Amended and Restated Merger and Exchange Agreement
This Amended and Restated Merger and Exchange Agreement dated November
24, 2000 (the "Agreement") is entered into by Commtouch Software Ltd., an
Israeli corporation (the "Buyer"), Commtouch Inc., a California corporation
("U.S. Sub"), CW Acquisition Corporation, a Wisconsin corporation and wholly
owned subsidiary of the Buyer ("Merger Sub"), Wingra, Incorporated, a Wisconsin
corporation (the "Company"), the holder of certain of the outstanding capital
stock of the Company executing this Agreement (the "Stockholder"), and the
undersigned holders of all the outstanding membership interests in Wingra
Technologies, LLC, a Wisconsin limited liability company (the "LLC"), other than
that owned by the Company (the "Additional Members"). The LLC is a developer and
marketer of electronic messaging integration and migration solutions for large
enterprises (the "Business").
This Agreement supercedes and replaces the Merger and Exchange
Agreement dated November 2, 2000 (the "Original Agreement") between all the
parties listed above. The Schedules referred to in this Agreement refer to the
Schedules attached to the Original Agreement. Capitalized terms used herein have
the meanings stated in Section 9.
The Buyer desires to acquire the Company through a merger of Merger Sub
with and into the Company (the "Merger"), and the Company and the Stockholder
desire to consummate the Merger, under the terms of this Agreement. The Merger
is intended to qualify as reorganization within the meaning of Section
368(a)(2)(E) of the Code.
The Company owns 88% of the outstanding membership interests in the
LLC. U.S. Sub and the Additional Members desire to exchange all the outstanding
membership interest in the LLC not owned by the Company by exchanging such
interests for ordinary shares of the Buyer under the terms of this Agreement.
Such exchange is herein called the "Exchange."
Therefore, in consideration of the mutual agreements contained herein,
the parties hereby agree as follows:
Section 1 The Merger and Exchange
1.1 Closing. The closing (the "Closing") under this Agreement shall
take place at the offices of McCutchen, Doyle, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, Palo Alto,
California, within 2 business days after the satisfaction (or waiver by the
party entitled to waive) of all conditions stated in Sections 5 and 6, or at
such other place or on such other date as the parties may agree in writing.
1.2 Effective Date of Merger and Exchange. The Merger and the Exchange
shall take effect upon filing of a certificate of merger with the Wisconsin
Department of Financial Institutions in accordance with Wisconsin law (the
"Effective Time").
1.3 Merger. At the Effective Time, Merger Sub shall be merged with and
into the Company and the separate corporate existence of Merger Sub shall cease.
The Company shall be the surviving corporation in the Merger (the "Surviving
Corporation") and shall continue to hold the purposes, objects, powers,
immunities, assets and Properties, and continue to be subject to the debts,
liabilities and obligations, of the Company and shall also be vested in all
assets and Properties of, and be subject to the debts, liabilities and
obligations, of Merger Sub with the same effect as though such assets and
Properties had been originally owned, and such debts, liabilities and
obligations had been originally incurred, by the Surviving Corporation.
1.4 Articles of Incorporation. At the Effective Time, the articles of
incorporation of the Company shall constitute the articles of incorporation of
the Surviving Corporation, subject always to the right of the Company to amend
its articles of incorporation after the Effective Time in accordance with the
laws of the State of Wisconsin, and shall not be amended by virtue of the
Merger.
1.5 By-Laws. At the Effective Time, the by-laws of Merger Sub shall
constitute the by-laws of the Surviving Corporation and shall not be amended by
the Merger.
1.6 Directors and Officers. At the Effective Time, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇ shall constitute the directors of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
Time shall constitute the officers of the Surviving Corporation, in each case
until their successors have been elected and qualified or until otherwise
provided by law.
1.7 Company Shares Owned by Company or Buyer. At the Effective Time,
all of the shares of capital stock of the Company that are owned directly or
indirectly by the Company or any subsidiary of the Company and any Shares owned
by the Buyer, Merger Sub or any other subsidiary of the Buyer shall be canceled
and no consideration shall be delivered therefor.
1.8 Company Shares and Membership Interests.
(a) Company Shares. At the Effective Time, each share of Common Stock,
$0.001 par value per share, and each share of Preferred Stock, $0.001 par value
per share, of the Company (each such share of Common Stock or Preferred Stock
being herein called a "Share"), other than any Shares as to which dissenters'
rights under Chapter 180 of the Wisconsin Business Corporation Law are perfected
and other than those referred to in Section 1.7, shall be converted into the
number of shares of the Buyer Ordinary Shares, $0.01 par value per share ("Buyer
Ordinary Shares"), determined by dividing the Company Portion of the Buyer Share
Amount by the Fully-Diluted Company Shares (such quotient being herein called
the "Company Exchange Ratio"). "Fully-Diluted Company Shares" means the sum,
without duplication, of (i) all Shares outstanding immediately prior to the
Effective Time and (ii) the number of Shares subject to any Stock Right
outstanding immediately prior to the Effective Time, whether or not then
exercisable. "Company Portion" means the portion of the LLC's equity interest
which is owned beneficially and of record by the Company immediately prior to
the Effective Time.
(b) "Buyer Share Amount" means
2
(i) if the Average Closing Price is less than $11.00 and the
Closing occurs on or before December 6, 2000, 1,590,909 Buyer Ordinary
Shares;
(ii) if the Average Closing Price is equal to or greater than
$11.00 but less than $14.00, the number of Buyer Ordinary Shares which
have an aggregate value, at the Average Closing Price, of $17,500,000.
(iii) if the Average Closing Price is equal to or greater than
$14.00 but not greater than $17.00, 1,250,000 Buyer Ordinary Shares.
(iv) if the Average Closing Price is greater than $17.00 but
not greater than $25.00, the number of Buyer Ordinary Shares which have
an aggregate value, at the Average Closing Price, of $21,250,000.
(v) if the Average Closing Price is greater than $25.00, the
number of Buyer Ordinary Shares which have an aggregate value, at the
Average Closing Price, of $17,500,000 plus one-third of the product of
1,250,000 times the difference between the Average Closing Price and
$14.
"Average Closing Price" means the average closing price of a Buyer Ordinary
Share on the Nasdaq National Market System for the 20 trading days ending on and
including the 2nd trading day prior to the Closing. All calculations relevant to
the determination of the Company Exchange Ratio and the LLC Exchange Ratio shall
be appropriately adjusted for any stock split, reverse stock split, stock
dividend or similar transaction occurring after the date hereof.
(c) Membership Interest. At the Effective Time, each Additional Member
shall transfer to U.S. Sub by ▇▇▇▇ of sale the LLC membership interest held by
him, her or it in exchange for the number of Buyer Ordinary Shares determined by
multiplying the number of units of LLC membership interest ("Units") so
transferred times the LLC Exchange Ratio. The "LLC Exchange Ratio" means the
ratio determined by dividing the LLC Portion of the Buyer Share Amount by the
Fully-Diluted LLC Additional Units. "Fully-Diluted LLC Additional Units" means
the sum, without duplication, of (i) all Units outstanding immediately prior to
the Effective Time, other than any owned beneficially and of record by the
Company and (ii) the number of Units subject to any LLC Equity Right outstanding
immediately prior to the Effective Time, whether or not then exercisable, other
than any owned beneficially and of record by the Company. "LLC Portion" means
the portion of the LLC's equity interest which is not owned beneficially and of
record by the Company immediately prior to the Effective Time.
1.9 Restrictions on Transfer.
(a) General. The Buyer Ordinary Shares issuable upon the Closing will
be subject to the restriction that they shall not be transferred, sold or
otherwise disposed of until April 1, 2001.
(b) Restricted Shares. In addition, 20% of the Buyer Ordinary Shares
issuable upon the Closing (the "Restricted Shares") shall be subject to the
restriction that they shall not be transferred, sold or otherwise disposed of
until December 20, 2001. The Restricted Shares will be allocated among the
recipients otherwise entitled to receive Buyer Ordinary Shares at the Effective
Time pro rata in accordance to the number they would otherwise receive, unless,
prior
3
to the Effective Time, the Company delivers a non-pro-rata allocation of the
Restricted Shares, which allocation shall be accompanied by the written
agreement thereto of all Holders to which Restricted Shares in excess of their
pro rata share shall be allocated. In any such special allocation, ▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall each be allocated not less than their
respective pro rata amounts.
(c) Exception. The restrictions of Sections 1.9(a) and (b) will not
preclude a transfer to one or more immediate family members and/or an entity in
which one or more immediate family members owns all the interest, provided that
the transferee expressly agrees in writing to be bound by this Section 1.9.
1.10 Common Stock of Merger Sub. At the Effective Time, all of the
outstanding shares of Common Stock of Merger Sub shall be converted into an
equal number of shares of Common Stock of the Surviving Corporation.
1.11 Fractional Shares. The Buyer shall not be required to issue or
deliver any fractional Buyer Ordinary Shares or any certificates representing
fractional Buyer Ordinary Shares for certificates representing the Shares;
however, the Buyer shall pay to each person who would otherwise be entitled to
receive a certificate representing a fractional share of Buyer Ordinary Shares
an amount in cash (rounded to the nearest whole cent) equal to the per share
value of Buyer Ordinary Shares (based on the last sales price of Buyer Ordinary
Shares as reported on Nasdaq on the Effective Time) multiplied by the fraction
of a share of Buyer Ordinary Shares to which such Stockholder would otherwise be
entitled.
1.12 Stock Options. At the Effective Time, the Buyer will assume the
LLC's obligations under the LLC's 1998 Unit Option Plan and all options
outstanding thereunder, and each option outstanding thereunder at the Effective
Time will be exercisable for the number of Buyer Ordinary Shares determined by
multiplying the number of Units subject thereto at the Effective Time by the LLC
Exchange Ratio (subject to Sections 1.20 and 1.21), and the exercise price for
each Buyer Ordinary Share subject thereto shall be the exercise price in effect
immediately prior to the Effective Time divided by the LLC Exchange Ratio. Such
options shall continue to vest in accordance with their terms and shall
accelerate pursuant to the terms of the Option Plan. Such assumption shall not
preclude employees of the Company that continue their employment from
participating in the Buyer's stock option plan and other plans in the normal
course.
1.13 Warrants. At the Effective Time, the warrants to acquire Shares
and Units set forth in Section 2.1 shall be exercisable for the number of Buyer
Ordinary Shares determined by multiplying the number of Shares or Units subject
thereto at the Effective Time by the Company Exchange Ratio or the LLC Exchange
Ratio, as the case may be (subject to Sections 1.20 and 1.21), and the exercise
price for each Buyer Ordinary Share subject thereto shall be the exercise price
in effect immediately prior to the Effective Time divided by the Company
Exchange Ratio or the LLC Exchange Ratio, as the case may be.
1.14 Certificate Surrender Required. Notwithstanding any other
provision of this Agreement, no certificate for Buyer Ordinary Shares and no
cash in lieu of fractional shares otherwise payable to a holder of Shares who
has not theretofore surrendered its, his or her
4
certificates formerly evidencing the Shares registered in its, his or her name
shall be issued or paid until the surrender of such certificates to the Buyer.
Until properly surrendered, certificates formerly evidencing the Shares shall be
deemed for all purposes to evidence only the Buyer Ordinary Shares into which
such Shares were converted by virtue of the Merger.
1.15 Notice. As soon as practicable after the Effective Time, the
Company shall notify each Stockholder who has not already surrendered all its,
his or her certificates formerly evidencing the Shares registered in its, his or
her name, that the Merger has become effective and that such certificates may be
surrendered to the Buyer in order to receive certificates representing the Buyer
Ordinary Shares into which such Shares were converted by virtue of the Merger
and the amounts then payable to such holder in accordance with this Agreement.
1.16 Nonregistered Certificate Holders. If any part of the Buyer
Ordinary Shares issuable or right to receive cash in lieu of fractional shares
payable to a holder of Shares is to be issued or paid to a Person other than the
Person in whose name the certificates surrendered in exchange therefor are
registered, it shall be a condition to such issuance or payment that the
certificate so surrendered shall be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the Person requesting such transfer pay to
the Company any transfer or other taxes payable by reason of the foregoing or
establish to the satisfaction of the Company that such taxes have been paid or
are not required to be paid.
1.17 Lost, Stolen or Destroyed Certificates. In the event any
certificate formerly representing Shares shall have been lost, stolen or
destroyed, upon the making of any affidavit of that fact by the registered
holder thereof or such holders' duly authorized attorney-in-fact, the Buyer
shall issue the certificate for Buyer Ordinary Shares and pay the cash amount to
which such Shares are then entitled by virtue of the Merger, provided that the
Buyer may, in its discretion and as a condition precedent to such issuance and
payment, require the owner of such lost, stolen or destroyed certificate to give
the Buyer and the Company a bond in such sum as it may direct as indemnity
against any claim that may be made against the Buyer or the Company with respect
to the certificate alleged to have been lost, stolen or destroyed.
1.18 Transfer Books; No Further Ownership Rights in the Shares or
Membership Interest. At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration of
transfers of the Shares on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of the Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares, except as otherwise provided for herein or
by applicable law.
1.19 Dissenters' Rights. If any dissenters' right under subchapter XIII
of chapter 180 of the 1999 Wisconsin Statutes are asserted, the Company shall
give the Buyer and Merger Sub notice thereof and the Buyer and Merger Sub shall
have the right to participate in all negotiations and proceedings with respect
to any such demands. The Surviving Corporation shall not, except with the prior
written consent of the Buyer or Merger Sub, voluntarily make any payment with
respect to, or settle or offer to settle, any assertion of appraisal rights. If
any Shares as to which appraisal rights are asserted shall fail to perfect or
shall have effectively withdrawn or lost such
5
appraisal rights, such Shares shall thereupon be treated as though such Shares
had been converted into Buyer Ordinary Shares pursuant to Section 1.8.
1.20 Other Agreements.
(a) Stockholder has entered into a support agreement (a "Support
Agreement") with the Buyer, a copy of which is attached as Exhibit A.
Stockholder agrees that the Support Agreement will apply to this Agreement in
lieu of the Original Agreement.
(b) At the Closing, the Buyer and the Holders' Agent, on behalf of the
Holders participating therein (determined as set forth in Section 1.21), will
enter into an escrow agreement in customary form (the "Escrow Agreement") to
carry out the provisions of Sections 1.21 and 1.22.
(c) At the Closing, the Stockholder and Additional Members will enter
into mutual releases with the Company and the LLC in the form attached as
Exhibit B.
(d) The individuals listed in Schedule 1.19(c) have entered into
employment agreements with the Buyer, copies of which are attached as Exhibits
C-1, C-2 and C-3.
