts, licenses or agreements between the Company and any other person with
respect to Company Intellectual Property under which there is any dispute
regarding the scope of such agreement, or performance under such agreement,
including with respect to any payments to be made or received by the Company
thereunder.
(w) To the Company's Knowledge, no person is infringing or
misappropriating any Company Intellectual Property Right.
(x) The Company has taken all steps that are reasonably
required to protect the Company's rights in confidential information and trade
secrets of the Company or provided by any other person to the Company. Without
limiting the foregoing, Company has and enforces a policy requiring each
employee and consultant of the Company to execute a proprietary rights and
confidentiality agreement substantially in the form set forth in Schedule
2.13(x) and all current and former employees and consultants of Company who have
created or modified any of the Company Intellectual Property have executed such
an agreement assigning all of such employees' and consultants' rights in and to
the Company Intellectual Property to the Company.
(y) Except as set forth on Schedule 2.13(y), neither this
Agreement nor the transactions contemplated by this Agreement, including the
assignment to Parent or Surviving Corporation, by operation of law or otherwise,
of any contracts or agreements to which the Company is a party, will result in
(i) either Parent's or the Surviving Corporation's granting to any third party
any right to or with respect to any Intellectual Property or Intellectual
Property Right owned by, or licensed to, either of them, (ii) either the
Parent's or the Surviving Corporation's being bound by, or subject to, any
non-compete or other restriction on the operation or scope of their respective
businesses, or (iii) either the Parent's or the Surviving Corporation's being
obligated to pay any royalties or other amounts to any third party in excess of
those payable by Parent or Surviving Corporation, respectively, prior to the
Closing.
(z) All of the Company's Products (including products
currently under development): (i) will record, store, process, calculate and
present calendar dates falling on and after (and if applicable, spans of time
including) January 1, 2000, and will calculate any information dependent on or
relating to such dates in the same manner, and with the same functionality, data
integrity and performance, as the products record, store, process, calculate and
present calendar dates
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on or before December 31, 1999, or calculate any information dependent on or
relating to such dates (collectively, "YEAR 2000 COMPLIANT"); (ii) will lose no
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000; and (iii) will be interoperable with other
products used and distributed by Parent that may reasonably deliver records to
the Company's products or receive records from the Company's products, or
interact with the Company's products, including but not limited to back-up and
archived data. All of the Company's Information Technology (as defined below) is
Year 2000 Compliant, and will not cause an interruption in the ongoing
operations of the Company's business on or after January 1, 2000. For purposes
of the foregoing, the term "INFORMATION TECHNOLOGY" shall mean and include all
software, hardware, firmware, telecommunications systems, network systems,
embedded systems and other systems, components and/or services (other than
general utility services including gas, electric, telephone and postal) that are
owned or used by the Company in the conduct of its business, or purchased by the
Company from third party suppliers.
2.14 Agreements, Contracts and Commitments.
(a) Except as set forth on Schedule 2.14(a), the Company does
not have any obligations under or is not otherwise bound by:
(i) any collective bargaining agreements;
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations;
(iii) any employment or consulting agreement or
contract with an employee or individual consultant or salesperson or consulting
or sales agreement or contract, under which a firm or other organization
provides services to the Company of a nature which would otherwise be
customarily provided under an employment or consulting relationship, pursuant to
which the Company is obligated to make payments in excess of $25,000 per year;
(iv) any fidelity or surety bond or completion bond;
(v) any lease of personal property having a value
individually in excess of $25,000;
(vi) any agreement of indemnification or guaranty
which could result in liability to the Company in excess of $25,000,
individually, other than such indemnification obligations in the Company's
software license agreements entered into in the ordinary course of business
consistent with past practices;
(vii) any agreement, contract or commitment relating
to capital expenditures and involving future payments in excess of $25,000
individually;
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(viii) any agreement, contract or commitment relating
to the disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's business;
(ix) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof but excluding advances to employees for travel and
business expenses incurred in the ordinary course of business in accordance with
past practices; provided, however, that such advances do not exceed an aggregate
of $25,000; and excluding extended payment terms offered to customers;
(x) any purchase order or contract for the purchase
of materials involving $25,000 or more;
(xi) any construction contract;
(xii) any material distribution, joint marketing or
development agreement;
(xiii) any agreement, contract or commitment pursuant
to which the Company has granted or may grant in the future, to any party a
source-code license or option or other right to use or acquire source-code; or
(xiv) any other agreement, contract or commitment
that involves $25,000 or more or is not cancelable without penalty within thirty
(30) days.
(b) Schedule 2.14(b) sets forth a list of the Company's top 15
customers according to recognized revenue (as determined under GAAP consistently
applied) for the fiscal year ended December 31, 2000 and the six-month period
ended June 30, 2001, and each customer with which the Company currently has a
signed Contract that the Company in good faith expects to be one of the
Company's top 15 customers for the fiscal year ending December 31, 2001, and a
list of all Contracts between such customer and the Company.
(c) Except for such alleged breaches, violations and defaults,
and events that would constitute a breach, violation or default with the lapse
of time, giving of notice, or both, all of which are noted in Schedule 2.14(c),
the Company has not breached, violated or defaulted under, or received written
notice that it has breached, violated or defaulted under, any of the terms or
conditions of any Contract required to be set forth on Schedule 2.14(a),
Schedule 2.14(b) or any Schedule referred to in Schedule 2.13. Each Contract is
in full force and effect and, except as otherwise disclosed in Schedule 2.14(c),
is not subject to any default thereunder of which the Company has knowledge by
any party obligated to the Company pursuant thereto. Except as set forth on
Schedule 2.8 and except as described in each customer's Contract with the
Company, neither the Company nor any subsidiary has any understandings or
obligations of any kind to any customer and has not committed itself to perform
any services to any customer that are not so described in such customer's
Contract.
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2.15 Interested Party Transactions. Except as set forth on Schedule
2.15, no officer, director, or, to the Knowledge of the Company, any affiliate
(as defined under the Securities Act) or any stockholder of the Company (nor, to
the Knowledge of the Company, any ancestor, sibling, descendant or spouse of any
of such persons, or any trust, partnership or corporation in which any of such
persons has or has had an economic interest), has or has had, directly or
indirectly, (a) an economic interest in any entity which furnished or sold, or
furnishes or sells, services or products that the Company furnishes or sells, or
proposes to furnish or sell, or (b) an economic interest in any entity that
purchases from or sells or furnishes to, the Company, any goods or services or
(c) a beneficial interest in any contract or agreement set forth in Schedule
2.14(a), Schedule 2.14(b) or any Schedule referred to in Schedule 2.13;
provided, that ownership of no more than one percent (1%) of the outstanding
voting stock of a publicly traded corporation shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.15.
2.16 Compliance with Laws. The Company and each of its subsidiaries has
complied in all material respects with, is not in material violation of, and has
not received any notices of violation with respect to, any applicable foreign,
federal, state or local statute, law or regulation.
2.17 Litigation. Except as set forth on Schedule 2.17, there is no
action, suit or proceeding of any nature pending or, to the Knowledge of the
Company, threatened against the Company, its subsidiaries, their properties or
any of their officers or directors nor is there any reasonable basis therefor.
To the Company's Knowledge, there is no investigation pending or threatened
against the Company, its subsidiaries, their properties or any of their officers
or directors by or before any Governmental Entity nor is there any reasonable
basis therefor. Schedule 2.17 sets forth, with respect to any such pending or
threatened action, suit, proceeding or investigation, the forum, the parties
thereto, the subject matter thereof and the amount of damages claimed or other
remedy requested. No Governmental Entity has at any time challenged or
questioned the legal right of the Company or any of its subsidiaries to conduct
its operations as presently or previously conducted or as presently contemplated
to be conducted.
2.18 Insurance. The insurance policies and fidelity bonds covering the
assets, business, equipment, properties, operations, employees, officers and
directors of the Company contain provisions that are reasonable and customary in
the Company's industry, and there is no claim by the Company pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company is
otherwise in material compliance with the terms of such policies and bonds (or
other policies and bonds providing substantially similar insurance coverage).
The Company has no Knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.19 Notice of Fairness Hearing. In the event that Parent issues the
shares of Parent Common Stock hereunder pursuant to Section 5.1(b), the
information supplied by the Company for inclusion in the notice of the Fairness
Hearing (as defined in Section 5.1 hereof) and Information Statement to be
provided to the Company's stockholders (the "NOTICE") on the date that the
Notice and Information Statement is first mailed to the Company's stockholders,
and at the Effective Time,
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will 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 not misleading, in light of the circumstances under which
they are made.
2.20 Registration Statement. In the event that Parent shall elect or is
otherwise required to issue the shares of Parent Common Stock hereunder pursuant
to Section 5.1(c), none of the information supplied by the Company for inclusion
or incorporation by reference in the registration statement on Form S-4
(including the proxy statement/prospectus contained therein) that may be filed
with the SEC by Parent in connection with the issuance of the Parent Common
Stock in or as a result of the Merger (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 in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
2.21 Company SEC Documents. As of their respective filing dates, the
Company's registration statement on Form S-1 and each of the amendments to the
registration statement on Forms S-1/A (collectively, the "COMPANY SEC
Documents") filed with the SEC did not contain on their filing dates any untrue
statement of a material fact or omit to state a 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.
2.22 Accounts Receivable.
(a) Schedule 2.22(a) contains a list of all accounts
receivable of the Company as of June 30, 2001, together with a range of days
elapsed since invoice.
(b) All of the Company's accounts receivable as of June 30,
2001 arose in the ordinary course of business and are carried at values
determined in accordance with GAAP consistently applied. Except as set forth on
Schedule 2.22(b), no person has any Lien on any of the Company's accounts
receivable and no request or agreement for deduction or discount has been made
with respect to any of the Company's accounts receivable reflected on the
Current Balance Sheet, in excess of reserves as set forth on the Current Balance
Sheet.
2.23 Minute Books. The minute books of the Company provided to counsel
for Parent are the only minute books of the Company and contain accurate
summaries of all of the actions taken at meetings and actions by written consent
of directors (including committees thereof) of the Company, and contain accurate
summaries of all of the actions taken at Company stockholder meetings or actions
by written consent since the time of incorporation of the Company. The Company
does not keep minute books for any of its subsidiaries.
2.24 Environmental Matters.
(a) Hazardous Material. Neither the Company nor any of its
subsidiaries has: (i) operated any underground storage tanks at any property
that the Company has at any time owned, operated, occupied or leased; or (ii)
illegally released in violation of applicable law any material
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amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws (a
"HAZARDOUS MATERIAL"), but excluding office and janitorial supplies properly and
safely maintained. No Hazardous Materials are present as a result of the actions
of the Company, or, to the Knowledge of the Company, as a result of any actions
of any third party or otherwise, in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that the
Company or any of its subsidiaries has at any time owned, operated, occupied or
leased.
(b) Hazardous Materials Activities. Neither the Company nor
any of its subsidiaries has transported, stored, used, manufactured, disposed
of, released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has the
Company or any of its subsidiaries disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "HAZARDOUS MATERIALS ACTIVITIES") in
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company and each of its subsidiaries
currently holds all environmental approvals, permits, licenses, clearances and
consents (the "ENVIRONMENTAL PERMITS") necessary for the conduct of the
Company's Hazardous Material Activities and other businesses of the Company and
each of its subsidiaries as such activities and businesses are currently being
conducted.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the Knowledge of the Company, threatened concerning any
Environmental Permit, Hazardous Material or any Hazardous Materials Activity of
the Company or any of its subsidiaries. The Company is aware of any fact or
circumstance that could involve the Company in any environmental litigation or
impose upon the Company or any of its subsidiaries any environmental liability.
(e) Reports and Records. The Company has delivered to Parent
all records in the Company's possession concerning the Hazardous Materials
Activities of the Company and each of its subsidiaries relating to its business
and all environmental audits and environmental assessments of any Leased Real
Property conducted at the request of, or otherwise in the possession of the
Company. The Company and each of its subsidiaries has complied with all
environmental disclosure obligations imposed by applicable law with respect to
this transaction.
2.25 Brokers' and Finders' Fees; Third Party Expenses. Except as set
forth on Schedule 2.25, the 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
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Agreement or any transaction contemplated hereby. Schedule 2.25 sets forth (a)
the principal terms and conditions of any agreement with respect to such fees,
and (b) the Company's current reasonable estimate of all Third Party Expenses
(as defined in Section 5.5) expected to be incurred by the Company in connection
with due diligence efforts and the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby.
2.26 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"AFFILIATE" set forth in Section 2.26(a)(i) below (which definition shall apply
only to this Section 2.26), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity
under common control with the Company or any of its subsidiaries within the
meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations
issued thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(iii) "COMPANY EMPLOYEE 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, other than an International Employee Plan, 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, any of its subsidiaries or any Affiliate for the
benefit of any Employee, or with respect to which the Company, any of its
subsidiaries or any Affiliate has or may have any liability or obligation;
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current or former or
retired employee, consultant or director of the Company, any of its subsidiaries
or any Affiliate;
(vi) "EMPLOYMENT AGREEMENT" shall mean each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or other agreement, contract or understanding
between the Company, any of its subsidiaries or any Affiliate and any Employee;
(vii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act
of 1993, as amended;
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(ix) "IRS" shall mean the Internal Revenue Service;
(x) "INTERNATIONAL EMPLOYEE PLAN" shall mean each
Company Employee Plan that has been adopted or maintained by the Company or any
Affiliate, whether informally or formally, or with respect to which the Company
or any Affiliate will or may have any liability, for the benefit of Employees
who perform services outside the United States;
(xi) "MULTIEMPLOYER PLAN" shall mean any Pension Plan
(as defined below) which is a "multiemployer plan," as defined in Section 3(37)
of ERISA; and
(xii) "PENSION PLAN" shall mean each Company Employee
Plan which is an "employee pension benefit plan," within the meaning of Section
3(2) of ERISA.
