EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ANSYS, INC.,
ANSYS XL, LLC,
BEN I, INC.,
▇▇▇▇▇ II, INC.,
HEAT HOLDINGS CORP.,
AAVID THERMAL TECHNOLOGIES, INC.,
▇▇▇▇ III, INC.,
FLUENT, INC.,
PRINCIPAL STOCKHOLDERS
AND
STOCKHOLDERS' REPRESENTATIVE
FEBRUARY 15, 2006
TABLE OF CONTENTS
PAGE
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ARTICLE I - DEFINITIONS......................................................................................... 3
ARTICLE II - THE MERGERS........................................................................................ 20
Section 2.1 The Mergers............................................................................ 20
Section 2.2 Closing................................................................................ 21
Section 2.3 Effective Times........................................................................ 21
Section 2.4 Certificate of Incorporation and By-laws of the Surviving Companies.................... 22
Section 2.5 Directors and Officers................................................................. 23
ARTICLE III - EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; ADJUSTMENTS........... 24
Section 3.1 Calculation of Merger Consideration.................................................... 24
Section 3.2 Effect on Capital Stock in the First Merger............................................ 24
Section 3.3 Effect on Capital Stock in the Second Merger........................................... 25
Section 3.4 Effect on Capital Stock in the Third Merger............................................ 26
Section 3.5 Effect on Capital Stock in the Fourth Merger........................................... 26
Section 3.6 Payments at Closing for Indebtedness................................................... 27
Section 3.7 Working Capital Adjustment............................................................. 28
Section 3.8 Post Closing Adjustment................................................................ 29
Section 3.9 Working Capital Escrows................................................................ 32
Section 3.10 Vesting of Incentive Stock............................................................. 33
Section 3.11 No Stock Option Plans.................................................................. 33
ARTICLE IV - PAYMENT FOR SHARES; DISSENTING SHARES.............................................................. 33
Section 4.1 Payment for Shares of Stock of the Selling Companies................................... 33
Section 4.2 Appraisal Rights....................................................................... 35
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE SELLING COMPANIES............................................. 36
Section 5.1 Organization; Standing and Authority................................................... 37
Section 5.2 Capitalization......................................................................... 38
Section 5.3 Subsidiaries........................................................................... 39
Section 5.4 No Conflict; Consents.................................................................. 40
Section 5.5 Required Vote.......................................................................... 41
Section 5.6 Securities Law Matters................................................................. 41
Section 5.7 Financial Statements; No Undisclosed Liabilities; Indebtedness......................... 42
Section 5.8 SEC Filings; Information Provided...................................................... 43
Section 5.9 Absence of Certain Changes............................................................. 44
Section 5.10 Customers.............................................................................. 46
Section 5.11 Transactions with Affiliates........................................................... 46
Section 5.12 Litigation............................................................................. 47
Section 5.13 Taxes.................................................................................. 47
Section 5.14 Employee Benefit Plans................................................................. 50
Section 5.15 Real and Personal Property............................................................. 53
(i)
Section 5.16 Labor and Employment Matters........................................................... 54
Section 5.17 Contracts and Commitments.............................................................. 55
Section 5.18 Intellectual Property.................................................................. 57
Section 5.19 Environmental Matters.................................................................. 60
Section 5.20 No Brokers............................................................................. 61
Section 5.21 Books and Records...................................................................... 61
Section 5.22 Insurance Policies..................................................................... 62
Section 5.23 Compliance with Laws................................................................... 62
Section 5.24 Licenses and Permits................................................................... 62
Section 5.25 Accounts Receivable.................................................................... 63
Section 5.26 Warranty and Related Matters........................................................... 63
Section 5.27 Illegal Payments....................................................................... 63
Section 5.28 State Takeover Statutes................................................................ 64
Section 5.29 Spin-Off............................................................................... 64
Section 5.30 Disclosure............................................................................. 64
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDERS........................................... 64
Section 6.1 Purchase Entirely for Own Account...................................................... 64
Section 6.2 Investment Experience.................................................................. 64
Section 6.3 Accredited Investor.................................................................... 65
Section 6.4 Authority.............................................................................. 65
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBS.......................................... 65
Section 7.1 Organization, Good Standing and Qualification.......................................... 65
Section 7.2 Formation and Ownership of Merger Subs; No Prior Activities............................ 66
Section 7.3 Capitalization......................................................................... 66
Section 7.4 Authorization; Validity of Agreement; Necessary Action................................. 66
Section 7.5 No Conflict; Consents.................................................................. 67
Section 7.6 SEC Filings; Financial Statements; Information Provided................................ 67
Section 7.7 No Brokers............................................................................. 68
Section 7.8 Customers.............................................................................. 68
Section 7.9 Litigation............................................................................. 69
Section 7.10 Absence of Certain Changes............................................................. 69
Section 7.11 Intellectual Property.................................................................. 70
Section 7.12 Compliance with Laws................................................................... 70
Section 7.13 Warranty and Related Matters........................................................... 71
Section 7.14 Books and Records...................................................................... 71
Section 7.15 Illegal Payments....................................................................... 71
Section 7.16 Merger Consideration................................................................... 71
Section 7.17 Disclosure............................................................................. 72
ARTICLE VIII - CONDUCT OF BUSINESS PENDING THE MERGER........................................................... 72
Section 8.1 Conduct of Selling Companies Business Prior to Closing................................. 72
Section 8.2 Conduct of Parent's Business Prior to Closing.......................................... 76
(ii)
ARTICLE IX - ADDITIONAL AGREEMENTS.............................................................................. 77
Section 9.1 Stockholders' Consent and Notices...................................................... 77
Section 9.2 Merger Sub Consents.................................................................... 78
Section 9.3 Access to Information.................................................................. 79
Section 9.4 Confidentiality........................................................................ 79
Section 9.5 Regulatory and Other Authorizations; Consents.......................................... 80
Section 9.6 Registration of Shares................................................................. 81
Section 9.7 Director............................................................................... 81
Section 9.8 Press Releases......................................................................... 82
Section 9.9 No Solicitations....................................................................... 82
Section 9.10 Officers' and Directors' Indemnification............................................... 83
Section 9.11 Employee Benefit Arrangements.......................................................... 84
Section 9.12 Takeover Statutes...................................................................... 84
Section 9.13 Delivery of Stock Ledger and Minute Books of the Selling Companies..................... 84
Section 9.14 Selling Companies Auditors............................................................. 84
Section 9.15 Company Audit.......................................................................... 85
Section 9.16 Certain Actions Relating to the Holders of Warrants and Holding Preferred Stock........ 85
Section 9.17 FIRPTA Compliance...................................................................... 85
Section 9.18 Notification of Certain Matters........................................................ 85
Section 9.19 Intellectual Property.................................................................. 86
Section 9.20 Additional Documents and Further Assurances; Cooperation............................... 86
Section 9.21 Spin-Off............................................................................... 87
Section 9.22 Fluent Stockholder Notes............................................................... 87
ARTICLE X - CONDITIONS TO THE MERGERS........................................................................... 87