1.21 Escrow Deposit. Notwithstanding anything in this Section 1, a
number of Buyer Ordinary Shares equal to 5% of the number of Buyer Ordinary
Shares issuable pursuant to the Merger and the Exchange and subject to options
pursuant to Section 1.12 or to warrants pursuant to Section 1.13 shall be
subject to the Escrow Agreement. The Company will provide, prior to the
Effective Time, the allocation of such escrow deposit among the Holders, which
allocation shall be accompanied by the written agreement thereto of all Holders
to which such escrow deposit shall be allocated, confirming the Holders' Agent's
authority as set forth herein. Certificates representing such Buyer Ordinary
Shares otherwise deliverable pursuant to the Merger or the Exchange shall be
delivered to the escrow agent under the Escrow Agreement (the "Escrow Agent")
rather than the holder of Shares or Units otherwise entitled thereto, to be held
and distributed by the Escrow Agent in accordance with the terms of the Escrow
Agreement. It is understood and agreed that to the extent set forth in Section
7.2 herein, the escrow created by the Escrow Agreement shall represent the sole
remedy of the Buyer, Merger Sub and U.S. Sub, and the maximum exposure of the
Company, the LLC, the Stockholder and the Additional Members, for any claim
based on a breach by the Company, the LLC, the Stockholder or the Additional
Members of a representation, warranty, covenant, or agreement under this
Agreement or any indemnification or similar obligations of such parties
hereunder, unless otherwise expressly set forth herein.
1.22 Distribution from Escrow
(a) Promptly after the Last Escrow Claim Date, as that term is defined
in the Escrow Agreement, the Holders' Agent and the Buyer shall sign a joint
instruction pursuant to which the Escrow Agent will distribute (or confirm as no
longer being a potential option or warrant adjustment, as the case may be) to
the Holders, in the Holders' Proportions, if any, of the amount then held under
the Escrow Agreement against which the Buyer has not made a claim.
6
(b) Promptly after resolution of any Buyer claims under the Escrow
Agreement, the Holders' Agent and the Buyer will sign a joint instruction
pursuant to which the Escrow Agent will distribute (or confirm as no longer
being a potential option or warrant adjustment, as the case may be) to the
Holders, in the Holders' Proportionate Shares, their share, if any, and to the
Buyer its share, if any, of the amount released to the Holders and the Buyer
pursuant to such resolution.
(c) The agreed dollar value of a claim by the Buyer shall be converted
into Buyer Ordinary Shares at the average closing price of a Buyer Ordinary
Share on the Nasdaq National Market System for the 20 trading days ending on and
including the 2nd trading day prior to the payment date. All calculations
relevant to such determination shall be appropriately adjusted for any stock
split, reverse stock split, stock dividend or similar transaction occurring
after the Closing Date but before the payment date. The resulting number of
Buyer Ordinary Shares shall be prorated as a reduction, in the Holders'
Proportions, to the number of Buyer Ordinary Shares otherwise issuable pursuant
to the Merger and the Exchange and subject to option pursuant to Section 1.11 or
warrant pursuant to Section 1.12.
(d) The provisions of this Section 1.21 will be supplemented by the
more detailed provisions of the Escrow Agreement.
Section 2 Transactional Representations and Warranties of the Stockholder, the
Company, the Additional Members and the LLC
A. The Stockholder, the Company and the LLC represent and warrant to
the Buyer that, on and as of the date hereof:
2.1 Capital Stock and Membership Interest.
(a) The authorized and outstanding capital stock of the Company is as
follows:
Shares Shares
Designation of Class Authorized Outstanding
Common Stock 3,800,000 652,684.01
Preferred Stock 1,800,000 None
There is no capital stock of the Company outstanding except as stated in this
Section 2.1(a). The record and beneficial owners to the outstanding capital
stock stated in this Section 2.1(a) are set forth in Schedule 2.1(a). There are
no outstanding Stock Rights of the Company: Except as disclosed in Schedule
2.1(a), the Company is not a party to any stockholders agreement, registration
rights agreement or other Contract with respect to capital stock or Stock Right
issued or to be issued by it.
(b) The authorized and outstanding membership interests in the LLC are
as follows:
7
Units Units
Designation of Class Authorized Outstanding
LLC Units 1,800,000 738,799.26
There is no membership interest in the LLC outstanding except as stated
in this Section 2.1(b). The record and beneficial owners to the outstanding
membership interests stated in this Section 2.1(b) are set forth in Schedule
2.1(b). The outstanding LLC Equity Rights of the LLC are as follows:
Units
Subject
Designation of LLC Equity Right Class of Units to Right
Options under 1998 Unit Option Plan LLC Units 96,788
Warrants LLC Units 78,883
There are no LLC Equity Rights outstanding with respect to the LLC except as set
forth in this Section 2.1(b), and the terms, and record and beneficial owners,
of such LLC Equity Rights are as set forth in Schedule 2.1(b). Except as
disclosed in Schedule 2.1(b), the LLC is not a party to any members agreement,
registration rights agreement or other Contract with respect to membership
interests or LLC Equity Rights issued or to be issued by it.
(c) All of the issued and outstanding capital stock of the Company has
been duly and validly authorized and issued and is fully paid and non-assessable
(except with respect to certain unpaid employee wages under Section
180.0622(2)(b) of the 1999 Wisconsin Statutes), and has not been issued in
violation of any preemptive or similar rights of any stockholder or any
applicable securities law. Except as disclosed in Schedule 2.1(a), no Person has
any right to require the Company to redeem, purchase or otherwise reacquire any
capital stock issued by the Company or any Stock Rights with respect to any
capital stock issued by the Company. There are no preemptive or similar rights
in respect of any capital stock of the Company except as set forth in Schedule
2.1(a).
(d) All of the issued and outstanding membership interests in the LLC
have been duly and validly authorized and issued and is fully paid and
non-assessable, and has not been issued in violation of any preemptive or
similar rights of any member or any applicable securities law. Except as
disclosed in Schedule 2.1(b), no Person has any right to require the LLC to
redeem, purchase or otherwise reacquire any membership interest in the LLC or
any LLC Equity Rights. There are no preemptive or similar rights in respect of
any membership interest in the LLC except as set forth in Schedule 2.1(b).
(e) The Company has never declared or paid any dividend or made any
distribution in respect of any of its capital stock or any Stock Rights with
respect thereto, or, except as set forth
8
in Schedule 2.1(a), directly or indirectly redeemed, purchased or otherwise
acquired any of the capital stock issued by it or any Stock Rights with respect
thereto.
(f) The LLC has never declared or made any distribution in respect of
any of its membership interest or any LLC Equity Rights with respect thereto,
or, except as set forth in Schedule 2.1(b), directly or indirectly redeemed,
purchased or otherwise acquired any of the membership interests issued by it or
any LLC Equity Rights with respect thereto.
2.2 Organization; Good Standing.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of Wisconsin and has all requisite power and
authority under applicable corporate law to own, lease and operate its
Properties and to conduct the Business as currently conducted. The Company is
not required to be qualified to do business as a foreign corporation in any
jurisdiction. The Company is not a partner in any general or limited partnership
or a member in any limited liability company except the LLC.
(b) The LLC is a limited liability company duly organized, validly
existing and in good standing under the laws of Wisconsin and has all requisite
power and authority under applicable limited liability company law to own, lease
and operate its Properties and to conduct the Business as currently conducted.
The LLC is not required to be qualified to do business as a foreign limited
liability company in any jurisdiction other than jurisdictions in which any
failures to be so qualified would not materially adversely affect the LLC. The
LLC is not a partner in any general or limited partnership or a member in any
limited liability company.
2.3. Authority.
(a) The Company has all requisite power and authority under applicable
corporate law to execute and deliver this Agreement and to perform the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of the Company (subject
to the vote or consent of its stockholders approving the Merger and this
Agreement) and no other approval on the part of the Company is necessary under
applicable corporate law for the execution, delivery and performance of this
Agreement.
(b) The LLC has all requisite power and authority under applicable
limited liability company law to execute and deliver this Agreement and to
perform the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all requisite limited liability company action on the part of
the LLC and no other approval on the part of the LLC is necessary under
applicable limited liability company law for the execution, delivery and
performance of this Agreement.
2.4 No Violation. Except as set forth in Schedule 2.4, the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby (i) will not violate or conflict with the articles of
incorporation or by-laws of the Company or the operating agreement of the LLC,
(ii) do not require any Third-Party Action with respect to the Company or the
LLC, (iii) do not violate any Legal Requirement or Order applicable to the
Company or the LLC,
9
(iv) do not conflict with or constitute a default under, or result in the
acceleration or right of acceleration of any obligations or the termination or
right of termination of any rights under any Contract to which the Company or
the LLC is a party, and (v) will not result in the creation or imposition of any
Lien, claim, charge, restriction, equity or encumbrance of any kind upon or give
any Person any interest or right in or with respect to any of the Properties,
assets, business, agreements or Contracts of the Company or the LLC.
2.5 No Brokers, Finders, Etc. Neither the Company nor the LLC nor (with
respect to each Stockholder) such Stockholder nor (with respect to each
Additional Member) such Additional Member has engaged any agent, broker, finder
or investment or commercial banker in connection with the negotiation, execution
or performance of this Agreement or the transactions contemplated hereby.
B. Each Stockholder and Additional Member, with respect to itself,
himself or herself only, hereby represents and warrants to the Buyer that, on
and as of the date hereof:
2.6 Title. Such Stockholder is the sole record and beneficial owner of
the shares of Company stock set forth opposite such Stockholder's name on
Schedule 2.1(a). Such shares are free and clear of all Third-Party Rights, and
such Stockholder has the full and unrestricted right, power and authority to
vote such shares in favor of, and have such shares participate in, the Merger,
except as set forth in Schedule 2.6. Such Additional Member is the sole record
and beneficial owner of the membership interests set forth opposite such
Additional Member's name on Schedule 2.1(b). Such membership interests are free
and clear of all Third-Party Rights, and such Additional Member has the full and
unrestricted right, power and authority to consummate the Exchange, except as
set forth in Schedule 2.6.
2.7 Authority; Enforceability. Such Stockholder has full right and
power and all authorization and approval required by any Legal Requirement, and
by any Contract to which such Stockholder is a party, to vote his, her or its
shares in favor of the Merger. Such Additional Member has full right and power
and all authorization and approval required by any Legal Requirement, and by any
Contract to which such Additional Member is a party to exchange his, her or its
membership interest pursuant to the Exchange. The execution, delivery and
performance of this Agreement by such Stockholder or Additional Member have been
duly authorized by all necessary action, and such Stockholder or Additional
Member has all requisite power and authority to execute and deliver this
Agreement and perform the transactions contemplated hereby. This Agreement is
legally binding on and enforceable against such Stockholder or Additional Member
in accordance with its terms. Except as set forth in Schedule 2.7, the
execution, delivery and performance of this Agreement by such Stockholder or
Additional Member and the consummation by such Stockholder or Additional Member
of all of the transactions contemplated hereby (x) do not violate any Legal
Requirement or Order applicable to such Stockholder or Additional Member and (y)
do not conflict with or constitute a default (with or without the giving of
notice or the passage of time or both) under, or result in any acceleration or
right of acceleration of any obligations under, any Contract to which such
Stockholder or Additional Member is a party.
2.8 Investment Intent. Such Stockholder or Additional Member is
acquiring Buyer Ordinary Shares under the terms of this Agreement for such
Stockholder's or Additional
10
Member's own account and not with the view to, or for resale in connection with,
any distribution or public offering thereof within the meaning of the Act. Such
Stockholder or Additional Member understands that the Buyer Ordinary Shares are
characterized as "restricted securities" under the federal securities laws
inasmuch as the Buyer Ordinary Shares are being acquired from the Buyer in a
transaction not involving a public offering. Such Stockholder or Additional
Member understands that the Buyer Ordinary Shares have not been registered under
the Act by reason of their issuance or contemplated issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act,
that they must be held indefinitely unless a subsequent disposition thereof is
registered under the Act or is exempt from registration, and that the reliance
of the Buyer and others on this exemption is predicated in part on such
Stockholder's or Additional Member's representations and warranties.
2.9 Investment Experience. Such Stockholder or Additional Member has
carefully reviewed this Agreement, including the Exhibits and Schedules hereto,
and has carefully reviewed all other available materials concerning the Buyer
and has asked the Buyer all questions he, she or it deemed appropriate. Such
Stockholder or Additional Member represents and warrants that he, she or it (i)
is an "accredited investor," as that term is defined in ss. 501(a) of Regulation
D of the Act; and/or (ii) is experienced in evaluating and investing in
companies similar to the Buyer, can bear the economic risk of owning the Buyer
Ordinary Shares, including a complete loss of the investment, for an indefinite
period of time, and (alone or together with his, her or its advisors) has enough
knowledge and experience in financial and business matters to evaluate the
merits and risks of owning the Buyer Ordinary Shares.
2.10 Transfer and Assignment. Any transfer or assignment of the Buyer
Ordinary Shares must be made in compliance with the Act and applicable state
securities laws. No such assignment or transfer will be valid unless the Buyer
first receives notice of such assignment or transfer and an opinion of counsel
(which opinion of counsel must be reasonably satisfactory to the Buyer) to the
effect that such assignment or transfer does not violate the registration
requirements of the Act or any applicable state securities law. There are no
Contract, first refusal rights or arrangements of any kind between such
Stockholder or Additional Member and any other Person that require such
Stockholder or Additional Member to offer or sell the Buyer Ordinary Shares to
any Person, whether in connection with the transaction contemplated by this
Agreement, any resale of the Buyer Ordinary Shares in the future or otherwise.
2.11 Legends. Such Stockholder or Additional Member understands that
the certificate(s) evidencing the Buyer Ordinary Shares may bear a legend
substantially as follows:
The shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares have been acquired not
with a view to distribution and may not be offered, sold, transferred,
pledged or hypothecated in the absence of an effective registration
statement for the shares under the Act and under any applicable state
securities laws, or an opinion of counsel satisfactory to the Buyer
that the proposed transfer can be made in compliance with federal and
state securities laws.
and any legend required by any applicable state laws or regulations. In
addition, such certificates will bear a legend reflecting the transfer
restrictions set forth in Section 1.9.
11
2.12 Tax Status. Each Stockholder understands and acknowledges that the
qualification of the Merger as a reorganization under Section 368(a)(2)(E) of
the Code is dependent on a number of factors outside the control of the Buyer,
including without limitation, actions taken after the Closing by such
Stockholder and other holders of Company capital stock, and that the Buyer will
have no responsibility with respect to any such matter and is not assuring such
Stockholder that such qualification will be achieved. Each Stockholder confirms
that he, she or it has relied upon his, her or its own tax counsel, and not on
the Buyer or any representative of the Buyer, with respect to such
qualification. Each Additional Member understands and acknowledges that the
exchange of membership interests in the LLC for Buyer Ordinary Shares
contemplated hereby is a taxable transaction.