(b) Schedule. Schedule 2.26(b) contains an accurate and
complete list of each Company Employee Plan, International Employee Plan, and
each Employment Agreement. Neither the Company nor any subsidiary has any plan
or commitment to establish any new Company Employee Plan or Employment
Agreement, to modify any Company Employee Plan or Employment Agreement (except
to the extent required by law or to conform any such Company Employee Plan or
Employment Agreement to the requirements of any applicable law, in each case as
previously disclosed to Parent in writing, or as required by this Agreement), or
to adopt or enter into any Company Employee Plan or Employment Agreement.
Schedule 2.26(b) sets forth a table setting forth the name and salary of each
employee of the Company and each of its subsidiaries.
(c) Documents. The Company has provided to Parent correct and
complete copies of: (i) all documents embodying each Company Employee Plan and
Employment Agreement including (without limitation) all amendments thereto and
all related trust documents, administrative service agreements, group annuity
contracts, group insurance contracts, and policies pertaining to fiduciary
liability insurance covering the fiduciaries for each Plan; (ii) the most recent
annual actuarial valuations, if any, prepared for each Company Employee Plan;
(iii) the three (3) most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Company Employee Plan; (iv) if the
Company Employee Plan is funded, the most recent annual and periodic accounting
of Company Employee Plan assets; (v) the most recent summary plan description
together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Company Employee Plan; (vi) all IRS
determination opinion, notification and advisory letters, and all applications
and correspondence to or from the IRS or the DOL with respect to any such
application or letter; (vii) all communications material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company or any of its subsidiaries; (viii) all correspondence to or from
any governmental agency relating to any Company Employee Plan; (ix) all COBRA
forms and related notices (or such forms and notices as required under
comparable law); (x) the three (3) most recent plan years discrimination tests
for each Company Employee Plan; and (xi) all registration statements, annual
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reports (Form 11-K and all attachments thereto) and prospectuses prepared in
connection with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.26(d), (i) the Company and each of its subsidiaries has performed in all
material respects all obligations required to be performed by it under, is not
in default or violation of, and has no Knowledge of any default or violation by
any other party to each Company Employee Plan, and each Company Employee Plan
has been established and maintained in all material respects in accordance with
its terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including but not limited to ERISA or the Code; (ii) each
Company Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code has either
received a favorable determination opinion, notification or advisory letter from
the IRS with respect to each such Company Employee Plan as to its qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has remaining a period of time
under applicable Treasury regulations or IRS pronouncements in which to apply
for such a letter and make any amendments necessary to obtain a favorable
determination as to the qualified status of each such Company Employee Plan;
(iii) no "prohibited transaction," within the meaning of Section 4975 of the
Code or Sections 406 and 407 of ERISA and not otherwise exempt under Section
4975 of the Code or Section 408 of ERISA (or any administrative class exemption
issued thereunder), has occurred with respect to any Company Employee Plan; (iv)
there are no actions, suits or claims pending, or, to the Knowledge of the
Company and each of the Stockholders, threatened or reasonably anticipated
(other than routine claims for benefits) against any Company Employee Plan or
against the assets of any Company Employee Plan; (v) each Company Employee Plan
(other than any stock option plan) can be amended, terminated or otherwise
discontinued after the Effective Time, without liability to Parent, the Company,
any subsidiary of the Company or any Affiliates (other than ordinary
administration expenses); (vi) there are no audits, inquiries or proceedings
pending or, to the Knowledge of the Company or any Affiliates, threatened by the
IRS or DOL with respect to any Company Employee Plan; and (vii) neither the
Company, its subsidiaries nor any Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Section 502(i) of ERISA or
Section 4975 through 4980 of the Code. The Company and each of its subsidiaries
has made all contributions and other payments required by and due under the
terms of each Company Employee Plan. Liabilities which have accrued or may
accrue as a result of non-compliance with any laws or regulations with respect
to any International Employee Plans and the obligation of the Company or the
Company's subsidiaries to provide employee benefits to non-United States
employees, shall not exceed such amount as accrued for such matters on the
Current Balance Sheet.
(e) Pension Plan. Neither the Company, its subsidiaries nor
any Affiliate has ever maintained, established, sponsored, participated in, or
contributed to, any Pension Plan which is subject to Title IV of ERISA or
Section 412 of the Code.
(f) Collectively Bargained, Multiemployer and Multiple
Employer Plans. At no time has the Company or any Affiliate contributed to or
been obligated to contribute to any Multiemployer Plan. Neither the Company, its
subsidiaries nor any Affiliate has at any time ever
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maintained, established, sponsored, participated in, or contributed to any
multiple employer plan, or to any plan described in Section 413 of the Code.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or reflects or represents any liability to provide retiree health to
any person for any reason, except as may be required by COBRA or other
applicable statute, and neither the Company nor its subsidiaries has ever
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree health,
except to the extent required by statute. Except as set forth in Schedule
2.26(g), the Company obtained a release from each of its former employees whose
termination occurred subsequent to April 1, 2001.
(h) Health Care Compliance. Neither the Company, its
subsidiaries nor any Affiliate has, prior to the Effective Time and in any
material respect, violated any of the health care continuation requirements of
COBRA, the requirements of FMLA, the requirements of the Health Insurance
Portability and Accountability Act of 1996, the requirements of the Women's
Health and Cancer Rights Act of 1998, the requirements of the Newborns' and
Mothers' Health Protection Act of 1996, or any amendment to each such act, or
any similar provisions of state law applicable to its Employees. Neither the
Company nor any of its subsidiaries has any unsatisfied obligations to any
Employees or qualified beneficiaries pursuant to COBRA, HIPAA or any state law
governing health care coverage or extension.
(i) Effect of Transaction.
(i) Except as set forth on Schedule 2.26(i)(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employment Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.26(i)(ii), no
payment or benefit which will or may be made by the Company, its subsidiaries or
its Affiliates with respect to any Employee will be characterized as a
"parachute payment," within the meaning of Section 280G(b)(2) of the Code.
(j) Employment Matters. Except as set forth on Schedule
2.26(j), the Company and each of its subsidiaries (i) is in compliance in all
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund governed by or maintained by or on
behalf of any governmental authority, with respect to unemployment compensation
benefits, social security or
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other benefits or obligations for Employees (other than routine payments to be
made in the normal course of business and consistent with past practice). There
are no pending, threatened or reasonably anticipated claims or actions against
the Company or any of its subsidiaries under any worker's compensation policy or
long-term disability policy. Liability with regard to termination (other than
employee benefits as addressed under Section 2.26(d)) prior to the date hereof
of employees of the Company's subsidiaries in the United Kingdom, France and
Germany shall not exceed such amount as accrued for such matters on the Current
Balance Sheet.
(k) Labor. No work stoppage or labor strike against the
Company or any of its subsidiaries is pending, threatened or reasonably
anticipated. The Company does not know of any activities or proceedings of any
labor union to organize any Employees. Except as set forth in Schedule 2.26(k),
there are no actions, suits, claims, labor disputes or grievances pending, or,
to the Knowledge of the Company, threatened or reasonably anticipated relating
to any labor, safety or discrimination matters involving any Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in any material liability to the Company. Neither
the Company nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act. Except as set
forth in Schedule 2.26(k), neither the Company nor any of its subsidiaries is
presently, nor have they been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to Employees and
no collective bargaining agreement is being negotiated by the Company or any of
its subsidiaries.
2.27 Employees. To the best Knowledge of the Company and each of its
subsidiaries, no employee of the Company or any of its subsidiaries (a) is in
violation of any term of any employment contract, patent disclosure agreement,
non-competition agreement, or any restrictive covenant to a former employer
relating to the right of any such employee to be employed by the Company or any
of its subsidiaries because of the nature of the business conducted or presently
proposed to be conducted by the Company or any of its subsidiaries or to the use
of trade secrets or proprietary information of others and (b) has given notice
to the Company or any subsidiary, nor is the Company or any subsidiary otherwise
aware, that any employee intends to terminate his or her employment with the
Company or any subsidiary.
2.28 Governmental Authorization. The Company and each of its
subsidiaries possesses all material consents, licenses, permits, grants or other
authorizations issued to the Company and each of its subsidiaries by a
Governmental Entity (a) pursuant to which the Company and each of its
subsidiaries currently operates or holds any interest in any of their properties
or (b) which is required for the operation of its business or the holding of any
such interest, other than such consents, licenses, permits, grants or
authorizations of which the failure to obtain would not, either individually or
in the aggregate, have a Company Material Adverse Effect (herein collectively
called "COMPANY AUTHORIZATIONS"), which Company Authorizations are in full force
and effect and constitute all Company Authorizations required to permit the
Company and each of its subsidiaries to operate or conduct their business or
hold any interest in its properties or assets.
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2.29 Complete Copy of Materials. The documents represented in
electronic format on CD-ROMs delivered to Parent represent true and complete
copies of each document (or summaries of same) referenced on such CD-ROM.
2.30 Representations Complete. None of the representations or
warranties made by the Company (as modified by the Disclosure Schedule) in this
Agreement, and none of the statements made in any exhibit, schedule or
certificate furnished by the Company pursuant to this Agreement contains, or
will contain at the Effective Time, any untrue statement of a material fact, or
omits or will omit at the Effective Time to state any material fact necessary in
order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading. The information furnished on or
in any documents mailed, delivered or otherwise furnished to the Company's
stockholders in connection with the solicitation of their consent to this
Agreement and the Merger, did not contain or will not contain any untrue
statement of a material fact and did not omit or will not omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Organization, Standing and Power. Parent and Merger Sub are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of Parent and Merger Sub has the corporate
power to own its properties and to carry on its business as now being conducted.
Each of Parent and Merger Sub is duly qualified or licensed to do business and
in good standing as a foreign corporation in each jurisdiction in which it
conducts business, except in those jurisdictions where the failure to be so
qualified would have a Parent Material Adverse Effect.
3.2 Authority. Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (b) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
3.3 Parent Common Stock. The shares of Parent Common Stock to be issued
pursuant to the Merger have been duly authorized, and upon consummation of the
transactions contemplated by this Agreement, will be validly issued, fully paid
and nonassessable.
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3.4 SEC Filings; Parent Financial Statements. A true and complete copy
of each annual, quarterly and other report, and definitive proxy statement filed
by Parent with the Securities and Exchange Commission (the "SEC") since October
31, 2000 (the "SEC DOCUMENTS") is available on the Web site maintained by the
SEC at ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the rules
and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents contained on their filing dates any
untrue statement of a material fact or omitted to state a 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, except to the
extent corrected by a subsequently filed SEC Document filed prior to the date
hereof. The financial statements of Parent, including the notes thereto,
included in the SEC Documents (the "PARENT FINANCIAL STATEMENTS") comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and present fairly the consolidated financial
position of Parent at the dates thereof and of its consolidated results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring audit adjustments).
3.5 No Conflict. The execution and delivery of this Agreement does not,
and, the consummation of the transactions contemplated hereby will not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a Conflict under (a) any provision of the
Certificate of Incorporation and Bylaws of Parent or Merger Sub, (b) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise or license to which Parent or any of its respective
properties or assets are subject and which has been filed as an exhibit to
Parent's filings under the Securities Act or the Exchange Act or (c) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or Merger Sub or their respective properties or assets, except in each
case where such Conflict will not have a Parent Material Adverse Effect or will
not have an affect on the legality, validity or enforceability of this
Agreement.
3.6 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity or any
third party is required by or with respect to Parent or Merger Sub in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (a) the filing of the Merger
Certificate with the Secretary of State of Delaware, (b) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable securities laws and the HSR Act and other
similar anti-trust requirements of foreign governmental authorities, (c) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings of which the failure to obtain would not either
materially delay the ability of Parent or Merger Sub to consummate the Merger or
have a Parent Material Adverse Effect.
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3.7 Notice of Fairness Hearing. In the event that Parent issues the
shares of Parent Common Stock hereunder pursuant to Section 5.1(b), the
information supplied by Parent for inclusion in the Information Statement on the
date that the Information Statement is first mailed to the stockholders of the
Company, and at the Effective Time, will 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 not misleading, in light of
the circumstances under which they are made.
3.8 Registration Statement. In the event that Parent shall elect or is
otherwise required to issue the shares of Parent Common Stock hereunder pursuant
to Section 5.1(c), none of the information supplied by Parent for inclusion or
incorporation by reference in 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 in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
3.9 Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement and has
engaged in no business activities other than as contemplated by this Agreement.
