EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NOKIA INC.
▇▇▇▇▇▇▇ ACQUISITION CORPORATION
AND
LOUDEYE CORP.
Dated as of August 7, 2006
TABLE OF CONTENTS
PAGE
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Article I THE MERGER............................................................2
1.1 THE MERGER..........................................................2
1.2 EFFECTIVE TIME; CLOSING.............................................2
1.3 EFFECT OF THE MERGER................................................2
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS.............................2
1.5 DIRECTORS AND OFFICERS..............................................3
1.6 EFFECT ON CAPITAL STOCK.............................................3
1.7 DISSENTING SHARES...................................................5
1.8 SURRENDER OF CERTIFICATES...........................................5
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.................7
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES..............................7
1.11 FURTHER ACTION......................................................7
Article II REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................7
2.1 ORGANIZATION; STANDING AND POWER; CHARTER DOCUMENTS; SUBSIDIARIES...7
2.2 CAPITAL STRUCTURE...................................................8
2.3 AUTHORITY; NO CONFLICT; NECESSARY CONSENTS.........................10
2.4 SEC FILINGS; FINANCIAL STATEMENTS; INTERNAL CONTROLS...............12
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS...............................15
2.6 TAXES..............................................................17
2.7 TITLE TO PROPERTIES................................................19
2.8 INTELLECTUAL PROPERTY..............................................21
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES................................27
2.10 GOVERNMENTAL AUTHORIZATIONS........................................27
2.11 LITIGATION.........................................................27
2.12 COMPLIANCE WITH LAWS...............................................28
2.13 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS........................28
2.14 BROKERS' AND FINDERS' FEES.........................................30
2.15 TRANSACTIONS WITH AFFILIATES.......................................30
2.16 EMPLOYEE BENEFIT PLANS AND COMPENSATION............................30
2.17 CONTRACTS..........................................................36
2.18 INSURANCE..........................................................38
2.19 EXPORT CONTROL LAWS................................................39
2.20 FOREIGN CORRUPT PRACTICES ACT......................................39
2.21 INFORMATION SUPPLIED...............................................39
2.22 FAIRNESS OPINION...................................................40
2.23 TAKEOVER STATUTES..................................................40
Article III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............40
3.1 ORGANIZATION.......................................................40
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3.2 AUTHORITY; NO CONFLICT; NECESSARY CONSENTS.........................40
3.3 CAPITAL RESOURCES..................................................41
3.4 INFORMATION SUPPLIED...............................................41
3.5 OPERATIONS OF MERGER SUB...........................................42
3.6 BROKERS' AND FINDERS' FEES.........................................42
3.7 LITIGATION. ......................................................42
Article IV CONDUCT BY THE COMPANY PRIOR TO THE EFFECTIVE TIME..................42
4.1 CONDUCT OF BUSINESS BY THE COMPANY.................................42
4.2 PROCEDURES FOR REQUESTING PARENT CONSENT...........................46
Article V ADDITIONAL AGREEMENTS................................................47
5.1 PROXY STATEMENT....................................................47
5.2 MEETING OF COMPANY STOCKHOLDERS; BOARD RECOMMENDATION..............47
5.3 ACQUISITION PROPOSALS..............................................48
5.4 CONFIDENTIALITY; ACCESS TO INFORMATION; NO MODIFICATION
OF REPRESENTATIONS, WARRANTIES OR COVENANTS .......................52
5.5 PUBLIC DISCLOSURE..................................................53
5.6 REGULATORY FILINGS; REASONABLE EFFORTS.............................53
5.7 NOTIFICATION OF CERTAIN MATTERS....................................55
5.8 THIRD-PARTY CONSENTS/TERMINATIONS..................................56
5.9 EMPLOYEE MATTERS...................................................56
5.10 INDEMNIFICATION....................................................58
5.11 SECTION 16 MATTERS.................................................59
5.12 TERMINATION OF CERTAIN COMPANY CONTRACTS...........................59
Article VI CONDITIONS TO THE MERGER............................................60
6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER...60
6.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB..60
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE COMPANY............61
Article VII TERMINATION, AMENDMENT AND WAIVER..................................62
7.1 TERMINATION........................................................62
7.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION.......................65
7.3 FEES AND EXPENSES..................................................65
7.4 AMENDMENT..........................................................66
7.5 EXTENSION; WAIVER..................................................66
Article VIII GENERAL PROVISIONS................................................67
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................67
8.2 NOTICES............................................................67
8.3 INTERPRETATION; KNOWLEDGE..........................................68
8.4 COUNTERPARTS.......................................................69
8.5 ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES........................70
8.6 SEVERABILITY.......................................................70
8.7 OTHER REMEDIES.....................................................70
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8.8 GOVERNING LAW......................................................70
8.9 RULES OF CONSTRUCTION..............................................70
8.10 ASSIGNMENT.........................................................71
8.11 WAIVER OF JURY TRIAL...............................................71
Exhibit A Form of Voting Agreement
Exhibit B Joint Press Release
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INDEX OF DEFINED TERMS
DEFINED TERM SECTION
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401(k) Plan 5.9(a)
2005 Plan 2.2(a)
Acquisition 7.3(b)(iii)
Acquisition Proposal 5.3(g)(i)
Action of Divestiture 5.6(d)
Agreement Preamble
the business of 8.3(a)
Bundeskartellamt 6.1(c)
Business Day 1.2
Cashed-Out Options 1.6(b)(ii)
Certificate of Merger 1.2
Certificates 1.8(c)
Change of Recommendation 5.3(d)
Change of Recommendation Notice 5.3(d)(iii)
Closing 1.2
Closing Date 1.2
COBRA 2.16(a)
Code 1.8(d)
Company Preamble
Company Balance Sheet 2.4(b)
Company Charter Documents 2.1(b)
Company Common Stock 1.6(a)
Company Disclosure Letter Article II
Company Employee Plan 2.16(a)
Company Financials 2.4(b)
Company Intellectual Property 2.8(a)
Company Material Contract 2.17(a)
Company Options 2.2(b)
Company Preferred Stock 2.2(a)
Company Registered Intellectual Property 2.8(a)
Company SEC Reports 2.4(a)
Company Services 2.8(a)
Company Stock Option Plans 2.2(b)
Company Warrants 1.6(b)(i)
Confidentiality Agreement 5.4(a)
Contaminants 2.8(k)
Continuing Employees 5.9(b)(i)
Contract 2.1(a)
Cure Expiration Date 7.1(i)(B)
Customer Information 2.8(o)
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Delaware Law Recitals
Dissenting Shares 1.7(a)
DOJ 2.3(c)
DOL 2.16(a)
Effect 8.3(d)
Effective Time 1.2
Employee 2.16(a)
Employee Agreement 2.16(a)
End Date 7.1(b)
Environmental or Health and Safety Claim 2.13(a)
Environmental Laws 2.13(a)
ERISA 2.16(a)
ERISA Affiliate 2.16(a)
Exchange Act 2.3(c)
Exchange Agent 1.8(a)
Exchange Fund 1.8(b)
Export Approvals 2.19(a)
FCO 6.1(c)
FCPA 2.20
FTC 2.3(c)
GAAP 2.4(b)
Governmental Authorizations 2.10
Governmental Entity 2.3(c)
Health and Safety Laws 2.13(a)
HIPAA 2.16(a)
HSR Act 2.3(c)
include, includes, including 8.3(a)
Indemnified Parties 5.10(a)
Intellectual Property 2.8(a)
Intellectual Property Rights 2.8(a)
International Employee Plan 2.16(a)
IRS 2.16(a)
Knowledge 8.3(b)
Lease Documents 2.7(b)
Legal Requirements 2.2(d)
Liens 2.1(c)
Made Available 8.3(c)
Material Adverse Effect 8.3(d)
Materials of Environmental Concern 2.13(a)
Merger 1.1
Merger Consideration 1.6(a)
Merger Sub Preamble
Merger Sub Common Stock 1.6(c)
Necessary Consents 2.3(c)
OD2 2.4(c)
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Open Source 2.8(i)
Overpeer 2.4(c)
Parent Preamble
Parent Benefit Plans 5.9(b)(ii)
Pension Plan 2.16(a)
Person 8.3(e)
Proxy Statement 2.21
Real Property 2.7(a)
Returns 2.6(b)(i)
Reviewed Document 5.12(a)
SEC 2.3(c)
Second Request Responses 5.6(a)
Securities Act 2.4(a)
Shrink-Wrapped Code 2.8(a)
Significant Subsidiaries 2.1(c)
Source Code 2.8(a)
SOX 2.4(a)
Stockholders' Meeting 5.2(a)
Subsidiary 2.1(a)
Subsidiary Charter Documents 2.1(b)
Superior Offer 5.3(g)(ii)
Surviving Corporation 1.1
Tax 2.6(a)
Taxes 2.6(a)
Termination Fee 7.3(b)(i)
Trade Secrets 2.8(a)
Triggering Event 7.1
Voting Agreements Recitals
Voting Debt 2.2(c)
WARN 2.16(a)
without limitation 8.3(a)
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of August 7, 2006, by and among Nokia Inc., a Delaware corporation
("PARENT"), ▇▇▇▇▇▇▇ Acquisition Corporation, a Delaware corporation and direct
wholly owned subsidiary of Parent ("MERGER SUB"), and Loudeye Corp., a Delaware
corporation (the "COMPANY").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and the
Company have deemed it advisable and in the best interests of their respective
corporations and stockholders that Parent and the Company consummate the
business combination and other transactions provided for herein.
B. The respective Boards of Directors of Merger Sub and the Company have
approved, in accordance with the Delaware General Corporation Law ("DELAWARE
LAW"), this Agreement and the transactions contemplated hereby, including the
Merger.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, all current
executive officers and members of the Board of Directors of the Company are
entering into Voting Agreements and irrevocable proxies in substantially the
form attached hereto as EXHIBIT A (each, a "VOTING AGREEMENT" and, collectively,
the "VOTING AGREEMENTS").
D. Concurrently with the execution of this Agreement, and as an inducement
to Parent's willingness to enter into this Agreement, certain key employees of
the Company have entered into employment-related agreements with Parent (which
contain non-competition and non-solicitation provisions) and certain other
senior executives of the Company have entered into Non-Competition and
Non-Solicitation Agreements.
E. Subject to Section 5.3(d) hereof, the Board of Directors of the Company
has resolved to recommend to its stockholders the adoption of this Agreement.
F. Parent, as the sole stockholder of Merger Sub, has approved and adopted
this Agreement and approved the Merger.
G. Parent, Merger Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe certain conditions to the Merger.
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NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of Delaware Law,
Merger Sub shall be merged with and into the Company (the "MERGER"), the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation and as a wholly owned subsidiary of
Parent. The surviving corporation after the Merger is hereinafter sometimes
referred to as the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "CERTIFICATE OF
MERGER") (the time of such filing with the Secretary of State of the State of
Delaware (or such later time as may be agreed in writing by the Company and
Parent and specified in the Certificate of Merger) being the "EFFECTIVE TIME")
as soon as practicable on the Closing Date. The closing of the Merger (the
"CLOSING") shall take place at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ &
▇▇▇▇ (UK) LLP, located at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇, at a
time and date to be specified by the parties, which shall be no later than the
fourth Business Day after the satisfaction or waiver of the conditions set forth
in ARTICLE VI (other than those that by their terms are to be satisfied or
waived at the Closing), or at such other time, date and location as the parties
hereto agree in writing. The date on which the Closing occurs is referred to
herein as the "CLOSING DATE." "BUSINESS DAY" shall mean each day that is not a
Saturday, Sunday or other day on which Parent is closed for business or banking
institutions located in any of New York, United States of America, London,
England or Helsinki, Finland are authorized or obligated by law or executive
order to close.
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS. Unless otherwise determined
by Parent prior to the Effective Time, at the Effective Time, the Amended and
Restated Certificate of Incorporation of the Company shall be amended and
restated in its entirety to be identical to the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, until
thereafter amended in accordance with Delaware Law and as provided in such
Certificate of Incorporation; provided, however, that at the Effective Time,
Article I of the Certificate of Incorporation of the Surviving Corporation shall
be amended and restated in its entirety to read as follows: "The name of the
corporation is Loudeye Corp." Unless otherwise determined by Parent prior to the
Effective
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Time, at the Effective Time, the Bylaws of the Company shall be amended and
restated in their entirety to be identical to the Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, until thereafter amended in
accordance with Delaware Law and as provided in such Bylaws.
1.5 DIRECTORS AND OFFICERS. Unless otherwise determined by Parent prior to
the Effective Time, the initial directors of the Surviving Corporation shall be
the directors of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly elected or appointed and qualified. Unless
otherwise determined by Parent prior to the Effective Time, the initial officers
of the Surviving Corporation shall be the officers of Merger Sub immediately
prior to the Effective Time, until their respective successors are duly
appointed. In addition, unless otherwise determined by Parent prior to the
Effective Time, Parent, the Company and the Surviving Corporation shall cause
the directors and officers of Merger Sub immediately prior to the Effective Time
to be the directors and officers, respectively, of each of the Company's
Subsidiaries immediately after the Effective Time, each to hold office as a
director or officer of each such Subsidiary in accordance with the provisions of
the laws of the respective jurisdiction of organization and the respective
bylaws or equivalent organizational documents of each such Subsidiary.
1.6 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Merger Sub, the Company or the holders of any shares of
capital stock of the Company, the following shall occur:
(a) COMPANY COMMON STOCK. Each share of common stock, par value
$0.001 per share, of the Company ("COMPANY COMMON STOCK") issued and outstanding
immediately prior to the Effective Time will be canceled and extinguished and
automatically converted (subject to SECTION 1.7) into the right to receive an
amount of cash equal to $4.50 per share, without interest (such amount of cash
hereinafter referred to as the "MERGER CONSIDERATION") upon surrender of the
certificate representing such share of Company Common Stock in the manner
provided in SECTION 1.8 (or in the case of a lost, stolen or destroyed
certificate, upon delivery of an affidavit (and bond, if required) in the manner
provided in SECTION 1.10).
(b) COMPANY WARRANTS AND COMPANY OPTIONS.
(i) COMPANY WARRANTS. Following the Effective Time, all
warrants to purchase Company Common Stock issued by the Company ("COMPANY
WARRANTS") shall represent only the right, upon the valid exercise thereof, if
any, to receive the Merger Consideration payable upon the shares of Company
Common Stock previously issuable upon exercise of such Company Warrants and
shall in no event be exercisable for any equity securities of Parent, the
Company or any of their Subsidiaries. In addition, the Company shall use all
reasonable efforts to notify as soon as practicable following the date hereof,
and in accordance with the terms of the relevant Common Stock Purchase Warrants
and Subscription Agreements related to the Company Warrants, all holders of
Company Warrants that they may fully exercise such Company Warrants prior to the
Effective Time or shall be entitled to receive following the Effective Time,
upon surrender of the certificate representing such Company Warrant, only an
amount equal to the product of (x) the number of shares of Company Common Stock
issuable upon exercise of such Company Warrant multiplied by
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(y) the excess, if any, of the per share Merger Consideration over the per share
exercise price in effect for such Company Warrant.
(ii) COMPANY OPTIONS. At the Effective Time, each Company
Option that is vested as of the Effective Time, giving effect to any
acceleration of vesting resulting from the Merger (collectively, the "CASHED-OUT
OPTIONS"), and that is unexpired, unexercised and outstanding immediately prior
to the Effective Time shall, on the terms and subject to the conditions set
forth in this Agreement, terminate in its entirety at the Effective Time, and
the holder of each Cashed-Out Option shall be entitled to receive therefor an
amount of cash (rounded down to the nearest whole cent) equal to the product of
(i) the number of shares of Company Common Stock as to which such Company Option
was vested and exercisable immediately prior to the Effective Time (giving
effect to any acceleration of vesting resulting from the Merger), and (ii) the
excess, if any, of the per share Merger Consideration over the exercise price of
such Company Option immediately prior to the Effective Time.
(iii) As of the Effective Time, the Company Stock Option Plans
shall terminate and all rights under the Company Options and any provision of
any other plan, program, agreement or arrangement providing for the issuance or
grant of any other interest in respect of the capital stock of the Company or
any Subsidiary shall be cancelled. The Company shall use all commercially
reasonable efforts, including delivery of all notices, to effectuate the
provisions of this Section 1.6(b), and to ensure that, from and following the
Effective Time, no Person shall have any right under the Company Stock Options
Plans, the Company Options or any other plan, program, agreement or arrangement
with respect to equity securities of the Company, the Surviving Corporation or
any Subsidiary thereof.
(iv) Any materials to be submitted to the holders of Company
Warrants or Company Options shall be subject to review and prior reasonable
approval by Parent.
(c) CANCELLATION OF TREASURY STOCK. Each share of Company Common
Stock held by the Company or any direct or indirect wholly-owned Subsidiary of
the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(d) CAPITAL STOCK OF MERGER SUB. Each share of common stock, par
value $0.001 per share, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock, par value
$0.001 per share, of the Surviving Corporation. Each certificate evidencing
ownership of shares of Merger Sub Common Stock shall evidence ownership of such
shares of capital stock of the Surviving Corporation.
(e) ADJUSTMENTS TO MERGER CONSIDERATION. The Merger Consideration
shall be adjusted to reflect fully the appropriate effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Company Common Stock), reorganization,
recapitalization, reclassification or other like change with respect to Company
Common Stock having a record date on or after the date hereof and prior to the
Effective Time.
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1.7 DISSENTING SHARES.
(a) Notwithstanding any other provision of this Agreement to the
contrary, any shares of Company Common Stock held by a holder who: (i) has not
voted in favor of the Merger or consented thereto in writing, (ii) has demanded
its rights to appraisal in accordance with Section 262 of Delaware Law and (iii)
as of the Effective Time has not effectively withdrawn or lost such holder's
appraisal rights (collectively, the "DISSENTING SHARES"), shall not be converted
into or represent a right to receive the applicable consideration for Company
Common Stock set forth in SECTION 1.6, but the holder thereof shall only be
entitled to such rights as are provided by Delaware Law.
(b) Notwithstanding the provisions of SECTION 1.7(a), if any holder
of Dissenting Shares shall effectively withdraw or lose (through failure to
perfect or otherwise) such holder's appraisal rights under Delaware Law, then,
as of the later of the Effective Time and the occurrence of such event, such
holder's shares shall automatically be converted into and represent only the
right to receive the consideration for Company Common Stock, as applicable, set
forth in SECTION 1.6, without interest thereon, upon surrender of the
certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demand for appraisal received by the Company pursuant to the applicable
provisions of Delaware Law and (ii) the opportunity to participate in any
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to any such demands or offer to settle or settle any such demands. Any
communication to be made by the Company to any holder of Company Common Stock
with respect to such demands shall be submitted to Parent in advance and shall
not be presented to any holder of Company Common Stock prior to the Company
receiving Parent's consent, which consent shall not be unreasonably withheld or
delayed.
1.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Parent shall retain an institution reasonably
satisfactory to the Company to act as the exchange agent (the "EXCHANGE AGENT")
for the Merger on customary terms and conditions.
(b) PARENT TO PROVIDE CASH. Promptly following the Effective Time,
Parent shall make available to the Exchange Agent for exchange in accordance
with this ARTICLE I, the Merger Consideration payable pursuant to SECTION 1.6(a)
in exchange for outstanding shares of Company Common Stock. Any cash deposited
with the Exchange Agent shall hereinafter be referred to as the "EXCHANGE FUND."
(c) EXCHANGE PROCEDURES. As soon as reasonably practicable following
the Effective Time (but in no event more than five Business Days thereafter),
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) of a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive the
Merger Consideration pursuant to SECTION 1.6(a): (i) a letter of transmittal
(which shall specify that delivery
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shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
customary form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for cash constituting the Merger Consideration. Upon surrender of
Certificates for cancellation to the Exchange Agent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto and such other documents as may reasonably be required by
the Exchange Agent, the holder of record of such Certificates shall be entitled
to receive in exchange therefor the cash constituting the Merger Consideration,
and the Certificates so surrendered shall forthwith be canceled. Until so
surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, to evidence the right to receive the
Merger Consideration into which such shares of Company Common Stock shall have
been so converted.
(d) REQUIRED WITHHOLDING. Each of the Exchange Agent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock, Company Warrants or Company
Options such amounts as may be required to be deducted or withheld therefrom
under the Internal Revenue Code of 1986, as amended (the "CODE") or under any
provision of state, local or foreign Tax law or under any other applicable Legal
Requirement. To the extent such amounts are so deducted or withheld, the amount
of such consideration shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such consideration would otherwise have
been paid.
(e) NO LIABILITY. Notwithstanding anything to the contrary in this
SECTION 1.8, neither the Exchange Agent, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Company Common Stock for any
amount paid to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest the
cash included in the Exchange Fund as directed by Parent on a daily basis;
provided, however, that no such investment or loss thereon shall affect the
amounts payable to Company stockholders pursuant to this ARTICLE I. Any interest
and other income resulting from such investment shall become a part of the
Exchange Fund, and any amounts in excess of the amounts payable to Company
stockholders pursuant to this ARTICLE I shall promptly be paid to Parent.
(g) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates six months after the
Effective Time shall, at the request of the Surviving Corporation, be delivered
to the Surviving Corporation or otherwise according to the instruction of the
Surviving Corporation, and any holders of Certificates who have not surrendered
such Certificates in compliance with this SECTION 1.8 shall after such delivery
to the Surviving Corporation, subject to SECTION 1.8(e), look only to the
Surviving Corporation solely as general creditors for the cash constituting the
Merger Consideration (which shall not accrue interest) pursuant to SECTION
1.6(a) with respect to the shares of Company Common Stock formerly represented
thereby.
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1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All Merger
Consideration paid upon the surrender for exchange of shares of Company Common
Stock in accordance with the terms hereof shall be deemed to have been paid in
full satisfaction of all rights pertaining to such shares of Company Common
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this ARTICLE I.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such cash constituting the Merger
Consideration; provided, however, that Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent, the Company or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
1.11 FURTHER ACTION. At and after the Effective Time, the officers and
directors of Parent and the Surviving Corporation shall be authorized to execute
and deliver, in the name and on behalf of the Company and Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of Company and Merger Sub, any other actions and things to vest, perfect
or confirm of record or otherwise in the Surviving Corporation any and all
right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to
the exceptions specifically disclosed (i) in the Company SEC Reports (as defined
below) that have been filed with the SEC between January 1, 2006 and the date
hereof, or (ii) in writing in the disclosure letter (referencing the appropriate
section or subsection; provided, however, that any information set forth in one
section of the disclosure letter shall be deemed to apply to each other section
or subsection thereof and to the applicable representation and warranty to which
its relevance is reasonably apparent on its face) supplied by the Company to
Parent dated as of the date hereof (the "COMPANY DISCLOSURE LETTER"), as
follows:
2.1 ORGANIZATION; STANDING AND POWER; CHARTER DOCUMENTS; SUBSIDIARIES.
(a) ORGANIZATION; STANDING AND POWER. Except as set forth in SECTION
2.1(a) of the Company Disclosure Letter, the Company and each of its
Subsidiaries are each a corporation or other organization duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (except, in the case of good standing, for
entities organized under the laws of any jurisdiction that does not recognize
such concept) and each has the requisite power and authority to own, lease and
operate its properties and to carry on its business as
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currently conducted, except where the failure to be so organized, validly
existing and in good standing would not reasonably be expected to be material to
the Company and its Subsidiaries taken as a whole. For purposes of this
Agreement, "SUBSIDIARY," when used with respect to any party, shall mean any
corporation, association, business entity, partnership, limited liability
company or other Person of which such party, either alone or together with one
or more Subsidiaries or by one or more Subsidiaries (i) directly or indirectly
owns or controls securities or other interests representing more than 50% of the
voting power of such Person or (ii) is entitled, by Contract or otherwise, to
elect, appoint or designate directors constituting a majority of the members of
such Person's board of directors or other governing body. For purposes of this
Agreement, "CONTRACT" shall mean any written, oral or other agreement, contract,
subcontract, settlement agreement, lease, binding understanding, instrument,
note, option, warranty, purchase order, license, sublicense, insurance policy,
benefit plan or legally binding, commitment or arrangement, or undertaking of
any nature, as in effect as of the date hereof or as may hereinafter be
enforceable against the Company or its Subsidiaries.