Section 3 Business Representations and Warranties of the Stockholder, the
Company and the LLC
The Stockholder, the Company and the LLC represent and warrant to the
Buyer that, on and as of the date hereof:
3.1 Subsidiaries, Etc. Except for the Company's ownership of a
membership interest in the LLC and as set forth in Schedule 3.1, the Company and
the LLC do not beneficially own any equity or debt interest (except as a
creditor in the ordinary course of business), direct or indirect, in any Person.
3.2 Financial Statements, Etc.
(a) Schedule 3.2(a) contains copies of the unaudited consolidated
balance sheets and consolidated statements of operations and shareholders equity
and of cash flows for the Company and the LLC at and for each of the three years
ended September 30, 2000 (the "Last Fiscal Year-End") (the "Financial
Statements"). The Financial Statements fairly present the consolidated financial
condition of the Company and the LLC at the dates indicated and the consolidated
results of operations and cash flows of the Company and the LLC for the periods
indicated in accordance with GAAP consistently applied throughout the periods
indicated (except as stated therein and for the absence of statements of
retained earnings and cash flows and footnotes and subject to normal,
nonmaterial year-end adjustments). The Company will engage its accountants,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, to review the unaudited financial statements for the year
ended September 30, 2000, and the cost of such review shall be borne by the
Buyer.
(b) [intentionally omitted]
(c) Certain Indebtedness. Schedule 3.2(c) sets forth all obligations of
the Company and the LLC with respect to borrowed money, debt securities,
capitalized leases and the deferred payment of the purchase price of property or
services over an original term of six months or more, and the Property of the
Company and the LLC, if any, subject to a Lien to secure any of such
obligations.
(d) Absence of Certain Liabilities. The Company and the LLC have no
liability or obligation of any nature, whether absolute, accrued, contingent or
otherwise, arising out of acts or omissions heretofore occurring, or
circumstances currently or heretofore existing, except: (i) as expressly set
forth in this Agreement (including without limitation disclosures in the
12
Schedules hereto); (ii) as accrued in the balance sheet included in the
Financial Statements; (iii) for liabilities and obligations incurred since the
Last Fiscal Year-End in the ordinary course of business consistent in nature and
amount with past practice; and (iv) liabilities and obligations of a kind not
required to be accrued in a balance sheet at the date hereof prepared in
accordance with GAAP which individually (or in the aggregate for related
matters), based on the facts known to the Company or the LLC are not reasonably
likely to subject the Company or the LLC to Damages in excess of $100,000.
(e) Absence of Certain Changes. Since the Last Fiscal Year-End, except
as set forth in Schedule 3.2(e):
(i) The Company and the LLC have operated its business in the
ordinary course.
(ii) There has been no material adverse change in the assets,
business, liabilities, financial condition, results of operations or
customer base of the Company or the LLC.
(iii) There has not been any damage, destruction or
condemnation known to the Company or the LLC with respect to Property
having an aggregate net book value on the Company's and LLC's
consolidated books in excess of $100,000, net of any insurance
recoveries.
(iv) There has not been any change in the accounting methods,
practices or principles of the Company or the LLC.
(v) Neither the Company nor the LLC has sold, transferred or
otherwise disposed of (or agreed or committed to sell, transfer or
otherwise dispose of) any Property other than the sale of inventory in
the ordinary course, or canceled, compromised, released or assigned any
debt or claim in its favor, where the aggregate amount of such sales,
transfers, dispositions, cancellations, compromises, releases or
assignments for both the Company and the LLC exceeds $100,000, except
with respect to this Agreement.
(vi) Neither the Company nor the LLC has instituted, settled
or agreed to settle any litigation, action or proceeding before any
Governmental Agency.
(vii) Neither the Company nor the LLC has assumed, guaranteed,
endorsed or otherwise become responsible (or otherwise agreed to become
responsible) for the obligations of any other Person, except for the
endorsement of negotiable instruments in the ordinary course of
business and the Company's guarantee of certain loan obligations of the
LLC.
(viii) Neither the Company nor the LLC has granted (or agreed
or committed to grant) any increase in compensation or fringe benefits
other than normal salary increases and stock option grants consistent
with prior periods and employment offers issued in the ordinary course
of business.
13
3.3 Taxes.
(a) The Company and the LLC has each properly completed and filed,
within the time and in the manner prescribed by law, all Tax returns and other
documents required to be filed in respect of all Taxes, and all such returns and
other documents are true, correct and complete. The Company and the LLC has each
furnished to the Buyer copies of all income Tax returns of the Company and/or
the LLC for the past four years. The Company and the LLC have, within the time
and in the manner prescribed by law, paid all Taxes that are due and payable.
The Company and the LLC have established reserves on their consolidated books
that are adequate for the payment of all Taxes not yet due and payable.
(b) (i) None of such returns contained a disclosure statement under
Section 6662 of the Code or any similar provision of foreign law;
(ii) Neither the Company nor the LLC has received written
notice from any federal or foreign taxing authority asserting any
deficiency against any the Company or the LLC or claim for additional
Taxes in connection therewith, other than any deficiency or claim which
has been previously settled or for which appropriate reserves are
included in the Financial Statements;
(iii) Neither the Company nor the LLC has received any notice
of any pending action, audit, proceeding or investigation with respect
to the assessment or collection of federal or foreign Taxes or a claim
for refund made by the Company and/or the LLC with respect to federal
or foreign Taxes previously paid, and to the Company's and the LLC's
knowledge, no such pending action, audit, proceeding or investigation
exists;
(iv) All amounts that are required to be collected or withheld
by the Company or the LLC with respect to federal or foreign Taxes have
been duly collected or withheld, and all such amounts that are required
to be remitted to any federal or foreign taxing authority have been
duly remitted;
(v) No audit has been conducted of any income tax return filed
by the Company or the LLC. The time during which such returns remain
open for examination has expired in accordance with applicable statute
and regulations, except for those returns for which the normally
applicable statutory/regulatory period has not yet elapsed;
(vi) Neither the Company and the LLC has requested or been
granted any currently effective waiver or extension of any statute of
limitations with respect to the assessment or filing of any Tax or
return with respect thereto;
(vii) No consent has been filed under Section 341(f) of the
Code with respect to the Company or the LLC;
(viii) Neither the Company nor the LLC are required to include
in income any adjustment pursuant to Section 481(a) of the Code (or
similar provisions of foreign laws or regulations) by reason of a
change in accounting method nor does the Company or the LLC have any
knowledge that the Internal Revenue Service (or other taxing authority)
has proposed, or is considering, any such change in accounting method;
and
14
(ix) Neither the Company nor the LLC is a party to or is bound
by or has any continuing obligation under any tax sharing or similar
agreement or arrangement with any Person.
3.4 Title to Properties.
(a) Neither the Company nor the LLC owns any real Property.
(b) Schedule 3.4(b) is a true and complete summary based on the books
and records of the Company and the LLC of all items of personal Property owned
by the Company or the LLC with a net book value at the Last Fiscal Year-End in
excess of $5,000 per item.
(c) Except as set forth in Schedule 3.4(c), the Company and the LLC
each has good title to all of its Properties, in each case free and clear of all
Third-Party Rights .
(d) Except with respect to items leased as described in Schedule 3.7,
the Company and the LLC each owns all material items of non-inventory tangible
and intangible personal Property that were owned as of the Last Fiscal Year-End
and used in generating the revenue shown in the last audited statement of
operations of the Company and the LLC for the fiscal year ending on the Last
Fiscal Year-End previously delivered to the Buyer, subject to any sales or
dispositions of tangible personal Property since the Last Fiscal Year-End in the
ordinary course of business.
3.5 Inventories. Since the Last Fiscal Year-End, all sales of inventory
have been made in the ordinary course of business and no inventory has been
pledged as collateral.
3.6 Accounts Receivable. The respective accounts receivable of the
Company and the LLC (i) are bona fide and arose from valid sales in the ordinary
course of business in material conformity with all applicable Legal
Requirements, (ii) are valid and binding obligations of the debtors requiring no
further performance by the Company or the LLC, and (iii) subject to the
allowance for doubtful accounts receivable in the latest balance sheet included
in the Financial Statements, are fully collectible and not subject to any
offsets or counterclaims and do not represent guaranteed sale, sell-or-return
transactions or any other similar understanding. No accounts receivable have
been pledged as collateral to any Person. The amounts shown for accounts
receivable in the Financial Statements reflect an allowance for doubtful
accounts receivable in accordance with GAAP.
3.7 Leases, Etc. Schedule 3.7 lists all leases, rental agreements,
conditional sales contracts and other similar Contracts under which the Company
or the LLC leases (as lessor or lessee) any real or personal Property with
rental payments exceeding $5,000 per year (collectively, the "Disclosable
Leases"). All Disclosable Leases are, in all material respects, valid, in good
standing and enforceable by the Company or the LLC, as the case may be, in
accordance with their terms. Neither the Company, the LLC nor any other party to
any Disclosable Lease is in material breach thereof. The Company and the LLC
each enjoys peaceable possession of all real estate premises subject to
Disclosable Leases to which it is a party and to all personal Property subject
to Disclosable Leases to which it is a party.
3.8 Facilities, Equipment. The Company and the LLC each owns or leases
all material land, buildings and equipment used in the operation of its
business. Neither the Company nor
15
the LLC has received any notice of any material violation of any Legal
Requirement or Order by the Company's or the LLC's facilities which has not been
corrected, and no facility of the Company or the LLC is in material violation of
any Legal Requirement or Order.
3.9 Insurance. Schedule 3.9 lists and describes briefly all binders and
policies of liability, theft, life, fire and other forms of insurance and surety
bonds, insuring the Company, the LLC or any of their respective Properties,
assets and business as of the date hereof. Except as noted in Schedule 3.9, all
listed policies and binders insure on an occurrence, rather than claims-made,
basis. All policies and binders listed in Schedule 3.9 are valid and in good
standing and in full force and effect and the premiums have been paid when due.
Except for any claims set forth in Schedule 3.9, there are no outstanding unpaid
claims under such policy or binder, and, except as set forth in Schedule 3.9,
the Company and the LLC have not received any notice of cancellation, general
disclaimer of liability or non-renewal of any such policy or binder.
3.10 Employment and Benefit Matters.
(a) Schedule 3.10(a) lists each of the following for each employee of
the Company or the LLC: employer, name, hire date, current salary and currently
held options (including the vesting schedule applicable to such options). None
of the employees listed on Schedule 3.10(a) has given Company or the LLC notice
of his or her intention to resign his or her position with the Company and the
LLC and Company and the LLC has no present intention to terminate any of such
employees.
(b) Schedule 3.10(b) lists all of the following items which are
applicable to the Company and the LLC: (i) employment Contracts with any
employee, officer or director; and (ii) Contracts or arrangements with any
Person providing for bonuses, profit sharing payments, deferred compensation,
stock options, stock purchase rights, retainer, consulting, incentive, severance
pay or retirement benefits, life, medical or other insurance, payments triggered
by a change in control or any other employee benefits or any other payments,
"fringe benefits" or perquisites which are not terminable at will without
liability to the Company or the LLC or which are subject to ERISA. The contracts
or arrangements referred to in the foregoing clause (ii) are herein called
"Benefit Plans."
(c) Neither the Company, the LLC nor any of their ERISA Affiliates has
any union contracts, collective bargaining, union or labor agreements or other
Contract with any group of employees, labor union or employee representative(s),
nor has the Company, the LLC or any ERISA Affiliate ever participated in or
contributed to any single employer defined benefit plan or multi-employer plan
within the meaning of ERISA Section 3(37), nor is the Company or the LLC
currently engaged in any labor negotiations, excepting minor grievances, nor is
the Company the subject of any union organization effort. The Company and the
LLC is each in material compliance with applicable Legal Requirements respecting
employment and employment practices and terms and conditions of employment,
including without limitation health and safety and wages and hours. No unfair
labor practice complaint is pending against the Company or the LLC before the
National Labor Relations Board or other Governmental Agency. There is no labor
dispute, strike, slowdown or work stoppage pending or threatened against the
Company or the LLC.
16
(d) True and correct copies of each Benefit Plan listed in Schedule
3.10(b) that is subject to ERISA (an "ERISA Plan") and related trust agreements,
insurance contracts, and summary descriptions have been delivered or made
available to the Buyer by the Company and the LLC. The Company and the LLC have
also delivered or made available to the Buyer a copy of the two most recently
filed IRS Forms 5500, with attached financial statement and accountant's
opinion, if applicable, for each ERISA Plan. The Company and the LLC have also
delivered or made available to the Buyer a copy of, in the case of each ERISA
Plan intended to qualify under Section 401(a) of the Code, the most recent
Internal Revenue Service letter as to its qualification under Section 401(a) of
the Code. Nothing has occurred prior to or since the issuance of such letters to
cause the loss of qualification under the Code of any of such plans.
(e) Except as disclosed in Schedule 3.10(e), none of the ERISA Plans
has participated in, engaged in or been a party to any prohibited transaction as
defined in ERISA or the Code, and there are no material claims pending or
overtly threatened, involving any Benefit Plan listed in Schedule 3.10(b). There
have been no material violations of any reporting or disclosure requirements
with respect to any ERISA Plan.
(f) Neither the Company, the LLC nor any of their ERISA Affiliates has
any liability for any excise tax imposed by Section 4971, 4972, 4974, 4975,
4976, 4977, 4978, 4978B, 4979, 4979A, 4980 or 4980B of the Code.
(g) Except as disclosed in Schedule 3.10(g), neither the Company, the
LLC nor any of their respective ERISA Affiliates maintains any plans providing
benefits within the meaning of Section 3(1) of ERISA (other than group health
plan continuation coverage under Section 601 of ERISA and 4980B(f) of the Code)
to former employees or retirees.
3.11 Contracts. Except as shown on Schedules 3.7 and 3.11, and except
for Contracts fully performed or terminable at will without liability to the
Company or the LLC (both before and after the Effective Time), neither the
Company nor the LLC is a party to any Contract (i) which materially affects the
Company or the LLC or their respective businesses, Properties, assets,
operations or financial condition, (ii) which contemplates performance by the
Company or the LLC during a remaining period of more than one year (90 days in
the case of any purchase Contract) or involves remaining commitments for sale or
purchase in excess of $50,000, (iii) under which the rights or obligations of
any party will change, accelerate, terminate, vest or in any other way be
affected by the consummation of the Merger or the Exchange or (iv) in which any
Affiliate of the Company or the LLC (other than the Company) has any direct or
indirect economic interest. True and complete copies of each Contract
disclosable on Schedule 3.11 (a "Disclosable Contract") have been delivered to
the Buyer. Each Disclosable Contract is, in all material respects, valid, in
good standing and enforceable by the Company and/or the LLC, as the case may be,
in accordance with its terms. Neither the Company, the LLC nor any other party
to any Disclosable Contract is in material breach thereof.