Section 10.1 Conditions to the Obligations of Each Party to Effect the Mergers...................... 87
Section 10.2 Additional Conditions to Obligations of Parent and Merger Subs......................... 88
Section 10.3 Additional Conditions to Obligations of the Selling Companies.......................... 90
ARTICLE XI - SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE SELLING COMPANIES;
ESCROW PROVISIONS; INDEMNIFICATION..................................................................... 91
Section 11.1 Survival of Representations, Warranties, Covenants and Agreements of the Selling
Companies.............................................................................. 91
Section 11.2 Indemnification........................................................................ 91
Section 11.3 Escrow Provisions...................................................................... 93
Section 11.4 Third Party Claims..................................................................... 99
Section 11.5 Indemnification Escrow Agent's Duties.................................................. 101
Section 11.6 Stockholders' Representative........................................................... 103
Section 11.7 Treatment of Indemnity Payments........................................................ 105
Section 11.8 Remedies Exclusive..................................................................... 105
ARTICLE XII - TAX MATTERS....................................................................................... 106
Section 12.1 Tax Indemnification.................................................................... 106
Section 12.2 Straddle Periods....................................................................... 108
Section 12.3 Responsibility for Filing Tax Returns.................................................. 108
(iii)
Section 12.4 Cooperation on Tax Matters............................................................. 109
Section 12.5 Tax-Sharing Agreements................................................................. 110
Section 12.6 Certain Taxes and Fees................................................................. 110
ARTICLE XIII - TERMINATION, AMENDMENT AND WAIVER................................................................ 110
Section 13.1 Termination............................................................................ 110
Section 13.2 Effect of Termination.................................................................. 111
Section 13.3 Amendment.............................................................................. 112
Section 13.4 Extension; Waiver...................................................................... 112
ARTICLE XIV - GENERAL PROVISIONS................................................................................ 112
Section 14.1 Notices................................................................................ 112
Section 14.2 Entire Agreement....................................................................... 113
Section 14.3 Further Assurances; Post-Closing Cooperation........................................... 114
Section 14.4 Third Party Beneficiaries.............................................................. 114
Section 14.5 Assignment............................................................................. 114
Section 14.6 Severability........................................................................... 114
Section 14.7 No Agreement Until Executed............................................................ 114
Section 14.8 Interpretation......................................................................... 115
Section 14.9 Survival............................................................................... 115
Section 14.10 Fees and Expenses...................................................................... 115
Section 14.11 Choice of Law/Consent to Jurisdiction.................................................. 115
Section 14.12 Waiver of Trial by Jury................................................................ 116
Section 14.13 Specific Performance................................................................... 116
Section 14.14 Mutual Drafting........................................................................ 116
Section 14.15 Miscellaneous.......................................................................... 116
(iv)
EXHIBITS
Exhibit A Spin-Off Documents
Exhibit B Form of Stockholder Written Consents
Exhibit C Form of Employment Letter
Exhibit D-1 Form of Spin-Off Entities Non-Competition Agreement
Exhibit D-2 Form of Principal Stockholder Non-Solicitation Agreement
Exhibit E Form of Waiver Letter
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of Voting Agreement
Exhibit H List of Persons included in Parent's Knowledge
Exhibit I List of Persons included in Selling Companies' Knowledge
Exhibit J-1 Form of First Surviving Corporation Certificate of Incorporation
Exhibit J-2 Form of First Surviving Corporation By-Laws
Exhibit K-1 Form of Merger LLC Certificate of Formation
Exhibit K-2 Form of Merger LLC Operating Agreement
Exhibit L-1 Form of Third Surviving Corporation Certificate of Incorporation
Exhibit L-2 Form of Third Surviving Corporation By-Laws
Exhibit M-1 Form of Fourth Surviving Corporation Certificate of Incorporation
Exhibit M-2 Form of Fourth Surviving Corporation By-Laws
Exhibit N-1 First Merger Consideration
Exhibit N-2 Third Merger Consideration
Exhibit N-3 Fourth Merger Consideration
Exhibit O Form of Legal Opinion of Counsel to the Selling Companies
Exhibit P Form of Legal Opinion of Counsel to Parent
SCHEDULES
Selling Companies Schedules
5.1(a) Holding Organization; Standing
5.1(b) Company Organization; Standing
5.1(c) Fluent Organization; Standing
5.2(a) Capitalization of Holding
5.2(b) Capitalization of Company
5.2(c) Capitalization of Fluent
5.2(d) Capitalization Obligations of Selling Companies
5.3(a) Subsidiaries
5.3(b) Subsidiaries' Qualifications
5.4(a) No Conflicts
5.4(b) Consents
5.7(b) Fluent Financial Statements
5.7(c) Undisclosed Liabilities
5.7(d) Indebtedness
5.8(a) Company SEC Reports
5.9 Absence of Changes
5.9(e) Fluent 2006 Compensation Plan
5.11(a) Transactions with Affiliates
(v)
5.11(b) Transactions with Affiliates - Indebtedness
5.12 Litigation
5.13 Taxes
5.14(a) Employee Benefit Plans and Employment Agreements
5.14(c) Amendment and Termination of Employee Benefit Plans
5.14(e) Benefits to Former Employees
5.14(f) Change of Control Payments and Rights
5.15(a) Real Property
5.15(b) Real Property - Material Violations
5.15(c) Leased Real Property
5.15(d) Personal Property
5.16(a) Labor and Employment Matters
5.16(b) Labor and Employment Matters - Material Violations
5.16(c) Collective Bargaining Agreements and Labor Unions
5.17 Contracts
5.18 Intellectual Property
5.19 Environmental Matters
5.22 Insurance Claims
5.24 Licenses and Permits
5.26 Warranty and Related Matters
5.29 Assets of Spin-Off Entities
Parent Schedules
7.6(d) Material Liabilities
7.10 Certain Changes
7.11 Intellectual Property
Other Schedules
1.1 Base Net Working Capital Illustration
1.2 Identified Employees
8.1 Conduct of Business
8.2 Conduct of Parent's Business Prior to Closing
9.5(b) Regulatory and Other Authorizations; Consents
9.5(e) Third Party Consents
9.22 Fluent Promissory Notes
10.2(d) Governmental Consents
10.2(k) Employees
12.4 List of Employees
(vi)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
15, 2006, is by and among ANSYS, Inc., a Delaware corporation ("Parent"), ANSYS
XL, LLC, a Delaware limited liability company and wholly owned subsidiary of
Parent ("Merger LLC"), BEN I, Inc., a Delaware corporation and wholly owned
subsidiary of Merger LLC ("Merger Sub"), ▇▇▇▇▇ II, Inc., a Delaware corporation
and wholly owned subsidiary of Merger LLC ("Merger Sub II" and with Merger Sub
and Merger LLC, the "Merger Subs"), Heat Holdings Corp., a Delaware corporation
("Holding"), Aavid Thermal Technologies, Inc., a Delaware corporation (the
"Company"), ▇▇▇▇ III, Inc., a Delaware corporation and wholly owned subsidiary
of the Company ("Merger Sub III"), Fluent, Inc., a Delaware corporation
("Fluent," together with Holding and the Company, the "Selling Companies" and
each a "Selling Company"), and, for purposes of Section 9.7 and Article VI,
Article XI, Article XII and Article XIV, ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners II, L.P.,
▇▇▇▇▇▇ ▇▇▇▇▇ & Partners III, L.P., ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Dutch, L.P., ▇▇▇▇▇▇
▇▇▇▇▇ & Partners Dutch III-A, L.P., ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Dutch III-B, L.P.,
and ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners III-C, L.P. (each a "Principal Stockholder" and
collectively, the "Principal Stockholders"), and for purposes of Sections 3.7,
3.8, 3.9 and 9.7 and Articles XI, XII and XIV, ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners II, L.P.,
as Stockholders' Representative. An index of defined terms and the definitions
of certain terms used in this Agreement are listed in Article I hereof.
WHEREAS, the parties wish to effect a business combination through (a) the
merger of Merger Sub with and into Holding (the "First Merger"), with Holding
being the surviving corporation (the "First Surviving Corporation"), followed by
(b) the merger of Holding with and into Merger LLC (the "Second Merger"), with
Merger LLC being the surviving company ("Second Surviving Company"), followed by
(c) the merger of Merger Sub II with and into the Company (the "Third Merger"),
with the Company being the surviving corporation ("Third Surviving
Corporation"), and followed by (d) the merger of Merger Sub III with and into
Fluent (the "Fourth Merger," together with the First Merger, the Second Merger
and the Third Merger, the "Mergers"), with Fluent being the surviving
corporation ("Fourth Surviving Corporation," and with Second Surviving Company
and Third Surviving Corporation, the "Surviving Companies"), each on the terms
and conditions set forth in this Agreement and in accordance with the Delaware
General Corporation Law (the "DGCL") and, as applicable, the Delaware Limited
Liability Company Act, as amended (the "DLLCA");
WHEREAS, as a condition to the obligation of the parties hereto, the
Company has agreed to transfer and distribute to its stockholders, prior to the
First Effective Time, all of the capital stock of Aavid Thermal Products, Inc.
and its Subsidiaries (the "Spin-Off Entities"), and Holding has agreed to
transfer and distribute to its stockholders, following the Company's
distribution and prior to the First Effective Time, all of the capital stock of
the Spin-Off Entities, in each case pursuant to the terms and conditions
provided in the agreements and documents attached as Exhibit A hereto (the
"Spin-Off") in accordance with the terms and conditions listed therein;
WHEREAS, the parties intend to report the First Merger and the Second
Merger as a reorganization under Section 368(a)(1)(A) of the Code for U.S.