(b) CHARTER DOCUMENTS. The Company has Made Available (i) a true and
correct copy of the amended and restated certificate of incorporation and bylaws
of the Company, each as amended to date (collectively, the "COMPANY CHARTER
DOCUMENTS") and (ii) the certificate of incorporation and bylaws, or like
organizational documents, of each of its Significant Subsidiaries (collectively,
"SUBSIDIARY CHARTER DOCUMENTS"), and each such instrument is in full force and
effect. The Company is not in violation of any of the provisions of the Company
Charter Documents and each Subsidiary is not in violation of its respective
Subsidiary Charter Documents.
(c) SUBSIDIARIES. SECTION 2.1(c)(i) of the Company Disclosure Letter
sets forth each Subsidiary of the Company. For the purposes of this Agreement
"SIGNIFICANT SUBSIDIARIES" shall mean all of the Subsidiaries listed in SECTION
2.1(c)(II) of the Company Disclosure Letter. The Company does not have any
Subsidiaries that are "significant subsidiaries" within the meaning of Rule 1-02
of Regulation S-X of the Exchange Act (as defined below) that are not included
in the Significant Subsidiaries. Except as set forth in SECTION 2.1(c) of the
Company Disclosure Letter, the Company is the owner of all of the outstanding
shares of capital stock of, or other equity or voting interests in, each such
Subsidiary and all such shares have been duly authorized, validly issued and are
fully paid and nonassessable, free and clear of all pledges, claims, liens,
charges, encumbrances, options and security interests of any kind or nature
whatsoever (collectively, "LIENS"), including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests, except for restrictions imposed by applicable securities laws. Other
than the Subsidiaries of the Company, neither the Company nor any of its
Subsidiaries owns any capital stock of, or other equity or voting interests of
any nature in, or any interest convertible, exchangeable or exercisable for,
capital stock of, or other equity or voting interests of any nature in, any
other Person.
2.2 CAPITAL STRUCTURE.
(a) CAPITAL STOCK. The authorized capital stock of the Company
consists of: (i) 25,000,000 shares of Company Common Stock, par value $0.001 per
share, and (ii) 5,000,000 shares of undesignated preferred stock, par value
$0.001 per share (the "COMPANY PREFERRED STOCK"). As of the close of business on
August 4, 2006: (i) 13,251,531 shares of Company Common Stock were issued and
outstanding (excluding shares of Company Common Stock held by the
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Company in its treasury) of which 90,939 were shares of Company Common Stock
issued pursuant to unvested restricted stock awards under the Company's 2005
Incentive Award Plan (the "2005 PLAN"), (ii) no shares of Company Common Stock
were issued and held by the Company in its treasury and (iii) no shares of
Company Preferred Stock were issued and outstanding. No shares of Company Common
Stock are owned or held by any Subsidiary of the Company. All outstanding shares
of Company Common Stock are duly authorized, validly issued, fully paid and
non-assessable and are not subject to preemptive rights created by statute, the
Company Charter Documents, or any agreement to which the Company is a party or
by which the Company is bound.
(b) COMPANY OPTIONS AND COMPANY WARRANTS. As of the close of
business on the date hereof: (i) 831,147 shares of Company Common Stock are
issuable upon the exercise of outstanding options to purchase Company Common
Stock under the 2005 Plan, 2005 Company Stock Option Plan (a subplan to the 2005
Plan), On Demand Distribution Option Exchange Agreements, 2000 Stock Option
Plan, 2000 Employee Stock Option Plan, 2000 Director Stock Option Plan and the
1998 Stock Option Plan (collectively, the "COMPANY STOCK OPTION PLANS") (such
options, whether payable in cash, shares or otherwise granted under or pursuant
to the Company Stock Option Plans are referred to in this Agreement as "COMPANY
OPTIONS"), (ii) 245,385 of the Company Options are vested and exercisable as of
the date hereof; (iii) 1,770,050 shares of Company Common Stock are available
for future grant under the 2005 Plan; and (iv) 1,832,646 shares of Company
Common Stock are issuable upon the exercise of Company Warrants. SECTION 2.2(b)
of the Company Disclosure Letter sets forth a list of each outstanding Company
Option and Company Warrant: (a) the name of the holder of such Company Option or
Company Warrant, (b) the number of shares of Company Common Stock subject to
such Company Option or Company Warrant, (c) the exercise price of such Company
Option or Company Warrant, (d) the date on which such Company Option or Company
Warrant was granted or issued, (e) the Company Stock Option Plan under which
such Company Option was issued and whether such Company Option is an "incentive
stock option" (as defined in Section 422 of the Code) or a nonqualified stock
option, (f) for each Company Option, whether such Company Option is held by a
Person who is not an employee of the Company or any of its Subsidiaries, (g) the
extent to which such Company Option or Company Warrant is vested and exercisable
as of the date hereof, and (h) the date on which such Company Option or Company
Warrant expires. As a result of the transactions contemplated by this Agreement,
all outstanding unvested Company Options will vest and become immediately
exercisable immediately prior to the Effective Time. All shares of Company
Common Stock subject to issuance under the Company Stock Option Plans and the
Company Warrants, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. None of the Company Options or
Company Warrants were granted with exercise prices below fair market value on
the date of grant. Except as set forth in SECTION 2.2(b) of the Company
Disclosure Letter, there are no commitments or agreements of any character to
which the Company is bound obligating the Company to accelerate the vesting or
exercisability of any Company Option or Company Warrant as a result of the
Merger (whether alone or upon the occurrence of any additional or subsequent
events). Except as set forth in SECTIONS 2.2(b) of the Company Disclosure
Letter, there are no outstanding or authorized stock appreciation, phantom
stock, profit participation, restricted stock, performance shares or other
similar rights with respect to the Company.
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(c) VOTING DEBT. No bonds, debentures, notes or other indebtedness
of the Company or any of its Subsidiaries (i) having the right to vote on any
matters on which stockholders may vote (or which is convertible into, or
exchangeable for, securities having such right) or (ii) the value of which is in
any way based upon or derived from capital or voting stock of the Company, are
issued or outstanding as of the date hereof (collectively, "VOTING DEBT").
(d) OTHER SECURITIES. Except as otherwise set forth in SECTION
2.2(b) or SECTION 2.2(d) of the Company Disclosure Letter, as of the date
hereof, there are no securities, options, warrants, calls, rights, contracts,
commitments, agreements, instruments, arrangements, understandings, obligations
or undertakings of any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating (or purporting to obligate)
the Company or any of its Subsidiaries to (including on a deferred basis) issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock, Voting Debt, other voting securities or any securities
convertible into shares of capital stock, Voting Debt or other voting securities
of the Company or any of its Subsidiaries, or obligating the Company or any of
its Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, instrument, arrangement,
understanding, obligation or undertaking of any kind. There are no outstanding
Contracts to which the Company or any of its Subsidiaries is a party or by which
any of them is bound obligating (or purporting to obligate) the Company or any
of its Subsidiaries to (i) repurchase, redeem or otherwise acquire any shares of
capital stock of, or other equity or voting interests in, the Company or any of
its Subsidiaries or (ii) dispose of any shares of the capital stock of, or other
equity or voting interests in, any of its Subsidiaries. Except for the Voting
Agreements, the Company is not a party to any voting agreement with respect to
shares of the capital stock of, or other equity or voting interests in, the
Company or any of its Subsidiaries and, other than the Voting Agreements and the
irrevocable proxies granted pursuant to the Voting Agreements, there are no
irrevocable proxies and no voting agreements, voting trusts, rights plans,
anti-takeover plans or registration rights agreements with respect to any shares
of the capital stock of, or other equity or voting interests in, the Company or
any of its Subsidiaries to which the Company or any of its Subsidiaries is a
party or by which any of them are bound. There are no outstanding contractual
commitments of the Company or any of its Subsidiaries that obligate the Company
or its Subsidiaries to make any investment (in the form of a loan, capital
contribution or otherwise) in any other Person. For purposes of this Agreement,
"LEGAL REQUIREMENTS" shall mean any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, order, edict, decree, directive, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity.
2.3 AUTHORITY; NO CONFLICT; NECESSARY CONSENTS.
(a) AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject, in the case of consummation of the Merger, to
obtaining the adoption of this Agreement by the Company's stockholders as
contemplated in SECTION 5.2. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company and no
further corporate action is required on the part of the Company to authorize the
execution and delivery of this Agreement or to consummate the
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Merger and the other transactions contemplated hereby, subject only to the
adoption of this Agreement by the Company's stockholders as contemplated by
SECTION 5.2 and the filing of the Certificate of Merger pursuant to Delaware
Law. The affirmative vote of the holders of a majority of the outstanding shares
of Company Common Stock is the only vote of the holders of any class or series
of Company capital stock necessary to adopt this Agreement and consummate the
Merger and the other transactions contemplated hereby. The Board of Directors of
the Company has, by resolution adopted by unanimous vote at a meeting where all
the Directors were present and the meeting was duly called and held and not
subsequently rescinded or modified in any way (except as is permitted pursuant
to SECTION 5.3(d) hereof or for clerical or administerial modifications) duly
(i) determined that the Merger is fair to, and in the best interests of, the
Company and its stockholders and declared the Merger to be advisable, (ii) duly
and validly approved this Agreement and the transactions contemplated thereby,
including the Merger, and taken all corporate action required to be taken by the
Company's Board of Directors to authorize the consummation of the Merger, and
(iii) resolved to recommend that the stockholders of the Company adopt this
Agreement and directed that such matter be submitted to the Company's
stockholders at the Stockholders' Meeting (as defined below). This Agreement has
been duly executed and delivered by the Company and assuming due authorization,
execution and delivery by Parent and Merger Sub, constitutes the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the rights and remedies of
creditors generally and to general principles of equity.
(b) NO CONFLICT. The execution and delivery by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) conflict with or violate any provision of the Company Charter Documents or
any Subsidiary Charter Documents of any Subsidiary of the Company, (ii) subject
to obtaining the adoption of this Agreement by the Company's stockholders as
contemplated in SECTION 5.2 and compliance with the requirements set forth in
SECTION 2.3(c), conflict with or violate any material Legal Requirement
applicable to the Company or any of its Subsidiaries or by which the Company or
any of its Subsidiaries or any of their respective properties or assets (whether
tangible or intangible) is bound or affected or (iii) result in any material
breach of or constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under, or to the
Knowledge of the Company, materially impair the Company's rights or alter the
rights or obligations of any third party under, or to the Knowledge of the
Company, give to others any rights of termination, amendment, acceleration or
cancellation of any Company Material Contract, or result in the creation of a
Lien on any of the properties or assets of the Company or any of its
Subsidiaries other than, in the cases of clauses (ii) and (iii) as would not
reasonably be expected to have a Material Adverse Effect on the Company or to
materially and adversely affect the Company's ability to consummate the Merger.
SECTION 2.3(b) of the Company Disclosure Letter lists all consents, waivers and
approvals required to be obtained in connection with the consummation of the
transactions contemplated hereby under any Contract to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or any of their properties or assets is bound or affected,
which, if individually or in the aggregate, not obtained, would reasonably be
expected to be material to the Company and its Subsidiaries taken as a whole or
result in the Company or any of its Subsidiaries incurring any material
penalties or other financial obligations or to materially and adversely affect
the ability of the parties hereto to consummate the Merger as contemplated.
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(c) NECESSARY CONSENTS. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with any supranational,
national, state, municipal, local or foreign government, any instrumentality,
subdivision, court, arbitral body, administrative agency or commission or other
governmental authority or instrumentality, or any quasi-governmental or private
body exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority (a "GOVERNMENTAL ENTITY") or any other Person is
required to be obtained or made by the Company in connection with the execution
and delivery of this Agreement or the consummation of the Merger and other
transactions contemplated hereby and thereby, except for (i) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which the
Company or Parent are qualified to do business, (ii) the filing of the Proxy
Statement with the United States Securities and Exchange Commission (the "SEC")
in accordance with the requirements of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and the rules and regulations promulgated
thereunder, (iii) the filing of the Notification and Report Forms with the
United States Federal Trade Commission ("FTC") and the Antitrust Division of the
United States Department of Justice ("DOJ") required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended ("HSR ACT") and the expiration or
termination of the applicable waiting period under the HSR Act and such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required by any competent merger control
authority or the expiration of any applicable waiting period and the absence of
an order by any competent authority or court preliminarily or permanently
prohibiting the transaction pursuant to the competition laws of Germany, Italy
and any applicable mandatory competition laws of any other country identified in
SECTION 2.3(c) of the Company Disclosure Letter, (iv) approval of the Company's
stockholders as contemplated in SECTION 5.2, (v) such other filings and
notifications as may be required to be made by the Company under federal, state
or foreign securities laws or the rules and regulations of the Nasdaq Capital
Market and (vi) such other consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings which if not obtained or made would not,
individually or in the aggregate, reasonably be expected to materially affect
the ability of any of the parties hereto to consummate the Merger as
contemplated in the absence of the need for such consent, waiver, approval,
order, authorization, registration, declaration or filing or to have a Material
Adverse Effect on the Company. The consents, approvals, orders, authorizations,
registrations, declarations and filings set forth in (i) through (vi) above are
referred to herein as the "NECESSARY CONSENTS."
2.4 SEC FILINGS; FINANCIAL STATEMENTS; INTERNAL CONTROLS.
(a) SEC FILINGS. The Company has filed all required registration
statements, prospectuses, reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated by
reference) required to be filed by it with the SEC since January 1, 2004. All
such required registration statements, prospectuses, reports, schedules, forms,
statements and other documents, as each of the foregoing have been amended since
the time of their filing (including those that the Company may file subsequent
to the date hereof), are referred to herein as the "COMPANY SEC REPORTS." As of
their respective dates, the Company SEC Reports (i) were prepared in accordance
with, and complied in all material respects with, the requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), the Exchange Act, or
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 ("SOX"), as the case may be, and, in each case,
the rules and regulations promulgated thereunder applicable to such Company SEC
Reports and (ii) did not at the time they were filed (or
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if amended or superseded by a filing prior to the date of this Agreement then on
the date of such subsequent filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of the Company's Subsidiaries is
required to file any forms, reports or other documents with the SEC. The Company
has Made Available complete and correct copies of all amendments and
modifications that have not been filed by the Company with the SEC (but that are
required to be filed with the SEC) to all Contracts and other documents that
previously had been filed by the Company with the SEC and are currently in
effect. The Company has Made Available true, correct and complete copies of all
correspondence between the SEC, on the one hand, and the Company and any of its
Subsidiaries, on the other, since January 1, 2004, including but limited to all
SEC comment letters and responses to such comment letters by or on behalf of the
Company. As of the date hereof, none of the Company SEC Reports are the subject
of ongoing SEC review or outstanding SEC comment. The Company is in compliance
with, and has complied, in each case in all material respects with (i) the
applicable provisions of SOX and the related rules and regulations promulgated
under or pursuant to such act and (ii) the applicable listing and corporate
governance rules and regulations of the Nasdaq Capital Market. Each of the
principal executive officers of the Company and the principal financial officer
of the Company (or each former principal executive officer of the Company and
each former principal financial officer of the Company, as applicable) has made
all certifications required by Rule 13a-14 or Rule 15d-14 under the Exchange Act
or Sections 302 and 906 of SOX with respect to the Company SEC Reports. For
purposes of the preceding sentence, "principal executive officer" and "principal
financial officer" shall have the meanings given to such terms in SOX.
(b) FINANCIAL STATEMENTS. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports (the "COMPANY FINANCIALS"), including each Company SEC
Report filed after the date hereof until the Closing: (i) complied as to form in
all material respects with the published rules and regulations of the SEC with
respect thereto, (ii) was prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements or pro forma financial
statements, as may be permitted by the SEC on Form 10-Q, 8-K or any successor
form under the Exchange Act) and (iii) presented fairly in all material respects
the consolidated financial position of the Company and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated results of
the Company's operations and cash flows for the periods indicated. The Company
does not intend to correct or restate and, to the Knowledge of the Company,
there is not any basis to correct or restate, any of the Company Financials. The
unaudited consolidated balance sheet of the Company and its consolidated
subsidiaries as of March 31, 2006 contained in the Company SEC Reports is
hereinafter referred to as the "COMPANY BALANCE SHEET." Except as set forth in
the Company Financials or SECTION 2.4(b) of the Company Disclosure Letter, since
the date of the Company Balance Sheet, neither the Company nor any of its
Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise,
either matured or unmatured) of a nature required to be disclosed on a
consolidated balance sheet or in the related notes to the consolidated financial
statement prepared in accordance with GAAP, except for (i) liabilities incurred
since the date of the Company Balance Sheet in the ordinary course of business
consistent with past practice, (ii) liabilities incurred in connection with this
Agreement or the transactions contemplated hereby and (iii) liabilities, which
individually or in the aggregate, would not reasonably be expected to be
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material to the Company and its Subsidiaries, taken as a whole. The Company has
not had any dispute with any of its auditors regarding accounting matters or
policies during any of its past three full fiscal years or during the current
fiscal year-to-date. The books and records of the Company and each Subsidiary
have been, and are being maintained in all material respects in accordance with
applicable legal and accounting requirements, and the Financial Statements are
consistent with such books and records. Neither the Company nor any of its
Subsidiaries is a party to, or has any commitment to become a party to, any
joint venture, off-balance sheet partnership or any similar Contract relating to
any transaction or relationship between or among the Company or any of its
Subsidiaries, on the one hand, and any unconsolidated affiliate, including any
structured finance, special purpose or limited purpose Person, on the other
hand, or any "off-balance sheet arrangements" (as defined in Item 303(a) of
Regulation S-K of the SEC).
(c) INTERNAL CONTROLS. Except as set forth in SECTION 2.4(c) of the
Company Disclosure Letter, the Company, On Demand Distribution Limited ("OD2")
and Overpeer Inc. ("OVERPEER") have established and maintain, adhere to and
enforce a system of internal controls over financial reporting required by Rules
13a-15(f) or 15d-15(f) of the Exchange Act which are effective in providing
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
GAAP (including the Company Financials) including policies and procedures that
(i) pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
Company, OD2 and Overpeer, (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures of the Company, OD2 and
Overpeer are being made only in accordance with the appropriate authorizations
of management and the Board of Directors of the Company, (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the assets of the Company, OD2 and Overpeer
that could have a material effect on the Company's, OD2's or Overpeer's
financial statements and (iv) provide reasonable assurance that any significant
deficiencies or material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely
affect the ability to record, process, summarize and report financial
information, and any fraud, whether or not material, that involves the Company's
management or other Employees who have a significant role in the preparation of
financial statements or the Company's internal controls over financial reporting
utilized by the Company and its Significant Subsidiaries, are adequately and
promptly disclosed to the Company's independent auditors and the audit committee
of the Company's Board of Directors. None of the Company, OD2 or Overpeer
(including any Employee thereof) nor, to the Knowledge of the Company, the
Company's independent auditors, have identified or been made aware of (i) any
significant deficiency or material weakness in the system of internal controls
utilized by the Company, OD2 or Overpeer, (ii) any fraud, whether or not
material, that involves the Company's management or other Employees who have a
role in the preparation of financial statements or the internal controls
utilized by the Company, OD2 or Overpeer, or (iii) any claim or allegation
regarding any of the foregoing.
(d) DISCLOSURE CONTROLS. The Company's disclosure controls and
procedures required by Rules 13a-15(f) or 15d-15(f) of the Exchange Act are
reasonably designed in all material respects to ensure that all material
information relating to the Company and its Subsidiaries required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act (i) is
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recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms and (ii) is accumulated and communicated to the
Company's management to allow timely decisions regarding required disclosure.
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Company
Balance Sheet through the date hereof, except as set forth in SECTION 2.5 of the
Company Disclosure Letter there has not been, accrued or arisen:
(a) any Material Adverse Effect on the Company;
(b) any acquisition by the Company or any Subsidiary of, or
agreement by the Company or any Subsidiary to acquire by merging or
consolidating with, or by purchasing any assets or equity securities of, or by
any other manner, any business or corporation, partnership, association or other
business organization or division thereof, or other acquisition or agreement to
acquire any assets or any equity securities that are material, individually or
in the aggregate, to the business of the Company and its Subsidiaries, taken as
a whole, or, to the Knowledge of the Company, any solicitation of, or
participation in, any negotiations or discussions with respect to any of the
foregoing;
(c) any entry into, amendment or termination by the Company or any
of its subsidiaries of any Contract, agreement in principle, letter of intent,
memorandum of understanding or similar agreement with respect to any joint
venture, strategic partnership or alliance;
(d) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
the Company's or any of its Subsidiaries' capital stock, or any purchase,
redemption or other acquisition by the Company or any of its Subsidiaries of any
of the Company's capital stock or any other securities of the Company or its
Subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from Employees following their
termination pursuant to the terms of their pre-existing agreements;
(e) any split, reverse split, combination or reclassification of any
of the Company's or any of its Subsidiaries' capital stock except as set forth
in SECTION 2.5(e) of the Company Disclosure Letter;
(f) any granting by the Company or any of its Subsidiaries, whether
orally or in writing, of any increase in compensation or fringe benefits (except
for normal increases of cash compensation to current non-officer employees in
the ordinary course of business consistent with past practice) or any payment by
the Company or any of its Subsidiaries of any bonus (except for bonuses made to
current non-officer employees in the ordinary course of business consistent with
past practice) or any change to a Company Employee Plan by the Company or any of
its Subsidiaries that would increase current or future accruals of participants
under any such plan or would otherwise increase the expense of operating such
plan by the Company or any of its Subsidiaries or any change by the Company or
any of its Subsidiaries of severance, termination or bonus policies and
practices or any change to or entry by the Company or any of its Subsidiaries
into any currently effective employment, severance, termination, change in
control or indemnification agreement or, except as
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set forth in SECTION 2.5(f) of the Company Disclosure Letter, any agreement the
benefits of which are contingent or the terms of which are materially altered
upon the occurrence of a transaction involving the Company of the nature
contemplated hereby (either alone or upon the occurrence of additional or
subsequent events), or any grant of any share options or share schemes or any
issue of shares or securities or entitlement to any shares or securities to any
employee or associated person;
(g) any termination, consent or amendment with respect to any
Company Material Contract;
(h) entry into any Contract that contains any term or obligation of
non-assertion or any other material non-standard terms, including but not
limited to, non-standard discounts, provisions for unpaid future deliverables,
non-standard service requirements, non-compete or future royalty payments;
(i) any material change by the Company in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP;
(j) any debt, capital lease or other debt or equity financing
transaction by the Company or any of its Subsidiaries or entry into any
agreement by the Company or any of its Subsidiaries in connection with any such
transaction, except for capital leases entered into in the ordinary course of
business consistent with past practice which are not, individually or in the
aggregate, material to the Company and its Subsidiaries taken as a whole;
(k) any grants of any material refunds, credits, rebates or other
allowances by the Company or any of its Subsidiaries to any end user, customer,
reseller or distributor, in each case, other than in the ordinary course of
business consistent with past practice;
(l) any material change in the level of product returns or Company
policy or practice regarding accounts receivable or reserves, bad debts or
rights to accounts receivable experienced by the Company or any of its
Subsidiaries;
(m) any material restructuring activities by the Company or any of
its Subsidiaries, including any material reductions in force, lease
terminations, restructuring of contracts or similar actions;
(n) any sale, lease, license, encumbrance or other disposition of
any properties or assets except the sale, lease, license or disposition of
property or assets which are not material, individually or in the aggregate, to
the business of the Company or any of its Subsidiaries or the licenses of
current Company Services, in each case, in the ordinary course of business and
in a manner consistent with past practice;
(o) any material investment, loan, extension of credit or financing
or grant of extended payment terms by the Company or any of its Subsidiaries to
any Person other than in the ordinary course of business and in a manner
consistent with past practice;
(p) any material purchases of fixed assets or other long-term assets
other than in the ordinary course of business and in a manner consistent with
past practice;
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(q) any material amendment filed to any Tax Return, adoption of or
change in any material election in respect of Taxes, adoption or change in any
accounting method in respect of Taxes, agreement or settlement of any claim or
assessment in respect of Taxes, or extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(r) any material revaluation, or any indication that such a
revaluation is required under GAAP, by the Company of any of its assets,
including, without limitation, writing down the value of long-term or short-term
investments, fixed assets, goodwill, intangible assets, deferred tax assets, or
writing off notes or accounts receivable other than in the ordinary course of
business consistent with past practice; or
(s) any significant deficiency or material weakness identified in
the system of internal control over financial reporting utilized by the Company
and its Subsidiaries.
