1
EXHIBIT 10.63
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
RED HAT, INC.,
COKE ACQUISITION CORP.,
PLANNING TECHNOLOGIES, INC.,
CERTAIN STOCKHOLDERS OF PLANNING TECHNOLOGIES, INC.,
AND
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ AS SECURITYHOLDER AGENT
DATED AS OF FEBRUARY 23, 2001
2
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER...................................................... 2
1.1 The Merger............................................... 2
1.2 Effective Time........................................... 2
1.3 Effect of the Merger..................................... 2
1.4 Articles of Incorporation; Bylaws........................ 2
1.5 Directors and Officers................................... 3
1.6 Merger Consideration; Effect on Capital Stock............ 3
1.7 Surrender of Certificates................................ 6
1.8 No Further Ownership Rights in Company Stock............. 8
1.9 Lost, Stolen or Destroyed Certificates................... 8
1.10 Tax and Accounting Consequences.......................... 9
1.11 Taking of Necessary Action; Further Action............... 9
1.12 Parent Trading Policy.................................... 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 9
2.1 Organization of the Company.............................. 9
2.2 Subsidiaries............................................. 10
2.3 Company Capital Structure................................ 10
2.4 Authority................................................ 11
2.5 No Conflict.............................................. 12
2.6 Consents................................................. 12
2.7 Company Financial Statements............................. 12
2.8 No Undisclosed Liabilities............................... 13
2.9 No Changes............................................... 13
2.10 Tax and Other Returns and Reports........................ 15
2.11 Restrictions on Business Activities...................... 18
2.12 Title to Properties; Absence of Liens and Encumbrances... 18
2.13 Governmental Authorization............................... 19
2.14 Intellectual Property.................................... 19
2.15 Product Warranties; Defects; Liabilities................. 20
2.16 Contracts................................................ 20
2.17 Change of Control Payments............................... 22
2.18 Interested Party Transactions............................ 22
2.19 Compliance with Laws..................................... 23
2.20 Litigation............................................... 23
2.21 Insurance................................................ 23
2.22 Books and Records........................................ 23
2.23 Environmental Matters.................................... 24
2.24 Brokers' and Finders' Fees............................... 25
2.25 Employee Matters and Benefit Plans....................... 25
2.26 Bank Accounts............................................ 29
2.27 Government Contracts..................................... 30
2.28 Affiliates............................................... 30
i
3
2.29 Pooling of Interests..................................... 30
2.30 Indemnification Obligations.............................. 30
2.31 Representations Complete................................. 31
2.32 Company Disclosure Schedules............................. 31
ARTICLE II-A REPRESENTATIONS AND WARRANTIES OF THE SIGNING STOCKHOLDERS... 31
2A.1 Accredited Investor...................................... 31
2A.2 Pooling of Interests..................................... 31
2A.3 Brokers' and Finders' Fees............................... 31
2A.4 Consents................................................. 31
2A.5 No Conflict.............................................. 32
2A.6 Authority................................................ 32
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB....... 32
3.1 Organization of Parent and Merger Sub.................... 33
3.2 Authority................................................ 33
3.3 Parent Common Stock...................................... 34
3.4 SEC Filings; Parent Financial Statements................. 34
3.5 No Material Adverse Change............................... 34
3.6 Parent Capital Structure................................. 35
3.7 Affiliate Agreements..................................... 35
3.8 Pooling of Interests..................................... 35
3.9 Merger Sub............................................... 35
3.10 Litigation............................................... 35
3.11 Representations Complete................................. 35
ARTICLE IV SECURITIES ACT COMPLIANCE; REGISTRATION........................ 36
4.1 Restrictions Regarding Securities Law Matters............ 36
4.2 Registration Rights...................................... 36
4.3 Registration Statement................................... 37
ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME............................. 38
5.1. Conduct of Business of the Company....................... 38
ARTICLE VI ADDITIONAL AGREEMENTS.......................................... 41
6.1 Stockholder Approval..................................... 41
6.2 Access to Information.................................... 41
6.3 Confidentiality.......................................... 42
6.4 Public Disclosure........................................ 42
6.5 Consents................................................. 42
6.6 Legal Conditions to the Merger........................... 42
6.7 Reasonable Best Efforts; Additional Documents and
Further Assurances...................................... 42
6.8 Notification of Certain Matters.......................... 43
6.9 Pooling Accounting....................................... 43
6.10 Reorganization........................................... 43
6.11 Form S-8................................................. 43
ii
4
6.12 Blue Sky Laws............................................ 43
6.13 No Solicitation.......................................... 44
6.14 Termination of Company Investor Rights................... 44
6.15 Employment Terms......................................... 45
6.16 Release by Signing Stockholders.......................... 45
6.17 Dissenters' Rights....................................... 46
6.18 Intercompany Accounts.................................... 46
ARTICLE VII CONDITIONS TO THE MERGER...................................... 46
7.1 Conditions to Obligations of Each Party to Effect
the Merger.............................................. 46
7.2 Additional Conditions to the Obligations of the
Company and the Signing Stockholders.................... 47
7.3 Additional Conditions to the Obligations of Parent
and Merger Sub.......................................... 48
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW........... 51
8.1 Survival of Representations and Warranties............... 51
8.2 Escrow Arrangements; Securityholder Agent................ 51
8.3 Indemnification.......................................... 53
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.............................. 58
9.1 Termination.............................................. 58
9.2 Effect of Termination.................................... 59
9.3 Amendment................................................ 60
9.4 Extension; Waiver........................................ 60
ARTICLE X GENERAL PROVISIONS.............................................. 60
10.1 Notices.................................................. 60
10.2 Expenses................................................. 61
10.3 Interpretation........................................... 62
10.4 Counterparts............................................. 62
10.5 Entire Agreement; Assignment............................. 62
10.6 Severability............................................. 63
10.7 Other Remedies........................................... 63
10.8 Governing Law............................................ 63
10.9 Rules of Construction.................................... 63
10.10 Specific Performance..................................... 63
EXHIBIT DESCRIPTION
Exhibit A Form of Company Affiliate Agreement
Exhibit B Form of Parent Affiliate Agreement
Exhibit C Form of Georgia Certificate of Merger
Exhibit D Form of North Carolina Articles of Merger
Exhibit E Form of Escrow Agreement
Exhibit F Form of Legal Opinion of Counsel to Parent and Merger Sub
Exhibit G Form of Legal Opinion of Counsel to the Company
Exhibit H Form of Noncompetition, Nonsolicitation and Nondisclosure Agreement
Exhibit I Form of Legal Opinion of Counsel to iGate
iii
5
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into in the State of North Carolina as of February __, 2001 among
Red Hat, Inc., a Delaware corporation ("Parent"), Coke Acquisition Corp., a
North Carolina corporation and a wholly-owned subsidiary of Parent ("Merger
Sub"), Planning Technologies, Inc., a Georgia corporation (the "Company"), the
holders of more than, in the aggregate, 97% of the issued and outstanding common
stock of the Company (individually, a "Signing Stockholder" and collectively,
the "Signing Stockholders") and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual residing in
Upper St. Clair, Pennsylvania, as Securityholder Agent (the "Securityholder
Agent").
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger (the
"Merger") of Merger Sub with and into the Company in accordance with this
Agreement, the Georgia Business Corporation Code ("Georgia Law") and the North
Carolina Business Corporation Act ("North Carolina Law"). Upon consummation of
the Merger, Merger Sub will cease to exist, and the Company will become a
wholly-owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger be
treated as a "pooling of interests."
C. The Board of Directors of the Company has unanimously (i) determined
that the Merger is fair to, and in the best interests of, the Company and its
stockholders, (ii) approved this Agreement, the Escrow Agreement, the Merger and
the other transactions contemplated by this Agreement and the Escrow Agreement
and (iii) resolved to recommend to the stockholders of the Company that they
adopt and approve this Agreement, the Escrow Agreement, the Merger and the
transactions contemplated hereby and thereby.
D. The respective Boards of Directors of Parent and Merger Sub have
approved this Agreement, the Escrow Agreement and the Merger.
E. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's and Merger Sub's willingness to enter into
this Agreement, each of the affiliates of the Company listed on Schedule 2.28 of
the Company Schedules hereto is entering into an Affiliate Agreement
substantially in the form attached hereto as Exhibit A.
F. Concurrently with the execution of this Agreement, each of the
affiliates of Parent listed on Schedule 3.7 of the Parent Schedules is entering
into an Affiliate Agreement substantially in the form attached hereto as Exhibit
B
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby, the parties hereto agree as follows:
6
ARTICLE I
THE MERGER
1.1 THE MERGER.
At the Effective Time (as defined in Section 1.2), and subject to and
upon the terms and conditions of this Agreement, Georgia Law and North Carolina
Law, Merger Sub shall be merged with and into the Company, 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
Company as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation."
1.2 EFFECTIVE TIME.
Unless this Agreement is earlier terminated pursuant to Section 9.1,
the closing of the Merger (the "Closing") will take place as promptly as
practicable, but no later than three (3) business days, following satisfaction
or waiver of the conditions set forth in Article VII, at the offices of ▇▇▇▇▇ &
▇▇▇ ▇▇▇▇▇ PLLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
unless another place or time is agreed to by Parent and the Company. The date
upon which the Closing actually occurs is herein referred to as the "Closing
Date." On the Closing Date, the parties hereto shall cause the Merger to be
consummated by (a) filing a Certificate of Merger, in substantially the form
attached hereto as Exhibit C (the "Certificate of Merger"), with the Secretary
of State of the State of Georgia, and, within one business day thereafter,
publishing notice of the Merger in the county in Georgia where the registered
office of the Company is located once a week for two consecutive weeks, in
accordance with the relevant provisions of Georgia Law and (b) the Articles of
Merger, in substantially the form attached hereto as Exhibit D (the "Articles of
Merger"), with the Secretary of State of the State of North Carolina, in
accordance with the relevant provisions of North Carolina Law (the date and time
of such later filing being referred to herein as the "Effective Time").
1.3 EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as provided in
this Agreement, the Certificate of Merger, the Articles of Merger, the
applicable provisions of Georgia Law and the applicable provisions of North
Carolina Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the rights, property, powers, privileges and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time the Articles of Incorporation of
the Surviving Corporation shall be amended and restated in their
entirety as set forth in the Certificate of Merger until thereafter
amended as provided by law and such Articles of Incorporation.
2
7
(b) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time the Bylaws of the Surviving
Corporation shall be amended and restated in their entirety to conform
to the bylaws of Merger Sub as in effect immediately prior to the
effective time.
1.5 DIRECTORS AND OFFICERS.
The directors of Merger Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation. The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation.
1.6 MERGER CONSIDERATION; EFFECT ON CAPITAL STOCK.
(a) Merger Consideration; Conversion. The aggregate number of
shares of common stock of Parent, par value $.0001 per share ("Parent
Common Stock"), to be issued and delivered by Parent (including Parent
Common Stock to be reserved for issuance upon exercise of any Company
Options (as defined in Section 1.6(e)) in exchange for the acquisition
by Parent of all outstanding capital stock of the Company and the
assumption by Parent of all outstanding Company Options as provided in
Section 1.6(e) shall be the Merger Consideration Share Number (as
defined below), such consideration having an aggregate value of $47
Million (the "Merger Consideration") No adjustment shall be made in the
Merger Consideration Share Number as a result of any proceeds received
by the Company from the date hereof to the Closing Date pursuant to the
exercise of any Company Options. Subject to the terms and conditions of
(i) this Agreement, including Sections 1.6(c) and 1.6(h) hereof, and
(ii) the Escrow Agreement (as defined in Section 7.2(d)), at the
Effective Time, by virtue of the Merger and without any action on the
part of Merger Sub, the Company, the holders of any shares of Company
capital stock or the holders of any capital stock of Merger Sub, each
share of common stock of the Company, no par value per share ("Company
Common Stock"), issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be
canceled pursuant to Section 1.6(d)) will be canceled and extinguished
and be converted automatically into the right to receive from Parent
that number of shares of Parent Common Stock equal to the Exchange
Ratio. For purposes of this Agreement, the following definitions shall
apply:
(i) "Exchange Ratio" shall mean the quotient obtained
by dividing (x) the Merger Consideration Share Number by (y)
the Fully Diluted Company Share Number, rounded down to the
nearest .0000001, which quotient is 0.0974021;
(ii) the "Merger Consideration Share Number" is
6,573,436 shares of Parent Common Stock, which was determined
by dividing an amount equal to the Merger Consideration by the
Designated Parent Stock Price (as defined below);
3
8
(iii) the "Designated Parent Stock Price" is
7.1499900, which is the average closing price per share of
Parent's common stock on the Nasdaq National Market for the
ten (10) trading day period ending on the trading day two (2)
trading days immediately prior to the execution of this
Agreement, rounded down to the nearest .0000001;
(iv) the "Fully Diluted Company Share Number" means
the sum of (A) the aggregate number of shares of Company
Common Stock issued and outstanding immediately prior to the
Effective Time, and (B) the aggregate number of shares of
Company Common Stock issuable under, or otherwise subject to,
any Purchase Rights outstanding immediately prior to the
Effective Time (including any Purchase Rights that are
unvested or are otherwise not then exercisable and including
all shares of Company Common Stock issued or issuable upon
exercise, conversion or exchange of all unvested and vested
Company Options which are not exercised, converted, exchanged
or expired immediately prior to the Effective Time).
(b) Stock Restrictions. If any shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time are
unvested or subject to a risk of forfeiture or other condition (other
than any right of repurchase) under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares
of Parent Common Stock issued in exchange for such shares of Company
Common Stock will also be unvested and subject to the same risk of
forfeiture or other condition (other than any right of repurchase), and
the certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends in the discretion of
Parent.
(c) Escrows. A number of shares of Parent Common Stock (the
"Escrow Shares") determined by dividing an aggregate amount equal to
$4.7 million (of which $356,179 is being reserved for any claims of the
Indemnified Parties under Section 8.3(a)(i)(M), $1,900,000 is being
reserved for any claims of the Indemnified Parties under Section
8.3(a)(i)(F) and $2,443,821 is being reserved for any other indemnity
claim that may arise under Section 8.3 of this Agreement) by the
Designated Parent Stock Price (none of which Escrow Shares shall be
unvested, subject to any right of repurchase, risk of forfeiture or
other condition in favor of the Company or the Surviving Corporation)
shall be held in escrow pursuant to the Escrow Agreement to be
available as the exclusive (other than with respect to claims of fraud
or intentional misrepresentation) source to reimburse Parent and its
Affiliates (including the Surviving Corporation) for any Losses (as
defined in Section 8.3(a) hereof) incurred in connection with this
Agreement and the transactions contemplated hereby. The Escrow Shares
will be withheld on a pro rata basis among the holders of Company
Common Stock. The exact number of Escrow Shares held for the account of
each holder of Company Common Stock will be set forth in the Escrow
Schedules as provided in Section 8.2(a). The delivery of the Escrow
Shares will be made on behalf of the holders of Company Common Stock in
accordance with the provisions hereof, with the same force and effect
as if such shares had been delivered by Merger Sub directly to such
holders and subsequently delivered by such holders to the Escrow Agent
(as defined in Section 8.2(a)).
4
9
(d) Cancellation of Parent-Owned and Company-Owned Stock. At
the Effective Time, by virtue of the Merger and without any action on
the part of Merger Sub, the Company, the holders of any shares of
Company Common Stock, or the holders of any capital stock of Merger
Sub, each share of Company Common Stock owned by Merger Sub, Parent,
the Company or any direct or indirect wholly-owned subsidiary of Parent
immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no consideration shall
be delivered in exchange therefor.
(e) Stock Options. At the Effective Time, the Company's
"Planning Technologies, Inc. Stock Incentive Plan," as amended to date
(the "Option Plan"), and all options to purchase Company Common Stock
(as defined in Section 2.3(a)) then outstanding under the Option Plan,
shall be assumed by Parent in accordance with the following provisions:
(i) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock issued under the
Option Plan (each a "Company Option"), whether vested or
unvested, shall be, in connection with the Merger, assumed by
Parent. Parent and the Company will take all action necessary
to cause the assumption by Parent as of the Effective Time of
the Option Plan and all of the Company Options set forth on
Schedule 2.3(b) with the consent of Parent and, in each case,
outstanding as of the Effective Time. The Company will take
all corporate action necessary to effect, without the consent
or cooperation of the holders of Company Options, such
assumption by Parent and the conversion of the Company Options
into options to purchase shares of Parent Common Stock as set
forth herein. Each Company Option so assumed by Parent under
this Agreement shall continue to have, and be subject to, the
same terms and conditions set forth in the Option Plan and/or
as provided in the respective option agreements governing such
Company Option immediately prior to the Effective Time, except
that (A) such Company Option shall be exercisable for that
number of whole shares of Parent Common Stock equal to the
product of the number of shares of Company Common Stock that
were issuable upon exercise of such Company Option immediately
prior to the Effective Time multiplied by the Exchange Ratio,
rounded down (in the case of Company Options granted under the
Option Plan) to the nearest whole number of shares of Parent
Common Stock and (B) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such
assumed Company Option shall be equal to the quotient
determined by dividing the exercise price per share of Company
Common Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent.
(ii) It is the intention of the parties that the
Company Options assumed by Parent pursuant to this Section
1.6(e) qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent
the Company Options qualified as incentive stock options
immediately prior to the Effective Time.