3.12 Officers and Directors, Etc. Schedule 3.12 is a true and complete
list of:
(a) the names and addresses of each of the Company's and the LLC's
officers and directors;
17
(b) the name of each bank or other financial institution in which the
Company or the LLC has an account, deposit or safe deposit box and the names of
all persons authorized to draw thereon or to have access thereto; and
(c) the name of each bank or other financial institution in which the
Company or the LLC has a line of credit or other loan facility.
3.13 Corporate Documents. The Company and the LLC have furnished or
made available to the Buyer or its representatives true, correct and complete
copies of (i) the articles or certificate of incorporation and bylaws of the
Company and the operating agreement of the LLC, (ii) the minute books of the
Company and the LLC containing all records required to be set forth of all
proceedings, consents, actions and meetings of the stockholders and board of
directors of the Company and the members and managers of the LLC; (iii) all
material Permits and Orders with respect to the Company and the LLC; (iv) the
stock transfer books of the Company setting forth all issuances and transfers of
any capital stock; and (v) the membership records of the LLC setting forth all
issuances and transfers of any membership interest.
3.14 Legal Proceedings, Claims. There is no action, suit, proceeding or
investigation pending in any court or before any arbitrator or before or by any
Governmental Agency against the Company, the LLC or any of their Properties or
business, and no such action, suit, proceeding or investigation currently
threatened. Neither the Company nor the LLC is currently subject to any claim by
any Person, whether or not such claim involves the threat of any action, suit,
proceeding or investigation.
3.15 Compliance with Instruments, Orders and Legal Requirements.
Neither the Company nor the LLC is in material violation of, or in default in
any material respect with respect to, any term or provision of its articles or
certificate of incorporation or bylaws or operating agreement, or any Order or
any Legal Requirement applicable to the Company or the LLC.
3.16 Permits. The Company and the LLC each holds all Permits material
to the conduct of its business as and where now conducted. There is not pending
nor, threatened any proceedings to terminate, revoke, limit or impair any
material Permit.
3.17 Intellectual Property.
(a) Except as set forth on Schedule 3.17(a), the Company or the LLC
owns, solely and exclusively, and free and clear of any Third-Party Right, all
title to and rights in all Intellectual Property that is used in the business of
the Company or the LLC as currently conducted (collectively, the "Wingra
Intellectual Property"). "Intellectual Property" means patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
copyright registrations, copyrights, and any applications for any of the
foregoing, net lists, schematics, industrial models, inventions, technology,
know-how, trade secrets, computer software programs or applications (in both
source code and object code form), development documentation, programming tools,
data, technical information, and tangible or intangible proprietary information
or material.
(b) Schedule 3.17(b) lists all patents, patent applications,
trademarks, trade names, service marks and copyrights included in the Wingra
Intellectual Property which have been registered, issued
18
or applied for and the jurisdictions in which such Wingra Intellectual Property
right has been issued, registered or applied for.
(c) Schedule 3.17(c) lists (i) all licenses, sublicenses and other
agreements, written or unwritten, to which the Company or the LLC is a party and
pursuant to which any Person is authorized to use, resell, sublicense or market
or distribute any Wingra Intellectual Property, and (ii) all written, and all
material unwritten, licenses, sublicenses and other agreements to which the
Company or the LLC is a party and pursuant to which the Company or the LLC is
authorized to use, resell or distribute any third-party Intellectual Property,
including without limitation software, opensource, freeware, shareware and
hardware, (collectively, "Third-Party Intellectual Property") which are
incorporated in or are a part of any products which the Company or the LLC has
sold, resold, licensed or sublicensed, or which is material to the current
operations of the Company or the LLC, other than (in the case of Third-Party
Intellectual Property used internally only) readily-obtainable standard products
with wide retail distribution. The Company and the LLC has, and at the relevant
times in the past had, all necessary rights to resell or distribute any hardware
and software of a third party which it resells or distributes or has resold or
distributed. Neither the Company nor the LLC is in material violation of any
license, sublicense or agreement described in Schedule 3.17(c). To the knowledge
of the Company and the LLC, neither the Company nor the LLC, nor any of the
products or operations of either, is in material violation of or materially
infringes any Third-Party Intellectual Property. Except as set forth on Schedule
3.17(c), neither the Company nor the LLC has received any claim that it has lost
or will lose any rights of the Company or the LLC under any licenses to
Third-Party Intellectual Property to which the Company or the LLC is a party.
The execution and delivery of this Agreement by the Company and the LLC and the
consummation of the transactions contemplated hereby will neither cause the
Company or the LLC to be in violation or default under any such license,
sublicense or agreement nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement. Except as listed on Schedule 3.17(c), neither the Company nor the LLC
has assigned or licensed to any third party any right, title or interest in the
Wingra Intellectual Property. Except as listed on Schedule 3.17(c), neither the
Company nor the LLC is contractually obligated to pay any compensation to any
third party for the use of the Wingra Intellectual Property or the Third-Party
Intellectual Property.
(d) Except as set forth in Schedule 3.17(d), to the Company's and the
LLC's knowledge, there is no material unauthorized use, disclosure, infringement
or misappropriation of any Wingra Intellectual Property or any Third-Party
Intellectual Property licensed by or through the Company or the LLC by any third
party, including without limitation any employee or former employee of the
Company or the LLC. Neither the Company nor the LLC has entered into any
agreement to indemnify any other person against any charge of infringement of
any Third-Party Intellectual Property, other than indemnification provisions
contained in purchase orders arising in the ordinary course of business.
(e) To the Company's and the LLC's knowledge, all patents, registered
trademarks, registered service marks and registered copyrights held by the
Company or the LLC are valid and subsisting. To the Company's and the LLC's
knowledge, there is no assertion or claim (or basis therefor) challenging the
validity of any Wingra Intellectual Property. Neither the Company nor the LLC
has been sued in any suit, action or proceeding, or otherwise notified of any
claim, which involves a claim of infringement of any Intellectual Property of
any third party, or received an unsolicited request or proposal that the Company
or the LLC license (as licensee) any Intellectual Property of any third party
(other than normal marketing and sales activity). Neither the conduct of
19
the business of the Company and the LLC as currently conducted nor the
manufacture, sale, licensing or use of any of the products of the Company or the
LLC as now manufactured, sold or licensed or used, infringes on or conflicts
with, in any way, any trademark, trademark right, trade name, trade name right,
service ▇▇▇▇ or copyright, or, to the Company's or the LLC's knowledge, any
patent, patent right, industrial model or invention, of any third party that
individually or in the aggregate has or is reasonably likely to have a Material
Adverse Effect. To the Company's the LLC's knowledge and except as set forth on
Schedule 3.17(e), no third party is challenging the ownership by the Company or
the LLC, or the validity or effectiveness of, any of the Wingra Intellectual
Property. Neither the Company nor the LLC has brought any action, suit or
proceeding for infringement of Wingra Intellectual Property or breach of any
license or agreement involving Wingra Intellectual Property against any third
party. There are no pending, or to the Company's or the LLC's knowledge,
threatened interference, re-examinations, oppositions or nullities involving any
patents, patent rights or applications therefor of the Company or any
Subsidiary. Except as set forth on Schedule 3.17(e), to the Company's and the
LLC's knowledge, there is no breach or violation by a third party of, or actual
or threatened, loss of rights under, any licenses to which the Company or the
LLC is a party.
(f) Except as set forth in Schedule 3.17(f), the Company or the LLC, as
appropriate, has secured written assignments from all current and former
consultants and employees who contributed to the creation or development of the
Wingra Intellectual Property currently being provided or marketed to customers
or currently being used by the Company or the LLC of the rights to such
contributions that the Company or the LLC does not already own by operation of
law, recognizing the Company's or the LLC's ownership of all such Wingra
Intellectual Property, agreeing to hold such of it as is not protected by
patents, patent applications or copyright ("Confidential Information") in
confidence and not to use any Confidential Information except in connection with
such consultant's or employee's work for the Company or the LLC and agreeing to
assist the Company or the LLC, as appropriate, to perfect in its own name any
patentable Wingra Intellectual Property to which such consultant or employee
contributed.
(g) The Company and the LLC has each taken all commercially reasonable
steps to protect and preserve the confidentiality of all Confidential
Information. Except as set forth on Schedule 3.17(g), all use, disclosure or
appropriation of Confidential Information by or to a third party has been
pursuant to the terms of a written confidentiality or nondisclosure agreement
between the Company, the LLC or any Subsidiary and such third party. Schedule
3.17(g) lists all such agreements currently in effect.
(h) Schedule 3.17(h) lists (including names, addresses, contact names,
telephone numbers and termination date and next renewal date) all Contracts or
other arrangements currently in effect pursuant to which the Company or the LLC
is obligated to provide installation, maintenance, consultation or other support
services (collectively, the "Customer Support Agreements"). Except for any
nonstandard maintenance agreements specified as such in Schedule 3.17(h), all of
the Customer Support Agreements are in all material respects in the form of the
license agreement identified as the standard maintenance agreement set forth in
Schedule 3.17(h). The versions of the products currently supported by the
Company and the LLC are set forth in Schedule 3.17(h).
(i) There are no material defects in the Company's or the LLC's
products, and there are no material errors in any documentation, specifications,
manuals, user guides, promotional material, internal notes or memos, technical
documentation, drawings, flow charts, diagrams, source language
20
statements, demo disks, benchmark test results or other written materials
related to, associated with or used or produced in the development of the
Company's or the LLC's products.
(j) Schedule 3.17(j) lists, as of the date hereof, all written
agreements or other arrangements under which the Company, the LLC or any
Subsidiary has provided or agreed to provide source code of Enterprise
Migrator(R), Net Junction(R), Missive(R) or any other Wingra Intellectual
Property to any third Person, whether pursuant to escrow arrangements or
otherwise.
(k) The Company and the LLC have made available to the Buyer copies of
the Company's and the LLC's standard forms of end-user licenses. Except as
disclosed in Schedule 3.17(k) (which describes the material variations from the
standard form of end-user license), as of the date hereof, neither the Company
nor the LLC has entered into any end-user licenses which contain terms
materially different than as set forth in the standard forms of such agreements
made available to Purchaser.
(l) No government funding or university or college facilities were used
in the development of any product currently marketed or currently proposed to be
marketed, and no such product was developed pursuant to any contract or other
agreement with any Person except pursuant to Contracts listed in Schedule
3.17(l).
(m) Schedule 3.17(m) describes the categorization of warranty claims
against the Company and the LLC and lists all warranty claims in the categories
there listed related to products currently or previously marketed by the Company
or the LLC and the nature of such claims, except for customary product support
and maintenance, that are pending or were made within the past twelve months.
Except as set forth in Schedule 3.17(m), to the knowledge of the Company and the
LLC, neither the Company nor the LLC has made any material oral or written
representations or warranties with respect to its products or services.
3.18 Capital Expenditures. Schedule 3.18 sets forth, by nature and
amount, all budgeted capital expenditures of the Company and the LLC for which
commitments have been or are budgeted to be made, or for which payments or
current liabilities have been made or incurred or are budgeted to be made or
incurred, after the Last Fiscal Year-End.
3.19 Environmental Matters. There are no Hazardous Materials used or
present at any location currently used by the Company or the LLC in the conduct
of the Business, except for any Hazardous Materials constituting normal office
supplies. To the knowledge of the Company and the LLC, no location currently or
previously used by the Company or the LLC is contaminated by any Hazardous
Material, and no event has occurred and no activity has been or is being
conducted by the Company or the LLC or any other Person which has resulted or
could reasonably result in contamination of any location currently or previously
used by the Company or the LLC by any Hazardous Material. To the knowledge of
the Company and the LLC, no Government Agency has commenced any investigation or
proceeding with respect to the contamination of any location currently or
previously used by the Company or the LLC by any Hazardous Material.
3.20 Illegal Payments. To the Company's and the LLC's knowledge, none
of the Company, the LLC nor any of their respective directors, officers,
managers, employees or agents has, directly or indirectly, paid or delivered any
fee, commission or other sum of money or item
21
of Property however characterized to any broker, finder, agent, government
official or other person, in the United States or any other country, in any
manner related to the business or operations of the Company or the LLC, which
the Company, the LLC or any such director, officer, manager, employee or agent
knows or has reason to believe to have been illegal under any law.
3.21 Confidentiality Obligations. Neither the Company nor the LLC is in
possession of any information, documents or materials under an obligation of
confidentiality or use to any other Person other than pursuant to a Contract
described in Schedule 3.11. The conduct of the Business as presently conducted
does not violate or conflict with the obligation of confidentiality or use to
any other Person.
3.22 Affiliate Transactions. Schedule 3.22 lists all transactions since
December 31, 1996, and all obligations currently in effect (whenever arising),
between the Company or the LLC on the one hand and any Affiliate of the Company
or the LLC or any Person related to an Affiliate of the Company or the LLC by
blood or marriage on the other hand.
3.23 Information Statement. The information supplied by the Company,
the Stockholder, the LLC and the Additional Members for inclusion in any
information statement (the "Information Statement") to be sent to the holders of
Shares or Units or in connection with such holders' consideration of the Merger
or the Exchange shall not, on the date the Information Statement is first mailed
to such holders, at the time such holders vote or consent to the Merger and at
the Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any previously communicated
statement which has become false or misleading. Notwithstanding the foregoing,
neither the Company, the Stockholder, the LLC nor the Additional Members make
any representation, warranty or covenant with respect to any information
supplied by the Buyer or Merger Sub that is contained in the Information
Statement.
3.24 Representations. No representation or warranty by the Company, the
LLC, the Stockholder or the Additional Members in this Agreement, or in any
document furnished by the Company, the LLC, the Stockholder or the Additional
Members pursuant hereto contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
and therein not misleading.
Section 4 Representations and Warranties of Buyer
The Buyer hereby represents and warrants to the Stockholder, the
Company, the Additional Members and the LLC that, on and as of the date hereof:
4.1 Organization, Standing, Etc. of Buyer and Merger Sub. The Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of Israel. The Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Wisconsin. The Buyer and
Merger Sub have full power and authority under
22
applicable corporate law to own, lease and operate their Properties and to carry
on the business in which they are engaged.
