Exhibit 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (this
"AGREEMENT"), dated as of November 2, 2000, is by and among Sonus Networks,
Inc., a Delaware corporation ("BUYER"); Storm Merger Sub, Inc., a Texas
corporation that is a wholly owned subsidiary of BUYER ("MERGER SUB"); and
telecom technologies, inc., a Texas corporation (the "COMPANY").
WHEREAS, the parties desire that Merger Sub be merged with and into the
Company, subject to the terms and conditions set forth in this Agreement; and
WHEREAS, BUYER and certain stockholders of the Company have entered
into a Voting Agreement, dated as of the date hereof (the "VOTING AGREEMENT"),
pursuant to which such stockholders have agreed to vote, and have issued a
contingent proxy to BUYER to vote, in favor of, or execute a written consent
with respect to, the transactions contemplated hereby at any stockholder
meetings called for such purpose.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth in this Agreement, the parties hereto hereby agree as follows:
Certain terms used in this Agreement are defined in Section 17.
1. CLOSING. Subject to the other provisions of this Agreement, a
closing (the "CLOSING") will be held at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as soon as is reasonably
practicable following satisfaction or waiver of the conditions set forth in
Sections 11 through 13 (the date on which the Closing actually occurs shall be
referred to as the "CLOSING DATE"). On the Closing Date, Merger Sub and the
Company will execute the Articles of Merger (the "ARTICLES OF MERGER")
substantially in the form of the attached EXHIBIT 1 and file it with the Texas
Secretary of State, in order to cause the merger of Merger Sub with and into the
Company (the "MERGER") to be effected in accordance with the laws of the State
of Texas. The Merger will be effective under the Texas Business Corporation Act
("TBCA") upon the filing of the Articles of Merger with the Secretary of State
of the State of Texas and the issuance of a certificate of merger by the
Secretary of State of the State of Texas (or such later time as may be agreed by
BUYER and the Company, as specified in the Articles of Merger and in accordance
with the provisions of the applicable law of Texas) (the "EFFECTIVE TIME"). For
all purposes, all of the document deliveries and other actions to occur at the
Closing will be conclusively presumed to have occurred at the same time,
immediately before the Effective Time.
2. EFFECT OF MERGER. At the Effective Time, automatically and without
further action:
2.1. SURVIVING CORPORATION. Merger Sub will be merged with and into the
Company and the separate existence of Merger Sub will cease. The Company will
continue in existence as the surviving corporation in the Merger (the "SURVIVING
CORPORATION"). The Merger shall have further effects as set forth in the TBCA.
All right, title and interest to all real estate and other property owned by the
Company and Merger Sub shall be allocated to and vest in the Surviving
Corporation. All liabilities and obligations of the Company and Merger Sub shall
be allocated to the Surviving Corporation.
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2.2. ARTICLES OF INCORPORATION. At the Effective Time, the Articles of
Incorporation of the Merger Sub shall be the Articles of Incorporation of the
Surviving Corporation and read in their entirety as set forth on EXHIBIT 2.2.
2.3. BY-LAWS. At the Effective Time, the by-laws of the Merger Sub
shall be the by-laws of the Surviving Corporation and read in their entirety as
set forth on EXHIBIT 2.3.
2.4. DIRECTORS AND OFFICERS. From and after the Effective Time, the
members of the Board of Directors of the Surviving Corporation will consist of
the members of the Board of Directors of Merger Sub as of immediately prior to
the Effective Time, and the officers of the Surviving Corporation shall be the
officers of the Company as of immediately prior to the Effective Time, each such
person to hold office, subject to the applicable provisions of the Restated
Articles of Incorporation and the by-laws of the Surviving Corporation, as
amended and restated in each case, until the next annual meeting of directors or
stockholders, as the case may be, of the Surviving Corporation and until his or
her successor will be duly elected or appointed and will duly qualify.
2.5. CONVERSION OF COMPANY COMMON STOCK.
(a) COMPANY COMMON STOCK. Each share of the Company's Class A
common stock, no par value (the "COMPANY CLASS A COMMON STOCK") and each share
of the Company's Class B common stock, no par value (the "COMPANY CLASS B COMMON
STOCK," and together with the Company Class A Common Stock, the "COMPANY COMMON
STOCK"), issued and outstanding immediately prior to the Effective Time (other
than any Dissenting Shares (as defined in Section 2.7) and other than any shares
held directly or indirectly by BUYER or the Company or any of their respective
Subsidiaries) will be converted into and become the right to receive such number
of shares of BUYER Common Stock as is equal to the Exchange Ratio (as defined in
Section 17.1), subject to adjustment as provided in Section 2.5(b) and to the
payment of cash in lieu of the issuance of fractional shares as provided in
Section 3.6.
(b) ADJUSTMENT OF EXCHANGE RATIO. In the event that,
subsequent to the date of this Agreement but prior to the Effective Time, the
shares of BUYER Common Stock or Company Common Stock issued and outstanding as
of the date of this Agreement are increased, decreased, or changed into or
exchanged for a different number or kind of shares or securities through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar changes in BUYER's or the Company's
capitalization, then an appropriate and proportionate adjustment will be made to
the Exchange Ratio so that each holder of Company Common Stock immediately
before the Effective Time will receive pursuant to this Section 2.5: (i) in the
event of any such change with respect to Company Common Stock, that number of
shares of BUYER Common Stock that such holder would have received if such change
had never occurred and (ii) in the event of any such change with respect to
BUYER Common Stock, that number of shares of BUYER Common Stock that such holder
would have received as a result of such change if such change had occurred
immediately after the Effective Time (and such holders were treated for purposes
of such change as holders of BUYER Common Stock).
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2.6. CANCELLATION OF TREASURY STOCK, ETC. At the Effective Time, each
share of Company Common Stock held directly or indirectly by BUYER or the
Company or any of their respective Subsidiaries will be canceled and will cease
to exist, and no payment will be made with respect thereto.
2.7. DISSENTING SHARES. Each share of Company Common Stock that,
immediately prior to the Effective Time, was held by any person who has duly
exercised the appraisal rights afforded to dissenting stockholders pursuant to
Sections 5.11 and 5.12 of the TBCA (such shares, collectively, "DISSENTING
SHARES") will be converted into the right to receive the fair value of such
shares as determined in accordance with the provisions of such sections and
shall not be converted into shares of BUYER Common Stock in accordance with
Section 2.5; PROVIDED, however, that the provisions of this Section 2.7 shall
not supersede or in any other way affect the enforceability of any separate
agreement between the Company and/or BUYER and any Company Stockholder (as
defined in Section 17.1), including, but not limited to, the Voting Agreement.
2.8. CONVERSION OF MERGER SUB'S SHARES. Each share of the common stock,
$0.01 par value per share, of Merger Sub that was issued and outstanding
immediately before the Effective Time will be converted into and become one
common share, no par value, of the Surviving Corporation.
3. PROCEDURES; ESCROWED SHARES AND EARN-OUT SHARES.
3.1. CERTIFICATES. Immediately after the Effective Time, stock
certificates (each, a "CERTIFICATE," and collectively, the "CERTIFICATES")
representing shares of Company Common Stock that have been converted into shares
of BUYER Common Stock in the Merger will be conclusively deemed to represent
such shares of BUYER Common Stock until validly exchanged pursuant to Section
3.2.
3.2. EXCHANGE OF CERTIFICATES. At the Closing, upon surrender of a
Certificate to BUYER or its transfer agent, as the case may be, together with a
duly executed letter of transmittal and any other documents reasonably required
by BUYER, the holder of such Certificate will be entitled to receive, in
exchange therefor, a certificate for the number of shares of BUYER Common Stock
to which such holder is entitled (subject to the escrow arrangements referred to
in Section 3.3) plus cash in lieu of fractional shares (as set forth in Section
3.6), and such Certificate will be canceled.
3.3. ESCROWED SHARES AND EARN-OUT SHARES.
(a) Notwithstanding any other provision of this Agreement, at
the Closing, BUYER, the Stockholder Representatives and the Escrow Agent named
therein (the "ESCROW AGENT") will execute and deliver an Escrow Agreement in the
form of the attached EXHIBIT 3.3(A) (the "CONTINGENCY ESCROW AGREEMENT"), with
such additional revisions, prior to the Closing, as
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BUYER and the Stockholder Representatives may mutually agree after consultation
with the Escrow Agent. An aggregate of 5,400,000 of the shares of BUYER Common
Stock issuable in the Merger (the "ESCROWED SHARES AND THE EARN-OUT SHARES") to
each of the Company Stockholders, shall not be distributed to such Company
Stockholders but shall instead be deposited with the Escrow Agent pursuant to
the Contingency Escrow Agreement. The Escrowed Shares and Earn-Out Shares shall
be held by the Escrow Agent pursuant to the Contingency Escrow Agreement and
distributed in accordance therewith.
(b) In addition to the Contingency Escrow Agreement, at the
Closing, BUYER, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and the Escrow Agent will execute
and deliver an Escrow Agreement in the form of the attached EXHIBIT 3.3(B) (the
"OPTION ESCROW AGREEMENT" and, together with the Contingency Escrow Agreement,
the "ESCROW AGREEMENTS"), with such additional revisions, prior to the Closing,
as BUYER, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ may mutually agree after consultation
with the Escrow Agent. An aggregate number of shares of BUYER Common Stock
(rounded to the nearest whole number of shares) (the "OPTION ESCROWED SHARES")
equal to the Funding Number shall not be distributed to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇ but shall instead be deposited with the Escrow Agent pursuant to
the Option Escrow Agreement. For purposes of this Agreement, the term "FUNDING
NUMBER" shall mean the product obtained by multiplying (A) the maximum number of
shares of BUYER Common Stock issuable upon the exercise of all BUYER Exchange
Options outstanding immediately after the Effective Time (as set forth on the
Capitalization Certificate (as defined in Section 13.8), and as such Roll-Over
Options are adjusted pursuant to Article IV), TIMES (B) sixty-four percent
(64%), rounded to the nearest share. The Option Escrowed Shares shall be held by
the Escrow Agent pursuant to the Option Escrow Agreement and distributed in
accordance therewith.
3.4. DISTRIBUTIONS. No dividend or other distribution payable after the
Effective Time with respect to BUYER Common Stock will be paid to the holder of
any unsurrendered Certificate until the holder thereof surrenders such
Certificate, at which time such holder will receive all dividends and
distributions, without interest thereon, previously payable or paid but withheld
from such holder pursuant hereto.
3.5. NO TRANSFERS. From and after the Effective Time, no transfers of
shares of Company Common Stock will be made in the stock transfer books of the
Company. If, after the Effective Time, Certificates are presented (for transfer
or otherwise) to the Surviving Corporation or its transfer agent for Company
Common Stock, they will be canceled and exchanged for the shares of BUYER Common
Stock deliverable in respect thereof as determined in accordance with this
Agreement (or returned to the presenting person, if such Certificate represents
Dissenting Shares).
3.6. NO FRACTIONAL SHARES. In lieu of the issuance of fractional shares
of BUYER Common Stock, cash adjustments will be paid (without interest) to the
Company Stockholders in respect of any fractional share of BUYER Common Stock
that would otherwise be issuable to them and the amount of such cash adjustments
will be determined by multiplying each relevant holder's fractional interest by
the Closing Date Price Per Share (as defined in Section 17.1). For purposes of
determining whether, and in what amounts, a particular Company Stockholder would
be entitled to receive cash adjustments under this Section, shares of record
held by such holder and represented by two or more Certificates will be
aggregated.
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3.7. TERMINATION OF RIGHTS. After the Effective Time, holders of
Company Common Stock will cease to be, and will have no rights as, stockholders
of the Company or the Surviving Corporation, other than (i) in the case of
shares other than Dissenting Shares, the rights to receive shares of BUYER
Common Stock into which such shares have been converted and/or payments in lieu
of fractional shares, as provided in this Agreement, and (ii) in the case of
Dissenting Shares, the rights afforded to the holders thereof under Sections
5.11 and 5.12 of the TBCA and (iii) rights under this Agreement and the Escrow
Agreement.
3.8. ABANDONED PROPERTY. Neither BUYER nor the Company nor any other
person will be liable to any holder or former holder of shares of Company Stock
for any shares, or any dividends or other distributions with respect thereto,
properly delivered to a public official pursuant to applicable abandoned
property, escheat, or similar laws.
3.9. LOST CERTIFICATES, ETC. In the event that any Certificate has been
lost, stolen, or destroyed, then upon receipt of appropriate evidence as to such
loss, theft, or destruction, and to the ownership of such Certificate by the
person claiming such Certificate to be lost, stolen, or destroyed, and the
receipt by BUYER or its transfer agent for BUYER Common Stock of appropriate and
customary affidavit of loss or personal indemnification undertaking
documentation, BUYER or such transfer agent will issue in exchange for such
lost, stolen, or destroyed Certificate the shares of BUYER Common Stock and the
fractional share payment, if any, deliverable in respect thereof as determined
in accordance with this Agreement.
4. COMPANY COMMON STOCK OPTIONS.
(a) At the Effective Time, each unexpired and unexercised
outstanding option granted or issued under stock option plans of the Company and
set forth on the Capitalization Certificate (each, a "COMPANY OPTION") shall be
automatically converted into an option (a "BUYER EXCHANGE OPTION") to purchase,
subject to paragraph (d) below, that number of shares of BUYER Common Stock
equal to the number of shares of Company Common Stock subject to the Company
Option immediately prior to the Effective Time (without regard to any actual
restrictions on exerciseability) multiplied by the Exchange Ratio (and rounded
to the nearest share), with an exercise price per share equal to the exercise
price per share that existed under the corresponding Company Option divided by
the Exchange Ratio (and rounded to the nearest cent), and with other terms and
conditions, subject to paragraph (d) below, that are the same as the terms and
conditions of such Company Option immediately before the Effective Time. Prior
to the Effective Time, the Company and Buyer shall take all such action
necessary to effectuate the foregoing provisions of this Section 4(a).
(b) In connection with the issuance of BUYER Exchange Options,
BUYER shall (i) reserve for issuance the number of shares of BUYER Common Stock
that will become subject to BUYER Exchange Options pursuant to this Section 4,
and (ii) from and after the Effective Time, upon exercise of BUYER Exchange
Options, make available for issuance all shares of BUYER Common Stock covered
thereby, subject to the terms and conditions applicable thereto.
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(c) BUYER agrees to use its best efforts to file with the SEC,
no later than the Closing Date, a registration statement on Form S-8 or other
appropriate form under the Securities Act to register the maximum number of
shares of BUYER Common Stock issuable upon exercise of BUYER Exchange Options
and to use its reasonable efforts to cause such registration statement to remain
effective until the exercise or expiration of such options.
(d) On any exercise of a BUYER Exchange Option subsequent to
the Effective Time (including but not limited to following expiration of the
Escrow Agreements), BUYER shall have no obligation to transfer to the holder
thereof more than sixty-four percent (64%) (the portion in excess of such
percentage, the "DEFERRED OPTION SHARES") of the BUYER Common Stock for which
the BUYER Exchange Option is then being exercised (with the proportion withheld
rounded up to the nearest whole share), except to the extent, and only at such
time, if ever, as the conditions to the release of the "First Release Shares",
"Second Release Shares", and "Third Release Shares" (as defined in the
Contingency Escrow Agreement) to the Company Stockholders shall have been
satisfied in whole or in part (either before or after the exercise of such BUYER
Exchange Option), with such Deferred Option Shares being released in part upon
any partial satisfaction in the same ratio that the "First Release Shares",
"Second Release Shares", and "Third Release Shares" are released from the escrow
established by the Contingency Escrow Agreement. Upon satisfaction of all of
such conditions in whole, any Deferred Option Shares subject to BUYER Exchange
Options previously exercised shall be released and any remaining unexercised
BUYER Exchange Option shall be under no such restrictions. To the extent the
conditions are satisfied, the Deferred Option Shares as to previously exercised
BUYER Exchange Options will be delivered and the subsequent exercise of the
BUYER Exchange Options shall be under no such restrictions. Neither BUYER nor
the Company shall have any liability to any holder of a BUYER Exchange Option
for that part of the exercise price of the BUYER Exchange Option attributable to
the Deferred Option Shares in the event or to the extent the conditions to the
release of the Escrowed Shares and the Earn-Out Shares to the Company
Stockholders are not satisfied and in such circumstances the Company shall still
be entitled to collect that part of the exercise price on any subsequent
exercises.
5. [INTENTIONALLY OMITTED.]
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to BUYER as follows, subject
in each case to such exceptions as are specifically contemplated by this
Agreement, the Voting Agreement or the Registration Rights Agreement or as are
set forth in the attached Disclosure Schedule of the Company (the "COMPANY
DISCLOSURE SCHEDULE"). Notwithstanding any other provision of this Agreement or
the Company Disclosure Schedule, each exception set forth in the Company
Disclosure Schedule will be deemed to qualify each representation and warranty
set forth in this Agreement (i) that is specifically identified (by
cross-reference or otherwise) in the Company Disclosure Schedule as being
qualified by such exception, or (ii) with respect to which the relevance of such
exception is reasonably apparent on the face of the disclosure of such exception
set forth in the Company Disclosure Schedule.
6.1. INCORPORATION; AUTHORITY. The Company (i) is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Texas and (ii) has all
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requisite corporate power and authority in all material respects to own or lease
and operate its properties and to carry on its business as now conducted. The
Company has made available to BUYER complete and correct copies of its Amended
and Restated Articles of Incorporation and by-laws, in each case with all
amendments thereto made through the date hereof.