5
10
(iii) Promptly following the Effective Time, Parent
will issue to each holder of an outstanding (unexpired and
unexercised) Company Option a document evidencing the
foregoing assumption of such Company Option by Parent.
(iv) Parent will reserve sufficient shares of Parent
Common Stock for issuance pursuant to this Section 1.6(e).
(v) No new options shall be issued pursuant to the
Option Plan. New options, if any, would be issued pursuant to
the Parent's existing stock option plan.
(f) Capital Stock of Merger Sub. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub,
the Company, the holders of any shares of Company Common Stock or the
holders of any capital stock of Merger Sub, each share of Common Stock
of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and become one validly issued, fully paid
and nonassessable share of Common Stock of the Surviving Corporation.
Each stock certificate of Merger Sub evidencing ownership of any such
shares shall continue to evidence ownership of such shares of capital
stock of the Surviving Corporation.
(g) Adjustments. In the event of any stock split, reverse
split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common
Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock occurring after
the date hereof and prior to the Effective Time, appropriate
adjustments will be made to the number of shares of Parent Common Stock
issuable in exchange for shares of Company Common Stock and upon the
exercise of Company Options.
(h) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of
Company Common Stock who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares
of Parent Common Stock to be received by such holder) shall be entitled
to receive from Parent an amount of cash (rounded to the nearest whole
cent) equal to the product of (i) such fraction, multiplied by (ii) the
Designated Parent Stock Price.
1.7 SURRENDER OF CERTIFICATES.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate First Union National Bank, Charlotte, North Carolina (or if
First Union National Bank is not willing or able to so act, another
United States bank or trust company reasonably acceptable to the
Company) to act as exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Deliver Common Stock. Promptly following the
Closing, but in no event later than ten (10) business days following
the Closing, Parent shall deliver to the Exchange Agent for exchange in
accordance with this Article I, the aggregate amount of cash and the
aggregate number of shares of Parent Common Stock payable or issuable
6
11
pursuant to Section 1.6 in exchange for outstanding shares of Company
Common Stock; provided, however, that, on behalf of the holders of
shares of Company Common Stock, and pursuant to the Escrow Agreement
and Section 8.2(a) hereof, Parent shall deposit the Escrow Shares with
the Escrow Agent out of the aggregate number of shares of Parent Common
Stock otherwise issuable pursuant to Section 1.6.
(c) Exchange Procedures. Promptly after the Effective Time,
but in no event later than ten (10) business days following the
Effective Time, the Surviving Corporation shall cause to be mailed to
each holder of record 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 shares of Parent Common Stock
from Merger Sub pursuant to Section 1.6, (i) a form of letter of
transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent
Common Stock. Promptly after the Effective Time, but in no event later
than ten (10) business days following the Effective Time, the Surviving
Corporation shall cause to be mailed to the Company Stockholders other
than the Signing Stockholders, notice of dissenters rights pursuant to
Georgia Law Sections 14-2-1301, et. Seq. and a private placement
memorandum. Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by
the Surviving Corporation, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions
thereto, and such other customary documents as may be required pursuant
to such instructions (the "Transmittal Documents"), the holder of such
Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common
Stock (less the number of shares of Parent Common Stock to be deposited
with the Escrow Agent on such holder's behalf pursuant to Section 1.6
and Section 8.2(a) hereof and the Escrow Agreement), plus cash in lieu
of fractional shares in accordance with Section 1.6, to which such
holder is entitled pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. At the Closing, and subject to
and in accordance with the provisions of Section 8.2(a) hereof and the
Escrow Agreement, Parent shall cause to be delivered to the Escrow
Agent, on behalf of the holders of Certificates, certificates
representing the Escrow Shares which shall be registered in the name of
the Escrow Agent. Such shares shall be beneficially owned by the
holders on whose behalf such shares were deposited with the Escrow
Agent as set forth in Section 8.2(a) and the Escrow Agreement and shall
be available to reimburse Parent as provided in Sections 8.2(a), 8.3(a)
and the Escrow Agreement. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of
Company Common Stock will be deemed from and after the Effective Time,
for all corporate purposes, other than the payment of dividends, to
evidence the ownership of the number of full shares of Parent Common
Stock into which such shares of Company Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective
Time with respect to Parent
7
12
Common Stock with a record date after the Effective Time will be paid
to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of
record of such Certificate shall surrender such Certificate. Subject to
applicable law, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing
whole shares of Parent Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective
Time theretofore paid with respect to such whole shares of Parent
Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it will
be a condition of the issuance thereof that the Certificate so
surrendered will be properly endorsed and otherwise in proper form for
transfer and that the Person requesting such exchange will have paid to
Parent or any agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has
been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, none of the Exchange Agent, Parent, the Surviving
Corporation or any party hereto shall be liable to a holder of shares
of Parent Common Stock or Company Common Stock for any amount properly
paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.8 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK.
All shares of Parent Common Stock issued by Parent and delivered by
Merger Sub upon the surrender for exchange of shares of Company Common Stock in
accordance with the terms hereof (including any cash paid in respect thereof)
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Company Common Stock 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.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event any certificates evidencing shares of Company Common Stock
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange in lieu of such lost, stolen or destroyed certificates, upon the making
of an affidavit of that fact by the holder thereof, such shares of Parent Common
Stock and cash for fractional shares, if any, as may be required pursuant to
Section 1.6; 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 direct
as indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Exchange Agent with respect to the certificates alleged to
have been lost, stolen or destroyed.
8
13
1.10 TAX AND ACCOUNTING CONSEQUENCES.
It is intended by the parties hereto that the Merger shall (i)
constitute a reorganization within the meaning of Section 368 of the Code (and
this Agreement is intended to constitute a plan of reorganization for purposes
of Section 368 of the Code) and (ii) qualify for accounting treatment as a
"pooling of interests."
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION.
If, at any time after the Effective Time, any such further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and Merger
Sub, the officers and directors of the Company and Merger Sub are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
1.12 PARENT TRADING POLICY.
With respect to any shares of Parent held by any Person who serves as
an officer, director or employee of Parent or any subsidiary or Affiliate of
Parent, such shares shall be subject to the trading restrictions set forth in
Parent's Company Policy Regarding ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
For purposes of this Agreement, any reference to "the knowledge" of the
Company shall mean the actual awareness of the particular fact or other matter
by any of the senior executive officers of the Company. Except as disclosed on
the written disclosure schedule delivered by the Company to Parent concurrently
with the execution of this Agreement (the "Company Schedules"), the Company
hereby represents and warrants to each of Parent and Merger Sub as follows:
2.1 ORGANIZATION OF THE COMPANY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia. The Company has the
corporate power to own, lease and operate its properties and to carry on its
business as now being conducted. Except as set forth on Schedule 2.1 of the
Company Schedules, the Company is duly qualified or licensed to do business and
is in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified or licensed has had or could be reasonably expected
to have a Material Adverse Effect (as defined below) on the Company. For
purposes of this Agreement, a "Material Adverse Effect" shall mean, with respect
to Parent on the one hand and the Company on the other hand, the result of one
or more events, occurrences, changes or effects which, individually or in the
aggregate, has had or could be reasonably expected to have a material adverse
effect or impact on the business, assets (including intangible assets), results
of operations or financial condition of such party and its subsidiaries, taken
as a whole, or on such party's ability to consummate the transactions
contemplated hereby; provided, however, changes in economic conditions generally
or changes in the industry in which the Company or Parent, as the
9
14
case may be, competes shall not constitute a "Material Adverse Effect." The
Company has delivered a true and correct copy of its Articles of Incorporation
and Bylaws, each as amended to date, to Parent.
2.2 SUBSIDIARIES.
The Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any Person (as defined in Section 10.3
below).
2.3 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of
(i) 100,000,000 shares of Company Common Stock, of which 64,882,729
shares are issued and outstanding and (ii) 10,000,000 shares of Company
Series A Preferred Stock, of which no shares are issued and
outstanding. No shares of Company Common Stock are held in the
Company's treasury. The Company Common Stock is held of record by the
Persons, with the addresses of record and in the amounts set forth on
Schedule 2.3(a) of the Company Schedules. Schedule 2.3(a) of the
Company Schedules also indicates for each Company Stockholder whether
any shares of Company Common Stock held by such stockholder are subject
to a repurchase right in favor of the Company, the lapsing schedule for
any such restricted shares, including the extent to which any such
repurchase right has lapsed as of the date of this Agreement and
whether (and to what extent) the lapsing will be accelerated by the
transactions contemplated by this Agreement. All outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid
and non-assessable and not subject to preemptive rights created by
statute, the Articles of Incorporation or Bylaws of the Company or any
agreement to which the Company is a party or by which it is bound. All
issued and outstanding shares of Company Common Stock have been
offered, sold and delivered by the Company in compliance with
applicable federal and state securities laws. There are no outstanding
shares of Company Common Stock other than as set forth on Schedule
2.3(a) of the Company Schedules. Except as set forth on Schedule 2.3(a)
of the Company Schedules, the Company has not declared any dividends
which remain unpaid.
(b) The Company has reserved 6,500,000 shares of Company
Common Stock under its employee stock option plans. Schedule 2.3(b) of
the Company Schedules sets forth each outstanding Company Option,
including the name of the holder of such option, the domicile address
of such holder, an indication of whether such holder is an employee of
the Company as of the date hereof, the date of grant or issuance of
such option, the number of shares of Common Stock subject to such
option, the exercise price of such option and the vesting schedule for
such option, including the extent vested to the date of this Agreement
and whether and to what extent the exercisability of such option will
be accelerated and such option shall become exercisable as a result of
the transactions contemplated by this Agreement. Except for the Company
Options, and the agreements set forth on Schedule 2.3(b) of the Company
Schedules, there are no options, warrants, calls, rights, exchangeable
or convertible securities, commitments or agreements of any character,
written or oral, to which the Company is a party or by which it is
bound obligating the Company to (i) issue, deliver, sell, repurchase or
redeem, or cause to be
10
15
issued, delivered, sold, repurchased or redeemed, any Company Common
Stock or (ii) grant, extend, accelerate the vesting of, change the
price of, otherwise amend or enter into any such option, warrant, call,
right, exchangeable or convertible securities, commitment or agreement
(collectively, "Purchase Rights"). Except as set forth on Schedule
2.3(b) of the Company Schedules, all issued and outstanding Company
Options have been offered, issued and delivered in compliance with
applicable federal and state securities laws. The holders of Company
Options have been or will be given, or shall have properly waived, any
required notice of the Merger prior to the Merger. As a result of the
Merger, Parent will be the record and sole beneficial owner of all
Company Common Stock and rights to acquire or receive Company Common
Stock. Upon the assumption by Parent of the outstanding Company Options
as set forth in Section 1.6(e), all of such Company Options shall be
exercisable solely for shares of Parent Common Stock as set forth in
Section 1.6(e). The assumption of the Company Options and the Option
Plan by Parent as set forth in Section 1.6(e) does not conflict with or
violate the provisions of any Option Plan or any stock option or other
agreement or instrument relating to or governing any Company Option and
no consent or approval of, or notice to, any Person is required in
connection with such assumption.
(c) Except as set forth on Schedule 2.3(c) of the Company
Schedules, since the date of its formation, the Company has not (i)
effected a subdivision of any class of Company Common Stock, (ii)
declared any dividend payable in shares of Company Common Stock, (iii)
declared an extraordinary dividend payable in a form other than shares
of Company Common Stock in an amount that had a material effect in the
fair market value of any class of Company Common Stock, (iv) combined
or consolidated any class of Company Common Stock into a lesser number,
or (v) engaged in a recapitalization, spin-off, reclassification or
similar occurrence.
2.4 AUTHORITY.
The Company has all requisite corporate power and authority to execute
and deliver this Agreement and the Escrow Agreement and, subject only to the
requisite approval of the Merger and the terms of this Agreement and the Escrow
Agreement by the Company's stockholders, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The only vote required of the Company's stockholders to duly approve
the Merger and the terms of this Agreement is the affirmative vote, by written
consent in accordance with Section 14-2-704 of the Georgia Business Corporation
Code or at a meeting duly called and held for such purpose, of such number of
shares as would constitute as of the record date for such meeting or written
consent (a) a majority of the outstanding shares of Company Common Stock. The
execution and delivery of this Agreement and the Escrow Agreement and, subject
only to the approval of the Merger and this Agreement by the Company's
stockholders, the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Company. The Company's Board of Directors, at a meeting duly called and
held or by written consent, has unanimously (i) determined that the Merger is
fair to, and in the best interests of, the Company and its stockholders, (ii)
approved this Agreement, the Merger, the Escrow Agreement and the other
transactions contemplated by this Agreement and the Escrow Agreement and (iii)
resolved to recommend to the stockholders of the Company that they adopt and
approve this Agreement, the Merger, the Escrow Agreement and all the
transactions contemplated hereby and thereby.
11
16
This Agreement has been duly executed and delivered by the Company, the
Securityholder Agent and the Signing Stockholders and constitutes, and the
Escrow Agreement, when duly executed and delivered by the Company and the
Securityholder Agent will constitute, the legal, valid and binding obligation of
the Company, the Securityholder Agent and the Signing Stockholders, as the case
may be, enforceable against each such person in accordance with its respective
terms, except that the enforcement hereof or thereof may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). Each of the Company, the Securityholder Agent
and the Company Stockholders has complied with, or has taken all actions
necessary to render inapplicable, any state takeover statute or similar statute
or regulation applicable to the Merger, this Agreement, the Escrow Agreement and
the transactions contemplated hereby and thereby.
2.5 NO CONFLICT.
Except as set forth on Schedule 2.5 of the Company Schedules, the
execution and delivery of this Agreement and the Escrow Agreement by each of the
Company, the Securityholder Agent and the Signing Stockholders do not, and the
compliance with and performance of this Agreement and the Escrow Agreement and
the consummation of the transactions contemplated hereby and thereby by the
Company, the Securityholder Agent and the Company Stockholders will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (any
such event, a "Conflict") (i) any provision of the Articles of Incorporation or
Bylaws of the Company or (ii) other than Conflicts that would not result in a
Material Adverse Effect on the Company, any Contract (as defined in Section
2.16(b) below), permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company, the
Securityholder Agent, the Company Stockholders or any of the respective
properties or assets of such Person.
2.6 CONSENTS.
No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any court,
administrative agency or commission or other federal, state, county, local or
foreign governmental authority, instrumentality, agency or commission
("Governmental Entity") or any third party (so as not to trigger any Conflict),
is required by or with respect to the Company, the Securityholder Agent, the
Signing Stockholders in connection with the execution and delivery of this
Agreement or the Escrow Agreement or the consummation of the transactions
contemplated hereby or thereby, except for (i) the filing of the Certificate of
Merger and required certificates with the Georgia Secretary of State, (ii) the
filing of the Articles of Merger with the Secretary of State of the State of
North Carolina, and (iii) such other consents, waivers, authorizations, filings,
approvals and registrations which are set forth on Schedule 2.6 of the Company
Schedules.
2.7 COMPANY FINANCIAL STATEMENTS.
The Company has previously delivered to Parent the unaudited balance
sheets of the Company as of 1997, 1998, 1999 and 2000, and the related unaudited
statements of operations
12
17
and changes in stockholders' equity and cash flows for each of the years ended
1997, 1998, 1999 and the related unaudited statements of operations and changes
in stockholders' equity for the year ended 2000 (collectively, the "Company
Financial Statements"). The Company Financial Statements present fairly, in all
material respects, the financial position of the Company as of the dates thereof
and the results of operations and changes in stockholders' equity and cash flows
for the periods then ended in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods then
ended, except as otherwise stated therein (or in any related notes) and except
for the lack of footnotes and subject to normal audit adjustments which are not
material in amount other than as set forth on Schedule 2.7 of the Company
Schedules. For purposes of this Agreement, the "Balance Sheet Date" shall be
December 31, 2000, and the "Company Balance Sheet" shall be the balance sheet
included in the Company Financial Statements (including any related notes) for
the year ended on the Balance Sheet Date.
2.8 NO UNDISCLOSED LIABILITIES.
Except as set forth in Schedule 2.8 of the Company Schedules, the
Company has no liability, indebtedness, obligation, expense, claim, deficiency,
guaranty or endorsement of any type, whether accrued, absolute, contingent,
matured, unmatured or other (whether or not required to be reflected in
financial statements in accordance with GAAP), which (i) has not been fully
disclosed, reflected or reserved against in the Company Balance Sheet or the
Company Financial Statements or (ii) has not arisen in the ordinary course of
the Company's business consistent with past practices since December 31, 2000,
in each case which has had or could be reasonably expected to have a Material
Adverse Effect on the Company.