4.2 Authority; Enforceability. The Buyer and Merger Sub have all
necessary power and authority under applicable corporate law to execute, deliver
and perform their obligations under this Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer and Merger Sub have been duly authorized by all
necessary action under applicable corporate law and no other approvals are
required. This Agreement is legally binding on and enforceable against the Buyer
and Merger Sub in accordance with its terms. The execution, delivery and
performance of this Agreement by the Buyer and Merger Sub and the consummation
by the Buyer and Merger Sub of all of the transactions contemplated hereby, (w)
will not violate or conflict with the memorandum of association, articles of
association or articles of incorporation or bylaws of the Buyer or Merger Sub,
(x) do not require any Third-Party Action relating to the Buyer or Merger Sub
except those listed on Schedule 4.2, (y) do not violate any Legal Requirement or
Order applicable to the Buyer or Merger Sub and (z) do not conflict with or
constitute a default (with or without the giving of notice or the passage of
time or both) under, or result in any acceleration or right of acceleration of
any obligations under, any Contract to which the Buyer or Merger Sub is a party,
where, in each case, the absence of such Third-Party Action or such violation,
conflict, default or acceleration would in any way adversely affect the
transactions contemplated hereby.
4.3 SEC Information. As of their respective filing dates (except as
thereafter amended), all documents that the Buyer has filed with the SEC (the
"Buyer SEC Documents") have complied in all material respects with the
applicable requirements of the Act or the Exchange Act, and none of the Buyer
SEC Documents has contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading except to the extent corrected by a subsequently filed
Buyer SEC Document.
4.4 Information Statement. The information supplied by the Buyer for
inclusion in the Information Statement shall not, on the date the Information
Statement is first mailed to the holders of Shares or Units, at the time such
holders vote or consent to the Merger and at the Effective Time, contain any
statement which, at such time, is false or misleading with respect to any
material fact with respect to such information, or omit to state any material
fact necessary in order to make the statements made therein with respect to such
information, in light of the circumstances under which they are made, not false
or misleading; or omit to state any material fact necessary to correct any
previously communicated statement with respect to such information which has
become false or misleading. Notwithstanding the foregoing, neither the Buyer nor
Merger Sub makes any representation, warranty or covenant with respect to any
information supplied by the Company, the Stockholder, the LLC or the Additional
Members that is contained in the Information Statement.
4.5 HSR Act. The Buyer is its own "ultimate parent entity." The "total
assets" and "annual net sales" of the Buyer are each less than $100,000,000. The
quoted terms used in this Section 4.5 have the meanings stated in the HSR Act.
23
4.6 Representations. No representation or warranty by the Buyer or
Merger Sub in this Agreement, or in any document furnished by the Buyer or
Merger Sub pursuant hereto contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
and therein not misleading.
Section 5 Conditions to Obligations of Buyer at Closing
The obligations of the Buyer hereunder to be performed at the Closing
are subject to the satisfaction at or prior to the Closing of the following
conditions, except for any condition the Buyer may waive in writing in
accordance with Section 8.3.
5.1 Representations and Warranties.
(a) The representations and warranties contained in Section 2 shall
have been true on the date of this Agreement and shall be true at and as of
immediately prior to the Closing with the same effect as though made at and as
of immediately prior to the Closing.
(b) The representations and warranties contained in Section 3 which are
qualified as to materiality or a specified dollar amount shall have been true on
the date of this Agreement and shall be true at and as of immediately prior to
the Closing with the same effect as though made at and as of immediately prior
to the Closing.
(c) The representations and warranties contained in Section 3 which are
not qualified as to materiality or a specified dollar amount shall have been
true in all material respects on the date of this Agreement and shall be true in
all material respects at and as of immediately prior to the Closing with the
same effect as though made at and as of immediately prior to the Closing.
5.2 Closing Certificate. The Company, the LLC, each Stockholder and
each Additional Member shall have delivered to the Buyer its, his or her
certificate dated the date of the Closing that the conditions specified in
Section 5.1 are satisfied. Such certificate shall be deemed a representation and
warranty of the Company, the LLC, each Stockholder and each Additional Member
under Sections 2 and 3 for all purposes of this Agreement.
5.3 Performance. The Company, the LLC, each Stockholder and each
Additional Member shall have performed and complied in all material respects
with all covenants required herein to be performed or complied with by it, him
or her on or before the Closing.
5.4 Third-Party Action. All Third-Party Action required in order to
consummate the Closing on the terms hereof shall have been taken.
5.5 Opinion of Counsel. The Buyer shall have received from ▇▇▇▇▇ &
Lardner, counsel to the Company and the LLC, an opinion dated the date of the
Closing, in form and substance customary for similar transactions and reasonably
satisfactory to the Buyer.
5.6 Transactional Litigation. No action, suit or proceeding before any
Governmental Agency shall have been commenced, and no investigation by any
Governmental Agency shall have been commenced or overtly threatened, against the
Company, the LLC, the Buyer, Merger Sub, U.S. Sub or any of their respective
principals, officers, directors or shareholders seeking to
24
restrain, prevent or change the transactions contemplated hereby or questioning
the validity or legality of any of such transactions or seeking damages in
connection with any of such transactions, other than Dissenters' Rights.
5.7 Interim Events. None of the events listed in Sections 7.10(a)
through (h) shall have occurred.
5.8 Management Changes. No change in the chief executive officer, chief
technology officer or chief financial officer of the Company or the LLC and no
material change in the other employees of the Company or the LLC shall have
occurred from the date hereof.
5.9 Pay-Off. The holders of all Indebtedness of the Company or the LLC,
which the Buyer, in its business discretion, desires to pay off or refinance in
connection with the consummation of the transactions contemplated hereby shall
have accepted the Buyer' tender of the pay-off amount and delivered such
releases as are reasonably satisfactory to the Buyer.
5.10 Releases. The Stockholder, the Additional Members and the
directors, officers and managers of the Company and the LLC shall have entered
into releases in favor of the Company and the LLC in the form attached as
Exhibit B.
5.11 Key Customers. No material adverse change shall have occurred
since the Last Fiscal Year-End in the current or prospective business
relationships between the Company and the LLC on the one hand and any of the top
five customers of the Company and the LLC during the year ended September 30,
2000 on the other hand:
5.12 Stockholder Approval. The Stockholder shall have approved the
Merger and none of the Company's stockholders entitled to vote thereon shall
have filed notices of intention to dissent which would result in a cash payment,
at the Average Closing Price, of more than $100,000.
5.13 Employees. Not less than 75% of the employees of the Company and
the LLC shall have indicated to the Buyer's reasonable satisfaction that they
will continue their employment with the Surviving Corporation following the
Merger and Exchange.
5.14 Average Closing Price. The Average Closing Price shall not be less
than $11.00 unless the Closing occurs on or before December 6, 2000.
5.15 Termination of Agreements. All agreements between the Company and
its shareholders, and all agreements between the LLC and its members, or among
the Additional Members, relating to registration rights, first refusal or first
offer rights, pre-emptive or percentage maintenance rights, co-sale rights and
similar rights shall have terminated on or before the Effective Time pursuant to
their terms or a termination agreement reasonably satisfactory to Buyer.
5.16 Material Adverse Effect on the Company. There shall not have
occurred a Material Adverse Effect on the Company.
25
5.17 Corporate and Other Proceedings. All corporate and other
proceedings on the part of the Company, the LLC, the Additional Members and the
Company's shareholders in connection with the transactions to be consummated at
the Closing, and all documents and instruments incident to such transactions,
shall be reasonably satisfactory in substance and form to the Buyer.
Section 6 Conditions to Company's, LLC's, Stockholder's and Additional Members'
Obligations at Closing
The obligations of Company, the LLC, the Stockholder and the Additional
Members hereunder to be performed at the Closing are subject to the satisfaction
at or prior to the Closing of the following conditions, except for any condition
the Holders' Agent may waive in accordance with Section 8.3.
6.1 Representations and Warranties. The representations and warranties
of the Buyer contained in Sections 4.1 and 4.2 shall have been true in all
respects on the date of this Agreement and shall be true in all respects at and
as of immediately prior to the Closing with the same effect as though made at
and as of immediately prior to the Closing, and the representations and
warranties of the Buyer contained in Sections 4.3, 4.4 and 4.5 shall have been
true in all material respects on the date of this Agreement and shall be true in
all material respects at and as of immediately prior to the Closing with the
same effect as though made at and as of immediately prior to the Closing.
6.2 Closing Certificate. The Buyer shall have delivered to the Company
a certificate dated the date of the Closing that the conditions specified in
Section 6.1 are satisfied. Such certificate shall be deemed a representation and
warranty of the Buyer under Section 4 for all purposes of this Agreement.
6.3 Performance. The Buyer shall have performed and complied in all
material respects with all covenants required herein to be performed or complied
with by the Buyer on or before the Closing.
6.4 Third-Party Action. All Third-Party Action required in order to
consummate the Closing on the terms hereof, other than any the absence of which
in the aggregate would not have a material effect on the transactions
contemplated hereby, shall have been taken.
6.5 Opinion of Counsel. The Company, the Stockholder and the Additional
Members shall have received at the Closing from McCutchen, Doyle, ▇▇▇▇▇ &
▇▇▇▇▇▇▇, LLP, counsel to the Buyer and Merger Sub, an opinion dated the date of
the Closing, in form and substance customary for similar transactions and
reasonably satisfactory to Company.
6.6 Transactional Litigation. No action, suit or proceeding before any
Governmental Agency shall have been commenced, and no investigation by any
Governmental Agency shall have been commenced or overtly threatened, against the
Company, the Buyer, Merger Sub or any of their respective principals, officers,
directors or stockholders seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the validity or legality of any
of such transactions or seeking damages in connection with any of such
transactions, other than Dissenters' Rights.
26
6.7 Stockholder Approval. The Merger shall have been approved by not
less than a majority of the Shares entitled to vote thereon.
6.8 Material Adverse Effect on the Buyer. There shall not have occurred
a Material Adverse Effect on the Buyer.
6.9 Listing. The Buyer Ordinary Shares to be issued pursuant to this
Agreement shall have been approved for listing on the Nasdaq National Market.
6.10 Average Closing Price. The Average Closing Price shall not be less
than $11.00 unless the Closing occurs on or before December 6, 2000.
6.11 Bonus. The Buyer shall have provided to designated LLC continuing
employees a signing and stay bonus in the amounts and pursuant to the terms
heretofore agreed upon by the Buyer and the LLC.
6.12 Corporate and Other Proceedings. All corporate and other
proceedings on the part of the Buyer and Merger Sub in connection with the
transactions to be consummated at the Closing, and all documents and instruments
incident to such transactions, shall be reasonably satisfactory in substance and
form to the Holders' Agent.
Section 7 Covenants
7.1 Non-Disclosure. Each party agrees not to divulge or communicate, or
use for any purpose other than evaluating this transaction or exercising rights
as a party hereto, any information or materials concerning this Agreement, the
negotiation between the parties hereto and the transactions contemplated hereby,
except to the extent that such information (w) is or hereafter becomes lawfully
obtainable from other sources, (x) is required to be disclosed to a Governmental
Agency having jurisdiction over the party or its Affiliates, (y) is otherwise
required by law to be disclosed or (z) is disclosed following a waiver in
writing from the other parties. Promptly after the Effective Time, the Buyer,
the Company and the LLC will issue a mutually agreeable press release concerning
the transactions contemplated hereby. The parties also hereby ratify and confirm
the Confidentiality and Nonsolicitation Agreement dated October 2, 2000, which
shall continue in effect.
7.2 Survival of Representations and Warranties, Indemnification.
(a) Survival. All representations and warranties made under Section 2,
3 or 4 shall survive the Closing and any investigation with respect thereto by
an authorized party. Following the Closing, however, the Company and the LLC
shall have no liability with respect to any representation or warranty and shall
not be subject to any contribution, indemnity or similar claims with respect
thereto by any Stockholder, Additional Member or any other Person.
(b) Representations and Warranties in Part A of Section 2 and in
Section 3. In the event of any misrepresentation or breach of warranty in Part A
of Section 2 or in Section 3 (it being agreed that for purposes of determining
the existence of any such misrepresentation, all such representations,
warranties or covenants of the Stockholder, Additional Member, the LLC and the
Company that are qualified as to materiality or as to a specified threshold or
minimum
27
amounts shall be deemed to be not so qualified), the Buyer shall be entitled to
recover the related Recoverable Amount from the Escrow Account, provided that
(i) the Buyer gives notice of such misrepresentation or breach in accordance
with the Escrow Agreement, in reasonable detail, specifying the amount of the
claim, on or before 5:00 p.m. Pacific Time on the Last Escrow Claim Date, it
being understood that no recovery may be had against the Escrow Account with
respect to any claim which is not the subject of such a notice given by such
time, and (ii) the Buyer shall not be entitled to any such recovery unless the
aggregate Recoverable Amount for all claims made under this Section 7.2(b)
exceeds $150,000, in which event the Buyer may recover from the Escrow Account
the entire Recoverable Amount.
"Recoverable Amount" means Damages, if any, proximately resulting to
the Buyer on account of any misrepresentation, breach of warranty or breach of
covenant.
The Company, the Stockholder, the LLC, the Additional Members and any
Affiliate of the Company or the LLC or any Affiliate of the Stockholder or
Additional Members shall not have any liability or obligation of any kind to the
Buyer, or any other Person on account of the subject matter of any
representation or warranty made in Part A of Section 2 or in Section 3 except as
stated in this Section 7.2. Notwithstanding anything in this Section 7.2, any
liability or obligation resulting from knowing fraud or willful misconduct shall
not be subject to any of the limitations or thresholds stated in this Section
7.2(b).
(c) Pre-Closing Taxes, Brokerage. The Buyer shall be entitled to
recover against the Escrow Account for Damages to it resulting from (i) the
failure of the Company, the LLC or any member of the LLC to pay Taxes payable,
or accruing under GAAP, on or before the Closing (subject to the applicable
statute of limitations with respect to such Taxes) or (ii) any claim by any
broker, finder or similar person claiming through the Company, the LLC or any
Additional Member or Stockholder for any broker's fee, finder's fee, commission
or similar amount.
(d) Individual Transactional Representations and Warranties of the
Stockholder and Additional Members. Each Stockholder and Additional Member
individually, for himself, herself or itself only, hereby agrees to indemnify,
defend and hold the Buyer harmless against Damages resulting from breaches by
him, her or it of the representations and warranties in part B of Section 2.
(e) Limitations. Nothing in this Section 7.2 shall limit the
indemnification available to the Buyer, the Additional Members and the
Stockholder under Section 7.12.