2.6 TAXES.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "TAX"
or "TAXES" shall mean any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions, levies, social
security contributions and liabilities relating to taxes, based upon or measured
by gross receipts, income, profits, capital gains, net assets, sales, use and
occupation, and value added, ad valorem, transfer, stamp duty and UK stamp duty
reserve tax, stamp duty land tax, franchise, withholding, payroll, recapture,
employment, excise and property taxes as well as public imposts, fees and social
security charges (including health, unemployment, workers' compensation and
pension insurance), together with all interest, penalties and additions imposed
with respect to such amounts and any obligations under any agreements or
arrangements with any other Person with respect to such amounts and including
any liability for taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS. Except as set forth in SECTION 2.6(b) of
the Company Disclosure Letter,
(i) The Company and each of its Subsidiaries have (a) timely
filed or caused to be filed all federal, state, local and foreign income Tax
returns, estimates, information statements and reports and any amendments
thereto ("RETURNS") and all other material Tax Returns required to be filed
relating to Taxes concerning or attributable to the Company or any of its
Subsidiaries, and such Returns are true, correct, and complete and have been
completed in accordance with applicable Legal Requirements in all material
respects, (b) preserved records required for the delivery of correct and
complete Returns as required by Schedule 18 of the Finance ▇▇▇ ▇▇▇▇, and (c)
timely paid or withheld (and timely paid over any withheld amounts to the
appropriate Governmental Entity) all Taxes required to be paid or withheld
whether or not shown as due on any Return, other than Taxes not yet due and
payable for which an adequate reserve has been accrued or established on the
Company Balance Sheet.
(ii) Neither the Company nor any of its Subsidiaries has any
Tax deficiency or adjustment outstanding, assessed or proposed against the
Company or any of its Subsidiaries, that has not been settled, nor has the
Company or any of its Subsidiaries executed any
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waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iii) No audit or other examination of any Return of the
Company or any of its Subsidiaries is presently in progress, nor has the Company
or any of its Subsidiaries been notified of any request for an audit or other
examination of any material Return of the Company or any of its Subsidiaries.
(iv) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation" in
a distribution of stock intended to qualify for tax-free treatment under Section
355 of the Code.
(v) Neither the Company nor any of its Subsidiaries has
engaged in a transaction that is the same as or substantially similar to one of
the types of tax avoidance transactions that the Internal Revenue Service
identified by notice, regulation, or other form of published guidance as a
listed transaction, as set forth in Treasury Regulation Section 1.6011-4(b)(2).
(vi) The Company and its Significant Subsidiaries are in
substantial compliance with all terms and conditions of any Tax exemption, Tax
holiday or other Tax reduction agreement or order of a territory or non-U.S.
government, and to the Knowledge of the Company, the consummation of the
transactions contemplated by this Agreement will not have any adverse effect on
the continued validity and effectiveness of any such Tax exemption, Tax holiday
or other Tax reduction agreement or order.
(vii) As of the date of the Company Financials, neither the
Company nor any of its Subsidiaries has any material liability for unpaid Taxes
which have not been accrued or reserved on the Company Financials, whether
asserted or unasserted, contingent or otherwise, and neither the Company nor any
of its Subsidiaries has incurred any liability for material Taxes since the date
of the Company Balance Sheet other than Taxes incurred in the ordinary course of
business which are consistent in type and amount with Taxes attributable to
prior periods.
(viii) Neither the Company nor any of its Subsidiaries has (a)
ever been a member of an affiliated group (within the meaning of Code Section
1504(a)) filing a consolidated federal income Tax Return (other than a group the
common parent of which was Company), (b) ever been a party to any Tax sharing,
indemnification or allocation or group payment agreement or arrangement, (c) any
liability for the Taxes of any Person (other than Company or any of its
Subsidiaries), under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law including any arrangement for group or
consortium Tax relief or similar arrangement), as a transferee or successor, by
contract or agreement, or otherwise, (d) ever been a party to any joint venture,
partnership or other arrangement that is treated as a partnership for Tax
purposes and (e) been party to any claim or surrender of group relief under the
provision of Section 402 to 413 of the Income and Corporation Taxes Act 1988
(other than between the Company and / or any of its Subsidiaries) or claim for
relief under Section 42 of the Finance ▇▇▇ ▇▇▇▇ which could be withdrawn
pursuant to section 111 of the Finance ▇▇▇ ▇▇▇▇.
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(ix) Neither the Company nor its Subsidiaries will be required
to include any income or gain or exclude any deduction or loss from taxable
income as a result of (a) any change in method of accounting under Section
481(c) of the Code, (b) closing agreement under Section 7121 of the Code, (c)
any material deferred intercompany gain or excess loss account under Treasury
Regulations under Section 1502 of the Code, (d) Section 482 of the Code (or in
the case of each of (a), (b), (c) and (d)), under any similar provision of
applicable state, local or foreign law, (e) installment sale or open transaction
disposition or (f) prepaid amount.
(x) The Company and its Subsidiaries has been resident in its
jurisdiction of incorporation for corporation tax purposes and is not and has
not been treated as resident or belonging, or subject to Tax in any other
jurisdiction for any material Tax purpose. The Company and its Subsidiaries have
made all claims necessary to obtain relief from double taxation under any
relevant bilateral convention relating to double taxation in respect of income,
profits, gains or payments accrued.
(xi) All material written concessions, agreements or
undertakings, between the Company and its Subsidiaries and HM Revenue and
Customs or any foreign tax authorities regarding or affecting the future
taxation treatment of the Company have been disclosed in the Company Disclosure
Letter.
(xii) Neither the Company nor its Subsidiaries have within the
past three years suffered any material non-routine investigation or audit by HM
Revenue and Customs, or any other taxation or excise authority.
(xiii) Neither the Company nor the Subsidiaries have any
liability to make any payment pursuant to an indemnity, guarantee or covenant
entered into before the date of this Agreement under which the Company or its
Subsidiaries agreed to meet or pay a sum equivalent to or by reference to
another person's liability to tax.
(xiv) All documents in the enforcement of which the
Significant Subsidiaries may be interested and which are liable to stamp duty
have been duly stamped and no document in the enforcement of which the
Significant Subsidiaries may be interested has not been properly stamped by
reason of it being executed and retained abroad.
(xv) The Significant Subsidiaries are duly registered for the
purposes of Value Added Tax and their registration is not nor has in the last
three years been subject to any conditions imposed by or agreed with HM Revenue
and Customs including any requirement to provide security and neither the
Company nor its Subsidiaries are under a duty to make monthly payments on
account under the Value Added Tax (Payments on Account) Order 1993.
2.7 TITLE TO PROPERTIES.
(a) PROPERTIES. Neither the Company nor any of its Subsidiaries owns
or has owned any real property. SECTION 2.7(a) of the Company Disclosure Letter
sets forth a list of all real property currently leased, licensed or subleased
by the Company or any of its Subsidiaries or otherwise used or occupied by the
Company or any of its Subsidiaries (the "REAL PROPERTY"), and
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each Real Property that is material to the Company and its Subsidiaries, taken
as a whole, is marked by an asterisk. All current leases set forth in SECTION
2.17(a)(VII) of the Company Disclosure Letter are in full force and effect, are
valid and effective in accordance with their respective terms there is not,
under any of such leases, any existing material breach, default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default) by the Company or its Subsidiaries or, to the Knowledge of
the Company, any third Person under such leases, in each case subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the rights and remedies of creditors generally. To the
Knowledge of the Company, no parties other than the Company or any of its
Subsidiaries have a right to occupy any material Real Property and the Real
Property is used only for the operation of the business of the Company and its
Subsidiaries. The Real Property and the physical assets of the Company and the
Subsidiaries are, in all material respects, in good condition and repair
(ordinary wear and tear excepted) and regularly maintained in accordance with
standard industry practice and the Real Property is in compliance, in all
material respects, with Legal Requirements. Except as set forth in SECTION
2.7(a) of the Company Disclosure Letter neither the Company nor any of its
Subsidiaries will be required to incur any material cost or expense for any
restoration or surrender obligations, or any other material costs otherwise
qualifying as asset retirement obligations under Financial Accounting Standards
Board Statement of Financial Accounting Standard No. 143 "Accounting for Asset
Retirement Obligations," upon the expiration or earlier termination of any
leases or other occupancy agreements for the Real Property. The Company and each
of its Subsidiaries have performed in all material respects all of their
obligations under any material termination agreements pursuant to which they
have terminated any leases of real property that are no longer in effect and
have no material continuing liability with respect to such terminated real
property leases.
(b) DOCUMENTS. The Company has Made Available true, correct and
complete copies of all material leases, lease guarantees, agreements for the
leasing, use or occupancy of, or otherwise granting a right in or relating to
the Real Property to which the Company or any of its Subsidiaries is a party,
including all amendments, terminations and modifications thereof ("LEASE
DOCUMENTS"); and there are no other material leases, lease guaranties,
agreements for the leasing use or occupancy of, or otherwise granting a right in
or relating to or affecting any Real Property or to which the Company or any of
its Subsidiaries is a party, other than those identified in SECTION 2.7(b) of
the Company Disclosure Letter.
(c) VALID TITLE. The Company and each of its Subsidiaries have good
and valid title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of their material tangible properties and assets,
real, personal and mixed, used or held for use in its business, free and clear
of any Liens except (i) as reflected in the Company Balance Sheet, (ii) Liens
for Taxes not yet due and payable and (iii) such imperfections of title and
encumbrances, if any, which do not in any material respect detract from the
value or interfere with the present use of the property subject thereto or
affected thereby. The rights, properties and assets presently owned, leased or
licensed by the Company and its Significant Subsidiaries include all rights,
properties and assets necessary to permit the Company and its Significant
Subsidiaries to conduct their business in all material respects in the same
manner as their businesses have been conducted prior to the date hereof.
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2.8 INTELLECTUAL PROPERTY.
(a) DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
"COMPANY INTELLECTUAL PROPERTY" shall mean any and all
Intellectual Property and Intellectual Property Rights that are owned by, or
purported to be owned by, or exclusively licensed to, the Company or its
Subsidiaries.
"COMPANY SERVICES" shall mean all services, technologies and
products developed (including products, technologies and services under
development), owned, made, provided, distributed, imported, sold or licensed out
by or on behalf of the Company and any of its Subsidiaries.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" shall mean the
applications, registrations and filings for Intellectual Property Rights that
have been registered, filed, certified or otherwise perfected or recorded with
or by any Governmental Entity by or in the name of the Company or any of its
Subsidiaries.
"INTELLECTUAL PROPERTY" shall mean any or all of the following
(i) works of authorship including computer programs, source code, and executable
code, whether embodied in software, firmware or otherwise, architecture,
documentation, designs, files, records, and data, (ii) inventions (whether or
not patentable), discoveries, improvements, and technology, (iii) proprietary
and confidential information, trade secrets and know how, (iv) databases, data
compilations and collections and technical data, (v) logos, trade names, trade
dress, trademarks and service marks, (vi) domain names, web addresses and sites,
(vii) tools, methods and processes, (viii) devices, prototypes, schematics,
breadboards, netlists, test methodologies, verilog files, emulation and
simulation reports, test vectors and hardware development tools and (ix) any and
all instantiations of the foregoing in any form and embodied in any media.
"INTELLECTUAL PROPERTY RIGHTS" shall mean worldwide common law
and statutory rights associated with (i) patents, patent applications and
inventors' certificates, (ii) copyrights, copyright registrations and copyright
applications and "moral" rights, (iii) trade and industrial secrets and
confidential information ("TRADE SECRETS"), (iv) other proprietary rights
relating to intangible intellectual property, (v) trademarks, trade names and
service marks, (vi) divisions, continuations, renewals, reissuances and
extensions of the foregoing (as applicable) and (vii) analogous rights to those
set forth above, including the right to enforce and recover remedies for any of
the foregoing.
"SHRINK-WRAPPED CODE" means generally commercially available
software code (other than development tools and development environments) where
available for a cost of not more than $10,000 for a perpetual license for a
single user or work station (or $50,000 in the aggregate for all users and work
stations).
"SOURCE CODE" shall mean computer software and code, in form
other than object code form, including related programmer comments and
annotations, help text, data and data
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structures, instructions and procedural, object-oriented and other code, which
may be printed out or displayed in human readable form.
(b) NO DEFAULT/NO CONFLICT. Except as set forth in SECTION 2.8(b) of
the Company Disclosure Letter, all Contracts relating to either (i) Company
Intellectual Property that is material to the business of the Company or (ii)
Intellectual Property or Intellectual Property Rights of a third Person licensed
to the Company or any of its Subsidiaries that is material to the business of
the Company, are in full force and effect, and enforceable in accordance with
their terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the rights and remedies of
creditors generally. The consummation of the transactions contemplated by this
Agreement will neither violate nor by their terms result in the material breach,
material modification, cancellation, termination, suspension of, or acceleration
of any payments with respect to, such Contracts. Except as set forth in SECTION
2.8(b) of the Company Disclosure Letter, each of the Company and its
Subsidiaries is in material compliance with, and has not breached any material
term of any such Contracts and, to the Knowledge of the Company, all other
parties to such Contracts are in compliance with, and have not breached any term
of, such Contracts. Following the Closing Date, the Surviving Corporation will
be permitted to exercise all of the Company's and its Subsidiaries' rights under
such Contracts to the same extent the Company and its Subsidiaries would have
been able to had the transactions contemplated by this Agreement not occurred
and without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company or any of its Subsidiaries
would otherwise be required to pay.
(c) NO INFRINGEMENT. The operation of the business of the Company
and its Subsidiaries as currently conducted, including the design, development,
use, import, branding, advertising, promotion, marketing, manufacture and sale
of any Company Service does not infringe or misappropriate, and, to the
Knowledge of the Company, when conducted by Parent and/or Surviving Corporation
immediately following the Closing, will not infringe or misappropriate in any
material respect any Intellectual Property Rights of any Person, violate any
right to privacy or publicity, or constitute unfair competition or trade
practices under the laws of any relevant jurisdiction. Except as set forth in
SECTION 2.8(c) of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries has obtained opinions or memoranda of counsel relating to
infringement, validity or enforceability of any third party Intellectual
Property Rights.
(d) NOTICE. Except as set forth in SECTION 2.8(d) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries has received
written notice (or, to the Knowledge of the Company, any other notice) from any
Person claiming that the Company, any of its Subsidiaries, any Company Service
or Company Intellectual Property infringes or misappropriates any Intellectual
Property Rights of any Person, violates any rights to privacy or publicity or
constitutes unfair competition or trade practices under the laws of any
jurisdiction (nor does the Company have Knowledge of any basis therefor).
(e) NO THIRD PARTY INFRINGERS. To the Knowledge of the Company and
except as set forth in SECTION 2.8(e) of the Company Disclosure Letter, no
Person is infringing, misappropriating or otherwise violating any Company
Intellectual Property. Within the past three years, neither the Company nor any
of its Subsidiaries have asserted or threatened any claim against any Person
alleging any infringement, misappropriation or violation of any Company
Intellectual Property.
-22-
(f) TRANSACTION. Except as set forth in SECTION 2.8(f) of the
Company Disclosure Letter, neither this Agreement nor the transactions
contemplated by this Agreement, including any assignment to Parent by operation
of law, if any, as a result of the Merger of any contracts or agreements to
which the Company or any of its Subsidiaries is a party, will result in: (i)
Parent, any of its affiliates or the Surviving Corporation or any of its
subsidiaries granting to any third party any incremental right to or with
respect to or non-assertion under any Intellectual Property Rights owned by, or
licensed to, any of them, (ii) Parent, any of its affiliates or the Surviving
Corporation or any of its subsidiaries, being bound by, or subject to, any
incremental non-compete or other incremental material restriction on the
operation or scope of their respective businesses, (iii) Parent, any of its
affiliates or the Surviving Corporation or any of its subsidiaries being
obligated to pay any incremental royalties or other material amounts, or offer
any incremental discounts, to any third party or (iv) the Company or any of its
Subsidiaries attempting to procure from Parent or any of its affiliates a
license grant or covenant not to assert under any Contract. As used in this
SECTION 2.8(f), an "incremental" right, non-compete, restriction, royalty or
discount refers to a right, non-compete, restriction, royalty or discount, as
applicable, in excess, whether in terms of contractual term, contractual rate or
scope, of those that would have been required to be offered or granted, as
applicable, had the parties to this Agreement not entered into this Agreement or
consummated the transactions contemplated hereby.
(g) INTELLECTUAL PROPERTY. Except as set forth in SECTION 2.8(g) of
the Company Disclosure Letter, each of the Company and its Subsidiaries has used
all commercially reasonable efforts to obtain, maintain and protect the Company
Intellectual Property. Except as set forth in SECTION 2.8(g) of the Company
Disclosure Letter and without limiting the foregoing, each of the Company and
its Subsidiaries has, and enforces, a policy requiring each current and former
employee, consultant and contractor to execute sufficient proprietary
information and confidentiality agreements which (i) assign to the Company
and/or its Subsidiaries all right, title and interest (including the sole right
to enforce) in any Intellectual Property or Intellectual Property Rights arising
therefrom and (ii) provide reasonable protection for trade secrets of the
Company and its Subsidiaries. Except as set forth in SECTION 2.8 of the Company
Disclosure Letter, all current or former employees, consultants and contractors
of the Company or any Subsidiary that have created any material Company
Intellectual Property have executed such agreements, and to the Knowledge of the
Company, no party to any such agreement is in breach thereof.
(h) NO ORDER. There are no forbearances to ▇▇▇, consents, settlement
agreements, judgments, orders or similar obligations, other than the Contracts
set forth on SECTIONS 2.8(h) of the Company Disclosure Letter, that do or, to
the Knowledge of the Company, may: (i) restrict the rights of the Company or any
of its Subsidiaries to use, transfer, license or enforce any of its Intellectual
Property Rights, (ii) restrict the conduct of the business of the Company or any
of its Subsidiaries in order to accommodate a third party's Intellectual
Property Rights or (iii) grant any third party any right with respect to any
Company Intellectual Property Rights.
(i) OPEN SOURCE. No Intellectual Property or Intellectual Property
Rights of the Company or any of its Subsidiaries, of a third party or in the
public domain, that constitutes open source, public source or freeware
Intellectual Property, or any modification or derivative thereof, including any
version of any software licensed pursuant to any GNU general public license or
GNU lesser general public license or other software that is licensed pursuant to
a license that purports to
-23-
require the distribution of or access to Source Code or purports to restrict
one's ability to charge for distribution of or to use software for commercial
purposes (collectively "OPEN SOURCE"), has been used in, incorporated into,
integrated or bundled with, or used in the development or compilation of, any
current Company Services. Each of the Company and its Subsidiaries has used
commercially reasonable efforts to: (i) identify such Open Source and (ii) to
avoid the release of the Source Code of the Company Intellectual Property.
SECTION 2.8(i) of the Company Disclosure Letter sets forth a list of all
material Open Source that is included in, or provided or distributed with any
current Company Service. To the Knowledge of the Company, there has been no
material deviation from or violation of the Company's policies with respect to
Open Source.
(j) SOURCE CODE. SECTION 2.8(j) of the Company Disclosure Letter
identifies each Contract pursuant to which the Company has deposited, or is or
may be required to deposit, with an escrow agent or any other Person, any Source
Code that is Company Intellectual Property, and describes whether the execution
of this Agreement or any of the other transactions contemplated by this
Agreement, could reasonably result in a release from escrow of any Source Code
that is Company Intellectual Property and the grant of incremental rights to a
Person with regard to such Source Code. To the Knowledge of the Company, no
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time, or both) will, or would reasonably be expected
to, result in the disclosure or delivery by the Company, any of its Subsidiaries
or any Person acting on their behalf to any Person of any Source Code that is
Company Intellectual Property under any Contract, and no such Source Code has
been disclosed, delivered or licensed to a third party.
(k) SOFTWARE. To the Knowledge of the Company, all Company Services
and all applicable Company Intellectual Property (and all parts thereof) are
free of: (i) any material defects, including without limitation any material
error or omission in the processing of any transactions and (ii) any disabling
codes or instructions and any "back door," "time bomb," "Trojan horse," "worm,"
"drop dead device," "virus" or other software routines or hardware components
that permit unauthorized access or the unauthorized disruption, impairment,
disablement or erasure of such Company Service or applicable Company
Intellectual Property (or all parts thereof) or data or other software of users
("CONTAMINANTS").
(l) INFORMATION TECHNOLOGY. The Company and its Subsidiaries have
taken commercially reasonable steps and implemented commercially reasonable
procedures to ensure that information technology systems used in connection with
the operation of the Company and its Subsidiaries are free from Contaminants. To
the Knowledge of the Company and except as set forth in SECTION 2.8(l) of the
Company Disclosure Letter, the Company and its Subsidiaries have appropriate
disaster recovery and business continuity plans, procedures and facilities for
the business and have taken commercially reasonable steps to safeguard the
information technology systems utilized in the operation of the business of the
Company and its Subsidiaries as it is currently conducted or proposed to be
conducted. To the Knowledge of the Company, there have been no unauthorized
intrusions or breaches of the security of the information technology systems.