2.9 NO CHANGES.
Except as set forth in Schedule 2.9 of the Company Schedules, since the
Balance Sheet Date through and including the date hereof there has not been,
occurred or arisen any:
(a) transaction or action or failure to act by the Company
except in the ordinary course of business as conducted on the Balance
Sheet Date and consistent with past practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws (or other comparable document) of the Company;
(c) capital expenditure or capital commitment by the Company
of $25,000 in any individual case or $75,000 in the aggregate (other
than commitments to pay expenses incurred in connection with this
transaction);
(d) destruction of, significant damage to or loss of any
material assets, business or customer of the Company (whether or not
covered by insurance);
(e) work stoppage, labor strike or other labor trouble, or any
action, suit, claim, labor dispute or grievance relating to any labor,
safety or discrimination matter involving the Company, including
charges of wrongful discharge or other unlawful labor practices or
actions;
13
18
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the
Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or
other distribution with respect to any Company Common Stock, or any
direct or indirect redemption, purchase or other acquisition by the
Company of any Company Common Stock;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors,
employees or advisors, including, but not limited to, the modification
of any existing compensation or equity arrangements with such
individuals (which modification may include the amendment of any
vesting terms related to Company Options held by such individuals)
other than salary increases in connection with annual salary reviews
consistent with past practices and in no event in excess of five
percent (5%) per employee, or the declaration, payment or commitment or
obligation of any kind for the payment by the Company of a bonus or
other additional salary or compensation to any such Person;
(j) material agreement, contract, covenant, instrument, lease,
license or commitment to which the Company is a party or by which it or
any of its assets is bound or any termination, extension, amendment or
modification of the terms of any agreement, contract, covenant,
instrument, lease, license or commitment to which the Company is a
party or by which it or any of its assets is bound, except in the
ordinary course of business and consistent with past practices;
(k) sale, lease, license or other disposition of any of the
assets or properties of the Company, or creation of any lien or
security interest in such assets or properties, except in the ordinary
course of business and consistent with past practices;
(l) loan by the Company to any Person, incurring by the of any
indebtedness, guaranteeing by the Company of any indebtedness, issuance
or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, except for advances to employees for travel
and business expenses or extensions of trade credit to customers in the
ordinary course of business on customary terms and consistent with past
practices;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable
of the Company, except in the ordinary course of business and
consistent with past practices;
(n) commencement or notice or, to the Company's knowledge,
threat of commencement of any lawsuit or proceeding against or
investigation of the Company or its affairs;
(o) (i) sale by the Company of any Company "Intellectual
Property" (as defined in Section 2.14 below) or the entering into of
any license agreement (other than customer agreements or end-user
license agreements entered into by the Company in the ordinary course
of business consistent with past practices), distribution agreement,
reseller agreement, security agreement, assignment or other conveyance
or option for the foregoing, with respect to the
14
19
Company Intellectual Property with any Person or with respect to the
"Intellectual Property" (as defined in Section 2.14 below) of any
Person, (ii) purchase or other acquisition of any Intellectual Property
(other than commercially available software programs generally
available to the public in any manner which have been licensed to the
Company pursuant to licenses and which are lawfully used in the
business of the Company) or the entering into of any license agreement,
distribution agreement, reseller agreement, security agreement,
assignment or other conveyance or option for the foregoing, with
respect to the Intellectual Property (other than Commercial Software
Rights) of any Person or (iii) change in pricing or royalties set or
charged by the Company to its customers or licensees or in pricing or
royalties set or charged by Persons who have licensed Intellectual
Property to the Company;
(p) except as set forth on Schedule 2.3(b) of the Company
Schedules, issuance or sale by the Company of any Company Common Stock
or Purchase Rights or any amendment of any existing equity arrangement;
(q) event, occurrence, change, effect or condition of any
character that has had or could be reasonably expected to have a
Material Adverse Effect on the Company; or
(r) agreement by the Company or any officer or, to the
Company's knowledge, employee thereof to do any of the things described
in the preceding clauses (a) through (q) (other than negotiations with
Parent and its representatives regarding the transactions contemplated
by this Agreement).
2.10 TAX AND OTHER RETURNS AND REPORTS.
(a) Definitions.
(i) For the purposes of this Agreement, "Tax" or,
collectively, "Taxes", means any and all federal, state, local
and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities, including taxes based
upon or measured by gross receipts, income, profits, sales,
use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise
and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts 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.
(ii) For the purposes of this Agreement, "Tax
Returns" means all returns, declarations, reports, claims for
refund, information statements and other documents relating to
Taxes, including all schedules and attachments thereto, and
including all amendments thereof, and the term "Tax Return"
means any one of the foregoing Tax Returns.
(iii) For the purposes of this Agreement, "Tax
Authority" means any governmental authority responsible for
the imposition of any Tax.
15
20
(b) Tax Returns and Audits. Except as set forth in Schedule
2.10(b) of the Company Schedules:
(i) The Company has timely filed all Tax Returns
required to be filed. All Tax Returns filed by the Company are
true, correct and complete in all material respects and have
been completed in accordance with applicable law.
(ii) The Company: (A) has paid or accrued all Taxes
it is required to pay or accrue (whether or not shown as due
on any Tax Return) and (B) has withheld with respect to its
employees all federal and state income Taxes, FICA, FUTA and
other Taxes required to be withheld.
(iii) The Company has not been delinquent in the
payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against the Company, nor has
the Company executed any waiver of any statute of limitations
on or extending the period for the assessment or collection of
any Tax.
(iv) None of the Tax Returns filed by the Company or
Taxes payable by the Company have been the subject of an
audit, action, suit, proceeding, claim, examination,
deficiency or assessment by any governmental authority, and no
such audit, action, suit, proceeding, claim, examination,
deficiency or assessment is currently pending or, to the
knowledge of the Company, threatened.
(v) The Company has no liability for unpaid federal,
state, local and foreign Taxes (including any penalties or
interest assessed with respect thereto) which have not been
accrued or reserved against in the Company Balance Sheet,
whether asserted or unasserted, contingent or otherwise, the
Company has not incurred any liability for Taxes since the
Balance Sheet Date other than in the ordinary course of
business consistent with past practice.
(vi) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims,
restrictions on transfer, mortgages, security interests or
other encumbrances of any sort (collectively, "Liens") on the
assets of the Company relating to or attributable to Taxes,
other than Liens for ad valorem taxes not yet due and payable
as of such time.
(vii) To the Company's knowledge, there is no basis
for the assertion of any claim relating or attributable to
Taxes which, if adversely determined, would result in any Lien
on the assets of the Company.
(viii) None of the assets of the Company are treated
as "tax-exempt use property" within the meaning of Section
168(h) of the Code.
(ix) There is no contract, agreement, plan or
arrangement to which the Company is a party, including but not
limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually
or collectively, could give rise to an "excess parachute
payment" within the meaning of Section 280G (without regard to
the exceptions set forth in Sections 280G(b)(4) and 280G(b)(5)
of the Code) or Section 404 of the Code.
16
21
(x) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as defined in Section 341(f)(4) of the Code) owned
by the Company.
(xi) The Company is not a party to a tax sharing,
allocation or indemnification agreement nor does the Company
owe any amount under any such agreement.
(xii) The Company is not, nor has the Company been at
any time, a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.
(xiii) The Company's tax basis in its assets for
purposes of determining its future amortization, depreciation
and other federal income Tax deductions is accurately
reflected on the tax books and records of the Company.
(xiv) No adjustment relating to any Tax Return filed
by the Company has been proposed formally or informally by any
Tax Authority to the Company or any representative thereof
which was not resolved more than three years ago to the
satisfaction of the relevant Tax Authority.
(xv) The Company has not agreed to make any
adjustment under Section 481(a) of the Code (or any
corresponding provision of state, local or foreign Tax law) by
reason of a change in accounting method or otherwise, and will
not be required to make such an adjustment as a result of the
transactions contemplated by this Agreement other than changes
after the Effective Time to conform to Parent's accounting
methods.
(xvi) No material claim has been made by a Tax
Authority in a jurisdiction where the Company does not file
Tax Returns that the Company is or may be subject to Tax in
that jurisdiction.
(xvii) The Company does not have, nor has the Company
had, a permanent establishment in any foreign country, as
defined in any applicable Tax treaty or convention between the
United States and such foreign country.
(xviii) The Company has never been a member of a
group filing a consolidated federal income Tax Return (other
than a group the common parent of which was the Company), and
the Company has no liability for the Taxes of any Person
(other than the Company) under Treasury Regulation Section
1.1502-6 (or any corresponding provision of state, local or
foreign Tax law), as a transferee or successor, by contract,
or otherwise. The Company has no net operating losses or other
tax attributes presently subject to limitation under Sections
382, 383 or 384 of the Code, or the federal consolidated
return regulations (other than limitations imposed as a result
of the transactions contemplated pursuant to this Agreement).
(xix) The Company will not be liable for any tax
imposed under Code Section 1374.
17
22
(xx) All amounts paid by the Company which have been
treated as deductible research and development expenses, are
properly deductible on the returns as filed.
(xxi) The Company has paid for any transfers of
technology, assets or services in a manner that will be
respected by the Internal Revenue Service under Internal
Revenue Code Section 482 and the Regulations thereunder, and
by the taxing authorities in foreign jurisdictions as arms
length under similar principles in those countries.
(xxii) The Company was a valid S corporation for the
tax years 1992 to 1993. The Company terminated its S
corporation status on January 1, 1994, and has been taxed as a
C corporation from that date forward.
2.11 RESTRICTIONS ON BUSINESS ACTIVITIES.
Except as set forth in confidentiality agreements and non-disclosure
agreements entered into in the ordinary course of business, there is no
agreement (noncompete or otherwise), judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has had
or could be reasonably expected to have the effect of prohibiting or impairing
any business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing and except as set forth on Schedule 2.11 of the Company
Schedules, the Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its products or services to any class of customers, in any geographic area,
during any period of time or in any segment of the market.
2.12 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company does not own any real property, nor has the
Company ever owned any real property. Schedule 2.12(a) of the Company
Schedules sets forth a list of all real property currently leased by
the Company, the name of the lessor and the date of the lease and each
amendment thereto and with respect to any current lease, the aggregate
annual rent. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing default or event
of default as defined in such leases (or event which with notice or
lapse of time, or both, would constitute a default in any material
respect). The operations of the Company on such real property, and to
the knowledge of the Company, such real property, including
improvements thereon, do not violate any applicable building code,
zoning requirement, or classification, or pollution control ordinance
or statute relating to the particular property or such operations, and
such non-violation is not dependent, in any instance, on so-called
non-conforming use exceptions.
(b) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of
its tangible properties and assets, real, personal and mixed, used or
held for use in its business, free and clear of any Liens, except as
reflected in the Company Financial Statements and such Liens, if any,
which are not material in character, amount or extent, and which do not
materially detract from
18
23
the value, or materially interfere with the present use, of the
property subject thereto or affected thereby.
(c) All facilities, machinery, equipment, fixtures, vehicles,
and other properties owned, leased or used by the Company are (i)
adequate for the conduct of the business of the Company as currently
conducted and as proposed to be conducted and (ii) in good operating
condition, subject to normal wear and tear, and reasonably fit and
usable for the purposes for which they are being used, except where a
failure to be in such condition has not had and could not be reasonably
expected to have a Material Adverse Effect on the Company.
(d) The Company has not sold or otherwise released for
distribution any of its customer files and other customer information
relating to the current and former customers of the Company (the
"Company Customer Information"). No Person other than the Company
possesses any claims or rights with respect to use of the Company
Customer Information.
2.13 GOVERNMENTAL AUTHORIZATION.
Schedule 2.13 of the Company Schedules accurately lists each consent,
license, permit, grant or other authorization issued to the Company by a
Governmental Entity (i) pursuant to which the Company currently operates or
holds any interest in any of its properties or (ii) which is required for the
operation of its business or the holding of any such interest (herein
collectively called "Company Authorizations"). The Company Authorizations are in
full force and effect and constitute all Company Authorizations required to
permit the Company to operate or conduct its business or hold any interest in
its properties or assets except for Company Authorizations the absence or
invalidity of which has not had and could not be reasonably expected to have a
Material Adverse Effect on the Company.
2.14 INTELLECTUAL PROPERTY.
Schedule 2.14 of the Company Schedules is a complete and correct list
of all of the material Intellectual Property used in or necessary for the
operation of the Company's business. All Intellectual Property used in or
necessary for the operation of the Company's business is owned by the Company
free and clear of all security interests or the Company has a valid license to
use the same. The Intellectual Property listed on Schedule 2.14 of the Company
Schedules constitutes all of the proprietary rights necessary and sufficient for
the lawful and efficient operation of the Company's business as presently
conducted. The Company is not infringing upon, misappropriating or otherwise
acting adversely to any Intellectual Property owned by any other person. The
Company is not in default and, to the knowledge of the Company, no third party
is in default under any license, sublicense or agreement by which the Company
holds or has given to others the right to use any Intellectual Property. The
execution and delivery of this Agreement by the Company, and the consummation of
the transactions contemplated hereby, will not cause Company to be in violation
or default under any license, sublicense or agreement by which the Company holds
or has given to others the right to use any Intellectual Property, nor entitle
any other party to any such license, sublicense or agreement to terminate or
modify such license, sublicense or agreement. For purposes of this Agreement,
"Intellectual Property" shall mean all (i) patents, patent applications, patent
disclosures and all related continuation,
19
24
continuation in part, divisional, reissue, reexamination, utility model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations, (ii) trademarks, service marks, trade dress,
logos, trade names, domain names, and corporate names ("Trademarks") and
registrations and applications for registration thereof, (iii) copyrights and
registrations and applications for registration thereof, (iv) computer software,
data and documentation (excluding computer software, data and documentation
purchased by the Company from persons who are not Affiliates of the Company and
who generally offer such computer software, data and documentation for sale to
the public), (v) trade secrets, confidential and proprietary business
information, financial, marketing and business data, pricing and cost
information, databases, business and marketing plans and customer and supplier
lists, and whether patentable or unpatentable and whether or not reduced to
practice, know-how, research and development information, and business methods,
(vi) other proprietary rights relating to any of the foregoing, and (vii) copies
and tangible embodiments thereof.
2.15 PRODUCT WARRANTIES; DEFECTS; LIABILITIES.
Each Company Product has been in all material respects in conformity
with all applicable contractual commitments and all applicable express and
implied warranties. The Company has no liability or obligation (and to the
Company's knowledge, there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
the Company giving rise to any liability or obligation) for replacement or
repair thereof or other damages in connection therewith except liabilities or
obligations incurred in the ordinary course of business consistent with past
practice. No Company Product is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale, license
or lease or beyond that implied or imposed by applicable law. Schedule 2.15 of
the Company Schedules includes a copy of the standard terms and conditions of
sale, license, or lease for each of the Company Products and copies of the
Company's standard forms of merchant agreements, portal agreements and
professional services agreements.
2.16 CONTRACTS.
(a) Except as set forth on Schedule 2.16(a) of the Company
Schedules, the Company does not have, is not a party to or is not bound
by:
(i) any collective bargaining agreements,
(ii) any employment or consulting agreement, contract
or commitment with any officer, director, employee or member
of the Company's Board of Directors that is not immediately
terminable at will by the Company without payment or penalty,
(iii) any bonus, deferred compensation, pension,
profit sharing or retirement plans, or any other employee
benefit plans or arrangements,
(iv) any employment or consulting agreement with an
employee or individual consultant or salesperson or consulting
or sales agreement, under which a firm or other organization
provides services to the Company,
20
25
(v) any agreement or plan, including 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 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,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $25,000 per annum or which is not
cancelable by the Company without penalty within ninety (90)
days,
(viii) any agreement of indemnification or guaranty
other than customer agreements entered into in the ordinary
course of business,
(ix) any agreement containing any covenant limiting
the freedom of the Company to engage in any line of business
or to compete with any Person,
(x) any agreement relating to capital expenditures
and involving future payments in excess of $25,000,
(xi) any agreement relating to the disposition or
acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's
business,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or
instruments relating to the borrowing of money or extension of
credit, including guaranties referred to in clause (viii)
hereof, other than extensions of trade credit on customary
terms in customer agreements entered into in the ordinary
course of business,
(xiii) any purchase order or contract involving
$25,000 or more,
(xiv) any construction contracts,
(xv) any dealer, distribution, joint marketing
(including any pilot program), development, content provider,
destination site or sales representative agreement,
(xvi) any agreement pursuant to which the Company has
granted or may be obligated to grant in the future, to any
party a source-code license or option or other right to use or
acquire source-code, including any agreements which provide
for source code escrow arrangements,
(xvii) any original equipment manufacturer, value
added, remarketer or other agreement for distribution of the
Company's products or services, or the products or services of
any other Person,
21
26
(xviii) any agreement pursuant to which the Company
has advanced or loaned any amount to any stockholder of the
Company or any director, officer, employee, or consultant
other than business travel advances in the ordinary course of
business consistent with past practice,
(xix) any client service agreements or customer
support agreements, or
(xx) any other agreement that involves $25,000 or
more and is not cancelable by the Company without penalty
within ninety (90) days and any other agreement that is not
cancelable by the Company without penalty within one (1) year.
(b) Except for such alleged breaches, violations and defaults,
and events that would constitute a breach, violation or default with
the lapse of time, giving of notice, or both, as are all set forth in
Schedule 2.16(b) of the Company Schedules, the Company has not
breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions
of any agreement, mortgage, lease, indenture, instrument, contract or
commitment required to be set forth on Schedule 2.16(a) of the Company
Schedules, Schedule 2.14(b) of the Company Schedules or Schedule
2.14(c) of the Company Schedules (any such agreement, mortgage, lease,
indenture, instrument, contract or commitment, a "Contract"). Each
Contract is in full force and effect and, except as otherwise disclosed
in Schedule 2.16(b) of the Company Schedules, is not subject to any
default thereunder of which the Company has knowledge by any party
obligated to the Company pursuant thereto.
2.17 CHANGE OF CONTROL PAYMENTS.
There is no plan or agreement pursuant to which any amounts may become
payable (whether currently or in the future) to current or former officers,
directors or employees of or consultants to the Company as a result of or in
connection with the Merger, other than any plan or agreement (i) with respect to
which rights to any such payment have been waived or (ii) that provides for
accelerated vesting of stock options granted by the Company.