federal income tax purposes, the Third Merger as a taxable exchange of Warrants
and the Fourth Merger as a reorganization under Section 368(a)(1)(B) of the Code
for U.S. federal income tax purposes;
WHEREAS, each of the Selling Companies Boards has unanimously approved
this Agreement, the Mergers and the other transactions contemplated by this
Agreement and determined that this Agreement, the Mergers and the other
transactions contemplated by this Agreement are advisable and in the best
interest of their respective Stockholders;
WHEREAS, the Board of Directors of Merger Sub III has unanimously approved
this Agreement, the Fourth Merger and the other transactions contemplated by
this Agreement and determined that this Agreement, the Fourth Merger and the
other transactions contemplated by this Agreement are in the best interest of
its stockholders;
WHEREAS, each of the Boards of Directors of Parent, Merger Sub and Merger
Sub II has unanimously approved this Agreement, the Mergers and the other
transactions contemplated by this Agreement and determined that this Agreement,
the Mergers and the other transactions contemplated by this Agreement are in the
best interest of their respective stockholders;
WHEREAS, the Managing Member of Merger LLC has approved this Agreement,
the Mergers and the other transactions contemplated by this Agreement and
determined that this Agreement, the Mergers and the other transactions
contemplated by this Agreement are advisable and in the best interest of its
sole member;
WHEREAS, as a condition and an inducement to the willingness of Parent to
enter into this Agreement, each of the Selling Companies and Merger Sub III
shall obtain immediately following the execution of this Agreement the
irrevocable approval and adoption of the Mergers, this Agreement and the
transactions contemplated hereby, including without limitation, (a) the escrow
and indemnification obligations of the Stockholders set forth in Article XI and
Article XII hereof and the deposit of the Merger Consideration into escrow funds
and (b) the terms provided in Section 11.6 hereof, pursuant to written consents,
in the forms attached hereto as Exhibit B (the "Holding Stockholder Written
Consent," "Company Stockholder Written Consent," "Fluent Stockholder Written
Consent," "Merger Sub III Written Consent" and together, the "Stockholder
Written Consents"), signed, as appropriate, by the Company and such Stockholders
who, together with the foregoing, constitute at least a majority of the
outstanding voting power of each of Holding Stock, Company Stock and Fluent
Stock, respectively, and returned to the applicable Secretary of each Selling
Company within one (1) day from the execution of this Agreement, pursuant to and
in strict accordance with the applicable provisions of the DGCL and the Charter
Documents and the respective by-laws of the Selling Companies;
WHEREAS, as a further condition and inducement to the willingness of
Parent to enter into this Agreement and concurrently with the execution and
delivery of this Agreement, (a) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Ph.D. has entered into that
certain Consulting Agreement with Parent (the "Consulting Agreement") and Hasan
▇▇▇▇▇ ▇▇▇▇▇▇, Ph.D. has entered into that certain Employment Agreement with
Parent (the "Boysan Employment Agreement"); (b) each of the Identified Employees
has executed an employment letter with Parent or one of its Subsidiaries
substantially in the form attached hereto as Exhibit C (the "Employment
Letters") to be effective at, and subject to the occurrence of, the Fourth
Effective Time; (c) each of the Spin-Off Entities has entered into a
Non-Competition Agreement in the form attached hereto as Exhibit D-1 (the
"Spin-Off Entities Non-Competition Agreements") with Parent, each of which shall
be effective at, and subject to the occurrence of, the Fourth Effective Time;
and (d) each of the Principal
2
Stockholders and certain of their Affiliates have entered into a
Non-Solicitation Agreement in the form attached hereto as Exhibit D-2 (the
"Principal Stockholder Non-Solicitation Agreement") with Parent, each of which
shall be effective at, and subject to the occurrence of, the Fourth Effective
Time;
WHEREAS, as a further condition and inducement to the willingness of
Parent to enter into this Agreement and as a condition to Closing, each of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Ph.D., Hasan ▇▇▇▇▇ ▇▇▇▇▇▇, Ph.D., ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
will execute those certain Waiver Letters with Parent attached hereto as Exhibit
E (the "Waiver Letters");
WHEREAS, concurrently with the execution and delivery of this Agreement,
the parties hereto shall execute and deliver a Registration Rights Agreement in
the form attached hereto as Exhibit F (the "Registration Rights Agreement") to
be effective at, and subject to the occurrence of, the Fourth Effective Time,
and pursuant to which Parent has agreed to provide certain registration rights
under the Securities Act and the Regulations promulgated thereunder;
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Principal Stockholders shall execute and deliver a Voting Agreement in the
form attached hereto as Exhibit G (the "Voting Agreement") to be effective at,
and subject to the occurrence of, the Fourth Effective Time, and pursuant to
which such stockholders have agreed to vote in favor of certain amendments to
Parent's Restated Certificate of Incorporation ("Parent Charter") to increase
the number of authorized shares of Parent Common Stock and to approve the
reservation of additional shares of Parent Common Stock for grants as
equity-based awards in accordance with the provisions of the DGCL and the rules
of NASDAQ;
WHEREAS, as a condition and inducement to the willingness of Parent to
enter into this Agreement and concurrently with the execution and delivery of
this Agreement, Enductive Solutions, Inc. shall execute and deliver an
Assignment Agreement assigning all intellectual property held by Enductive
Solutions, Inc. to Fluent;
WHEREAS, a portion of the Merger Consideration otherwise payable in the
merger pursuant to this Agreement shall be placed into six (6) separate escrows
by Parent and Fluent, the release of which shall be contingent upon certain
events and conditions set forth herein; and
WHEREAS, Parent, Merger Subs, Merger Sub III, the Selling Companies, the
Principal Stockholders and the Stockholders' Representative desire to make
certain representations, warranties, covenants and agreements in connection with
the Mergers, and also to prescribe various conditions to the Mergers.
NOW THEREFORE, in consideration of the mutual agreements and covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I - DEFINITIONS
"Accounting Referee" has the meaning set forth in Section 3.8(b) of this
Agreement.
3
"Acquisition Proposal" means any proposal or offer from any Person (other
than Parent, Merger Subs or any of their Affiliates) relating to any merger,
consolidation, recapitalization, liquidation or other direct or indirect
business combination or reorganization, involving any of the Selling Companies
or any of their respective Subsidiaries, or the issuance or acquisition of
shares of capital stock of any of the Selling Companies or any of their
respective Subsidiaries or any tender or exchange offer that if consummated
would result in any Person, together with all Affiliates thereof, beneficially
owning fifteen percent (15%) or more of the outstanding shares of capital stock
of any of the Selling Companies or any of their respective Subsidiaries, or the
sale, lease, exchange, license (whether exclusive or not) or other disposition
of any significant portion of the business or other assets of any of the Selling
Companies or any of their respective Subsidiaries, or any other similar
acquisition transaction, the consummation of which would reasonably be expected
to materially impede or interfere with, prevent or materially delay the
consummation of the transactions contemplated hereby or which would reasonably
be expected to diminish significantly the benefits to Parent or its Affiliates
of the transactions contemplated hereby; provided that, for greater certainty,
any transaction contemplated by this Agreement, including the Spin-Off and the
transactions contemplated thereby, shall not constitute, individually or in the
aggregate, an Acquisition Proposal.
"Action" means any suit, arbitration, cause of action, claim, criminal
prosecution, non-routine investigation, governmental or other administrative
proceeding, whether at law or at equity, before or by any Court or Governmental
Authority or before any arbitrator or other tribunal.
"Adjusted Cash Consideration" has the meaning set forth in Section
3.1(a)(i) of this Agreement.
"Affiliate" means, with respect to any Person, a Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person; and "control"
(including the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of stock or other securities, as trustee or executor, by contract or
otherwise.
"Agreement" has the meaning set forth in the introduction to this
Agreement.
"Ancillary Agreement" means the Waiver Letters, the Spin-Off Entities
Non-Competition Agreements, the Principal Stockholder Non-Solicitation
Agreements, the Registration Rights Agreement and the Voting Agreement.
"Appraisal Rights Provisions" has the meaning set forth in Section 4.2(a)
of this Agreement.
"Base Net Working Capital" means $(32,500,000). The Base Net Working
Capital was derived in part from the consolidated balance sheet of the Company
and its Subsidiaries as of December 31, 2004 as calculated on the attached
Schedule 1.1.
"Boysan Employment Agreement" has the meaning set forth in the Recitals to
this Agreement.
4
"Business" means the business of the Selling Companies and their
Subsidiaries as currently conducted and proposed to be conducted.
"Business Day" means any day other than a day on which the SEC or the
office of the Delaware Secretary of State is closed.
"Cash Consideration" has the meaning set forth in Section 3.1(a)(i) of
this Agreement.
"Certificate" or "Certificates" means the stock certificates which
immediately prior to the applicable Effective Time represented shares of Selling
Companies Stock.
"Charter Documents" means the Holding Certificate of Incorporation, the
Company Certificate of Incorporation and the Fluent Certificate of
Incorporation.
"Chosen Courts" has the meaning set forth in Section 14.11 of this
Agreement.
"Closing" has the meaning set forth in Section 2.2 of this Agreement.
"Closing Balance Sheet" has the meaning set forth in Section 3.8(a) of
this Agreement.