The Company and its Subsidiaries have implemented commercially reasonable and
all necessary security patches or upgrades that are generally available for the
Company's information technology systems.
-24-
(m) LICENSES-IN. Other than (i) licenses to Shrink-Wrapped Code,
(ii) licenses to Open Source as set forth in SECTION 2.8(i) of the Company
Disclosure Letter and (iii) non-disclosure agreements entered into in the
ordinary course of business, SECTION 2.8(m) of the Company Disclosure Letter
lists all Contracts that are material to the business of the Company to which
the Company or any of its Subsidiaries is a party and under which the Company or
any of its Subsidiaries has been granted or provided any rights to Intellectual
Property or Intellectual Property Rights by a third party.
(n) LICENSES-OUT. Other than (i) written non-disclosure agreements
and (ii) non-exclusive licenses and related agreements with respect thereto
(including software and maintenance and support agreements) of current Company
Services to end-users (in each case, pursuant to written agreements that have
been entered into in the ordinary course of business that do not materially
differ in substance from the Company's standard form(s) which have been Made
Available), SECTION 2.8(n) of the Company Disclosure Letter lists the top ten
Contracts (based on revenues generated for the fiscal quarter ended March 31,
2006) providing for the license or other use of Company Intellectual Property or
Company Services to which the Company or any of its Subsidiaries is a party.
(o) TRADE SECRETS. Except as set forth in SECTION 2.8(o) of the
Company Disclosure Letter, the Company and each of its Subsidiaries have
ownership, free and clear of any Liens, of all customer lists, customer contact
information, customer correspondence and customer licensing and purchasing
histories relating to its current and former customers (the "CUSTOMER
Information"). Except as set forth in SECTION 2.8(o) of the Company Disclosure
Letter, no Person other than the Company, its wholly owned Subsidiaries, or
Persons distributing Company Services through channels (whether by way of sales,
licensing, leasing or otherwise) possess any claims or rights with respect to
use of the Customer Information. The Company and its Subsidiaries have taken
commercially reasonable steps to protect their trade secrets, and any trade
secrets of third parties provided thereto, according to the laws of the
applicable jurisdictions where such trade secrets are developed, practiced or
disclosed. The Company and its Subsidiaries have used commercially reasonable
efforts to enforce a policy requiring all personnel and third parties having
access to such trade secrets to execute a written agreement which provides
reasonable protection for such trade secrets and which does not allow use or
disclosure of such trade secrets by the recipient upon the expiration of any
specified period of time and, to the Knowledge of the Company, except pursuant
to such agreements, there has been no disclosure by the Company or any of its
Subsidiaries of any such trade secrets and, to the Knowledge of the Company, no
party to any such agreement is in breach thereof.
(p) PRIVACY. The Company and its Subsidiaries have complied with all
applicable laws and their respective internal privacy policies and guidelines
relating to privacy, data protection, and the collection and use of personal
information collected, used, or held for use by the Company and its Subsidiaries
in the conduct of their business. The Company and its Subsidiaries take
commercially reasonable measures to ensure that such information is protected
against unauthorized access, use, modification, or other misuse. The execution,
delivery and performance of this Agreement complies with the Company's and its
Subsidiaries' applicable privacy policies and in all material respects with all
applicable laws relating to privacy. Except as set forth in SECTION 2.8(p) of
the Company Disclosure Letter, the Company and its Subsidiaries has fully
complied with the
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requirements of all applicable local, state, federal and foreign legislation
concerning rights in respect of privacy and personal information. A website link
to all currently applicable privacy policies and guidelines is provided in
SECTION 2.8(p) of the Company Disclosure Letter and the Company and its
Subsidiaries have at all times made all disclosures to users or customers
required by applicable laws and none of such disclosures have been inaccurate,
misleading or deceptive or in violation of any applicable laws in all material
respects.
(q) OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS. SECTION 2.8(q) of the
Company Disclosure Letter lists all Company Registered Intellectual Property,
identifying in each case the inventors/authors, status, filing date, and
issuance/registration/grant date, and prosecution status thereof. The Company or
its Subsidiaries own all right, title, and interest (including the sole right to
enforce) free and clear of all encumbrances in and to all Company Intellectual
Property, and with respect to Company Registered Intellectual Property, are
listed in the records of the appropriate United States, state or foreign
authority as the sole owner for each item thereof.
(r) VALIDITY AND ENFORCEABILITY. Except as set forth in SECTION
2.8(r) of the Company Disclosure Letter and to the Knowledge of the Company and
its Subsidiaries: (i) the Company Intellectual Property is subsisting, in full
force and effect, is valid and enforceable, and (in the case of Company
Registered Intellectual Property) has not expired or been cancelled or
abandoned, except where such expiration, cancellation or abandonment is
consistent with the exercise of reasonable business judgment, (ii) neither the
Company nor any of its Subsidiaries has done, or failed to do, any act or thing
which may prejudice the validity or enforceability of any Company Intellectual
Property, (iii) all necessary registration, maintenance and renewal fees
currently due have been paid, and all necessary documents, recordations and
certificates have been filed, for the purposes of maintaining such Company
Registered Intellectual Property and (iv) each of the patents and patent
applications within the Company Registered Intellectual Property has been
prosecuted in compliance in all material respects with all applicable rules,
policies, and procedures of the United States Patent and Trademark Office or
applicable foreign agencies.
(s) SERVICES. Except as set forth in SECTION 2.8(s) of the Company
Disclosure Letter, all Company Services conform in all material respects with
all applicable contractual commitments and warranties, the Company's or any of
its Subsidiaries,' as the case may be, published product specifications and with
all regulations, certification standards and other requirements of any
applicable Governmental Entity or third party. Neither the Company nor any of
its Subsidiaries has any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due) for
replacement or modification of any Company Services or other damages in
connection therewith other than in the ordinary course of business. To the
Knowledge of the Company, there are no material defects in the design or
technology embodied in any Company Services which impair or are likely to impair
the intended use of such Company Service. There is no presently pending, or, to
the Knowledge of the Company, threatened, and, to the Knowledge of the Company,
there is no basis for, any civil, criminal or administrative actions, suits,
demands, claims, hearings, notices of violation, investigations, proceedings or
demand letters relating to any alleged hazard or alleged defect in design,
manufacture, materials or workmanship, including any failure to warn or alleged
breach of express or implied warranty or representation, relating to any Company
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Service. Except as set forth in SECTION 2.8(s) of the Company Disclosure Letter,
neither the Company nor any of its Subsidiaries has extended to any of its
customers any written service or product warranties, indemnifications or
guarantees that deviate in any material respect from the standard service or
product warranties, indemnification arrangements or guarantees of the Company or
any Company Subsidiary.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in SECTION
2.9 of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is party to or bound by any Contract containing any covenant (a)
limiting in any material respect the right of the Company or any of its
Subsidiaries to engage or compete in any line of business, to make use of any
material Company Intellectual Property or to compete with any Person, (b)
granting any exclusive distribution rights, (c) providing "most favored nations"
or other preferential pricing terms for Company Services, or (d) which otherwise
in any material respect adversely affects or would reasonably be expected to, in
any material respect, adversely affect the right of the Company and its
Subsidiaries to sell, distribute or manufacture any Company Services or material
Company Intellectual Property or to purchase or otherwise obtain any material
software, components, parts or subassemblies.
2.10 GOVERNMENTAL AUTHORIZATIONS. Except as set forth in SECTION 2.10 of
the Company Disclosure Letter and except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company, each consent, license, permit, grant or other authorization (i)
pursuant to which the Company or any of its Significant Subsidiaries currently
operates or holds any material interest in any of their respective properties or
(ii) which is required for the operation of the Company's or any of its
Significant Subsidiaries' business as currently conducted or currently
contemplated to be conducted or the holding of any such interest (collectively,
"GOVERNMENTAL AUTHORIZATIONS") has been issued or granted to the Company or any
of its Significant Subsidiaries, as the case may be, and are in full force and
effect. As of the date hereof, neither the Company nor any of its Subsidiaries
has received any written notification that any suspension or cancellation of any
of the Governmental Authorizations is pending or, to the Knowledge of the
Company, threatened and the Company and its Subsidiaries are in compliance in
all material respects with the terms of the Governmental Authorizations.
2.11 LITIGATION. Except as set forth in SECTION 2.11 of the Company
Disclosure Letter and except as would not be material to the Company and its
Subsidiaries, taken as a whole, as of the date of this Agreement, there is no
material action, suit, claim or proceeding pending or, to the Knowledge of the
Company, threatened or reasonably anticipated against the Company, any of its
Subsidiaries or any of their respective properties (tangible or intangible). As
of the date of this Agreement, there is no material investigation or other
proceeding pending or, to the Knowledge of the Company, threatened or reasonably
anticipated against the Company, any of its Subsidiaries or any of their
respective properties (tangible or intangible) by or before any Governmental
Entity. There has not been since January 1, 2004, nor are there currently, any
internal investigations or inquiries being conducted by the Company, the
Company's Board of Directors (or any committee thereof) or any third party,
either at the request of any of the foregoing or otherwise concerning any
financial, accounting, tax, conflict of interest, illegal activity, fraudulent
or deceptive conduct or other misfeasance or malfeasance issues. As of the date
of this Agreement, there is no action, suit,
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proceeding, arbitration or, to the Company's Knowledge, investigation involving
the Company that the Company presently intends to initiate.
2.12 COMPLIANCE WITH LAWS. Except as set forth in SECTION 2.12 of the
Company Disclosure Letter and except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company, neither the Company nor any of its Subsidiaries is in violation or
default in any material respect of any Legal Requirements applicable to the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is bound or any of their respective properties is bound or
affected. There is no agreement, judgment, injunction, order or decree binding
upon the Company or any of its Subsidiaries which has or would reasonably be
expected to have the effect of prohibiting or impairing any business practice of
the Company or any of its Subsidiaries in such a way as to be material and
adverse to the Company and its Subsidiaries, taken as a whole.
2.13 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS.
(a) DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
"ENVIRONMENTAL OR HEALTH AND SAFETY CLAIM" means any claim,
action, cause of action, suit, proceeding, investigation, order, demand or
notice (in each case, in writing) by any Person alleging potential liability
(including, without limitation, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or resulting
from (a) the presence, or release into the environment, of, or exposure to, any
Materials of Environmental Concern at any location, whether or not owned or
operated by the Company or any of its Subsidiaries; (b) the health and safety of
any person, including all accidents, injuries, illnesses and diseases; or (c)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
"ENVIRONMENTAL LAWS" mean all federal, state, local and
foreign laws, regulations, ordinances, and common law relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata, and
natural resources), including, without limitation, laws and regulations relating
to (i) emissions, discharges, releases or threatened releases of, or exposure
to, Materials of Environmental Concern, (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern, and (iii) recordkeeping, notification,
disclosure and reporting requirements regarding Materials of Environmental
Concern.
"HEALTH AND SAFETY LAWS" mean all federal, state, local and
foreign laws, regulations, ordinances and common law relating to the health of
any person.
"MATERIALS OF ENVIRONMENTAL CONCERN" means hazardous
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum and petroleum products, asbestos or asbestos-containing
materials or products, polychlorinated biphenyls, lead or lead-based paints or
materials, radon, toxic fungus, toxic mold, mycotoxins or other hazardous
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substances that would reasonably be expected to have an adverse effect on human
health or the environment.
(b) ENVIRONMENTAL AND HEALTH AND SAFETY COMPLIANCE. Except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, the Company and its Subsidiaries are in material
compliance with all Environmental Laws and Health and Safety Laws, which
compliance includes, but is not limited to, the possession by the Company and
its Subsidiaries of all permits and other governmental authorizations required
under the Environmental Laws, and Health and Safety Laws, and compliance with
the terms and conditions thereof. Neither the Company nor any of its
Subsidiaries have received any written communication, whether from a
Governmental Entity, citizens group, employee or otherwise, that alleges that
the Company or any of its Subsidiaries are not in such compliance. There are no
material permits and other material governmental authorizations currently held
by the Company or any of its Subsidiaries pursuant to Environmental Laws or
Health and Safety Laws.
(c) ENVIRONMENTAL OR HEALTH AND SAFETY LIABILITIES. Except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, there is no Environmental and Health and Safety
Claim pending or, to the Knowledge of the Company, threatened against the
Company, any of its Subsidiaries or against any Person whose liability for any
Environmental and Health and Safety Claim the Company or any of its Subsidiaries
have retained or assumed either contractually or by operation of law. In
addition, there have been no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that would reasonably be expected to form the basis of any material
Environmental and Health and Safety Claim against the Company, any of its
Subsidiaries or against any Person whose liability for any Environmental and
Health and Safety Claim the Company or any of its Subsidiaries have retained or
assumed either contractually or by operation of law, or otherwise result in any
material costs or liabilities under Environmental Law or Health and Safety Law.
(d) ENVIRONMENTAL AND HEALTH AND SAFETY INFORMATION. Except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, the Company has provided to Parent all material
assessments, reports, data, results of investigations or audits, and other
information that is in the possession of or reasonably available to the Company
or its Subsidiaries regarding environmental matters pertaining to or the
environmental condition of the business of the Company and its Subsidiaries, or
the compliance (or noncompliance) by the Company and its Subsidiaries with any
Environmental Laws or Health and Safety Laws.
(e) ENVIRONMENTAL AND HEALTH AND SAFETY OBLIGATIONS. Except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, neither the Company nor any of its Subsidiaries
are required by virtue of the transactions set forth herein and contemplated
hereby, or as a condition to the effectiveness of any transactions contemplated
hereby, (i) to perform a site assessment for Materials of Environmental Concern,
(ii) to remove or remediate Materials of Environmental Concern, (iii) to give
notice to or receive approval from any Governmental Entity or (iv) to record or
deliver to any Person any disclosure document or statement pertaining to
environmental matters.
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2.14 BROKERS' AND FINDERS' FEES. Except for fees payable to ▇▇▇▇▇ &
Company LLC, pursuant to an engagement letter dated July 21, 2005, as amended, a
copy of which has been provided to Parent, neither the Company nor any of its
Subsidiaries has incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions, fees related to
investment banking or similar advisory services or any similar charges in
connection with this Agreement or any transaction contemplated hereby, nor has
the Company or any of its Subsidiaries entered into any indemnification
agreement or arrangement with any Person in connection with this Agreement and
the transactions contemplated hereby.
2.15 TRANSACTIONS WITH AFFILIATES. Except as set forth in SECTION 2.15 of
the Company Disclosure Letter and in the Company SEC Reports, since the date of
the Company's last proxy statement filed with the SEC, no event has occurred as
of the date hereof that would be required to be reported by the Company pursuant
to Item 404 of Regulation S-K promulgated by the SEC.
2.16 EMPLOYEE BENEFIT PLANS AND COMPENSATION.
(a) DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
"COMPANY EMPLOYEE PLAN" shall mean any "employee benefit
plan," within the meaning of Section 3(3) of ERISA and any other plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, bonus, incentive compensation, severance, termination pay,
deferred compensation, performance awards, stock or stock-related awards,
welfare benefits, retirement benefits, fringe benefits, gratuity, leaving
service, jubilee, termination indemnity, long service awards or other employee
benefits or remuneration of any kind, whether written, unwritten or otherwise,
funded or unfunded, which is or in the past six years has been maintained,
contributed to, or required to be contributed to, by the Company, any of its
Subsidiaries or any ERISA Affiliate for the benefit of any Employee, or with
respect to which the Company, any of its Subsidiaries or any ERISA Affiliate has
or may have any liability or obligation and any International Employee Plan.
"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
"DOL" shall mean the United States Department of Labor.
"EMPLOYEE" shall mean any current or former employee,
consultant, independent contractor or director of the Company, any of its
Subsidiaries or any ERISA Affiliate, excluding consultants and independent
contractors who are not individuals.
"EMPLOYEE AGREEMENT" shall mean each management, employment,
severance, separation, settlement, consulting, contractor, relocation,
repatriation, expatriation, loan, visa, work permit or other agreement, or
contract (including, any offer letter which provides for any term of employment
other than employment at will or any agreement providing for acceleration of
Company Options, or any other agreement providing for compensation or benefits)
between the
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Company, any of its Subsidiaries or any ERISA Affiliate and any Employee
pursuant to which the Company or any of its Subsidiaries has or may have any
current or future liabilities or obligations.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA AFFILIATE" shall mean any other Person under common
control with the Company or any of its Subsidiaries within the meaning of
Section 414(b), (c), (m) or (o) of the Code, and the regulations issued
thereunder.
"HIPAA" shall mean the Health Insurance Portability and
Accountability Act of 1996, as amended.
"INTERNATIONAL EMPLOYEE PLAN" shall mean each Company Employee
Plan or Employee Agreement that has been adopted or maintained by the Company,
any of its Subsidiaries or any ERISA Affiliate, whether formally or informally,
or with respect to which the Company, any of its Subsidiaries or any ERISA
Affiliate will or may have any liability, for the benefit of Employees who
perform services outside the United States.
"IRS" shall mean the United States Internal Revenue Service.
"PENSION PLAN" shall mean each Company Employee Plan that is
an "employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
"WARN" shall mean the Worker Adjustment and Retraining
Notification Act of 1988.
(b) SCHEDULE. SECTION 2.16(b) of the Company Disclosure Letter
contains a correct and complete list (anonymalised if required by law) of each
Company Employee Plan and each Employee Agreement. The Company has Made
Available a table setting forth the name, salary, country of employment and
start date of each employee of the Company and each of its Subsidiaries as of
the date hereof and has Made Available a copy of all Employee Agreements between
the Company and such employees. To the Knowledge of the Company, no employee of
the Company or its Subsidiaries intends to terminate his or her employment for
any reason as of the date of this Agreement and, as of the date hereof, there
are no grounds on which the Company or any of its Subsidiaries is contemplating
giving any such employee notice to terminate his or her employment. SECTION
2.16(b) of the Company Disclosure Letter contains an accurate and complete list
of all Persons that have a consulting or advisory relationship with the Company
or any of its Subsidiaries that is subject to ongoing obligations in excess of
$75,000 per year.
(c) DOCUMENTS. Except as set forth in SECTION 2.16(c) of the Company
Disclosure Letter, the Company and each of its Subsidiaries has Made Available
(i) correct and complete copies of all material documents embodying each Company
Employee Plan and each Employee Agreement including all amendments thereto
(whether made, agreed or proposed to be made) and all related trust documents,
(ii) the three most recent annual reports (Form Series 5500 and all schedules
and financial statements attached thereto), if any, required under ERISA or the
Code in connection with each Company Employee Plan, and any other regulatory
filings, approvals or registrations required
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by applicable Legal Requirements since January 1, 2005, including but not
limited to ERISA or the Code, in connection with each Company Employee
Plan,(iii) if the Company Employee Plan is funded, the most recent annual and
periodic accounting of Company Employee Plan assets, (iv) the most recent
summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan, (v) all material written agreements and contracts relating to
each Company Employee Plan, including administrative service agreements and
group insurance contracts, (vi) all written communications material to any
Employee or Employees relating to any Company Employee Plan or any proposed
Company Employee Plan, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which could result in any liability to the
Company or any of its Subsidiaries, (vii) all material correspondence to or from
any governmental agency relating to any Company Employee Plan, (viii) forms of
COBRA notices and related outsourcing contracts, (ix) all policies pertaining to
fiduciary liability insurance covering the fiduciaries for each Company Employee
Plan, (x) all discrimination tests for each Company Employee Plan for the three
most recent plan years, (xi) all registration statements, annual reports (Form
11-K and all attachments thereto) and prospectuses prepared in connection with
each Company Employee Plan, (xii) forms of HIPAA Privacy Notices and forms of
Business Associate Agreements to the extent required under HIPAA and (xiii) a
current IRS determination or opinion letter issued with respect to each Company
Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE.
(i) The Company and each of its Subsidiaries have performed
all material obligations required to be performed by them under, are not in
material default or violation in any respect of, and the Company and each of its
Subsidiaries have no Knowledge of any material default or violation by any other
party to, any Company Employee Plan, and each Company Employee Plan has been
established, administered and maintained in accordance with its terms and in
material compliance with all applicable laws, statutes, orders, rules and
regulations, including ERISA and the Code. Any Company Employee Plan intended to
be qualified under Section 401(a) of the Code has obtained a current favorable
determination letter (or opinion letter, if applicable) as to its qualified
status under the Code. Neither the Company nor any Subsidiary or ERISA Affiliate
has engaged in, and to the Knowledge of the Company, no other person has engaged
in a "prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, that is not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Company Employee Plan. Without limiting
the foregoing, the Company and each of its Subsidiaries has Made Available all
Company Employee Plans, Employee Agreements and any other agreement or
arrangement applicable to any Employee providing for payments or benefits, or
the acceleration of any payment or benefit, either alone or in combination with
any other event, relating to or resulting from a change in control, separation
or termination of employment, Employee retention or similar such event.
(ii) There are no actions, suits or claims pending or, to the
Knowledge of the Company, threatened or reasonably anticipated (other than
routine claims for benefits) against or relating to any Company Employee Plan or
Employee Agreement or against the assets of any Company Employee Plan. Except as
set forth in SECTION 2.16(d) of the Company Disclosure Letter, each Company
Employee Plan can be amended, terminated or otherwise discontinued after the
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Effective Time in accordance with its terms, without material liability to
Parent, the Company, any of its Subsidiaries or any ERISA Affiliate (other than
ordinary administration expenses or with respect to benefits previously earned,
vested or accrued thereunder).
(iii) There are no audits, inquiries or proceedings pending or
to the Knowledge of the Company, threatened by the IRS, DOL, or any other
Governmental Entity with respect to any Company Employee Plan. Neither the
Company, any of its Subsidiaries nor any ERISA Affiliate is subject to any
penalty or Tax with respect to any Company Employee Plan under Section 502(i) of
ERISA or Sections 4975 through 4980 (including 4980B) of the Code.
(iv) The Company and each of its Subsidiaries have timely made
all contributions and other payments required by and due under the terms of each
Company Employee Plan.
(e) NO PENSION PLAN. Neither the Company, any of its Subsidiaries
nor any current or former ERISA Affiliate has ever maintained, established,
sponsored, participated in or contributed to, any Pension Plan subject to Part 3
of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code
in the past six years.
(f) NO SELF-INSURED PLAN. Neither the Company, any of its
Subsidiaries nor any ERISA Affiliate has ever maintained, established,
sponsored, participated in or contributed to any self-insured plan that provides
benefits to employees (including any such plan pursuant to which a stop-loss
policy or contract applies).
(g) COLLECTIVELY BARGAINED, MULTIEMPLOYER AND MULTIPLE-EMPLOYER
PLAN. At no time has the Company, any of its Subsidiaries or any ERISA Affiliate
contributed to or been obligated to contribute to any multiemployer plan (as
defined in Section 3(37) of ERISA) or any similar plan in any non-U.S.
jurisdiction. Neither the Company, any of its Subsidiaries nor any ERISA
Affiliate has at any time ever maintained, established, sponsored, participated
in or contributed to any multiple employer plan or any plan described in Section
413 of the Code.