6.2. AUTHORIZATION AND ENFORCEABILITY. Subject to the approval of this
Agreement and the Merger by the Company Stockholders and to the filing of the
Articles of Merger and the requirements set forth in Section 6.3, the Company
has all requisite power and full legal right and authority (including due
approval of its Board of Directors) to enter into this Agreement, to perform all
of its agreements and obligations hereunder, and to consummate the Merger and
the other transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid, and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
6.3. GOVERNMENTAL AND OTHER THIRD-PARTY CONSENTS, NON-CONTRAVENTION,
ETC. No consent, approval, or authorization or registration, designation,
declaration, or filing with any governmental authority, federal or other, or any
other person, is required on the part of the Company in connection with the
execution, delivery, and performance of this Agreement or the consummation of
the Merger and the other transactions contemplated hereby, except (i) for
applicable requirements, if any, of the Exchange Act, the Securities Act, state
securities or "blue sky" laws and state takeover laws, the HSR Act (each as
defined in Section 17.1), and filing and recordation of appropriate merger
documents as required by the TBCA and (ii) as specified in Section 6.3 of the
Company Disclosure Schedule, or (iii) for such consents, approvals or
authorizations of or registrations, designations, declarations or filings, the
failure to make or obtain would not, individually or in the aggregate, have a
Material Adverse Effect (as defined in Section 17.1) on the Company. The
execution, delivery, and performance of this Agreement and the consummation of
such transactions will not violate (a) any provision of the Company's Amended
and Restated Articles of Incorporation or by-laws, (b) any order, judgment,
injunction, award or decree of any court or state or federal governmental or
regulatory body applicable to the Company, (c) any judgment, decree, order,
statute, rule or regulation to which the Company is a party or by or to which it
or any of its assets is bound or subject, or (d) any agreement, instrument or
other obligation to which the Company is a party or by or to which it or any of
its assets is bound or subject, except, in each case, to the extent that the
failure to obtain any such consent, approval or authorization would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
6.4. CAPITALIZATION. The authorized and outstanding capital stock and
other securities of the Company as of the date hereof are as set forth in
Section 6.4 of the Company Disclosure Schedule. All of such outstanding shares
of capital stock of the Company are duly authorized, validly issued, fully paid,
and non-assessable, and all of such outstanding shares and other securities are
owned of record as set forth in Section 6.4 of the Company Disclosure Schedule,
and, except as would not have, individually or in the aggregate, have a Material
Adverse Effect on the Company, were issued in compliance with all applicable
laws, including securities laws, and all applicable preemptive or similar rights
of any person. No person has any valid right to rescind from the Company any
purchase of any shares of the Company's capital stock or other securities.
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There are no agreements or other obligations on the part of the Company
to purchase or sell, and other than as set forth in Section 6.4 of the Company
Disclosure Schedule, no convertible or exchangeable securities, options,
warrants, or other rights to acquire from the Company any shares of its capital
stock or other securities. Section 6.4 of the Company Disclosure Schedule sets
forth the name of each person who holds any option, warrant or other right to
acquire shares of the Company's capital stock, the number and type of shares
subject to such option, warrant or right, the per-share exercise price payable
therefor, how many of the shares subject to such option, warrant or other right
were "vested" (i.e., exercisable) as of September 30, 2000 and how many will
vest or become exercisable upon consummation of the Merger, and whether or not
the holder thereof is an employee of the Company.
6.5. QUALIFICATION. The Company is duly qualified and in good standing
as a foreign corporation in all jurisdictions in which the character of its
owned or leased properties or the nature of its activities makes such
qualification necessary, except for any failures to be so qualified and in good
standing as would not have, individually or in the aggregate, a Material Adverse
Effect on the Company.
6.6. SUBSIDIARIES. The Company does not have any Subsidiaries (as
defined in Section 17.1) or own any legal and/or beneficial interests in any
person other than telecom technologies, incorporated international and telecom
technologies, inc. - OSS.
6.7. FINANCIAL STATEMENTS. Included in Section 6.7 of the Company
Disclosure Schedule are copies of (i) the audited balance sheets of the Company
as of December 31, 1997 and 1998, and the related audited statements of
operations, shareholders' equity and cash flows of the Company, for the fiscal
years ended on such dates, accompanied by an audit report of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, (ii) the audited balance sheet of the Company as of December 31, 1999 (the
"MOST RECENT AUDITED BALANCE SHEET"), and the related audited statements of
operations, shareholders' equity and cash flows of the Company, for the fiscal
year ended on such date, accompanied by an audit report of Ernst & Young, LLP,
and (iii) the unaudited balance sheet of the Company as of September 30, 2000
(the "MOST RECENT UNAUDITED BALANCE SHEET"), and the related unaudited
statements of operations, shareholders' equity and cash flows, respectively, of
the Company, for the nine-month period ended on such date. Except as set forth
in the notes thereto, each of such financial statements is true and correct in
all material respects and has been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a basis consistent
with prior periods. Each of such balance sheets fairly presents in all material
respects the financial condition of the Company as of its respective date; and
each of such statements of operations, shareholders' equity and cash flows,
respectively, fairly presents in all material respects the results of operations
and Shareholders' equity, or cash flows, as the case may be, of the Company for
the period covered thereby; in each case, subject, with respect to the unaudited
financial statements referred to in clause (iii) of this Section, to the absence
of footnote disclosure and to normal, recurring end-of-period adjustments which
shall, in the aggregate, not be material.
6.8. ABSENCE OF CERTAIN CHANGES. Except as reflected in the Most Recent
Unaudited Balance Sheet, since the Most Recent Audited Balance Sheet Date, there
has not been: (i) any
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change in the assets, liabilities, sales, income, or business of the Company or
in its relationships with suppliers, customers, or lessors, other than changes
that were both in the ordinary course of business or changes that have not,
individually or in the aggregate, had a Material Adverse Effect on the Company;
(ii) any acquisition or disposition by the Company of any material asset or
property other than in the ordinary course of business; (iii) any damage,
destruction or loss, whether or not covered by insurance, except for any damage,
destruction or loss that did not, individually or in the aggregate, have a
Material Adverse Effect on the Company; (iv) any declaration, setting aside or
payment of any dividend or any other distributions in respect of any shares of
capital stock of the Company; (v) any issuance of any shares of the capital
stock of the Company, or options, warrants or other rights to acquire such
capital stock, or any direct or indirect redemption, purchase, or other
acquisition by the Company of any such capital stock or rights to acquire
capital stock, except upon the exercise of Company Stock Options set forth in
Section 6.4 of the Company Disclosure Schedule or issued subsequent to the date
hereof, in each case to the extent set forth on the Capitalization Certificate;
(vi) any loss of the services of any officers or key employees or consultants
that have had or will have, individually or in the aggregate, a Material Adverse
Effect on the Company, or any increase in the compensation, pension, or other
benefits payable or to become payable by the Company to any of its officers or
key employees or consultants, or any bonus payments or arrangements made to or
with any of them other than in the ordinary course; (vii) any forgiveness or
cancellation of any debt or claim by the Company or any waiver of any right of
material value, other than compromises of accounts receivable in the ordinary
course of business; (viii) any entry by the Company into any transaction with
any of its Affiliates (as defined in Section 17.1), other than any entered into
in the ordinary course of business in connection with the employment of such
Affiliate by the Company; (ix) any incurrence or imposition of any material Lien
(as defined in Section 17.1) on any of the material assets, tangible or
intangible, of the Company; or (x) any discharge or satisfaction by the Company
of any material Lien or payment by the Company of any obligation or liability
(fixed or contingent) other than (A) current liabilities included in or
reflected on the Most Recent Balance Sheet, and (B) current liabilities to
persons other than Affiliates of the Company incurred since the date of the Most
Recent Audited Balance Sheet in the ordinary course of business.
6.9. PROPERTIES AND ASSETS. The assets and properties of the Company
are adequate and sufficient, in all material respects, to conduct the business
of the Company as currently conducted in all material respects. The Company has
good and marketable title to all of its material assets and properties,
including without limitation all those reflected as owned in the Most Recent
Unaudited Balance Sheet (except for properties or assets sold, consumed, or
otherwise disposed of in the ordinary course of business since the date of the
Most Recent Unaudited Balance Sheet), all free and clear of material Liens. All
such properties and assets, in the aggregate, are in good condition and repair,
reasonable wear-and-tear and normal maintenance excepted. Section 6.9(a) of the
Company Disclosure Schedule sets forth a complete and correct list of all
capital assets of the Company having a net book value in excess of $50,000.
The Company does not own any real property. The Company has not
received any written notice that either the whole or any portion of any real
property leased by it is to be condemned, requisitioned, or otherwise taken by
any public authority or is to be the subject of any public improvements that may
result in special assessments against or otherwise affect such
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real property. Section 6.9(b) of the Company Disclosure Schedule sets forth a
complete and correct list of all leases of real property to which the Company is
a party. Complete and correct copies of all such leases have been made available
to BUYER. Each such lease is valid and subsisting and no event or condition
exists that constitutes, or after notice or lapse of time or both could
constitute, a default thereunder, except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The leasehold
interests of the Company in real property are not subject to any material Lien,
and the Company is in quiet possession of the real property covered by such
leases.
6.10. INTELLECTUAL PROPERTIES.
(a) Section 6.10(a) of the Company Disclosure Schedule lists
all Intellectual Properties, as such term is defined in Section 17.1, (other
than off-the-shelf software programs that have not been customized for its use)
material to and used in or necessary to the business of the Company as now being
conducted and as presently proposed by the Company to be conducted (the "COMPANY
INTELLECTUAL PROPERTIES"). The Company owns, or is licensed or otherwise has the
right to use all Company Intellectual Properties, free and clear of all liens,
claims and encumbrances, except for such liens, claims and encumbrances as do
not materially impair the Company's ability to use, exploit, license and
distribute such Company Intellectual Properties. Except as pursuant to any
agreement listed in Section 6.10 of the Company Disclosure Schedule, the Company
is not required to pay royalties or further consideration for the use of any
Company Intellectual Properties that the Company has licensed from other
Persons. The Company possesses (or has the right to obtain access pursuant to an
escrow agreement) the source codes and all related programs and documentation
sufficient to recreate the current and next most recent versions of any Company
Intellectual Properties that the Company has licensed from other Persons.
(b) The Company's Products, including all software, are free
from material defects and perform in substantial accordance with all published
specifications (if any).
(c) The Company has not granted any third party any right to
manufacture, reproduce, distribute or market any of the Company's Products or
any adaptations, translations, or derivative works based on the Company Products
or any portion thereof.
(d) The Company has not granted any third party any right to
license any of the Company's Products except under valid and binding Software
License Agreements.
(e) No third party has been licensed to use, or has lawful
access to, any source code developed in respect of the Company's Products.
(f) No product liability or warranty claims have been
communicated in writing to or threatened in writing against the Company.
(g) In any instance where the Company's rights to Company
Intellectual Properties arise under a license or similar agreement (other than
for off-the-shelf software programs that have not been customized for its use),
this is indicated in Section 6.10(a) of the
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Company Disclosure Schedule. No other person has an interest in or right or
license to use any of the Company Intellectual Properties owned by the Company.
To the Company's knowledge, there is and has been no material unauthorized use,
disclosure, infringement or misappropriation of any Company Intellectual
Properties owned by the Company by any third party. To the Company's knowledge,
none of the Company Intellectual Properties owned by the Company or licensed to
the Company on an exclusive basis is being infringed by others, or is subject to
any outstanding order, decree, judgment, or stipulation. No litigation (or other
proceedings in or before any court or other governmental, adjudicatory,
arbitral, or administrative body) relating to the Company Intellectual
Properties owned by the Company or licensed to the Company on an exclusive basis
is pending, nor to the Company's knowledge, threatened against the Company. The
Company maintains reasonable security measures for the preservation of the
secrecy and proprietary nature of such of its Company Intellectual Properties
that constitute trade secrets or other confidential information.
(h) To the Company's knowledge, the Company has not infringed
or made unlawful use of, and is not infringing or making unlawful use of, any
Intellectual Properties of any other person. No litigation (or other proceedings
in or before any court or other governmental, adjudicatory, arbitratory, or
administrative body) charging the Company with infringement or unlawful use of
any Intellectual Properties is pending, or to the Company's knowledge,
threatened against the Company. In addition, to the knowledge of the Company,
there are no legal restrictions or impediments that would prevent Company from
incorporating those features identified in Schedule 2(a)(iii) to the Contingency
Escrow Agreement into a release version of the Company's products.
(i) To the Company's knowledge, all of the Company's material
information technology systems and material non-information technology embedded
systems (including systems or technology currently under development) will
record, store, process, calculate and present calendar dates falling on and
after (and, if applicable, during spans of time including) January 1, 2000, and
will calculate any information dependent on or relating to such date in the same
manner, and with the same functionality, data integrity and performance, as the
information technology systems and non-information technology embedded systems
record, store, process, calculate and present, calendar dates on or before
December 31, 1999, or calculate any information dependent on or relating to such
date.
(j) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, each person presently or
previously employed by the Company (including independent contractors, if any)
with access authorized by the Company to confidential information relating to
the Company Intellectual Properties has executed a confidentiality and
non-disclosure agreement pursuant to an agreement substantially in the form of
agreement previously provided to BUYER or its representatives, or is otherwise
legally bound to preserve the confidentiality of such information, and such
confidentiality and non-disclosure agreements constitute valid and binding
obligations of the Company and, to the Company's knowledge, of such person,
enforceable in accordance with their respective terms. Except as would not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
all Company Intellectual Properties that are owned by the Company were written,
developed and created solely and exclusively by employees of the Company (and
all rights in and to all
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Company Intellectual Properties are owned by the Company) without the assistance
of any third party or entity OR were created by or with the assistance of third
parties who assigned ownership of their rights (including all intellectual
property rights) in such Company Intellectual Properties to the Company by means
of valid and enforceable consultant confidentiality and invention assignment
agreements, copies of which have been delivered to BUYER. All Company
Intellectual Properties that are licensed to the Company (other than
off-the-shelf software programs that have not been customized for its use) are
identified on Schedule 6.10(a) of the Company Disclosure Schedule and copies of
such license agreements have been made available to BUYER
(k) All use, disclosure or appropriation by the Company (or
its employees or agents) of confidential information relating to Intellectual
Properties not otherwise protected by patents, patent applications or copyright
("CONFIDENTIAL INFORMATION") owned by the Company and licensed to a third party
has been pursuant to the terms of a written agreement between the Company and
such third party. All use, disclosure or appropriation by the Company (or its
employees or agents) of Confidential Information not owned by the Company has
been made pursuant to the terms of a written agreement between the Company and
the owner of such Confidential Information, or is otherwise lawful.
(l) Section 6.10(a) of the Company Disclosure Schedule
contains an accurate and complete list of all patents and patent applications,
trademarks (with separate listings of registered and unregistered trademarks),
trade names, Internet domain names and registered copyrights in or related to
the Company Products or otherwise included in the Company Intellectual
Properties and all applications and registrations therefore. To the knowledge of
the Company, all of Company's patents, patent rights, copyrights, trademark,
trade name or Internet domain name registrations related to or in the Company
Products are valid and in full force and effect in all material respects; and
consummation of the transactions contemplated by this Agreement will not alter
or impair any such rights.
(m) As used in this Section 6.10: "PRODUCTS" means all
products, including all software, now being manufactured or sold by the Company,
and those products and software currently under development by the Company.
6.11. INDEBTEDNESS. At the date hereof, the Company has no material
Indebtedness (as defined in Section 17.1) outstanding, or any Indebtedness for
borrowed money regardless of amount, except for trade credit incurred in the
ordinary course of business not exceeding $1,000,000 in the aggregate (the
"INCIDENTAL INDEBTEDNESS"). The Company is not in default with respect to any
outstanding Indebtedness or any agreement, instrument, or other obligation
relating thereto and, no such Indebtedness or any agreement, instrument, or
other obligation relating thereto purports to limit the issuance of any
securities by the Company or the operation of its businesses. Complete and
correct copies of all agreements, instruments, and other obligations (including
all amendments, supplements, waivers, and consents) relating to any Indebtedness
of the Company other than Incidental Indebtedness have been made available to
BUYER.
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6.12. ABSENCE OF UNDISCLOSED LIABILITIES. Except (a) to the extent (i)
reflected or reserved against in the Most Recent Audited Balance Sheet, or (ii)
incurred in the ordinary course of business after the date of the Most Recent
Audited Balance Sheet, and (b) to be discharged before the Closing, the Company
does not have any liabilities or obligations of any nature, whether accrued,
absolute, contingent, or otherwise (including without limitation liabilities, as
guarantor or otherwise, in respect of obligations of others) other than
performance obligations with respect to the contracts that would not be required
to be reflected or reserved against in a balance sheet prepared in accordance
with GAAP or referred to in the footnotes thereto, except any such liabilities
and obligations that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
6.13. TAXES.
(a) ELECTIONS. All material elections with respect to Taxes
(including without limitation any elections under Sections 108(b)(5), 338(g),
565, 936(a), or 936(e) of the Internal Revenue Code of 1986, as amended (the
"CODE"), or Treasury Regulation (as defined in Section 17.1) Sections
1.1502-20(g) or 1.1502-32(f)(2)) affecting the Company and its Subsidiaries are
described in Section 6.13(a) of the Company Disclosure Schedule.
(b) FILING OF TAX RETURNS AND PAYMENT OF TAXES. The Company
and its Subsidiaries have timely filed (taking into account any extensions of
time in which to file) all Tax Returns (as defined in Section 17.1) required to
be filed by them, each such Tax Return has been prepared in compliance with all
applicable laws and regulations, and all such Tax Returns are true, accurate and
complete in all material respects. All Taxes due and payable by the Company and
its Subsidiaries whether or not shown on any Tax Returns have been paid, and the
Company and its Subsidiaries will not be liable for any additional Taxes in
respect of any taxable period ending on or before the Closing Date in an amount
that exceeds the corresponding reserve therefor, if any, reflected in the
accounting records of the Company and its Subsidiaries. The Company and its
Subsidiaries have made available to BUYER correct and complete copies of all Tax
Returns filed by or with respect to them with respect to taxable periods ended
on or after December 31, 1996.
(c) AUDIT HISTORY. With respect to each taxable period of the
Company and its Subsidiaries ended on or before December 31, 1996, each such
taxable period has closed and such taxable period is not subject to review by
any relevant taxing authorities.
(d) DEFICIENCIES. No deficiency or proposed adjustment in
respect of Taxes that has not been settled or otherwise resolved has been
asserted or assessed in writing by any taxing authority against the Company or
its Subsidiaries.
(e) LIENS. There are no Liens for Taxes (other than current
Taxes not yet due and payable) on the assets of the Company or its Subsidiaries.
(f) EXTENSIONS TO STATUTE OF LIMITATIONS FOR ASSESSMENT OF
TAXES. Neither the Company nor any of its Subsidiaries has consented to extend
the time in which any Tax may be assessed or collected by any taxing authority.
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(g) EXTENSIONS OF THE TIME FOR FILING TAX RETURNS. Neither the
Company nor any of its Subsidiaries has requested or been granted an extension
of the time for filing any Tax Return to a date on or after the Closing Date.
(h) PENDING PROCEEDINGS. There is no action, suit, taxing
authority proceeding, or audit with respect to any Tax now in progress, pending,
or to the Company's or any of its Subsidiaries' knowledge, threatened, against
or with respect to the Company or any of its Subsidiaries.
(i) NO FAILURES TO FILE TAX RETURNS. To the Company's or any
of its Subsidiaries' knowledge, no claim has ever been made by a taxing
authority in a jurisdiction where the Company or any of its Subsidiaries does
not pay Tax or file Tax Returns that the Company or any of its Subsidiaries is
or may be subject to Taxes assessed by such jurisdiction.