2.18 INTERESTED PARTY TRANSACTIONS.
Except as set forth on Schedule 2.18 of the Company Schedules, to the
Company's knowledge, no officer, director or Affiliate of the Company (nor, to
the Company's knowledge, any ancestor, sibling, descendant or spouse of any of
such Persons, or any Person in which any of such Persons has or had an economic
interest) has or, since June 22, 1999, has had, directly or indirectly, (i) an
economic interest in any Person which furnished or sold, or furnishes or sells,
services or products that the Company furnishes or sells, or proposes to furnish
or sell, or (ii) an economic interest in any Person that purchases from or sells
or furnishes to the Company any goods or services or (iii) a beneficial interest
in any Contract; provided, that ownership of no more than one percent (1%) of
the outstanding voting stock of a publicly traded corporation shall not be
deemed an "economic interest in any entity" for purposes of this Section 2.18.
There are no receivables of the Company owing by any director, officer,
employee, or consultant to the Company (or, to the Company's knowledge, any
ancestor, sibling, descendant or spouse of any such Persons, or any Person in
which any of such Persons has an economic interest), other than
22
27
advances in the ordinary and usual course of business for reimbursable business
expenses (as determined in accordance with the Company's established employee
reimbursement policies and consistent with past practice). None of the
stockholders of the Company has agreed to, or assumed, any obligation or duty to
guaranty or otherwise assume or incur any obligation or liability of the
Company.
2.19 COMPLIANCE WITH LAWS.
The Company has complied in all material respects with, is not in
material violation of, and has not received any notices of violation with
respect to, any foreign, federal, state or local statute, ordinance, law, rule
or regulation or any judgment, order or injunction.
2.20 LITIGATION.
Except as set forth on Schedule 2.20 of the Company Schedules, there is
no action, suit, claim or proceeding of any nature pending or to the Company's
knowledge threatened against the Company, its properties or any of its officers,
directors or employees, nor, to the knowledge of the Company, is there any
reasonable basis therefor. There is no investigation pending or, to the
Company's knowledge, threatened against the Company, its properties or any of
its officers, directors or employees by or before any Governmental Entity. No
Governmental Entity has at any time challenged or questioned the legal right of
the Company to conduct its operations as presently or previously conducted.
2.21 INSURANCE.
Schedule 2.21 of the Company Schedules sets forth a complete list of
all insurance policies and fidelity bonds covering the respective assets,
business, equipment, properties, operations, employees, officers and directors
of the Company. There is no claim by the Company or any Company Employee Plan
pending under any of such policies or bonds as to which coverage has been denied
or disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company is
otherwise in material compliance with the terms of such policies and bonds (or
other policies and bonds providing substantially similar insurance coverage).
The Company has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.22 BOOKS AND RECORDS.
(a) The books, records and accounts of the Company (i) are
accurate and complete in all material respects and have been maintained
in accordance with good business practices on a basis consistent with
prior years, (ii) are stated in reasonable detail and accurately and
fairly reflect the transactions and dispositions of the respective
assets of the Company and (iii) accurately and fairly reflect the basis
for the Company Unaudited Financial Statements.
(b) The Company has implemented and maintained a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary (A) to permit preparation of financial statements
in conformity with GAAP consistently applied and (B) to maintain
23
28
accountability for assets; and (iii) the amount recorded for assets on
the respective books and records of the Company is compared with the
existing assets at reasonable intervals in connection with the
preparation of annual audits of the Company's consolidated financial
statements and appropriate action is taken with respect to any
differences.
(c) The minute books of the Company have been made available
to counsel for Parent and are the only minute books of the Company and
contain an accurate summary of all meetings of directors (or committees
thereof) and stockholders or actions by written consent since the time
of incorporation of the Company.
2.23 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any
time owned, operated, occupied or leased; or (ii) released in violation
of any Law or environmental permit any material amount of any substance
that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the federal Resource
Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, (a "Hazardous Material"), but
excluding office and janitorial supplies properly and safely
maintained. No Hazardous Materials are present, as a result of the
actions of the Company, or, to the Company's knowledge, as a result of
any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and
surface water thereof, that the Company has at any time owned,
operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in material
violation of any law, nor has the Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any
or all of the foregoing being collectively referred to as "Hazardous
Materials Activities") in violation of any law, rule, regulation, or
statute promulgated by any Governmental Entity to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of the Company's
Hazardous Material Activities and other business of the Company as such
activities and business are currently being conducted.
(d) Environmental Liabilities. No action, proceeding,
investigation, revocation proceeding, amendment procedure, writ,
injunction or claim is pending or, to the Company's knowledge,
threatened, concerning any Environmental Permit, Hazardous Material or
any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which could reasonably be expected to
involve the
24
29
Company in any environmental litigation or impose upon the Company any
material environmental liability.
2.24 BROKERS' AND FINDERS' FEES.
Except as set forth on Schedule 2.24 of the Company Schedules, neither
the Company nor any of the Company Stockholders has incurred, nor will incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby. Attached to Schedule 2.24 of the Company
Schedules are copies of any written agreements and the summary of terms for any
oral agreements with respect to such fees.
2.25 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.25(a)(i) below (such definition
shall only apply to this Section 2.25), for purposes of this Agreement,
the following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any Person under common
control with the Company within the meaning of Section 414(b),
(c), (m) or (o) of the Code and the regulations thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(iii) "Company Employee Plan" shall refer to any
plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination
pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any
kind, whether formal or informal, funded or unfunded,
including each "employee benefit plan", within the meaning of
Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the
Company or any Affiliate or for the benefit of any "Employee"
(as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability contingent or
otherwise;
(iv) "DOL" shall mean the United States Department of
Labor.
(v) "Employee" shall mean any current, former, or
retired employee, officer, or director of the Company or any
Affiliate;
(vi) "Employee Agreement" shall refer to each
management, employment, severance, consulting, relocation,
repatriation, expatriation, or similar agreement or contract
between the Company or any Affiliate and any Employee or
consultant;
(vii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
25
30
(viii) "FMLA" shall mean the Family Medical Leave Act
of 1993, as amended;
(ix) "IRS" shall mean the Internal Revenue Service;
(x) "Multiemployer Plan" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan", as
defined in Section 3(37) of ERISA;
(xi) "Multiple Employer Plan" means an employee
benefit plan (as defined in Section 3(3) and Section 3(40) of
ERISA) which is covered by ERISA (other than a Multiemployer
Plan) and which the Company or any Affiliate and at least one
employer, other than the Company, or any Affiliate are
contributing sponsors; and
(xii) "Pension Plan" shall refer to each Company
Employee Plan which is an "employee pension benefit plan",
within the meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 2.25(b) of the Company Schedules
contains an accurate and complete list of each Company Employee Plan
and each Employee Agreement. Neither the Company nor any Affiliate has
any stated plan or commitment to establish or enter into any new
Company Employee Plan or Employee Agreement, to modify any Company
Employee Plan or Employee Agreement (except to the extent required by
law or to conform any such Company Employee Plan or Employee Agreement
to the requirements of any applicable law, in each case as previously
disclosed to Parent in writing, or as required by this Agreement), nor
any intention or commitment to do any of the foregoing.
(c) Documents. The Company has provided to Parent (i) correct
and complete copies of all documents embodying or relating to each
Company Employee Plan and each Employee Agreement including all
amendments thereto; (ii) the most recent annual actuarial valuations,
if any, prepared for each Company Employee Plan; (iii) the most recent
annual reports (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Company
Employee Plan or related trust; (iv) if the Company Employee Plan is
funded, the most recent annual and periodic accounting of Company
Employee Plan assets; (v) the most recent summary plan description
together with any applicable summary of material modifications, if any,
required under ERISA with respect to each Company Employee Plan; (vi)
all IRS determination, opinion, notification and advisory letters and
rulings relating to Company Employee Plans and copies of all
applications and correspondence to or from the IRS, DOL or any other
governmental agency with respect to any Company Employee Plan; (vii)
all material written agreements and contracts relating to each Company
Employee Plan or its related trust including, but not limited to,
administrative service agreements, group annuity contracts and group
insurance contracts; (viii) all material communications intended as
such, and not otherwise listed herein, that have been distributed to
any employees with respect to any Company Employee Plan and any
proposed Company Employee Plans or any Employee's participation
thereunder, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits,
26
31
acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company or the Company
Employee Plan; (ix) the most recent COBRA forms and related notices;
(x) all policies pertaining to fiduciary liability insurance covering
the fiduciaries of each Company Employee Plan; (xi) all registration
statements, annual reports (Form 11-K and all attachments thereto) and
prospectuses, if any, prepared in connection with each Company Employee
Plan and (xii) all correspondence to or from any governmental agency
relating to any Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.25(d) of the Company Schedules, (i) the Company and each Affiliate
has performed in all material respects all obligations required to be
performed by it under each Company Employee Plan and each Company
Employee Plan has been established and maintained in accordance with
its terms and in material compliance with all applicable laws,
statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) each Company Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has received a favorable determination
or opinion letter from the IRS covering all plan provisions that are
not subject to a remedial amendment period under Section 401(b) of the
Code; (iii) no non-exempt "prohibited transaction", within the meaning
of Section 4975 of the Code or Section 406 of ERISA, has occurred with
respect to any Company Employee Plan; (iv) there are no actions, suits
or claims pending, or, to the knowledge of the Company, threatened or
anticipated (other than routine claims for benefits) against any
Company Employee Plan or against the assets of any Company Employee
Plan; and (v) each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its
terms and in accordance with applicable law, without liability to the
Company, Parent or any of its Affiliates (other than reasonable
administration expenses incurred as a result of such termination); (vi)
there are no audits, inquiries or proceedings pending or, to the
knowledge of the Company, threatened by the IRS or DOL with respect to
any Company Employee Plan; (vii) neither the Company nor any Affiliate
is subject to any penalty or tax with respect to any Company Employee
Plan under Section 501(l) of ERISA or Section 4975 through 4980D of the
Code; and (ix) each Multiple Employer Plan, whether a Company Employee
Plan intended to be qualified under Section 401(a) of the Code, or a
Multiple Employer Welfare Arrangement (MEWA) (if any) as defined in
Section 3(40) of ERISA, has been established and maintained in all
material respects in accordance with its terms and in compliance with
all applicable laws, statutes, orders, rules, and regulations,
including but not limited to ERISA or the Code.
(e) Pension Plans. The Company and each Affiliate does not
now, nor has it ever, maintained, established, sponsored, participated
in, or contributed to, any Pension Plan which is subject to Part 3 of
Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the
Code.
(f) Multiemployer Plans. At no time has the Company or any
Affiliate contributed to or been requested to contribute to any
Multiemployer Plan.
27
32
(g) No Post-Employment Obligations. Except as set forth in
Schedule 2.25(g) of the Company Schedules, no Company Employee Plan
provides, or has any liability to provide, life insurance, medical or
other employee benefits to any Employee upon his or her retirement or
termination of employment for any reason, except as may be required by
statute, and neither the Company nor any Affiliate has ever
represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) that
such Employee(s) would be provided with life insurance, medical or
other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by statute.
(h) COBRA. The Company and its Affiliates, at all times prior
to the Closing Date, have substantially complied with the health care
continuation requirements of COBRA, the requirements of FMLA or any
similar provisions of the Georgia Family Rights Act applicable to its
Employees, or the requirements of the Health Insurance Portability and
Accountability Act of 1996.
(i) Effect of Transaction. Except as provided in Section 1.6
of this Agreement or as set forth in Schedule 2.25(i) of the Company
Schedules, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (either
alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Employee
Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation
to fund benefits with respect to any Employee.
(j) Employment Matters. Schedule 2.25(j) of the Company
Schedules lists all current officers, directors and employees of the
Company. The Company (i) is in compliance in all material respects with
all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with
respect to Employees (including any immigration laws with respect to
the same); (ii) has, in all material respects, withheld all amounts
required by law or by agreement to be withheld from the wages, salaries
and other payments to Employees; (iii) is not liable for any material
arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing; and (iv) is not liable for any material payment
to any trust or other fund or to any governmental or administrative
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) or for any civil or criminal penalties
pertaining to violations incurred under the Employer Sanctions
provisions of the immigration laws. There are no pending, reasonably
anticipated or, to the Company's knowledge, threatened claims or
actions against the Company under any workers compensation policy or
long-term disability policy. Each Person who is acting or has acted as
a consultant or service provider to the Company is acting or acted as
an "independent contractor" and could not, based on the facts and
circumstances of his consultancy, reasonably be deemed to be or have
been "employed" with the Company. Schedule 2.25(j) of the Company
Schedules also sets forth all outstanding offers of employment, whether
written or oral, made to any employee or prospective employee, which
offer has not been rejected by the offeree.
28
33
(k) Labor. No work stoppage or labor strike against the
Company or any Affiliate is pending or, to the Company's knowledge,
threatened. Neither the Company nor any Affiliate is involved in or, to
the Company's knowledge, threatened with, any labor dispute, grievance,
claim, charge or litigation relating to labor, safety, immigration or
discrimination matters involving any Employee, including charges of
unfair labor practices, discrimination complaints and/or abuse or
non-compliance with immigration laws, which, if adversely determined,
could, individually or in the aggregate, result in any liability to the
Company or any Affiliate. Neither the Company nor any Affiliate has
engaged in any unfair labor practices within the meaning of the
National Labor Relations Act which could, individually or in the
aggregate, directly or indirectly result in any liability to the
Company or any Affiliate. To the Company's knowledge, there are no
activities or proceedings of any labor union to organize any Employees.
Neither the Company nor any Affiliate is presently, nor has it been in
the past, a party to, or bound by, any collective bargaining agreement
or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by the Company or any
Affiliate.
(l) No Interference or Conflict. To the Company's knowledge,
no officer, employee or consultant of the Company or any Affiliate is
obligated under any contract or agreement or subject to any judgment,
decree or order of any court or administrative agency that would
interfere with such Person's efforts to promote the interests of the
Company or any Affiliate or that would interfere with the Company's or
any Affiliate's business. To the Company's knowledge, none of the
execution, delivery or performance of this Agreement by the Company,
nor the carrying on of the Company's or any Affiliate's respective
business as presently conducted nor any activity of such officers,
directors, employees or consultants in connection with the carrying on
of the Company's or any Affiliate's respective business as presently
conducted, will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any
contract or agreement under which any of such officers, directors,
employees or consultants is now bound.
2.26 BANK ACCOUNTS.
Schedule 2.26 of the Company Schedules constitutes a full and complete
list of all the bank accounts and safe deposit boxes of the Company, the number
of each such account or box, and the names of the Persons authorized to draw on
such accounts or to access such boxes. All cash in such accounts is held in
demand deposits and is not subject to any restriction or documentation as to
withdrawal.
29
34
2.27 GOVERNMENT CONTRACTS.
Except as described on Schedule 2.27 of the Company Schedules, (i) the
Company is not a party, either as a prime contractor or as a subcontractor, to
any Contract with the United States Government or any body, subdivision,
department, bureau, agency, commission, board, instrumentality or authority
thereof, including, but not limited to, the U.S. Department of Defense or any
military service of the United States (a "Government Contract"), (ii) the
Company has not received or applied for any facility security clearances issued
or to be issued under the U.S. Department of Defense Industrial Security program
or by or through any similar agency, (iii) the Company has not exported products
or technical data or provided services under the International Traffic in Arms
Regulations of the United States (22 CFR Subchapter M) or under a validated
license or similar permit issued by the U.S. Department of Defense or any
similar agency, and (iv) the Company is not (A) prohibited, debarred or
otherwise restricted from entering into Government Contracts in the future, (B)
limited in any way with respect to its ability to bid, or its qualifications for
bidding, on Government Contracts, or (C) prohibited in any way from maintaining
any products on Qualified Products Lists maintained by any Governmental
Authority. The Company has not issued or been the cause of issuance of any
product quality or recall notices including, without limitation, any Government
Industry Data Exchange Program (GIDEP) alerts in connection with the Business.
Schedule 2.27 of the Company Schedules contains a true and complete list of all
products of the Company that are listed on any federal "Qualified Products List"
and the Governmental Authorities that maintain the lists for such products. The
Company does not possess any property furnished by any Governmental Authority in
connection with its business.
2.28 AFFILIATES.
Schedule 2.28 of the Company Schedules sets forth those Persons who are
"affiliates" of the Company within the meaning of Rule 145 under the Securities
Act and Accounting Series Releases 130 and 135, as amended, of the SEC (each
such Person an "Affiliate"). The Company has delivered to Parent, concurrently
with the execution of this Agreement, from each of its Affiliates, an executed
Affiliate Agreement in the form attached hereto as Exhibit A.
2.29 POOLING OF INTERESTS.
Neither the Company nor any of its Affiliates has taken or agreed to
take any action which could materially affect the ability of Parent to account
for the business combination to be effected by the Merger as a "pooling of
interests."
2.30 INDEMNIFICATION OBLIGATIONS.
Except as set forth in Schedule 2.30 of the Company Schedules, neither
the Company nor any the Signing Stockholders has any knowledge of any action,
proceeding or other event pending or threatened against any officer or director
of the Company which would give rise to any indemnification obligation of
Company to its officers and directors under its Articles of Incorporation,
Bylaws or any agreement between the Company and any of its officers or
directors.