"Closing Date" has the meaning set forth in Section 2.2 of this Agreement.
"Closing Net Working Capital" has the meaning set forth in Section 3.8(a)
of this Agreement.
"Closing Price" has the meaning set forth in Section 11.3(a) of this
Agreement.
"Closing Review Period" has the meaning set forth in Section 3.8(a) of
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations promulgated thereunder.
"Commitment Letters" has the meaning set forth in Section 7.16(b) of this
Agreement.
"Company" has the meaning set forth in the introductory paragraph of this
Agreement.
"Company Balance Sheet" has the meaning set forth in Section 5.7(c) of
this Agreement.
"Company Board" means the board of directors of the Company.
"Company Certificate of Incorporation" means the Third Amended and
Restated Certificate of Incorporation of the Company.
"Company Class A Common Stock" means the Company Class A Common Stock, par
value $0.0001 per share, of the Company.
"Company Class B Common Stock" means the Company Class B Common Stock, par
value $0.0001 per share, of the Company.
5
"Company Class H Common Stock" means the Company Class H Common Stock, par
value $0.0001 per share, of the Company.
"Company Common Stock" means the Company Class A Common Stock, Company
Class B Common Stock and Company Class H Common Stock.
"Company Financial Statements" has the meaning set forth in Section 5.7(a)
of this Agreement.
"Company Incentive Plan" means Fluent's management incentive purchase
program, as amended and currently in effect.
"Company Preferred Stock" means the Company Series A Preferred Stock and
the Company Series B Preferred Stock.
"Company SEC Reports" has the meaning set forth in Section 5.8(a) of this
Agreement.
"Company Series A Preferred Stock" means the Company Series A Preferred
Stock, par value $0.0001 per share, of the Company.
"Company Series B Preferred Stock" means the Company Series B Preferred
Stock, par value $0.0001 per share, of the Company.
"Company Stock" means the Company Preferred Stock and the Company Common
Stock.
"Company Stockholder" or "Company Stockholders" has the meaning set forth
in Section 3.4 of this Agreement.
"Company Stockholder Vote" has the meaning set forth in Section 5.5 of
this Agreement.
"Company Stockholder Written Consent" has the meaning set forth in the
Recitals of this Agreement.
"Confidentiality Agreement" has the meaning set forth in Section 9.4 of
this Agreement.
"Contract" means any contract, agreement, license, lease or other
instrument, and all amendments, modifications and supplements thereto.
"Controlled Group Liability" means any and all liabilities of the Selling
Companies, any of their Subsidiaries or any ERISA Affiliate (a) under Title IV
of ERISA, (b) under Section 302 of ERISA, (c) under Sections 412 and 4971 of the
Code, or (d) as a result of a failure to comply with the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code.
"Copyrights" has the meaning set forth in the definition of "Intellectual
Property Assets" in this Article I.
6
"Court" means any court, arbitration tribunal or judicial body of the
United States, any domestic state, or any foreign country, and any political
subdivision thereof.
"Current Assets" has the meaning set forth in Section 3.7(b) of this
Agreement.
"Current Liabilities" has the meaning set forth in Section 3.7(b) of this
Agreement.
"DGCL" has the meaning set forth in the Recitals to this Agreement.
"Deductible Amount" has the meaning set forth in Section 11.3(c)(i) of
this Agreement.
"Dissenting Shares" has the meaning set forth in Section 4.2(a) of this
Agreement.
"Dissenting Stockholders" has the meaning set forth in Section 4.2(a) of
this Agreement.
"DLLCA" has the meaning set forth in the Recitals to this Agreement.
"Effective Times" has the meaning set forth in Section 2.3(d) of this
Agreement.
"Employee Benefit Plan" means any employee benefit plan, program, policy,
practices or other arrangement providing benefits to any current or former
employee, officer or director of any of the Selling Companies or any of their
Subsidiaries or any beneficiary or dependent thereof that is or has been within
the last six (6) years sponsored or maintained by any of the Selling Companies
or any of their Subsidiaries or to which any of the Selling Companies or any of
their Subsidiaries contributes or is or has been within the last six (6) years
obligated to contribute, whether or not written, including without limitation
any employee welfare benefit plan within the meaning of Section 3(1) of ERISA,
any employee pension benefit plan within the meaning of Section 3(2) of ERISA
(whether or not such plan is subject to ERISA) and any bonus, incentive,
deferred compensation, vacation, stock, stock purchase, stock option, severance,
employment, change of control or fringe benefit plan, program, policy or
agreement. For purposes of this definition of Employee Benefit Plan, references
to the "Selling Companies" or their "Subsidiaries" shall include and incorporate
each of their respective ERISA Affiliates.
"Employment Agreement" means a Contract of the Selling Companies or any of
their Subsidiaries with any individual who is rendering or has rendered services
thereto as an employee or consultant pursuant to which the Selling Companies or
any of their Subsidiaries has any actual or contingent liability or obligation
as of or following the date hereof to provide compensation and/or benefits in
consideration for past, present or future services (other than base salary in
the ordinary course of business for employment services provided). For purposes
of this definition of Employment Agreement, references to the "Selling
Companies" or their "Subsidiaries" shall include and incorporate each of their
respective ERISA Affiliates.
"Employment Letters" has the meaning set forth in the Recitals of this
Agreement.
"Environment" has the meaning set forth in Section 5.19(e)(i) of this
Agreement.
"Environmental Laws" has the meaning set forth in Section 5.19(e)(ii) of
this Agreement.
7
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any organization that is or has ever been treated
as a single employer with the Company or any of its Subsidiaries under Section
414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.
"Estimated Closing Balance Sheet" has the meaning set forth in Section
3.7(a)(i) of this Agreement.
"Estimated Net Working Capital" has the meaning set forth in Section
3.7(a)(i) of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 4.1(a) of this
Agreement.
"Excluded Representations and Warranties" has the meaning set forth in
Section 11.1 of this Agreement.
"Final Amount" has the meaning set forth in Section 3.8(c) of this
Agreement.
"Final Net Working Capital" has the meaning set forth in Section 3.8(b) of
this Agreement.
"First Certificate of Merger" has the meaning set forth in Section 2.3(a)
of this Agreement.
"First Effective Time" has the meaning set forth in Section 2.3(a) of this
Agreement.
"First Merger" has the meaning set forth in the Recitals of this
Agreement.
"First Merger Consideration" has the meaning set forth in Section 3.1(b)
of this Agreement.
"First Surviving Corporation" has the meaning set forth in the Recitals of
this Agreement.
"Fluent" has the meaning set forth in the introductory paragraph of this
Agreement.
"Fluent Balance Sheet" has the meaning set forth in Section 5.7(c) of this
Agreement.
"Fluent Board" means the board of directors of Fluent.
"Fluent Cash Escrow Amount" has the meaning set forth in Section 11.3(a)
of this Agreement.
"Fluent Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of Fluent.
8
"Fluent Common Stock" means the Common Stock, par value $0.01 per share,
of Fluent.
"Fluent Financial Statements" has the meaning set forth in Section 5.7(b)
of this Agreement.
"Fluent Master Escrow" has the meaning set forth in Section 11.3(i) of
this Agreement.
"Fluent Notes" has the meaning set forth in Section 9.22 of this
Agreement.
"Fluent Preferred Stock" means the Series A Preferred Stock, par value
$0.01 per share, of Fluent.
"Fluent Stock" means the Fluent Preferred Stock and the Fluent Common
Stock.
"Fluent Stockholder" or "Fluent Stockholders" has the meaning set forth in
Section 3.5 of this Agreement.
"Fluent Stockholder's Pro Rata Cash Amount" has the meaning set forth in
Section 3.9(b) of this Agreement.
"Fluent Stockholder Vote" has the meaning set forth in Section 5.5 of this
Agreement.
"Fluent Stockholder Written Consent" has the meaning set forth in the
Recitals of this Agreement.
"Fluent Working Capital Escrow Amount" has the meaning set forth in
Section 3.9(a) of this Agreement.
"Fourth Certificate of Merger" has the meaning set forth in Section 2.3(d)
of this Agreement.
"Fourth Effective Time" has the meaning set forth in Section 2.3(d) of
this Agreement.
"Fourth Merger" has the meaning set forth in the Recitals of this
Agreement.
"Fourth Merger Consideration" has the meaning set forth in Section 3.1(d)
of this Agreement.
"Fourth Merger Indebtedness" has the meaning set forth in Section 7.16(b)
of this Agreement.
"Fourth Surviving Corporation" has the meaning set forth in the Recitals
of this Agreement.
"GAAP" means U.S. generally accepted accounting principles consistently
applied throughout the periods indicated.