(j) MEMBERSHIP IN AFFILIATED GROUPS, ETC. Neither the Company
nor any of its Subsidiaries has ever been a member of any affiliated group of
corporations (as defined in Section 1504(a) of the Code), other than a group of
which the Company or any of its Subsidiaries is or was the common parent, or
filed or been included in a combined, consolidated, or unitary Tax Return, other
than with respect to a combined, consolidated or unitary group of which the
Company or any of its Subsidiaries is or was the common parent.
(k) ADJUSTMENTS UNDER SECTION 481. Neither the Company nor any
of its Subsidiaries will be required, as a result of a change in method of
accounting for any period ending on or before the Closing Date, to include any
adjustment under Section 481(c) of the Code (or any similar or corresponding
provision or requirement under any Tax law) in taxable income for any period
ending on or after the Closing Date.
(l) TAX SHARING, ALLOCATION, OR INDEMNITY AGREEMENTS. Neither
the Company nor any of its Subsidiaries is a party to or bound by any Tax
sharing or allocation agreement or has any current or potential contractual
obligation to indemnify any other person with respect to Taxes.
(m) WITHHOLDING TAXES. The Company and its Subsidiaries have
withheld and paid all Taxes required to have been withheld and paid by them in
connection with amounts paid or owing to any employee, creditor or other person.
(n) FOREIGN PERMANENT ESTABLISHMENTS AND BRANCHES. Neither the
Company nor any of its Subsidiaries has a permanent establishment in any foreign
country, as defined in the relevant tax treaty between the United States of
America and such foreign country, and does not otherwise operate or conduct
business through any branch in any foreign country.
(o) U.S. REAL PROPERTY HOLDING CORPORATION. Neither the
Company nor any of its Subsidiaries is or has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2), during the
applicable period specified in Code Section 897(c)(1)(A)(ii).
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(p) TAX-EXEMPT USE PROPERTY. None of the property owned by the
Company or any of its Subsidiaries is "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
(q) SECURITY FOR TAX-EXEMPT OBLIGATIONS. None of the assets of
the Company or any of its Subsidiaries directly or indirectly secures any
indebtedness, the interest on which is tax-exempt under Section 103(a) of the
Code, and neither the Company nor any of its Subsidiaries is directly or
indirectly an obligor or a guarantor with respect to any such indebtedness.
(r) SECTION 341(f) CONSENT. Neither the Company nor any of its
Subsidiaries has filed a consent under Code Section 341(f) concerning
collapsible corporations.
(s) PARACHUTE PAYMENTS. Neither the Company nor any of its
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments, that will not be deductible under Code Sections 162(m) or
280G.
(t) OTHER PERSONS. Neither the Company nor any of its
Subsidiaries is presently liable for the Taxes of another person (i) under
Treasury Regulation Section 1.1502-6 (or comparable provision of state, local or
foreign law), (ii) as transferee or successor or (iii) by contract or indemnity
or otherwise.
6.14. EMPLOYEE BENEFIT PLANS.
(a) IDENTIFICATION OF PLANS. The Company does not now maintain
or contribute to, and does not have any outstanding liability to or in respect
of or obligation under, any material pension, profit-sharing, deferred
compensation, bonus, stock option, employment, share appreciation right,
severance, group or individual health, dental, medical, life insurance, survivor
benefit, or similar plan, policy, arrangement or agreement, whether formal or
informal, written or oral, for the benefit of any director, officer, consultant
or employee, whether active or terminated, of the Company. Each of the
arrangements set forth on Section 6.14(a) of the Company Disclosure Schedule is
here referred as an "EMPLOYEE BENEFIT PLAN".
(b) DELIVERY OF DOCUMENTS. The Company has heretofore
delivered to BUYER true, correct and complete copies of each Employee Benefit
Plan, and with respect to each such Plan true, correct and complete copies of
(i) any associated trust, custodial, insurance or service agreements, (ii) any
annual report, actuarial report, or disclosure materials (including specifically
any summary plan descriptions) submitted to any governmental agency or
distributed to participants or beneficiaries thereunder in the current or any of
the three (3) preceding calendar years and (iii) the most recently received
Internal Revenue Service (the "IRS") determination letters and any governmental
advisory opinions, rulings, compliance statements, or closing agreements
specific to such Employee Benefit Plan.
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(c) COMPLIANCE WITH TERMS AND LAW. Each Employee Benefit Plan
is and has heretofore been maintained and operated in all material respects in
compliance with the terms of such Plan and with the requirements prescribed
(whether as a matter of substantive law or as necessary to secure favorable tax
treatment) by any and all statutes, governmental or court orders, or
governmental rules or regulations in effect from time to time, including but not
limited to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code and applicable to such Plan. Each Employee Benefit Plan
which is intended to qualify under Section 401(a) of the Code and each trust or
other entity intended to qualify as a "voluntary employee benefit association"
within the meaning of Section 501(c)(9) of the Code and associated with any
Employee Benefit Plan is expressly identified as such on Section 6.14(a) of the
Company Disclosure Schedule and has been determined to be so qualified by the
IRS and, to the best knowledge of the Company, nothing has occurred as to each
which has resulted or is likely to result in the revocation of such
determination or which requires or could require action under the compliance
resolution programs of the Internal Revenue Service to preserve such
qualification.
(d) ABSENCE OF CERTAIN EVENTS AND ARRANGEMENTS.
(i) There is no material pending or, to the best
knowledge of the Company, threatened legal action, proceeding or investigation,
other than routine claims for benefits, concerning any Employee Benefit Plan or
to the best knowledge of the Company any fiduciary or service provider thereof
and, to the knowledge of the Company, there is no basis for any such legal
action or proceeding.
(ii) Neither the Company nor any affiliate maintains
or contributes to or has heretofore maintained or contributed to any plan
subject to Title IV of ERISA or Section 412 of the Code or any multi-employer
plan, and no liability under Title IV of ERISA has been incurred by the Company
or any affiliate.
(iii) No Employee Benefit Plan nor any party in
interest with respect thereof, has engaged in a prohibited transaction which
could subject the Company directly or indirectly to material liability under
Section 409 or 502(i) of ERISA or Section 4975 of the Code.
(iv) No Employee Benefit Plan provides welfare
benefits subsequent to termination of employment to employees or their
beneficiaries except to the extent required by applicable state insurance laws
or Title I, Part 6 of ERISA.
(v) The Company has not announced its intention, or
committed (whether or not legally bound) to modify or terminate any Employee
Benefit Plan or adopt any arrangement or program which, once established, would
come within the definition of an Employee Benefit Plan.
(vi) Each Employee Benefit Plan (other than
individual agreements) is terminable at the sole discretion of the sponsor
thereof, subject only to such constraints as may imposed by applicable law.
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(e) FUNDING OF CERTAIN PLANS. With respect to each Employee
Benefit Plan for which a separate fund of assets is or is required to be
maintained, full and timely payment has been made of all material amounts
required of the Company, under the terms of each such Plan or applicable law, as
applied through the Closing Date.
(f) EFFECT OF TRANSACTIONS. The execution of this Agreement
and the consummation of the transactions contemplated herein will not, by itself
or in combination in any other event (regardless of whether that other event has
or will occur), result in any payment (whether of severance pay or otherwise)
becoming due from or under any Employee Benefit Plan (including any employment
agreement) to any current or former director, officer, consultant or employee of
the Company or result in the vesting, acceleration of payment or increases in
the amount of any benefit payable to or in respect of any such current or former
director, officer, consultant or employee.
(g) DEFINITIONS. For purposes of this Section 6.14,
"multi-employer plan", "party in interest" "current value" and "benefit
liability" have the same meaning assigned such terms under Sections 3, 4043(b)
or 4001(a) of ERISA, and "affiliate" means any entity which under Section 414 of
the Code is treated as a single employer with the Company.
6.15. SAFETY AND ENVIRONMENTAL MATTERS.
(a) None of the plants, offices, or properties in or on which
the Company carries on business nor any of the activities carried on by it are
in violation of any zoning, health, or safety law or regulation, including
without limitation the Occupational Safety and Health Act of 1970, as amended,
except for such violations as would not have, individually or in the aggregate,
a Material Adverse Effect on the Company.
(b) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, neither the Company nor, to the
knowledge of the Company, any operator of any real property presently or
formerly owned, leased, or operated by the Company is in violation or alleged
violation of any judgment, decree, order, law, license, rule or regulation
pertaining to environmental matters, including without limitation the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("▇▇▇▇"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, and
applicable federal, state, foreign, and local statutes, regulations, ordinances,
orders, and decrees relating to health, safety, or the environment (all of the
foregoing, collectively, "ENVIRONMENTAL LAWS").
(c) The Company has not received written notice from any third party,
including without limitation any federal, state, foreign, or local governmental
authority, that (i) the Company has been identified by the United States
Environmental Protection Agency (the "EPA") as a potentially responsible party
under CERCLA with respect to a site listed on the National Priorities List, 40
C.F.R. Part ▇▇▇ ▇▇▇▇▇▇▇▇ ▇ (1986); (ii) any hazardous waste as defined by 42
U.S.C. Section 6903(5), any hazardous substance as defined by 42 U.S.C. Section
9601(14),
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any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33)
or any toxic substance, oil, or hazardous material or other chemical or
substance regulated by any Environmental Laws (collectively, "HAZARDOUS
SUBSTANCES") that the Company has generated, transported, handled, used, or
disposed of has been found in violation of Environmental Laws at any site at
which a federal, state, foreign, or local agency or other third party has
conducted or has ordered that the Company conduct a remedial investigation,
removal, or other response action pursuant to any Environmental Law; or (iii)
the Company is or will be a named party to any claim, action, cause of action,
complaint (contingent or otherwise), or legal or administrative proceeding
arising out of any third party's incurrence of costs, expenses, losses, or
damages of any kind whatsoever in connection with the release of Hazardous
Substances.
(d) Except as would not have, and will not have, individually
or in the aggregate, a Material Adverse Effect on the Company, (i) no portion of
any real property presently or formerly owned, leased, or operated by the
Company has been used by the Company, or to the Company's knowledge, by any
other person, for the handling, usage, manufacturing, processing, storage, or
disposal of Hazardous Substances except in accordance with applicable
Environmental Laws; and no underground tank or other underground storage
receptacle for Hazardous Substances is located on any real property presently
owned, leased, or operated by the Company, or to the Company's knowledge, any
real property formerly owned, leased, or operated by it; (ii) in the course of
the activities conducted by the Company and to the Company's knowledge, those of
any other operators of any real property presently or formerly owned, leased, or
operated by the Company, no Hazardous Substances have been generated, stored, or
used on such properties except in accordance with applicable Environmental Laws;
(iii) to the Company's knowledge, there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing, or dumping) or threatened releases
of Hazardous Substances on, upon, into, or from any real property presently or
formerly owned, leased, or operated by the Company; (iv) to the Company's
knowledge, there have been no releases on, upon, from, or into any real property
in the vicinity of any real property presently or formerly owned, leased, or
operated by the Company that, through soil or groundwater contamination, may
have come to be located on, any of the real property presently or formerly
owned, leased, or operated by the Company; and (v) any Hazardous Substances that
have been generated by the Company, or to the Company's knowledge, any other
person, on any real property presently or formerly owned, leased, or operated by
the Company, have been transported offsite only by carriers having an
identification number issued by the EPA and treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required under
applicable Environmental Laws, which transporters and facilities, to the
Company's knowledge, have been and are operating in compliance with such permits
and applicable Environmental Laws.
(e) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, no real property presently owned,
leased, or operated by the Company, and to the Company's knowledge, no real
property formerly owned, leased, or operated by the Company, is or will be
subject to any environmental cleanup responsibility law or regulation or
environmental restrictive transfer law or regulation by reason of the Merger or
the other transactions contemplated hereby.
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6.16. LABOR RELATIONS. The Company is and has been in compliance in all
material respects with all material federal and state laws respecting employment
and employment practices, terms and conditions of employment, wages and hours,
nondiscrimination in employment, and unfair labor practices. There is no charge
or proceeding pending, or to the Company's knowledge, threatened, against the
Company alleging unlawful discrimination in employment practices or unfair labor
practice before any court or agency, including without limitation the National
Labor Relations Board. There is no labor strike, work slow-down, or work
stoppage pending or to the Company's knowledge threatened against or involving
the Company. No one has petitioned within the last four years or, to the
Company's knowledge, is now petitioning for union representation of any of the
employees of the Company. None of the employees of the Company is covered by any
collective bargaining agreement, and no collective bargaining agreement is
currently being negotiated by the Company. The Company has not experienced any
labor strike, work slowdown, work stoppage or other material labor difficulty
during the last four years.
6.17. LITIGATION. No litigation, arbitration, action, suit, proceeding,
or to the Company's knowledge investigation (whether conducted by any judicial
or regulatory body, arbitrator, or other person) is pending or, to the Company's
knowledge, threatened, against the Company, nor is there any basis therefor
known to the Company.
6.18. ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES. As of the date hereof,
the accounts receivable and other receivables recorded in the records and books
of account of the Company as due to the Company, represent all material
receivables that have arisen from bona fide transactions in the ordinary course
of the Company's business, and the extensions of credit reflected by such
receivables have been extended, or will be extended, in the manner consistent
with past trade and credit practices of the Company. Said receivables, less the
amount of any reserve therefore, have been recorded in the records and books of
account of the Company in accordance with GAAP, and, to the Company's knowledge,
shall be collectible in the ordinary course of business. As of the date hereof,
none of such accounts receivable or other credits is or will at the Closing
Date, be subject to any valid counterclaim or set off, except to the extent of
any such provision for reserve.
6.19. ACCOUNTS PAYABLE. As of the date hereof, the accounts payable
recorded in the records and books of account of the Company, represent all of
the payables that have arisen from bona fide transactions in the ordinary course
of the Company's business, and the payment of such payables have been made in
the manner consistent with past trade and credit practices of the Company. Said
payables, have been recorded in the records and books of account of the Company
in accordance with GAAP, consistent with past business practices.
6.20. CONTRACTS. Section 6.20 of the Company Disclosure Schedule sets
forth a complete and accurate list of all material contracts to which the
Company is a party or by or to which it or any of its assets or properties is
bound or subject. As used in this Agreement, the word "CONTRACT" includes every
agreement of any kind, written or oral, that is legally enforceable by or
against or otherwise binding on the Company, and specifically includes without
limitation: (a) agreements with any current or former officer, director,
employee, consultant, or stockholder, or any partnership, corporation, joint
venture, or any other entity in which any such person has
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an interest and the Company has knowledge of such person's interest; (b)
agreements with any labor union or association representing any employee; (c)
agreements for the provision of services by or to the Company; (d) bonds or
other security agreements provided by any party in connection with the business
of the Company; (e) agreements for the purchase or other acquisition or the sale
or other disposition of assets or properties, in each case other than in the
ordinary course of business, or for the grant to any person of any preferential
rights to purchase any of such assets or properties; (f) joint venture
agreements relating to the assets, properties, or business of the Company or by
or to which it or any of its assets or properties is bound or subject; (g)
agreements under which the Company agrees to indemnify any party, to share tax
liability of any party, or to refrain from competing with any party; (h)
agreements with regard to Indebtedness; or (i) any other contract or other
agreement, whether or not made in the ordinary course of business. All of the
contracts listed in Section 6.20 of the Company Disclosure Schedule are in full
force and effect except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, and (A) the Company, is not in material
default under or breach of any of them, and (B) to the Company's knowledge, no
other party thereto, is in material default under or breach of any of them, nor
to the Company's knowledge, does any event or condition exist that after notice
or lapse of time or both could constitute a material default thereunder or
breach thereof on the part of the Company, or to the Company's knowledge, any
other party thereto. Except as would not, individually or in the aggregate, have
a Material Adverse Effect on the Company, no approval or consent of any person
that has not already been obtained and listed in Section 6.20 of the Company
Disclosure Schedule is needed in order that the contracts listed in Section 6.20
of the Company Disclosure Schedule continue in full force and effect following
the consummation of the Merger and the other transactions contemplated hereby,
and no such contract includes any provision, the effect of which may be to
terminate (or give rise to a right of termination under) such contract, to
enlarge or accelerate any obligations of the Company thereunder, or to give
additional rights to any other person, upon consummation of the Merger or the
other transactions contemplated hereby. The Company has made available to BUYER
true, correct, and complete copies of all such material contracts, including all
amendments, modifications, and supplements thereto.
6.21. POTENTIAL CONFLICTS OF INTEREST. No officer, director, or
stockholder of the Company (other than the non-employee directors of the Company
and their Affiliates) (a) to the knowledge of the Company owns, directly or
indirectly, any interest (excepting not more than 1% stock holdings for
investment purposes in securities of publicly held and traded companies) in, or
is an officer, director, employee, or consultant of, any person that is a
material competitor, lessor, lessee, or supplier of the Company; (b) owns,
directly or indirectly, in whole or in part, any tangible or intangible property
that the Company is using or the use of which is necessary for the business of
the Company; or (c) to the Company's knowledge, has any cause of action or other
claim whatsoever against, or owes any amount to, the Company, except for claims
in the ordinary course of business, such as for accrued vacation pay, accrued
benefits under Employee Benefit Plans, and similar matters and agreements. To
the Company's knowledge, no customer or prospective customer of the Company
holds any beneficial interest in any securities issued by the Company. No
officer, director, employee or stockholder of the Company has been party to any
transaction with the Company, other than those relating to employment in the
ordinary course of business that have not been, individually or in the
agreement, material.
-21-
6.22. INSURANCE. Section 6.22 of the Company Disclosure Schedule lists
the policies of theft, fire, liability, workmen's compensation, life, property
and casualty, and other insurance owned or held by the Company, and describes
for each such policy the annual premiums due thereunder, the deductibles, if
any, the coverage amounts and the expiration dates thereof. Such policies of
insurance are maintained with financially sound and reputable insurance
companies, funds, or underwriters, and are of the kinds, cover such risks, and
are in such amounts and with such deductibles and exclusions, as are consistent
with prudent business practice. All such policies are in full force and effect;
are sufficient for compliance in all material respects by the Company with all
requirements of law and of all agreements to which the Company is a party; are,
in all material respects, valid, outstanding, and enforceable policies and
provide that they will remain in full force and effect through the respective
dates set forth in the Company Disclosure Schedule; and will not in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement.