(h) NO POST-EMPLOYMENT OBLIGATIONS. No Company Employee Plan or
Employee Agreement provides, or reflects or represents any liability on the part
of the Company, any of its Subsidiaries or any ERISA Affiliate to provide,
post-termination or retiree life insurance, health or other employee welfare
benefits to any Person for any reason, except as may be required by COBRA or
other applicable statute, and neither the Company nor any of its Subsidiaries
has ever represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) or any other
Person that such Employee(s) or other Person would be provided with
post-termination or retiree life insurance, health or other employee welfare
benefits, except to the extent required by statute.
(i) EFFECT OF TRANSACTION. Except as set forth in SECTION 2.16(i) of
the Company Disclosure Letter, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or any
termination of employment or service or any other event in connection therewith
will (i) result in any payment (including retirement, severance, change in
control, golden parachute, retention payment, bonus or otherwise but excluding
payments required to
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be made by law), becoming due to any Employee or funding of any such payment,
(ii) result in any forgiveness of indebtedness, (iii) materially increase any
benefits otherwise payable by the Company or any Subsidiary or (iv) result in
the acceleration of the time of payment or vesting of any such benefits
(including with regard to Company Options) except as required under applicable
Legal Requirements.
(j) PARACHUTE PAYMENTS; 409A; EXECUTIVE COMPENSATION TAX. Except as
set forth in SECTION 2.16(j) of the Company Disclosure Letter, there is no
agreement, plan, arrangement or other contract covering any Employee that,
considered individually or considered collectively with any other such
agreements, plans, arrangements or other contracts, will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount that
would be characterized as a "parachute payment" within the meaning of Section
280G(b)(2) of the Code. There is no agreement, plan, arrangement or other
contract by which the Company or any of its Subsidiaries is bound to compensate
any Employee for excise taxes paid pursuant to Sections 4999 or 409A of the
Code. The Company Employee Plans and Employee Agreements have been administered
in good faith compliance with Section 409A of the Code. Prior to the date of
this Agreement, the Company has not undergone a change in ownership or effective
control as defined in Section 280G of the Code and the regulations promulgated
thereunder. There is no contract, agreement, plan or arrangement to which the
Company or any of its Subsidiaries is a party, including the provisions of this
Agreement, covering any Employee of the Company or any of its Subsidiaries,
which, individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code. No employee of the Company or any of its Subsidiaries has made an
election under Section 83(b) of the Code (or under any similar provision of U.K.
law) with respect to restricted stock awards or any other equity awards.
(k) EMPLOYMENT MATTERS. The Company and each of its Subsidiaries are
and have been in compliance in all material respects with all applicable Legal
Requirements respecting employment, employment practices, terms, conditions and
classifications of employment, employee safety and health, immigration status,
employment discrimination, disability rights or benefits, labor relations,
employee leave requirements, plant closures and layoffs, affirmative action,
whistleblower protections and wages and hours and, in each case, with respect to
Employees (i) except as accrued in the ordinary course, are not liable for any
arrears of wages or other remunerations, accrued holiday pay, expenses, bonus,
commission, penalties, severance pay or any Taxes, any penalty or any other
payment for failure to comply with any of the foregoing and (ii) are not liable
for any payment to any trust or other fund governed by or maintained by or on
behalf of any governmental authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no actions, grievances, investigations, suits,
claims, charges or administrative matters pending, or, to the Knowledge of the
Company, threatened or reasonably anticipated against the Company, any of its
Subsidiaries, or any of their Employees relating to any Employee, Employee
Agreement or Company Employee Plan. There are no pending or, to the Knowledge of
the Company, threatened or reasonably anticipated claims or actions against the
Company, any of its Subsidiaries, any Company trustee or any trustee of any
Subsidiary under any worker's compensation policy or long-term disability
policy. Except as set forth in SECTION 2.16(k) of the Company Disclosure Letter,
the services provided by each of the Company's, each of the Company's
Subsidiary's and each of their ERISA Affiliates' Employees employed in the
United
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States are terminable at the will of the Company and its ERISA Affiliates and
all Employee Agreements relating to Employees employed or engaged in the United
Kingdom are terminable by giving the applicable minimum period of notice
specified in section 86 of the United Kingdom's Employment Rights ▇▇▇ ▇▇▇▇. No
Employee has at any time been the subject of a "relevant transfer" for the
purposes of the United Kingdom's Transfer of Undertakings (Protection of
Employment) Regulations 2006. The Company and its Subsidiaries, as appropriate,
do not operate or intend to operate and have not operated any arrangement or any
redundancy or redeployment scheme or arrangement, whether formal or informal.
contractual or non-contractual, which provide for payments greater than those
required by applicable laws, statutes, orders, rules and regulations or for
notice periods greater than those set out in applicable Employee Agreements.
There are no Employees who have been absent from work for more than four weeks
(whether on maternity leave, unpaid leave, long-term sickness, secondment,
authorized annual leave or any other type of leave or otherwise) in the
twelve-month period ending on the date of this Agreement. There is no person
previously employed or engaged by the Company or its Subsidiaries, as
appropriate, who now has or may have a statutory or contractual or other right
to return to work or to be re-instated or re-engaged by the Company or its
Subsidiaries (as appropriate). There are no homeworking, part-time, job share,
flexi time or other flexible working arrangements or early retirement schemes
applicable to any of the Employees.
(l) WORKS' COUNCILS. Neither the Company nor any of its Subsidiaries
is subject to any non-U.S. works' councils or similar organizations. Neither the
Company nor any of its Subsidiaries is presently nor has it been in the past a
party to, or bound by, any agreements, contract or other arrangement with any
non-U.S. works council or similar organization with respect to Employees. The
consummation of the Merger and the other transactions contemplated by this
Agreement will not entitle any third party (including any works' council, labor
union or labor organization) to any payments under any collective bargaining
agreement, labor agreement or any similar agreement or arrangement to which the
Company or any of its Subsidiaries is subject or require the Company or any of
its Subsidiaries to consult with any works' council or similar labor relations
body.
(m) LABOR. No work stoppage, slowdown, lockout or labor strike
against the Company or any of its Subsidiaries is current or pending or, to the
Knowledge of the Company, threatened nor has there been any such occurrence for
the past five years. The Company has no Knowledge of any activities or
proceedings of any labor union to organize any Employees or of any activities or
proceedings to recognize any trade union or similar body. There are no actions,
suits, claims, labor disputes or grievances pending or, to the Knowledge of the
Company, threatened or reasonably anticipated by or on behalf of any Employee or
involving any Employee relating to any labor or employment matters including,
without limitation, labor practices, employment practices, terms, conditions and
classifications of employment, employee safety and health, immigration status,
employment discrimination, disability rights or benefits, labor relations,
employee leave requirements, plant closures and layoffs, affirmative action,
whistleblower protections, wages or other remuneration and hours. Neither the
Company nor any of its Subsidiaries has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or any unfair labor
practice under any comparable state, local or foreign law. Neither the Company
nor any of its Subsidiaries is presently, nor has it been in the past, a party
to, or bound by, any collective bargaining agreement, union contract or similar
agreement with respect to Employees and no such
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agreement is being negotiated by the Company or any of its Subsidiaries as of
the Effective Time, or expected to be negotiated prior the Closing Date. Within
the past year, neither the Company nor any of its Subsidiaries has incurred any
liability or obligation under WARN or any similar state or local law that
remains unsatisfied, and no terminations prior to the Closing Date shall result
in unsatisfied liability or obligation under WARN or any similar state or local
law. No employee of the Company or any of its Subsidiaries has experienced an
employment loss, as defined by the WARN Act or any similar applicable state or
local law requiring notice to employees in the event of a closing or layoff,
within ninety days prior to the date of this Agreement.
(n) INTERNATIONAL EMPLOYEE PLANS. Except as (i) is required under
any Legal Requirements or (ii) otherwise set forth in SECTION 2.16(n)(i) of the
Company Disclosure Letter, the foregoing representations contained in SECTIONS
2.16(d) through 2.16(m) are accurate with respect to Employees located outside
the United States and International Employee Plans, to the extent applicable.
Each International Employee Plan has been established, maintained and
administered in compliance in all material respects with its terms and
conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan. No
International Employee Plan has unfunded liabilities, that as of the Effective
Time, will not be offset by insurance or fully accrued. All benefits under each
International Employee Plan (other than those which are fully insured) are
calculated on a money purchase basis only and there is no obligation on the
Company or any of its Subsidiaries or under an International Employee Plan to
provide any specified level of benefits (other than in the case of those
benefits which are fully insured). Except as required by law or in relation to
benefits previously vested, earned or accrued, or pursuant to the terms of an
Employee Agreement disclosed in SECTION 2.16(b)(i) of the Company Disclosure
Letter, no condition exists that would prevent the Company or Parent from
terminating or amending any International Employee Plan at any time for any
reason. The Company and its Subsidiaries, as appropriate, comply and at all
times have complied with any duty in the United Kingdom to facilitate access to
a stakeholder pension scheme (under section 3 of the United Kingdom's Welfare
Reform and Pensions Act 1999).
2.17 CONTRACTS.
(a) MATERIAL CONTRACTS. For purposes of this Agreement, "COMPANY
MATERIAL CONTRACT" shall mean any of the following to which the Company or any
of its Subsidiaries is a party or by which it or its assets are bound:
(i) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) with respect to the Company and its
Subsidiaries;
(ii) any employment, contractor or consulting Contract with
any executive officer or other employee of the Company earning an annual salary
in excess of $75,000 or member of the Company's Board of Directors, other than
those that are terminable by the Company or any of its Subsidiaries on no more
than 30 days notice without material liability or financial obligation to the
Company or any of its Subsidiaries, or any collective bargaining agreement or
contract with any labor union, works' council, employee consultation group or
other employee organization;
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(iii) any Contract or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement (either alone or upon the occurrence of additional or
subsequent events) or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement (either alone or upon the occurrence of additional or subsequent
events);
(iv) any agreement of indemnification or any guarantee (other
than any agreement of indemnification entered into in connection with the sale,
license, maintenance, support or service of Company Services or between the
Company and an officer, director or an employee of the Company in the ordinary
course of business);
(v) any Contract relating to the disposition or acquisition by
the Company or any of its Subsidiaries of a material amount of assets or any
interest in any other Person or business enterprise other than in the ordinary
course of business;
(vi) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other Contracts relating to the borrowing of
money or extension of credit in excess of $75,000, other than accounts
receivable and payable in the ordinary course of business;
(vii) any material Lease Document;
(viii) any settlement agreement entered into within three
years prior to the date of this Agreement or which otherwise contains continuing
material obligations of the Company or any of its Subsidiaries;
(ix) (1) any dealer, distributor, joint marketing or end-user
license agreement any development agreement under which the Company or any of
its Subsidiaries have continuing material obligations to jointly market any
product, technology or service and which may not be canceled without penalty to
the Company or any of its Subsidiaries upon notice of 30 days or less, or (2)
any material agreement pursuant to which the Company or any of its Subsidiaries
have continuing material obligations to jointly develop any Intellectual
Property or Intellectual Property Rights that will not be owned, in whole or in
part, by the Company or any of its Subsidiaries and which may not be terminated
without penalty to the Company or any of its Subsidiaries upon notice of 30 days
or less;
(x) any Contract required to be disclosed in SECTION 2.8 of
the Company Disclosure Letter including any subsection thereof;
(xi) any Contract containing any material support, maintenance
or service obligations on the part of the Company or any of its Subsidiaries,
other than those obligations that are terminable by the Company or any of its
Subsidiaries on no more than 30 days notice without liability or financial
obligation to the Company or its Subsidiaries;
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(xii) any Contract, or group of Contracts with a Person (or
group of affiliated Persons), the termination or breach of which could
reasonably be expected to have a Material Adverse Effect on the Company;
(xiii) any Contract with any obligations to make payments or
entitlement to receive payments on behalf of the Company or any of its
Subsidiaries of $75,000 or more;
(xiv) any Contract or license for the digital download of
audio or visual, or mixed content with any artist, with any artist's association
or with any recorded music or video company including all major labels and
independent record label companies, including but not limited to those relating
to an artist's content catalogue;
(xv) any material Contract, plan or placement relating to
Company Common Stock;
(xvi) any Contract containing any term or obligation of
non-assertion or other material non-standard terms, including but not limited
to, non-standard discounts or non-standard licensing obligations, provisions for
unpaid future deliverables, non-standard service requirements or future royalty
payments; or
(xvii) any other material Contract containing any termination
rights triggered by a change of control in the Company.
(b) SCHEDULE. SECTION 2.17(a) of the Company Disclosure Letter sets
forth a list of all Company Material Contracts to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound or by which any of their respective properties is bound or affected as
of the date hereof. Except as set forth in SECTION 2.17(a) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
or bound by, nor are any of their respective properties bound or affected by any
Company Material Contract.
(c) NO BREACH. All Company Material Contracts are valid and in full
force and effect, and enforceable in accordance with their terms, except to the
extent they have previously expired in accordance with their terms or if the
failure to be in full force and effect, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole. Neither the Company nor any of its
Subsidiaries have violated any provision of, or committed or failed to perform
any act which, with or without notice, lapse of time or both would constitute a
default under the provisions of, any Company Material Contract, except in each
case for those violations and defaults which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.
2.18 INSURANCE. Except as set forth in SECTION 2.18 of the Company
Disclosure Letter, the Company has all insurance policies in place customary for
the industry to protect its business and operations and has Made Available true,
correct and accurate copies of all insurance policies and fidelity bonds
material to the business of the Company that are in effect as of the date
hereof. There is no material claim by the Company or any of its Subsidiaries
pending under any of the insurance
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policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company and its
Subsidiaries as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds.
2.19 EXPORT CONTROL LAWS. The Company and each of its Subsidiaries have at
all times conducted their export transactions materially in accordance with (i)
all applicable U.S. export and re-export controls, including the United States
Export Administration Act and Regulations and Foreign Assets Control Regulations
and (ii) all other applicable import/export controls in other countries in which
the Company conducts business in an amount that is material to the Company and
its Subsidiaries taken as a whole. Without limiting the foregoing:
(a) The Company and each of its Subsidiaries have obtained, and are
in material compliance with, all export licenses, license exceptions and other
consents, notices, waivers, approvals, orders, authorizations, registrations,
declarations, classifications and filings with any Governmental Entity required
for (i) the export and re-export of products, services, software and
technologies and (ii) releases of technologies and software to foreign nationals
located in the United States and abroad ("EXPORT APPROVALS"), in each case for
clauses (i) or (ii) except as would not reasonably be expected to be material to
the Company and its Subsidiaries taken as a whole;
(b) There are no pending or, to the Knowledge of the Company,
threatened claims against the Company or any Subsidiary with respect to such
Export Approvals;
(c) To the Knowledge of the Company there are no actions, conditions
or circumstances pertaining to the Company's or any Subsidiary's export
transactions that may give rise to any future claims; and
(d) No Export Approvals for the transfer of material export licenses
held by the Company or its Subsidiaries to Parent or the Surviving Corporation
are required, or, if required, such Export Approvals can be obtained
expeditiously without material cost.
2.20 FOREIGN CORRUPT PRACTICES ACT. To the Knowledge of the Company,
neither the Company nor any of its Subsidiaries (including any of their
officers, directors, agents, distributors, employees or other Person associated
with or acting on their behalf) have, directly or indirectly, taken any action
which would cause them to be in material violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any rules or regulations thereunder or any
similar anti-corruption or anti-bribery Legal Requirements applicable to the
Company or any of its Subsidiaries in any jurisdiction other than the United
States (collectively, the "FCPA"), or, to the Knowledge of the Company, used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, made, offered or authorized
any unlawful payment to foreign or domestic government officials or employees,
whether directly or indirectly, or made, offered or authorized any bribe,
rebate, payoff, influence payment, kickback or other similar unlawful payment,
whether directly or indirectly. The Company has established reasonable internal
controls and procedures intended to ensure compliance with the FCPA.
2.21 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by or on behalf of the Company for inclusion or incorporation by
reference in the definitive proxy statements
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to be filed by the Company with the SEC in connection with the Merger
(collectively, the "PROXY STATEMENT") will, on each relevant filing date, on the
date of mailing to the Company's stockholders and at the time of the
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to any information supplied by
Parent or Merger Sub for inclusion or incorporation by reference in the Proxy
Statement.
2.22 FAIRNESS OPINION. The Company's Board of Directors has received an
opinion from ▇▇▇▇▇ & Company LLC dated as of August 7, 2006 to the effect that,
as of such date, the Merger Consideration to be received by the holders of the
Company Common Stock pursuant to this Agreement is fair from a financial point
of view to the holders of Company Common Stock.
2.23 TAKEOVER STATUTES. The Company's Board of Directors has taken all
reasonable actions so that the restrictions contained in Section 203 of Delaware
Law applicable to a "business combination" (as defined in such Section 203), and
any other similar Legal Requirement, will not apply to Parent, including the
execution, delivery or performance of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 ORGANIZATION. Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. All of the capital stock of Merger Sub is owned
directly or indirectly by Parent.
3.2 AUTHORITY; NO CONFLICT; NECESSARY CONSENTS.
(a) AUTHORITY. Each of Parent and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by each of Parent
and Merger Sub of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub and no other action is required on the part
of Parent and Merger Sub to authorize the execution and delivery of this
Agreement or to consummate the Merger and the other transactions contemplated
hereby, subject only to the filing of the Certificate of Merger pursuant to
Delaware Law. This Agreement has been duly executed and delivered by Parent and
Merger Sub and, assuming due execution and delivery of this Agreement by the
Company, constitutes the valid and binding obligations of Parent, enforceable
against each of Parent and Merger Sub in accordance with its terms, subject to
applicable bankruptcy, insolvency,
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reorganization, moratorium or other laws relating to or affecting the rights and
remedies of creditors generally and to general principles of equity.
(b) NO CONFLICT. The execution and delivery by Parent and Merger Sub
of this Agreement and the consummation of the transactions contemplated hereby
will not (i) conflict with or violate any provision of their respective
certificates of incorporation or bylaws, (ii) subject to compliance with the
requirements set forth in SECTION 3.2(c), conflict with or violate any material
Legal Requirement applicable to Parent or Merger Sub or by which Parent or
Merger Sub or any of their respective properties or assets (whether tangible or
intangible) is bound or affected or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or materially impair Parent's or Merger Sub's rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of Parent or Merger Sub
pursuant to, any contract filed with the SEC by Parent or any affiliate of
Parent pursuant to Item 601(b)(10) of Regulation S-K of the SEC; except, in the
case of each of the preceding clauses (i), (ii) and (iii) for any conflict,
violation, breach, default, impairment, alteration, giving of rights or Lien
which would not materially adversely affect the ability of the parties hereto to
consummate the Merger within the time frame in which the Merger would otherwise
be consummated in the absence of such conflict, violation, breach, default,
impairment, alteration, giving of rights or Lien.
(c) NECESSARY CONSENTS. No consent, approval, order, authorization,
registration, declaration or filing with any Governmental Entity, or any third
party, is required to be made or obtained by Parent or Merger Sub in connection
with the execution and delivery of this Agreement by Parent and Merger Sub or
the consummation of the Merger and the transactions contemplated hereby, except
for (i) the Necessary Consents and (ii) such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings which, if not
obtained or made, would not materially adversely affect the ability of Parent
and Merger Sub to consummate the Merger within the time frame in which the
Merger would otherwise be consummated in the absence of the need for such
consent, approval, order, authorization, registration, declaration or filing.
3.3 CAPITAL RESOURCES. Parent has, and will have available to it upon the
consummation of the Merger, sufficient capital resources to pay the Merger
Consideration and to consummate all of the transactions contemplated by this
Agreement.
3.4 INFORMATION SUPPLIED. The information supplied or to be supplied by or
on behalf of Parent and Merger Sub for inclusion or incorporation by reference
in the Proxy Statement will not contain, on the date of the mailing to the
Company's stockholders and at the time of the Stockholders' Meeting, any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time, any event relating to Parent or any of its
affiliates, officers or directors should be discovered by Parent which is
required to be set forth in a supplement to the Proxy Statement, Parent shall
promptly inform the Company. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any information supplied by or on
behalf of the Company which is contained in the Proxy Statement.
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3.5 OPERATIONS OF MERGER SUB. Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted and will conduct its operations prior to
the Effective Time only as contemplated hereby.
3.6 BROKERS' AND FINDERS' FEES. Except for fees payable to ▇▇ ▇▇▇▇▇▇
(which shall be paid by Parent), neither Parent nor any of its Subsidiaries has
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions, fees related to investment banking or
similar advisory services or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
3.7 LITIGATION. As of the date of this Agreement, there is no material
action, suit, claim or proceeding pending or, to the Knowledge of Parent or
Merger Sub, threatened or reasonably anticipated against Parent or any of its
Subsidiaries, including Merger Sub that, if adversely determined, would
reasonably be expected to have a material adverse effect on the ability of
Parent and Merger Sub to consummate the Merger and the other transactions
contemplated hereby. As of the date of this Agreement, there is no investigation
or other proceeding pending or, to the Knowledge of Parent or Merger Sub,
threatened or reasonably anticipated against Parent or any of its Subsidiaries,
including Merger Sub by or before any Governmental Entity that, if adversely
determined, would reasonably be expected to have a material adverse effect on
the ability of Parent and Merger Sub to consummate the Merger and the other
transactions contemplated hereby.
ARTICLE IV
CONDUCT BY THE COMPANY PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS BY THE COMPANY.
(a) ORDINARY COURSE. During the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, the Company and each of its Subsidiaries shall,
except as set forth in SECTION 4.1(b) of the Company Disclosure Letter or as
otherwise expressly contemplated by this Agreement or to the extent that Parent
shall otherwise consent in writing, (i) carry on their business in the usual,
regular and ordinary course, in substantially the same manner as heretofore
conducted and in compliance in all material respects with all applicable laws
and regulations, (ii) pay their debts and Taxes when due, pay or perform other
material obligations when due and (iii) use commercially reasonable efforts
consistent with past practice to (x) preserve intact their present business
organization, (y) keep available the services of their present executive
officers and employees and (z) preserve their relationships with customers,
suppliers, licensors, licensees, and others with which they have business
dealings in a manner consistent with past practice. In addition, the Company
shall promptly notify in writing Parent of any Material Adverse Effect involving
its business or operations.