30
35
2.31 REPRESENTATIONS COMPLETE.
None of the representations or warranties made by the Company and the
Signing Stockholders in this Agreement, nor any statement made in any Company
Schedule or certificate furnished by the Company or the Signing Stockholders
pursuant to this Agreement, when taken together, contains any untrue statement
of a material fact, or omits to state any material fact necessary in order to
make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading.
2.32 COMPANY DISCLOSURE SCHEDULES.
The information and disclosures contained in any of the Company
Schedules shall be deemed to be part of and qualify the representations and
warranties that specifically refer to the particular Company Schedule and such
other representations and warranties as a reasonable person reading any such
schedule would reasonably relate to such other representations and warranties.
ARTICLE II-A
REPRESENTATIONS AND WARRANTIES OF THE SIGNING STOCKHOLDERS
2A.1 ACCREDITED INVESTOR.
Each Signing Stockholder is an "accredited investor" as defined in Rule
501(a) promulgated pursuant to the Securities Act of 1933, as amended.
2A.2 POOLING OF INTERESTS.
None of the Signing Stockholders has taken or agreed to take any action
which could materially affect the ability of Parent to account for the business
combination to be effected by the Merger as a "pooling of interests."
2A.3 BROKERS' AND FINDERS' FEES.
None of the Company Stockholders has incurred, nor will incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2A.4 CONSENTS.
No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any Governmental Entity
or any third party (so as not to trigger any Conflict), is required by or with
respect to the Securityholder Agent or the Signing Stockholders in connection
with the execution and delivery of this Agreement or the Escrow Agreement or the
consummation of the transactions contemplated hereby or thereby, except for (i)
the filing of the Certificate of Merger and required certificates with the
Georgia Secretary of State, and (ii) the filing of the Articles of Merger with
the Secretary of State of the State of North Carolina.
31
36
2A.5 NO CONFLICT.
The execution and delivery of this Agreement and the Escrow Agreement
by each of the Securityholder Agent and the Signing Stockholders does not, and
the compliance with and performance of this Agreement and the Escrow Agreement
and the consummation of the transactions contemplated hereby and thereby by the
Securityholder Agent and the Signing Stockholders will not, Conflict with (i)
any provision of the organizational, charter or governing documents of any of
the Signing Stockholders, as applicable, or (ii) other than Conflicts that would
not result in a Material Adverse Effect on the Securityholder Agent, the Signing
Stockholders, or the Company, any contract, agreement, mortgage, lease,
indenture, instrument, commitment, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Securityholder Agent, the Signing Stockholders or any of the respective
properties or assets of such Person.
2A.6 AUTHORITY.
The Signing Stockholders have all requisite corporate or partnership
power and authority, as applicable, to execute and deliver this Agreement and
the Escrow Agreement and, subject only to the requisite approval of the
directors or any general partner of the Signing Stockholders, as applicable, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate or partnership action on the part of the Signing Stockholders, as
applicable. This Agreement has been duly executed and delivered by the
Securityholder Agent and the Signing Stockholders and constitutes, and the
Escrow Agreement, when duly executed and delivered by the Securityholder Agent
will constitute, the legal, valid and binding obligation of the Securityholder
Agent and the Signing Stockholders, as the case may be, enforceable against each
such Person in accordance with its respective terms, except that the enforcement
hereof or thereof may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity). Each
of the Securityholder Agent and the Signing Stockholders has complied with, or
has taken all actions necessary to render inapplicable, any state takeover
statute or similar statute or regulation applicable to the Merger, this
Agreement, the Escrow Agreement and the transactions contemplated hereby and
thereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Each of Parent and Merger Sub jointly and severally represents and
warrants to the Company, except as set forth in the written disclosure schedules
delivered by Parent to the Company concurrently with the execution of this
Agreement (the "Parent Schedules"), as follows:
32
37
3.1 ORGANIZATION OF PARENT AND MERGER SUB.
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 North Carolina. Each of Parent and Merger Sub has the corporate power
to own, lease and operate its properties and to carry on its business as now
being conducted and is duly qualified or licensed to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified has had or could be reasonably expected to have a Material
Adverse Effect on Parent.
3.2 AUTHORITY.
Parent and Merger Sub have all requisite corporate power and authority
to execute and deliver this Agreement and the Escrow Agreement, to perform their
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub. Each of this Agreement
and the Escrow Agreement has been duly executed and delivered by Parent and
Merger Sub and constitutes the legal, valid and binding obligation of Parent and
Merger Sub, enforceable against each of them in accordance with its respective
terms, except as the enforcement hereof or thereof may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar taws now or
hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). The execution and delivery of this Agreement
and the Escrow Agreement by Parent and Merger Sub does not, and the compliance
with and performance of this Agreement and the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby by Parent and
Merger Sub will not, conflict with, or result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a benefit under (i) any provision of the Certificate of Incorporation or
Bylaws of Parent or the Articles of Incorporation or Bylaws of Merger Sub or
(ii) any mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, the breach, violation,
default, termination or forfeiture of which could be reasonably expected to have
a Material Adverse Effect on Parent. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, or notice to, any
Governmental Entity is required by or with respect to Parent or Merger Sub in
connection with the execution and delivery of this Agreement or the Escrow
Agreement by Parent and Merger Sub or the consummation by Parent and Merger Sub
of the transactions contemplated hereby or thereby except for (i) the filing of
the Certificate of Merger with the Secretary of State of the State of Georgia
and publication of notice of the Merger in the county in Georgia where the
registered office of the Company is located once a week for two consecutive
weeks, (ii) the filing of the Articles of Merger with the Secretary of State of
the State of North Carolina, (iii) any filings, consents and approvals of or
with the Nasdaq National Market ("Nasdaq"), or (iv) such consents, approvals,
order, authorizations, registrations, declarations and filings as may be
required under applicable state and federal securities laws.
33
38
3.3 PARENT COMMON STOCK.
The shares of Parent Common Stock to be issued pursuant to the Merger,
when issued and delivered in accordance with this Agreement, will be duly
authorized, validly issued, fully paid, and non-assessable.
3.4 SEC FILINGS; PARENT FINANCIAL STATEMENTS.
(a) Since August 16, 1999, Parent has filed all forms,
reports, and documents required to be filed by Parent with the
Securities and Exchange Commission (the "SEC") pursuant to the Exchange
Act and has made available to the Company such forms, reports, and
documents in the form filed with the SEC. All such required forms,
reports and documents (including those that Parent may file subsequent
to the date hereof until the Effective Time) are referred to herein as
the "Parent SEC Reports." As of their respective filing dates, the
Parent SEC Reports (i) complied or will comply in all material respects
with the requirements of the Exchange Act and the rules and regulations
of the SEC thereunder applicable to such Parent SEC Reports and (ii)
did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
filing) or will not at the time they are filed 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.
(b) Each of the consolidated financial statements of Parent
(including, in each case, the notes thereto) included in the final
prospectus relating to the initial public offering of Parent Common
Stock and in the Parent SEC Reports, including each Parent SEC Report
filed after the date hereof until the Effective Time (the "Parent
Financial Statements"), (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 GAAP applied on a
consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto or, in the case of unaudited statements,
as may be permitted by the SEC on Form 10-Q under the Exchange Act);
and (iii) fairly presented, in all material respects, the consolidated
financial position of Parent and its subsidiaries as at the respective
dates thereof and the consolidated results of Parent's operations and
cash flows for the periods indicated (subject, in the case of unaudited
financial statements, to normal audit adjustments).
(c) Parent meets the "registrant requirements" provided under
the SEC's General Instructions for use of Form S-3.
3.5 NO MATERIAL ADVERSE CHANGE.
Except as set forth in Schedule 3.5 of the Parent Schedules, during the
period commencing on the date of the most recent balance sheet included in the
Parent Financial Statements, through and including the date of this Agreement,
Parent has conducted its business in the ordinary course of business consistent
with past practices and no events, occurrences, changes or effects have occurred
which, individually or in the aggregate, have had or could be reasonably
expected to have a Material Adverse Effect on Parent. For purposes of this
Section
34
39
3.5, changes in economic conditions generally or changes in the industry in
which Parent competes shall not constitute a "Material Adverse Effect."
3.6 PARENT CAPITAL STRUCTURE.
The authorized capital stock of Parent consists of 5,000,000 shares of
preferred stock, par value $.0001 per share, none of which shares are issued and
outstanding, and 225,000,000 shares of Parent Common Stock, of which, as of
December 31, 2000, (a) 161,593,691 shares were issued and outstanding and (b)
13,086,088 shares were reserved for issuance pursuant to Parent's stock option
and stock purchase plans. Except as aforestated, there are no options, warrants,
calls, rights, exchangeable or convertible securities, commitments or agreements
of any character, written or oral, to which Parent is a party or by which it is
bound obligating Parent to issue shares of its capital stock or any other
securities convertible into or evidencing the right to subscribe to shares of
its capital stock.
3.7 AFFILIATE AGREEMENTS.
Schedule 3.7 of the Parent Schedules sets forth those Persons who are
Affiliates of Parent (each such Person a "Parent Affiliate"). Parent has
delivered to the Company, concurrently with the execution of this Agreement,
from each Parent Affiliate, an executed Affiliate Agreement in the form attached
hereto as Exhibit B.
3.8 POOLING OF INTERESTS.
Neither Parent nor any Parent Affiliate has taken or agreed to take any
action which could materially affect the ability of Parent to account for the
business combination to be effected by the Merger as a "pooling of interests."
3.9 MERGER SUB.
Merger Sub was formed solely by Parent for the purpose of engaging in
the transactions contemplated hereby and has not (i) engaged in any business
activities, (ii) conducted any operations other than in connection with the
transactions contemplated hereby or (iii) incurred any liabilities other than in
connection with the transactions contemplated hereby.
3.10 LITIGATION.
There is no action, suit or proceeding at law or in equity, or by or
before any governmental instrumentality or agency or arbitral body, now pending
or overtly threatened against Parent, or any of its assets or properties, (i)
that seeks to prohibit, restrain or enjoin the transactions contemplated by the
Transaction Documents or (ii) that questions the validity of the Transaction
Documents or the right of the Company to execute, deliver and perform the
Transaction Documents or to consummate the transactions contemplated thereby.
3.11 REPRESENTATIONS COMPLETE.
None of the representations or warranties made by Parent or Merger Sub
in this Agreement, nor any statement made in any Parent Schedule or certificate
furnished by Parent or Merger Sub pursuant to this Agreement, when taken
together, contains any untrue statement of a
35
40
material fact, or omits to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which they were made, not misleading.
ARTICLE IV
SECURITIES ACT COMPLIANCE; REGISTRATION
4.1 RESTRICTIONS REGARDING SECURITIES LAW MATTERS.
Each stockholder of the Company, by virtue of the Merger and the
conversion into Parent Common Stock of the Company Common Stock held by such
stockholder, shall be bound by the following provisions:
(a) Such stockholder will not offer, sell, or otherwise
dispose of any shares of Parent Common Stock except in compliance with
the Securities Act and the rules and regulations thereunder.
(b) Such stockholder will not sell, transfer or otherwise
dispose of any shares of Parent Common Stock unless (i) such sale,
transfer or other disposition is within the limitations of and in
compliance with Rule 144 promulgated by the SEC under the Securities
Act and the stockholder furnishes Parent with reasonable proof of
compliance with such Rule, (ii) in the opinion of counsel, reasonably
satisfactory to Parent and its counsel, some other exemption from
registration under the Securities Act is available with respect to any
such proposed sale, transfer, or other disposition of Parent Common
Stock or (iii) the offer and sale of Parent Common Stock is registered
under the Securities Act.
4.2 REGISTRATION RIGHTS.
Each Company Stockholder acknowledges that the issuance of the Parent
Common Stock in the Merger will not be registered under the Securities Act in
reliance upon the exemption(s) from registration provided thereby, including
Section 4(2) and regulations promulgated thereunder. Each Company Stockholder
also acknowledges that the issuance of the Parent Common Stock issued in the
Merger will not be registered under the securities laws of any state.
Consequently, each Company Stockholder understands that the shares of Parent
Common Stock issued in the Merger cannot be resold unless they are registered
under the Securities Act and applicable state securities laws, or unless an
exemption from such registration requirements is available. Therefore, Parent
shall, within fifteen (15) days following the filing of Parent's Annual Report
on Form 10-K with the SEC for the year ended February 28, 2001, but no later
than May 10, 2001, file a Registration statement on Form S-3 (or any successor
form) (the "Registration Statement") to register the Parent Common Stock for
resale to the public and shall use its best efforts to cause such Registration
Statement to be declared effective as soon as commercially reasonable
thereafter; provided, however, that Parent shall not be required in connection
with this Section 4.2 to qualify as a foreign corporation or consent to service
of process in any jurisdiction. Parent shall use its best efforts to cause the
Registration Statement to remain effective until the first anniversary date of
the Effective Time or such lesser period until all shares of Parent Common Stock
have been resold to the public. Each Company Stockholder
36
41
understands that there will be placed on the certificates representing the
Parent Common Stock issued in the Merger as Merger Consideration a legend
stating in substance the following and each Company Stockholder understands that
Parent will refuse to permit the transfer of the Parent Common Stock out of such
Company Stockholder's name in the absence of compliance with the terms of such
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH SUCH ACT
AND THE RULES AND REGULATIONS THEREUNDER AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. RED HAT, INC. (THE "CORPORATION")
WILL NOT TRANSFER THE SECURITIES REPRESENTED BY THIS CERTIFICATE EXCEPT
UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE CORPORATION, WHICH MAY
INCLUDE AN OPINION OF COUNSEL, THAT THE REGISTRATION PROVISIONS OF SUCH
ACT HAVE BEEN COMPLIED WITH OR THAT SUCH REGISTRATION IS NOT REQUIRED
AND THAT SUCH TRANSFER WILL NOT VIOLATE ANY APPLICABLE STATE SECURITIES
LAWS.
In the event that, in the judgment of Parent, it is advisable, in order
to continue to be in compliance with all applicable Federal or state securities
laws, to suspend use of a prospectus included in Registration Statement due to
pending material developments or other events that have not yet been publicly
disclosed and as to which Parent believes public disclosure would be detrimental
to Parent, Parent shall notify all Company Stockholders to such effect, and,
upon receipt of such notice, each Company Stockholder shall immediately
discontinue any sales of Parent Common Stock pursuant to the Registration
Statement until such Company Stockholder has received copies of a supplemented
or amended prospectus or until such Company Stockholder is advised in writing by
Parent that the then current prospectus may be used and has received copies of
any additional or supplemental filings that are incorporated or deemed
incorporated by reference in such prospectus. Notwithstanding anything to the
contrary herein, Parent shall not exercise its rights under this Section 4.2 to
suspend sales of Parent Common Stock for a period in excess of 60 days in any
365-day period.
4.3 REGISTRATION STATEMENT.
(a) In connection with the preparation of the Registration
Statement, the Company Stockholders shall:
(i) provide promptly to Parent such information as
Parent may reasonably request and may be required for
inclusion in the Registration Statement, including beneficial
ownership of Parent Common Stock and the intended method or
plan of distribution;
(ii) promptly advise Parent if at any time prior to
the Effective Time they should obtain any knowledge of any
fact that might make it necessary or appropriate to amend or
supplement the Registration Statement; and
(iii) agree to customary indemnification and other
provisions in connection with the preparation and filing of
the Registration Statement.
37
42
(b) The information supplied by the Company Stockholders in
writing for inclusion in the Registration Statement shall not, at (i)
the time the Registration Statement is filed, amended, supplemented or
declared effective and (ii) the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which made, not
misleading.
(c) In connection with the preparation of the Registration
Statement, Parent shall:
(i) Prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep the Registration
Statement effective for the period set forth above and to comply with
the provisions of the 1933 Act with respect to the sale or other
disposition of the shares of Parent Common Stock covered by the
Registration Statement.
(ii) Deliver to the Stockholders such numbers of
copies of the Registration Statement, prospectus, and any amendments
and supplements thereto, in conformity with the requirements of the
1933 Act, such documents incorporated by reference in the Registration
Statement and such other documents as the Stockholders reasonably
request, in order to facilitate the public sale or other disposition of
the Parent Common Stock. Availability of such documents on the SEC's
Electronic Data Gathering and Retrieval System shall be deemed to
constitute delivery pursuant to this Section 4.3(c)(ii).
(iii) Use its reasonable efforts to file in a timely
manner any reports required to be filed by it under the 1933 Act and
the Securities Exchange Act of 1934, as amended (the "1933 Act"), and
take such further action as the Stockholders may reasonably request,
from time to time to enable each Stockholder to sell the Parent Common
Stock owned by it without registration under the 1933 Act pursuant to
the exemption provided by Rule 144.
(iv) Agree to customary indemnification and other
provisions in connection with preparation and filing of the
Registration Statement.