6.23. SUPPLIERS AND CUSTOMERS. The relationships of the Company with
its suppliers and customers (as a whole) are good commercial working
relationships, and no supplier or customer of material importance to the Company
or material number of Company customers has canceled or otherwise terminated, or
threatened in writing to cancel or terminate, its relationship with the Company
or has during the last such twelve months decreased materially, or threatened to
decrease or limit materially, its services, supplies, or materials to the
Company or its usage or purchase of the services or products of the Company,
except for normal cyclical changes related to customers' businesses and industry
developments. The Company has no knowledge, and no knowledge of any specific
factual circumstances that would cause the Company reasonably to believe, that
any such supplier or a material number of customers intends to cancel or
otherwise substantially modify its relationship with the Company or to decrease
materially or limit its services, supplies, or materials to the Company, or its
usage or purchase of the Company's services or products, and the consummation of
the transactions contemplated hereby will not, to the Company's knowledge,
adversely affect the relationship of the Company with any such supplier or
customers. To the Company's knowledge, as of the date hereof, the consummation
of the transactions contemplated by this Agreement will not give rise to rights
to elect to terminate by the issuer of, any material pending purchase order,
including, but not limited to, the purchase order described on Schedule 2(a)(i)
of the Contingency Escrow Agreement.
6.24. EMPLOYMENT OF OFFICERS, EMPLOYEES. Section 6.24 of the Company
Disclosure Schedule lists, as of the date hereof, the name, positions, date of
hire, current annual salary and other compensation (including but not limited to
wages, salary, commissions, normal bonus, deferred compensation, and other extra
compensation) payable by the Company to each exempt non-hourly employee of the
Company, including the date and amount of the last raise received by such
employee. No employee of the Company has notified the Company of his or her
intention to terminate employment with the Company.
6.25. MINUTE BOOKS. The minute books of the Company made available to
BUYER for inspection accurately record therein all material actions taken by its
Board of Directors, all committees thereof, and its stockholders.
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6.26. BROKERS; FEES. Except for ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., no finder,
broker, agent, or other intermediary has acted for or on behalf of the Company
in connection with the negotiation, preparation, execution, or delivery of this
Agreement or the consummation of the Merger or the other transactions
contemplated hereby. The aggregate liability of the Company and the Surviving
Corporation with respect to professional, advisory and other fees that are or
will become due and payable, or have been paid, upon consummation of the Merger
(including the fees and expenses of ▇▇▇▇▇▇▇, Sachs & Co. and Wachtell, Lipton,
▇▇▇▇▇ and ▇▇▇▇) will not exceed the amount set forth in Section 6.26 of the
Company Disclosure Schedule.
6.27. COMPLIANCE WITH OTHER AGREEMENTS, LAWS, ETC. The Company has
complied with, and is in compliance with, (i) all laws, statutes, governmental
regulations and all judicial or administrative tribunal orders, judgments,
writs, injunctions, decrees or similar commands applicable to its business, and
(ii) its Restated Articles of Incorporation and by-laws, respectively, each as
amended to date; in the case of the preceding clause (i), except for such
instances of noncompliances that would not, individually and in the aggregate,
have a Material Adverse Effect on the Company. The Company has not been charged
with, or to the Company's knowledge, been under investigation with respect to,
any violation of any provision of any federal, state, or local law or
administrative regulation. The Company has and maintains and Section 6.27 of the
Company Disclosure Schedule sets forth a complete and correct list of, all such
material licenses, permits, and other authorizations of governmental authorities
as are necessary or desirable for the conduct of its businesses or in connection
with the ownership or use of its properties, all of which are in full force and
effect, true and complete copies of all of which have previously been made
available to BUYER, and, except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, no such licenses, permits and
other authorizations will be affected by the consummation of the Merger and the
other transactions contemplated hereby.
6.28. REGISTRATION RIGHTS. No person has any right to cause the Company
to effect the registration under the Securities Act of any shares of Company
Common Stock or any other securities of the Company.
6.29. REORGANIZATION. The Company is not aware of any fact or
circumstance that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
6.30. INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in the Registration Statement on Form S-4 to be filed in connection with this
Agreement (such Form or any other appropriate form if Form S-4 is not available,
the "FORM S-4") will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it 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.
6.31. RETENTION PLAN APPROVAL. Holders of more than 75% of the voting
power of all outstanding Company Common Stock (not including for purposes of
such calculation any "disqualified individual", as required by Proposed Treasury
Regulation 1.280G-1, Q&A-7) have approved the awards to be granted under the
Retention Plan.
-23-
7. REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB.
BUYER and Merger Sub, jointly and severally, hereby represent and
warrant to the Company as follows, subject in each case to such exceptions as
are specifically contemplated by this Agreement, the Voting Agreement or the
Registration Rights Agreement or as are set forth in the attached Disclosure
Schedule of BUYER and Merger Sub (the "BUYER AND MERGER SUB DISCLOSURE
SCHEDULE"). Notwithstanding any other provision of this Agreement or the BUYER
and Merger Sub Disclosure Schedule, each exception set forth in the BUYER and
Merger Sub Disclosure Schedule will be deemed to qualify each representation and
warranty set forth in this Agreement (i) that is specifically identified (by
cross-reference or otherwise) in the BUYER and Merger Sub Disclosure Schedule as
being qualified by such exception, or (ii) with respect to which the relevance
of such exception is reasonably apparent on the face of the disclosure of such
exception set forth in the BUYER and Merger Sub Disclosure Schedule.
7.1. INCORPORATION; AUTHORITY. Each of BUYER and Merger Sub (i) is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and (ii) has all requisite corporate power and
authority in all material respects to own or lease and operate its properties
and to carry on its business as now conducted. BUYER has made available to the
Company complete and correct copies of the Certificate of Incorporation and
by-laws of BUYER and the Certificate of Incorporation and by-laws of the Merger
Sub, in each case with all amendments thereto made through the date hereof.
7.2. AUTHORIZATION AND ENFORCEABILITY. Each of BUYER and Merger Sub has
all requisite power and full legal right and authority (including due approval
of its Board of Directors and, if necessary, its stockholders, respectively) to
enter into this Agreement, to perform all of its agreements and obligations
hereunder, and to consummate the Merger and the other transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of BUYER and
Merger Sub and constitutes a legal, valid, and binding obligation of each of
them, enforceable against each of them in accordance with its terms.
7.3. GOVERNMENTAL AND OTHER THIRD-PARTY CONSENTS, NON-CONTRAVENTION,
ETC. No consent, approval, or authorization or registration, designation,
declaration, or filing with any governmental authority, federal or other, or any
other person, is required on the part of BUYER or Merger Sub in connection with
this Agreement, the Merger, or any of the other transactions contemplated
hereby, except (i) for applicable requirements, if any, of the Exchange Act, the
Securities Act, state securities or "blue sky" laws and state takeover laws, the
HSR Act, the Nasdaq National Market and filing and recordation of appropriate
merger documents as required by the TBCA and the Delaware General Corporation
Law (the "DGCL"), or (ii) for such consents, approvals or authorizations of or
registrations, designations, declarations or filings, the failure to make or
obtain would not, individually or in the aggregate, have a Material Adverse
Effect on BUYER or Merger Sub. The execution, delivery, and performance of this
Agreement and the consummation of such transactions will not violate (a) any
provision of BUYER's or Merger Sub's Certificate of Incorporation or by-laws,
(b) any order, judgment, injunction, award
-24-
or decree of any court or state or federal governmental or regulatory body
applicable to BUYER or Merger Sub, or (c) any judgment, decree, order, statute,
rule, regulation, agreement, instrument, or other obligation to which BUYER or
Merger Sub is a party or by or to which either of them or any of their
respective assets is bound or subject, except, in each case, to the extent that
the failure to obtain any such consent, approval or authorization would not,
individually or in the aggregate, have a Material Adverse Effect on BUYER or
Merger Sub.
7.4. MERGER SUB. Merger Sub has been organized for the specific purpose
of engaging in the Merger and the other transactions contemplated hereby and has
not incurred any material liabilities, conducted any material business, or
entered into any material contracts or commitments, in each case except such as
are in furtherance of or incidental to such transactions. The capitalization of
Merger Sub consists of 100 shares of common stock, all of which shares are owned
directly by BUYER.
7.5. BUYER'S SEC STATEMENTS, REPORTS AND DOCUMENTS. Since May 24, 2000,
BUYER has timely filed with the SEC all forms, reports, registration statements,
and documents required to be filed by it under the Securities Act or Exchange
Act. BUYER has made available to the Company true and complete copies of (i) the
prospectus dated May 24, 2000 filed by BUYER with the SEC on May 25, 2000, (ii)
its Quarterly Report on Form 10-Q for its fiscal quarter ended September 30,
2000 (the "SEPTEMBER 2000 10-Q"), and (iii) all other forms, reports (including
without limitation annual reports pursuant to Exchange Act Rule 14a-3),
registration statements, and documents filed by BUYER with the SEC since May 24,
2000 (collectively, all of the foregoing documents, "BUYER'S SEC REPORTS"). As
of their respective dates, BUYER's SEC Reports complied in all material respects
with all applicable requirements of the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder, and did not contain 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. None of BUYER's SEC
Reports is required to be amended or supplemented as of the date hereof. The
financial statements of BUYER included in BUYER's SEC Reports were prepared in
conformity with GAAP applied on a consistent basis (except as otherwise stated
in the financial statements or, in the case of audited statements, the related
report of BUYER's independent certified public accountants) and present fairly,
in all material respects, the consolidated financial position, results of
operations, changes in stockholders' equity, and cash flows, as applicable, of
BUYER and its consolidated Subsidiaries as of the dates and for the periods
indicated; subject, in the case of unaudited interim consolidated financial
statements included in the September 2000 10-Q, to condensation, the absence of
footnote disclosure, and normal, recurring end-of-period adjustments, none of
which will be material.
7.6. CAPITALIZATION. The authorized capital stock of BUYER as of the
date hereof consists of 300,000,000 shares of BUYER Common Stock, $0.001 par
value per share with one vote per share on all matters on which shareholders are
entitled to vote under the DGCL ("BUYER COMMON STOCK") and 5,000,000 shares of
BUYER Preferred Stock, $0.01 par value per share. No shares of such Preferred
Stock are issued and outstanding. All of the outstanding shares of BUYER Common
Stock, except as would not, individually or in the aggregate, have a Material
Adverse Effect on BUYER, were issued in compliance with all applicable laws,
-25-
including securities laws and all applicable preemptive and similar rights of
any person. No person has the right to rescind any purchase of any shares of
BUYER's capital stock or other securities.
As of October 18, 2000 (i) 183,308,070 shares of BUYER Common Stock
were issued and outstanding, all of which were duly authorized, validly issued,
fully paid and non-assessable, and (ii) outstanding options to buy BUYER Common
Stock granted pursuant to BUYER's Amended and Restated 1997 Stock Incentive
Plan, and BUYER's 2000 Employee Stock Purchase Plan (collectively, the "BUYER
STOCK PLANS") are, in the aggregate, not greater than 17,750,000. Since that
date, no shares of BUYER Common Stock have been issued except upon the exercise
of options granted under the BUYER Stock Plans.
Except (i) as set forth in BUYER's SEC Reports filed prior to the date
hereof, and (ii) for stock options issued pursuant to the BUYER's Stock Plans,
there are no agreements or other obligations on the part of BUYER to purchase or
sell, no convertible or exchangeable securities, options, warrants or other
rights to acquire from BUYER any shares of its capital stock or other
securities.
7.7. LITIGATION. Except as set forth on BUYER's SEC Reports, no
litigation, arbitration, action, suit, proceeding, or, to BUYER's knowledge,
investigation (whether conducted by any judicial or regulatory body, arbitrator,
or other person) is pending or, to BUYER's knowledge, threatened, against BUYER
or any of its Subsidiaries, nor is there is any valid basis therefor known to
BUYER.
7.8. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent (a)
reflected or reserved against in the balance sheet set forth in September 2000
10-Q, or (b) incurred with persons other than any Affiliate of BUYER in the
ordinary course of business after the filing date of the September 2000 10-Q,
BUYER does not have any liabilities or obligations of any nature (including
obligations or liabilities relating to any violation of law), whether accrued,
absolute, contingent or otherwise (including, without limitation, liabilities,
as guarantor or otherwise, in respect of obligations of others) other than
performance obligations with respect to the contracts that would not be required
to be reflected or reserved against in a balance sheet prepared in accordance
with GAAP or referred to in the footnotes thereto, except such liabilities and
obligations that would not, individually or in the aggregate, have a Material
Adverse Effect on BUYER.
7.9. REGISTRATION RIGHTS. No person has any right to cause BUYER to
effect the registration under the Securities Act of any shares of Company Common
Stock or any other securities of the Company.
7.10. REORGANIZATION. BUYER is not aware of any fact or circumstance
that could reasonably be expected to prevent the Merger from qualifying as a
reorganization under Section 368(a) of the Code.
7.11. CONTRACTS. The BUYER's SEC Reports include as exhibits thereto
all material contracts within the meaning of Item 601(10) of Regulation S-K
under the Securities Act (the "BUYER MATERIAL CONTRACTS") to which BUYER or
Merger Sub is a party or by or to which they
-26-
or any of their assets or properties are bound or subject. The BUYER Material
Contracts are in full force and effect, and (A) BUYER or Merger Sub, as the case
may be, is not in material default under or breach of any of them, and (B) to
BUYER's knowledge, no other party thereto, is in material default under or
breach of any of them, nor to BUYER's knowledge, does any event or condition
exist that after notice or lapse of time or both could constitute a default
thereunder or breach thereof on the part of BUYER or Merger Sub, or to BUYER's
knowledge, any other party thereto. No approval or consent of any person is
needed in order that the BUYER Material Contracts continue in full force and
effect following the consummation of the Merger and the other transactions
contemplated hereby, and no such contract includes any provision, the effect of
which may be to terminate (or give rise to a right of termination under) such
contract, to enlarge or accelerate any obligations of BUYER or Merger Sub
thereunder, or to give additional rights to any other person, upon consummation
of the Merger or the other transactions contemplated hereby. BUYER has made
available to the Company true, correct, and complete copies of all such BUYER
Material Contracts, including all amendments, modifications, and supplements
thereto.
7.12. COMPLIANCE WITH OTHER AGREEMENTS, LAWS, ETC. BUYER and Merger Sub
have complied with, and are in compliance with, (i) all laws, statutes,
governmental regulations and all judicial or administrative tribunal orders,
judgments, writs, injunctions, decrees or similar commands applicable to their
respective businesses, and (ii) their Restated Articles of Incorporation and
by-laws, respectively, each as amended to date; in the case of the preceding
clause (i), except for such instances of noncompliances that, both individually
and in the aggregate, would not have a Material Adverse Effect on BUYER. BUYER
has not been charged with, or to its knowledge, been under investigation with
respect to, any violation of any provision of any federal, state, or local law
or administrative regulation. BUYER has and maintains all such material
licenses, permits, and other authorizations of governmental authorities as are
necessary or desirable for the conduct of its businesses or in connection with
the ownership or use of its properties, all of which are in full force and
effect, and, except as would not, individually or in the aggregate, have a
Material Adverse Effect on BUYER, no such licenses, permits and other
authorizations will be affected by the consummation of the Merger and the other
transactions contemplated hereby.
7.13. SAFETY AND ENVIRONMENTAL MATTERS.
(a) None of the plants, offices, or properties in or on which
BUYER carries on business nor any of the activities carried on by it are in
violation of any zoning, health, or safety law or regulation, including without
limitation the Occupational Safety and Health Act of 1970, as amended, except
for such violations that would not, individually or in the aggregate, have a
Material Adverse Effect on BUYER.
(b) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on BUYER, neither BUYER nor, to the knowledge of
BUYER, any operator of any real property presently or formerly owned, leased, or
operated by BUYER, is in violation or alleged violation of any Environmental
Laws.
-27-
(c) BUYER has not received written notice from any third
party, including without limitation any federal, state, foreign, or local
governmental authority, that (i) BUYER has been identified by the EPA as a
potentially responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part ▇▇▇ ▇▇▇▇▇▇▇▇ ▇ (1986); (ii) any
Hazardous Substances that BUYER has generated, transported, handled, used, or
disposed of has been found in violation of Environmental Laws at any site at
which a federal, state, foreign, or local agency or other third party has
conducted or has ordered that BUYER conduct a remedial investigation, removal,
or other response action pursuant to any Environmental Law; or (iii) BUYER is or
will be a named party to any claim, action, cause of action, complaint
(contingent or otherwise), or legal or administrative proceeding arising out of
any third party's incurrence of costs, expenses, losses, or damages of any kind
whatsoever in connection with the release of Hazardous Substances.
(d) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on BUYER, (i) no portion of any real property
presently or formerly owned, leased, or operated by BUYER has been used by
BUYER, or to BUYER's knowledge, by any other person, for the handling, usage,
manufacturing, processing, storage, or disposal of Hazardous Substances except
in accordance with applicable Environmental Laws; and no underground tank or
other underground storage receptacle for Hazardous Substances is located on any
real property presently owned, leased, or operated by BUYER, or to BUYER's
knowledge, any real property formerly owned, leased, or operated by it; (ii) in
the course of the activities conducted by BUYER and to BUYER's knowledge, those
of any other operators of any real property presently or formerly owned, leased,
or operated by BUYER, no Hazardous Substances have been generated, stored, or
used on such properties except in accordance with applicable Environmental Laws;
(iii) to BUYER's knowledge, there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing, or dumping) or threatened releases
of Hazardous Substances on, upon, into, or from any real property presently or
formerly owned, leased, or operated by BUYER; (iv) to BUYER's knowledge, there
have been no releases on, upon, from, or into any real property in the vicinity
of any real property presently or formerly owned, leased, or operated by BUYER
that, through soil or groundwater contamination, may have come to be located on,
any of the real property presently or formerly owned, leased, or operated by
BUYER; and (v) any Hazardous Substances that have been generated by BUYER, or to
BUYER's knowledge, any other person, on any real property presently or formerly
owned, leased, or operated by BUYER, have been transported offsite only by
carriers having an identification number issued by the EPA and treated or
disposed of only by treatment or disposal facilities maintaining valid permits
as required under applicable Environmental Laws, which transporters and
facilities, to BUYER's knowledge, have been and are operating in compliance with
such permits and applicable Environmental Laws.
(e) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on BUYER, no real property presently owned,
leased, or operated by BUYER, and to BUYER's knowledge, no real property
formerly owned, leased, or operated by BUYER, is or will be subject to any
environmental cleanup responsibility law or regulation or environmental
restrictive transfer law or regulation by reason of the Merger or the other
transactions contemplated hereby.