3.10 Tax Matters. Neither Parent nor Merger Sub has taken any action
or, as of the date of this Agreement, to Parent's knowledge, is there any fact
that would prevent the Merger from qualifying as a tax-free reorganization
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
3.11 Absence of Certain Changes or Events. Since October 31, 2000,
except as contemplated by or disclosed in this Agreement, or as disclosed in the
SEC Documents or any Parent press release, there has not been any event,
occurrence, change or effect that, individually or in the aggregate, would
reasonably be expected to have a Parent Material Adverse Effect or prevent or
materially delay the consummation of the transactions contemplated by this
Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing) to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business, to
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, all with the goal of preserving unimpaired its
goodwill and ongoing businesses at the Effective Time. The Company shall
promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of
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business, and any material event involving or adversely affecting the Company or
its business. Except as expressly contemplated by this Agreement, or disclosed
in Schedule 4.1, the Company shall not, without the prior written consent of
Parent:
(a) Enter into any commitment or transaction not in the
ordinary course of business consistent with past practices or, in any event,
which exceeds $25,000, individually;
(b) Transfer to any person or entity any rights to the
Company's Intellectual Property other than limited, end-user license agreements
entered into in the ordinary course of business consistent with past practices,
and on terms and conditions substantially similar to the Company's standard
existing form agreements set forth in Schedule 2.13(r), which do not exceed
$25,000, individually;
(c) Enter into or amend any agreements pursuant to which any
other party is granted manufacturing, marketing, distribution or similar rights
of any type or scope with respect to any products of the Company;
(d) Except as otherwise required pursuant to Article V, amend
or otherwise modify (or agree to do so), or violate the terms of, any of the
agreements set forth or described in the Company Schedules;
(e) Commence any litigation or any dispute resolution process;
(f) Except for cumulative dividends with respect to the Series
A Preferred, declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor), other than
pursuant to the Company's repurchase right under employee restricted stock
purchase agreements;
(g) Except for the issuance of shares of Company Capital Stock
upon exercise of the presently outstanding Company Options, issue, grant,
deliver or sell or authorize or propose the issuance, grant, delivery or sale
of, or purchase or propose the purchase of, any shares of its capital stock or
securities convertible into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities;
(h) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
(i) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise
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acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of the Company;
(j) Sell, lease, license, loan or otherwise dispose of any of
its properties or assets other than the Company's Intellectual Property;
provided, however, that any such transaction as it relates to the Company's
Intellectual Property is performed in the ordinary course of business,
consistent with past practices and does not exceed $25,000, individually;
(k) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of the Company or
guarantee any debt securities of others;
(l) Grant any severance or termination pay to any director,
officer, employee or consultant, except payments made pursuant to standard
written agreements outstanding on the date hereof;
(m) Except as otherwise required pursuant to Article V and not
including travel and business expenses incurred in the ordinary course of
business in accordance with past practices (provided that such advances do not
exceed an aggregate of $25,000), adopt or amend any employee benefit plan,
program, policy or arrangement, or enter into any employment contract, extend
any employment offer or loan, pay or agree to pay any special bonus or special
remuneration to any director, employee or consultant, or increase the salaries
or wage rates of its employees;
(n) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
in excess of $5,000 in any one case or $10,000 in the aggregate;
(o) Pay, discharge or satisfy, in an amount in excess of
$25,000 in any one case, any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business consistent with
past practice;
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(q) Take any action, including the acceleration of vesting of
any restricted stock or any options or other rights to acquire shares of the
capital stock of the Company which would be reasonably likely to prevent the
Merger from qualifying as a tax-free reorganization hereunder;
(r) Enter into any strategic alliance, joint development or
joint marketing agreement;
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(s) Fail to pay or otherwise satisfy its monetary obligations
in the ordinary course of business consistent with past practice, except such as
are being contested in good faith;
(t) Waive or commit to waive any rights with a value in excess
of $25,000, in any one case, excluding current obligations all of which are
described on Schedule 2.8;
(u) Cancel, materially amend or renew any insurance policy;
(v) Alter, or enter into any commitment to alter, its interest
in any corporation, association, joint venture, partnership or business entity
in which the Company directly or indirectly holds any interest on the date
hereof; or
(w) Commit to, or agree (in writing or otherwise) to take, any
of the actions described in Sections 4.1(a) through (v) above, or any other
action that would prevent the Company from performing or cause the Company not
to perform its covenants hereunder.
4.2 No Solicitation. Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not (nor will the Company permit any of the Company's
officers, directors, agents, representatives or affiliates to) directly or
indirectly, take any of the following actions with any party other than Parent
and its designees: (a) solicit, initiate, entertain or encourage any proposals
or offers from, or conduct discussions with or engage in negotiations with, any
person, relating to, any possible acquisition of the Company or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise), any material portion of its or their capital stock or
assets or any equity interest in the Company or any of its Subsidiaries, (b)
provide information with respect to it to any person, other than Parent,
relating to, or otherwise cooperate with, facilitate or encourage any effort or
attempt by any such person with regard to, any possible acquisition of the
Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its or
their capital stock or assets or any equity interest in the Company or any of
its subsidiaries, (c) enter into an agreement with any person, other than
Parent, providing for the acquisition of the Company or any of its subsidiaries
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), any material portion of its or their capital stock or assets or any
equity interest in the Company or any of its subsidiaries, or (d) make or
authorize any statement, recommendation or solicitation in support of any
possible acquisition of the Company or any of its subsidiaries (whether by way
of merger, purchase of capital stock, purchase of assets or otherwise), any
material portion of its or their capital stock or assets or any equity interest
in the Company or any of its subsidiaries, by any person, other than by Parent.
The Company shall immediately cease and cause to be terminated any such
contracts or negotiations with third parties relating to any such transaction or
proposed transaction. In addition to the foregoing, if the Company receives
prior to the Effective Time or the termination of this Agreement any offer or
proposal relating to any of the above, the Company shall immediately notify
Parent thereof, including information as to the identity of the offeror or the
party making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be, and such other information related thereto as
Parent may reasonably request. Except as contemplated by this Agreement,
disclosure by the Company of the terms hereof (other than the prohibition of
this section and other
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than disclosure by the Company to its authorized representatives, consultants
and advisors) shall be deemed to be a violation of this Section 4.2. To the
extent required by the Exchange Act, nothing contained in this Agreement shall
prohibit the Company or its Board of Directors from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) under the Exchange Act;
provided, however, that neither the Company nor its Board of Directors shall
disclose any confidential information related to the terms of this Agreement or
any other confidential information about Parent that the Company may possess.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Exemption from Registration or Registration Statement.
(a) Parent initially intends to issue the shares of Parent
Common Stock hereunder pursuant to the procedures described in Section 5.1(b)
hereof. Parent may elect, in its reasonable discretion, to issue the shares of
Parent Common Stock hereunder pursuant to the Registration Statement as provided
in Section 5.1(c) hereof in lieu of obtaining a North Carolina Permit by
providing written notice of such election to the Stockholder Representative. If
after filing the relevant document to obtain a North Carolina Permit pursuant to
Section 5.1(b) hereof, it shall become reasonably apparent that Parent will not
be able to obtain the North Carolina permit within the time period that Parent
would otherwise have been able to prepare and file the Registration Statement
and have the same be declared effective following a full review, Parent shall
issue the shares of Parent Common Stock hereunder pursuant to the Registration
Statement as provided in Section 5.1(c) hereof.
(b) Unless Parent shall have elected to issue the shares of
Parent Common Stock hereunder pursuant to the Registration Statement, as soon as
reasonably practicable following the execution of this Agreement, Parent and the
Company shall prepare the necessary documents, and Parent shall apply to obtain
an order of approval (a "NORTH CAROLINA PERMIT") from the Secretary of State of
the State of North Carolina (after a hearing before such Secretary) pursuant to
Section 78A-30 of the North Carolina Securities Act. The Company and Parent will
respond to any comments from the Secretary of State of North Carolina and use
their commercially reasonable efforts to have the North Carolina Permit granted
as soon as practicable after such filing, if applicable. Without limiting the
generality of the foregoing, promptly after the execution of this Agreement, the
Company, in consultation with Parent, will prepare an information statement (the
"INFORMATION STATEMENT") to be used in connection with obtaining the approval by
the Company's stockholders of this Agreement. The Company shall cause the
Information Statement and any other disclosure documents reasonably deemed
appropriate by Parent to be mailed to the stockholders of the Company promptly
upon receipt of a North Carolina Permit. The Company shall not distribute the
Information Statement without Parent's approval, which approval shall not be
unreasonably withheld or delayed. Each of Parent, Merger Sub and the Company
shall in no way be responsible for any of the content of the Information
Statement except as it pertains to and is supplied by Parent, Merger
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Sub or the Company, as the case may be. Parent shall be responsible for any fees
imposed by the North Carolina Secretary of State in connection with obtaining
the North Carolina Permit.
(c) In the event that Parent shall elect or is otherwise
required to issue the shares of Parent Common Stock hereunder pursuant to the
Registration Statement, the Company and Parent shall prepare, and Parent shall
file with the SEC, the Registration Statement, which shall include a proxy
statement and prospectus (the "PROXY STATEMENT/PROSPECTUS"), to register under
the Securities Act the issuance of shares of Parent Common Stock in connection
with the Merger. Each of the Company and Parent shall respond to any comments of
the SEC, and use its respective commercially reasonable efforts to have the
Registration Statement declared or ordered effective under the Securities Act as
promptly as practicable after such filing, and cause the Proxy
Statement/Prospectus to be mailed to the stockholders of the Company at the
earliest practicable time after the Registration Statement shall have become
effective. As promptly as practicable after the date hereof, the Company and
Parent shall prepare and file any other filings required under the Exchange Act
or the Securities Act with respect to the issuance of shares of Parent Common
Stock in the Merger. Each party hereto shall notify the other promptly upon the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement/Prospectus or
the Registration Statement or for additional information, and shall supply the
other party with copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement/Prospectus or the Registration Statement.
Parent and the Company shall comply in all material respects with all
requirements of law applicable to such party in connection with the Proxy
Statement/Prospectus and the Registration Statement. Whenever any event occurs
which is required to be set forth in an amendment or supplement to the Proxy
Statement/Prospectus or the Registration Statement, the Company or Parent, as
the case may be, shall promptly inform the other party hereto of such occurrence
and cooperate in filing with the SEC or its staff, and/or mailing to the
stockholders of the Company, such amendment or supplement. Each of Parent and
the Company shall in no way be responsible to the other for any of the content
of the Registration Statement or the Proxy Statement/Prospectus except as it
pertains to and is supplied by Parent or the Company, as the case may be.
5.2 Meetings of Stockholders. The Company shall take all action
necessary in accordance with Delaware Law and its Certificate of Incorporation
and Bylaws to convene a meeting of its stockholders (the "STOCKHOLDERS'
MEETING"), to be held as promptly as practicable or, if applicable, on such
later date as may be required by the Secretary of State of North Carolina after
the issuance of a North Carolina Permit (in the event that Parent shall issue
the shares of Parent Common Stock pursuant to Section 5.1(a)), or to be held as
promptly as practicable after the Registration Statement is declared effective
under the Securities Act (in the event that Parent shall issue the shares of
Parent Common Stock hereunder pursuant to the Registration Statement), for the
purpose of voting upon the approval and adoption of this Agreement and the
transactions contemplated hereby, as appropriate. In connection therewith, (a)
the Board of Directors of the Company shall approve this Agreement and declare
its advisability, and recommend that the stockholders of the Company vote in
favor of and adopt and approve this Agreement at the Stockholders' Meeting, and
(b) the Information Statement or Proxy Statement, as applicable, shall
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include a statement to the effect that the Board of Directors of the Company has
recommended that the stockholders of the Company vote in favor of and adopt and
approve this Agreement at the Stockholders' Meeting. The Proxy Statement shall
specify that adoption of this Agreement shall constitute approval by the
stockholders of the Company of: (i) the escrow and all other provisions of
Article VII hereof and the deposit of that number of shares of Parent Common
Stock equal to the Escrow Amount into the Escrow Fund and (ii) in favor of the
appointment of ▇▇▇▇▇ ▇▇▇▇ as Stockholder Representative, under and as defined in
this Agreement. The Company shall consult with Parent regarding the date of the
Stockholders' Meeting and shall not postpone or adjourn (other than for absence
of a quorum) the Stockholders' Meeting without the consent of Parent. The
Company shall use its best efforts to obtain the consent of its stockholders
sufficient to approve this Agreement and to enable the Closing to occur as
promptly as practicable. The Company shall give its stockholders sufficient
notice such that no stockholder will be able to exercise appraisal rights if
such stockholder has not perfected such appraisal rights prior to Closing,
pursuant to Section 262 of Delaware Law.
In addition, the Company shall (i) simultaneously submit for approval
by the stockholders of the Company by the requisite vote any payments or
benefits that may be deemed to constitute "parachute payments" pursuant to
Section 280G of the Code, such that all such payments or benefits shall not be
deemed to be "parachute payments" pursuant to proposed regulations issued
pursuant to Section 280G of the Code or shall be exempt from such treatment
under such Section 280G, or (ii) deliver to Parent evidence satisfactory to
Parent that such requisite stockholder approval has not been obtained with
respect to any payment or benefit that may be deemed to constitute a "parachute
payment" within the meaning of the proposed regulations issued pursuant to
Section 280G of the Code and, as a consequence, that such "parachute payment"
shall not be made or provided. Schedule 5.2 lists all persons who the Company
reasonably believes are, with respect to the Company or any Affiliate,
"disqualified individuals" (within the meaning of Section 280G of the Code and
the regulations promulgated thereunder) as determined as of the date hereof. On
or about the date which is five (5) business days prior to the expected date of
the Closing, the Company shall, as and to the extent necessary, deliver to
Parent a revised Schedule 5.2, which sets forth any additional information which
the Company reasonably believes would affect the determination of the persons
who are, with respect to the Company or any Affiliate, deemed to be
"disqualified individuals" (within the meaning of Section 280G of the Code and
the regulations promulgated thereunder) as of the date of each such revised
Schedule 5.2.
5.3 Access to Information. The Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during the
period from the date hereof and prior to the Effective Time to (a) all of the
Company's and its subsidiaries' properties, books, contracts, commitments and
records, including the Company's and its subsidiaries' source code, other than
the source code for the framework layer of the Company's software, (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of the Company and its subsidiaries as
Parent may reasonably request, and (c) all Employees of the Company and its
subsidiaries identified by Parent. The Company agrees to provide to Parent and
its accountants, counsel and other representatives copies of internal financial
statements (including Tax returns and supporting documentation) promptly upon
request. No information or knowledge
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obtained in any investigation pursuant to this Section 5.3 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger in
accordance with the terms and provisions hereof.
5.4 Confidentiality. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 5.3 hereof, or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transactions contemplated hereby, shall be governed by the terms of the
Confidentiality and Nonsolicitation Agreement effective as of July 27, 2001 (the
"CONFIDENTIAL DISCLOSURE AGREEMENT") between the Company and Parent.
5.5 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
("THIRD PARTY EXPENSES") incurred by a party in connection with the negotiation
and effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses.
5.6 Public Disclosure. No party shall issue any statement or
communication to any third party (other than their respective agents) regarding
the subject matter of this Agreement or the transactions contemplated hereby,
including, if applicable, the termination of this Agreement and the reasons
therefor, without the consent of the other party, which consent shall not be
unreasonably withheld, except that this restriction shall be subject to Parent's
obligation to comply with applicable securities laws and Nasdaq Stock Market
regulations.
5.7 Consents. The Company shall obtain all necessary consents, waivers
and approvals with respect to the transactions contemplated by this Agreement
under those Contracts identified on Schedule 6.3(c).