"Governmental Authority" means any governmental agency, authority,
department, commission, board, bureau, Court or instrumentality of the United
States, or any state, local or
9
any foreign government, and any political subdivision or agency, bureau or
commission thereof, and includes any authority having governmental or
quasi-governmental powers, including any administrative agency.
"Hazardous Materials" has the meaning set forth in Section 5.19(e)(iii) of
this Agreement.
"Holding" has the meaning set forth in the introductory paragraph of this
Agreement.
"Holding Board" means the board of directors of Holding.
"Holding Cash Escrow Amount" has the meaning set forth in Section 11.3(a)
of this Agreement.
"Holding Certificate of Incorporation" means the Third Amended and
Restated Certificate of Incorporation of Holding.
"Holding Class A Common Stock" means the Class A Common Stock, par value
$0.01 per share, of Holding.
"Holding Class B Common Stock" means the Class B Common Stock, par value
$0.01 per share, of Holding.
"Holding Common Stock" means the Holding Class A Common Stock and the
Holding Class B Common Stock.
"Holding Designee" has the meaning set forth in Section 9.7 of this
Agreement.
"Holding Master Escrow" has the meaning set forth in Section 11.3(i) of
this Agreement.
"Holding Preferred Stock" means the Holding Series A Preferred Stock, the
Holding Series B Preferred Stock, the Holding Series C Preferred Stock and the
Holding Series D Preferred Stock.
"Holding Preferred Stock Consent" has the meaning set forth in Section
9.16 of this Agreement.
"Holding Series A Preferred Stock" means the Series A Preferred Stock, par
value $0.01 per share, of Holding.
"Holding Series B Preferred Stock" means the Series B Preferred Stock, par
value $0.01 per share, of Holding.
"Holding Series C Preferred Stock" means the Series C Preferred Stock, par
value $0.01 per share, of Holding.
"Holding Series D Preferred Stock" means the Series D Preferred Stock, par
value $0.01 per share, of Holding.
10
"Holding Stock" means the Holding Preferred Stock and the Holding Common
Stock.
"Holding Stockholder" or "Holding Stockholders" has the meaning set forth
in Section 3.2 of this Agreement.
"Holding Stockholder Vote" has the meaning set forth in Section 5.5 of
this Agreement.
"Holding Stockholder Written Consent" has the meaning set forth in the
Recitals of this Agreement.
"Holding Stockholder's Pro Rata Cash Amount" has the meaning set forth in
Section 3.9(b) of this Agreement.
"Holding Working Capital Escrow Amount" has the meaning set forth in
Section 3.9(a) of this Agreement.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
"Identified Employees" means those employees identified on Schedule 1.2.
"Incentive Stock" means those shares of Fluent Common Stock held by Fluent
Stockholders other than the Company.
"Income Tax" means any federal, state, local or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"Indebtedness" means Liabilities (a) for borrowed money, (b) evidenced by
bonds, debentures, notes or similar instruments, (c) upon which interest charges
are customarily paid (other than obligations accepted in connection with the
purchase of products or services in the ordinary course of business), (d) of
others secured by (or which the holder of such Liabilities has an existing
right, contingent or otherwise, to be secured by) any Lien or security interest
on property owned or acquired by the Person in question whether or not the
obligations secured thereby have been assumed, (e) under leases required to be
accounted for as capital leases under GAAP, or (f) guarantees relating to any
such Liabilities. Notwithstanding the foregoing, for all purposes hereunder,
Indebtedness shall not include the Fourth Merger Indebtedness, any Intercompany
Payables, and guarantees, if any, among the Selling Companies and/or their
Subsidiaries, and the Fluent Notes.
"Indemnification Cut-Off Date" has the meaning set forth in Section 11.1
of this Agreement.
"Indemnification Escrow Agent" has the meaning set forth in Section
11.3(a) of this Agreement.
"Indemnification Escrow Funds" has the meaning set forth in Section
11.3(a) of this Agreement.
11
"Indemnification Escrow Period" has the meaning set forth in Section
11.3(d) of this Agreement.
"Intellectual Property Assets" means any of the Selling Companies' or any
of their Subsidiaries': (a) patents, patent applications, patent rights, and
inventions and discoveries and invention disclosures (whether or not patented)
(collectively, "Patents"); (b) trade names, trade dress, logos, packaging
design, slogans, Internet domain names, registered and unregistered trademarks
and service marks and related registrations and applications for registration
(collectively, "Marks"); (c) copyrights in both published and unpublished works,
including without limitation all compilations, databases and computer programs,
manuals and other documentation and all copyright registrations and
applications, and all derivatives, translations, localizations, adaptations and
combinations of the above, whether or not registered or sought to be registered
(collectively, "Copyrights"); (d) know-how, trade secrets, confidential or
proprietary information, research in progress, algorithms, data, designs,
processes, formulae, drawings, schematics, blueprints, flow charts, models,
strategies, prototypes, techniques, testing procedures and testing results
(collectively, "Trade Secrets"); (e) other intellectual property rights and/or
proprietary rights relating to any of the foregoing; and (f) goodwill,
franchises, licenses, permits, consents, approvals, immunities, covenants not to
▇▇▇ and claims of infringement against third parties.
"Intercompany Payables" means any payables between the Selling Companies
or their respective Subsidiaries specifically excluding any Spin-Off Entity.
"Intercompany Receivables" means any receivables between the Selling
Companies or their respective Subsidiaries specifically excluding any Spin-Off
Entity.
"IRS" means the United States Internal Revenue Service.
"Knowledge of Parent" and all permutations thereof (including "Parent's
Knowledge"), means the knowledge of those persons listed on Exhibit H attached
hereto after due inquiry of Parent's employees, advisors and representatives and
reasonable investigation of Parent's books and records.
"Knowledge of the Selling Companies" and all permutations thereof
(including "Selling Companies' Knowledge"), means the knowledge of those persons
listed on Exhibit I attached hereto after due inquiry of each of the Selling
Companies' employees, advisors and representatives and reasonable investigation
of each of the Selling Companies' books and records.
"Laws" means any laws, statutes, codes, executive orders, licensing
requirements, ordinances and Regulations of any Governmental Authority,
including all Orders having the effect of law in each such jurisdiction.
"Leased Real Property" has the meaning set forth in Section 5.15(c) of
this Agreement.
"Leases" has the meaning set forth in Section 5.15(c) of this Agreement.
12
"Liabilities" means all debts, obligations and other liabilities of any
kind or nature (whether known, unknown, accrued, or not accrued, absolute or
contingent, liquidated or unliquidated, due or to become due, asserted or
unasserted or otherwise).
"Lien" means any mortgage, pledge, security interest, attachment,
easement, restriction, encumbrance or other charge, lien (statutory or
otherwise), option, conditional sale agreement, right of first refusal or right
of first offer (including any agreement to give any of the foregoing).
"Loss" or "Losses" means any and all damages, fines, fees, Taxes,
penalties, charges, assessments, deficiencies, judgments, defaults, settlements
and other losses (including diminution in value) and fees and expenses
(including interest, expenses of investigation, defense, prosecution and
settlement of claims, court costs, fees and expenses of attorneys, accountants
and other experts, and all other fees and expenses) as the same are incurred in
connection with any Action, Third Party Claim or any other claim, default or
assessment (including any claim asserting or disputing any right under this
Agreement or any Ancillary Agreement against any party hereto or otherwise),
plus any interest that may accrue on any of the foregoing.
"Marks" has the meaning set forth in the definition of "Intellectual
Property Assets" in this Article I.
"Master Escrow Agent" has the meaning set forth in Section 11.3(i) of this
Agreement.
"Material Contracts" has the meaning set forth in Section 5.17 of this
Agreement.
"Material Employment Agreement" means an Employment Agreement pursuant to
which any of the Selling Companies or any of their Subsidiaries has or would
reasonably be expected to have any obligation to provide compensation and/or
benefits (including without limitation severance pay or benefits) in an amount
or having a value in excess of $100,000 per year or $300,000 in the aggregate.
"Merger Consideration" has the meaning set forth in Section 3.1(a) of this
Agreement.
"Merger LLC" has the meaning set forth in the introductory paragraph of
this Agreement.
"Merger LLC Consent" has the meaning set forth in Section 9.2(b) of this
Agreement.
"Merger Sub" has the meaning set forth in the introductory paragraph of
this Agreement.
"Merger Sub Consent" has the meaning set forth in Section 9.2(a) of this
Agreement.
"Merger Sub Consents" has the meaning set forth in Section 9.2(d) of this
Agreement.
"Merger Sub II" has the meaning set forth in the introductory paragraph of
this Agreement.