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7.14. INFORMATION SUPPLIED. The Form S-4 (i) will not, at the time the
Form S-4 is filed with the SEC, at any time it is amended or supplemented or at
the time it 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, and (ii) will
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations promulgated thereunder, except that
no representation or warranty is made by BUYER or Merger Sub with respect to
statements made or incorporated by reference in either the Form S-4 based on
information supplied by the Company specifically for inclusion or incorporation
by reference therein.
7.15. INTELLECTUAL PROPERTIES.
(a) BUYER owns, or is licensed or otherwise has the right to
use all Intellectual Properties (other than off-the-shelf software programs that
have not been customized for its use) material to and used in or necessary to
the business of BUYER as now being conducted and as presently proposed by BUYER
to be conducted (the "BUYER INTELLECTUAL PROPERTIES"), free and clear of all
liens, claims and encumbrances, except for such liens, claims and encumbrances
as do not materially impair BUYER's ability to use, exploit, license and
distribute such BUYER Intellectual Properties. BUYER possesses (or has the right
to obtain access pursuant to an escrow agreement) the source codes and all
related programs and documentation sufficient to recreate the current and next
most recent versions of any BUYER Intellectual Properties that BUYER has
licensed from other Persons.
(b) BUYER's Products, including all software, are free from
material defects and perform in substantial accordance with all published
specifications (if any).
(c) BUYER has not granted any third party any right to license
any of BUYER's Products except under valid and binding Software License
Agreements.
(d) No third party has been licensed to use, or has lawful
access to, any source code developed in respect of BUYER's Products, except
escrow agreements entered into in the ordinary course of business.
(e) No product liability or warranty claims have been
communicated in writing to or threatened in writing against BUYER, other than
those encountered from time to time in the ordinary course of business.
(f) To BUYER's knowledge, there is and has been no material
unauthorized use, disclosure, infringement or misappropriation of any BUYER
Intellectual Properties owned by BUYER by any third party. To BUYER's knowledge,
none of BUYER Intellectual Properties owned by BUYER or licensed to BUYER on an
exclusive basis is being infringed by others, or is subject to any outstanding
order, decree, judgment, or stipulation. No litigation (or other proceedings in
or before any court or other governmental, adjudicatory, arbitral, or
administrative body) relating to BUYER Intellectual Properties owned by BUYER or
licensed to
-29-
BUYER on an exclusive basis is pending, nor to BUYER's knowledge, threatened
against BUYER. BUYER maintains reasonable security measures for the preservation
of the secrecy and proprietary nature of such of its BUYER Intellectual
Properties that constitute trade secrets or other confidential information.
(g) To BUYER's knowledge, BUYER has not infringed or made
unlawful use of, and is not infringing or making unlawful use of, any
Intellectual Properties of any other person. No litigation (or other proceedings
in or before any court or other governmental, adjudicatory, arbitratory, or
administrative body) charging BUYER with infringement or unlawful use of any
Intellectual Properties is pending, or to BUYER's knowledge, threatened against
BUYER.
(h) To BUYER's knowledge, all of BUYER's material information
technology systems and material non-information technology embedded systems
(including systems or technology currently under development) will record,
store, process, calculate and present calendar dates falling on and after (and,
if applicable, during spans of time including) January 1, 2000, and will
calculate any information dependent on or relating to such date in the same
manner, and with the same functionality, data integrity and performance, as the
information technology systems and non-information technology embedded systems
record, store, process, calculate and present, calendar dates on or before
December 31, 1999, or calculate any information dependent on or relating to such
date.
(i) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on BUYER, each person presently or previously
employed by BUYER (including independent contractors, if any) with access
authorized by BUYER to confidential information relating to BUYER Intellectual
Properties has executed a confidentiality and non-disclosure agreement pursuant
to an agreement substantially in the form of agreement previously provided to
the Company or its representatives, or is otherwise legally bound to preserve
the confidentiality of such information, and such confidentiality and
non-disclosure agreements constitute valid and binding obligations of BUYER and,
to BUYER's knowledge, of such person, enforceable in accordance with their
respective terms. Except as would not, individually or in the aggregate, have a
Material Adverse Effect on BUYER, all BUYER Intellectual Properties that are
owned by BUYER were written, developed and created solely and exclusively by
employees of BUYER (and all rights in and to all BUYER Intellectual Properties
are owned by BUYER) without the assistance of any third party or entity OR were
created by or with the assistance of third parties who assigned ownership of
their rights (including all intellectual property rights) in such BUYER
Intellectual Properties to BUYER by means of valid and enforceable consultant
confidentiality and invention assignment agreements.
(j) All use, disclosure or appropriation by BUYER (or its
employees or agents) of Confidential Information owned by BUYER and licensed to
a third party has been pursuant to the terms of a written agreement between
BUYER and such third party. All use, disclosure or appropriation by BUYER (or
its employees or agents) of Confidential Information not owned by BUYER has been
made pursuant to the terms of a written agreement between BUYER and the owner of
such Confidential Information, or is otherwise lawful.
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(k) To the knowledge of BUYER, all of Company's patents,
patent rights, copyrights, trademarks, trade names or Internet domain name
registrations related to or in BUYER Products are valid and in full force and
effect in all material respects; and consummation of the transactions
contemplated by this Agreement will not alter or impair any such rights.
(l) As used in this Section 7.15: "PRODUCTS" means all
products, including all software, now being manufactured or sold by BUYER, and
those products and software currently under development by BUYER and which are
material to the business of BUYER.
7.16. TAXES.
(a) ELECTIONS. All material elections with respect to Taxes
(including without limitation any elections under Sections 108(b)(5), 338(g),
565, 936(a), or 936(e) of the Code, or Treasury Regulation (as defined in
Section 17.1) Sections 1.1502-20(g) or 1.1502-32(f)(2)) affecting BUYER and its
Subsidiaries are described in Section 7.16(a) of BUYER and Merger Sub
Disclosure.
(b) FILING OF TAX RETURNS AND PAYMENT OF TAXES. BUYER and its
Subsidiaries have timely filed (taking into account any extensions of time in
which to file) all Tax Returns (as defined in Section 17.1) required to be filed
by them, each such Tax Return has been prepared in compliance with all
applicable laws and regulations, and all such Tax Returns are true, accurate and
complete in all material respects. All Taxes due and payable by BUYER and its
Subsidiaries whether or not shown on any Tax Returns have been paid, and BUYER
and its Subsidiaries will not be liable for any additional Taxes in respect of
any taxable period ending on or before the Closing Date in an amount that
exceeds the corresponding reserve therefor, if any, reflected in the accounting
records of BUYER and its Subsidiaries. The BUYER and its Subsidiaries have made
available to the Company correct and complete copies of all Tax Returns filed by
or with respect to them with respect to taxable periods ended on or after
December 31, 1997.
(c) AUDIT HISTORY. With respect to each taxable period of
BUYER and its Subsidiaries ended on or before December 31, 1997, each such
taxable period has closed and such taxable period is not subject to review by
any relevant taxing authorities.
(d) DEFICIENCIES. No deficiency or proposed adjustment in
respect of Taxes that has not been settled or otherwise resolved has been
asserted or assessed in writing by any taxing authority against BUYER or its
Subsidiaries.
(e) LIENS. There are no Liens for Taxes (other than current
Taxes not yet due and payable) on the assets of BUYER or its Subsidiaries.
(f) EXTENSIONS TO STATUTE OF LIMITATIONS FOR ASSESSMENT OF
TAXES. Neither BUYER nor any of its Subsidiaries has consented to extend the
time in which any Tax may be assessed or collected by any taxing authority.
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(g) EXTENSIONS OF THE TIME FOR FILING TAX RETURNS. Neither
BUYER nor any of its Subsidiaries has requested or been granted an extension of
the time for filing any Tax Return to a date on or after the Closing Date.
(h) PENDING PROCEEDINGS. There is no action, suit, taxing
authority proceeding, or audit with respect to any Tax now in progress, pending,
or to BUYER's or any of its Subsidiaries' knowledge, threatened, against or with
respect to BUYER or any of its Subsidiaries.
(i) NO FAILURES TO FILE TAX RETURNS. To BUYER's or any of its
Subsidiaries' knowledge, no claim has ever been made by a taxing authority in a
jurisdiction where BUYER or any of its Subsidiaries does not pay Tax or file Tax
Returns that BUYER or any of its Subsidiaries is or may be subject to Taxes
assessed by such jurisdiction.
(j) MEMBERSHIP IN AFFILIATED GROUPS, ETC. Neither BUYER nor
any of its Subsidiaries has ever been a member of any affiliated group of
corporations (as defined in Section 1504(a) of the Code), other than a group of
which BUYER or any of its Subsidiaries is or was the common parent, or filed or
been included in a combined, consolidated, or unitary Tax Return, other than
with respect to a combined, consolidated or unitary group of which BUYER or any
of its Subsidiaries is or was the common parent.
(k) ADJUSTMENTS UNDER SECTION 481. Neither BUYER nor any of
its Subsidiaries will be required, as a result of a change in method of
accounting for any period ending on or before the Closing Date, to include any
adjustment under Section 481(c) of the Code (or any similar or corresponding
provision or requirement under any Tax law) in taxable income for any period
ending on or after the Closing Date.
(l) TAX SHARING, ALLOCATION, OR INDEMNITY AGREEMENTS. Neither
the Company nor any of its Subsidiaries is a party to or bound by any Tax
sharing or allocation agreement or has any current or potential contractual
obligation to indemnify any other person with respect to Taxes.
(m) WITHHOLDING TAXES. BUYER and its Subsidiaries have
withheld and paid all Taxes required to have been withheld and paid by them in
connection with amounts paid or owing to any employee, creditor or other person.
(n) FOREIGN PERMANENT ESTABLISHMENTS AND BRANCHES. Neither
BUYER nor any of its Subsidiaries has a permanent establishment in any foreign
country, as defined in the relevant tax treaty between the United States of
America and such foreign country, and does not otherwise operate or conduct
business through any branch in any foreign country.
(o) U.S. REAL PROPERTY HOLDING CORPORATION. Neither BUYER nor
any of its Subsidiaries is or has been a United States real property holding
corporation within the meaning of Code Section 897(c)(2), during the applicable
period specified in Code Section 897(c)(1)(A)(ii).
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(p) TAX-EXEMPT USE PROPERTY. None of the property owned by
BUYER or any of its Subsidiaries is "tax-exempt use property" within the meaning
of Section 168(h) of the Code.
(q) SECURITY FOR TAX-EXEMPT OBLIGATIONS. None of the assets of
BUYER or any of its Subsidiaries directly or indirectly secures any
indebtedness, the interest on which is tax-exempt under Section 103(a) of the
Code, and neither BUYER nor any of its Subsidiaries is directly or indirectly an
obligor or a guarantor with respect to any such indebtedness.
(r) SECTION 341(f) CONSENT. Neither BUYER nor any of its
Subsidiaries has filed a consent under Code Section 341(f) concerning
collapsible corporations.
(s) PARACHUTE PAYMENTS. Neither BUYER nor any of its
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments, that will not be deductible under Code Sections 162(m) or
280G.
(t) OTHER PERSONS. Neither BUYER nor any of its Subsidiaries
is presently liable for the Taxes of another person (i) under Treasury
Regulation Section 1.1502-6 (or comparable provision of state, local or foreign
law), (ii) as transferee or successor or (iii) by contract or indemnity or
otherwise.
7.17. SUPPLIERS AND CUSTOMERS. The relationships of BUYER with its
suppliers and customers (as a whole) are good commercial working relationships,
and no supplier or customer of material importance to BUYER or material number
of BUYER's customers has canceled or otherwise terminated, or threatened in
writing to cancel or terminate, its relationship with BUYER or has during the
last such twelve months decreased materially, or threatened to decrease or limit
materially, its services, supplies, or materials to BUYER or its usage or
purchase of the services or products of BUYER, except for normal cyclical
changes related to customers' businesses and industry developments. BUYER has no
knowledge, and no knowledge of any specific factual circumstances that would
cause BUYER reasonably to believe, that any such supplier or a material number
of customers intends to cancel or otherwise substantially modify its
relationship with BUYER or to decrease materially or limit its services,
supplies, or materials to BUYER, or its usage or purchase of BUYER's services or
products, and the consummation of the transactions contemplated hereby will not,
to BUYER's knowledge, adversely affect the relationship of BUYER with any such
supplier or customers.
7.18. BROKERS. Except for ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc., no finder, broker,
agent, or other intermediary has acted for or on behalf of BUYER or Merger Sub
in connection with the negotiation, preparation, execution, or delivery of this
Agreement or the consummation of the Merger or the other transactions
contemplated hereby.
8. MUTUAL COVENANTS.
8.1. SATISFACTION OF CONDITIONS. Each of the parties will use its
reasonable best efforts to cause the satisfaction as promptly as practicable of
the conditions contained in
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Sections 11 through 13 of this Agreement that impose obligations on it or
require action on its part or the part of any of its stockholders or Affiliates.
8.2. FURTHER ASSURANCES. Subject to the terms and conditions set forth
in this Agreement, from time to time both before and after the Effective Time,
each of the parties will use its reasonable best efforts, as promptly as is
practicable to take or cause to be taken all actions, and to do or cause to be
done all other things, as are necessary, proper, or advisable to consummate and
make effective the Merger and the other transactions contemplated hereby. In the
event the Secretary of State of the State of Texas raises any technical
objection to the terms of this Agreement as part of the Articles of Merger, the
parties hereto agree to restate and amend this Agreement to eliminate such
objection so long as such amendment does not adversely affect any party hereto.
8.3. HSR ACT. Each of the parties will:
(a) as promptly as is practicable, but in any event within
five (5) business days following the execution of this Agreement, make its
required filings under the HSR Act (as defined in Section 17.1);
(b) as promptly as is practicable after receiving any
governmental request under the HSR Act for additional information, documents, or
other materials, use its reasonable best efforts to comply with such request;
(c) cooperate with the other in connection with resolving any
governmental inquiry or investigation relating to their respective HSR Act
filings, the Merger, or any related inquiry or investigation;
(d) promptly inform the other of any communication with, and
any proposed understanding, agreement, or undertaking with any governmental
entity relating to their respective HSR Act filings, the Merger, or any related
inquiry or investigation;
(e) to the extent reasonably practicable, give the other
reasonable advance notice of, and the opportunity to participate in (directly or
through its representatives), any meeting or conference with any governmental
entity relating to their respective HSR Act filings, the Merger, or any related
inquiry or investigation;
(f) use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Merger and the transactions contemplated
hereby, including, without limitation, using its reasonable best efforts to
obtain all permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities as are necessary for the consummation of the
Merger and the other transactions contemplated hereby and to fulfill the
conditions set forth in Sections 11 through 13; PROVIDED that neither BUYER nor
the Company will be required by this Section 8.3(f) to take any action that
would have a Material Adverse Effect on the Company or BUYER, including entering
into any consent decree, hold separate orders or other arrangements that would
have a Material
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Adverse Effect on the Company or BUYER. In case, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall use their reasonable best efforts to take all such action; and
(g) cooperate and use its reasonable best efforts to
vigorously contest and resist any action, including administrative or judicial
action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and that restricts, prevents or prohibits
consummation of the Merger and the other transactions contemplated hereby,
including, without limitation, by vigorously pursuing all available avenues of
administrative and judicial appeal.
8.4. REORGANIZATION TREATMENT. None of the parties shall take any
action which could reasonably be expected to prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.
8.5. PUBLIC ANNOUNCEMENTS. BUYER and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the Merger and related transactions
and shall not issue any such press release or make any such public statement
prior to such consultation, except that BUYER may make such public statements or
announcements that may be required by applicable law or the rules of the Nasdaq
Stock Market ("NASDAQ") or the National Association of Securities Dealers, Inc.
The parties have agreed on the text of a joint press release by which BUYER and
the Company will announce the execution of this Agreement.
8.6. REGULATORY MATTERS. BUYER shall promptly prepare and file with the
SEC the Form S-4. BUYER shall use its reasonable best efforts to have the Form
S-4 declared effective under the Securities Act as promptly as practicable after
such filing, and the Company shall thereafter mail or deliver the prospectus
included in the Form S-4 to its stockholders. BUYER shall use its reasonable
best efforts to obtain all necessary state securities law or "blue sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement, and the Company shall furnish all information concerning the Company
and the holders of Company Capital Stock as may be reasonably requested in
connection with any such action. Notwithstanding the foregoing, in no event
shall BUYER be required to file the Form S-4, or cause it to become effective,
unless and until it has been provided with all financial statements of the
Company required to be included therein, in form and substance satisfactory to
BUYER together with all consents to the use thereof required to complete the
filing and effectiveness of the Form S-4. BUYER agrees to keep the Company
informed as to the status of the Form S-4 and to advise the Company, promptly
after BUYER receives notice, of the time when the Form S-4 has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or any request by the SEC for amendment of the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information. BUYER shall
provide the Company with reasonable opportunity to review and comment on the
Form S-4, and any amendment thereto, before filing such document with the SEC,
PROVIDED, that the ultimate editorial control over the Form S-4 shall remain
with BUYER.
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8.7. NASDAQ QUOTATION. BUYER shall use its reasonable best efforts to
cause the shares of BUYER Common Stock to be issued in the Merger (including the
shares held in Escrow) to be authorized for quotation on Nasdaq, subject to
official notice of issuance, prior to the Effective Time.
9. CONDUCT OF THE COMPANY'S BUSINESS PENDING THE CLOSING. The Company
covenants and agrees that, from and after the date of this Agreement and until
the Closing, except as otherwise specifically consented to or approved by BUYER
in writing, which consent shall not be unreasonably withheld or delayed, or as
set forth in Section 9 of the Company Disclosure Schedule:
9.1. FULL ACCESS. The Company will afford to BUYER and its authorized
representatives, upon reasonable notice, all access during normal business hours
to all properties, books, records, contracts, and documents of the Company as
BUYER may reasonably request and a complete opportunity to make such
investigations as they will reasonably desire to make of the Company, and the
Company will furnish or cause to be furnished to BUYER and its authorized
representatives all such information with respect to the affairs and businesses
of the Company as BUYER may reasonably request, except to the extent that such
access and opportunity cannot be provided and such information can be furnished
without unreasonably interfering with the business of the Company. All
information obtained by BUYER pursuant to this Section 9.1 shall be kept
confidential in accordance with the confidentiality agreement, dated August 23,
2000 (the "CONFIDENTIALITY AGREEMENT"), between BUYER and the Company. No
investigation pursuant to this Section 9.1 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto.