5.8 FIRPTA Compliance. On the Closing Date, the Company shall deliver
to Parent a properly executed statement (a "FIRPTA COMPLIANCE CERTIFICATE") in a
form reasonably acceptable to Parent for purposes of satisfying Parent's
obligations under Treasury Regulation Section 1.1445-2(c)(3).
5.9 Tax Matters. None of the parties hereto shall, nor shall they cause
or permit their respective affiliates to, take any action that would be
reasonably expected to prevent the Merger from qualifying as a reorganization
with the meaning of Section 368(a) of the Code.
5.10 Reasonable Efforts. Subject to the terms and conditions provided
in this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this
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Agreement; provided, however, that Parent shall not be required to agree to any
divestiture by Parent or the Company or any of Parent's subsidiaries or
affiliates, of shares of capital stock or of any business, assets or property of
Parent or its subsidiaries or affiliates, or of the Company, its affiliates, or
the imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock. As soon as may be reasonably practicable, to the extent
not already filed, each of the Company and Parent shall file with the United
States Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice (the "DOJ") the Notification and Report
Forms relating to the transactions contemplated herein as required by the HSR
Act, as well as comparable pre-merger notification forms required by the merger
notification or control laws and regulations of applicable jurisdiction, as
agreed to by the parties. The Company and Parent each shall promptly (a) supply
the other with any information which may be required in order to effectuate such
filings and (b) supply any additional information which reasonably may be
required by the FTC, the DOJ or the competition or merger control authorities of
any other jurisdiction and which the parties may reasonably deem appropriate.
5.11 Notification of Certain Matters. The Company shall give prompt
notice to Parent of: (a) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of the Company contained in this Agreement to be untrue or inaccurate
at or prior to the Effective Time, and (b) any failure of the Company to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.11 shall not (i) limit or otherwise affect any
remedies available to the party receiving such notice or (ii) constitute an
acknowledgment or admission of a breach of this Agreement. No disclosure by the
Company pursuant to this Section 5.11, however, shall be deemed to amend or
supplement the Disclosure Schedule or prevent or cure any misrepresentations,
breach of warranty or breach of covenant.
5.12 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of the Merger
and the transactions contemplated hereby.
5.13 Company's Auditors. The Company will use its commercially
reasonable efforts to cause its management and its independent auditors to
facilitate on a timely basis the preparation of financial statements (including
pro forma financial statements if required) as required by Parent to comply with
applicable SEC regulations.
5.14 New Employment Arrangements. At the discretion of Parent, each
person who is an employee of the Company or its subsidiaries immediately prior
to the Closing Date shall be offered "at-will" employment by Parent and/or the
Surviving Corporation, to be effective as of the Closing Date, upon proof of
citizenship or appropriate employment authorization from the U.S. Immigration
and Naturalization Service or the U.S. Department of State evidencing a right to
work in the United States. Such "at-will" employment arrangements may (a) be set
forth in offer letters based on Parent's standard form (each, an "OFFER
LETTER"), (b) be subject to and in compliance with Parent's
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applicable human resources policies and procedures, (c) have terms, including
the position, salary and responsibilities of such employee, which will be
determined by Parent after consultation with the Company's management, and (d)
supersede any prior employment agreements and other arrangements with such
employee in effect prior to the Closing Date. Each employee listed on Schedule
5.14 hereto (each, a "KEY EMPLOYEE") shall execute an Employment Agreement, at
the same time as the execution of this Agreement or as soon as possible
thereafter, which Employment Agreements shall be effective as of the Closing
Date. Each employee of the Company who remains an employee of Parent or the
Surviving Corporation after the Closing Date shall be referred to hereafter as a
"CONTINUING EMPLOYEE." Effective at the Effective Time, Continuing Employees
shall be eligible to receive benefits consistent with Parent's applicable human
resources policies. Parent will or will cause the Surviving Corporation or
appropriate subsidiary of Parent to give Continuing Employees full credit under
such policies for prior service at the Company or its subsidiaries for purposes
of eligibility and vesting (subject to the terms of any new vesting arrangement
to take effect at the Effective Time). Parent shall make commercially reasonably
efforts to cause the tax-qualified retirement plan in which Continuing Employees
become eligible to participate to accept direct paid and indirect rollovers of
distributions made to Continuing Employees under the Company's retirement plan
to the extent permitted by law.
5.15 Voting Agreement. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement (and in
any case prior to the Closing Date), from each person listed on Schedule 5.15,
an executed Voting Agreement in the form attached hereto as Exhibit A.
5.16 Stockholder Agreements. Schedule 5.16 sets forth those persons
who, in the Company's reasonable judgment, are or may be "affiliates" of the
Company within the meaning of Rule 145 (each such person, an "AFFILIATE")
promulgated under the Securities Act ("RULE 145") as of the time of the
Stockholders' Meeting. The Company shall provide Parent such information and
documents as Parent shall reasonably request for purposes of reviewing such
list. The Company shall deliver or cause to be delivered to Parent, concurrently
with the execution of this Agreement (and in any case prior to the Closing Date)
from each of the Affiliates of the Company that beneficially own Company Capital
Stock, an executed Stockholder Agreement in the form attached hereto as Exhibit
E. Parent and Merger Sub shall be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by such
Affiliates pursuant to the terms of the Stockholder Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Parent Common
Stock, consistent with the terms of such Stockholder Agreements.
5.17 Termination of 401(k) Plan. Effective as of the day immediately
preceding the Closing Date, the Company shall terminate any and all Company
Employee Plans intended to include a Code Section 401(k) arrangement; provided,
however, that Parent requests termination of such Company Employee Plans by
sending a written notice to the Company at least five business days prior to the
Effective Time. If Parent provides such written notice to the Company, the
Company shall provide Parent with evidence that such Company Employee Plan(s)
have been terminated (effective as of the day immediately preceding the Closing
Date) pursuant to resolutions of the Company's Board of Directors. The form and
substance of such resolutions shall be subject to
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review and approval of Parent. The Company also shall take such other actions in
furtherance of terminating such Company Employee Plan(s) as Parent may
reasonably require.
5.18 Termination of Agreements. The Company shall cause those
agreements listed on Schedule 6.3(e) to be terminated. The Company shall
negotiate a mutual termination of the Company Warrant described on Schedule
6.3(e) with the holder of such Company Warrant; provided, however, that if the
consideration paid by the Company for the termination of such Company Warrant
exceeds $32,000, then the amount of consideration in excess of such $32,000
shall constitute "Losses" recoverable under the Escrow Agreement, and such
Losses shall not be subject to the Threshold Amount.
5.19 Spreadsheet. The Company shall prepare a spreadsheet (the
"SPREADSHEET") in form acceptable to Parent, which spreadsheet shall be
certified as complete and correct by the Chief Executive Officer or Chief
Financial Officer of the Company as of the Closing and which shall separately
list, as of the Closing, all Stockholders and their respective addresses as
reflected in the Company's records, the number of shares of Company Capital
Stock held by such persons (including whether such shares are Company Common
Stock, Series A Preferred, Series B Preferred or Series C Preferred and the
respective certificate numbers), the exchange ratio applicable to each holder,
the number of shares of Parent Common Stock to be issued to each holder, the
amount of Cash Consideration to be received by each holder, the number of shares
of Parent Common Stock to be deposited into the Escrow Fund on behalf of each
holder, and such other information relevant thereto or which the Exchange Agent
may reasonably request. The Company shall prepare a separate spreadsheet (the
"OPTION SPREADSHEET") in form acceptable to Parent, which spreadsheet shall be
certified as complete and correct by the Chief Executive Officer or Chief
Financial Officer of the Company as of the Closing and which shall separately
list, as of the Closing, all holders of Company Warrants, Company Options (to
the extent such Company Options will be outstanding at the Effective Time) and
shares of restricted Common Stock of the Company ("COMPANY RESTRICTED STOCK"),
and their respective addresses, the number of shares of Company Capital Stock
underlying each such Company Option and Company Warrant, and the vesting
arrangement with respect to such Company Options, Company Warrants and Company
Restricted Stock and such other information relevant thereto or which Parent may
reasonably request.
5.20 Officers and Directors.
(a) Parent agrees that all rights to indemnification existing
on the date hereof in favor of the present or former officers and directors of
the Company with respect to actions taken or omissions made in their capacities
as directors or officers of the Company on or prior to the Effective Time as
provided in the Company's Third Amended and Restated Certificate of
Incorporation, the Company's Bylaws and those indemnification agreements listed
on Schedule 5.20 (each as in effect on the date hereof) shall survive the Merger
and continue in full force and effect following the Effective Time for a period
equal to the statute of limitations for any such claims against such officers
and directors, and the obligations related thereto will be assumed by Parent for
such period.
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(b) The Surviving Corporation shall maintain the Company's existing officers'
and directors' liability insurance ("D&O INSURANCE") for a period of three years
following the Effective Time.
5.21 S-8 Registration Statement. Not later than thirty (30) days after
the Closing Date, Parent agrees to file with the Securities and Exchange
Commission a registration statement on Form S-8 registering a number of shares
of Parent Common Stock equal to the number of shares of Parent Common Stock
issuable upon the exercise of all Company Options assumed by Parent pursuant to
Section 1.6(d) hereof. Such registration statement shall be kept effective (and
the current status of the prospectus required thereby shall be maintained in
accordance with the relevant requirements of the Securities Act and the Exchange
Act) at least for so long as any Company Options assumed by Parent remain
outstanding.
5.22 Nasdaq National Market Listing. No later than the Effective Time,
Parent shall authorize for listing on The Nasdaq National Market the shares of
Parent Common Stock issuable, and those subject to Company Options assumed by
Parent, in connection with the Merger, upon official notice of issuance.
5.23 Certain Litigation. The Company shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable to settle any
outstanding claims between the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, which claims are
more fully described in Schedule 2.17; provided, however, that the Company shall
not settle such claims if, as a condition to such settlement, the Company pays
or becomes obligated to pay any amount in excess of $70,000.
5.24 Termination of Certain Company Options. No later than 10 business
days prior to the Effective Time, Parent shall deliver to the Company a list of
all Company Options that Parent will not assume as part of the Merger. Following
such delivery, the Company shall give written notice not fewer than five
business days prior to the Effective Time to each holder of such Company Options
that (i) Parent has determined not to assume such Company Options, (ii) such
Company Options will be accelerated as of the Effective Time, and (iii) such
optionee may exercise his or her Company Option in compliance with the terms
provided in the relevant Option Plan on or prior to the last date specified in
the notice, conditioned upon and subject to completion of the Merger. The
foregoing shall be accomplished in accordance with the relevant Option Plan and
other applicable contractual obligations, as the case may be, including, without
limitation, any notice requirements contained therein or by virtue thereof.
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, of the
following conditions:
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(a) Fairness Hearing and North Carolina Permit or Registration
Statement Effective. Prior to the issuance of the Parent Common Stock in the
Merger, either:
(i) The Secretary of the State of North Carolina
shall have approved the terms and conditions of the transactions contemplated by
this Agreement, and the fairness of such terms and conditions following a
hearing for such purpose, and shall have issued a North Carolina Permit, or
(ii) The SEC shall have declared the Registration
Statement effective in accordance with the provisions of the Securities Act; and
no stop order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued by the SEC and no proceeding for that
purpose, and no similar proceeding in respect of the Proxy Statement/Prospectus,
shall have been initiated or threatened in writing by the SEC.
(b) HSR Act and Comparable Laws. All waiting periods, if any,
under the HSR Act relating to the transactions contemplated hereby shall have
expired or been terminated and clearance for such transactions shall have been
obtained under the comparable laws of any foreign countries where consummation
of such transactions prior to such clearance is required.
(c) 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.
(d) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other Governmental Entities (i)
preventing the consummation of the Merger, (ii) prohibiting Parent's ownership
or operation of any portion of the business of the Company or (iii) compelling
Parent or the Company to dispose of or hold separate all or any material portion
of the business or assets of the Company or Parent as a result of the Merger,
shall be in effect, nor shall any proceeding brought by an administrative agency
or commission or other governmental authority or instrumentality of competent
jurisdiction, domestic or foreign, seeking any of the foregoing be threatened or
pending.
(e) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the stockholders of the Company by the
requisite vote under Delaware Law and the Company's Certificate of
Incorporation.
(f) Tax Opinions. Parent and the Company shall each have
received written opinions from their counsel, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, respectively, in form and substance reasonably
satisfactory to them, to the effect that the Merger will constitute a
reorganization with the meaning of Section 368(a) of the Code; provided,
however, that if counsel to either Parent or the Company does not render such
opinion, this condition shall nonetheless be deemed to be satisfied with respect
to such party if counsel to the other party renders such opinion to such party.
In rendering such opinions, counsel may rely upon reasonable
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representations and certificates of Parent, Merger Sub and the Company, and
Parent, Merger Sub and the Company agree to make such representations and
deliver such certificates.
(g) Nasdaq Listing. The Parent Common Stock to be issued in
the Merger and subject to Company Options assumed by Parent shall have been
approved for listing on Nasdaq, subject to official notice of issuance.
6.2 Additional Conditions to Obligations of the Company. The
obligations of the Company to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all respects as of the date of this Agreement and shall be true
and correct in all respects on and as of the Closing Date with the same force
and effect as if made on and as of the Closing Date, except, (i) in each case,
or in the aggregate, where such breaches or inaccuracies of representations or
warranties do not constitute a Parent Material Adverse Effect, and (ii) for
those representations and warranties which address matters only as of a
particular date (which representations shall remain true and correct as of such
date (subject to the qualification as set forth in the preceding clause (i)).
For purposes of determining the accuracy of such representations and warranties,
all "Material Adverse Effect" qualifications and other qualifications based on
the word "material" or similar phrases contained in such representations and
warranties shall be disregarded. The Company shall have received a certificate
to such effect signed on behalf of Parent by a duly authorized 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 Effective Time, and the Company shall have received a certificate to such
effect signed by a duly authorized officer of Parent.