"Merger Sub II Consent" has the meaning set forth in Section 9.2(c) of
this Agreement.
13
"Merger Sub III" has the meaning set forth in the introductory paragraph
of this Agreement.
"Merger Sub III Consent" has the meaning set forth in Section 9.2(d) of
this Agreement.
"Merger Subs" has the meaning set forth in the introductory paragraph of
this Agreement.
"Mergers" has the meaning set forth in the Recitals of this Agreement.
"Multiemployer Plan" means any "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA.
"Multiple Employer Plan" has the meaning set forth in Section 5.14(d) of
this Agreement.
"Net Working Capital" has the meaning set forth in Section 3.7(b) of this
Agreement.
"Net Working Capital Overage" has the meaning set forth in Section 3.8(c)
of this Agreement.
"Net Working Capital Shortfall" has the meaning set forth in Section
3.8(c) of this Agreement.
"Officer's Certificate" has the meaning set forth in Section 11.3(f)(i) of
this Agreement.
"Order" means any judgment, order, writ, injunction, ruling, decision or
decree of, or any settlement under the jurisdiction of, any Court or
Governmental Authority.
"Other Business" means the business conducted by the Spin-Off Entities
(previously, currently and prospectively).
"Other Business Liabilities" means all debts, obligations and other
liabilities of any kind or nature (whether known, unknown, accrued, or not
accrued, absolute or contingent, liquidated or unliquidated, due or to become
due, asserted or unasserted or otherwise) whether now existing or hereafter
arising, relating to, based upon, resulting from, or arising out of the Other
Business or the Other Business Transfer, including, without limitation, any
obligations or liabilities relating to product liability matters, warranty
claims, failure to comply with applicable laws, personal injury and property
damage matters, environmental matters, worker health and safety matters and
Taxes resulting from or related to the Other Business or the Other Business
Transfer.
"Other Business Transfer" means the transfer to and assumption by the
Spin-Off Entities of all of the Other Business Liabilities, in each case
pursuant to agreements and other documents in form and substance as set forth in
Exhibit A.
"Parent" has the meaning set forth in the introductory paragraph of this
Agreement.
"Parent Board" means the board of directors of Parent.
14
"Parent Charter" has the meaning set forth in the Recitals of this
Agreement.
"Parent Common Stock" means the Common Stock, par value $0.01 per share,
of Parent.
"Parent Disclosure Schedule" has the meaning set forth in the introduction
to Article VII of this Agreement.
"Parent Expenses" has the meaning set forth in Section 13.2(b) of this
Agreement.
"Parent Indemnified Parties" or "Parent Indemnified Party" has the meaning
set forth in Section 11.2(a) of this Agreement.
"Parent Material Adverse Effect" means any change, event, circumstance or
condition that has or results in a material adverse effect (a) on the business,
financial condition, assets, liabilities, results of operations or prospects of
Parent and its Subsidiaries, taken as a whole, except that none of the following
constitute a Parent Material Adverse Effect: (i) changes in general economic or
political conditions or the securities market in general (whether as a result of
acts of terrorism, war (whether or not declared), armed conflicts or otherwise)
to the extent they do not disproportionately effect Parent and its Subsidiaries
taken as a whole; (ii) changes, effects or circumstances resulting from the
announcement of this Agreement or the consummation of the transactions
contemplated by this Agreement; (iii) a decline in the price of Parent Common
Stock after the date hereof; or (iv) any action taken at the written request of
the Selling Companies, or (b) on the ability of Parent and Merger Subs to
consummate the transactions contemplated by this Agreement. For purposes of
clarification, an event (other than an event described in clauses (a)(i) through
(iv) above) which would otherwise constitute a Parent Material Adverse Effect
shall not be deemed to not constitute a Parent Material Adverse Effect solely
because such event has resulted in or resulted from one of the events described
in clauses (a)(i) through (iv) above.
"Parent Notice" has the meaning set forth in Section 3.7(a)(i) of this
Agreement.
"Parent Payment Notice" has the meaning set forth in Section 3.8(c) of
this Agreement.
"Parent Product" has the meaning set forth in Section 7.11(b) of this
Agreement.
"Parent SEC Reports" has the meaning set forth in Section 7.6(a) of this
Agreement.
"Patents" has the meaning set forth in the definition of "Intellectual
Property Assets" in this Article I.
"Permitted Liens" means (i) Liens reflected in either the Company Balance
Sheet or the Fluent Balance Sheet, including Liens in favor of the holder of the
Senior Indebtedness and Liens evidencing capitalized leases, (ii) Liens for
Taxes, fees, assessments or other governmental charges which are not delinquent
or remain payable without penalty, (iii) Liens set forth on Section 5.15(d) of
the Selling Companies Disclosure Schedule and (iv) Liens of record or
imperfections of title which are not, individually or in the aggregate, material
in character, amount or extent and which do not materially detract from the
value or materially interfere with the present or presently contemplated use of
the assets subject thereto or affected thereby or
15
which would not otherwise reasonably be expected to, individually or in the
aggregate, restrict, impair or otherwise materially impact the ability of the
Selling Companies to continue to own, use and operate such assets as currently
utilized.
"Person" means an individual, corporation, partnership, association,
trust, unincorporated organization, limited liability company or other legal
entity.
"Plan" means any Employee Benefit Plan.
"Pre-Closing Period" has the meaning set forth in Section 8.1 of this
Agreement.
"Pre-Closing Tax Period" has the meaning set forth in Section 12.1(a) of
this Agreement.
"Principal Stockholder" or "Principal Stockholders" has the meaning set
forth in the introductory paragraph of this Agreement, and includes any
successor or assign of any such Principal Stockholder.
"Principal Stockholder Indemnifying Party" or "Principal Stockholder
Indemnifying Parties" has the meaning set forth in Section 11.2(b) of this
Agreement.
"Principal Stockholder Non-Solicitation Agreement" has the meaning set
forth in the Recitals of this Agreement.
"Qualified Plans" has the meaning set forth in Section 5.14(b) of this
Agreement.
"Real Property" has the meaning set forth in Section 5.15(a) of this
Agreement.
"Real Property Regulations" has the meaning set forth in Section 5.15(b)
of this Agreement.
"Registrable Securities" has the meaning set forth in Section 9.6 of this
Agreement.
"Registration Statement" has the meaning set forth in Section 5.8(c) of
this Agreement.
"Registration Rights Agreement" has the meaning set forth in the Recitals
of this Agreement.
"Regulation" means any rule or regulation of any Governmental Authority.
"Release" has the meaning set forth in Section 5.19(e)(iv) of this
Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Second Certificate of Merger" has the meaning set forth in Section 2.3(b)
of this Agreement.
"Second Effective Time" has the meaning set forth in Section 2.3(b) of
this Agreement.
"Second Merger" has the meaning set forth in the Recitals of this
Agreement.
16
"Second Surviving Company" has the meaning set forth in the Recitals of
this Agreement.
"Section 262 Notice" has the meaning set forth in Section 9.1(b)(ii) of
this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Company" or "Selling Companies" has the meaning set forth in the
introductory paragraph of this Agreement.
"Selling Companies Boards" means the Holding Board, the Company Board and
the Fluent Board.
"Selling Companies Disclosure Schedule" has the meaning set forth in the
introduction to Article V.
"Selling Companies Employees" has the meaning set forth in Section 9.11 of
this Agreement.
"Selling Companies Licenses" has the meaning set forth in Section 5.24 of
this Agreement.
"Selling Companies Marks" has the meaning set forth in Section 5.18(a) of
this Agreement.
"Selling Companies Material Adverse Effect" means any change, event,
circumstance or condition that has or results in a material adverse effect (a)
on the business, financial condition, assets, liabilities, results of operations
or prospects of the Selling Companies and their respective Subsidiaries, taken
as a whole, except that none of the following constitute a Selling Companies
Material Adverse Effect: (i) changes in general economic or political conditions
or the securities market in general (whether as a result of acts of terrorism,
war (whether or not declared), armed conflicts or otherwise) to the extent they
do not disproportionately effect the Selling Companies and their respective
Subsidiaries taken as a whole; (ii) changes, effects or circumstances resulting
from the announcement of this Agreement or the consummation of the transactions
contemplated by this Agreement; or (iii) any action taken at the written request
of Parent or any of the Merger Subs, or (b) on the ability of the Selling
Companies to consummate the transactions contemplated by this Agreement. For
purposes of clarification, an event (other than an event described in clauses
(a)(i) through (iii) above) which would otherwise constitute a Selling Companies
Material Adverse Effect shall not be deemed to not constitute a Selling
Companies Material Adverse Effect solely because such event has resulted in or
resulted from one of the events described in clauses (a)(i) through (iii) above.