9.2. CARRY ON IN REGULAR COURSE. The Company will maintain its owned
and leased properties in good operating condition and repair, will make all
necessary renewals, additions, and replacements thereto, will carry on its
businesses diligently and substantially in the same manner as heretofore
conducted, and will not make or institute any material new, unusual, or novel
methods of manufacture, purchase, sale, lease, management, accounting, or
operation, except to the extent to comply with outstanding contractual
obligations otherwise disclosed in this Agreement or as permitted by this
Agreement. Except as set forth in Section 9.2 of the Company Disclosure
Schedule, the Company will not incur material additional Indebtedness.
9.3. NO DIVIDENDS, ISSUANCES, REPURCHASES, ETC. The Company will not
declare, set aside, or pay any dividends (whether in cash, shares of stock,
other property, or otherwise) on, or make any other distribution in respect of,
any shares of its capital stock or other securities, or issue, purchase, redeem,
or otherwise acquire for value any shares of its capital stock or other
securities, except that (i) the Company may issue shares of the Company Common
Stock upon exercise of Company Options or Company Warrants in accordance with
the respective terms thereof, and (ii) the Company may issue additional options
to purchase up to an aggregate of 1,000,000 shares of Company Common Stock under
the Company Option Plan to existing non-executive officer employees and new
employees.
9.4. NO COMPENSATION CHANGES. Other than as required by applicable law,
as set forth in Section 9.4 of the Company Disclosure Schedule or as required by
this Agreement, the
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Company will not increase the compensation payable or to become payable to any
of its officers or directors or (except for increases made in the usual and
ordinary course of business and consistent with past practices) any of its key
employees or agents, or increase any bonus, insurance, pension, or other benefit
plan, payment, or arrangement made to, for, or with any such officers,
directors, key employees or agents, nor, except in the ordinary course, will it
effect any general or uniform increase in the compensation payable or to become
payable to its employees, including without limitation any increase in the
benefits under any bonus or pension plan or other contract or commitment.
9.5. CONTRACTS AND COMMITMENTS. The Company will not enter into any
contract or commitment, or engage in any other transaction, with any of its
Affiliates, other than in the usual and ordinary course of business and
consistent with its normal past business practices.
9.6. PURCHASE AND SALE OF CAPITAL ASSETS. The Company will not
purchase, lease as lessee, license as licensee, or otherwise acquire any
interest in, or sell, lease as lessor, license as licensee, or otherwise dispose
of any interest in, any capital asset(s) (i) other than in the ordinary course
of business, and having a market value in excess of $50,000 in any instance, or
in excess of $250,000 in the aggregate, or (ii) other than to the extent
necessary in order to comply with outstanding contractual obligations under
agreements specified in Section 6.21 of the Company Disclosure Schedule, or
under similar agreement entered into subsequent to the date hereof in compliance
with this Agreement. The Company shall not engage in any sale-leaseback
transactions with an aggregate value in excess of $1,000,000.
9.7. NO INVESTMENTS. The Company will not establish any Subsidiary or
make or commit to make any investment in any Subsidiary or other person.
9.8. INSURANCE. The Company will maintain in all material respects the
insurance policies described in Section 6.23 of the Company Disclosure Schedule
or, in the event of expiration of any such policies prior to the Closing Date,
use its best efforts to replace such expired policies with policies with similar
(and no less favorable) terms (including coverage amounts, deductibles and
exclusions) with financially sound and reputable insurance companies, funds or
underwriters.
9.9. PRESERVATION OF ORGANIZATION. The Company will use its reasonable
best efforts to preserve its business organization intact, to keep available for
the benefit of the Surviving Corporation its present officers and key employees
and consultants, and to preserve for the benefit of the Surviving Corporation
its present business relationships with its material suppliers and customers and
others having business relationships with it.
9.10. NO DEFAULT. The Company will not take or omit to take any action,
or permit any action or omission to act, within the Company's reasonable
control, that would cause a default under or a material breach of any of its
contracts, commitments, or obligations which default or breach would,
individually or in the aggregate with all other such defaults or breaches, have
a Material Adverse Effect on the Company.
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9.11. ADVICE OF CHANGE. The Company will promptly advise BUYER in
writing of the occurrence or existence of any events or circumstances that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company.
9.12. NO SHOP. From the date hereof until May 31, 2001, the Company
will not and will use its best efforts to cause its officers, directors,
employees, investment bankers, attorneys, consultants and other agents or
representatives to not, negotiate for, solicit, discuss (other than to decline a
soliciting party's offer to enter into such a discussion), negotiate, or enter
into any agreement or understanding, whether or not binding, with respect to the
issuance, sale, or transfer of any of the capital stock (other than pursuant to
the Company Option Plan or with respect to other securities existing as of the
date hereof) or the assets of the Company (other than sales of inventory or
other assets in the ordinary course of business) or any merger or other business
combination of the Company, to or with any person other than BUYER and Merger
Sub. Notwithstanding the foregoing, nothing in this Section 9.12 shall be deemed
to prohibit the Company's officers, directors, employees, investment bankers,
attorneys, consultants and other agents or representatives from relaying the
contents, or informing themselves as to the terms of, an unsolicited offer to
the Company Stockholders to the extent such persons reasonably determine, upon
advice of counsel, such action is required by their fiduciary duty under
applicable law.
9.13. STOCKHOLDERS MEETING. As soon as practicable after the effective
date of the Form S-4, the Company shall call a special meeting of the Company
Stockholders to consider and vote upon the approval of this Agreement and the
Merger and the other transactions contemplated hereby. Subject to the fiduciary
duties of the Company's Board of Directors under applicable law the Company
shall recommend to its stockholders the approval of this Agreement and the
Merger and the other transactions contemplated hereby and shall use its
reasonable best efforts to solicit and obtain the requisite vote of approval.
Nothing in this Section 9.13 shall be deemed to amend or modify the obligations
of any party under any separate agreement between the Company and/or BUYER,
including but not limited to the Voting Agreement.
9.14. CONSENT OF THIRD PARTIES. The Company shall employ its reasonable
best efforts to secure, before the Closing, the consent, in form and substance
reasonably satisfactory to BUYER, to the consummations of the transactions
contemplated by the Agreement by each party to any contract, commitment or
obligation of the Company, in each case under which such consent is required,
and BUYER shall cooperate with the Company in securing such consents as
reasonably required.
9.15. DISCLOSURE SUPPLEMENTS. From time to time before the Closing, and
in any event immediately before the Closing, the Company will promptly advise
BUYER in writing of any matter hereafter arising or becoming known to any of
them that, if existing, occurring, or known at or before the date of this
Agreement, would have been required to be set forth or described in the Company
Disclosure Schedule, or that is necessary to correct any information in the
Company Disclosure Schedule that is or has become inaccurate.
9.16. 401(k) PLAN. BUYER and the Company, if requested by BUYER, shall
cooperate, including by causing their respective boards of directors to take
appropriate actions, in
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order to provide for an orderly transition with respect to the Company's 401(k)
plan to another plan maintained by or on behalf of BUYER or its affiliates
including, if required, to initiate termination.
9.17. VESTING. The Company, if reasonably requested by BUYER, shall
take all necessary action to cause all convertible or exchangeable securities,
options, warrants, or other rights to acquire from the Company any shares of its
capital stock or other securities held by non-employees to become fully vested
and exercisable immediately prior to Closing.
9.18. DASH. The Company shall issue options to purchase Company Common
Stock under the Company's Amended and Restated 1998 Equity Incentive Plan (the
"COMPANY OPTION PLAN") to all employees of the Company who have received notice
that they would receive contingent grants under the Company Option Plan in
connection with the Company's "DASH" and "DASH-like" programs and related
programs instituted under the Company Option Plan, but only to the extent that
the contingencies relating to such grants have been satisfied prior to the
Effective Time in any manner that would lead to the issuance of some or all of
such options in accordance with such notice.
10. BUYER'S AND MERGER SUB'S COVENANTS. BUYER and Merger Sub covenant
and agree that, except as otherwise specifically consented to or approved by the
Company in writing, such consent or approval not to be unreasonably withheld or
delayed:
10.1. FULL ACCESS. BUYER will afford the Company and its authorized
representatives, upon reasonable notice, full access during normal business
hours to all properties, books, records, contracts and documents of BUYER and a
full opportunity to make such investigations as they will desire to make of
BUYER, and BUYER will furnish or cause to be furnished to the Company and its
authorized representatives all such information with respect to the affairs and
businesses of BUYER as the Company reasonably requests, except to the extent
that such access and opportunity cannot be provided and such information can be
furnished without unreasonably interfering with the business of BUYER. All
information obtained by the Company pursuant to this Section 10.1 shall be kept
confidential in accordance with the Confidentiality Agreement. No investigation
pursuant to this Section 10.1 shall affect any representation or warranty in
this Agreement of any party hereto or any condition to the obligations of the
parties hereto.
10.2. COMPLIANCE WITH LAWS. BUYER and each of its Subsidiaries will
duly comply in all material respects with all applicable laws, regulations, and
orders.
10.3. ADVICE OF CHANGE. BUYER will promptly advise the Company in
writing of the occurrence or existence of any events or circumstances that would
reasonably be expected to have a Material Adverse Effect on BUYER.
10.4. CONSENT OF THIRD PARTIES. BUYER shall employ its reasonable best
efforts to secure, before the Closing, the consent, in form and substance
reasonably satisfactory to the Company and the Company's counsel, to the
consummation of the transactions contemplated by the Agreement, by each party to
any material contract, commitment or obligation of BUYER, in
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each case under which the failure of which to obtain such consent would have a
Material Adverse Effect on BUYER.
10.5. EXEMPTION FROM LIABILITY UNDER SECTION 16. The Board of Directors
of BUYER, or a committee of non-employee directors thereof (as such term is
defined for purposes of Rule 16b-3(d) under the Exchange Act) shall, reasonably
promptly after the date hereof, and in any event prior to the Effective Time,
adopt a resolution providing that the receipt by those officers and directors of
the Company who may be subject to the reporting requirements of Section 16(a) of
the Exchange Act following the Effective Time (the "COMPANY INSIDERS") of BUYER
Common Stock in the Merger or the exercise of BUYER Exchange Options, in each
case pursuant to the transactions contemplated hereby, are intended to be exempt
transactions under Rule 16(b)-3.
10.6. DISCLOSURE SUPPLEMENTS. From time to time before the Closing, and
in any event immediately before the Closing, BUYER will promptly advise the
Company in writing of any matter hereinafter arising or becoming known to BUYER
that, if occurring, or known to BUYER at or before the date of this Agreement,
would have been required to be set forth or described in the BUYER and Merger
Sub Disclosure Schedule, or that is necessary to correct any information in the
BUYER and Merger Sub Disclosure Schedule that is or has become inaccurate.
10.7. DIRECTOR AND OFFICERS INSURANCE.
(a) For six years after the Effective Time, BUYER shall, or
shall cause the Surviving Corporation to, indemnify and hold harmless each
present and former officer and director of the Company in respect of acts and
omissions occurring at or prior to the Effective Time to the fullest extent
permitted by applicable law, PROVIDED that any such indemnification shall be
subject to any limitation imposed from time to time under applicable law. In
furtherance thereof, BUYER shall cause the Articles of Incorporation and By-laws
of the Surviving Corporation to contain provisions indemnifying and exculpating
officers and directors to the maximum extent permitted by law, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would adversely effect the rights
thereunder of any individuals who, immediately prior to the Effective Time, were
officers, directors and/or employees of the Company.
(b) BUYER shall cause to be maintained in effect for a period
of six years from the Effective Time the current policies of directors' and
officers' liability insurance maintained by the Company (provided that BUYER may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less advantageous) with respect to matters
or events occurring prior to the Effective Time; PROVIDED, HOWEVER, that in no
event shall BUYER be required to expend more than an amount per year equal to
150% of current annual premiums paid by the Company to maintain or procure
insurance coverage pursuant to the terms hereof; and, PROVIDED, FURTHER, that if
the annual premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(c) BUYER shall, or shall cause the Surviving Corporation to,
to the fullest extent permitted by applicable law, advance reasonably incurred
fees and expenses (including
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reasonable attorneys' fees) incurred in connection with any indemnification
provided for pursuant to Section 10.7(a), PROVIDED the person to whom such
expenses are advanced provides a customary undertaking complying with applicable
law to repay such advances if it is ultimately determined that such person is
not entitled to indemnification).
(d) Nothing in this Agreement is intended to, shall be
construed to or shall release, waive, or impair any rights to directors' and
officers' insurance claims under any policy that is or has been in existence
with respect to the Company or any of its officers, directors or employees, it
being understood that the indemnification provided for in this Section 10.7 is
not prior to or in substitution for any such claim under such policies.
10.8. MANAGEMENT COVENANTS.
(a) MANAGEMENT OF OPERATIONS. From and after the Effective
Time, and until the earlier of (i) full release of the Escrowed and Earn-Out
Shares to the Company Stockholders or to BUYER (other than any Indemnity Shares
or Second Indemnity Shares, as such terms are defined in the Contingency Escrow
Agreement) pursuant to the terms of the Contingency Escrow Agreement, or (ii)
December 31, 2002 (such period, the "EARN-OUT PERIOD"), the Surviving
Corporation shall be operated as an operating division of BUYER. During the
Earn-Out Period and until the termination of her employment with the Surviving
Corporation, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇ as her successor, if appointed as
such pursuant to paragraph (e) below (the "MANAGER"), shall have discretion to
manage the day-to-day business affairs and operations of the Surviving
Corporation, reporting directly only to the Chief Executive Officer of BUYER
(the "CEO"), PROVIDED that such business affairs and operations are managed in
the ordinary course and in a manner consistent with the past practices of the
Company, and general guidelines mutually established by the Manager and the CEO
(such discretion subject to such limitations being referred to herein as the
"GENERAL MANAGEMENT AUTHORITY"). Without limiting the generality of the
foregoing, the General Management Authority shall include the discretion and
authority to:
(1) make personnel decisions for the Surviving Corporation
other than with respect to the Manager, including with respect to hiring,
promotion, dismissal and compensation and benefits of the Surviving
Corporation's senior executives and other employees within guidelines mutually
established by BUYER and the Manager for Surviving Corporation (which such
guidelines shall take into account the market conditions in Richardson, Texas),
subject to the terms of those certain employment agreements, of even date
herewith, by and between BUYER and each of those persons set forth in Section
10.8 of the BUYER and Merger Sub Disclosure Schedule (the "EMPLOYMENT
AGREEMENTS");
(2) determine appropriate, commercially reasonable pricing
structures and sales and marketing strategies with respect to the Surviving
Corporation's products;
(3) negotiate and enter into commercially reasonable
agreements with customers, suppliers and other vendors (including with respect
to the selection of development tools and embedded third party software and
hardware) on behalf of the Surviving Corporation;
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(4) determine the location within the Richardson, Texas area
of the principal executive offices and principal place of business of the
Surviving Corporation;
(5) determine the architecture, design and other technical
aspects specifications of the Surviving Corporation's products, as well to
determine the development schedules and priorities thereof;
(6) enter into partnerships and teaming arrangements with
third-party vendors, including third parties that compete with BUYER (including
those set forth in Section 10.8(a)(6) of the BUYER and Merger Sub Disclosure
Schedule), in order to provide integrated solutions to customers if necessary to
accomplish the Surviving Corporation's business objectives, PROVIDED, that the
Manager shall be required to secure the prior written consent of the CEO before
entering any such partnerships or teaming arrangements, except in the case of
(i) those partnerships and teaming arrangements set forth in Section 10.8(a)(6)
of the Company Disclosure Schedule; (ii) teaming arrangements and partnerships
entered into with respect to customers that had made a hardware decision before
commencement of the Surviving Corporation's sales process, and not selected
BUYER's products; or (iii) teaming arrangements and partnerships entered into
with respect to a customer where the Surviving Corporation has used its
reasonable best efforts to cause the customer to select BUYER's products and
such customer has selected another hardware provider;
(7) continue and expand the Surviving Corporation's
interoperability laboratory efforts; and
(8) determine appropriate staffing levels to support the
Surviving Corporation's product development calendar and sales and marketing
efforts.
(b) RESERVATION. Notwithstanding anything to the contrary
herein, the General Management Authority shall not include, and the Manager
shall not have, without the prior written consent of the CEO, any discretion to:
(1) adopt or change any accounting procedures or methods of
the Surviving Corporation, including with respect to establishment of internal
controls, procedures and reporting systems;
(2) dispose of any material asset of the Surviving
Corporation, whether tangible or intangible, other than dispositions in the
ordinary course in connection with the fulfillment of customer orders and
service contracts or otherwise in the ordinary course;
(3) acquire, whether through purchase or lease, any assets in
excess of $500,000, whether tangible or intangible, except in connection with
fulfillment of customer orders or contracts in the ordinary course or ordinary
course purchases of equipment in connection with research and development;
(4) acquire (whether by means of a merger, consolidation, or
acquisition of stock or assets) any interest in any other person (except for any
securities issued to the Surviving Corporation in connection with payment for
any products or services sold or provided by the Surviving Corporation);
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(5) incur any indebtedness for borrowed money, or assume,
guarantee, pledge or endorse, or otherwise as an accommodation become
responsible for, the obligations of any other person, except for the receipt of
trade credit in the ordinary course of business, consistent with past practices;
(6) establish any policies that conflict with, or fail to
adopt, BUYER's corporate-wide policies with respect to BUYER's position as a
public company (e.g., policies regarding conflicts of interest, stock trading,
political contributions, etc.); and
(7) make any personnel decisions, inconsistent with (a) the
employment agreements of those employees of the Surviving Corporation set forth
on Section 10.8 of the BUYER and Merger Sub Disclosure Schedule attached hereto,
including terminating the employment of any such employees for any reason or no
reason, or (b) paragraph (a)(1) or (a)(8) above.
In addition, in no event shall the Manager take any action in
contradiction of any material written policies of BUYER of which the Manager has
been informed, or any material unwritten policies of which the Manager is aware,
without first consulting with the CEO on such action.
(c) BUYER'S OBLIGATIONS. During the Earn-Out Period, BUYER
agrees (1) to fund those operations of the Surviving Corporation relating to the
Company's Intelligent IP softswitch software product, and as necessary to
complete the Company's existing contractual obligations, as referenced in
Section 6.20 of the Company Disclosure Schedule, to deliver other products and
services, in each case in accordance with reasonable budgets reflective of past
practice and anticipated growth, and to discuss in good faith any modifications
to such budgets as may be appropriate, and (2) to provide reasonable cooperation
with the Surviving Corporation in the areas of technical assistance, contract
negotiations, identification of appropriate third-party vendors, and customer
sales and marketing efforts. Notwithstanding anything to the contrary in
paragraph (a), nothing set forth in the grant of the General Management
Authority shall require BUYER to provide any funding, support or cooperation in
addition to or in excess of that required pursuant to this paragraph (c).