(v) Pay all legal and accounting fees, all printing
fees and all other fees, costs and expenses in connection with the
preparation and filing of the Registration Statement.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1. CONDUCT OF BUSINESS OF THE COMPANY.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement and the Effective Time, the
Company agrees (except to the extent that Parent shall otherwise consent in
writing) to carry on its business in the usual, regular and ordinary course of
business in substantially the same manner as heretofore conducted, to pay its
38
43
debts and Taxes when due, to pay or perform other obligations when due, and, to
the extent consistent with such business, to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve their relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
all with the goal of preserving unimpaired its goodwill and ongoing businesses
at the Effective Time. The Company shall promptly notify Parent of any
materially negative event involving or adversely affecting the Company or its
business. By way of amplification and not limitation, except as expressly
contemplated by this Agreement, the Company shall not without the prior written
consent of Parent:
(a) Waive any stock repurchase rights, accelerate, amend, or
change the period of exercisability of any outstanding Company Options
or Company Common Stock subject to vesting, or reprice Company Options
or authorize cash payments in exchange for any such outstanding
options;
(b) Make any payment or enter into any commitment or
transaction outside of the ordinary course of business in excess of
$25,000;
(c) Modify, amend or terminate any material contract or
agreement to which the Company is a party or waive, release or assign
any material rights or claims thereunder;
(d) Transfer to any person or entity any rights to the Company
Intellectual Property (other than pursuant to end-user licenses granted
to customers of the Company in the ordinary course of business);
(e) Enter into (except in the ordinary course of business and
consistent with past practices) or amend any agreements pursuant to
which any other party is granted marketing, distribution or similar
rights of any type or scope with respect to any products of the
Company;
(f) Amend or otherwise modify (or agree to do so), except in
the ordinary course of business, or violate the terms of, any of the
Contracts;
(g) Commence any litigation except to enforce its rights
hereunder or under any agreements related hereto;
(h) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of
any Company Common Stock, or split, combine or reclassify any Company
Common Stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for any Company Common
Stock;
(i) Purchase, redeem or otherwise acquire, directly or
indirectly, any Company Common Stock or Company Options, except
repurchases of unvested shares of Company Common Stock at cost in
connection with the termination of the employment relationship with any
employee or consultant pursuant to stock option or purchase agreements
in effect on the date hereof;
39
44
(j) Issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the
purchase of, any Company Common Stock or Purchase Rights (except for
the issuance of any Company Common Stock upon exercise or conversion of
presently outstanding Company Options);
(k) Cause or permit any amendments to its Articles of
Incorporation or Bylaws;
(l) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any
other manner, any business or any Person or other business organization
or division thereof, or otherwise acquire or agree to acquire outside
of the ordinary course of business any assets in any amount, or in the
ordinary course of business in an amount in excess of $25,000 in the
case of a single transaction or in excess of $50,000 in the aggregate;
(m) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
(n) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of the Company
or guarantee any debt securities of others;
(o) Grant any severance or termination pay (i) to any director
or officer or (ii) to any other Employee except payments made pursuant
to written agreements outstanding on the date hereof and as disclosed
in the Company Schedules, or adopt any new severance plan;
(p) Adopt or amend any Company Employee Plan, or enter into
any Employee Agreement, extend employment offers, pay or agree to pay
any special bonus or special remuneration to any director or Employee,
or increase the salaries or wage rates of its Employees; except that
from and after the date that the Company and Parent agree on a mutually
acceptable hiring plan (which shall be agreed within fourteen days of
the date hereof) the Company may extend employment offers consistent
with the hiring plan;
(q) Effect or agree to effect, including by way of involuntary
termination, any change in the Company's directors, officers or key
Employees;
(r) Revalue any of its assets, including writing down the
value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(s) Pay, discharge or satisfy, in an amount in excess of
$10,000 (in any one case) or $25,000 (in the aggregate), any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities
reflected or reserved against in the Company Balance Sheet (or the
notes thereto) or that arose in the ordinary course of business
subsequent to the Balance Sheet Date or expenses consistent with the
provisions of this Agreement incurred in connection with the
transaction contemplated hereby;
40
45
(t) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into
any closing agreement, settle any claim or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(u) Enter into any strategic alliance, joint development or
joint marketing agreement;
(v) Engage in any action with the intent to directly or
indirectly adversely impact any of the transactions contemplated by
this Agreement;
(w) Take or agree to take any action which would preclude the
ability of Parent to account for the business combination to be
effected by the Merger as a "pooling of interests;" or
(x) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.l(a) through (w) above, or any other
action that would prevent the Company from performing or cause the
Company not to perform its covenants and obligations hereunder.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 STOCKHOLDER APPROVAL.
The Company shall take all action necessary to obtain the written
consent of the holders of Company Common Stock (the "Company Stockholders
Approval") prior to Closing in order to obtain the approval by the Company's
Stockholders of the Merger, this Agreement, the Escrow Agreement, and the
transactions contemplated hereby and thereby. The Company shall ensure that
stockholder approval is solicited in compliance with the procedural requirements
of Georgia Law, the Articles of Incorporation and Bylaws of the Company and all
other applicable legal requirements. The Company agrees to use its best efforts
and to take all action necessary or advisable to secure the necessary votes
required by Georgia Law, the Company's Articles of Incorporation and Bylaws to
effect the Merger.
6.2 ACCESS TO INFORMATION.
The Company shall afford Parent and its accountants, legal counsel, and
other representatives reasonable access during normal business hours during the
period prior to the Effective Time to (a) the properties, books, contracts,
commitments and records of the Company and (b) such other information concerning
the business, properties, and personnel of the Company as Parent may reasonably
request. The Company agrees to provide Parent and its accountants, legal
counsel, and other representatives copies of internal financial statements
promptly upon request. No information or knowledge obtained in any investigation
pursuant to this Section 6.3 or otherwise shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
41
46
6.3 CONFIDENTIALITY.
The parties acknowledge that the Company and Parent have previously
executed a Nondisclosure Agreement, dated as of February 8, 2001 (the
"Nondisclosure Agreement"), which Nondisclosure Agreement will continue in full
force and effect in accordance with its terms.
6.4 PUBLIC DISCLOSURE.
Unless otherwise required by applicable laws, rules or regulations
(including securities laws, rules and regulations) or, as to Parent or iGate
Capital Corporation ("iGate"), by regulatory authority of the National
Association of Securities Dealers, Inc. ("NASD"), Nasdaq or the SEC, prior to
the Effective Time, no disclosure (whether or not in response to an inquiry) of
the subject matter of this Agreement shall be made by any party hereto (other
than disclosures to Company stockholders pursuant to Section 6.2) unless
approved by Parent and the Company prior to release, provided that such approval
shall not be unreasonably withheld or delayed.
6.5 CONSENTS.
The Company shall promptly apply for or otherwise seek and use its best
efforts to obtain all consents and approvals required to be obtained by it for
the consummation of the Merger, including all consents, waivers, or approvals
under any of the Contracts in order to preserve the benefits thereunder for the
Surviving Corporation and otherwise in connection with the Merger. All of such
consents and approvals are set forth in Schedule 2.6 of the Company Schedules.
Each of Parent and Merger Sub shall promptly apply for or otherwise seek and use
its best efforts to obtain all consents and approvals required to be obtained by
it for the consummation of the Merger.
6.6 LEGAL CONDITIONS TO THE MERGER.
Each of Parent, Merger Sub and the Company will take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed on such party with respect to the Merger and will promptly cooperate
with and furnish information to any other party hereto in connection with any
such requirements imposed upon such other party in connection with the Merger.
Each party will take all reasonable actions to obtain (and will cooperate with
the other parties in obtaining) any consent, authorization, order or approval
of, or any registration, declaration, or filing with, or notice to, or an
exemption by, any Governmental Entity, or other third party, required to be
obtained or made by such party or its subsidiaries in connection with the Merger
or the taking of any action contemplated thereby or by this Agreement.
6.7 REASONABLE BEST EFFORTS; ADDITIONAL DOCUMENTS AND FURTHER
ASSURANCES.
Each of the parties to this Agreement shall use its reasonable best
efforts to effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to Closing under this Agreement. Each party
hereto, at the request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
reasonably necessary or desirable for effecting completely the consummation of
this Agreement, and the transactions contemplated hereby.
42
47
6.8 NOTIFICATION OF CERTAIN MATTERS.
The Company shall give prompt notice to Parent, and Parent shall give
prompt notice to the Company, of (i) the occurrence or non-occurrence of any
event which has caused or is likely to cause any representation or warranty of
the Company, Parent or Merger Sub, respectively, contained in this Agreement to
be materially untrue or inaccurate at or prior to the Effective Time and (ii)
any failure of the Company, Parent or Merger Sub, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.10 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
6.9 POOLING ACCOUNTING.
Parent and the Company shall each use its reasonable best efforts to
cause the business combination to be effected by the Merger to be accounted for
as a pooling of interests in accordance with GAAP which shall be acceptable to
the SEC. Each of Parent and the Company shall use its reasonable best efforts to
cause its respective employees, directors, stockholders and Affiliates not to
take any action that would adversely affect the ability of Parent to account for
the business combination to be effected by the Merger as a pooling of interests
in accordance with GAAP which shall be acceptable to the SEC. Neither Parent nor
the Company shall take any action, either before or after consummation of the
Merger, including the acceleration of vesting of any options, stock purchase
rights, warrants, restricted stock or other rights to acquire shares of the
capital stock of the Company, which reasonably would be expected to interfere
with Parent's ability to account for the Merger as a pooling of interests in
accordance with GAAP which shall be acceptable to the SEC.
6.10 REORGANIZATION.
It is the intent of the Company, Parent and the Surviving Corporation
that this Merger qualify as a tax-free reorganization under Section 368(a) of
the Code. Neither Parent nor the Company shall take any action which reasonably
would be expected to interfere with the qualification of the Merger as a
tax-free reorganization under Section 368(a) of the Code.
6.11 FORM S-8.
Parent shall file a Registration Statement on Form S-8 with the SEC
covering the shares of Parent Common Stock issuable with respect to assumed
Company Options no later than 60 days after the Closing Date.
6.12 BLUE SKY LAWS.
Parent shall use its reasonable best efforts to comply with the
securities and blue sky laws of all jurisdictions which are applicable to the
issuance of the Parent Common Stock pursuant hereto. The Company shall use its
reasonable best efforts to assist Parent as may be necessary, to comply with the
securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of Parent Common Stock pursuant hereto.
43
48
6.13 NO SOLICITATION.
From and after the date of this Agreement until the earlier to occur of
the Effective Time or termination of this Agreement pursuant to its terms, the
Company and the Company Stockholders will not, and the Company will not permit
its directors, officers, employees, representatives, investment bankers, agents,
or Affiliates to, directly or indirectly (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or could reasonably be expected
to lead to, any "Acquisition Proposal" (as defined herein) by any Person, or
(ii) participate in any discussions or negotiations with, or disclose any
non-public information concerning the Company to, or afford access to the
properties, books, or records of the Company, or otherwise assist or facilitate,
or enter into any agreement or understanding with, any Person (other than Parent
and its Affiliates, agents, and representatives) for the purpose of making, or
take any other action to facilitate the making, of an Acquisition Proposal or
inquiry, offer or proposal that could reasonably be expected to lead to an
Acquisition Proposal; or (iii) agree to, approve or recommend any Acquisition
Proposal or change, withdraw or modify its position with respect to the Merger.
For the purposes of this Agreement, "Acquisition Proposal" shall mean any of one
following (other than the transactions between the Company, Parent and Merger
Sub contemplated hereunder) involving the Company: (i) a proposal for any
transaction pursuant to which any Person or its Affiliates (a "Third Party")
proposes to acquire beneficial ownership of at least ten percent (10%) of the
outstanding equity securities of the Company, whether from the Company or
pursuant to a tender offer, exchange offer, recapitalization, reorganization or
otherwise, (ii) a proposal for any merger, consolidation or other business
combination involving the Company pursuant to which any Third Party proposes to
acquire beneficial ownership of at least ten percent (10%) of the outstanding
equity securities of the Company, or the entity surviving such merger,
consolidation or other business combination, (iii) a proposal for any other
transaction or series of related transactions (including any license) pursuant
to which any Third Party proposes to acquire control of assets of the Company
having a fair market value equal to or greater than ten percent (10%) of the
fair market value of all of the assets of the Company, taken as a whole,
immediately prior to such transaction, or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. The Company will, and will cause its directors,
officers, employees, representatives, investment bankers, agents and Affiliates
to, immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Company will promptly (i) notify Parent if it receives any
proposal or inquiry or request for information in connection with an Acquisition
Proposal or potential Acquisition Proposal and (ii) notify Parent of the
significant terms and conditions of any such Acquisition Proposal including the
identity of the party making an Acquisition Proposal. In addition, from and
after the date of this Agreement until the earlier to occur of the Effective
Time or termination of this Agreement pursuant to its terms, the Company will
not, and will instruct its directors, officers, employees, representatives,
investment bankers, agents, and Affiliates not to, directly or indirectly, make
or authorize any public statement, recommendation, or solicitation in support of
any Acquisition Proposal made by any Person (other than Parent).
6.14 TERMINATION OF COMPANY INVESTOR RIGHTS.
Except as otherwise set forth on Schedule 6.14 of the Parent Schedules,
the Company shall take such steps as may be necessary (other than obtaining any
required consent of ▇▇▇▇▇ ▇.
44
49
▇▇▇▇▇▇) to provide for termination as of the Closing Date of all stockholders'
agreements that govern the rights of holders of equity interests in the Company
and all investor rights granted by the Company to its stockholders and in effect
prior to Closing, including but not limited to rights of co-sale, voting,
registration, first refusal, board observation or information or operational
covenants, including, without limitation, (i) the indemnification rights granted
to certain Company stockholders in that certain Stock Purchase Agreement dated
June 22, 1999, by and among Grumman Hill Investments III, L.P. ("GHI"),
AppliedTheory Corporation ("ATC"), the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇ and (ii) that certain Shareholders Agreement dated as of March
31, 2000 by and among the Company, GHI, ATC, iGate, ENS, Inc., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
6.15 EMPLOYMENT TERMS.
With respect to ▇▇▇▇▇▇ "Jake" ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, who Parent and Company agree will continue as employees of the
Company or Parent after the Closing Date, and any other Company employees who
shall be retained as Surviving Corporation employees after the Closing Date,
such employment relationship will be employment at will and will be subject to
the rights and conditions applicable to similarly situated employees of Parent.
For purposes of determining the date of commencement of employment for a Company
employee that is retained as a Surviving Corporation employee, the date such
employee commenced employment with the Company shall be used.
6.16 RELEASE BY SIGNING STOCKHOLDERS.
(a) Except as otherwise set forth on Schedule 6.16 of the
Parent Schedules, each Signing Stockholder, for himself, his
predecessors, successors, heirs, personal representatives, and assigns
and affiliated entities (whether parent, sister, subsidiary, partner or
otherwise), as the case may be, hereby fully and forever releases and
discharges the Company, its successors, heirs, personal
representatives, assigns and affiliated companies (other than Parent),
as the case may be, from any and all Obligations and Claims.
"Obligation" means any and all obligations, whether previously
or now existing, which the Company may have to, or have incurred for
the benefit or on behalf of, any Signing Stockholder, whether pursuant
to written or oral agreement or understanding, statute, provision of
the Company's certificate of incorporation or bylaws, or otherwise,
including any obligations under or arising out of any indebtedness,
guaranty, promissory note, security agreement, mortgage or deed of
trust or other contract, agreement or instrument.
"Claim" means any and all claims, rights, demands, causes of
action, suits, liabilities, damages, actions, litigation, proceedings,
arbitrations or similar matters whatsoever of every kind and nature, in
law or equity, known or unknown, actual or potential, previously or now
existing, whether foreseen or unforeseen, and whether or not damages
therefrom have accrued, including any and all rights which any Signing
Stockholder may have against the Company (including the right to
receive indemnification or contribution payments from the Company).
45
50
(b) Each Signing Stockholder acknowledges and agrees to and
with the Company that the consideration received by each of them for
the execution and delivery of this Agreement was fully negotiated and
bargained for and constitutes full and fair consideration for the
agreements, waivers, releases and indemnifications by each of them set
forth herein.
(c) Each Signing Stockholder hereby represents and warrants to
the Company that such Signing Stockholder has carefully read the
provisions of this Agreement and that he has reviewed such provisions
with his attorneys and has consulted therewith regarding his rights and
obligations under this Agreement, that he has had ample and sufficient
opportunity to consider the terms of this Agreement without duress or
coercion, that he understands and freely accepts all of the terms and
conditions of this Agreement, and that he knowingly and voluntarily
enters into this Agreement in reliance wholly upon their respective
judgments, belief and knowledge, and that this Agreement has been
entered into by them without reliance upon any statement from the
Company or representative thereof. Accordingly, each Signing
Stockholder forever waives all rights to assert that this Agreement was
the result of a mistake in law or in fact or to assert that any or all
of the legal theories or factual assumptions used for negotiating
purposes are for any reason inaccurate or inappropriate.
6.17 DISSENTERS' RIGHTS.
PTI shall comply with the provisions of Sections 14-2-1301 et.
seq of Georgia Law regarding dissenters' rights with respect to the
Company Stockholders who did not execute the consent action of
Shareholders approving the Merger.
6.18 INTERCOMPANY ACCOUNTS.
(a) Within thirty (30) days from the Closing Date, the Company
shall pay to iGate all amounts referenced on Schedule 6.18(a) of the
Parent Schedules.
(b) iGate shall use its best efforts to collect from customers
the amounts referenced on Schedule 6.18(b) of the Parent Schedules, and
shall remit such amounts to the Company within three (3) business days
of iGate's receipt of any such amounts. However, iGate does not warrant
that such amounts are collectible.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(a) Stockholder Approval. The terms of this Agreement, the
Escrow Agreement and the Merger shall have been approved and adopted by
the stockholders of
46
51
the Company by the requisite vote under applicable law and the
Company's Articles of Incorporation.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the
Merger shall be in effect; and there shall not have been any action
taken, or any statute, rule, regulation or order enacted, entered,
enforced, promulgated, issued or deemed applicable to the Merger, which
makes consummation of the Merger illegal.