(b) REQUIRED CONSENT. Without limiting the generality of SECTION
4.1(a), except as expressly permitted or expressly required by the terms of this
Agreement, and except as provided in SECTION 4.1(b) of the Company Disclosure
Letter, without the prior written consent of Parent (which consent shall not be
unreasonably withheld or delayed), during the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective
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Time, the Company shall not do any of the following, and shall not permit any of
its Subsidiaries to do any of the following:
(i) Enter into any new line of business;
(ii) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock, other than any such
transaction by a wholly-owned Subsidiary of it that remains a wholly-owned
Subsidiary of it after consummation of such transaction, in the ordinary course
of business consistent with past practice;
(iii) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of its capital stock or the capital stock of its
Subsidiaries (except for repurchases or cancellations of restricted Company
Common Stock for nominal value upon termination of employment of the person
holding the restricted Company Common Stock);
(iv) Issue, deliver, sell, authorize, pledge or otherwise
encumber any shares of capital stock, Voting Debt, other voting securities or
any securities convertible into shares of capital stock, Voting Debt or other
voting securities, or subscriptions, rights (including stock appreciation rights
whether settled in cash or shares of Company Common Stock), warrants or options
to acquire any shares of capital stock, Voting Debt, other voting securities or
any securities convertible into shares of capital stock, Voting Debt or other
voting securities, or enter into other agreements or commitments of any
character obligating it to issue any such securities or rights, other than: (A)
issuances of Company Common Stock upon the exercise of Company Options existing
on the date hereof in accordance with their present terms; and (B) issuances of
Company Common Stock upon the exercise of Company Warrants existing on the date
hereof;
(v) Cause, permit or propose any amendments to the Company
Charter Documents or adopt any amendments to any of the Subsidiary Charter
Documents of the Company's Subsidiaries;
(vi) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity or voting interest in or a portion of the
assets of, or by any other manner, any business or any Person or division
thereof, or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of the Company and its
Subsidiaries, or solicit or participate in any negotiations or discussions with
respect to any of the foregoing;
(vii) Enter into any binding agreement, agreement in
principle, letter of intent, memorandum of understanding or similar agreement
with respect to any joint venture, strategic partnership or alliance;
(viii) Sell, lease, license, encumber or otherwise dispose of
any properties or assets except the sale, lease, license, encumbrance or
disposition of property or assets which are not material, individually or in the
aggregate, to the business of Company and its Subsidiaries, or the
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licenses of current Company Services, in each case, in the ordinary course of
business and in a manner consistent with past practice;
(ix) Effect any material restructuring activities by the
Company or any of its Subsidiaries, including any material reductions in force,
lease terminations, restructuring of contracts or similar actions;
(x) Make any loans, extensions of credit or financing,
advances or capital contributions to, or investments in, or grant extended
payment terms to any other Person, other than: (A) loans or investments by the
Company or a wholly-owned Subsidiary of the Company to or in the Company or any
wholly-owned Subsidiary of the Company, (B) employee loans or advances for
travel and entertainment expenses made in the ordinary course of business
consistent with past practices or (C) extensions of credit or financing to, or
extended payment terms for, customers made in the ordinary course of business
consistent with past practice;
(xi) Except as required by concurrent changes in GAAP or Legal
Requirements as concurred in by its independent auditors, make any change in its
methods or principles of accounting or revalue any of its assets;
(xii) Fail to file any material Return when due, file an
amendment to any material Return, make or change any material election in
respect of Taxes, adopt or change any accounting method in respect of Tax or any
Tax reporting practice, enter into any agreement or settle any claim or
assessment in respect of Taxes or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
(xiii) Except in the ordinary course of business consistent
with past practice, enter into any licensing, distribution, supply, procurement,
manufacturing, marketing, OEM, VAR, system integrator, system outsourcer or
other similar contracts, agreements, covenants, or obligations which either (A)
may not be canceled without penalty by the Company or its Subsidiaries upon
notice of 30 days or less and which provide for express payments by or to the
Company or its Subsidiaries in an amount in excess of $100,000 in any one year
or (B) which contain exclusivity provisions of any kind which are binding on the
Company or any of its Subsidiaries;
(xiv) Cancel or terminate or allow to lapse without reasonable
substitute policy therefor, or amend in any material respect or enter into, any
material insurance policy, other than the renewal of existing insurance policies
on substantially the same terms as in effect on the date hereof;
(xv) Commence or settle any lawsuit, threat of any lawsuit or
proceeding or other investigation by or against the Company or any Subsidiary or
relating to any of their businesses, properties or assets, other than
settlements with prejudice entered into in the ordinary course of business and
requiring of the Company and its Subsidiaries only the payment of monetary
damages not exceeding $100,000;
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(xvi) Except as required by Legal Requirements or Contracts
currently binding on the Company or its Subsidiaries, (1) increase in any manner
the amount of compensation or fringe benefits of, pay or grant any bonus, change
of control, severance or termination pay to any Employee or director of the
Company or any Subsidiary of the Company, (2) adopt or amend any Company
Employee Plan or make any contribution, other than regularly scheduled
contributions, to any Company Employee Plan, (3) waive any stock repurchase
rights, accelerate, amend or change the period of vesting or exercisability of
Company Options or Company Warrants, or reprice any Company Options, Company
Warrants or authorize cash payments in exchange for any Company Options or
Company Warrants, or (4) modify or amend any Employee Agreement or
indemnification agreement with any Employee other than in the ordinary course of
business consistent with past practice;
(xvii) Enter into, amend or renew any Contracts containing, or
otherwise subjecting the Surviving Corporation or Parent to, any
non-competition, exclusivity, "most favored nations" or other preferential
pricing, unpaid future deliverables, service requirements outside the ordinary
course of business or future royalty payments, or other material restrictions on
the Company or the Surviving Corporation or Parent, or any of their respective
businesses, following the Closing;
(xviii) Provide any material refund, credit, rebate or other
allowance to any end user, customer, reseller or distributor, in each case,
other than in the ordinary course of business consistent with past practice;
(xix) Hire or enter into any Employee Agreement,
indemnification agreement or other agreement with any employee or director or
elect or appoint any officers or directors, other than replacement of personnel
plus an additional sixteen employees prior to the Effective Date who may be
hired by the Company or any of its Significant Subsidiaries in each case based
on demonstrated need and demonstrated suitability of the applicable candidate
for the position;
(xx) Incur any indebtedness for borrowed money or guarantee
any indebtedness of another Person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of the
Company or any of its Subsidiaries, guarantee any debt securities of another
Person, enter into any "keep well" or other agreement to maintain any financial
statement condition of any other Person or enter into any arrangement having the
economic effect of any of the foregoing, other than in connection with the
financing of ordinary course trade payables consistent with past practice;
(xxi) Enter into any agreement to purchase or sell any
interest in real property, grant any security interest in any real property,
enter into any lease, sublease, license or other occupancy agreement with
respect to any real property or alter, amend, modify or terminate any of the
terms of any lease;
(xxii) Enter into, modify or amend, in each case, in a manner
adverse in any material respect to the Company or any of its Subsidiaries, or
terminate any Company Material Contract, or waive, release or assign any
material rights or claims thereunder;
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(xxiii) Enter into any customer Contract, other than a
customer Contract which (i) is in accordance with the form of customer Contract
Made Available, (ii) has no alterations to such form other than consistent with
prior practice, and (iii) complies with all subsections of this section 4.1;
provided, always, that the Company shall not enter into any customer Contracts
which requires additional research and development or other employee resources
for implementation over and above the sixteen additional employees contemplated
in subsection (xix) above;
(xxiv) Enter into, modify or amend any Contract containing any
term or obligation of non-assertion binding on the Company or any Subsidiary or
affiliate thereof or binding on Parent or any of its affiliates;
(xxv) Make any material purchase of fixed assets or other
long-term assets other than in the ordinary course of business and in a manner
consistent with past practice;
(xxvi) Enter into, modify or amend any Contract with respect
to, or otherwise potentially binding upon, any Intellectual Property or
Intellectual Property Rights of Parent or any of its affiliates (other than the
Company and its Subsidiaries following the Effective Time);
(xxvii) Incur any obligation in excess of $100,000 to any
third party in connection with any upgrade to the Company's financial or
operating systems;
(xxviii) Proceed with any PCT patent applications related to
any U.S. patent applications of the Company or its Subsidiaries; or
(xxix) Take, commit, or agree (in writing or otherwise) or
announce the intention to take, any of the actions described in SECTIONS
4.1(b)(i) through 4.1(b)(xxviii) hereof, or any other action that would
reasonably be expected to prevent the Company from performing, or cause the
Company not to perform, its obligations hereunder or otherwise prevent or
materially delay the consummation of the transactions contemplated hereby.
4.2 PROCEDURES FOR REQUESTING PARENT CONSENT. Notwithstanding SECTION 8.2,
if the Company desires to take any action which would be prohibited pursuant to
SECTION 4.1(b) hereof without the written consent of Parent (which consent shall
not be unreasonably withheld or delayed), prior to taking such action the
Company may request such written consent (such consent not to be unreasonably
withheld) by sending an e-mail (which the sender has reason to believe has been
received by the recipient of the email) to the individuals identified on SECTION
4.2 of the Company Disclosure Letter and may not take such action until such
consent in writing (by email (which the sender has reason to believe has been
received by the recipient of the email) or other writing) has been received from
one of such individuals; provided, however, that with respect to Sections
4.1(b)(xiii), (xv), (xvi), (xvii), (xix), (xxi - with respect to the Company's
U.S. lease), (xxii), (xxiii), (xxvi), (xxvii) and (xxviii) hereof only, the
failure of at least one such individual listed on SECTION 4.2 of the Company
Disclosure Letter to respond with a request to delay such action, including an
indication of concern, to an email from the Company within five Business Days of
a request for consent shall be deemed approval.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PROXY STATEMENT. As promptly as reasonably practicable after the
execution of this Agreement, the Company, in consultation with Parent, will
prepare and file with the SEC preliminary proxy materials that will constitute
the Proxy Statement. The Proxy Statement shall include the notice to
stockholders required by Section 262(d)(1) of Delaware Law that appraisal rights
will be available. As promptly as reasonably practicable after any comments are
received from the SEC thereon (or upon notice from the SEC that no such comments
will be made), the Company shall, in consultation with Parent, prepare and file
any required amendments to, and the definitive, Proxy Statement with the SEC.
The Company will notify Parent promptly upon the receipt of any comments from
the SEC or its staff in connection with the filing of, or amendments or
supplements to, the Proxy Statement. Whenever any event occurs which is required
to be set forth in an amendment or supplement to the Proxy Statement, the
Company will promptly inform Parent of such occurrence and will, in consultation
with Parent, file with the SEC or its staff, and/or mail to stockholders of the
Company, such amendment or supplement. The Company shall provide Parent (and its
counsel) with a reasonable opportunity to review and comment on the preliminary
Proxy Statement and any amendment or supplement thereto prior to filing such
with the SEC, and will provide Parent with a copy of all such filings made with
the SEC; provided that the Company shall retain final discretion regarding the
contents of the Proxy Statement, any amendment or supplement thereto or any
other filings of the Company made with the SEC. Subject to Section 5.3(d), the
Company will cause the Proxy Statement to be mailed to its stockholders as
promptly as reasonably practicable after the definitive Proxy Statement is filed
with the SEC.
5.2 MEETING OF COMPANY STOCKHOLDERS; BOARD RECOMMENDATION.
(a) MEETING OF COMPANY STOCKHOLDERS. Subject to SECTION 5.3(d), the
Company will take all action necessary in accordance with Delaware Law and its
certificate of incorporation and bylaws to call, hold and convene a meeting of
its stockholders to consider adoption of this Agreement (the "STOCKHOLDERS'
MEETING") to be held (to the extent permissible under applicable law) within 45
to 60 days after the mailing of the Proxy Statement to the Company's
stockholders. Subject to SECTION 5.3(d), the Company will use all commercially
reasonable efforts to solicit from its stockholders proxies in favor of the
adoption of this Agreement and will take all other reasonable action necessary
or advisable to secure the vote or consent of its stockholders required by the
rules of the Nasdaq Capital Market or Delaware Law or any other applicable Legal
Requirements to obtain such approvals. Notwithstanding anything to the contrary
contained in this Agreement, the Company in its discretion may adjourn or
postpone the Stockholders' Meeting to the extent necessary to ensure that any
necessary supplement or amendment to the Proxy Statement is provided to its
stockholders in advance of a vote on the Merger and this Agreement or, if as of
the time for which the Stockholders' Meeting is originally scheduled (as set
forth in the Proxy Statement), there are insufficient shares of Company Common
Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of such Stockholders' Meeting. Subject to
SECTION 5.3(d), the Company shall ensure that the Stockholders' Meeting is
called, noticed, convened, held and conducted in compliance with, and that all
proxies solicited by it in connection with the Stockholders' Meeting are
solicited in compliance with Delaware Law, its certificate of
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incorporation and bylaws, the rules of the Nasdaq Capital Market and all other
applicable Legal Requirements.
(b) BOARD RECOMMENDATION. Except to the extent expressly permitted
by SECTION 5.3(d): (i) the Board of Directors of the Company shall unanimously
recommend that its stockholders vote in favor of adoption of this Agreement at
the Stockholders' Meeting, (ii) the Proxy Statement shall include a statement to
the effect that the Board of Directors of the Company has unanimously
recommended that the Company's stockholders vote in favor of adoption of this
Agreement at the Stockholders' Meeting and (iii) neither the Board of Directors
of the Company nor any committee thereof shall withdraw, amend or modify, or
propose or resolve to withdraw, amend or modify in a manner adverse to Parent,
the unanimous recommendation of the Board of Directors that the Company's
stockholders vote in favor of adoption of this Agreement.
5.3 ACQUISITION PROPOSALS NO SOLICITATION. The Company agrees that neither
it nor any of its Subsidiaries shall, nor shall it nor any of its Subsidiaries
authorize or permit any of their respective officers and directors to, and that
it shall use all reasonable efforts to cause the Company's and its affiliates,
Subsidiaries' other Employees, agents and representatives (including any
investment banker, attorney or accountant retained by the Company or any of its
Subsidiaries) not to (and shall not authorize or permit any of them to),
directly or indirectly: (i) solicit, initiate, knowingly encourage or facilitate
or induce any inquiry with respect to, or the making, submission or announcement
of, any Acquisition Proposal, (ii) participate or engage in any discussions or
negotiations regarding, or furnish to any Person any nonpublic information with
respect to, or take any other action to knowingly encourage or facilitate any
inquiries or the making of any proposal that constitutes or would reasonably be
expected to lead to, any Acquisition Proposal, (iii) approve, endorse, recommend
or make or authorize any statement, recommendation or solicitation in support of
any Acquisition Proposal (except to the extent specifically permitted pursuant
to SECTION 5.3(d)), or (iv) execute or enter into, or propose to execute or
enter into, any letter of intent or similar document or any contract, agreement
or commitment contemplating or otherwise relating to any Acquisition Proposal or
transaction contemplated thereby except in the case of clauses (ii), (iii) or
(iv) to the extent expressly permitted by SECTIONS 5.3(c) OR (d). The Company
and its Subsidiaries will immediately cease and cause to be terminated any and
all existing activities, discussions or negotiations (including, without
limitation, any such activities, discussions or negotiations conducted by
controlled affiliates, directors, officers, employees, agents and
representatives (including any investment banker, financial advisor, attorney,
accountant or other representative) of the Company or any of its Subsidiaries)
with any third parties conducted heretofore with respect to consideration of any
Acquisition Proposal. The Company will exercise any rights under any
confidentiality or non-disclosure agreements with any such third parties to
require the return or destruction of non-public information provided by the
Company prior to the date of this Agreement, its Subsidiaries or their agents
and representatives to any such third parties. (b) NOTIFICATION OF UNSOLICITED
ACQUISITION PROPOSALS. As promptly as practicable (and in any event no later
than 24 hours) after receipt of any Acquisition Proposal or any request for
nonpublic information or inquiry that could reasonably be expected to lead to an
Acquisition Proposal or from any Person seeking to have discussions or
negotiations with the Company relating to a possible Acquisition Proposal, the
Company shall provide Parent with notice of such Acquisition Proposal, request
or inquiry, including the material terms and conditions of such Acquisition
Proposal, request or inquiry; the identity of the Person or
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group making any such Acquisition Proposal, request or inquiry; and a copy of
all written materials provided by or on behalf of such Person or group in
connection with such Acquisition Proposal, request or inquiry. The Company shall
provide Parent with 48 hours prior notice (or such lesser prior notice as is
provided to the members of its Board of Directors) of any meeting of its Board
of Directors at which its Board of Directors could reasonably be expected to
consider any Acquisition Proposal or any such inquiry or to consider providing
nonpublic information to any Person. The Company shall notify Parent, in
writing, of any decision of its Board of Directors to enter into discussions or
negotiations concerning any Acquisition Proposal or to provide nonpublic
information or data to any Person, which notice shall be given as promptly as
practicable after such meeting (and in any event no later than 24 hours after
such determination was reached and 24 hours prior to entering into any
discussions or negotiations or providing any nonpublic information or data to
any Person). The Company agrees that it shall promptly provide Parent with oral
and written notice setting forth all such information as is reasonably necessary
to keep Parent currently informed in all material respects of the status and
material terms (including material amendments or proposed material amendments)
of any such Acquisition Proposal, request or inquiry (including any negotiations
contemplated by SECTION 5.3(c)) and shall promptly provide Parent a copy of all
written materials subsequently provided to, by or on behalf of such Person or
group in connection with such Acquisition Proposal, request or inquiry.
(c) SUPERIOR OFFERS. Notwithstanding anything to the contrary
contained in SECTION 5.3, in the event that the Company receives prior to the
adoption of this Agreement by the stockholders of the Company in accordance with
applicable law an unsolicited, bona fide written Acquisition Proposal from a
third party that did not result from a material breach of this SECTION 5.3 and
that the Company's Board of Directors has in good faith concluded, after
consultation with its outside legal counsel and its financial advisor, that such
Acquisition Proposal is, or could reasonably be expected to result in, a
Superior Offer, the Company may then (1) furnish nonpublic information to the
third party making such Acquisition Proposal and (2) engage in negotiations
(including exchanging draft agreements) with the third party and its
representatives with respect to such Acquisition Proposal; provided, however,
that:
(i) the Company complies with all of the terms of this SECTION
5.3 in all material respects;
(ii) prior to furnishing any nonpublic information or entering
into any negotiations or discussions with such third party, (1) the Company
receives from such third party an executed confidentiality agreement containing
customary limitations on the use and disclosure of all nonpublic written and
oral information furnished to such third party on the Company's behalf on terms
no less restrictive to such third party than the Confidentiality Agreement is
with respect to Parent (or its affiliates) (except for Paragraph 7 of the
Confidentiality Agreement); provided that in the event that any confidentiality
agreement with a third party that is executed pursuant to this SECTION 5.3
(c)(ii) does not contain a standstill, the standstill provisions contained in
the Confidentiality Agreement shall terminate, and (2) contemporaneously with
furnishing any such nonpublic information to such third party, the Company
furnishes such nonpublic information to Parent (to the extent such nonpublic
information has not been previously so furnished);
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(iii) prior to engaging in negotiations with such third party,
the Company gives Parent written notice of the Company's intention to enter into
negotiations with such third party; and
(iv) the Board of Directors of the Company reasonably
determines in good faith, after consultation with outside legal counsel, that
the failure to provide such information or enter into such discussion or
negotiations could reasonably be expected to result in a breach of the Board of
Directors' fiduciary duties to the stockholders of the Company under applicable
law.
(d) CHANGE OF RECOMMENDATION. Notwithstanding anything to the
contrary contained in SECTION 5.2(b) or SECTION 5.3, in response to the receipt
of a Superior Offer, (x) the Board of Directors of the Company may withhold,
withdraw, amend or modify its recommendation in favor of the Merger, and, in the
case of a Superior Offer that is a tender or exchange offer made directly to the
stockholders of the Company, may recommend that the stockholders of the Company
accept the tender or exchange offer (any of the foregoing actions, whether by
the Board of Directors of the Company or a committee thereof, a "CHANGE OF
RECOMMENDATION"), (y) the Board of Directors of the Company, the Company or its
Subsidiaries (including each of their respective directors, officers, employees,
agents or other representatives) may approve, endorse, or recommend any Superior
Offer or recommend a Superior Offer, or (z) the Company or any of its
Subsidiaries may execute or enter into or propose to execute or enter into any
letter of intent or similar document or any contract, agreement or commitment
(which may be conditioned on the termination of this Agreement) contemplating or
otherwise relating to any Superior Offer or transaction contemplated thereby, if
all of the following conditions in clauses (i) through (vi) are met:
(i) the Board of Directors of the Company determines in good
faith, after consultation with the Company's financial advisors and outside
legal counsel, that a Superior Offer has been made and not withdrawn;
(ii) the stockholders of the Company have not approved this
Agreement in accordance with applicable law;
(iii) the Company shall have delivered to Parent written
notice (a "CHANGE OF RECOMMENDATION NOTICE") at least four Business Days prior
to publicly effecting such Change of Recommendation which shall state expressly
(A) that the Company has received a Superior Offer, (B) the final terms and
conditions of the Superior Offer and the identity of the Person or group making
the Superior Offer and (C) that the Company intends to effect a Change of
Recommendation;
(iv) after delivering the Change of Recommendation Notice, the
Company shall provide Parent with a reasonable opportunity to make such
adjustments in the terms and conditions of this Agreement during such
four-Business Day period, and negotiate in good faith with respect thereto
during such four-Business Day period, as would enable the Company to proceed
with its recommendation to stockholders in favor of adoption of this Agreement
without making a Change of Recommendation;
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(v) the Board of Directors of the Company shall have
determined (A) after consultation with its financial advisor, that the terms of
the Superior Offer are more favorable to the stockholders of the Company than
the Merger (as it may be adjusted pursuant to paragraph (iv) above) and (B)
after consultation with outside legal counsel, the failure to effect a Change of
Recommendation could reasonably be expected to result in a breach of the Board
of Directors' fiduciary duties to the stockholders of the Company under
applicable law; and
(vi) the Company shall not have breached in any material
respect any of the provisions set forth in SECTION 5.2 or this SECTION 5.3.
(e) COMPLIANCE WITH DISCLOSURE OBLIGATIONS. Nothing contained in
this Agreement shall prohibit the Company or its Board of Directors from
complying with Rules 14-a-9, 14d-9 and 14e-2(a) promulgated under the Exchange
Act or prohibit or restrict the Company or its Board of Directors from making
other disclosures required by federal securities laws, applicable rules or
applicable Nasdaq rules; provided, however, that nothing in this clause shall
(i) relieve the Company of any of its other obligations hereunder (ii) adversely
affect the rights of Parent or Merger Sub to any remedy (including without
limitation the right to terminate this Agreement) or (iii) relieve the Company
of liability in respect of a breach of any term or obligation as set forth
elsewhere in this Agreement. Without limiting the foregoing, the Company shall
not effect a Change of Recommendation unless specifically permitted pursuant to
the terms of SECTION 5.3(d).
(f) STATE TAKEOVER STATUTE. The Board of Directors of the Company
shall not, in connection with any Change of Recommendation, take any action to
change the approval of the Board of Directors of the Company for purposes of
causing any state takeover statute or other state law to be applicable to the
transactions contemplated hereby. For the avoidance of doubt, this SECTION
5.3(f) shall not prohibit the Company from effecting a Change of Recommendation
under the circumstances and subject to the conditions set forth in this SECTION
5.3.