(d) LIMITATION ON CERTAIN RESTRUCTURING BY BUYER. During the
Earn-Out Period, without the written consent of the Manager (or if there is no
Manager, the Stockholder Representatives), BUYER shall not cause other existing
operating units, or acquired businesses, of BUYER to be included in the
Surviving Corporation, or cause operating units of the Surviving Corporation to
be moved to BUYER or another subsidiary of BUYER.
(e) SUCCESSION. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be the initial Manager.
In the event that ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ceases to serve in her position as Vice
President and General Manager of BUYER as a result of her death or disability,
BUYER shall offer the such position to ▇▇▇▇▇ ▇▇▇▇▇▇ and if ▇▇▇▇▇ ▇▇▇▇▇▇ accepts,
thereafter ▇▇▇▇▇ ▇▇▇▇▇▇ shall be the Manager and the provisions of this Section
10.8 shall apply with respect to ▇▇▇▇▇ ▇▇▇▇▇▇ as such. If ▇▇▇▇▇ ▇▇▇▇▇▇ declines
or is unable to serve as Manager for the remainder of the Earn-Out Period, BUYER
shall be released from its obligations under this Section 10.8, other than those
arising under paragraphs (c) and (d), which shall remain in effect for the
Earn-Out Period.
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(F) BREACH BY BUYER.
(1) If at any time, BUYER shall have materially breached (an
"ALLEGED BREACH") the covenants set forth in this Section 10.8 (the "MANAGEMENT
COVENANTS"), the Manager may deliver to the attention of the CEO a Notice of
Alleged Breach, such notice to be given in accordance with Section 18.5 of this
Agreement. For purposes of this Agreement, a "NOTICE OF ALLEGED BREACH" means a
written notice that sets forth in reasonable detail the facts and circumstances
upon which the allegation of a breach of the Management Covenants are based.
(2) After receipt of a Notice of Alleged Breach, BUYER shall
cure as promptly as possible, but in no event more than thirty (30) days after
receipt of the Notice of Alleged Breach, the Alleged Breach (such period, the
"CURE PERIOD"). If after such Cure Period, the Alleged Breach has not been
cured, the Stockholder Representatives shall be entitled to make a claim for
release to the Company Stockholders of all of the then Escrowed Shares and
Earn-Out Shares under the Contingency Escrow Agreement (other than any Indemnity
Shares or Second Indemnity Shares, as defined therein) according to the
procedures set forth therein.
10.9. EMPLOYEE BENEFIT MATTERS. BUYER agrees to honor, or cause the
Surviving Corporation to honor, the Employee Benefit Plans pursuant to their
terms, subject to the ability to amend or terminate such Plans if permitted to
do so pursuant to their terms. BUYER agrees that from the Effective Time through
the end of the Earn-Out Period it shall, or shall cause the Surviving
Corporation to, provide to employees of the Surviving Corporation and its
Subsidiaries employee benefit plan benefits substantially comparable in the
aggregate to the benefits of the Employee Benefit Plans as in effect for such
employees as of the date hereof. Also, BUYER shall and shall cause the Surviving
Corporation to:
(1) recognize the service with the Company prior to the
Effective Time of the Company's employees as of the Effective Time for purposes
of eligibility, vesting and level of benefits (but not benefit accrual, with
respect to defined benefit plans) under each Employee Benefit Plan (or any plan
adopted in substitution for such Employee Benefit Plan) to the extent such
service was recognized under such Employee Benefit Plan prior to the Effective
Time,
(2) use their reasonable best efforts to cause the Company's
employees as of the Effective Time to be given credit for (i) otherwise
qualifying expenses incurred by such employees prior to the Effective Time but
during the plan year of any BUYER group health plan in which the Effective Time
occurs against any deductible or co-payment requirements of such group health
plan and (ii) elimination periods requirements if and to the extent satisfied by
such employees under an analogous Company Employee Benefit Plan, and
(3) use their reasonable best efforts to limit application of
any pre-existing condition exclusion which would otherwise be applicable to an
employee on or after the Effective Time under a BUYER group health plan to the
same extent, if any, applicable under the analogous Company Employee Benefit
Plan.
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BUYER shall not be in violation of this Section to the extent its
compliance with the foregoing obligations is frustrated by reason of any of the
Manager's actions pursuant to the management covenants of Section 10.8.
10.10. RETENTION PLAN. Immediately prior to the Effective Time, BUYER
shall adopt the Retention Plan (as defined in Section 12.7 and make the
scheduled Awards thereunder).
11. MUTUAL CONDITIONS TO THE PARTIES' OBLIGATIONS. The parties'
obligations to consummate the Merger are subject to the satisfaction (or waiver
by the Company or BUYER, each in its sole discretion) of each of the conditions
set forth in this Section on or before the Closing Date. If the Merger is
consummated, such conditions will conclusively be deemed to have been satisfied
or waived.
11.1. NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction, or other order issued by any court of
competent jurisdiction, or other legal restraint or prohibition preventing the
consummation of the Merger, will be in effect, and no petition or request by any
governmental authority or agency for any such injunction or other order will be
pending.
11.2. APPROVAL BY STOCKHOLDERS. The Company Stockholders shall have
authorized and approved this Agreement, the Merger and the transactions
contemplated hereby as required by the TBCA.
11.3. GOVERNMENTAL CONSENTS. All consents, approvals, orders or
clearances of any governmental authority (including any approvals or clearances
under the HSR Act), the granting of which is required for the consummation of
the transactions contemplated by this Agreement, shall have been obtained, and
all waiting periods specified under applicable law, the expiration of which is
necessary for such consummation, shall have passed, except for such consents,
approvals, orders or clearances (other than under the HSR Act), and the
expiration of such waiting periods (other than under the HSR Act), as would not
have individually or in the aggregate, a Material Adverse Effect on BUYER or the
Company.
11.4. NASDAQ LISTING. The shares of BUYER Common Stock into which
shares of Company Common Stock will be converted in the Merger will have been
authorized for listing, subject to official notice of issuance, on Nasdaq or
such other exchange or automated quotation system on which the BUYER Common
Stock is then listed or quoted.
11.5. FORM S-4. The Form S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the Form S-4
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
12. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of the
Company to consummate the Merger are subject to the satisfaction (or waiver by
the Company, in its sole discretion) of each of the conditions set forth in this
Section on or before the Closing Date. If the Merger is consummated, such
conditions will conclusively be deemed to have been satisfied or waived.
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12.1. REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by BUYER and/or Merger Sub in or pursuant to this Agreement or
in any statement, certificate, or other document delivered to the Company in
connection with this Agreement, the Merger, or any of the other transactions
contemplated hereby will have been true and correct in all material respects (or
in the case of matters qualified either by materiality or Material Adverse
Effect, in all respects) when made and (after taking into account any supplement
to or amendment of this Agreement or any such statement, certificate or other
document required to correct any information therein that is or has become
inaccurate) will be true and correct in all material respects at and as of the
Closing, except that representations and warranties that speak as of a specified
date shall be so true and correct as of such date.
12.2. COMPLIANCE WITH AGREEMENT. BUYER and Merger Sub will have
performed and complied in all material respects with all of their respective
obligations under this Agreement to be performed or complied with by them before
or at the Closing, including without limitation the execution and delivery of
all documents to be executed and delivered by any of them in connection with
this Agreement and/or the consummation of the Merger and the other transactions
contemplated hereby.
12.3. CLOSING CERTIFICATE. An executive officer of each of BUYER and
Merger Sub will have executed and delivered to the Company, at and as of the
Closing, certificates (without qualification as to knowledge or materiality)
certifying that the conditions referred to in Sections 12.1 and 12.2 have been
satisfied.
12.4. NO MATERIAL CHANGE. Since the date hereof, there shall not have
occurred any Material Adverse Effect on BUYER; PROVIDED HOWEVER, for the
purposes of this Section 12.4, a Material Adverse Effect on BUYER shall not be
deemed to have resulted solely from a decrease in the trading price of BUYER
Common Stock as reported on Nasdaq or such other exchange or automated quotation
system on which the BUYER Common Stock is then listed or quoted.
12.5. REGISTRATION RIGHTS AGREEMENT. BUYER shall have entered into a
Registration Rights Agreement in the form attached as Exhibit 12.5 (the
"REGISTRATION RIGHTS AGREEMENT").
12.6. TAX OPINION. The Company shall have received an opinion of
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, special counsel to the Company, dated the
Closing Date, substantially to the effect that (i) the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code and (ii) no gain
or loss will be recognized by stockholders of the Company who exchange all of
their Company Common Stock solely for BUYER Common Stock pursuant to the Merger,
except with respect to cash, if any, received in lieu of a fractional share
interest in BUYER Common Stock. In rendering its opinion, such counsel shall be
entitled to require and rely upon reasonable and customary representations
contained in certificates of the officers of the Company, BUYER and Merger Sub.
12.7. RETENTION PLAN. BUYER shall have (i) adopted the 2000 Retention
Plan attached as EXHIBIT 12.7 hereto (the "RETENTION PLAN") and (ii) issued
Award Agreements thereunder to the employees listed on Section 12.7 of the BUYER
and Merger Sub Disclosure Schedule.
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12.8. ESCROW AGREEMENTS. The BUYER shall have entered into the Escrow
Agreements.
13. CONDITIONS TO BUYER'S AND MERGER SUB'S OBLIGATIONS. The obligations
of each of BUYER and Merger Sub, respectively, to consummate the Merger are
subject to the satisfaction (or waiver by BUYER, in its sole discretion) of each
of the conditions set forth in this Section on or before the Closing Date. If
the Merger is consummated, such conditions will conclusively be deemed to have
been satisfied or waived.
13.1. REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Company in or pursuant to this Agreement or in any
statement, certificate, or other document delivered to BUYER in connection with
this Agreement, the Merger, or any of the other transactions contemplated hereby
will have been true and correct in all material respects (or in the case of
matters qualified as to materiality or Material Adverse Effect, in all respects)
when made and (after taking into account any supplement to or amendment of this
Agreement or any such statement, certificate or other document required to
correct any information therein that is or has become inaccurate) will be true
and correct in all material respects at and as of the Closing, except that
representations and warranties that speak as of a specified date shall be so
true and correct as of such date.
13.2. COMPLIANCE WITH AGREEMENT. The Company will have performed and
complied in all material respects with all of their respective obligations under
this Agreement to be performed or complied with by them before or at the
Closing, including without limitation the execution and delivery of all
documents to be executed and delivered by any of them in connection with this
Agreement and/or the consummation of the Merger and the other transactions
contemplated hereby.
13.3. CLOSING CERTIFICATE. An executive officer of the Company will
have executed and delivered to BUYER, at and as of the Closing, a certificate
(without qualification as to knowledge or materiality) certifying that the
conditions referred to in Sections 13.1 and 13.2 have been satisfied.
13.4. NO MATERIAL ADVERSE CHANGE. Since the date hereof, there shall
not have been a Material Adverse Effect on the Company.
13.5. REGISTRATION RIGHTS AGREEMENT. All parties thereto other than
BUYER shall have entered into the Registration Rights Agreement.
13.6. DISSENTING STOCKHOLDERS. Holders of no more than 0.25% of the
issued and outstanding Company Common Stock as of the Effective Time shall have
elected to, or continue to have contingent rights to, exercise dissenters rights
under the TBCA as to such shares.
13.7. ESCROW AGREEMENTS. All parties thereto other than BUYER shall
have entered into the Escrow Agreements.
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13.8. CAPITALIZATION CERTIFICATE. The principal executive officer and
the principal financial officer of the Company will have executed and delivered
to BUYER, at and as of the Closing Date, a certificate setting forth the
information required to be included in Section 6.4 of the Company Disclosure
Schedule (such certificate, the "CAPITALIZATION CERTIFICATE"). The
Capitalization Certificate shall be deemed to be a representation and warranty
of the Company hereunder.
14. INDEMNIFICATION.
14.1. INDEMNIFICATION BY BUYER. From and after the Effective Time,
subject to the limitations set forth in Section 14.5 hereof, BUYER will
indemnify, defend, and hold harmless each of the Company Stockholders and each
of their respective directors, officers, employees, representatives, and other
Affiliates, from and against any and all Damages (as defined in Section 17.1)
related to or arising, directly or indirectly, out of or in connection with any
breach by BUYER and/or Merger Sub of any representation, warranty, covenant,
agreement, obligation, or undertaking made by BUYER and/or Merger Sub in this
Agreement (including any schedule or exhibit hereto), or any other agreement,
instrument, certificate, or other document delivered by or on behalf of BUYER
and/or Merger Sub in connection with this Agreement, the Merger, or any of the
other transactions contemplated hereby. The Stockholder Representatives shall
have the ability to enforce these provisions solely on behalf of the Company
Stockholders.
14.2. INDEMNIFICATION BY THE COMPANY. From and after the Effective
Time, subject to the limitations set forth in Section 14.5 hereof, the Company,
will indemnify, defend and hold harmless BUYER, and each of their respective
directors, officers, employees, representatives and other Affiliates, from and
against any and all Damages related to or arising, directly or indirectly, out
of or in connection with any breach by the Company of any representation,
warranty, covenant, agreement, obligation or undertaking made by the Company in
this Agreement (including any schedule or exhibit hereto), or any other
agreement, instrument, certificate or other document delivered by or on behalf
of the Company at or prior to the Closing to effect the transactions
contemplated by this Agreement. Without limiting any other rights of BUYER,
BUYER shall be entitled to enforce this provision solely pursuant to the terms
of the Contingency Escrow Agreement.
14.3. CLAIMS.
(a) In the event that any party hereto (the "INDEMNIFIED
PARTY") desires to make a claim against another party hereto (the "INDEMNIFYING
PARTY", which term includes all indemnifying parties if more than one) in
connection with any third-party litigation, arbitration, action, suit,
proceeding, claim or demand at any time instituted against or made upon it for
which it may seek indemnification hereunder (a "THIRD-PARTY CLAIM"), the
Indemnified Party will promptly notify the Indemnifying Party of such
Third-Party Claim and of its claims of indemnification with respect thereto;
PROVIDED, that failure to promptly give such notice will not relieve the
Indemnifying Party of its indemnification obligations under this Section except
to the extent, if any, that the Indemnifying Party has actually been prejudiced
thereby.
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(b) The Indemnifying Party will have the right to assume the
defense of the Third-Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party by written notice to the Indemnified Party
within twenty days after the Indemnifying Party has received notice of the
Third-Party Claim; PROVIDED, HOWEVER, that the Indemnifying Party must conduct
the defense of the Third-Party Claim actively and diligently thereafter in order
to preserve its rights in this regard; and, PROVIDED, FURTHER, that the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third-Party Claim but the Indemnified
Party shall not control the defense thereof.
(c) The Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third-Party Claim
without the prior consent of the Indemnified Party (which will not be
unreasonably withheld or delayed) unless the judgment or proposed settlement (i)
includes an unconditional release of all liability of each Indemnified Party
with respect to such Third-Party Claim and (ii) involves only the payment of
money damages by the Indemnifying Party which are paid in a timely manner and
does not impose an injunction or other equitable relief upon the Indemnified
Party or require the Indemnified Party to pay any money damages. So long as the
Indemnifying Party has assumed and is conducting the defense of the Third-Party
Claim in accordance with Section 14.3(b) above, the Indemnified Party will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third-Party Claim without the prior written consent of the Indemnifying
Party (which will not be unreasonably withheld or delayed).
(d) In the event the Indemnifying Party fails to assume the
defense of the Third-Party Claim in accordance with Section 14.3(b) above, (i)
the Indemnified Party may defend against, and consent to the entry of any
judgment or enter in any settlement with respect to, the Third-Party Claim in
any manner it reasonably may deem appropriate, PROVIDED such settlement involves
only money damages and does not impose an injunction or other equitable relief
on the Indemnifying Party or has been consented to by such Indemnifying Party
(which will not be unreasonably withheld or delayed) and (ii) the Indemnifying
Party will remain responsible for any Damages the Indemnified Party may suffer
as a result of such Third-Party Claim to the extent provided in this Article 14.
14.4. PAYMENT OF CLAIMS. In the event of any bona fide claim for
indemnification hereunder, the Indemnified Party will advise the Indemnifying
Party that is required to provide indemnification therefor in writing with
reasonable specificity of the amount and circumstances surrounding such claim.
With respect to liquidated claims, if within thirty (30) days the Indemnifying
Party has not contested such claim in writing, the Indemnifying Party will pay
and/or the Escrow Agent shall pay, as applicable, the full amount thereof,
subject to the limitations set forth in Section 14.5, within ten (10) days after
the expiration of such period.
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14.5. LIMITATIONS OF LIABILITY.
(a) BASKET. No Indemnifying Party will be required to
indemnify an Indemnified Party hereunder until such time as the aggregate amount
of Damages for which (i) BUYER and the Surviving Corporation, and their
respective directors, officers, employees, representatives, and other
Affiliates, on the one hand, or (ii) the Company Stockholders and their
respective directors, officers, employees, representatives, and other
Affiliates, as the case may be, on the other, are otherwise entitled to
indemnification pursuant to this Agreement exceeds $1,000,000.
(b) MAXIMUM LIABILITY. The maximum liability of BUYER and the
Surviving Corporation, on the one hand, and the Company, on the other hand,
under this Article XIV with respect to breaches of the representations and
warranties made by such parties (other than with regard to those made under
Section 6.13 the remedies for breach are as set forth in Section 2(g) of the
Contingency Escrow Agreement) shall not exceed the then-value of the Indemnity
Shares (as defined in the Contingency Escrow Agreement).
(c) SURVIVAL. All representations and warranties in this
Agreement shall survive the Closing and any investigation at any time made by or
on behalf of an Indemnified Party and shall expire, and no Indemnifying Party
will be liable for any Damages hereunder unless a written claim for
indemnification is given by the Indemnified Party to the Indemnifying Party with
respect thereto prior to the first anniversary of the Effective Time (the
"CUT-OFF DATE"). Notwithstanding the foregoing, (i) liability for Damages
resulting from a breach of the representations and warranties contained in
Section 6.13 shall continue (and claims therefor may be made) until the
expiration of all applicable statute of limitations relating to any Taxes owed
as a result of such breach, and (ii) liability for Damages resulting from a
breach of the representations and warranties contained in Section 6.10 and that
portion of the Capitalization Certificate setting forth the number of
outstanding shares of Company Common Stock and other securities of the Company
shall continue (and claims therefor may be made) until December 31, 2002.