(c) Legal Opinion. The Company shall have received a legal
opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, legal counsel to Parent and
Merger Sub, in substantially the form attached hereto as Exhibit C.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all respects as of the date of this Agreement and shall be true and correct
in all respects on and as of the Closing with the same force and effect as if
made on and as of the Effective Time, except, (i) in each case, or in the
aggregate, where such breaches or inaccuracies of representations or warranties
do not constitute a Company Material Adverse Change, and (ii) for those
representations and warranties which address matters
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only as of a particular date (which representations shall remain true and
correct as of such date (subject to the qualification as set forth in the
preceding clause (i)). For purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect" qualifications
and other qualifications based on the word "material" or similar phrases
contained in such representations and warranties shall be disregarded, and (ii)
any update of or modification to any Company Schedule made or purported to have
been made after the date of this Agreement shall be disregarded (other than
changes which have occurred as a result of actions or omissions permitted under
the terms of this Agreement or otherwise consented to in writing by Parent).
Parent and Merger Sub shall have received a certificate to such effect signed on
behalf of the Company by the chief executive officer of the Company.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants (other
than Section 5.4) required by this Agreement to be performed or complied with by
it on or prior to the Effective Time. The Company shall have complied in all
respects with Section 5.4, except where such failure to comply did not result in
a Parent Material Adverse Change. Parent and Merger Sub shall have received a
certificate to such effect signed by the chief executive officer of the Company.
(c) Third Party Consents. Parent shall have been furnished
with evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c). Notwithstanding anything
herein to the contrary, to the extent the Company or, following the Effective
Time, Parent makes any payment or is obligated to make any payment to any third
party to fulfill the closing condition described in Section 6.3(c),
fifty-percent (50%) of such payment, if made by the Company or, following the
Effective Time, Parent, will be considered "Losses" for the purpose of Article
VII, and such Losses shall not be subject to the Threshold Amount.
(d) Legal Opinion. Parent shall have received a legal opinion
from ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, legal counsel to the Company, in substantially the
form attached hereto as Exhibit D.
(e) Termination of Agreements. The Company shall have
terminated each of those agreements listed on Schedule 6.3(e) to this Agreement
and each such agreement shall be of no further force or effect.
(f) Resignation of Directors. Parent shall have received a
written resignation from each of the directors of the Company and its
subsidiaries effective as of the Effective Time.
(g) Employment Agreements. Each of the Key Employees shall
have executed and delivered to Parent an Employment Agreement in the form
attached hereto as Exhibit B, and at least ninety percent (90%) of such
Employment Agreements shall be in full force and effect.
(h) New Employment Arrangements. Excluding the employees
identified on Schedule 6.3(h) and any other employees to whom the Parent does
not offer an "at-will" employment arrangement, at least 70% of the remaining
employees employed by the Company as of the date of this Agreement shall
continue to be employees on the Closing Date.
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(i) Stockholder Approval; Dissenting Shares. This Agreement,
the Merger and the transactions contemplated hereby and thereby shall have been
approved and adopted by stockholders of the Company holding not less than
eighty-five percent (85%) of the outstanding shares of the Company Capital
Stock, as well as by the requisite vote under Delaware Law and the Company's
Certificate of Incorporation, as applicable. The Company's stockholders shall
have approved by the requisite vote (i) any payments or benefits that may be
deemed to constitute "parachute payments" pursuant to Section 280G of the Code
such that all such payments, sales, and purchases shall not be deemed to be
"parachute payments" pursuant to the proposed regulations issued pursuant to
Section 280G of the Code or shall be exempt from such treatment under the
proposed regulations issued pursuant to such Section 280G or the rights to such
parachute payments shall have been terminated or cancelled and (ii) the
Management Incentive Plan. The number of shares of Company Capital Stock
constituting Dissenting Shares shall not represent, immediately prior to the
Effective Time, more than ten percent (10%) of the issued and outstanding shares
of Company Common Stock and Company Preferred Stock.
(j) Certificate of the Company. Parent shall have received a
certificate, validly executed by the Chief Executive Officer of the Company for
and on its behalf, to the effect that, as of the Closing, each and every one of
the conditions to the obligations of Parent and Merger Sub set forth in this
Section 6.3 have been satisfied (unless otherwise waived in accordance with the
terms hereof).
(k) Certificate of Secretary of Company. Parent shall have
received a certificate, validly executed by the Secretary or Assistant Secretary
of the Company, certifying as to (i) the terms and effectiveness of the
Certificate of Incorporation and the Bylaws of the Company, and (ii) the valid
adoption of resolutions of the Board of Directors of the Company and its
stockholders approving this Agreement and the consummation of the transactions
contemplated hereby.
(l) Certificate of Good Standing. Parent shall have received a
long-form certificate of good standing for the Company from the Secretary of
State of the State of Delaware, dated within a reasonable period prior to
Closing.
(m) Certificate of Status of Foreign Corporation. Parent shall
have received a Certificate of Status of Foreign Corporation or similar
certificate of the Company issued by the Secretary of State of such states where
the Company is qualified to do business for the period prior to 14 days prior to
the Effective Time within a reasonable period prior to the Closing certifying as
to the good standing of the Company in such states.
(n) FIRPTA Certificate. Parent shall have received a copy of
the FIRPTA Compliance Certificate, validly executed by a duly authorized officer
of the Company.
(o) Spreadsheet. The Company shall have delivered to Parent
and the Exchange Agent the Spreadsheet, which shall have been certified as true
and correct by the Chief Executive Officer or Chief Financial Officer of the
Company.
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(p) Company Material Adverse Change. There shall not have
occurred any Company Material Adverse Change.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 Survival of Representations and Warranties. Notwithstanding any
right of Parent or the Company (whether or not exercised) to investigate the
affairs of Parent or the Company (whether pursuant to Section 5.3 or otherwise)
or a waiver by Parent or the Company of any condition to Closing set forth in
Article VI, each party shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other party
contained in this Agreement or in any instrument delivered pursuant to this
Agreement. All of the representations and warranties of the Company in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Merger and continue until 5:00 p.m., EDT, on the date that is ten
(10) months following the Closing Date (the "EXPIRATION DATE"). The covenants
and agreements set forth in this Agreement and any ancillary document hereto
shall not expire and shall survive indefinitely. The representations and
warranties of Parent and Merger Sub contained in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
terminate at the Closing.
7.2 Escrow Arrangements.
(a) Escrow Fund. At the Effective Time the Company's
stockholders will be deemed to have received and consented to the deposit with
the Escrow Agent (as defined below) of the Escrow Amount (plus any additional
shares as may be issued upon any stock split, stock dividend or recapitalization
effected by Parent after the Effective Time), without any act required on the
part of any stockholder. As soon as practicable after the Effective Time, the
Escrow Amount, without any act required on the part of any stockholder, will be
deposited with an escrow agent acceptable to Parent and the Stockholder
Representative (as defined in Section 7.2(i)(i) below) as Escrow Agent (the
"ESCROW AGENT"), such deposit to constitute an escrow fund (the "ESCROW FUND")
to be governed by the terms set forth herein and at Parent's cost and expense.
The portion of the Escrow Amount contributed on behalf of each stockholder of
the Company shall be in proportion to the aggregate Parent Common Stock to which
such holder would otherwise be entitled under Section 1.6(b). The Escrow Amount
shall be funded entirely out of the shares of Parent Common Stock issuable upon
the Merger in respect of Company Capital Stock. The Escrow Fund is available to
compensate Parent and its officers, directors and affiliates, including the
Surviving Corporation (any, an "INDEMNIFIED PARTY" and collectively, the
"INDEMNIFIED PARTIES"), for any claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses, and expenses of investigation and defenses (hereinafter individually a
"LOSS" and collectively "LOSSES") incurred by the Indemnified Parties, or any of
them, directly or indirectly as a result of (i) any inaccuracy or breach of a
representation or warranty of the Company contained in Article II herein, (ii)
any failure by the Company to perform or comply with any covenant contained
herein, (iii) any Dissenting Share Payments, or (iv) any claim made by any
person that such person is or was entitled (by contract or otherwise) to receive
any amount or property in such person's
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capacity (or asserted capacity) as a holder of equity interests in the Company
or contingent equity interests or as a beneficiary of any rights in excess of
the consideration set forth in the Merger Agreement by virtue of or as a result
of the Merger, other than any claim described in clause (iii) above. Parent and
the Company each acknowledge that such Losses, if any, would relate to
unresolved contingencies existing at the Effective Time, which if resolved at
the Effective Time would have led to a reduction in the aggregate Merger
consideration. Nothing herein shall limit the liability of the Company for any
breach of any representation, warranty or covenant if the Merger does not close.
For the purpose of this Article VII only, in the event of any
inaccuracy or breach of a representation or warranty of the Company contained in
Article II herein (determined giving effect to any requirement in any
representation or warranty that an event or fact be material or have a Material
Adverse Effect), the amount of any Loss resulting from such inaccuracy or breach
of such representation or warranty shall be determined without giving effect to
any requirement in any representation or warranty that an event or fact be
material or have a Material Adverse Effect, and any such requirement shall be
disregarded for such purpose. There shall be no right of contribution from any
Indemnified Party with respect to any Loss. The Escrow Agent may execute this
Agreement following the date hereof and prior to the Closing, and such later
execution, if so executed after the date hereof, shall not affect the binding
nature of this Agreement as of the date hereof between the other signatories
hereto.
(b) Threshold. No Indemnified Party may recover any Losses
unless and until one or more Officer's Certificates identifying a Loss or Losses
in excess of $500,000 in the aggregate (the "THRESHOLD AMOUNT") has or have been
delivered to the Escrow Agent as provided in Section 7.2(e) hereof, in which
case such Indemnified Party shall be entitled to recover all Losses (including
the Threshold Amount) so identified to the extent then available in the Escrow
Fund. Notwithstanding the foregoing, Parent shall be entitled to recover for,
and the Threshold Amount shall not apply as a threshold to, any and all claims
or payments made with respect to:
(i) all Losses incurred pursuant to clause (iii) or
(iv) of Section 7.2(a) hereof;
(ii) fraud, intentional misrepresentation or willful
misconduct;
(iii) any breach or inaccuracy of a representation or
warranty contained in Section 2.2 (Company Capital Structure), Section 2.10(d)
(Tax and Other Returns and Reports) (to the extent such Losses are in excess of
accruals for such matters as set forth on the Current Balance Sheet), the first
sentence of Section 2.25 (Brokers' and Finders' Fees), the last sentence of
Sections 2.26(d) and (j) (Employee Matters and Benefit Plans) (to the extent
such Losses are in excess of accruals for such matters as set forth on the
Current Balance Sheet);
(iv) all Losses incurred pursuant to Section 6.3(c)
(Third Party Consents) and Section 5.18 (Termination of Agreements); or
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(v) all Losses resulting under or related to the
matters described in Schedule 7.2(b).
(c) Escrow Period; Distribution upon Termination of Escrow
Periods. Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Effective Time and shall terminate at 5:00
p.m., EDT on the Expiration Date (the "ESCROW PERIOD"). Promptly following the
Expiration Date, the Escrow Agent shall transfer to the Exchange Agent or
stockholders of the Company, pursuant to written instructions by Parent, the
remaining Escrow Fund, if any; provided that the Escrow Period shall not
terminate with respect to such amount (or some portion thereof), that is
necessary in the reasonable judgment of Parent (subject to reduction as may be
determined by arbitration of the matter as provided in Section 7.2(g) hereof in
the event of the objection of the Stockholder Representative in the manner
provided in Section 7.2(f) hereof) to satisfy any unsatisfied claims concerning
facts and circumstances existing prior to the termination of such Escrow Period
and to the extent specified in any Officer's Certificate delivered to the Escrow
Agent prior to termination of such Escrow Period. As soon as all such claims
have been resolved, the Escrow Agent shall transfer to the stockholders of the
Company, pursuant to written instructions by Parent, the remaining portion of
the Escrow Fund not required to satisfy such claims. Deliveries of Escrow
Amounts to the stockholders of the Company pursuant to this Section 7.2(c) shall
be made in proportion to their respective original contributions to the Escrow
Fund.
(d) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the
Escrow Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other
equity securities issued or distributed by Parent (including shares issued upon
a stock split) ("NEW SHARES") in respect of Parent Common Stock in the Escrow
Fund which have not been released from the Escrow Fund as of the time of such
issuance or distribution by Parent shall be added to the Escrow Fund and become
a part thereof. Cash dividends on Parent Common Stock shall not be added to the
Escrow Fund but shall be distributed to the recordholders thereof. New Shares
issued in respect of shares of Parent Common Stock which have been released from
the Escrow Fund as of the time of such issuance or distribution by Parent shall
not be added to the Escrow Fund but shall be distributed to the recordholders
thereof.
(iii) Each stockholder shall be entitled to control
the vote of the shares of Parent Common Stock contributed to the Escrow Fund by
such stockholder (and on any voting securities added to the Escrow Fund in
respect of such shares of Parent Common Stock), and the Escrow Agent in whose
name the shares are held shall vote such shares on all matters as instructed by
the respective stockholders in writing.
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(e) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on
or before the last day of the Escrow Period of a certificate signed by any
officer of Parent (an "OFFICER'S CERTIFICATE"): (A) stating that Parent has paid
or properly accrued or reasonably anticipates that it will have to pay or accrue
Losses, and (B) specifying in reasonable detail the individual items of Losses
included in the amount so stated, the date each such item was paid or properly
accrued, or the basis for such reasonably anticipated liability, and the nature
of the misrepresentation, breach of warranty or covenant to which such item is
related, the Escrow Agent shall, subject to the provisions of Section 7.2(f)
hereof, transfer to Parent out of the Escrow Fund, as promptly as practicable,
shares of Parent Common Stock held in the Escrow Fund in an amount equal to such
Losses. Such payments of shares from the Escrow Fund will be made pro rata in
proportion to the stockholders' original contributions to the Escrow Fund.