7.3 Disputed and Third-Party Claims.
(a) If the Buyer shall give notice of a claim in accordance with
Section 7.2, and the Buyer and the Holders' Agent do not resolve such matter by
written agreement within 45 days after such notice is given, the dispute will be
settled exclusively by arbitration before a single arbitrator appointed by JAMS,
Inc. If the total amount (not including interest) of the dispute and any
counterclaim exceeds $250,000, the arbitration will be conducted in accordance
with the JAMS Comprehensive Arbitration Rules and Procedures; any other
arbitration under this Section will be conducted in accordance with the JAMS
Streamlined Arbitration Rules and Procedures. The Buyer and the Holders' Agent
shall each bear their own expenses (including without
28
limitation the fees and expenses of legal counsel and accountants) in connection
with such arbitration. The arbitral award shall allocate the arbitrator's fees
and expenses according to the relative success of the Buyer and the Holders'
Agent in the arbitration, as determined by the arbitrator.
(b) To the extent a claim by the Buyer under Section 7.2 relates to a
claim asserted against a party to this Agreement (other than to enforce this
Agreement) (a "Third-Party Claim") and the Buyer gives notice of the assertion
of the Third-Party Claim, then the Holders' Agent will have the option,
exercisable by written notice to the Buyer within 20 days after receipt of the
Buyer' notice, to control the defense of such Third-Party Claim. All expenses
(including, without limitation, attorneys' fees) incurred by the Holders' Agent
in connection with her assumption of control of the defense of a Third-Party
Claim shall be paid by the Holders' Agent. If the Holders' Agent has not assumed
the defense of a Third-Party Claim, then the Buyer shall have the right to
control the defense of the Third-Party Claim, and the expenses reasonably
incurred by the Buyer in connection with such defense shall be recoverable as
part of the underlying claim on the same basis and subject to the same
limitations as stated in Section 7.2 and this Section.
(c) The party controlling the defense may use counsel selected by it,
but if the other party reasonably objects (within 20 days after designation of
counsel initially selected) on account of such counsel's representation or
potential representation of the designating party in matters in which the
Buyer's or the Stockholder's and Additional Members' interests are adverse or
potentially adverse, the designating party shall select other counsel free of
any such adverse representation. The party controlling the defense shall have
the right, in its discretion exercised in good faith and upon the advice of
counsel, to settle such matter, either before or after the initiation of
litigation, at such time and upon such terms as they deem fair and reasonable,
provided that (i) at least 10 days' prior notice shall be given to the other
party of the intention to settle the Third-Party Claim, (ii) no settlement by
the controlling party shall include any equitable relief binding on the
noncontrolling party, and (iii) the controlling party shall not agree to any
settlement of such Third-Party Claim without the prior written consent of the
other party, which consent shall not be unreasonably withheld. The
noncontrolling party will have the right to be represented by counsel, solely at
its own expense. The controlling party shall keep the other party advised of the
status of the Third-Party Claim and the defense thereof and shall consider in
good faith recommendations made by the other party with respect thereto.
(d) Unless otherwise agreed by the parties, arbitration under Section
7.3(a) of a claim by the Buyer with respect to a Third-Party Claim shall be
deferred until the resolution of the Third-Party Claim.
7.4 Holders' Agent
(a) Authority. The Holders' Agent shall have the authority to enter
into the Escrow Agreement on behalf of all Holders, and to make all decisions
and perform all acts relating to the determination claims under Section 7.2 and
the resolution thereof, and waive any closing conditions under Section 6, as she
may determine in her discretion, including such decisions and acts that are not
expressly mentioned herein. Without limiting the generality of the foregoing
authorization granted to the Holders' Agent, the Holders' Agent is specifically
authorized to perform, or cause to be performed, on behalf of the Holders, the
following acts in the discretion of the Holders' Agent:
29
(i) Contest and/or settle any claim or Third-Party Claim in
accordance with Section 7.2;
(ii) Make any determination under Section 6.13 or 7.4; and
(ii) Engage legal, accounting and other representatives and
advisors and pay their fees and expenses.
(b) Successors. In the event that the Holders' Agent shall resign as
Holders' Agent or shall die or become incapacitated or otherwise unable to
perform her duties hereunder, the Holders shall elect and appoint a successor to
the resigning or incapacitated Holders' Agent. Any such election and appointment
may be made, and the Holders' Agent may be removed or replaced, by the written
consent of Holders who were entitled to receive (or subject to options or
warrants) at least a majority of the aggregate number of Buyer Ordinary Shares
issuable pursuant the Merger, the Exchange, the assumption of options pursuant
to Section 1.11 and the conversion of warrants pursuant to Section 1.12 (a
"Holders' Majority").
(c) Compensation; Expenses. The Holders' Agent shall not be entitled to
any compensation on account of acting as such. Nothing in this Section 7.4(c)
shall diminish or otherwise affect the rights of the Holders' Agent under
Section 7.4(d). Notwithstanding the foregoing, the Holders' Agent shall be
reimbursed by the Holders in the Holders' Proportions for any and all expenses
reasonably incurred by her in connection with the performance of her duties and
responsibilities in such capacity.
(d) Protection.
(i) The Holders' Agent shall not be liable to any of the
Holders or any other Person for any error of judgment, act done or
omitted by tem in good faith, or mistake of fact or law, or any other
act, omission or circumstance of any kind, excepting only their own
actual gross negligence or willful breach of this Agreement. The
Holders' Agent shall be entitled to treat as genuine any document
furnished to her hereunder and believed by her to be genuine and to
have been signed and/or presented by the proper party or parties. The
Holders' Agent shall have only those duties expressly stated herein,
and no others. The Holders' Agent may consult with counsel selected by
her, and will be protected in relying upon the advice of such counsel.
(ii) The protections stated in Section 7.4(d)(i) shall apply
whether or not the Holders grant any approval or consent with respect
to the matter in question. In addition, the Holders' Agent will have no
liability whatever, including any liability for gross negligence or
willful breach of this Agreement, with respect to any action taken or
omitted, or circumstance existing, with the written consent of a
Holders' Majority.
(iii) The Holders, severally and ratably in accordance with
Buyer Ordinary Shares received (or subjected to options or warrants),
shall indemnify and hold harmless the Holders' Agent for all liability,
loss, damage, cost, expense and claims, of whatsoever nature and by
whomsoever asserted, arising out of or otherwise related to her status
as a Holders' Agent, excepting only the Holders' Agent's own actual
gross negligence or willful breach of this Agreement.
30
(iv) The individual acting (or formerly acting) as Holders'
Agent shall have no personal liability, to the Buyer or any other
Person, with respect to any obligation of a Holder on account of her
acting (or formerly acting) as Holders' Agent.
7.5 Termination of this Agreement. If any condition of the Closing
stated in Section 5 is not satisfied on or before January 15, 2001, then,
provided the Buyer is not in material default hereunder, the Buyer may at any
time thereafter terminate any further obligations under this Agreement by giving
written notice thereof to the Company and the Holders' Agent. If any condition
of the Closing stated in Section 6 is not satisfied on or before such date,
then, provided the Company, the LLC, the Additional Members and the Stockholder
are not in material default hereunder, the Company, the LLC and the Holders'
Agent may at any time thereafter terminate any further obligations under this
Agreement by giving written notice thereof to the Buyer. Any such termination
will not, however, terminate or otherwise affect the obligations of the parties
under Sections 7.1 or 8.1. This Agreement may be so terminated, or terminated by
mutual agreement of the parties upon the authorization of their respective
boards of directors, notwithstanding approval of this Agreement by the
stockholders of any or all parties.
7.6 Reasonable Business Efforts, No Inconsistent Action. Each party
will use its, his or her reasonable business efforts to cause the conditions
over which it has control to be satisfied on or before the Closing. No party
will take any action which will foreseeably result in the nonsatisfaction of any
condition stated in Section 5 or 6 on or before the Closing.
7.7 Access. Between the date of this Agreement and the Closing or any
earlier termination of this Agreement in accordance with its terms, the Company
and the LLC will (i) give the Buyer and its authorized representatives access to
its books, records, Properties, officers, attorneys and accountants and permit
the Buyer to make inspections and copies of such books and records, and (ii)
furnish the Buyer with such financial information and operating data and other
information with respect to its business and Properties, and discuss with the
Buyer and its authorized representative its affairs, all as the Buyer may from
time to time reasonably request for the purposes of this Agreement, during
normal office hours. Any on-site visit shall be subject to reasonable advance
notice and to being accompanied by an officer or designated employee of the
Company or the LLC.
7.8 No Solicitation or Negotiation. The Company, the LLC, the
Additional Members and the Stockholder agree that, between the date of this
Agreement and the Closing or any earlier termination of this Agreement in
accordance with its terms, they will not (and will not permit any person or
entity which they control to) seek or entertain, or negotiate any terms of, a
Strategic Transaction with any party other than the Buyer and its affiliates, or
give any information concerning its business to any party other than the Buyer
and it affiliates in connection with a possible Strategic Transaction or enter
into any agreement inconsistent with this Agreement or the proposed transaction
with the Buyer. A "Strategic Transaction" means (i) any form of acquisition,
direct or indirect, whether by purchase, merger, stock sale (primary or
secondary), reinsurance or any other structure, of any significant (15% or
greater in the aggregate) portion of the Company's or the LLC's consolidated
business or a significant (15% or greater in the aggregate) equity interest
therein, (ii) any arrangement whereby effective operating control of the
Company's or the LLC's consolidated business or a portion thereof is granted to
another party or (iii) any transaction involving the recapitalization,
restructuring, liquidation,
31
dissolution or other similar type of transaction involving the Company or the
LLC. During such period, the Company and the LLC will promptly notify the Buyer
of the content and identity of any bona fide proposal or bona fide communication
it receives from any such person concerning any Strategic Transaction.
7.9 Interim Financial Information. The Company and the LLC will supply
to the Buyer unaudited consolidated monthly financial statements within 30
business days of the end of each month ending between the date of this Agreement
and the Closing or any earlier termination of this Agreement in accordance with
its terms, prepared on a basis consistent with the unaudited consolidated
financial statements for the preceding months, together with additional monthly
reports substantially in the form heretofore delivered to the Company's and the
LLC's Board of Directors or Management Board. For purposes of these statements,
employee bonuses and similar expenses may be accrued based on actual results for
the year to date and budgeted results for the balance of the year.
7.10 Interim Conduct of Business. From the date of this Agreement until
the Closing or any earlier termination of this Agreement in accordance with its
terms, unless approved by the Buyer in writing, the Company and the LLC will
operate its business consistently with past practice and in the ordinary course
of business, and neither will:
(a) merge or consolidate with or agree to merge or consolidate
with, or sell or agree to sell all or substantially all of its Property
to, or purchase or agree to purchase all or substantially all of the
Property of, or otherwise acquire, any other Person or a division
thereof, except as provided in this Agreement;
(b) amend its articles of incorporation, bylaws, articles of
organization or operating agreement except as may be necessary to
effect this Agreement and the transaction contemplated hereby (which
the Company and the LLC agree to complete on a timely basis);
(c) make any changes in its accounting methods, principles or
practices, except as required by GAAP;
(d) sell, consume or otherwise dispose of any Property, except
in the ordinary course of business consistent with past practices, or,
in the case of the Company, sell or otherwise dispose of any interest
in its membership interest in the LLC as of the date hereof;
(e) authorize for issuance, issue, sell or deliver any
additional shares of capital stock of any class or any Stock Rights
with respect thereto or and additional membership interest or any LLC
Equity Rights with respect thereto, other than, in each case, the
issuance of Shares or Units pursuant to the exercise of any outstanding
warrants, the exercise of any conversion rights under Shares
outstanding on the date hereof and the exercise of any stock options
outstanding on the date hereof;
(f) declare any dividend on, make any distribution with
respect to, or redeem or repurchase, its capital stock or membership
interests;
32
(g) modify, amend or terminate any Benefit Plan, except as
required under Legal Requirements or any Disclosable Contract; or
(h) authorize or enter into a Contract to do any of the
foregoing.
7.11 Information Statement.
As soon as practicable after the execution of this Agreement, the
Company and the LLC shall prepare, with the cooperation of the Buyer, the
Information Statement for the holders of Shares to approve this Agreement and
the transactions contemplated hereby and for the holders of Units to consummate
the Exchange. The Information Statement shall constitute a disclosure document
for the offer and issuance of the shares of Buyer Ordinary Shares to be received
by the holders of Shares and Units. The Buyer, the LLC and the Company shall
each use reasonable commercial efforts to cause the Information Statement to
comply with applicable Legal Requirements. Each of the Company, the LLC and
Buyer agrees to provide promptly to the other such information concerning its
business and financial statements and affairs as, in the reasonable judgment of
the providing party or its counsel, may be required or appropriate for inclusion
in the Information Statement, or in any amendments or supplements thereto, and
to cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the Information Statement. The Company and the
LLC will promptly advise the Buyer, and the Buyer will promptly advise the
Company and the LLC, in writing if at any time prior to the Effective Time
either shall obtain knowledge of any facts that might make it necessary or
appropriate to amend or supplement the Information Statement in order to make
the statements contained or incorporated by reference therein not misleading or
to comply with applicable law. The Information Statement shall contain the
recommendation of the Company's and the LLC's Board of Directors and Board of
Managers that the holders of Shares approve the Merger and this Agreement and
the conclusion of the Company's and LLC's Board of Directors and Board of
Managers that the terms and conditions of the Merger and Exchange are advisable
and fair and reasonable to the holders of Shares and Units. The Company and the
LLC shall not include in the Information Statement any information with respect
to the Buyer or its affiliates or associates, the form and content of which
information shall not have been approved by the Buyer prior to such inclusion.
7.12 Registration.
(a) Registration Statement. On or before March 1, 2001, the Buyer will
file a Form S-3 or F-3, as appropriate (the "S-3") registration for
non-underwritten resale into the open market of the Buyer Ordinary Shares issued
pursuant to this Agreement and subject to warrants pursuant to Section 1.13 (the
"Registrable Securities"). The Buyer may delay the filing of any such requested
registration for up to 180 days if the Board of Directors of the Buyer
determines in a written certificate delivered to the Holders' Agent, signed by
the chairman of the Buyer Board of Directors, that such filing would be
seriously detrimental to the Buyer or its stockholders at such time.