"Selling Companies Product" has the meaning set forth in Section
5.18(a)(iv) of this Agreement.
"Selling Companies Stock" means Holding Stock, the Company Stock and
Fluent Stock.
17
"Selling Companies Trade Secrets" has the meaning set forth in Section
5.18(a)(xi) of this Agreement.
"Senior Indebtedness" has the meaning set forth in Section 3.6(a) of this
Agreement.
"SOX" means the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
"Spin-Off" has the meaning set forth in the Recitals of this Agreement.
"Spin-Off Entities" has the meaning set forth in the Recitals of this
Agreement.
"Spin-Off Entities Non-Competition Agreements" has the meaning set forth
in the Recitals of this Agreement.
"Stock Consideration" has the meaning set forth in Section 3.1(a)(ii) of
this Agreement.
"Stock Escrow Amount" has the meaning set forth in Section 11.3(a) of this
Agreement.
"Stockholder" or "Stockholders" means the Holding Stockholders, the
Company Stockholders and Fluent Stockholders.
"Stockholder Notices" has the meaning set forth in Section 9.1(b)(i) of
this Agreement.
"Stockholder Votes" means the Holding Stockholder Vote, the Company
Stockholder Vote and the Fluent Stockholder Vote.
"Stockholder Written Consents" has the meaning set forth in the Recitals
of this Agreement.
"Stockholder's Pro Rata Stock Amount" shall mean the pro rata amount of
the stock portion of the Merger Consideration set forth in the Schedule provided
by the Selling Companies at the Closing.
"Stockholders' Representative" means ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners II, L.P.
"Stockholders' Representative Notice" has the meaning set forth in Section
3.8(a) of this Agreement.
"Straddle Period" has the meaning set forth in Section 12.2 of this
Agreement.
"Subordinated Indebtedness" has the meaning set forth in Section 3.6(b) of
this Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture, limited liability company, trust or other legal
entity of which such Person (either alone or through or together with any other
Subsidiary) owns, directly or indirectly, at least a majority of the capital
stock or other equity or similar interest in such entity, or which is
consolidated with such Person for financial reporting purposes; provided that,
as used herein with respect to the Selling Companies, the term "Subsidiary"
shall not include any of the Spin-Off Entities.
18
"Superior Proposal" means a bona fide written Acquisition Proposal that
the Selling Companies Boards conclude in good faith, after consultation with
outside legal counsel, is more favorable, from a financial point of view, to the
Stockholders than the Mergers and the other transactions contemplated hereby,
after taking into account (a) the likelihood of consummation of such transaction
on the terms set forth therein and (b) all legal, financial (including the
financing terms of such proposal), regulatory and other aspects of such
proposal.
"Surviving Companies" has the meaning set forth in the Recitals of this
Agreement.
"2006 Compensation Plan" has the meaning set forth in Section 5.9(e) of
this Agreement.
"Tax Authority" means any Governmental Authority or any quasi-governmental
or private body having jurisdiction over the assessment, determination,
collection or imposition of any Taxes.
"Taxes" means all taxes and governmental impositions of any kind in the
nature of (or similar to) taxes, payable to any federal, state, local or foreign
taxing authority or other Governmental Authority, including, but not limited to,
those on or measured by or referred to as income, franchise, profits, gross
receipts, capital, ad valorem, custom duties, alternative or add-on minimum
taxes, estimated, environmental, disability, registration, value added, sales,
use, service, real or personal property, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, and interest, penalties
and additions to tax imposed with respect thereto.
"Tax Return" means any report, return, document, declaration or other
information (and any supporting schedules or attachments thereto) required to be
supplied to any Tax Authority or jurisdiction with respect to Taxes (including
any returns or reports filed on a consolidated, unitary, or combined basis).
"Third Certificate of Merger" has the meaning set forth in Section 2.3(c)
of this Agreement.
"Third Effective Time" has the meaning set forth in Section 2.3(c) of this
Agreement.
"Third Merger" has the meaning set forth in the Recitals of this
Agreement.
"Third Merger Consideration" has the meaning set forth in Section 3.1(c)
of this Agreement.
"Third Party Claim" has the meaning set forth in Section 11.4(a) of this
Agreement.
"Third Party Consents" has the meaning set forth in Section 9.5(e) of this
Agreement.
"Third Party Rights" has the meaning set forth in Section 5.18(a)(iv) of
this Agreement.
"Third Surviving Corporation" has the meaning set forth in the Recitals of
this Agreement.
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"Trade Secrets" has the meaning set forth in the definition of
"Intellectual Property Assets" in this Article I.
"Transaction Expenses" has the meaning set forth in Section 3.7(b) of this
Agreement.
"Transfer Taxes" has the meaning set forth in Section 12.6 of this
Agreement.
"Voting Agreement" has the meaning set forth in the Recitals of this
Agreement.
"Waiver Letters" has the meaning set forth in the Recitals of this
Agreement.
"Warrant" or "Warrants" means any warrants or other rights to purchase
Company Common Stock pursuant to that certain Warrant Agreement, dated February
1, 2000 between the Company and the purchasers listed therein.
"Warrant Consent" has the meaning set forth in Section 9.16 of this
Agreement.
"Welfare Plan" has the meaning set forth in Section 5.14(c) of this
Agreement.
"Withdrawal Liability" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as those terms
are defined in Part 1 of Subtitle E of Title IV of ERISA inclusive of Section
4201 of ERISA and without regard to any waiver or reduction in the same pursuant
to Sections 4206, 4207 or 4208 of ERISA.
"Working Capital Accounting Principles" means, except as set forth in
Section 3.7(b), the accounting principles, procedures, policies and methods used
in preparing the audited consolidated balance sheet of the Company and its
Subsidiaries (including the Spin-Off Entities) as of December 31, 2004 that is
included in the Company's annual report on Form 10-K filed with the Securities
and Exchange Commission, including the types of adjustments used in preparing
such balance sheet as set forth in the notes thereto, to the extent that they
are in accordance with GAAP.
"Working Capital Escrow Agent" has the meaning set forth in Section 3.9(a)
of this Agreement.
"Working Capital Escrow Amounts" has the meaning set forth in Section
3.9(a) of this Agreement.
ARTICLE II - THE MERGERS
SECTION 2.1 THE MERGERS.
(a) Subject to the terms and conditions of this Agreement and in
accordance with the DGCL, at the First Effective Time, Holding and Merger Sub
shall consummate the First Merger pursuant to which (i) Merger Sub shall be
merged with and into Holding and the separate corporate existence of Merger Sub
shall thereupon cease, (ii) Holding shall be the surviving entity in the First
Merger, and (iii) the separate existence of Holding with all its rights,
20
privileges, immunities, powers and franchises shall continue unaffected by the
First Merger. The First Merger shall have the effects set forth in the DGCL.
(b) Subject to the terms and conditions of this Agreement and in
accordance with the DGCL, immediately after the First Effective Time, Holding
and Merger LLC shall consummate the Second Merger pursuant to which (i) Holding
shall be merged with and into Merger LLC and the separate corporate existence of
Holding shall thereupon cease, (ii) Second Surviving Company shall be the
surviving entity in the Second Merger, and (iii) the separate existence of
Second Surviving Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Second Merger. The Second Merger
shall have the effects set forth in the DGCL and in the DLLCA.
(c) Subject to the terms and conditions of this Agreement and in
accordance with the DGCL, immediately after the Second Effective Time, the
Company and Merger Sub II shall consummate the Third Merger pursuant to which
(i) Merger Sub II shall be merged with and into the Company and the separate
corporate existence of Merger Sub II shall thereupon cease, (ii) Third Surviving
Corporation shall be the surviving entity in the Third Merger, and (iii) the
separate existence of Third Surviving Corporation with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Third Merger. The Third Merger shall have the effects set forth in the DGCL.
(d) Subject to the terms and conditions of this Agreement and in
accordance with the DGCL, immediately after the Third Effective Time, Fluent and
Merger Sub III shall consummate the Fourth Merger pursuant to which (i) Merger
Sub III shall be merged with and into Fluent and the separate corporate
existence of Merger Sub III shall thereupon cease, (ii) Fourth Surviving
Corporation shall be the surviving entity in the Fourth Merger, and (iii) the
separate existence of Fourth Surviving Corporation with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Fourth Merger. The Fourth Merger shall have the effects set forth in the DGCL.