(c) Tax Opinion. The Company shall have received a written
opinion from ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇ PLLC, counsel to the Parent and Merger
Sub, addressed to the Company and the Company's stockholders, in form
and substance reasonably satisfactory to Parent and the Company and the
counsel of each, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. The
parties agree to make such reasonable representations as requested by
such counsel for the purpose of rendering such opinion.
(d) No Proceedings or Challenges. No investigation, action,
suit or proceeding by any Governmental Entity, and no action, suit or
proceeding by any other Person, shall be pending on the Closing Date
which challenges this Agreement or the Merger or seeks to restrain or
prohibit the consummation of the transactions contemplated by this
Agreement.
(e) Opinion of Accountants. Each of PricewaterhouseCoopers LLP
(Raleigh office), on behalf of Parent, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP on
behalf of the Company, shall have delivered a letter to Parent
affirming that firm's written concurrence, delivered concurrently with
the Closing, with Parent management's and the Company management's
conclusions, respectively, that no conditions exist that would preclude
Parent from accounting for the Merger as a "pooling of interests" under
Accounting Principles Board Opinion No. 16 and the applicable rules and
regulations of the SEC, if consummated in accordance with this
Agreement.
7.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND
THE SIGNING STOCKHOLDERS.
The obligations of the Company and the Signing Stockholders to
consummate the Merger and the transactions contemplated by this Agreement shall
be subject to the satisfaction at or prior to the Closing of each of the
following conditions, any of which may be waived, in writing, by the Company and
the Securityholder Agent:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall
have been true and correct (in the case of representations and
warranties qualified as to materiality) or true and correct in all
material respects (in the case of other representations and warranties)
on and as of the date of this Agreement and shall be so true and
correct on and as of the Closing Date except for those representations
and warranties which address matters only as of a
47
52
particular date (which shall remain so true and correct as of such
date), except where the failure to be so true and correct in the
aggregate would not have a Material Adverse Effect on Parent, and the
Company shall have received a certificate to such effect signed on
behalf of Parent by a duly authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all respects with all covenants, obligations
and conditions of this Agreement required to be performed or complied
with by them on or prior to the Closing Date, and the Company shall
have received a certificate to such effect signed by a duly authorized
officer of Parent.
(c) No Material Adverse Change. Since the date of this
Agreement, there shall not have occurred any events, occurrences,
changes or effects which, individually or in the aggregate, have had or
could be reasonably expected to have a Material Adverse Effect (as
defined in Section 2.1 above) on Parent or Merger Sub.
(d) Escrow Agreement. Each of Parent, Merger Sub, the
Securityholder Agent and First Union National Bank, as Escrow Agent,
shall have executed and delivered to the Company the Escrow Agreement
in substantially the form attached hereto as Exhibit E (the "Escrow
Agreement").
(e) Legal Opinion. The Company shall have received a legal
opinion from ▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇ PLLC, counsel to Parent and Merger Sub,
in the form attached hereto as Exhibit F.
(f) Loans From iGate. Parent shall have paid at Closing the
amounts set forth on Schedule 7.2(f) of the Company Schedules, which is
one-half of all amounts outstanding under any loans from iGate to the
Company, with the remainder to be paid to iGate within thirty (30) days
of the Closing Date.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER
SUB.
The obligations of Parent and Merger Sub to consummate the Merger and
the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been
true and correct (in the case of representations and warranties
qualified as to materiality) or true and correct in all material
respects (in the case of other representations and warranties) on and
as of the date of this Agreement and shall be so true and correct on
and as of the Closing Date except for those representations and
warranties which address matters only as of a particular date (which
shall remain so true and correct as of such date), except where the
failure to be so true and correct in the aggregate would not have a
Material Adverse Effect on the Company, and Parent and Merger Sub shall
have received a certificate to such effect signed on behalf of the
Company by a duly authorized officer of the Company.
48
53
(b) Agreements and Covenants. The Company shall have performed
or complied in all respects with all covenants, obligations and
conditions of this Agreement required to be performed or complied with
by it on or prior to the Closing Date, and Parent and Merger Sub shall
have received a certificate to such effect signed by a duly authorized
officer of the Company.
(c) Third Party Consents. Parent shall have been furnished
with evidence satisfactory to it that the Company, the Securityholder
Agent and the Company Stockholders have obtained the consents,
approvals and waivers set forth in Schedule 2.6 of the Company
Schedules.
(d) Legal Opinion. Parent shall have received a legal opinion
from ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, legal counsel to the Company, in the form
attached hereto as Exhibit G and from counsel to iGate, a stockholder
of the Company, in the form attached hereto as Exhibit I.
(e) Conduct of Company Business. The Company shall have
conducted its business in accordance with Article V from the date
hereof until the Effective Time.
(f) No Material Adverse Change. Since the date of this
Agreement, there shall not have occurred any events, occurrences,
changes or effects which, individually or in the aggregate, have had or
could be reasonably expected to have a Material Adverse Effect (as
defined in Section 2.1 above) on the Company.
(g) Termination of Company Investor Rights. Parent shall have
been furnished evidence reasonably satisfactory to it that the Company
has complied with Section 6.14 of this Agreement.
(h) Noncompetition, Nonsolicitation and Nondisclosure
Agreements and Continued Employment. Each of ▇▇▇▇▇▇ "▇▇▇▇" ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have executed and delivered to Parent a
Noncompetition, Nonsolicitation and Nondisclosure Agreement
substantially in the form attached hereto as Exhibit H. Each of the
employees identified in Schedule 7.3(h) of the Parent Schedules shall
remain in the employment of the Company as of the Closing Date and
shall not have provided to Parent or the Company notice of intention to
cease employment with the Company or Parent (or of intention not to
become employed by Parent).
(i) Escrow Agreement. Each of the Company, the Securityholder
Agent and First Union National Bank, as Escrow Agent, shall have
executed and delivered to Parent the Escrow Agreement.
(j) Termination of 401(k) Plan. The Company shall take all
actions necessary to terminate the Planning Technologies, Inc. 401(k)
Profit Sharing Plan (the "401(k) Plan") prior to the Closing Date in
compliance with all applicable laws, statutes, rules and regulations,
including but not limited to ERISA and the Code, and no participants
shall accrue any benefits under the 401(k) Plan on and after the
Closing Date.
(k) No Change to Organizational Documents or Capitalization.
Since the date of this Agreement, (i) no change shall have been made to
the Company's (A) Articles of
49
54
Incorporation or Bylaws or (B) authorized, issued, or outstanding
shares and (ii) the Company shall not have granted or issued to any
Person any Purchase Rights (as defined in Section 2.3).
(l) Satisfactory Completion of Due Diligence Review. Parent
shall have completed its review of the Company's business, condition,
assets, liabilities, operations, financial performance and prospects
and shall be satisfied, in its reasonable discretion, with the results
of such review.
(m) Stock Option Agreements. The Company shall have obtained
signed stock option agreements from all employees for whom the Company
has not previously furnished signed stock option agreements to the
Parent, covering the issuance of all outstanding stock options.
(n) UCC Termination Statements. The Company shall have
obtained from Deutsche Financial Services Corporation signed UCC
termination statements for filing with the Georgia Secretary of State
and the ▇▇▇▇▇▇ County Clerk of Superior Court.
(o) Termination of Letter Agreement. The Company and ▇▇▇
▇▇▇▇▇▇▇ shall have terminated that certain letter dated January 17,
2001, addressed to ▇▇▇ ▇▇▇▇▇▇▇ and signed by ▇▇▇▇▇▇ "Jake" ▇▇▇▇▇▇▇.
(p) [Reserved]
(q) Termination of Consulting Agreements. The Company shall
have terminated the agreements listed on Schedule 7.3(q) of the Parent
Schedules.
(r) Termination of Employment Agreements. The Company shall
have terminated all employment agreements with employees of the Company
effective as of the Closing Date.
(s) Notices to SBA. The Company shall have provided notice to
the SBA that, as a result of the Merger, it will no longer qualify as
an "8(a)" subcontractor.
(t) Termination of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Line of Credit. The Company
shall have terminated all lines of credit provided by ▇▇▇▇▇▇▇ ▇▇▇▇▇
Business Financial Services, Inc. and obtain a release from ▇▇▇▇▇▇▇
▇▇▇▇▇ of all security interests it currently holds against the Company,
including without limitation UCC-3 releases.
(u) Waiver of Change of Control Payments. Any person entitled
to payments of the type referred to in Section 2.17 of this Agreement
shall have waived all rights to such payments (except for any rights to
accelerated vesting of stock options).
50
55
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All of the representations and warranties of the Company and the
Stockholders in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Merger and continue until 5:00 p.m., Delaware time,
on the date which is the twelve-month anniversary of the Closing Date (the
"Expiration Date"). All of the covenants and agreements of the parties hereto
shall survive the Merger without limitation.
8.2 ESCROW ARRANGEMENTS; SECURITYHOLDER AGENT.
(a) Escrow Funds. At the Effective Time, the Company's
stockholders will be deemed to have received from Parent and deposited
with the Escrow Agent the Escrow Shares (plus any additional shares as
may be issued upon any stock split, stock dividend or recapitalization
effected by Parent after the Effective Time) without any act on the
part of any stockholder. As soon as practicable after the Effective
Time, the Escrow Shares, without any act on the part of any Company
stockholder, will be deposited with First Union National Bank as Escrow
Agent (the "Escrow Agent"), pursuant to an Escrow Agreement, such
deposits to constitute three escrow funds (the "Escrow Funds") to serve
as the exclusive (other than with respect to claims of fraud or
intentional misrepresentation) source from which any Losses (defined in
Section 8.3) of the Parent, its officers, directors, agents and
Affiliates (including the Surviving Corporation) may be indemnified
pursuant to the provisions of Section 8.3. The Company Stockholders
shall not be required to contribute additional shares of Parent Common
Stock or any other asset or cash (other than cash received as a result
of a sale of Escrow Shares by the Escrow Agent at the request of the
Securityholder Agent) to the Escrow Funds after the Effective Time. The
Escrow Funds shall be governed by the terms set forth herein and in the
Escrow Agreement. The number of Escrow Shares deposited on behalf of
each stockholder of the Company shall be in proportion to the aggregate
Parent Common Stock to which such holder would otherwise be entitled
under Section 1.6(a) and shall be in the respective share amounts and
percentages listed opposite each Company stockholder's name listed in
Schedules to be attached to the Escrow Agreement in form and substance
reasonably acceptable to Parent to be executed by the Company and
delivered to Parent at Closing (individually, an "Escrow Schedule" and,
collectively, the "Escrow Schedules"). No shares of Parent Common Stock
deposited in the Escrow Funds shall be unvested or subject to any right
of repurchase, risk of forfeiture or other condition in favor of the
Company or the Surviving Corporation.
(b) Securityholder Agent of the Stockholders; Power of
Attorney.
(i) By virtue of their approval of the Merger, the
stockholders of the Company (individually a "Company
Stockholder" and collectively the "Company Stockholders"),
including the Signing Stockholders, hereby appoint the
Securityholder Agent as agent and attorney-in-fact for each
stockholder of the
51
56
Company, for and on their behalf, to act as the Securityholder
Agent for the Company Stockholders under this Agreement and
under the Escrow Agreement and to give and receive notices and
communications, to agree to, negotiate, enter into settlements
and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to
claims to authorize delivery to Parent of Escrow Shares from
the Escrow Funds in satisfaction of claims against the Escrow
Funds by Parent, to object to such deliveries, and to take all
actions necessary or appropriate in the judgment of
Securityholder Agent for the accomplishment of the foregoing
in accordance with the terms and provisions of this Agreement
and the Escrow Agreement. Such agency may be changed by the
Company Stockholders from time to time upon not less than
thirty (30) days prior written notice to Parent; provided that
the Securityholder Agent may not be removed unless holders of
a majority of the disinterested shares of Parent Common Stock
issued to the Company Stockholders in the Merger pursuant to
Section 1.6(a) agree to such removal and to the identity of
the substituted agent. Any vacancy in the position of
Securityholder Agent may be filled by approval of the holders
of a majority of the shares of Parent Common Stock issued to
the Company Stockholders in the Merger pursuant to Section
1.6(a). No bond shall be required of the Securityholder Agent,
and the Securityholder Agent shall not receive compensation
for his or her services. Notices or communications to or from
the Securityholder Agent hereunder shall constitute notice to
or from each of the Company Stockholders.
(ii) The Securityholder Agent shall not be liable for
any act done or omitted hereunder or under the Escrow
Agreement as Securityholder Agent while acting in good faith
and in the exercise of reasonable judgment. The Signing
Stockholders shall severally, on a pro rata basis in
proportion to each Signing Stockholder's percentage ownership
of the total amount of Company Common Stock received by all of
the Signing Stockholders in the Merger, indemnify the
Securityholder Agent and hold the Securityholder Agent
harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the
Securityholder Agent and arising out of or in connection with
the acceptance or administration of the Securityholder Agent's
duties hereunder, including (x) the reasonable fees and
expenses of any legal counsel retained by the Securityholder
Agent and (y) any loss, liability or expense arising out of
any claim brought against the Securityholder Agent by a
Company Stockholder who is not a Signing Stockholder (a
"Non-Signing Stockholder") relating to the Securityholder
Agent's acceptance or administration of his duties hereunder
without such Non-Signing Stockholder's consent.
(iii) Notwithstanding anything in this Agreement to
the contrary, the Securityholder Agent hereby agrees to notify
all Company Stockholders of any action taken by the
Securityholder Agent pursuant to this Agreement within seven
(7) days of the taking of any such action.
(c) Actions of the Securityholder Agent. A decision, act,
consent or instruction of the Securityholder Agent relating to this
Article VIII shall constitute a decision of all the Company
Stockholders and shall be final, binding and conclusive upon
52
57
each of the Company Stockholders, and Parent may rely upon any such
written decision, consent or instruction of the Securityholder Agent as
being the decision, consent or instruction of each every Company
Stockholder. The Escrow Agent and Parent are hereby relieved from any
liability to any Person for any acts done by them in accordance with
such decision, consent or instruction of the Securityholder Agent.
8.3 INDEMNIFICATION.
(a) Indemnification Generally.
(i) The Company Stockholders severally, but not
jointly, agree to indemnify, defend and hold harmless Parent,
its officers, directors, agents and Affiliates (including the
Surviving Corporation) for any claims, losses, liabilities,
damages, deficiencies, costs and expenses, including
reasonable attorneys' fees and expenses, and expenses of
investigation and defense (hereinafter individually a "Loss"
and collectively "Losses") incurred by Parent, its officers,
directors, agents and Affiliates (including the Surviving
Corporation) directly or indirectly as a result of:
(A) any inaccuracy in, or breach of, a
representation or warranty of the Company or any
Company Stockholder contained herein (or in any
certificate, instrument, Schedule or document
attached to this Agreement and delivered by the
Company in connection with the Merger);
(B) any failure by the Company or any
Company Stockholder to perform or comply with any
covenant contained herein;
(C) any liability or obligation (A) of the
Company for any Taxes of the Company with respect to
any Tax year or portion thereof ending on or before
the Closing Date (or for any Tax year beginning
before and ending after the Closing Date to the
extent allocable to the portion of such period
beginning before and ending on the Closing Date)
including, but not limited to any liability for taxes
payable as a result of examinations disclosed on
Schedule 2.10(b) of the Company Schedules, and (B) of
the Company for the unpaid Taxes of any Person under
Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign Law), as a
transferee or successor, by contract, or otherwise;
(D) any claims or liabilities of any type of
the Company with respect to periods on or prior to
the Closing Date other than any liability set forth
in Schedule 2.8 of the Company Schedules, any
liability fully disclosed, reflected or reserved
against in the Company Balance Sheet or the Company
Financial Statements and any liability that has
arisen in the ordinary course of the Company's
business consistent with past practices since the
Balance Sheet Date;
(E) any liability of any type of the Company
or any Company Stockholder to any broker including
any fees or expenses payable to or for the benefit of
any broker used in connection with the transactions
53
58
described in this Agreement and any payment by the
Company of any fees or expenses of the Company
Stockholders incurred in connection with the Merger;
(F) any claims of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ against
the Company, including without limitation all Losses
incurred by the Company or parent in responding to
Civil Action File No. 00CV5509-8 filed in the
Superior Court of Dekalb County, State of Georgia;
(G) the assessment of Civil Penalties
incurred for a violation of section 274A of the
Immigration and Nationality Act, as amended,
including but not limited to monetary penalties for
the following violations: 1) knowing hire,
recruitment or referral for a fee of a foreign
national unauthorized to assume employment in the
United States; 2) knowing continued employment of a
foreign national unauthorized to work in the United
States; and 3) failure to comply with the employment
verification requirements set forth in 8 C.F.R.