(ii) For the purposes of determining the number of
shares of Parent Common Stock to be delivered to Parent out of the Escrow Fund
pursuant to Section 7.2(e)(i) hereof, the shares of Parent Common Stock shall be
valued at the Trading Price. Parent and the Stockholder Representative shall
certify such fair market value in a certificate signed by both Parent and the
Stockholder Representative, and shall deliver such certificate to the Escrow
Agent.
(f) Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Stockholder Representative and for a period of thirty
(30) days after such delivery, the Escrow Agent shall make no transfer to Parent
of any Escrow Amounts pursuant to Section 7.2(e) hereof unless the Escrow Agent
shall have received written authorization from the Stockholder Representative to
make such transfer. After the expiration of such thirty (30) day period, the
Escrow Agent shall transfer shares of Parent Common Stock from the Escrow Fund
in accordance with Section 7.2(e) hereof, provided that no such transfer may be
made if the Stockholder Representative shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such thirty (30) day
period.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Stockholder Representative shall
object in writing to any claim or claims made in any Officer's Certificate as
provided in Section 7.2(f) hereof, the Stockholder Representative and Parent
shall attempt in good faith to agree upon the rights of the respective parties
with respect to each of such claims. If the Stockholder Representative and
Parent should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Escrow Agent.
The Escrow Agent shall be entitled to rely on any such memorandum and distribute
shares of Parent Common Stock from the Escrow Fund in accordance with the terms
thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Parent or the Stockholder Representative may demand
arbitration of the matter unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event
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arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Parent and the
Stockholder Representative shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The arbitrators shall
set a limited time period and establish procedures designed to reduce the cost
and time for discovery while allowing the parties an opportunity, adequate in
the sole judgment of the arbitrators, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrators shall
rule upon motions to compel or limit discovery and shall have the authority to
impose sanctions, including attorneys fees and costs, to the extent as a court
of competent law or equity, should the arbitrators determine that discovery was
sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of a majority of the
three arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 7.2(f) hereof, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. Such decision shall be written
and shall be supported by written findings of fact and conclusions which shall
set forth the award, judgment, decree or order awarded by the arbitrators. If an
Indemnified Party claims that it has incurred a Loss by reason of the inaccuracy
or breach of a representation or warranty contained in Section 2.10, and such
Loss is reflected on a Tax Return prepared by or on behalf of the Indemnified
Party, then, unless there has been a final determination within the meaning of
Section 1313(a) of the Code, (A) there shall be no presumption of correctness or
incorrectness applied to such Tax Return; and (B) the Indemnified Party shall
not prevail to the extent that the arbitrators determine that there was
"substantial authority" (for purposes of Section 6662 of the Code) for a Tax
Return position that would not have resulted in a Loss.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in Denver County,
Colorado under the rules then in
effect of the American Arbitration Association. For purposes of this Section
7.2(g), in any arbitration hereunder in which any claim or the amount thereof
stated in the Officer's Certificate is at issue, Parent shall be deemed to be
the prevailing party in the event that the arbitrators award Parent an amount
equal to at least the sum of one-half (1/2) of the disputed amount plus any
amounts not in dispute; otherwise, the stockholders of the Company as
represented by the Stockholder Representative shall be deemed to be the
prevailing party. The non-prevailing party to an arbitration shall pay its own
expenses, the fees of each arbitrator, the administrative costs of the
arbitration, and the expenses, including without limitation, reasonable
attorneys fees and costs, incurred by the other party to the arbitration.
(h) Escrow as the Sole Remedy. The Escrow Fund shall be the
sole and exclusive source of satisfaction of any claim made by the Indemnified
Parties for any Losses resulting from the matters set forth in this Article VII;
provided that nothing herein shall limit any remedy of an Indemnified Party for
fraud, intentional misrepresentation or willful misconduct, and nothing herein
shall limit the liability of the Company or Parent for any breach of any
representation, warranty or covenant if the Merger does not close.
Notwithstanding anything contained herein to the contrary, nothing shall
prohibit Parent from seeking and obtaining recourse against the Company's
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stockholders, or any of them, in the event that Parent issues to the Company's
stockholders, or any of them, more than the number of Merger Shares or Cash
Consideration to which such stockholder is entitled pursuant to Article I of
this Agreement.
(i) Stockholder Representative; Power of Attorney.
(i) In the event that the Merger is approved,
effective upon such vote, and without further act of any stockholder, ▇▇▇▇▇ ▇▇▇▇
shall be appointed as agent and attorney-in-fact (the "STOCKHOLDER
REPRESENTATIVE") for each stockholder of the Company (except such stockholders,
if any, as shall have perfected their appraisal or dissenters' rights under
Delaware Law), for and on behalf of the stockholders of the Company, to give and
receive notices and communications, to authorize delivery to Parent of shares of
Parent Common Stock from the Escrow Fund in satisfaction of claims by Parent, to
object to such deliveries, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of Stockholder Representative for the
accomplishment of the foregoing. Such agency may be changed by the stockholders
of the Company from time to time upon not less than thirty (30) days prior
written notice to Parent; provided that the Stockholder Representative may not
be removed unless holders of a two-thirds interest of the Escrow Fund agree to
such removal and to the identity of the substituted agent. Any vacancy in the
position of Stockholder Representative may be filled by approval of the holders
of a majority in interest of the Escrow Fund. No bond shall be required of the
Stockholder Representative, and the Stockholder Representative shall not receive
compensation for its services. Notices or communications to or from the
Stockholder Representative shall constitute notice to or from each of the
stockholders of the Company.
(ii) Neither the Stockholder Representative nor any
agent employed by him shall be liable for any act done or omitted hereunder as
Stockholder Representative, except for his or her gross negligence or willful
misconduct. The stockholders of the Company on whose behalf the Escrow Amount
was contributed to the Escrow Fund shall severally on a pro rata basis (based on
the Merger Shares to which such stockholders are entitled) indemnify the
Stockholder Representative and hold the Stockholder Representative harmless
against any loss, liability or expense incurred without gross negligence or
willful misconduct on the part of the Stockholder Representative and arising out
of or in connection with the acceptance or administration of the Stockholder
Representative's duties hereunder, including the reasonable fees and expenses of
any legal counsel retained by the Stockholder Representative; provided, however,
that each stockholder's obligation to indemnify the Stockholder Representative
under this Agreement shall be limited to, and payable from, each stockholder's
pro rata interest in the Escrow Fund. The Stockholder Representative shall be
protected in acting upon any notice, statement or certificate believed by him to
be genuine and to have been furnished by the appropriate person and in acting or
refusing to act in good faith on any matter.
(j) Actions of the Stockholder Representative. A decision,
act, consent or instruction of the Stockholder Representative shall constitute a
decision of all the stockholders for whom a portion of the Escrow Amount
otherwise issuable to them are deposited in the Escrow Fund
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and shall be final, binding and conclusive upon each of such stockholders, and
the Escrow Agent and Parent may rely upon any such decision, act, consent or
instruction of the Stockholder Representative as being the decision, act,
consent or instruction of each every such stockholder of the Company. The Escrow
Agent and Parent are hereby relieved from any liability to any person for any
acts done by them in accordance with such decision, act, consent or instruction
of the Stockholder Representative.
(k) Third-Party Claims. In the event Parent becomes aware of a
third-party claim that Parent reasonably believes may result in a demand against
the Escrow Fund, Parent shall notify the Stockholder Representative of such
claim, and the Stockholder Representative, as representative for the
stockholders of the Company, shall be entitled, at his expense, to participate
in any defense of such claim. Parent shall have the right in its sole discretion
to control the defense of all such claims and to settle any such claim;
provided, however, that no settlement of any such claim with third-party
claimants shall alone be determinative of the amount of any claim against the
Escrow Fund, except with the consent of the Stockholder Representative. In the
event that the Stockholder Representative has consented to any such settlement
and acknowledged that the claim is a valid claim against the Escrow Fund, the
Stockholder Representative shall be deemed to have agreed to the claim by Parent
against the Escrow Fund in an amount equal to such settlement.
(l) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions that the Escrow Agent may
receive after the date of this Agreement that are signed by an officer of Parent
and the Stockholder Representative, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith, provided that the Escrow Agent has exercised
reasonable care in the selection of such counsel.
(ii) The Escrow Agent is hereby expressly authorized
to disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder absent gross negligence or
willful misconduct.
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(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent absent gross
negligence or willful misconduct.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for gross negligence or willful misconduct on the part of the Escrow
Agent. The Escrow Agent shall not incur any such liability for (A) any act or
failure to act made or omitted in good faith, or (B) any action taken or omitted
in reliance upon any instrument, including any written statement of affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with the legal counsel in connection
with Escrow Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel provided that the Escrow Agent has exercised
reasonable care in the selection of such counsel. The Escrow Agent is not
responsible for determining and verifying the authority of any person acting or
purporting to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to
this Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings. In
such event, the Escrow Agent will not be liable for damage.
Furthermore, the Escrow Agent may at its option, file an action of
interpleader requiring the parties to answer and litigate any claims and rights
among themselves. The Escrow Agent is authorized to deposit with the clerk of
the court all documents and shares of Parent Common Stock held in escrow, except
all cost, expenses, charges and reasonable attorneys fees incurred by the Escrow
Agent due to the interpleader action and which the parties jointly and severally
agree to pay. Upon initiating such action, the Escrow Agent shall be fully
released and discharged of and from all obligations and liabilities imposed by
the terms of this Agreement.
(vii) The parties and their respective successors and
assigns agree jointly and severally to indemnify and hold Escrow Agent harmless
against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, attorneys fees, and disbursements
that may be imposed on Escrow Agent or incurred by Escrow Agent in connection
with the performance of his/her duties under this Agreement, including but not
limited to any litigation arising from this Agreement or involving its subject
matter.
(viii) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to the parties; provided,
however, that no such resignation shall become effective until the appointment
of a successor escrow agent, which shall be accomplished as follows: the parties
shall use their best efforts to mutually agree on a successor escrow agent
within thirty (30) days after receiving such notice. If the parties fail to
agree upon a successor escrow agent
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within such time, the Escrow Agent shall have the right to appoint a successor
escrow agent authorized to do business in the State of Delaware. The successor
escrow agent shall execute and deliver an instrument accepting such appointment
and it shall, without further acts, be vested with all the estates, properties,
rights, powers and duties of the predecessor escrow agent as if originally named
as escrow agent. The Escrow Agent shall be discharged from any further duties
and liability under this Agreement.
(m) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated by Parent for such extraordinary services and
reimbursed for all costs, attorneys fees, and expenses occasioned by such
default, delay, controversy or litigation.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time of the Merger, whether before
or after approval of the Merger by the stockholders of the Company:
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent if: (i) the Effective Time
has not occurred by January 14, 2002 (i) provided that the right to terminate
this Agreement under this clause 8.1(b)(i) shall not be available to any party
whose failure to fulfill any obligation hereunder has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date;
(ii) there shall be a final nonappealable order of a federal or state court in
effect preventing consummation of the Merger; or (iii) there shall be any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity that would make consummation
of the Merger illegal;
(c) by either Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree or ruling is final and nonappealable;
(d) by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger, by any Governmental Entity, which would: (i) prohibit
Parent's or the Company's ownership or operation of any material
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portion of the business of the Company or (ii) compel Parent or the Company to
dispose of or hold separate, as a result of the Merger, any portion of the
business or assets of the Company or Parent;
(e) by Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement on the part of Parent or Merger
Sub 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 then be satisfied; provided that if
such inaccuracy in Parent's or Merger Sub's representations and warranties or
breach by Parent or Merger Sub is curable by Parent through the exercise of its
commercially reasonable efforts, then Company may only terminate this Agreement
under this Section 8.1(e) if the breach is not cured within thirty (30) days
following the date of written notice from Company of such breach (but no cure
period shall be required for a breach which by its nature cannot be cured); or
(f) by Parent if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, or if any representation or warranty of the 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 then be satisfied; provided, that if
such inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the Company through the exercise of its commercially
reasonable efforts, then Parent may only terminate this Agreement under this
Section 8.1(f) if the breach is not cured within thirty (30) days following the
date of written notice from Parent of such breach (but no cure period shall be
required for a breach which by its nature cannot be cured); or
(g) by Parent, if a Company Material Adverse Effect shall have
occurred after the date of this Agreement, and such Company Material Adverse
Effect has not been cured within thirty (30) calendar days; provided, however,
that no cure period shall be required for a Company Material Adverse Effect
which by its nature cannot be cured.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Merger Sub
or the Company, or their respective officers, directors or stockholders;
provided that each party shall remain liable for any breaches of this Agreement
prior to its termination; and provided further that the provisions of Sections
5.4, 5.5, 5.6 and Article VIII of this Agreement shall remain in full force and
effect and survive any termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
the stockholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time only by execution of an instrument in
writing signed on behalf of each of the parties hereto. Following the Effective
Time, for purposes of this Section 8.3, the Company's stockholders agree
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that any amendment of this Agreement signed by the Stockholder Representative
shall be binding upon and effective against the Company's stockholders whether
or not they have signed such amendment.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (a) extend the time for the performance of any of the
obligations of the other party hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (c) 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.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing, shall be effective when received, and shall in any event be deemed to
have been received (a) when delivered, if delivered personally or by commercial
delivery service, (b) three (3) business days after deposit with U.S. Mail, if
mailed by registered or certified mail (return receipt requested), (c) one (1)
business day after the business day of deposit with Federal Express or similar
overnight courier for next day delivery (or two (2) business days after such
deposit if deposited for second business day delivery), if delivered by such
means, or (d) one (1) business day after delivery by facsimile transmission with
copy by U.S. Mail, if sent via facsimile plus mail copy (with acknowledgment of
complete transmission), to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
▇.▇. ▇▇▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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(b) if to the Company, to:
YOUcentric, Inc.
14045 Ballantyne ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
3500 One First Union Center
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Stockholder Representative:
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.2 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to 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 word "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding. 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. Reference to
the subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.