(g) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "ACQUISITION PROPOSAL," with respect to the Company, shall
mean any offer or proposal by any Person (other than Merger Sub) relating to any
transaction or series of related transactions involving: (a) any purchase from
such party or acquisition by any Person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) of more than
a 15% interest of the total outstanding voting securities of the Company or any
of its Significant Subsidiaries or any tender offer or exchange offer that if
consummated would result in any Person or group beneficially owning 15% or more
of the total outstanding voting securities of the Company or any of its
Significant Subsidiaries, (b) any merger, consolidation, business combination or
similar transaction involving the Company or any of its Significant
Subsidiaries, (c) any sale, lease (other than in the ordinary course of business
consistent with past practice), exchange, transfer, license (other than in the
ordinary course of business consistent with past practice), acquisition or
disposition of more than 15% of the assets of the Company (including its
Subsidiaries taken as a whole) or (d) any liquidation or dissolution of the
Company (provided, however, that the transactions between Parent and the Company
contemplated by this Agreement shall not be deemed an Acquisition Proposal); and
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(ii) "SUPERIOR OFFER," with respect to the Company, shall mean
an unsolicited, bona fide written Acquisition Proposal made by any Person (other
than Merger Sub) on terms that the Board of Directors of the Company has in good
faith concluded, after consultation with its outside legal counsel and its
financial adviser, taking into account, among other things, the legal,
financial, regulatory and other aspects of the offer as the Board of Directors
of the Company deems relevant, to be more favorable to the Company's
stockholders (in their capacities as stockholders) than the terms of the Merger
and is reasonably capable of being consummated, provided that each reference to
"15%" in the definition of "Acquisition Proposal" shall be replaced with "50%"
for purposes hereof.
(h) SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that the provisions of this SECTION
5.3 were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed by the parties hereto that Parent shall be
entitled to an immediate injunction or injunctions, without the necessity of
proving the inadequacy of money damages as a remedy and without the necessity of
posting any bond or other security, to prevent breaches of the provisions of
this SECTION 5.3 and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which Parent may be entitled at law or in
equity. Without limiting the foregoing, it is understood that any violation of
the restrictions set forth above by any officer, director, agent, representative
or affiliate of the Company shall be deemed to be a breach of this Agreement by
the Company.
5.4 CONFIDENTIALITY; ACCESS TO INFORMATION; NO MODIFICATION OF
REPRESENTATIONS, WARRANTIES OR COVENANTS
(a) CONFIDENTIALITY. The parties acknowledge that the Company and
Nokia Corporation have previously executed a Confidentiality Agreement dated
November 30, 2005, as amended by a letter agreement dated July 6, 2006
(incorporating the second and third sentences of this paragraph (a), the
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms, and each of Parent and the
Company will hold, and will cause its respective directors, officers, Employees,
agents, affiliates and advisors (including attorneys, accountants, consultants,
bankers and financial advisors) to hold, any "Information" (as defined in the
Confidentiality Agreement) confidential in accordance with the terms of the
Confidentiality Agreement. The obligations in paragraph 7 of the Confidentiality
Agreement are hereby amended by extending such obligations until (i) the later
of January 6, 2007, the Effective Time or the termination of this Agreement or
(ii) a change of Recommendation of the Company pursuant to the terms of Section
5.3(d). Parent acknowledges and agrees that its obligations under Paragraph 7 of
the Confidentiality Agreement shall be binding on Parent, each of its
Subsidiaries and affiliates, and Parent shall be liable for any breach of such
obligations by any of its representatives, Subsidiaries or affiliates and any of
their respective representatives. Upon the termination of the obligations in
paragraph 7 of the Confidentiality Agreement, Parent, its affiliates and its
Subsidiaries shall be entitled to publicly disclose, subject to prior written
notice to the Company, any material information required to be disclosed by any
of them under applicable law in connection with the making of an offer for the
Company or the purchase of any Company Common Stock.
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(b) ACCESS TO INFORMATION. Subject to SECTION 5.4(a), the Company
shall afford Parent and its accountants, counsel and other representatives,
reasonable access (during regular business hours upon reasonable notice) during
the period from the date hereof and prior to the Effective Time to, (i) all of
the properties, books, contracts, commitments and records of the Company and its
Subsidiaries, including all Company Intellectual Property (including access to
design processes and methodologies) and all capitalization and equity
compensation information that is necessary for Parent to promptly comply with
the requirements of Statement of Financial Accounting Standards 123 (revised
2004) "Share-Based Payments" promulgated by the Financial Accounting Standards
Board in the form it is currently possessed by the Company or its accountants,
(ii) all other information concerning the business, properties and personnel
(subject to restrictions imposed by applicable law) of the Company and its
Subsidiaries as Parent may reasonably request and (iii) all Employees of the
Company and its Subsidiaries as reasonably requested by Parent; provided,
however, that such access noted in (i), (ii) and (iii) shall be provided only to
the extent such access, (x) does not unreasonably interfere with the business
operations of the Company or its Subsidiaries, (y) does not in the opinion of
legal counsel to the Company result in waiver of or otherwise prejudice the
attorney client privilege, or (z) violates any Legal Requirement, provided,
further, in the event of any litigation or threatened litigation between the
parties on the terms of this Agreement or the transactions contemplated hereby
access to information that may be adverse to the interests of the Company or its
Subsidiaries will not be provided. The Company agrees to promptly provide to
Parent and its accountants, counsel and other representatives copies of such
internal financial statements (including Tax Returns and supporting
documentation) as may be reasonably requested.
(c) NO MODIFICATION OF REPRESENTATIONS AND WARRANTIES OR COVENANTS.
No information or knowledge obtained in any investigation or notification
pursuant to this SECTION 5.4, SECTION 5.6, SECTION 5.7 or otherwise shall affect
or be deemed to modify any representation or warranty contained herein, the
covenants or agreements of the parties hereto or the conditions to the
obligations of the parties hereto under this Agreement.
5.5 PUBLIC DISCLOSURE. Without limiting any other provision of this
Agreement, Parent and the Company will consult with each other before issuing,
and provide each other the opportunity to review, comment upon and concur with,
and use all reasonable efforts to agree on any press release or public statement
with respect to this Agreement and the transactions contemplated hereby,
including the Merger, and any Acquisition Proposal and will not issue any such
press release or make any such public statement prior to such consultation and
(to the extent practicable) agreement, except as may be required by law or any
listing agreement with, in the case of Parent, the Helsinki Stock Exchange or
New York Stock Exchange, and in the case of the Company, the Nasdaq Capital
Market, or any other applicable national or regional securities exchange or
market. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement, the form of which is attached hereto
as EXHIBIT B.
5.6 REGULATORY FILINGS; REASONABLE EFFORTS.
(a) REGULATORY FILINGS. Each of Parent, Merger Sub and the Company
shall coordinate and cooperate with one another and shall each use all
reasonable efforts to comply with, and shall each refrain from taking any action
that would impede compliance with, all Legal
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Requirements, and as promptly as practicable after the date hereof, each of
Parent, Merger Sub and the Company shall make all filings, notices, petitions,
statements, registrations, submissions of information, application or submission
of other documents required by any Governmental Entity in connection with the
Merger and the transactions contemplated hereby, including, without limitation:
(i) Notification and Report Forms with the FTC and the DOJ and responses to
requests for additional information and documentary material from the FTC and
the DOJ ("SECOND REQUEST RESPONSES") as required by the HSR Act, (ii) such
necessary filings or approvals required by any other competent merger control
authority reasonably determined by Parent and the Company to be required
pursuant to the mandatory competition laws of any applicable jurisdiction, as
agreed by the parties hereto and (iii) any filings required under the Securities
Act, the Exchange Act, any applicable state or securities or "blue sky" laws and
the securities laws of any foreign country, or any other Legal Requirement
relating to the Merger. Each of Parent and the Company will cause all documents
that it is responsible for filing with any Governmental Entity under this
SECTION 5.6(a) to comply in all material respects with all applicable Legal
Requirements. Parent, Merger Sub and the Company each shall promptly supply the
other with any information that may be required in order to effectuate any
filings or application pursuant to this SECTION 5.6(a).
(b) NOTIFICATION. Each of Parent, Merger Sub and the Company will
notify the other promptly upon the receipt of (i) any comments from any
officials of any Governmental Entity in connection with any filings made
pursuant hereto and (ii) any request by any officials of any Governmental Entity
for amendments or supplements to any filings made pursuant to, or information
provided to comply in all material respects with, any Legal Requirements.
Whenever any event occurs that is required to be set forth in an amendment or
supplement to any filing made pursuant to SECTION 5.6(a), Parent, Merger Sub or
the Company, as the case may be, will promptly inform the other of such
occurrence and cooperate in filing with the applicable Governmental Entity such
amendment or supplement.
(c) COMMERCIALLY REASONABLE EFFORTS. Subject to the express
provisions of SECTION 5.2 and SECTION 5.3 hereof and upon the terms and subject
to the conditions set forth herein, each of the parties agrees to use
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including the following: (i) the
taking of all commercially reasonable acts necessary to cause the conditions
precedent set forth in ARTICLE VI to be satisfied, (ii) the obtaining of all
necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations from Governmental Entities and the making of all necessary
registrations, declarations, submissions and filings (including registrations,
declarations, filings and submissions of Second Request Responses with
Governmental Entities, if any) and the taking of all commercially reasonable
steps as may be necessary to avoid any suit, claim, action, investigation or
proceeding by any Governmental Entity, (iii) the defending of any suits, claims,
actions, investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby and (iv) the execution or delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement; provided, however, that in no event shall this
SECTION 5.6(c) require Parent to take any action that is reasonably expected to
materially and adversely affect Parent or its affiliates (other than Merger Sub)
following
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the consummation of the Merger. In connection with and without limiting the
foregoing, the Company and its Board of Directors shall, if any takeover statute
or similar Legal Requirement is or becomes applicable to the Merger, this
Agreement or any of the transactions contemplated by this Agreement, use all
commercially reasonable efforts to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such Legal Requirement on the Merger, this Agreement and
the transactions contemplated hereby.
(d) NO DIVESTITURE. Notwithstanding anything in this Agreement to
the contrary and except as set forth below, nothing contained in this Agreement
shall be deemed to require Parent or any Subsidiary or affiliate thereof to
agree to any Action of Divestiture, except (i) to the extent such Action of
Divestiture would not have a material consequence on Parent or (ii) with respect
to the business of any Person that Parent enters into a definitive binding
agreement to acquire, or acquires, following the date hereof. The Company shall
not, without the prior written consent of Parent, take or agree to take any
Action of Divestiture that would be reasonably likely to have a material
consequence on Parent or the Company. For purposes of this Agreement, an "ACTION
OF DIVESTITURE" shall mean (i) any license, sale or other disposition or holding
separate (through establishment of a trust or otherwise) of any shares of
capital stock or of any business, assets or properties of Parent, its
Subsidiaries or affiliates, or the Company or its Subsidiaries, (ii) the
imposition of any limitation on the ability of Parent, its Subsidiaries or
affiliates, or the Company or its Subsidiaries to conduct their respective
businesses or own any capital stock or assets or to acquire, hold or exercise
full rights of ownership of their respective businesses and, in the case of
Parent, the businesses of the Company and its Subsidiaries, or (iii) the
imposition of any impediment on Parent, its Subsidiaries or affiliates, or the
Company or its Subsidiaries under any statute, rule, regulation, executive
order, decree, order or other legal restraint governing competition, monopolies
or restrictive trade practices.
5.7 NOTIFICATION OF CERTAIN MATTERS.
(a) BY THE COMPANY. The Company shall give prompt notice to Parent
and Merger Sub of (i) any representation or warranty made by it contained in
this Agreement becoming untrue or inaccurate in any material respect or in any
respect in connection with Section 2.8 hereof, (ii) any failure of the Company
to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement or in any
respect with regard to Section 5.12(a), or (iii) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which could
reasonably be expected to cause the failure of any conditions to the obligations
of Parent and Merger Sub under SECTION 6.2; provided, however, that no such
notification shall affect the representations or warranties of the Company or
the conditions of the obligations of the parties under this Agreement; provided,
further, that the delivery of any notice pursuant to this SECTION 5.7(a) shall
not limit or otherwise affect the remedies available hereunder.
(b) BY PARENT. Parent and Merger Sub shall give prompt notice to the
Company of (i) any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate in any material respect, (ii) any
failure of Parent to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or (iii) the occurrence or non-occurrence of any event the
occurrence or non-occurrence
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of which could reasonably be expected to cause the failure of any conditions to
the obligations of the Company under SECTION 6.3; provided, however, that no
such notification shall affect the representations or warranties of Parent and
Merger Sub or the conditions to the obligations of the parties under this
Agreement; provided, further, that the delivery of any notice pursuant to this
SECTION 5.7(b) shall not limit or otherwise affect the remedies available
hereunder.
5.8 THIRD-PARTY CONSENTS/TERMINATIONS. As soon as practicable following
the date hereof, the Company will use all commercially reasonable efforts to
obtain such material consents, waivers, approvals and terminations under any of
its or its Subsidiaries' respective Contracts required to be obtained in
connection with the consummation of the transactions contemplated hereby as may
be reasonably requested by Parent after consultation with the Company, including
all consents, waivers, approvals and terminations set forth in SECTION 2.3(b)
and SECTION 6.2(e) of the Company Disclosure Letter. In connection with seeking
such consents, waivers, approvals and terminations, the Company shall keep
Parent informed of all material developments and shall, at Parent's request,
include Parent in any discussions or communications with any parties whose
consent, waiver or approval is sought hereunder. Such consents, waivers,
approvals and terminations shall be in a form reasonably acceptable to Parent;
provided, however, that the consents, waivers, approvals or terminations
required under SECTION 6.2(e) shall be on the terms set forth in SECTION 6.2(e)
and in SECTION 6.2(e) of the Company Disclosure Letter. In the event the Merger
does not close for any reason, Parent shall not have any liability to the
Company, its stockholders or any other Person for any costs, claims, liabilities
or damages resulting from the Company seeking to obtain such consents, waivers,
approvals and terminations.
5.9 EMPLOYEE MATTERS
(a) TERMINATION OF 401(k) PLANS. Effective as of no later than the
day immediately preceding the Closing Date, each of the Company, its
Subsidiaries and any ERISA Affiliate shall terminate any and all Company
Employee Plans intended to include a Code Section 401(k) arrangement (each a
"401(k) PLAN") unless Parent provides written notice to the Company that any
such 401(k) plan shall not be terminated. Unless Parent provides such written
notice to the Company, no later than five Business Days prior to the Closing
Date, the Company shall provide Parent with evidence that such 401(k) Plan(s)
have been terminated (effective as of no later than the day immediately
preceding the Closing Date) pursuant to resolutions of the Board of Directors of
the Company, its Subsidiaries or such ERISA Affiliate, as the case may be. The
form and substance of such resolutions shall be subject to review and approval
by Parent. The Company also shall take such other actions in furtherance of
terminating such 401(k) Plan(s) as Parent may reasonably require.
(b) BENEFIT PLANS.
(i) Parent shall provide, or cause to be provided, to each
person who was an employee of the Company or its Subsidiaries immediately prior
to the Effective Time and who remains an employee of the Surviving Corporation
or its Subsidiaries or becomes an employee of Parent immediately following the
Effective Time ("CONTINUING EMPLOYEES"), for a period of not less than one year
from and after the Closing Date (or if shorter, for so long as such employee
remains in such employment), unless any such employee contracts otherwise with
Parent, employee
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benefits that, in the aggregate, are no less favorable to such Employee than, at
Parent's election, either those benefits provided by Parent to similarly
situated employees of Parent or each of annual base salary and the benefits
provided by the Company and its Subsidiaries to Continuing Employees immediately
prior to the Effective Time (but not taking into account the value of any equity
or equity-related benefits or compensation for purposes of determining the value
of the benefits provided by the Company and its Subsidiaries immediately prior
to the Effective Time); provided however, that nothing in this Agreement shall
confer upon any Continuing Employee the right to continue in employment
following the Effective Time, or is intended to interfere with Parent's, the
Surviving Corporation's and its Subsidiaries' rights (i) to terminate the
employment of any Continuing Employee for any reason or no reason following the
Effective Time or (ii) to terminate any Company Employee Plan, or the right of
any Continuing Employee to terminate his or her own employment for any or no
reason following the Effective Time.
(ii) To the extent that Continuing Employees participate in
any of Parent's employee benefit plans, programs, policies and arrangements,
including, but not limited to, any severance plan, medical plan, dental plan,
life insurance plan, Code Section 401(k) arrangement, vacation program or
disability plan (collectively, the "PARENT BENEFIT PLANS"), such Continuing
Employees shall receive credit for purposes of eligibility, level of benefits,
benefit accrual and vesting under the Parent Benefit Plans in which such
Continuing Employees participate to the same extent such Continuing Employees'
were credited with service under comparable plans of the Company or any of its
Subsidiaries for such purposes; provided, however, that no such employee shall
be entitled to such credit (i) to the extent that it results in duplication of
benefits, or (ii) for purposes of any incentive compensation or sabbatical plan,
policy, program, agreement or arrangement, or any arrangement similar to the
foregoing.
(iii) With respect to any Parent Benefit Plan that is a
welfare benefit plan maintained by Parent for the benefit of Continuing
Employees on and after the Closing Date, Parent shall (1) cause there to be
waived any eligibility requirements or pre-existing condition limitations to the
extent such requirements and limitations were waived under comparable plans
maintained by the Company or any of its Subsidiaries prior to the Effective
Time, and (2) for the plan year that includes the Effective Time, give effect,
in determining any deductible and maximum out-of-pocket limitations, amounts
paid during the plan year that included the Effective Time by such Continuing
Employees with respect to similar plans maintained by Company and its
Subsidiaries. Notwithstanding anything to the contrary in this agreement but
solely to the extent permitted by applicable law, on or prior to the Closing
Date, the Company shall pay (or cause to be paid) to each Continuing Employee
the cash value of any and all accrued but unused vacation to which each such
Continuing Employee is entitled as of the Closing Date, provided, however, that
the Company's obligations to cash out accrued but unused vacation shall be
contingent upon Parent causing, as of the Closing Date, each Continuing Employee
to participate in Parent's vacation policy then in effect for similarly situated
employees of Parent, and to accrue such amount of vacation, as of the Effective
Time, as indicated pursuant to the terms of such plan.
(iv) Notwithstanding anything in this Section 5.9 to the
contrary, in the event that Parent, in its sole discretion, determines that any
of the provisions of this Section 5.9 may not be permissible under applicable
law in a non-U.S. jurisdiction, the laws of which are applicable to Continuing
Employees located in such non-U.S. jurisdiction, or may reasonably result in
adverse
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tax consequences in any such jurisdiction, then the Parent shall be permitted to
reasonably modify such provisions, but solely to the extent necessary or
appropriate to comply with applicable law or to avoid such tax consequences.
5.10 INDEMNIFICATION.
(a) INDEMNITY. From and after the Effective Time, Parent will, and
will cause the Surviving Corporation to fulfill and honor in all respects the
obligations of the Company to its current and former directors and officers (the
"INDEMNIFIED PARTIES") pursuant to the indemnification agreements between the
Company and its current and former directors and officers that are listed in
SECTION 5.10(a) of the Company Disclosure Letter (including, to the extent
indemnifiable thereunder, for acts or omissions occurring in connection with the
approval of this Agreement and the consummation of the transactions contemplated
hereby) subject to applicable law. The certificate of incorporation and bylaws
of the Surviving Corporation (or any successor to the Surviving Corporation)
will contain provisions with respect to exculpation, indemnification and the
advancement of expenses that are at least as favorable to the Indemnified
Parties as those contained in the Certificate of Incorporation and Bylaws of the
Company as in effect on the date hereof, which provisions will not, except as
required by law, be amended, repealed or otherwise modified for a period of six
years from the Effective Time in any manner that would adversely affect the
rights thereunder of Indemnified Parties; provided, however, that the foregoing
shall not apply if Parent assumes and honors any obligations to indemnify such
Persons to the extent provided in the Company's Certificate of Incorporation and
Bylaws and the indemnification agreements between the Company and its current
and former officers and directors as in effect immediately prior to the date
hereof and set forth in SECTION 2.16(b) of the Company Disclosure Letter.
(b) INSURANCE. For a period of six years after the Effective Time,
Parent will cause the Surviving Corporation to maintain directors' and officers'
liability insurance with one or more reputable unaffiliated third-party insurers
covering those Persons who are covered by the Company's directors' and officers'
liability insurance policy as of the date hereof for events occurring prior to
the Effective Time on terms and conditions that are, in the aggregate, no less
favorable to the insured than those applicable to the current directors and
officers of the Company under policies maintained by the Company; provided,
however, that in no event will the Surviving Corporation be required to expend
in any one year in excess of 200% of the annual premium currently paid by the
Company for such coverage (and to the extent annual premium would exceed 200% of
the annual premium currently paid by the Company for such coverage, the
Surviving Corporation shall use all reasonable efforts to cause to be maintained
the maximum amount of coverage as is available for such 200% of such annual
premium); and provided, further, however, that notwithstanding the foregoing,
Parent may satisfy its obligations under this SECTION 5.10(b) by purchasing, or
consenting to the purchase by the Company, of a "tail" policy under the
Company's existing directors' and officers' insurance policy which (i) has an
effective term of six years from the Effective Time, (ii) covers those Persons
who are currently covered by the Company's directors' and officers' insurance
policy in effect as of the date hereof for actions and omissions occurring on or
prior to the Effective Time and (iii) contains terms and conditions that are no
less favorable, in the aggregate, to the insured than those of the Company's
directors' and officers' insurance policy in effect as of the date hereof. Prior
to the Effective Time, Parent will provide the Company an opportunity to review
and approve any such "tail" policy, which approval shall not be unreasonably
delayed or withheld.
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(c) THIRD - PARTY BENEFICIARIES. This SECTION 5.10 is intended to be
for the benefit of, and shall be enforceable by the Indemnified Parties and
their heirs and personal representatives. The terms of this Section 5.10 shall
survive the consummation of the Merger and shall be binding on Parent and the
Surviving Corporation and their respective successors and assigns. In the event
Parent or the Surviving Corporation or its successor or assign (i) consolidates
with or merges into any other Person and shall not be the continuing or
surviving corporation or entity in such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any Person,
then, and in each case, proper provision shall be made so that the successor and
assign of Parent or the Surviving Corporation, as the case may be, honor the
obligations set forth with respect to Parent or the Surviving Corporation, as
the case may be, in this SECTION 5.10.Parent shall cause the surviving
corporation to perform all of the obligations of the surviving corporation under
this Section 5.10.
5.11 SECTION 16 MATTERS. Prior to the Effective Time, the Company shall
take all such steps as may be required (to the extent permitted under applicable
law) to cause any dispositions of Company Common Stock (including derivative
securities with respect to Company Common Stock) resulting from the transactions
contemplated by ARTICLE I of this Agreement by each individual who is subject to
the reporting requirements of Section 16(a) of the Exchange Act with respect to
the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
5.12 TERMINATION OF CERTAIN COMPANY CONTRACTS
(a) Prior to the Effective Time, the Company shall and shall cause
its Subsidiaries to effectively terminate, or otherwise modify (so as to
eliminate any term referred to in (i) or (ii) below), any Contract between
either the Company or any of its Subsidiaries and a third party (excluding any
such Contract specifically identified in the Company Disclosure Letter a
complete and true copy of which was Made Available (other than any Contract set
forth in SECTION 5.12 of the Company Disclosure Letter) (each, a "REVIEWED
DOCUMENT")) to the extent any such Contract:
(i) Contains any term affecting or otherwise binding upon any
Intellectual Property or Intellectual Property Rights of Parent or any of its
affiliates, other than the Company and its Subsidiaries; or
(ii) Contains any term or obligation of non-assertion in
respect of Intellectual Property Rights binding on Parent or any of its
affiliates, other than the Company and its Subsidiaries.