(b) Obligations of Buyer. In order to effect the registration, the
Buyer shall:
(1) prepare and file the S-3 with respect to the Registrable
Securities and use its best efforts to cause the S-3 to become effective by
April 1, 2001, and remain effective for at least
33
until the earlier of (a) 15 months after the Effective Time or (b) such time as
all Registrable Securities have been sold hereunder;
(2) prepare and file with the SEC such amendments and supplements
to the S-3 and the prospectus used in connection therewith as may be necessary
to comply with the provisions of the Act with respect to the disposition of all
securities covered by the S-3;
(3) furnish to holders of Buyer Ordinary Shares issued pursuant to
this Agreement or subject to warrants pursuant to Section 1.13 who sell Buyer
Ordinary Shares pursuant to the S-3 ("Selling Holders") the numbers of copies of
the prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as the such holders may
reasonably request in order to facilitate the disposition of the Registrable
Securities;
(4) use its best efforts to register and qualify the securities
covered by the S-3 under other securities or blue sky laws of such jurisdictions
as shall be reasonably appropriate for distribution of the securities covered by
the S-3, provided that the Buyer shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions; and
(5) notify the Selling Holders at any time when a prospectus
relating thereto is required to be delivered under the Act, of the happening of
any event as a result of which the prospectus included in such S-3, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing. In the event
of a material development or transaction affecting Buyer that has not yet been
publicly disclosed, if Buyer shall determine in good faith that it would be
adversely affected by such disclosure, Buyer may so notify the Selling Holders
(such notice being referred to herein as a "Deferral Notice"), and shall
thereafter be entitled to defer preparing and furnishing such supplement or
amendment until such time as it would not be so adversely affected, at which
time it shall so notify the Selling Holders and shall prepare and furnish to the
Selling Holders any such supplement or amendment as may then be required;
provided, however that the Buyer shall not exercise such a deferral (a) more
than three times during any 15 month period or (b) for a period exceeding 30
days on any one occasion. Following receipt of any supplement or amendment to
any prospectus, the Selling Holder shall deliver such amended, supplemental or
revised prospectus in connection with any offers or sales of Registrable
Securities, and shall not deliver or use any prospectus not so supplemented,
amended or revised. Following receipt of a Deferral Notice, the Selling Holder
shall not make any further sales of Registrable Securities pursuant to the S-3
until the Selling Holder receives such notice, and any such amendment or
supplement, from Buyer. If Buyer issues a Deferral Notice, Buyer will extend the
period of effectiveness of the S-3 for an amount of time equal to the length of
the deferral period.
(c) Furnish Information. It shall be a condition precedent to the
obligation of the Buyer under this Section 7.12 that each Selling Holder shall
furnish to the Buyer such information regarding such Selling Holder, the shares
of Registrable Securities held by him, her or it and the intended method of
disposition of such shares as shall reasonably be required to effect the
registration of the Registrable Securities.
34
(d) Registration Expenses. The Buyer shall bear and pay all expenses
incurred by the Buyer in connection with any registration, filing or
qualification of the Registrable Securities with respect to registrations
pursuant to this Section 7.12, including (without limitation) all registration,
filing, qualification, printer's fees, accounting fees and expenses, and the
fees for a single attorney for the Selling Holders, but shall not be responsible
for other charges relating to the Buyer Ordinary Shares or the Selling Holders'
attorneys' fees and expenses or any taxes imposed with respect to the
Registrable Securities on the sale and transfer thereof.
(e) Availability of the S-3. Buyer represents that it is currently
eligible to use the S-3 and agrees that, for a period of 1 year from the
Effective Time, Buyer will not intentionally take any action which would
preclude Buyer's eligibility to use the S-3.
(f) Indemnification.
(1) To the extent permitted by law, the Buyer will indemnify and hold
harmless any Selling Holder and each person, if any, who controls a Selling
Holder within the meaning of the Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Act, or the Exchange Act, or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the S-3, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Buyer of the Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Act, or the Exchange Act or any
state securities law; and the Buyer will pay to such Selling Holder or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection (1) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Buyer (which consent shall not be
unreasonably withheld), nor shall the Buyer be liable to any indemnitee for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished by such indemnitee expressly for use in
connection with such registration.
(2) To the extent permitted by law, each Selling Holder will indemnify
and hold harmless the Buyer, each of its directors, each of its officers who has
signed the S-3, each person, if any, who controls the Buyer within the meaning
of the Act, any other shareholder selling securities in the S-3 and any
controlling person of any such other shareholder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the Exchange Act, or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Selling Holder
expressly for use in connection with such registration; and each Selling Holder
will pay, as
35
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection (2), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection (2)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Selling Holder, which consent shall not be unreasonably withheld; and provided,
that, in no event shall any indemnity obligation under this Section 7.12(e)(2)
(together with any obligation to contribute under Section 7.12(e)((4)) exceed
the gross proceeds from the offering received by such Selling Holder.
(3) Promptly after receipt by an indemnified party under this Section
7.12(e) of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 7.12(e), deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
7.12(e), but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 7.12(e).
(4) If the indemnification provided for in this Section 7.12(e) is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. In no event shall any Selling Holder's obligation to
contribute under this Section 7.12(e)(4) (together with any obligation to
indemnify under Section 7.12(e)(2)) exceed the gross proceeds from the offering
received by such Selling Holder.
36
(5) The obligations of the Buyer and the Selling Holders under this
Section 7.12(e) shall survive the completion of any offering of Registrable
Securities in the S-3.
7.13 Notice of Certain Events. The Company and the LLC shall notify the
Buyer, and the Buyer shall promptly notify the Company and the LLC, of:
(i) receipt of any notice or other communication from any
Person alleging that the consent of such Person is or may be required
in connection with the transactions contemplated by this Agreement;
(ii) receipt of any notice or other communication from any
Governmental Entity in connection with the transactions contemplated by
this Agreement;
(iii) receipt of notice that any action, suit, claim,
investigation or proceeding has been commenced or, to the knowledge of
the Company or the LLC, threatened, against or involving the Company,
the LLC or the Buyer, as applicable, which, if pending on the date of
this Agreement, would have been required to have been disclosed
pursuant to Section 3.14 or which relates to the transactions
contemplated by this Agreement;
(iv) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of it (and, in the case of the Buyer, of
Merger Sub) contained in this Agreement to be untrue or inaccurate; and
(v) any failure of the Company, the LLC, the Buyer or Merger
Sub, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder
The delivery of any notice pursuant to this Section 7.12 shall not limit or
otherwise affect the remedies available to the party receiving such notice.
7.14 Company Location. The Buyer currently intends to maintain the
principal offices for the continuing development of the Company's and the LLC's
current product line in the Madison, Wisconsin, area and agrees not to move such
principal offices for at least three years from the date of this Agreement.
7.15 Personal Guarantees. Promptly following the Effective Time, the
Buyer shall offer to replace the personal guarantees listed in Schedule 7.15
with the Buyer's similar guarantee. To the extent the holder of any such
personal guarantee declines such offer, the Buyer shall indemnify and hold
harmless the individual guarantor named in Schedule 7.15 against any losses,
claims, damages or liabilities to which that guarantor my become subject insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon such personal guarantee.
7.16 Offer of Continued Employment. On or before the Effective Time,
the Buyer will confirm to substantially all the LLC's current employees the
continued availability of employment on the same terms.
37
7.17 Registration Statement on Form S-8. On or before April 1, 2001,
Buyer shall file a registration statement on Form S-8 or F-8, as appropriate,
(the "S-8") for the Commtouch Ordinary Shares issuable with respect to the LLC's
1998 Unit Option Plan to be assumed by Buyer pursuant to Section 1.12.
Section 8 Miscellaneous
8.1 Buyer Brokerage. The Buyer has not engaged any agent, broker,
finder or investment or commercial banker in connection with the negotiation,
execution or performance of this Agreement or the transactions contemplated
hereby. The Buyer shall indemnify, defend and hold the Company, the LLC, the
Stockholder and the Additional Members harmless against and in respect of any
claim for brokerage fees or other commissions incurred or owing due to any such
engagement or alleged engagement.
8.2 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, the Company and the LLC on the one hand and the Buyer
on the other hand shall each pay their own fees and expenses incident to the
negotiation, preparation, execution, delivery and performance hereof, including,
without limitation, the fees and expenses of their respective counsel,
accountants, bankers, brokers and other experts. If the transactions
contemplated by this Agreement are not consummated for reasons other a material
breach by the Company, the LLC, the Stockholder or an Additional Member, the
Buyer will reimburse the LLC for up to $10,000 of the LLC's legal fees and
expenses incurred in the negotiation and documentation of the transactions
contemplated hereby.
8.3 Complete Agreement; Waiver and Modification, Etc. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings of the parties, including without limitation the Original
Agreement, but excluding the Confidentiality and Nonsolicitation Agreement dated
October 2, 2000 between the Buyer and the Company, which shall continue in
effect. There are no representations or warranties by any party except those
expressly stated or provided for herein, any implied warranties being hereby
expressly disclaimed. There are no covenants or conditions except those
expressly stated herein. No amendment, supplement or termination of or to this
Agreement, and no waiver of any of the provisions hereof, shall be binding on a
party unless made in a writing signed by such party. This Agreement may be
modified by mutual agreement of the parties as authorized by their respective
boards of directors, notwithstanding approval hereof and thereof by the
stockholders of the parties, subject to the limitations imposed by the Wisconsin
Business Corporation Law. Nothing in this Agreement shall be construed to give
any Person other than the express parties hereto any rights or remedies.
8.4 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be given by delivery (by
mail or otherwise) or transmitted to the address or facsimile number listed
below, and will be effective (in all cases) upon receipt. Without limiting the
generality of the foregoing, a mail, express, messenger or other receipt signed
by any Person at such address shall conclusively evidence delivery to and
receipt at such address, and any printout showing successful facsimile
transmission of the correct total pages to the correct facsimile number shall
conclusively evidence transmission to and receipt at such facsimile number.
38
(a) If to the Buyer or Merger Sub:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
McCutchen, Doyle, ▇▇▇▇▇ & Enersen, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
facsimile: 650-849-4800
(b) If to the Company or LLC:
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(c) If to the Stockholder or Additional Members:
c/o ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Any party may change its address or facsimile number for purposes of this
Section 8.4 by giving the other party written notice of the new address or
facsimile number in accordance with this Section 8.4, provided it is a normal
street address, or normal operating facsimile number, in the continental United
States.
39
8.5 Law Governing. This Agreement shall be interpreted in accordance
with and governed by the laws of the State of Delaware, without regard to
principles of conflicts of laws.
8.6 Headings; References; "Hereof," Etc. The Section headings in this
Agreement are provided for convenience only, and shall not be considered in the
interpretation hereof. References herein to Sections, Exhibits or Schedules
refer, unless otherwise specified, to the designated Section of or Exhibit or
Schedule to this Agreement. Terms such as "herein," "hereto" and "hereof" refer
to this Agreement as a whole.
8.7 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the heirs, executors, administrators and successors of
the parties hereto, but no right or liability or obligation arising hereunder
may be assigned by any party hereto.
8.8 Counterparts, Separate Signature Pages. This Agreement may be
executed in any number of counterparts, or using separate signature pages. Each
such executed counterpart and each counterpart to which such signature pages are
attached shall be deemed to be an original instrument, but all such counterparts
together shall constitute one and the same instrument.
8.9 Severability. In the event any of the provisions of this Agreement
shall be declared by a court or arbitrator to be void or unenforceable, then
such provision shall be severed from this Agreement without affecting the
validity and enforceability of any of the other provisions hereof, and the
parties shall negotiate in good faith to replace such unenforceable or void
provisions with a similar clause to achieve, to the extent permitted under law,
the purpose and intent of the provisions declared void and unenforceable.
8.10 Attorneys' Fees. In the event any suit, counterclaim, arbitration
or other proceeding is brought to enforce or interpret the provisions of this
Agreement, the prevailing side (the Buyer, on the one hand, and the Company, the
LLC, the Additional Members and/or the Stockholder on the other hand) shall be
entitled to recover from the nonprevailing side, in addition to all other
remedies available at equity and law, the cost, including but not limited to
reasonable attorneys' fees, incurred by the prevailing side therein, including
any appeal or other subsequent proceeding. A side shall be considered to prevail
if it secures a more favorable result than the other side (who shall be
considered the nonprevailing party), as determined by the arbitrator or judge.
Any obligation of the Company, the LLC, the Additional Members and/or the
Stockholder under this Section 8.10 shall be recoverable, if at all, only from
the Escrow Account.
Section 9 Glossary
Act - the Securities Act of 1933, as amended.
Additional Members - introductory paragraphs.
Affiliate - a Person who controls, is controlled by or is under common
control with another Person, or who directly or indirectly owns 10% or more of
the voting power in such other Person, or of whose voting power such other
Person (or a Person holding 10% or more of the voting power in such other
Person) owns 10% or more. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
40
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
Agreement - this Merger and Exchange Agreement, including the Exhibits
and Schedules hereto, as it may be amended and supplemented from time to time in
accordance with its terms.
Average Closing Price - Section 1.8(b).
Benefit Plans - Section 3.10(b).
Business - introductory paragraphs.
Buyer - introductory paragraphs.
Buyer Ordinary Shares - Section 1.8(a).
Buyer SEC Documents - Section 4.3.
Buyer Share Amount - Section 1.8(b).
Closing - Section 1.1.
Code - the Internal Revenue Code of 1986, as amended.
Common Stock - the Common Stock of the Company.
Company - introductory paragraphs.
Company Exchange Ratio - Section 1.8(a).
Confidential Information - Section 3.17(f).
Company Portion - Section 1.8(a).
Contract - any agreement, written or oral, or any promissory note or
other instrument of a contractual nature, which is intended to be enforceable
against the Person in question or against any Property of such Person. Any
Person which is, or any of whose Property is, subject to enforcement of a
Contract shall, for purposes of this Agreement, be deemed a party to it.
Customer Support Agreements - Section 3.17(h).
Damages - any loss, loss in value, cost, liability or expense actually
incurred, including without limitation, costs and expenses of litigation and
reasonable attorneys' fees, but excluding in each case incidental, consequential
or punitive damages. (The foregoing exclusion of punitive damages does not
apply, however, to any punitive damages awarded in a Third-Party Claim.) All
Damages shall be net of (i) any applicable insurance recovery (net of any
retrospective premium adjustment), (ii) any related net realized tax benefit
(taking any applicable recovery into account), (iii) any related refund or
recovery realized by the Buyer, (iv) any related reserve
41
included in the latest balance sheet included in the Financial Statements and
(v) any other reserve (whether or not related to the Damages in question)
included in the latest balance sheet in the Financial Statements, to the extent
that, at the time of determination of Damages under this Agreement, such other
reserve has proved to be in excess of the Company's actual losses or liabilities
reserved against (provided, that such other reserves shall thereafter be reduced
by the excess thus utilized for netting).
Disclosable Contract - Section 3.11.
Disclosable Leases - Section 3.7.
Effective Time - Section 1.2.