When used in connection with the Company, the term "COMPANY MATERIAL
ADVERSE CHANGE" means a material adverse change with respect to the business,
assets (whether tangible or intangible), condition (financial or otherwise), or
results of operations of the Company and its subsidiaries, taken as a whole;
provided, however, that none of the following shall be deemed in
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themselves, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
will be, a Company Material Adverse Change:
(a) any change in the Company's financial condition, results
of operations or cash from operations as a result of (i) payments or accruals of
expenses incurred in the ordinary course of business and materially consistent
with past practices and (ii) the level of customer bookings during 2001;
(b) attrition with respect to employees of the Company;
provided, however, that such attrition does not exceed (i) thirty percent (30%)
of the Company's employees as of the date of the Agreement other than those
employees identified on Schedule 6.3(h) and any other employees to whom Parent
does not offer an "at-will" employment arrangement or (ii) ten percent (10%) of
the Key Employees;
(c) any adverse changes, events or effects resulting from
conditions affecting the industry in which the Company participates, the U.S.
economy as a whole or foreign economies in any locations where the Company has
material operations, sales, suppliers or customers, all to the extent that such
adverse changes, events or effects do not have a disproportionate effect on the
Company;
(d) any adverse changes, events or effects resulting from
out-of-pocket fees and expenses (including legal, accounting, investment banking
and other fees and expenses) incurred in connection with the transactions
contemplated by this Agreement;
(e) any adverse changes, events or effects resulting from the
taking of any action required by this Agreement; and
(f) any adverse changes, events or effects resulting from the
payment, by itself, of any amounts payable pursuant to severance arrangements,
all of which have been mutually agreed to in writing by the Company and Parent,
pursuant to severance agreements entered into with Parent's express prior
written consent.
When used in connection with the Company, the term "KNOWLEDGE" or
phrases of similar import means the actual knowledge of any director, officer
and director-level employees of the Company and all knowledge that was or would
reasonably be expected to have been obtained by inquiry by such persons of those
employees who have managerial responsibility for the relevant subject matter.
When used in connection with Parent, the term "PARENT MATERIAL ADVERSE
EFFECT" means a material adverse change with respect to the business, assets
(whether tangible or intangible), condition (financial or otherwise) or results
of operations of Parent and its subsidiaries, taken as a whole, except, for the
purposes of this Agreement, any such change, event or effect resulting from (i)
changes or conditions affecting the U.S. economy or Parent's industry generally,
which do not have a disproportionate effect on Parent; (ii) fluctuations in the
trading price of Parent Common
-69-
Stock; or (iii) any failure by Parent to meet or exceed analyst projections or
forecasts or published revenue or earnings expectations.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement. This Agreement, the Company Schedules, and the
documents and instruments and other agreements among the parties hereto
referenced herein, including the Confidentiality Agreement: (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
Section 5.5 shall continue in full force and effect until the Closing and shall
survive any termination of this Agreement; and (b) are not intended to confer
upon any other person any rights or remedies hereunder.
9.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Specific Performance. 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 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.
9.8 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 laws thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the State of
Colorado, in connection with any
matter based upon or arising out of this Agreement or the matters contemplated
herein, other than issues involving the corporate governance of any of the
parties hereto, agrees that process may be served upon them in any manner
authorized by the laws of the State of
Colorado for such
-70-
persons and waives and covenants not to assert or plead any objection that they
might otherwise have to such jurisdiction and such process.
9.9 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 law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other party. 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.
9.11 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, partner of any party hereto or any other person or entity
unless specifically provided otherwise herein.
9.12 Attorneys' 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 attorneys' fees,
costs, and disbursements (in addition to any other relief to which the
prevailing party may be entitled).
9.13 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
-71-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized respective officers as of the date first written
above.
▇.▇. ▇▇▇▇▇▇▇ & COMPANY
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
HORNET ACQUISITION CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
YOUCENTRIC, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
STOCKHOLDER REPRESENTATIVE
By:
--------------------------------------
▇▇▇▇▇ ▇▇▇▇
[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
SCHEDULE 1.6(b)
Calculation of Exchange Ratios In Accordance with the Company Charter
1. Calculation of Liquidation Preferences
(a) Series A Liquidation Preference. Subject to Section (8) of this
Schedule 1.6(b), the aggregate value of the Merger Consideration necessary to
satisfy the Series A Liquidation Preference is calculated as follows: (i) the
product obtained by multiplying (A) the sum of (x) $1.92333 (the Series A
Preferred liquidation preference as determined in accordance with the Company
Charter) and (y) accrued but unpaid dividends at the rate of $0.13463 per share
per annum (pro-rated for the fiscal years 1999 and 2001), by (B) the number of
Outstanding Shares of Series A Preferred, less (ii) the Series A Liquidation
Preference Management Incentive Compensation Reduction (as determined in
accordance with Section 7(a) of this Schedule 1.6(b) and Section 2(d) of the
Company Charter).
(b) Series B Liquidation Preference. Subject to Section (8) of this
Schedule 1.6(b), the aggregate value of the Merger Consideration necessary to
satisfy the Series B Liquidation Preference is calculated as follows: (i) the
product obtained by multiplying (A) $12.02 (the Series B Preferred liquidation
preference as determined in accordance with the Company Charter), by (B) the
number of Outstanding Shares of Series B Preferred, less (ii) the Series B
Management Incentive Compensation Reduction (as determined in accordance with
Section 7(b) of this Schedule 1.6(b) and Section 2(d) of the Company Charter).
(c) Series C Liquidation Preference. Subject to Section (8) of this
Schedule 1.6(b), the aggregate value of the Merger Consideration necessary to
satisfy the Series C Liquidation Preference is calculated as follows: (i) the
product obtained by multiplying (A) $0.43527 (the Series C Preferred liquidation
preference as determined in accordance with the Company Charter), by (B) the
number of Outstanding Shares of Series C Preferred, less (ii) the Series C
Management Incentive Compensation Reduction (as determined in accordance with
Section 7(c) of this Schedule 1.6(b) and Section 2(d) of the Company Charter).
2. Calculation of Merger Consideration
(a) Company Common Stock Merger Consideration. The Company Common Stock
Merger Consideration is calculated as follows: the product obtained by
multiplying (A) the Merger Consideration less (x) the Series A Liquidation
Preference, (y) the Series B Liquidation Preference and (z) the Series C
Liquidation Preference, by (B) the quotient obtained by dividing (x) the number
of Outstanding Shares of Company Common Stock, by (y) the sum of the Aggregate
Company Common Number and the aggregate number of shares of Company Common Stock
issued or issuable upon the conversion of all Outstanding Shares of Series A
Preferred; provided, however, that if the Company Common Stock Merger
Consideration, as so calculated, is less than zero, the Company Common Stock
Merger Consideration shall be zero.
(b) Series A Participation. The Series A Participation is calculated as
follows: the product obtained by multiplying (A) the Merger Consideration less
(x) the Series A Liquidation Preference, (y) the Series B Liquidation Preference
and (z) the Series C Liquidation Preference, by (B) the quotient obtained by
dividing (x) the aggregate number of shares of Company Common Stock issued or
issuable upon the conversion of all Outstanding Shares of Series A Preferred, by
(y) the sum of the Aggregate Company Common Number and the aggregate number of
shares of Company Common Stock issued or issuable upon the conversion of all
Outstanding Shares of Series A Preferred; provided, however, that if the Series
A Participation, as so calculated, is less than zero, the Series A Participation
shall be zero.
(c) Series A Merger Consideration. The Series A Merger Consideration is
calculated by adding the Series A Liquidation Preference and the Series A
Participation.
(d) Series B Merger Consideration. The Series B Merger Consideration
shall be equal to the Series B Liquidation Preference.
(e) Series C Merger Consideration. The Series C Merger Consideration
shall be equal to the Series C Liquidation Preference.
3. Calculation of Cash Consideration
(a) Series A Cash Consideration. The Series A Cash Consideration is
calculated by multiplying (i) the Cash Consideration, by (ii) the quotient
obtained by dividing (A) the Series A Merger Consideration, by (B) the sum of
the Series A Merger Consideration, the Series B Merger Consideration, the Series
C Merger Consideration and the Company Common Stock Merger Consideration.
(b) Series B Cash Consideration. The Series B Cash Consideration is
calculated by multiplying (i) the Cash Consideration, by (ii) the quotient
obtained by dividing (A) the Series B Merger Consideration, by (B) the sum of
the Series A Merger Consideration, the Series B Merger Consideration, the Series
C Merger Consideration and the Company Common Stock Merger Consideration.
(c) Series C Cash Consideration. The Series C Cash Consideration is
calculated by multiplying (i) the Cash Consideration, by (ii) the quotient
obtained by dividing (A) the Series C Merger Consideration, by (B) the sum of
the Series A Merger Consideration, the Series B Merger Consideration, the Series
C Merger Consideration and the Company Common Stock Merger Consideration.
(d) Company Common Stock Cash Consideration. The Company Common Stock
Cash Consideration is calculated by multiplying (i) the Cash Consideration, by
(ii) the quotient obtained by dividing (A) the Company Common Stock Merger
Consideration, by (B) the sum of the Series A Merger Consideration, the Series B
Merger Consideration, the Series C Merger Consideration and the Company Common
Stock Merger Consideration.
4. Calculation of Cash Consideration Per Share
(a) Series A Cash Consideration Per Share. The Series A Cash
Consideration Per Share is calculated by dividing (i) the Series A Cash
Consideration, by (ii) the number of Outstanding Shares of Series A Preferred.
(b) Series B Cash Consideration Per Share. The Series B Cash
Consideration Per Share is calculated by dividing (i) the Series B Cash
Consideration, by (ii) the number of Outstanding Shares of Series B Preferred.
(c) Series C Cash Consideration Per Share. The Series C Cash
Consideration Per Share is calculated by dividing (i) the Series C Cash
Consideration, by (ii) the number of Outstanding Shares of Series C Preferred.
(d) Company Common Stock Cash Consideration Per Share. The Company
Common Stock Cash Consideration Per Share is calculated by dividing (i) the
Company Common Stock Cash Consideration, by (ii) the number of Outstanding
Shares of Company Common Stock.
5. Calculation of Merger Shares
(a) Series A Merger Shares. The number of Series A Merger Shares is
calculated by dividing (i) the Series A Merger Consideration less the Series A
Cash Consideration, by (ii) the Trading Price.
(b) Series B Merger Shares. The number of Series B Merger Shares is
calculated by dividing (i) the Series B Merger Consideration less the Series B
Cash Consideration, by (ii) the Trading Price.
-2-
(c) Series C Merger Shares. The number of Series C Merger Shares is
calculated by dividing (i) the Series C Merger Consideration less the Series C
Cash Consideration, by (ii) the Trading Price.
(d) Company Common Stock Merger Shares. The number of Company Common
Stock Merger Shares is calculated by dividing (i) the Company Common Stock
Merger Consideration less the Company Common Stock Cash Consideration, by (ii)
the Trading Price.
6. Calculation of Exchange Ratios
(a) Series A Exchange Ratio. The Series A Exchange Ratio is calculated
by dividing (i) the quotient obtained by dividing (A) the Series A Merger
Consideration less the Series A Cash Consideration, by (B) the number of
Outstanding Shares of Series A Preferred, by (ii) the Trading Price.
(b) Series B Exchange Ratio. The Series B Exchange Ratio is calculated
by dividing (i) the quotient obtained by dividing (A) the Series B Merger
Consideration less the Series B Cash Consideration, by (B) the number of
Outstanding Shares of Series B Preferred, by (ii) the Trading Price.
(c) Series C Exchange Ratio. The Series C Exchange Ratio is calculated
by dividing (i) the quotient obtained by dividing (A) the Series C Merger
Consideration less the Series C Cash Consideration, by (B) the number of
Outstanding Shares of Series C Preferred, by (ii) the Trading Price.
(d) Company Common Stock Exchange Ratio. The Company Common Stock
Exchange Ratio is calculated by dividing (i) the quotient obtained by dividing
(A) the Company Common Stock Merger Consideration less the Company Common Stock
Cash Consideration, by (B) the number of Outstanding Shares of Company Common
Stock, by (ii) the Trading Price.
(e) Company Option Exchange Ratio. The Company Option Exchange Ratio is
calculated by dividing (i) the quotient obtained by dividing (A) the Merger
Consideration less (w) the Series A Merger Consideration, (x) the Series B
Merger Consideration, (y) the Series C Merger Consideration and (z) the Company
Common Stock Merger Consideration, by (B) the number of shares of Company Common
Stock issuable upon the exercise of all Company Options assumed by Parent
pursuant to this Agreement, by (ii) the Trading Price; provided, however, that
if the Company Option Exchange Ratio, as so calculated, is less than zero, the
Company Option Exchange Ratio shall be zero.
7. Calculation of Management Incentive Compensation Reduction
(a) Series A Liquidation Preference Management Incentive Compensation
Reduction. The Series A Liquidation Preference Management Incentive Compensation
Reduction is calculated by multiplying (i) the product obtained by multiplying
(A) the sum of (x) $1.92333 and (y) accrued but unpaid dividends at the rate of
$0.13463 per share per annum (pro-rated for the fiscal years 1999 and 2001), by
(B) the number of Outstanding Shares of Series A Preferred, by (ii) the quotient
obtained by dividing (A) the aggregate bonuses payable pursuant to the Company's
Management Incentive Compensation Plan (the "Bonuses") by (B) the sum of the
Merger Consideration and the Bonuses.
(b) Series B Management Incentive Compensation Reduction. The Series B
Management Incentive Compensation Reduction is calculated by multiplying (i) the
product obtained by multiplying (A) $12.02 by (B) the number of Outstanding
Shares of Series B Preferred, by (ii) the quotient obtained by dividing (A) the
Bonuses by (B) the sum of the Merger Consideration and the Bonuses.
(c) Series C Management Incentive Compensation Reduction. The Series B
Management Incentive Compensation Reduction is calculated by multiplying (i) the
product obtained by multiplying (A) $0.43527 by (B) the number of Outstanding
Shares of Series C Preferred, by (ii) the quotient obtained by dividing (A) the
Bonuses by (B) the sum of the Merger Consideration and the Bonuses.