(b) Prior to the Effective Time, the Company shall use its
commercially reasonable efforts and shall cause its Subsidiaries to use their
commercially reasonable efforts to effectively terminate, or otherwise modify
(so as to eliminate any term referred to in (i) or (ii) below), any Reviewed
Document to the extent that Parent notifies the Company following the date
hereof that any such Reviewed Document:
(i) Contains any term affecting or otherwise binding upon any
Intellectual Property or Intellectual Property Rights of Parent or any of its
affiliates, other than the Company and its Subsidiaries; or
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(ii) Contains any term or obligation of non-assertion in
respect of Intellectual Property Rights binding on Parent or any of its
affiliates, other than the Company and its Subsidiaries.
(c) To the extent that any notice is required under any Contract
prior to such Contract's termination pursuant to SECTION 5.12(a), such notice
shall be provided sufficiently in advance of the Effective Time to allow any
applicable notice period thereunder to have terminated in accordance with the
terms of such contract, agreement or arrangement prior to the Effective Time.
(d) From the period beginning on the date hereof and ending on the
Effective Time, the Company shall take all commercially reasonable necessary
steps, including, without limitation, making inquiries to relevant companies,
subsidiaries and employees, to verify the Company's compliance with
Subparagraphs (xxiii), (xxiv) or (xxvi) of SECTION 4.1(b).
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) COMPANY STOCKHOLDER APPROVAL. This Agreement shall have been
adopted by the requisite vote under applicable law, by the stockholders of the
Company.
(b) NO ORDER. No Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which (i) is in effect and (ii) has the
effect of making the Merger illegal or otherwise prohibiting or preventing
consummation of the Merger.
(c) ANTITRUST APPROVALS. All waiting periods (and any extension
thereof) under the HSR Act (if required) relating to the transactions
contemplated hereby will have expired or terminated early. The German Federal
Cartel Office ("BUNDESKARTELLAMT") (the "FCO") shall have approved the
transactions contemplated herein pursuant to the competition laws of Germany,
the applicable waiting period under those laws shall have expired and no order
shall have been issued by the FCO or court, preliminarily or permanently
prohibiting the transaction.
6.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent and Merger Sub:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall have been true and
correct as of the date hereof and shall be true and correct as of the Closing
Date with the same force and effect as if made on the Closing Date (except that
those representations and warranties which address matters only as of a
particular date shall have been true and correct only on such date), except, in
each case or in the
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aggregate (other than the representations and warranties of the Company
contained in SECTION 2.2, SECTION 2.3(a) and SECTION 2.23, which shall be true
and correct in all material respects), as does not constitute a Material Adverse
Effect on the Company at the Closing Date (it being understood that, for
purposes of determining the accuracy of such representations and warranties, any
update of or modification to the Company Disclosure Letter made or purported to
have been made after the execution of this Agreement shall be disregarded).
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants (other than
the agreements and covenants of the Company contained in SECTION 5.12, which the
Company shall have performed or complied with in all respects) required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
(c) MATERIAL ADVERSE EFFECT. No Effect, either individually or in
the aggregate, shall have occurred since the date hereof and be continuing that
has or would reasonably be expected to have a Material Adverse Effect on the
Company.
(d) NO GOVERNMENTAL RESTRICTION. There shall not be any pending or
threatened suit, action or proceeding asserted by any Governmental Authority (i)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement, the effect of
which restraint or prohibition if obtained would cause the condition set forth
in SECTION 6.1(b) to not be satisfied or (ii) seeking to require Parent or the
Company or any Subsidiary or affiliate to effect an Action of Divestiture.
(e) THIRD PARTY CONSENTS/TERMINATIONS. The Company shall have
delivered to Parent all the consents, waivers, approvals or termination notices
to parties to any Contract set forth on SECTION 6.2(e) of the Company Disclosure
Letter on the terms set forth in SECTION 6.2(e) of the Company Disclosure
Letter.
(f) OFFICER'S CERTIFICATE. Parent and Merger Sub shall have received
a certificate dated as of the Closing Date to the effect that the conditions set
forth in SECTIONS 6.2(a), (b) and (d) have been satisfied signed on behalf of
the Company by an authorized executive officer of the Company.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to consummate and effect the Merger shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall have been
true and correct in all material respects as of the date hereof and shall be
true and correct in all material respects as of the Closing Date with the same
force and effect as if made on the Closing Date (except that those
representations and warranties which address matters only as of a particular
date shall have been true and correct only on such date), except, in each case,
or in the aggregate, as does not materially impede the authority of Parent or
Merger Sub to consummate the transactions contemplated by this Agreement in
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accordance with the terms hereof and applicable Legal Requirements. The Company
shall have received a certificate with respect to the foregoing signed on behalf
of Parent, with respect to the representations and warranties of Parent, by an
authorized executive officer of Parent and a certificate with respect to the
foregoing signed on behalf of Merger Sub, with respect to the representations
and warranties of Merger Sub, by an authorized executive officer of Merger Sub.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date.
(c) OFFICER'S CERTIFICATES. The Company shall have received
certificates dated as of the Closing Date to the effect that the conditions set
forth in SECTIONS 6.3(a) and (b) have been satisfied signed on behalf of Parent,
with respect to the covenants and representations and warranties of Parent, by
an authorized executive officer of Parent and on behalf of Merger Sub, with
respect to the covenants and representations and warranties of Merger Sub, by an
authorized executive officer of Merger Sub.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, by action taken by the terminating party or parties, and except
as provided below, whether before or after the requisite approvals of the
stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Parent and the Company;
(b) by either the Company or Parent if the Merger shall not have
been consummated by February 9, 2007 which date shall be extended to April 10,
2007 if the Merger shall not have been consummated as a result of a failure to
satisfy the conditions set forth in SECTION 6.1(c) (the "END DATE"); provided,
however, that the right to terminate this Agreement under this SECTION 7.1(b)
shall not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement;
(c) by either the Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action (including the
failure to have taken an action), in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, which order, decree,
ruling or other action is final and nonappealable;
(d) by either the Company or Parent if the required approval of the
stockholders of the Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
the Company stockholders duly convened therefor or at any adjournment thereof;
provided, however, that the right to terminate this Agreement under this SECTION
7.1(d) shall not be available to the Company where the failure to obtain such
stockholder
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approval shall have been caused by the action or failure to act of the Company
and such action or failure to act constitutes a breach by the Company of this
Agreement;
(e) by Parent (at any time prior to the adoption of this Agreement
by the required vote of the stockholders of the Company) if a Triggering Event
with respect to the Company shall have occurred;
(f) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in SECTION 6.3(a) or SECTION 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue; provided, however, that if
such inaccuracy in Parent's representations and warranties or breach by Parent
is curable by Parent prior to the End Date through the exercise of reasonable
efforts, then the Company may not terminate this Agreement under this SECTION
7.1(f) prior to 20 days following the receipt of written notice from the Company
to Parent of such breach provided Parent continues to exercise all reasonable
efforts to cure such breach through such 20-day period (it being understood that
the Company may not terminate this Agreement pursuant to this paragraph (f) if
it shall have materially breached this Agreement or if such breach by Parent is
cured within such 20-day period);
(g) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in SECTION 6.2(a) or SECTION
6.2(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue; provided, however,
that if such inaccuracy in the Company's representations and warranties or
breach by the Company is curable by the Company prior to the End Date through
the exercise of reasonable efforts, then Parent may not terminate this Agreement
under this SECTION 7.1(g) prior to 20 days following the receipt of written
notice from Parent to the Company of such breach provided the Company continues
to exercise all reasonable efforts to cure such breach through such 20-day
period (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph (g) if it shall have materially breached this
Agreement or if such breach by the Company is cured within such 20-day period);
(h) by the Company, if, the Company shall have entered into a
definitive binding agreement with respect to a Superior Offer pursuant to and in
compliance with SECTION 5.3(d), the Company shall have paid Parent the
Termination Fee described in SECTION 7.3(b); and
(i) by Parent:
(A) if any Effect, either individually or in the aggregate,
has occurred since the date hereof that has or would reasonably be
expected to have a Material Adverse Effect on the Company; or
(B) if there has occurred any breach by the Company of SECTION
5.12(a), SECTION 2.8 or SECTION 2.17 that (with or without notice or
lapse of time, or both, or as a consequence of the transactions
contemplated herein) will or would reasonably
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be expected to be binding upon and adversely affecting the
Intellectual Property Rights of Parent or its affiliates; provided,
however, that in the case of either (A) or (B) above, if such Effect
or inaccuracy in the Company's representations and warranties or
breach by the Company is curable by the Company prior to the End
Date through the exercise of reasonable efforts, then Parent may not
terminate this Agreement under this SECTION 7.1(i) prior to 20 days
following the receipt of written notice from Parent to the Company
of such Effect or breach provided the Company continues to exercise
all reasonable efforts to cure such Effect or breach through such
20-day period (it being understood that Parent may not terminate
this Agreement pursuant to this paragraph (i) if it shall have
materially breached this Agreement or if such breach by the Company
is cured within such 20-day period); provided, further, that in the
case of (A) and (B) above, if Parent becomes aware of a possible
Material Adverse Effect or a breach by the Company of SECTION
5.12(a), SECTION 2.8 or SECTION 2.17 through notice to Parent from
the Company and such condition or breach is not cured within the
20-day cure period (the "CURE EXPIRATION DATE") then Parent must
exercise its termination rights under this SECTION 7.1(i) within ten
Business Days from the Cure Expiration Date; otherwise the
applicable event giving rise to the right to terminate under clause
(A) or (B) above shall be deemed to have been waived for all
purposes under this Agreement (including, but not limited to, under
Articles VI and VII).
For the purposes of this Agreement, a "TRIGGERING EVENT," with respect to
the Company, shall be deemed to have occurred only if: (i) its Board of
Directors or any committee thereof shall for any reason have withdrawn or shall
have amended or modified in a manner adverse to Parent its recommendation in
favor of the adoption of the Agreement by the stockholders of the Company, (ii)
it shall have failed to include in the Proxy Statement the recommendation of its
Board of Directors in favor of the adoption of the Agreement by the stockholders
of the Company, (iii) its Board of Directors fails to reaffirm (publicly, if so
requested) its recommendation in favor of the adoption of this Agreement by the
stockholders of the Company within ten Business Days after Parent requests in
writing that such recommendation be reaffirmed, provided, if such ten Business
Day period would end on a date that is after the date of the Stockholders'
Meeting, such re-affirmation must be made no later than two calendar days prior
to the date of the Stockholders' Meeting, (iv) its Board of Directors or any
committee thereof shall have approved or recommended any Acquisition Proposal,
(v) the Company shall have entered into any letter of intent or similar document
or any agreement, contract or commitment accepting any Superior Offer, (vi) a
tender or exchange offer relating to its securities shall have been commenced by
a Person unaffiliated with Parent, and the Company shall not have sent to its
security holders pursuant to Rule 14e-2 promulgated under the Exchange Act,
within ten Business Days after such tender or exchange offer is first published,
sent or given, a statement disclosing that the Board of Directors of the Company
recommends rejection of such tender or exchange offer, (vii) the Company
breaches in any material respect any of its obligations set forth in SECTION 5.2
and SECTION 5.3, provided, however, that with respect to any breach by the
Company of Section 5.3, that such breach is willful, or (viii) the Board of
Directors of the Company shall have resolved to do any of the foregoing.
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7.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under SECTION 7.1 above will be effective immediately upon the
delivery of a valid written notice of the terminating party to the other party
hereto. In the event of the termination of this Agreement as provided in SECTION
7.1, this Agreement shall be of no further force or effect, except (i) as set
forth in SECTION 5.4(a), this SECTION 7.2, SECTION 7.3 and ARTICLE VIII, each of
which shall survive the termination of this Agreement and (ii) nothing herein
shall relieve any party from liability for any breach of this Agreement,
provided that termination of this Agreement in accordance with SECTION 7.1(i)(B)
shall be the sole and exclusive remedy in respect of any breach of SECTION
5.12(a). Except as otherwise provided in SECTION 5.3 of this Agreement, no
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 FEES AND EXPENSES.
(a) GENERAL. Except as set forth in this SECTION 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that (i) Parent shall pay
the entire filing fee for the Notification and Report Forms filed with the FTC
and DOJ under the HSR Act, and all premerger notification and report forms under
similar applicable laws of other jurisdictions, in each case pursuant to SECTION
5.6(a); and (ii) the Company shall pay the entire fees and expenses in
connection with the filing, printing and mailing of and solicitation fees
related to the Proxy Statement (including SEC filing fees) and any preliminary
materials related thereto or any other documents distributed to the stockholders
of the Company in connection with the Merger.
(b) COMPANY PAYMENT. --
(i) PAYMENT. The Company shall promptly, but in no event later
than two Business Days after the date of termination pursuant to the sections of
this Agreement as set forth below, pay Parent a fee equal to $1,800,000, in
immediately available funds (the "TERMINATION FEE") in the event that this
Agreement is (i) terminated by Parent pursuant to SECTION 7.1(e), (ii)
terminated by the Company pursuant to SECTION 7.1(h), provided, however, in the
case of termination under SECTION 7.1(h), payment of the Termination Fee by the
Company shall be made prior to such termination, or (iii) terminated by Parent
or the Company, as applicable, pursuant to SECTION 7.1(b), SECTION 7.1(d) or
SECTION 7.1(g), provided, however, in the case of termination pursuant to
SECTION 7.1(g), that the breach by the Company giving rise to termination is
willful; provided, further, that in the case of termination pursuant to SECTION
7.1(b), SECTION 7.1(d) or SECTION 7.1(g), (A) such payment shall be made only if
prior to the termination of this Agreement, there has been disclosure publicly
of an Acquisition Proposal with respect to the Company and within 12 months
following the termination of this Agreement, an Acquisition of the Company is
consummated or the Company enters into a definitive agreement or letter of
intent with respect to an Acquisition of the Company and (B) such payment shall
be made promptly, but in no event later than two Business Days after the
consummation of such Acquisition of the Company or the entry into such
definitive agreement or letter of intent by the Company, provided, further that
no payment
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shall be made under this SECTION 7.3(b) to Parent if Parent terminates this
Agreement pursuant to SECTION 7.1(e) as a result of the events set forth in
(III) of the defined term TRIGGERING EVENT.
(II) INTEREST; OTHER REMEDIES. The Company acknowledges that
the agreements contained in this SECTION 7.3(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement; accordingly, if the Company fails to
pay in a timely manner the amounts due pursuant to this SECTION 7.3(b), and, in
order to obtain such payment, Parent makes a claim for the amounts set forth in
this SECTION 7.3(b), the non-prevailing party shall pay to the prevailing party
the reasonable costs and expenses (including reasonable attorneys' fees and
expenses) of the prevailing party incurred in connection with such suit, and
provided that Parent is the prevailing party, the Company shall pay to Parent
interest on the amounts due pursuant to this SECTION 7.3(b) at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
Payment of the fees described in this SECTION 7.3(b) shall not be in lieu of
damages incurred in the event of breach of this Agreement.
(III) CERTAIN DEFINITIONS. For the purposes of this SECTION
7.3(b) only, "ACQUISITION," with respect to a party hereto, shall mean any of
the following transactions (other than the transactions contemplated by this
Agreement): (i) a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the party pursuant to
which the equity interests held in such party and retained following such
transaction or issued to or otherwise received in such transaction by the
stockholders of the party immediately preceding such transaction constitute less
than 50% of the aggregate equity interests in the surviving or resulting entity
of such transaction or any direct or indirect parent thereof, (ii) a sale or
other disposition by the party of assets representing in excess of 50% of the
aggregate fair market value of the party's business immediately prior to such
sale or (iii) the acquisition by any Person or group (including by way of a
tender offer or an exchange offer or issuance by the party or such Person or
group), directly or indirectly, of beneficial ownership or a right to acquire
beneficial ownership of shares representing in excess of 40% of the voting power
of the then outstanding shares of capital stock of the party.
7.4 AMENDMENT. Subject to applicable law, this Agreement may be amended by
the parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after adoption of this Agreement by the
stockholders of the Company; provided, however, that after adoption of this
Agreement by the stockholders of the Company, no amendment shall be made which
by law requires further approval by the stockholders of the Company without such
further stockholder approval. This Agreement may not be amended except by
execution of an instrument in writing signed on behalf of each of Parent, Merger
Sub and the Company.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time either
party hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument
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in writing signed on behalf of such party. Delay in exercising any right under
this Agreement, including pursuant to SECTION 7.1(b), shall not constitute a
waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company, Parent and Merger Sub contained in this
Agreement, or any instrument delivered pursuant to this Agreement, shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time and this ARTICLE VIII shall survive the Effective
Time.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if delivered
personally and/or by messenger service, (ii) on the date of confirmation of
receipt (or, the first Business Day following such receipt if the date is not a
Business Day) of transmission by facsimile or (iii) on the date of confirmation
of receipt (or, the first Business Day following such receipt if the date is not
a Business Day) if delivered by a nationally recognized courier service. All
notices hereunder shall be delivered as set forth below, or pursuant to such
other instructions as may be designated in writing by the party to receive such
notice:
(a) if to Parent or Merger Sub, to:
Nokia Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
Telecopy No.: ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
with copies to (which shall not constitute notice to Parent or
Merger Sub):
Nokia Corporation
▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇
▇▇▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President and Chief Legal
Officer
Telephone No.: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
and
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (UK) LLP
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
-▇▇-
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
(b) if to the Company, to:
Loudeye Corp.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and Chief Executive
Officer
▇▇▇▇ ▇▇▇▇▇▇▇, General Counsel
Telephone No.: + ▇ (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: ▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to (which shall not constitute notice to the
Company):
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: W. ▇▇▇▇ ▇▇▇▇▇▇, Esq
Telephone No: ▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No: ▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
8.3 INTERPRETATION; KNOWLEDGE.
(a) When a reference is made in this Agreement to Exhibits or
Schedules, such reference shall be to an Exhibit or a Schedule to this Agreement
unless otherwise indicated. When a reference is made in this Agreement to
Sections, such reference shall be to a section of this Agreement unless
otherwise indicated. For purposes of this Agreement, the words "INCLUDE,"
"INCLUDES" and "INCLUDING," when used herein, shall be deemed in each case to be
followed by the words "WITHOUT LIMITATION." The table of contents, headings and
index of defined terms contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "THE BUSINESS OF" an entity, such
reference shall be deemed to include the business of such entity and its
Subsidiaries, taken as a whole.
(b) For purposes of this Agreement, the term "KNOWLEDGE" means, (i)
with respect to the Company, the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Ed Averdieck, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and (ii) with respect to Parent, the
actual knowledge of any of the "officers" (as such term is defined in Rule
16a-1(f) promulgated under the Exchange Act) or directors of Parent.
(c) For purposes of this Agreement, the term "MADE AVAILABLE" shall
mean that (i) the Company has posted such materials to a data room and has given
Parent and its agents and
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representatives all necessary access to such data room or (ii) has otherwise
made such materials available in writing to Parent.
(d) For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT," when used in connection with an entity, means any change, event,
violation, inaccuracy, circumstance or effect (any such item, an "EFFECT"),
individually or when taken together with all other Effects that have occurred
prior to the date of determination of the occurrence of the Material Adverse
Effect, that is or is reasonably likely to (i) be materially adverse to the
business, assets (including intangible assets), liabilities, capitalization,
financial condition or results of operations of such entity taken as a whole
with its Subsidiaries, other than any Effect primarily resulting from (A)
changes affecting the United States, European or world economy generally, which
changes do not disproportionately affect such entity taken as a whole with its
Subsidiaries as compared to other similarly situated participants in the
industry in which such entity and its subsidiaries operate, (B) changes
affecting the industry in which such entity and its Subsidiaries operate
generally, which changes do not disproportionately affect such entity taken as a
whole with its Subsidiaries, (C) the compliance by the Company or any of its
Subsidiaries with the terms and conditions of this Agreement; (D) any "act of
God" including weather, natural disasters and earthquakes and any hostilities,
acts of war, sabotage, terrorism or military actions or any escalation or
worsening of any hostilities, acts of war, sabotage, terrorism or military
actions; (E) changes in applicable law, GAAP or international accounting
standards, and (F) any litigation arising from the execution of this Agreement
and/or the negotiation, announcement, pendancy, or consummation of the
transactions contemplated by this Agreement, or (ii) materially impede the
authority of such entity, or, in any case, the Company, to consummate the
transactions contemplated by this Agreement in accordance with the terms hereof
and applicable Legal Requirements; provided, however, that for purposes of
SECTION 6.2(c), a Material Adverse Effect on the Company shall include (1) the
loss of the full-time services of more than 30 employees of the Significant
Subsidiaries, as of the date hereof, (2) the termination or expiration (without
renewal), or the reasonable likelihood of the termination or expiration (without
renewal) as determined based on communications to the Company from a party to
such Contract, of any Contracts with customer(s) of the Company or any of its
Subsidiaries that would likely result in the loss of more than 30% of the value
of the current customer base of the Company and its Subsidiaries, taken as a
whole, except for such termination or expiration of a customer relationship that
the Company has informed Parent of prior to the date hereof, and (3) a cash,
cash equivalents, marketable securities and restricted cash balance at the
Company on October 31, 2006 of less than $10 million (minus the aggregate amount
of up to $2,038,000 reflecting directors and officers insurance payments and any
severance and retention bonuses, in each case, if both Parent and the Company
agree that such payments shall be made before the Effective Date).
(e) For purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
8.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by facsimile, all of which shall be considered one and the
same agreement and shall become effective
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when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.
8.5 ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Letter
and the Voting Agreements and other Exhibits hereto (i) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement and (ii) are not
intended to confer upon any other Person any rights or remedies hereunder,
except as specifically provided, following the Effective Time, in SECTION 5.10.
Without limiting the foregoing, it is expressly understood and agreed that the
provisions of SECTION 5.9 are statements of intent and no employees or other
Person (including any party hereto) shall have any rights or remedies, including
rights of enforcement, with respect thereto and no employee or other Person is
or is intended to be a third-party beneficiary thereof.
8.6 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
Persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic, business and
other purposes of such void or unenforceable provision.
8.7 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
and venue of the Delaware Court of Chancery and any state appellate court
therefrom within the State of Delaware (or, if the Delaware Court of Chancery
declines to accept jurisdiction over a particular matter, any state or federal
court within the State of Delaware) in connection with any matter based upon or
arising out of this Agreement or the matters contemplated herein, agrees that
process may be served upon them in any manner authorized by the laws of the
State of Delaware for such Persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction, venue
and such process.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application
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of any law, regulation, holding or rule of construction providing that
ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
8.10 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties, except that Parent may assign its rights and delegate its
obligations hereunder to its affiliates as long as Parent remains ultimately
liable for all of Parent's obligations hereunder. Any purported assignment in
violation of this SECTION 8.10 shall be void. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE COMPANY
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, MERGER SUB OR THE COMPANY
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
*****
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
NOKIA INC.
By: /s/ Ilkka Raiskinen
-------------------------------
Name: Ilkka Raiskinen
--------------------
Title: SVP, Multimedia Experiences
---------------------------
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------
Title: Director, Multimedia Experiences
--------------------------------
▇▇▇▇▇▇▇ ACQUISITION CORPORATION
By: /s/ Ilkka Raiskinen
-------------------------------
Name: Ilkka Raiskinen
--------------------
Title: Director
--------------------
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------
Title: Director
--------------------
LOUDEYE CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------
Title: President & Chief Executive Officer
-----------------------------------