Section 274a.2(b);
(H) the assessment of Criminal Penalties
resulting from pattern and practice violations of
subsection (a)(1)(A) or (a)(2) of the Immigration and
Nationality Act, as amended;
(I) all other Penalties, Civil or Criminal,
stemming from civil action brought forward by the
Attorney General (or his/her representatives) in an
appropriate U.S. District Court, for violations of
section 274A(a)(1)(A) or (2) of the Immigration and
Nationality Act, as amended, including but not
limited to pattern or practice of knowingly hiring
unauthorized foreign workers, and recruitment or
referral of foreign nationals unauthorized to assume
employment in the United States;
(J) [Reserved]
(K) any liability not disclosed in the
Company Financial Statements with respect to
contracts assumed by the Company pursuant to the
Contribution Agreement dated March 31, 2000 under
which no services were performed by the Company;
(L) [Reserved]
(M) any liability with respect to the tax
issues described on Schedule 8.3(a)(i)(M) of the
Parent Schedules; or
(N) any liability with respect to the
matters disclosed on Schedule 8.3(a)(i)(N) of the
Parent Schedules; provided, however, that such
indemnification obligation shall not apply to (i) the
employment agreements set forth in such schedule to
the extent that they impose no obligations on the
Company other than providing the relevant employees
two weeks notice of termination/severance and such
other obligations as may be imposed by Company policy
or applicable law; and (ii) contracts
54
59
set forth on such schedule to the extent that such
contracts were entered into by the Company in the
ordinary course of its business and any liabilities
associated thereto are also in the ordinary course of
business consistent with past practice.
provided, however, that the maximum amount of Losses for which the Company
Stockholders will be liable shall not exceed $4.7 million in the aggregate
(subject to the provisions of the Escrow Agreement), and subject to this
aggregate limitation, the maximum amount of Losses for which any holder of
Company Common Stock shall be liable shall equal the product of (x) such
holder's pro rata share of the issued and outstanding Company Common Stock as
set forth on Schedule 2.3(a) of the Company Schedules and (y) the Escrow Funds;
provided further, however, that the foregoing limitations shall not apply in the
case of fraud or intentional misrepresentation, in which case the maximum
liability of each Company Shareholder shall be limited to an amount equal to the
product of the Designated Stock Price times the number of Red Hat Shares
received by such Company Stockholder (including any shares deposited into the
Escrow Funds).
(ii) None of the Company Stockholders shall be liable
to Parent or its Affiliates (including the Surviving
Corporation) unless and until the aggregate amount of Losses
exceeds the Deductible, at which time, Parent and its
Affiliates (including the Surviving Corporation) may recover
all amounts of such Losses in excess of the Deductible,
provided, however, that any Losses attributable to a breach of
the representations in Sections 2.3, 2.10, 2.24 and 2.25(b),
and any Losses to be indemnified under Sections 8.3(a)(i)(C),
(F) and (M), shall be immediately reimbursable to Parent in
accordance with this Article VIII (without regard to the
Deductible and without counting toward the Deductible),
provided, further, that no Losses shall be indemnified under
Section 8.3(a)(i)(N) unless an individual Loss exceeds $5,000
or Losses to be indemnified exceed, in the aggregate, $25,000.
For purposes of this Section 8.3, the term "Deductible" shall
mean that dollar amount which equals $100,000.
(iii) Notwithstanding anything to the contrary
contained herein, to the extent that Third Party Expenses (as
defined in Section 10.2(a) below) incurred by the Company
exceed $250,000 in the aggregate, such excess shall be deemed
a Loss for purposes of this Article VIII and shall be
immediately reimbursable to Parent in accordance with this
Article VIII (without regard to the Deductible and without
counting toward the Deductible).
(iv) Losses shall be determined without regard to any
materiality or knowledge qualifiers that may be included in
any representation or warranty that is breached.
(v) No one (other than Parent) shall be permitted to
assert any indemnification claim under this Agreement unless
Parent shall have consented to the assertion of such claim.
(vi) Except as otherwise set forth in Section 10.10
of this Agreement, in the Nondisclosure Agreement, in any of
the Noncompetition, Nonsolicitation
55
60
and Nondisclosure Agreements or Affiliate Agreements executed
by Company Stockholders, the Company Stockholders shall not be
liable or responsible in any manner whatsoever for any Losses,
whether for indemnification or otherwise, except for indemnity
as expressly provided in this Section 8, and, except as set
forth above, this Section 8 provides the exclusive remedy and
cause of action of the Parent, its officers, directors and
agents and Affiliates (including the Surviving Corporation)
(but not including any claims of the Escrow Agent under the
Escrow Agreement) against the Company Stockholders with
respect to any claim arising out of this Agreement.
(vii) No Indemnified Party shall be entitled to
recover under this Section 8 (and any amounts paid otherwise
shall be promptly reimbursed to the Company Stockholders) to
the extent the subject matter of the Loss is reimbursed by
insurance proceeds received by such Indemnified Party.
(b) Indemnification Procedures.
(i) Any claim for indemnification under Section
8.3(a)(i) must be asserted on or before 5:00 p.m. (Delaware
time) on the Expiration Date. Parent shall provide notice to
the Securityholder Agent within 30 days of Parent becoming
aware of any claims for Losses if such claims are reasonably
identifiable and determinable; provided, however, that no
delay or failure on the part of Parent in notifying the
Securityholder Agent shall relieve the Securityholder Agent or
the Company Stockholders from any obligation unless they are
materially prejudiced thereby (and then only to the extent of
such prejudice).
(ii) To make a claim for indemnification under this
Article VIII, Parent shall deliver to the Securityholder
Agent, acting as agent for the Company Stockholders
(collectively, the "Indemnifying Party") an officer's
certificate (the "Officer's Certificate"), which Officer's
Certificate shall:
(A) state that Parent or its Affiliates
(including the Surviving Corporation) (individually
an "Indemnified Party") has paid or properly accrued
or reasonably anticipates that it will have to pay or
accrue Losses;
(B) specify in reasonable detail the amount
of the claim for which the Officer's Certificate is
being delivered (the "Estimated Claim Amount"), the
date such amount was paid or properly accrued, or the
basis for such anticipated liability, and the nature
of the misrepresentation, breach of warranty or
covenant to which such amount is related;
(C) state the sequential number of such
claim in relation to all Officer's Certificates
delivered hereunder;
(D) set forth the date of such Officer's
Certificate;
(E) state the aggregate Estimated Claim
Amounts of all claims as to which Officer's
Certificates have been delivered hereunder; and
56
61
(F) contain a certification by an officer of
Parent that the claim is being made pursuant to this
Article VIII.
(iii) In case the Indemnifying Party shall object to
the indemnification of an Indemnified Party in respect of any
claim or claims specified in any Officer's Certificate, the
Indemnifying Party shall, within thirty (30) days after
receipt by the Indemnifying Party of such Officer's
Certificate, deliver to the Indemnified Party and the
Securityholder Agent a written notice to such effect and the
Indemnifying Party and the Indemnified Party shall, within the
thirty-day period beginning on the date of receipt by the
Indemnified Party of such written objection, attempt in good
faith to agree upon the rights of the respective parties with
respect to each of such claims to which the Indemnifying Party
shall have so objected. If the Indemnified Party and the
Indemnifying Party shall succeed in reaching agreement on
their respective rights with respect to any of such claims,
the Indemnified Party and the Indemnifying Party shall
promptly prepare and sign a memorandum setting forth such
agreement. Should the Indemnified Party and the Indemnifying
Party be unable to agree as to any particular item or items or
amount or amounts, then the Indemnified Party and the
Indemnifying Party shall submit such dispute to binding
arbitration in accordance with the provisions set forth in
Section 4(c) of the Escrow Agreement.
(iv) Promptly after the assertion by any third party
of any claim against any Indemnified Party that, in the
judgment of such Indemnified Party, may result in the
incurrence by such Indemnified Party of Losses for which such
Indemnified Party would be entitled to indemnification
pursuant to this Agreement, such Indemnified Party shall
deliver to the Indemnifying Party and the Securityholder Agent
a written notice describing in reasonable detail such claim
and such Indemnifying Party may, at its option, assume the
defense of the Indemnified Party against such claim (including
the employment of counsel, who shall be reasonably
satisfactory to such Indemnified Party, and the payment of
expenses); provided, however, that an Indemnifying Party may
not assume the defense of any claim the settlement of which,
or an adverse judgment with respect to which, is, in the good
faith judgment of Parent, likely to establish a precedential
custom or practice materially adverse to the continuing
business interests of Parent. The parties acknowledge that any
third party claim relating to Taxes, Intellectual Property or
the Company's products or services is likely to establish a
precedential custom or practice materially adverse to the
continuing business interests of Parent. Any Indemnified Party
shall have the right to employ separate counsel in any such
action or claim and to participate in the defense thereof, but
the fees and expenses of such counsel shall not be at the
expense of the Indemnifying Party (A) unless (i) the
Indemnifying Party shall have failed, within ten (10) days
after having been notified by the Indemnified Party of the
existence of such claim as provided in the preceding sentence,
to assume the defense of such claim or to notify the
Indemnified Party in writing that it will assume the defense
of such claim, (ii) the employment of such counsel has been
specifically authorized in writing by the Indemnifying Party,
or (iii) the named parties to any such action (including any
impleaded parties) include both such Indemnified Party and the
Indemnifying Party and such Indemnified Party shall have been
57
62
advised by such counsel that there may be one or more legal
defenses available to the Indemnifying Party which are not
available to, or the assertion of which would be adverse to
the interests of, the Indemnified Party. No Indemnifying Party
shall be liable to indemnify any Indemnified Party for any
settlement of any such action or claim effected without the
consent of the Indemnifying Party, but if settled with the
written consent of the Indemnifying Party, or if there be a
final judgment (including all appeals or with all times for
appeal expired) for the plaintiff in any such action, the
Indemnifying Party shall indemnify and hold harmless each
Indemnified Party from and against any loss or liability by
reason of such settlement of judgment.
(v) Claims for Losses specified in any Officer's
Certificate to which an Indemnifying Party shall not object in
writing within thirty (30) days of receipt of such Officer's
Certificate, claims for Losses covered by a memorandum of
agreement of the nature described in paragraph (iii) and
claims for Losses the validity and amount of which shall have
been the subject of a final judicial determination as
described in paragraph (iv) are hereinafter referred to,
collectively, as "Agreed Claims". Within ten (10) business
days of the determination of the amount of any Agreed Claims,
the Indemnifying Party shall pay to the Indemnified Party an
amount equal to the Agreed Claim by providing notice of an
Agreed Claim to the Securityholder Agent and the Escrow Agent.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION.
Except as provided in Section 9.2 below, this Agreement may be
terminated and the Merger abandoned at any time prior to the Closing Date
notwithstanding approval thereof by the stockholders of the Company:
(a) by mutual written consent duly authorized by the Board of
Directors of the Company and Parent;
(b) by either Parent or the Company if (i) the Closing Date
has not occurred by February 27, 2001 (the "Termination Date")
(provided that the right to terminate this Agreement under this clause
9.1(b)(i) shall not be available to any party whose failure to fulfill
any obligation hereunder has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date and such
action or failure constitutes a breach of this Agreement); (ii) there
shall be a final nonappealable order, decree or ruling of a
Governmental Entity having jurisdiction in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, entered, enforced, promulgated, issued or
deemed applicable to the Merger by any Governmental Entity which makes
consummation of the Merger illegal;
58
63
(c) by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the Merger, by any Governmental Entity, which
would: (i) prohibit Parent's or the Company's ownership or operation of
any portion of the business of the Company or (ii) compel Parent or the
Company to dispose of or hold separate, as a result of the Merger, any
portion of the business or assets of the Company or Parent;
(d) by Parent if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this
Agreement on the part of the Company or the Company Stockholders and as
a result of such breach the conditions set forth in Section 7.3(a) or
7.3(b), as the case may be, would not then be satisfied; provided,
however, that if such breach is curable by the Company or the Company
Stockholders prior to the Termination Date through the exercise of its
reasonable best efforts, then for so long as the Company or the Company
Stockholders continue to exercise such reasonable best efforts Parent
may not terminate this Agreement under this Section 9.1(d) unless such
breach is not cured prior to the Termination Date (but no cure period
shall be required for a breach which by its nature cannot be cured);
(e) by the Company if neither it nor the Company Stockholders
are in material breach of their obligations under this Agreement and
there has been a breach of any representation, warranty, covenant or
agreement contained in this Agreement on the part of Parent or Merger
Sub and as a result of such breach the conditions set forth in Section
7.2(a) or 7.2(b), as the case may be, would not then be satisfied;
provided, however, that if such breach is curable by Parent or Merger
Sub prior to the Termination Date through the exercise of its
reasonable best efforts, then for so long as Parent or Merger Sub
continues to exercise such reasonable best efforts the Company may not
terminate this Agreement under this Section 9.1(e) unless such breach
is not cured prior to the Termination Date (but no cure period shall be
required for a breach which by its nature cannot be cured).
Where action is taken to terminate this Agreement pursuant to Section
9.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
9.2 EFFECT OF TERMINATION.
Except as set forth in Section 10.2, any termination of this Agreement
under Section 9.1 above will be effective immediately upon the delivery of
written notice of the terminating party to the other parties hereto. In the
event of the termination of this Agreement as provided in Section 9.1, this
Agreement shall be of no further force or effect, except (i) as set forth in
this Section 9.2 and Article X (general provisions, including expenses), 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. No
termination of this Agreement shall affect the obligations of the parties
contained in the Nondisclosure Agreement, all of which obligations shall survive
termination of this Agreement.
59
64
9.3 AMENDMENT.
Except as is otherwise required by applicable law, prior to the
Closing, this Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed by Parent and the Company. Except
as is otherwise required by applicable law, after the Closing, this Agreement
may be amended by the parties hereto at any time by execution of an instrument
in writing signed by Parent and by either the Securityholder Agent or former
Company stockholders who receive more than 66 2/3% of the Parent Common Stock
issued pursuant to Section 1.6(a).
9.4 EXTENSION; WAIVER.
At any time prior to the Effective Time, Parent and Merger Sub, on the
one hand, and the Company, on the other, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations of the other party
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or mailed by registered or certified mail (return receipt requested) or sent via
facsimile (with acknowledgment of complete transmission) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Merger Sub, to:
Red Hat, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
60
65
with a copy to:
▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇ PLLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Hope
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
Planning Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ "▇▇▇▇" ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇-▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
iGate Capital Corporation
▇▇▇▇▇▇ Plaza 10
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Securityholder Agent:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇/▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
10.2 EXPENSES.
(a) In the event the Merger is not consummated, all fees and
expenses incurred in connection with the Merger including all legal,
accounting (including all fees
61
66
for providing services with respect to the pooling), financial
advisory, consulting and all other fees and expenses of third parties
("Third Party Expenses") incurred by a party in connection with the
negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby, shall be the
obligation of the respective party incurring such fees and expenses.
(b) Subject to the provisions of Section 8.3, in the event the
Merger is consummated, the Surviving Corporation shall be responsible
for the payment of all reasonable Third Party Expenses incurred by the
Company up to an aggregate amount of $250,000. No fees or expenses of
the Company Stockholders will be paid by the Company or Parent. To the
extent such fees or expenses of the Company Stockholders are paid by
the Company, or the Company's Third Party Expenses exceed $250,000, the
Company Stockholders shall indemnify the Company therefor pursuant to
Section 8.3(a)(iii).
10.3 INTERPRETATION.
The words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed by the words "without limitation." The
word "agreement" when used herein shall be deemed in each case to mean any
contract, commitment or other agreement, whether oral or written, that is
legally binding. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The term "Person" means any individual,
corporation, partnership, association, trust, limited liability company or
partnership, unincorporated organization, joint venture, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act).
10.4 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.
10.5 ENTIRE AGREEMENT; ASSIGNMENT.
Except for the Nondisclosure Agreement, this Agreement, the schedules
and Exhibits hereto, and the documents and instruments and other agreements
among the parties hereto referenced herein: (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof; (b) are not intended to confer upon
any other Person any rights or remedies hereunder; and (c) shall not be assigned
by operation of law or otherwise except as otherwise specifically provided,
except that Parent and Merger Sub may assign their respective rights and
delegate their respective obligations hereunder to their respective Affiliates.
62
67
10.6 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 extent possible, the economic, business and other purposes of
such void or unenforceable provision.
10.7 OTHER REMEDIES.
Except as otherwise provided herein (including as set forth in Section
8.3(a)), 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.
10.8 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof. Each
of the parties hereto agrees that process may be served upon them in any manner
authorized by the laws of the State of North Carolina for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
10.9 RULES OF CONSTRUCTION.
The parties hereto agree that they have been represented by counsel
during the negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
10.10 SPECIFIC PERFORMANCE.
Notwithstanding Section 8.2(b), the parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
63
68
IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Securityholder
Agent and the Signing Stockholders have signed this Agreement, or have caused
this Agreement to be signed by their duly authorized respective officers, all as
of the date first written above.
RED HAT, INC., PLANNING TECHNOLOGIES, INC.,
a Delaware corporation a Georgia corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------- ---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Title: CEO
SECURITYHOLDER AGENT COKE ACQUISITION CORP.,
a North Carolina corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ Illegible
--------------------------------- ------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name:
Title:
69
SIGNING STOCKHOLDERS:
APPLIEDTHEORY CORPORATION GRUMMAN HILL INVESTMENTS III, L.P.
By: Grumman Hill Group, LLC, its
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------- -----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------- ---------------------------
Title: CEO Title: Managing Partner
------------------------------ --------------------------
Dated: 2/23/01 Dated: 2/23/01
------------------------------ -------------------------
ENS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------- ------------------------------
▇▇▇▇▇▇ "▇▇▇▇" ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Dated: 2/23/01
-----------------------
Title: Vice President
Dated: 2/23/01
--------------------------
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Dated: 2/23/01
--------------------------