-3-
8. Satisfaction of Preferred Stock Liquidation Preference Priorities
Notwithstanding anything herein to the contrary, if the Merger
Consideration is insufficient to completely satisfy the Series C Liquidation
Preference, then the Company Common Stock Cash Consideration Per Share, Company
Common Stock Exchange Ratio, Series A Cash Consideration Per Share, Series A
Exchange Ratio, Series B Cash Consideration Per Share and Series B Exchange
Ratio shall each be equal to zero, with all of the Merger Consideration to be
distributed to the holders of Series C Preferred in accordance with the Company
Charter; and if the Merger Consideration is sufficient to completely satisfy the
Series C Liquidation Preference but the Merger Consideration remaining after
having satisfied the Series C Liquidation Preference is insufficient to
completely satisfy the Series A Liquidation Preference and the Series B
Liquidation Preference, then the Company Common Stock Cash Consideration Per
Share and Company Common Stock Exchange Ratio shall be equal to zero and such
remaining Merger Consideration shall be distributed to the holders of Series A
Preferred and Series B Preferred, pro rata, in accordance with the Company
Charter until all such remaining Merger Consideration is distributed.
A table, which provides further description to this Schedule 1.6(b), immediately
follows.
-4-
EXHIBIT 1.6(b) (CONTINUED)
EXAMPLE CALCULATION OF CASH CONSIDERATION AND EXCHANGE RATIOS
PURSUANT TO SECTION 1.6
ASSUMPTIONS:
Closing Date = October 15, 2001
Trading Price = $ 9.00
COMMON LIQUIDATION
STOCK EQUIVALENTS PREFERENCE
CAPITALIZATION INFORMATION ACTUAL SHARES ("CSE'S") PER SHARE DIVIDENDS IN LIQ. PREF.
-------------------------- ------------- ----------------- ----------- -----------------------
Company Common Stock 32,728,826 32,728,826 N/A N/A
Company Options 21,065,120 21,065,120 N/A N/A
Series A Preferred 4,159,446 20,097,441 1.92333 0.32643
Series B Preferred 2,572,376 55,362,506 12.02 N/A
Series C Preferred 75,815,012 75,815,012 0.43527 N/A
------------- -----------------
Total 136,340,780 205,068,905
============= =================
COMPANY COMMON STOCK MANAGEMENT
OPTION MERGER CONSIDERATION & INCENTIVE AGGREGATE
LIQUIDATION SERIES A COMPENSATION MERGER
COMPUTATIONS PREFERENCE PARTICIPATION SUBTOTAL REDUCTION CONSIDERATION
------------ -------------- -------------- -------------- -------------- --------------
Total Merger Consideration
Series C Preferred $33,000,000.27 $ -- $33,000,000.27 $ 2,110,474.34 $30,889,525.93
Series A Liquidation Preference $ 9,357,762.07 $ 9,357,762.07 $ 598,464.14 $ 8,759,297.93
Series A Participation $ 3,460,284.65 $ 3,460,284.65 $ 221,298.24 $ 3,238,986.41
Series A Liq. Pref. And Series A Participation $12,818,046.72 $ 819,762.38 $11,998,284.34
Series B Preferred $30,919,959.52 $ -- $30,919,959.52 $ 1,977,447.90 $28,942,511.62
Company Common Stock $ -- $ 5,635,098.29 $ 5,635,098.29 $ 360,385.77 $ 5,274,712.53
Company Options $ -- $ 3,626,895.19 $ 3,626,895.19 $ 231,953.61 $ 3,394,941.58
Company Common Stock & Company
Options $ -- $ 9,261,993.49 $ 9,261,993.49 $ 592,339.38 $ 8,669,654.11
-------------- -------------- -------------- --------------
$86,000,000.00 $ 5,500,024.00 $80,499,976.00
============== ============== ==============
Remaining Value for CSE's Participation $12,722,278.14 $ 8,669,654.11
Total CSE's for Participation $73,891,386.78 53,793,946
Company Common Stock Merger Consideration and
Company Option Merger Consideration per CSE (Pre
Carve-Out) $ 0.17218 Post Carve-Out $ 0.16116
AGGREGATE CASH
CASH CONSIDERATION MERGER EXCHANGE
COMPUTATIONS CONSIDERATION PER SHARE SHARES RATIOS
------------ -------------- -------------- -------------- --------------
Total Merger Consideration
Series C Preferred $ 600,924.30 $ 0.00792619 3,365,400 0.04438963
Series A Liquidation Preference $ 170,403.23
Series A Participation $ 63,011.19
Series A Liq. Pref. And Series A Participation $ 233,414.42 $ 0.05611671 1,307,208 0.31427449
Series B Preferred $ 563,047.12 $ 0.21888212 3,153,274 1.22582151
Company Common Stock $ 102,614.17 $ 0.00313528 574,678 0.01755876
Company Options 377,216 0.01790712
Company Common Stock & Company
Options $ 102,614.17
-------------- --------------
$ 1,500,000.00 8,777,775
============== ==============
Remaining Value for CSE's Participation
Total CSE's for Participation
Company Common Stock Merger Consideration and
Company Option Merger Consideration per CSE (Pre
Carve-Out)
EXHIBIT 1.6(b) (CONTINUED)
EXAMPLE CALCULATION OF CASH CONSIDERATION AND EXCHANGE RATIOS PURSUANT TO
SCHEDULE 1.6(b).
VALUE OF % OF % OF
MERGER CONSIDERATION PRE- POST
PER SHARE/OPTION AGGREGATE VALUE CARVE-OUT CARVE-OUT
-------------------- --------------- --------- ---------
$ 0.40743 $ 30,889,525.93 38.3721% 38.3721%
DATE CALCULATION FOR SERIES A DIVIDEND
Start 5/14/99
Close 10/15/01 $ 2.88459 $ 11,998,284.34 14.9047% 14.9047%
Days 885 $ 11.25128 $ 28,942,511.62 35.9534% 35.9534%
Years 2.42466 $ 0.16116 $ 5,274,712.53 6.5524% 6.5524%
$ 0.16116 $ 3,394,941.58 4.2173% 4.2173%
--------------- --------- ---------
$ 80,499,976.00 100.0000% 100.0000%
=============== ========= =========
-2-
SCHEDULE 1.6(g)
Stock Certificate Legends
Certificate One: *
Certificate Two: The shares represented by this
Certificate are subject to a Lock Up until
the beginning of business on [30 DAYS
FOLLOWING CLOSING] pursuant to the provision
set forth in the
Agreement and Plan of
Reorganization by and among ▇.▇. ▇▇▇▇▇▇▇ &
Company, YOUcentric Acquisition Corporation,
YOUcentric, Inc., and ▇▇▇▇▇ ▇▇▇▇ dated as of
August 14, 2001. Copies of this Agreement
are available from ▇.▇. ▇▇▇▇▇▇▇ & Company
upon request. On the beginning of business
on and after ________, the restriction on
the transfer of these shares pursuant to the
Lock Up shall terminate and be of no further
force or effect.
Certificate Three: The shares represented by this
Certificate are subject to a Lock Up until
the beginning of business on [60 DAYS
FOLLOWING CLOSING] pursuant to the provision
set forth in the
Agreement and Plan of
Reorganization by and among ▇.▇. ▇▇▇▇▇▇▇ &
Company, YOUcentric Acquisition Corporation,
YOUcentric, Inc., and ▇▇▇▇▇ ▇▇▇▇ dated as of
August 14, 2001. Copies of this Agreement
are available from ▇.▇. ▇▇▇▇▇▇▇ & Company
upon request. On the beginning of business
on and after ________, the restriction on
the transfer of these shares pursuant to the
Lock Up shall terminate and be of no further
force or effect.
Certificate Four: The shares represented by this
Certificate are subject to a Lock Up until
the beginning of business on [90 DAYS
FOLLOWING CLOSING] pursuant to the provision
set forth in the
Agreement and Plan of
Reorganization by and among ▇.▇. ▇▇▇▇▇▇▇ &
Company, YOUcentric Acquisition Corporation,
YOUcentric, Inc., and ▇▇▇▇▇ ▇▇▇▇ dated as of
August 14, 2001. Copies of this Agreement
are available from ▇.▇. ▇▇▇▇▇▇▇ & Company
upon request. On the beginning of business
on and after ________, the restriction on
the transfer of these shares pursuant to the
Lock Up shall terminate and be of no further
force or effect.
Certificate Five: The shares represented by this
Certificate are subject to a Lock Up until
the beginning of business on [120 DAYS
FOLLOWING CLOSING] pursuant to the
Agreement
and Plan of Reorganization by and among ▇.▇.
▇▇▇▇▇▇▇ & Company, YOUcentric Acquisition
Corporation, YOUcentric, Inc., and ▇▇▇▇▇
▇▇▇▇ dated as of August 14, 2001. Copies of
this Agreement are available from ▇.▇.
▇▇▇▇▇▇▇ & Company upon request. On the
beginning of business on and after ________,
the restriction on the transfer of these
shares pursuant to the Lock Up shall
terminate and be of no further force or
effect.
--------
* No Lock Up Legend
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF REORGANIZATION
This AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION (the
"AMENDMENT") is made and entered into as of October 3, 2001 by and among ▇.▇.
▇▇▇▇▇▇▇ & Company, a Delaware corporation ("PARENT"), Hornet Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("MERGER SUB"), YOUcentric, Inc., a Delaware corporation (the "COMPANY"), and
▇▇▇▇▇ ▇▇▇▇ as stockholder representative (the "STOCKHOLDER REPRESENTATIVE").
Capitalized terms used herein, unless otherwise defined herein, shall have the
meanings assigned to them in the Reorganization Agreement.
RECITALS
A. Parent, Merger Sub, the Company and the Stockholder Representative
have entered into an
Agreement and Plan of Reorganization dated as of August 14,
2001 (the "REORGANIZATION AGREEMENT").
B. Pursuant to Section 8.3 of the Reorganization Agreement, the
Reorganization Agreement may be amended at any time by a written instrument
executed by each of the parties thereto.
C. The parties hereto desire to amend the Reorganization Agreement as
set forth herein.
AGREEMENT
In consideration of the mutual covenants and promises set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties agree as follows:
1. Amendment. The first paragraph of Section 7.2(a) of the
Reorganization Agreement shall be amended and restated in its entirety as
follows:
"(a) Escrow Fund. At the Effective Time the Company's stockholders will
be deemed to have received and consented to the deposit with the Escrow Agent
(as defined below) of the Escrow Amount (plus any additional shares as may be
issued upon any stock split, stock dividend or recapitalization effected by
Parent after the Effective Time and less any shares that may be deposited
therewith by the participants in the Management Incentive Compensation Plan),
without any act required on the part of any stockholder. As soon as practicable
after the Effective Time, the Escrow Amount, without any act required on the
part of any stockholder, will be deposited with an escrow agent acceptable to
Parent and the Stockholder Representative (as defined in Section 7.2(i)(i)
below) as Escrow Agent (the "ESCROW AGENT"), such deposit to constitute an
escrow fund (the "ESCROW FUND") to be governed by the terms set forth herein and
at Parent's cost and expense. The portion of the Escrow Amount (less the value
of any shares that may be deposited into the Escrow Fund by the participants in
the Management Incentive Compensation Plan) contributed on behalf of each
stockholder of the Company shall be in proportion to the aggregate Parent Common
Stock to which such holder would otherwise be entitled under Section 1.6(b). The
Escrow Amount shall be funded entirely out of (i) the shares
1
of Parent Common Stock issuable upon the Merger in respect of Company Capital
Stock and (ii) the shares of Parent Common Stock issuable to the participants in
the Management Incentive Compensation Plan pursuant thereto. The Escrow Fund is
available to compensate Parent and its officers, directors and affiliates,
including the Surviving Corporation (any, an "INDEMNIFIED PARTY" and
collectively, the "INDEMNIFIED PARTIES"), for any claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses, and expenses of investigation and defenses (hereinafter
individually a "LOSS" and collectively "LOSSES") incurred by the Indemnified
Parties, or any of them, directly or indirectly as a result of (i) any
inaccuracy or breach of a representation or warranty of the Company contained in
Article II herein, (ii) any failure by the Company to perform or comply with any
covenant contained herein, (iii) any Dissenting Share Payments, or (iv) any
claim made by any person that such person is or was entitled (by contract or
otherwise) to receive any amount or property in such person's capacity (or
asserted capacity) as a holder of equity interests in the Company or contingent
equity interests or as a beneficiary of any rights in excess of the
consideration set forth in the Merger Agreement by virtue of or as a result of
the Merger, other than any claim described in clause (iii) above. Parent and the
Company each acknowledge that such Losses, if any, would relate to unresolved
contingencies existing at the Effective Time, which if resolved at the Effective
Time would have led to a reduction in the aggregate Merger consideration.
Nothing herein shall limit the liability of the Company for any breach of any
representation, warranty or covenant if the Merger does not close."
2. Governing Law. This Amendment 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 laws thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the State of
Colorado, in connection with any
matter based upon or arising out of this Amendment or the matters contemplated
herein, other than issues involving the corporate governance of any of the
parties hereto, agrees that process may be served upon them in any manner
authorized by the laws of the State of
Colorado for such persons and waives and
covenants not to assert or plead any objection that they might otherwise have to
such jurisdiction and such process.
3. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AMENDMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
4. Amendment Limited. Except as provided herein, each of the provisions
of the Reorganization Agreement shall remain in full force and effect following
the execution of this Amendment.
5. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
signed by their duly authorized respective officers as of the date first written
above.
▇.▇. ▇▇▇▇▇▇▇ & COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Executive Vice President and CFO
-----------------------------------
HORNET ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Title: Executive Vice President and CFO
-----------------------------------
YOUCENTRIC, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Title: President and CEO
-----------------------------------
STOCKHOLDER REPRESENTATIVE
By: /s/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇
[SIGNATURE PAGE TO AMENDMENT]
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