ERISA - the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute.
ERISA Affiliate - any company which, as of the relevant measuring date
under ERISA, is or was a member of a controlled group of corporations or trades
or businesses (as defined in Sections 414(b), (c), (m) or (o) of the Code) of
which a Commtouch Software Company is or was a member.
ERISA Plan - Section 3.10(d).
Escrow Account - the Property held by the escrow agent under the Escrow
Agreement.
Escrow Agent - Section 1.20.
Escrow Agreement - Section 1.19(b).
Exchange - introductory paragraphs.
Financial Statements - Section 3.2(a).
Fully-Diluted Company Shares - Section 1.8(a).
Fully-Diluted LLC Additional Units - Section 1.8(c).
GAAP - generally accepted accounting principles applied on a consistent
basis throughout the periods presented, as set forth in authoritative
pronouncements which are applicable to the circumstances as of the date in
question. The requirement that such principles be applied on a "consistent
basis" means that accounting principles observed in the period in question are
comparable in all material respects to those applied in the preceding periods,
except for any change which is permitted or required under or pursuant to such
accounting principles and which is expressly noted as a change in the financial
statements.
Governmental Agency - any agency, department, board, commission,
district or other public organ, whether federal, state, local or foreign.
42
Hazardous Material - all or any of the following: (i) any substance the
presence of which requires investigation or remediation under any applicable law
or regulation; (ii) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable laws or regulations as "hazardous
substances," "hazardous materials," "hazardous wastes," "toxic substances," or
any other formulation intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity or "EP toxicity;" (iii) any petroleum
products, explosives or radioactive materials; and (iv) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.
Holders - the holders of any capital stock and/or Stock Right in the
Company and/or any membership interests and/or LLC Equity Rights in the LLC.
Holders' Agent - ▇▇▇ ▇▇▇▇.
Holders' Majority - Section 7.4(b).
Holders' Proportions - the respective participating proportions of the
Holders participating in the escrow deposit pursuant to Section 1.21.
HSR Act - the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976, as
amended, and all regulations issued thereunder.
Information Statement - Section 3.23.
Intellectual Property - Section 3.17(a).
Last Escrow Claim Date - the first anniversary of the Closing Date.
Last Fiscal Year-End - Section 3.2(a).
Legal Requirement - a statute, regulation, ordinance or similar legal
requirement, whether federal, state, local or foreign, or any requirement of a
permit or other authorization issued by a Governmental Agency.
Lien - any lien, security interest, mortgage, deed of trust, pledge,
hypothecation, capitalized lease or interest or right for security purposes.
LLC - introductory paragraphs.
LLC Equity Right - any right (including without limitation any option
or warrant or subscription right) to acquire any membership interest in the LLC
or any other LLC Equity Right or any instrument convertible into or exchangeable
for any membership interest in the LLC or any other LLC Equity Right.
LLC Exchange Ratio - Section 1.8(c).
LLC Portion - Section 1.8(c).
43
Material Adverse Effect - any circumstance, change or effect which,
taken as a whole, is materially adverse to the operations, assets or liabilities
(including contingent liabilities), earnings or results of operations, or the
business, other than any such circumstance, change or effect related to (i)
general economic conditions, (ii) the software industry generally or (iii) the
outsourced e-mail industry generally.
Merger - introductory paragraphs.
Merger Sub - introductory paragraphs.
Order - any judgment, injunction, order or similar mandatory direction
of, or stipulation or agreement filed with, a Governmental Agency, court,
judicial body, arbitrator or arbitral body.
Original Agreement - introductory paragraphs.
Permit - a permit, license, franchise, certificate of authority or
similar instrument issued by a Governmental Agency.
Person - an individual, or a corporation, partnership, limited
liability company, trust, association or other entity of any nature, or a
Governmental Agency.
Preferred Stock - the Preferred Stock of the Company.
Property - any interest in any real, personal or mixed property,
whether tangible or intangible.
Recoverable Amount - Section 7.2(b).
Registration Statement - Section 7.12(a).
Restricted Shares - Section 1.9(b).
S-3 - Section 7.12(a).
SEC - the Securities and Exchange Commission.
Selling Holders - Section 7.12(b)(3).
Shares - Section 1.8.
Stock Right - any right (including without limitation any option or
warrant or subscription right) to acquire any capital stock or any other Stock
Right or any instrument convertible into or exchangeable for any capital stock
or any other Stock Right.
Stockholder Agreement - Section 1.18.
Stockholder - introductory paragraphs.
Strategic Transaction - Section 7.8.
44
Support Agreement - Section 1.19(a).
Surviving Corporation - Section 1.3.
Tax - any federal, state, local or foreign tax, assessment, duty, fee
and other governmental charge or imposition of any kind, whether measured by
properties, assets, wages, payroll, purchases, value added, payments, sales,
use, business, capital stock, surplus or income, and any addition, interest,
penalty, deficiency imposed with respect to any Tax.
Third-Party Action - any consent, waiver, approval, license or other
authorization of, or notice to, or filing with, any other Person, whether or not
a Governmental Agency, and the expiration of any associated mandatory waiting
period.
Third-Party Claim - Section 7.3(b).
Third-Party Intellectual Property - Section 3.17(c).
Third-Party Right - any Lien on any Property of the Person in question,
or any right (other than the rights of the Buyer hereunder) (i) to acquire,
lease, use, dispose of, vote or exercise any right or power conferred by any
Property of such Person, or (ii) restricting the Person's right to lease, use,
dispose of, vote or exercise any right or power conferred by any Property of
such Person.
Unit - Section 1.8(c).
U.S. Sub - introductory paragraphs.
Violation - Section 7.12(e)(1).
Wingra Intellectual Property - Section 3.17(a).
[signature pages follow]
45
Exhibit.doc
IN WITNESS WHEREOF, the parties have executed this Merger and Exchange
Agreement.
Buyer: COMMTOUCH SOFTWARE LTD.
By:/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Operating Officer
U.S. Sub: COMMTOUCH INC.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Operating Officer
Merger Sub: CW ACQUISITION CORPORATION
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & Secretary
Company: WINGRA, INCORPORATED
By: /s/▇▇▇ ▇▇▇▇
-----------
Name:
Title:
LLC: WINGRA TECHNOLOGIES, LLC
By: /s/▇▇▇ ▇▇▇▇
-----------
Name:
Title:
Stockholder:
/s/▇▇▇ ▇▇▇▇
Name: ▇▇▇ ▇▇▇▇
Additional Member:
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Treasurer
Name: Anchor Bancorp Wisconsin, Inc.
Additional Members:
/s/▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇
/s/▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Additional Member:
/s/▇▇▇▇ ▇. ▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇
Additional Member:
Name: ▇▇▇▇▇▇▇ Company 401K Plan & Trust
FBO ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Additional Member:
/s/W. ▇▇▇▇▇▇ ▇▇▇▇
Name: W. ▇▇▇▇▇▇ ▇▇▇▇
Exhibits
A Support Agreement
B General Release
C-1 Employment Agreement
C-2 Employment Agreement
C-3 Employment Agreement
Exhibit A
Support Agreement
This Support Agreement (this "Agreement") is entered into as of
November 2, 2000 between Commtouch Software Ltd., a company incorporated under
the laws of the State of Israel (the "Buyer"), and the undersigned stockholder
(the "Stockholder") of Wingra, Incorporated, a Wisconsin corporation (the
"Company").
The Buyer, its subsidiary CW Acquisition Corporation, a Wisconsin
corporation ("Merger Sub"), the Buyer's subsidiary Commtouch Software Inc., a
Delaware corporation ("U.S. Sub"), the Company, Wingra Technologies, LLC, a
Wisconsin limited liability company (the "LLC"), the Stockholder and Additional
Members designated therein propose to enter into a Merger and Exchange Agreement
dated the date hereof (the "Merger Agreement"), which provides for the Buyer's
acquisition of the Company through a merger (the "Merger") of Merger Sub into
the Company, pursuant to which the Company, as the surviving corporation, will
become a wholly-owned subsidiary of the Buyer. Neither the Buyer, Merger Sub nor
U.S. Sub would enter into or consummate the Merger Agreement but for the
Stockholder's entry into this Agreement. As used in this Agreement, the term
"Shares" means any and all capital stock of the Company owned by Stockholder
beneficially or of record on November 1, 2000 or in which Stockholder at any
time thereafter acquires any beneficial or record interest.
Capitalized terms used herein without definition have the meanings
stated in the Merger Agreement.
Therefore, in order to induce the Buyer, Merger Sub and U.S. Sub to
enter into and consummate the Merger Agreement, the parties hereby agree as
follows.
1. Voting, Etc.
(a) At any meeting of stockholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval (including
without limitation by written consent) with respect to the Merger or the Merger
Agreement is sought, the Stockholder shall as requested by the Buyer (including,
without limitation, by cooperating with the Buyer with respect to the proxy
granted to the Buyer pursuant to Section 1(d)) vote (or cause to be voted) all
the Stockholder's Shares in favor of the Merger, the adoption by the Company of
the Merger Agreement and the approval of the other transactions contemplated by
the Merger Agreement. At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the Stockholder's
vote, consent or other approval is sought, the Stockholder shall as requested by
the Buyer (including, without limitation, by cooperating with the Buyer with
respect to the proxy granted to the Buyer pursuant to Section 1(d)) vote (or
cause to be voted) all the Stockholder's Shares against (i) any Strategic
Transaction other than the Merger or (ii) any amendment of the Company's
articles of incorporation or by-laws or other proposal or transaction involving
the Company or any of its subsidiaries, which amendment or other proposal or
transaction would in
any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger Agreement
(collectively, a "Frustrating Transaction").
(b) Except with respect to the Merger Agreement or this Agreement, the
Stockholder shall not (i) sell, transfer, pledge, assign or otherwise dispose
of, or enter into any Contract, option or other arrangement (including any
profit sharing arrangement) or understanding with respect to the sale, transfer,
pledge, assignment or other disposition of, any of the Stockholder's Shares or
any interest therein to any Person other than the Buyer or the Buyer's designee,
(ii) enter into any voting arrangement, whether by proxy, voting agreement,
voting trust, power-of-attorney or otherwise, with respect to the Stockholder's
Shares or (iii) take any other action that would in any way restrict, limit or
interfere with the performance of the Stockholder's obligations hereunder or the
transactions contemplated hereby.
(c) The Stockholder hereby agrees to promptly notify the Buyer of the
number of any Shares acquired by the Stockholder, if any, after the date hereof.
(d) Subject to termination as set forth in Section 11 of this
Agreement, the Stockholder hereby irrevocably grants to, and appoints, each of
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and any other individual who shall hereafter
be designated by the Buyer, whether acting alone or together, the Stockholder's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of the Stockholder, to vote all the Stockholder's Shares,
or grant a consent or approval in respect of such Shares, at any meeting of
stockholders of the Company or at any adjournment thereof or in any other
circumstances upon which their vote, consent or other approval is sought, (i) in
favor of the Merger, the adoption by the Company of the Merger Agreement and the
approval of the other transactions contemplated by the Merger Agreement and (ii)
against any Strategic Transaction other than the Merger or any Frustrating
Transaction. The Stockholder represents that any proxies heretofore given in
respect of the Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked. The Stockholder hereby affirms that the proxy set
forth in this Section 1(d) is coupled with an interest and is irrevocable until
the earlier of (i) 365 days after the date hereof plus the number of days, if
any, during which any action or other proceeding is pending between the Company
and the Stockholder or between the Buyer and the Stockholder or, (ii)
consummation of the Merger in accordance with the terms of the Merger Agreement
or (iii) termination in accordance with Section 7.5 of the Merger Agreement. The
Stockholder hereby further affirms that the proxy is given in connection with
the execution of the Merger Agreement, and that such proxy is given to secure
the performance of the duties of the Stockholder under this Agreement.
2. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to principles
of conflicts of laws.
3. Entire Agreement; Amendment and Waiver. This Agreement sets forth
the entire understanding and agreement of the parties as to the subject matter
of this Agreement and supersedes prior and contemporaneous ones. It may not be
changed or waived orally, but only by a written instrument signed by the Buyer
and the Stockholder. The waiver by the Buyer or the Stockholder of a breach of
any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any other or subsequent breach by the other party.
4. Successors and Assigns. Neither this Agreement nor any of the rights
or obligations of either party arising under this Agreement shall be capable of
assignment, transfer or delegation, nor shall they be assigned, transferred or
delegated, either voluntarily or involuntarily, by operation of law or
otherwise, without the prior written consent of the other party. However, the
obligations of either party shall also be enforceable against any heir, executor
or other successor to such party.
5. Notices. All notices or other communications provided for by this
Agreement shall be made in writing and shall be deemed properly delivered upon
receipt (a) when delivered personally, (b) mailed by certified or registered
mail, (c) sent by facsimile transmission with receipt confirmed electronically,
or (d) sent by Federal Express or other express carrier, fee prepaid, addressed
to the Buyer at its address set forth in the Merger Agreement and to the
Stockholder, at the address set forth below his signature, or to such other
address or addresses of which a party shall have notified the other.
6. Headings. This Agreement shall not be interpreted by reference to
any of the titles or headings to the paragraphs herein, which have been inserted
for purposes of convenience only and are not to be deemed a part hereof.
7. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and counterpart
signature pages may be assembled to form a single original document.
8. Attorneys' Fees and Costs. If any legal action or other proceeding
is brought to enforce or interpret the terms of this Agreement, the party which
substantially prevails in such action or proceeding shall be entitled to recover
its costs and expenses incurred in connection therewith, including without
limitation attorneys' fees, costs and disbursements.
9. Effect of Merger, Transfer of Assets or Dissolution. This Agreement
shall not be terminated by any merger or consolidation affecting the Buyer,
whether or not the Buyer is the consolidated or surviving entity, or a transfer
of all or substantially all of the assets of the Buyer. In the event of any such
merger or consolidation or transfer of assets, the Buyer's rights, benefits and
obligations under this Agreement shall be assigned to and assumed by the
surviving or resulting entity (if other than the Buyer) or the transferee of the
Buyer's assets.
10. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in a court of the United States in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby.
11. Termination. This Agreement (including the proxy granted in Section
1(d) hereof) shall terminate and have no further force or effect upon the
consummation of the Merger or the termination of the Merger Agreement in
accordance with Section 7.5 of the Merger Agreement.
[remainder of page left blank intentionally]
IN WITNESS WHEREOF, the parties have executed this Agreement.
Buyer: Commtouch Software Ltd
By:
------------------------
Name:
Title:
Stockholder:
--------------------------
Name: ▇▇▇ ▇▇▇▇
Stockholder's address:
--------------------------
--------------------------
facsimile: _______________