(d) ADDITIONAL LIMITATIONS ON LIABILITY. The provisions of
this Section shall not be applicable in the event that the Merger is not
consummated, PROVIDED, that in the event that this Agreement is terminated due
to a breach hereof by a party hereto of its respective representations,
warranties or covenants, the non-breaching party shall be entitled to seek to
recover its actual damages in connection with such breach (but not special,
consequential or punitive damages, other than in the case of fraud), and nothing
in this Section shall otherwise limit such remedies, if any.
(e) EXCLUSIVE REMEDIES.
(i) If the Merger is consummated, the provisions of this
Article XIV will be the sole and exclusive basis for the assertion of claims
against, and/or the imposition of liability on, any party hereto in connection
with this Agreement and/or the transactions contemplated hereby, whether based
in contract, tort, statute or otherwise.
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(ii) If the Merger is consummated, the Company
Stockholders' sole and exclusive remedy in the event of a breach of any of the
covenants of BUYER set forth in Section 10.8 after the Effective Time shall be
that set forth in the Escrow Agreement.
15. STOCKHOLDER REPRESENTATIVES.
(a) APPOINTMENT OF STOCKHOLDERS' REPRESENTATIVE. The Company
and, by virtue of their approval of this Agreement, the Company Stockholders,
hereby constitute and appoint, effective from and after the date hereof ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇, as their respective agents and attorneys-in-fact
(together, the "STOCKHOLDER REPRESENTATIVES") to act as Stockholder
Representatives under this Agreement and the Contingency Escrow Agreement in
accordance with the terms of this Section 15. In the event of the resignation,
death or incapacity of either of the Stockholder Representatives, a successor
Stockholder Representative shall thereafter be appointed by an instrument in
writing signed by such successor Stockholder Representative and by the remaining
Stockholder Representative, and such appointment shall become effective as to
any such successor Stockholder Representative when a copy of such instrument
shall have been delivered to BUYER and the Escrow Agent.
(b) AUTHORITY. The Stockholder Representatives are, and each
of them acting alone is, hereby fully authorized to:
(i) receive all notices or other documents given or to
be given to the Company by BUYER under this Agreement;
(ii) receive and accept service of legal process in
connection with any Claim or other proceeding against the Company or the Company
Stockholders arising under this Agreement in respect of the Escrowed Shares and
Earn-Out Shares;
(iii) undertake, compromise, defend and settle any
such suit or proceeding;
(iv) execute and deliver all agreements, certificates and
documents required or deemed appropriate by the Stockholder Representatives in
connection with any of the transactions contemplated by this Agreement
(including, without limitation, one or more blank stock powers relating to the
transfer of any Escrowed Shares and Earn-Out Shares);
(v) engage special counsel, accountants and other
advisors and incur such other expenses on behalf of the Company Stockholders in
connection with any matter arising under this Agreement as the Stockholder
Representative deems appropriate;
(vi) retain and liquidate any Escrowed Shares and
Earn-Out Shares to which the Company Stockholders are entitled and apply the
proceeds thereof to the payment of (or reimbursement of the Stockholder
Representatives for) expenses and liabilities for which the Stockholder
Representatives may incur pursuant to this Section 15; and
(vii) take such other action as such Stockholder
Representatives may deem appropriate, including, without limitation:
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(A) agreeing to any modification or amendment of the
Contingency Escrow Agreement and executing and delivering an agreement
of such modification or amendment;
(B) taking any actions required or permitted under
the Contingency Escrow Agreement to protect or enforce the rights of
the Company Stockholders thereunder to the Escrowed Shares and Earn-Out
Shares; and
(C) all such other matters as the Stockholder
Representatives may deem necessary or appropriate to carry out the
intents and purposes of this Agreement and the Contingency Escrow
Agreement.
(c) EXTENT AND SURVIVAL OF AUTHORITY. The appointment of the
Stockholder Representatives is an agency coupled with an interest and is
irrevocable and any action taken by a Stockholder Representative pursuant to the
authority granted in this Section 15 shall be effective and absolutely binding
on the Company Stockholders notwithstanding any contrary action of or direction
from the Company Stockholders, except for actions or omissions of the
Stockholder Representatives constituting willful misconduct or gross negligence.
(d) REIMBURSEMENT OF EXPENSES; INDEMNITY. The Stockholder
Representatives shall receive no compensation for services as Stockholder
Representatives, but shall receive reimbursement from, and be indemnified and
held harmless by, the Company Stockholders, for any and all expenses, charges,
claims and liabilities, including, but not limited to, reasonable attorneys'
fees, incurred by the Stockholder Representatives in the performance or
discharge of his or her duties pursuant to this Section 15. Unless the Company
Stockholders pay all such expenses, charges and liabilities upon demand by the
Stockholder Representatives, the Stockholder Representatives shall have no
obligation to incur such expenses, charges or liabilities, or to continue to
perform any duties hereunder.
16. TERMINATION.
(a) This Agreement may be terminated at any time before the
Effective Time:
(i) by mutual agreement of BUYER and the Company;
(ii) by BUYER, in the event of a material breach by the
Company of any representation, warranty or agreement contained herein which has
not been cured or is not curable within fifteen (15) days after notice thereof
to the breaching party; or
(iii) by the Company, in the event of a material
breach by BUYER of any representation, warranty or agreement contained herein
which has not been cured or is not curable within fifteen (15) days after notice
thereof to the breaching party.
(b) If (i) any temporary restraining order, preliminary or
permanent injunction, or other order issued by any court of competent
jurisdiction, or other binding legal
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restraint or prohibition preventing the consummation of the Merger is in effect
and is final and non-appealable at any time in effect for a period of more than
20 consecutive days, or (ii) the Closing does not occur on or before May 31,
2001 then either BUYER or the Company may terminate this Agreement by delivering
written notice to the other at any time after the close of business on date such
termination right arises hereunder, PROVIDED in the case of a termination under
clause (ii) above, that such failure to close is not the result of a breach of
this Agreement by the terminating party (including, in the case of any such
termination by BUYER, any breach by Merger Sub).
17. DEFINITIONS.
17.1. CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms have the following respective meanings:
"Affiliate" shall mean, with respect to any person or entity, any
person or entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such person or entity.
"Closing Date Price Per Share" means the closing sale price (in
thousandths) of BUYER Common Stock on Nasdaq for the trading day prior to the
Closing Date.
"Closing Price Per Share" means the average closing sale price (in
thousandths) of BUYER Common Stock on Nasdaq for the five (5) trading days up to
and including the day that is one trading days prior to the date for which such
Closing Price Per Share is determined.
"Company Stockholder" means any holder of the Company Common Stock as
of the Closing Date.
"Damages" means all damages, losses, claims, demands, actions, causes
of action, suits, litigations, arbitrations, liabilities, costs, and expenses,
including court costs and the reasonable fees and expenses of legal counsel.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder, as in effect as of the
relevant time of reference.
"Exchange Ratio" means the fraction, rounded to the nearest
ten-thousandth, derived by dividing (i) 15,000,000; by (ii) the number of shares
of Company Common Stock issued and outstanding as of the Effective Time.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"Indebtedness," as applied to any person, means (a) all indebtedness of
such person for borrowed money, whether current or funded, or secured or
unsecured, (b) all indebtedness of such person for the deferred purchase price
of property or services represented by a note or other security, (c) all
indebtedness of such person created or arising under any conditional sale or
other
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title retention agreement (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of specific property), (d) all indebtedness of such person secured by a
purchase money mortgage or other Lien to secure all or part of the purchase
price of property subject to such mortgage or other Lien, (e) all obligations of
such person under leases that have been or must be, in accordance with generally
accepted accounting principles, recorded as capital leases in respect of which
such person is liable as lessee, (f) any liability of such person in respect of
banker's acceptances or letters of credit, and (g) all indebtedness referred to
in clauses (a), (b), (c), (d), (e), or (f) above that is directly or indirectly
guaranteed by such person or which such person has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which such person
has otherwise assured a creditor against loss.
"INTELLECTUAL PROPERTIES" means intellectual property or proprietary
rights of any description including without limitation (i) rights in any patent,
patent application, copyright, industrial design, URL, domain name, trademark,
service ▇▇▇▇, logo, trade dress or trade name, (ii) related registrations and
applications for registration, (iii) trade secrets, moral rights or publicity
rights (iv) inventions, discoveries, improvements, modification, know-how,
technique, methodology, writing, work of authorship, design or data that is
necessary or useful to design, manufacture, assemble, service, maintain,
install, operate, use or test the Product(s) and develop enhanced or new
products, whether or not patented, patentable, copyrightable or reduced to
practice, including but not limited to any inventions, discoveries,
improvements, modification, know-how, technique, methodology, writing, work of
authorship, design or data embodied or disclosed in any: (1) computer source
codes (human readable format) and object codes (machine readable format); (2)
specifications; (3) manufacturing, assembly, test, installation, service and
inspection instructions and procedures; (4) engineering, programming, service
and maintenance notes and logs; (5) technical, operating and service and
maintenance manuals and data; (6) hardware reference manuals; and (7) user
documentation, help files or training materials, and (v) goodwill related to any
of the foregoing.
"knowledge," when used to qualify a representation or warranty in this
Agreement, has the following meaning: Where a representation or warranty is made
to the Company's knowledge, or with a similar qualification, the Company will be
deemed to have knowledge of any matter with respect to which any executive
officer or director of the Company has actual knowledge or would have knowledge
after conducting a reasonable investigation. Where a representation is made to
BUYER's or Merger Sub's knowledge or with a similar qualification, BUYER and the
Merger Sub will be deemed to have knowledge of any matter with respect to which
any executive officer or director of BUYER or Merger Sub, has actual knowledge
or would have knowledge after conducting a reasonable investigation.
"Liens" means any and all liens, claims, mortgages, security interests,
charges, encumbrances, and restrictions on transfer of any kind, except, in the
case of references to securities, those arising under applicable securities laws
solely by reason of the fact that such securities were issued pursuant to
exemptions from registration under such securities laws.
"Material Adverse Effect" means, when used with respect to BUYER or the
Company, as the case may be, any event, change or effect that is materially
adverse to the business, financial
-54-
condition or results of operations of BUYER or the Company, as the case may be;
PROVIDED, that such term shall not include any event, change or effect arising
out of (i) the announcement or consummation of the Merger and the transactions
contemplated thereby, or (ii) changes generally affecting the United States
economy or the high-technology industry in which the Company and BUYER
participate.
"person" (regardless of whether capitalized) means any natural person,
entity, or association, including without limitation any corporation,
partnership, limited liability company, government (or agency or subdivision
thereof), trust, joint venture, or proprietorship.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, as in effect as of the relevant
time of reference.
"Subsidiary" or "Subsidiaries" means, with respect to any person, any
corporation a majority (by number of votes) of the outstanding shares of any
class or classes of which will at the time be owned by such person or by a
Subsidiary of such person, if the holders of the shares of such class or classes
(a) are ordinarily, in the absence of contingencies, entitled to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, even though the right to so vote has been
suspended by the happening of such a contingency, or (b) are at the time
entitled, as such holders, to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof,
whether or not the right so to vote exists by reason of the happening of a
contingency.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, intangibles, social
security, unemployment, disability, payroll, license, employee, or other tax or
levy, of any kind whatsoever, including any interest, penalties, or additions to
tax in respect of the foregoing.
"Tax Return" means any return, declaration, report, claim for refund,
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
"Treasury Regulation" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
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17.2. TERMS DEFINED ELSEWHERE. The following terms are defined herein
in the sections identified below:
TERM SECTION TERM SECTION
Agreement Preamble Employee Benefit Plan 6.14(a)
Alleged Breach 10.8(f)(1) Employment Agreements 10.8(a)(1)
Articles of Merger 1 Environmental Laws 6.15(b)
BUYER Preamble EPA 6.15(c)
BUYER and Merger Sub ERISA 6.14(c)
Disclosure Schedule 7 Escrow Agent 3.3(a)
BUYER Common Stock 7.6 Escrow Agreements 3.3(b)
BUYER Exchange Option 4(a) Escrowed Shares and
BUYER Material Contracts 7.11 the Earn-Out Shares 3.3(a)
BUYER's SEC Reports 7.5 Form S-4 6.30
BUYER Stock Plans 7.6 Funding Number 3.3(b)
Capitalization Certificate 13.8 GAAP 6.7
CEO 10.8 General Management
CERCLA 6.15(b) Authority 10.8(a)
Certificate 3.1 Hazardous Substances 6.15(c)
Closing 1 Incidental Indebtedness 6.11
Closing Date 1 Indemnified Party 14.3(a)
Code 6.13(a) Indemnifying Party 14.3(a)
Company Preamble IRS 6.14(b)
Company Class A Common June 2000 10-Q 7.5
Stock 2.5(a) Management Covenants 10.8(f)(1)
Company Class B Common Manager 10.8(a)
Stock 2.5(a) Merger 1
Company Common Merger Sub Preamble
Stock 2.5(a) Most Recent Audited
Company Disclosure Balance Sheet 6.7
Schedule 6 Most Recent Unaudited
Company Insiders 10.5 Balance Sheet 6.7
Company Intellectual Nasdaq 8.5
Properties 6.10(a) Notice of Alleged Breach 10.8(f)(1)
Company Option 4(a) Option Escrow Agreement 3.3(b)
Company Option Plan 9.18 Option Escrowed Shares 3.3(b)
Confidentiality Agreement 9.1 Products 6.10(m) & 7.15(l)
Confidential Information 6.10(k) RCRA 6.15(b)
Contingency Escrow Registration Rights Agreement 12.5
Agreement 3.3(a) Retention Plan 12.7
contract 6.20 ▇▇▇▇ 6.15(b)
Cure Period 10.8(f)(2) September 2000 10-Q 7.5
Cut-off Date 14.5(c) Stockholder Representatives 15(a)
DGCL 7.3 Surviving Corporation 2.1
Deferred Option Shares 4(d) TBCA 1
Dissenting Shares 2.7 Third-Party Claim 14.3(a)
Earn-Out Period 10.8 Voting Agreement Preamble
Effective Time 1
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18. GENERAL.
18.1. COOPERATION. Each of the parties will cooperate with the others
and use its reasonable best efforts to prepare all necessary documentation, to
effect all necessary filings, and to obtain all necessary permits, consents,
approvals, and authorizations of all governmental bodies and other third parties
necessary to consummate the transactions contemplated by this Agreement.
18.2. SURVIVAL OF PROVISIONS. The respective representations and
warranties of the Company and of BUYER and Merger Sub shall survive for such
periods as set forth in Section 14.5 hereof. Those covenants that contemplate or
may involve actions to be taken or obligations in effect after the Effective
Time shall survive in accordance with their terms.
18.3. EXPENSES. Each of the parties will be responsible for and will
pay his or its own expenses in connection with the negotiation and preparation
of this Agreement and the consummation of the Merger and the other transactions
contemplated hereby
18.4. BENEFITS OF AGREEMENT; NO ASSIGNMENTS; NO THIRD-PARTY
BENEFICIARIES.
(a) This Agreement will bind and inure to the benefit of the
parties hereto and their respective heirs, successors, and permitted assigns.
(b) No party will assign any rights or delegate any
obligations hereunder without the consent of the other parties, and any attempt
to do so will be void.
(c) Except for the obligations assumed by BUYER pursuant to
Section 10.7, which may be enforced by the third-party beneficiaries named
therein, nothing in this Agreement is intended to or will confer any rights or
remedies on any person other than the parties hereto and their respective heirs,
successors, and permitted assigns.
18.5. NOTICES. All notices, requests, payments, instructions, or other
documents to be given hereunder will be in writing or by written
telecommunication, and will be deemed to have been duly given if (i) delivered
personally (effective upon delivery), (ii) mailed by registered or certified
mail, return receipt requested, postage prepaid (effective five business days
after dispatch), (iii) sent by a reputable, established courier service that
guarantees next business day delivery (effective the next business day), or (iv)
sent by telecopier followed within 24 hours by confirmation by one of the
foregoing methods (effective upon receipt of the telecopy in complete, readable
form), addressed as follows (or to such other address as the recipient party may
have furnished to the sending party for the purpose pursuant to this Section):
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(a) If to BUYER, Merger Sub, and/or (after the Effective
Time), the Company to:
Sonus Networks, Inc.
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
General Counsel
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy sent at the same time and by the same means to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company, to the Stockholder Representative at:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
telecom technologies, inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy sent at the same time and by the same means to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
18.7. COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered will be an
original, but all of which together will constitute one and the same agreement.
In pleading or proving this Agreement, it will not be necessary to produce or
account for more than one such counterpart.
18.8. CAPTIONS. The captions of sections or subsections of this
Agreement are for reference only and will not affect the interpretation or
construction of this Agreement.
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18.9. EQUITABLE RELIEF. Each of the parties hereby acknowledges that
any breach by him or it of his or its obligations under this Agreement would
cause substantial and irreparable damage to the parties, and that money damages
would be an inadequate remedy therefor, and accordingly, acknowledges and agrees
that each other party will be entitled to an injunction, specific performance,
and/or other equitable relief to prevent the breach of such obligations.
18.10. CONSTRUCTION. The language used in this Agreement is the
language chosen by the parties to express their mutual intent, and no rule of
strict construction will be applied against any party.
18.11. WAIVERS. No waiver of any breach or default hereunder will be
valid unless in a writing signed by the waiving party. No failure or other delay
by any party exercising any right, power, or privilege hereunder will be or
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege.
18.12. ENTIRE AGREEMENT. This Agreement, together with the exhibits and
schedules hereto and the other agreements, instruments, certificates, and other
documents referred to herein as having been or to be executed and delivered in
connection with the transactions contemplated hereby, contains the entire
understanding and agreement among the parties, and supersedes any prior
understandings or agreements among them, or between or among any of them, with
respect to the subject matter hereof. Notwithstanding the foregoing, the
provisions of the Confidentiality Agreement will survive the execution and
delivery of this Agreement and the consummation of the Merger.
18.13. GOVERNING LAW. Except to the extent the TBCA applies, this
Agreement will be governed by and interpreted and construed in accordance with
the internal laws of the State of Delaware, as applied to contracts under seal
made, and entirely to be performed, within the State of Delaware, and without
reference to principles of conflicts or choice of laws.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
Executed and delivered under seal as of the date first above written.
SONUS: SONUS NETWORKS, INC.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name:
Title:
MERGER SUB: STORM MERGER SUB, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Name:
Title:
COMPANY: telecom technologies, inc.
By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: CEO, Chairman