SECTION 2.2 CLOSING. The closing of the Mergers (the "Closing") shall
occur on the third (3rd) Business Day after all of the conditions set forth in
Article X (other than conditions which by their terms are required to be
satisfied or waived at the Closing) shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same, and,
subject to the foregoing, shall take place at such time and on a date to be
specified by the parties (the "Closing Date"); provided, however, the Closing
shall not occur prior to April 3, 2006. The Closing shall take place at the
offices of ▇▇▇▇▇▇▇ Procter LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
or at such other place as agreed to by the parties hereto.
SECTION 2.3 EFFECTIVE TIMES.
(a) On the Closing Date, Holding shall duly execute a certificate of
merger (the "First Certificate of Merger") and file such First Certificate of
Merger with the Secretary of State of the State of Delaware in accordance with
the DGCL. The First Merger shall become effective at such time as the First
Certificate of Merger, accompanied by payment of the filing fee (in accordance
with applicable Law), has been examined by, and received the endorsed approval
of, the Secretary of State of the State of Delaware, or at such subsequent time
as Parent
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and Holding shall agree and shall specify in the First Certificate of Merger
(the date and time the First Merger becomes effective being the "First Effective
Time").
(b) On the Closing Date and after the First Effective Time, Merger
LLC shall duly execute a certificate of merger (the "Second Certificate of
Merger") and file such Second Certificate of Merger with the Secretary of State
of the State of Delaware in accordance with the DLLCA and DGCL. The Second
Merger shall become effective at such time as the Second Certificate of Merger,
accompanied by payment of the filing fee (in accordance with applicable Law),
has been examined by, and received the endorsed approval of, the Secretary of
State of the State of Delaware, or at such subsequent time as Parent and Holding
shall agree and shall specify in the Second Certificate of Merger (the date and
time the Second Merger becomes effective being the "Second Effective Time").
(c) On the Closing Date and after the Second Effective Time, the
Company shall duly execute a certificate of merger (the "Third Certificate of
Merger") and file such Third Certificate of Merger with the Secretary of State
of the State of Delaware in accordance with the DGCL. The Third Merger shall
become effective at such time as the Third Certificate of Merger, accompanied by
payment of the filing fee (in accordance with applicable Law), has been examined
by, and received the endorsed approval of, the Secretary of State of the State
of Delaware, or at such subsequent time as Parent and the Company shall agree
and shall specify in the Third Certificate of Merger (the date and time the
Third Merger becomes effective being the "Third Effective Time").
(d) On the Closing Date and after the Third Effective Time, Fluent
shall duly execute a certificate of merger (the "Fourth Certificate of Merger")
and file such Fourth Certificate of Merger with the Secretary of State of the
State of Delaware in accordance with the DGCL. The Fourth Merger shall become
effective at such time as the Fourth Certificate of Merger, accompanied by
payment of the filing fee (in accordance with applicable Law), has been examined
by, and received the endorsed approval of, the Secretary of State of the State
of Delaware, or at such subsequent time as Parent and Fluent shall agree and
shall specify in the Fourth Certificate of Merger (the date and time the Fourth
Merger becomes effective being the "Fourth Effective Time," and with the First
Effective Time, the Second Effective Time and the Third Effective Time, the
"Effective Times").
SECTION 2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
COMPANIES.
(a) At the First Effective Time, the Holding Certificate of
Incorporation shall be amended in its entirety in the form attached hereto as
Exhibit J-1 and, as so amended, shall be the certificate of incorporation of the
First Surviving Corporation until thereafter amended as provided by applicable
Law and the terms of such certificate of incorporation. At the First Effective
Time, the by-laws of Holding shall be amended in their entirety in the form
attached as Exhibit J-2 and, as so amended, shall be the by-laws of the First
Surviving Corporation until thereafter amended as provided by applicable Law,
the terms of the certificate of incorporation of the First Surviving Corporation
and the terms of such by-laws.
(b) The certificate of formation of Merger LLC, as in effect
immediately prior to the Second Effective Time in the form attached hereto as
Exhibit K-1, shall be the certificate
22
of formation of the Second Surviving Company until thereafter changed or amended
as provided therein or by the DLLCA. The limited liability company agreement of
Merger LLC in effect immediately prior to the Second Effective Time in the form
attached hereto as Exhibit K-1 shall be, from and after the Second Effective
Time, the operating agreement of Second Surviving Company until thereafter
changed or amended as provided therein or by the DLLCA.
(c) At the Third Effective Time, the Company Certificate of
Incorporation shall be amended in its entirety in the form attached hereto as
Exhibit L-1 and, as so amended, shall be the certificate of incorporation of the
Third Surviving Corporation until thereafter amended as provided by applicable
Law and the terms of such certificate of incorporation. At the Third Effective
Time, the by-laws of the Company shall be amended in their entirety in the form
attached hereto as Exhibit L-2 and, as so amended, shall be the by-laws of the
Third Surviving Corporation until thereafter amended as provided by applicable
Law, the terms of the certificate of incorporation of the Third Surviving
Corporation and the terms of such by-laws.
(d) At the Fourth Effective Time, the Fluent Certificate of
Incorporation shall be amended in its entirety in the form attached hereto as
Exhibit M-1 and, as so amended, shall be the certificate of incorporation of the
Fourth Surviving Corporation until thereafter amended as provided by applicable
Law and the terms of such certificate of incorporation. At the Fourth Effective
Time, the by-laws of Fluent shall be amended in their entirety in the form
attached hereto as Exhibit M-2 and, as so amended, shall be the by-laws of the
Fourth Surviving Corporation until thereafter amended as provided by applicable
Law, the terms of the certificate of incorporation of the Fourth Surviving
Corporation and the terms of such by-laws.
SECTION 2.5 DIRECTORS AND OFFICERS.
(a) The directors and officers of Merger Sub immediately prior to
the First Effective Time shall be the initial directors and officers of the
First Surviving Corporation until their successors are duly elected or appointed
and qualified or until their earlier death, resignation or removal.
(b) The managers and officers of Merger LLC immediately prior to the
Second Effective Time shall be the initial managers and officers of the Second
Surviving Company until their successors are duly elected or appointed and
qualified or until their earlier death, resignation or removal.
(c) The directors and officers of Merger Sub II immediately prior to
the Third Effective Time shall be the initial directors and officers of the
Third Surviving Corporation until their successors are duly elected or appointed
and qualified or until their earlier death, resignation or removal.
(d) Each of the directors of Fluent immediately prior to the Fourth
Effective Time shall resign as of the Fourth Effective Time.
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ARTICLE III - EFFECT OF THE MERGERS ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS; ADJUSTMENTS
SECTION 3.1 CALCULATION OF MERGER CONSIDERATION. As used herein,
(a) "Merger Consideration" means:
(i) cash in an amount equal to $300,000,000 (the "Cash
Consideration") plus or minus the amounts provided in Sections 3.7 and 3.8
plus cash in an amount equal to the cash and cash equivalents of the
Selling Companies and their Subsidiaries as of the Closing Date; plus the
principal and accrued interest owed on any outstanding promissory notes
held by Fluent on the Closing Date that were issued by Fluent employees or
former employees to acquire Incentive Stock, minus the amounts required to
repay in full the amounts of Indebtedness outstanding on the Closing Date,
plus the aggregate exercise price of the outstanding Warrants, and minus
cash owed to the holders of Warrants pursuant to the terms of the Warrants
(as adjusted, the "Adjusted Cash Consideration"); and
(ii) 6,000,000 validly issued, fully-paid and non-assessable
shares of Parent Common Stock, as adjusted for any stock splits,
dividends, distributions, combinations or reclassifications after the date
hereof and prior to the Closing, minus Parent Common Stock to be issued to
the holders of Warrants pursuant to the terms of the Warrants (as
adjusted, the "Stock Consideration").
(b) "First Merger Consideration" means the consideration set forth
on Exhibit N-1.
(c) "Third Merger Consideration" means the consideration set forth
on Exhibit N-2.
(d) "Fourth Merger Consideration" means the consideration set forth
on Exhibit N-3.
SECTION 3.2 EFFECT ON CAPITAL STOCK IN THE FIRST MERGER. As of the First
Effective Time, by virtue of the First Merger and without any action on the part
of the holders of any shares of Holding Stock (each a "Holding Stockholder," and
collectively, the "Holding Stockholders") or the holders of any shares of
capital stock of Merger Sub:
(a) Each share of common stock, par value $0.01 per share, of Merger
Sub issued and outstanding immediately prior to the First Effective Time, shall
by virtue of the First Merger and without any action on the part of the holder
thereof, be converted into and shall become one fully paid nonassessable share
of common stock, par value $0.01 per share, of the First Surviving Corporation,
following the First Merger, and such share shall constitute the only outstanding
shares of capital stock of the First Surviving Corporation.
(b) Each share of Holding Stock that is owned by Holding, by any
direct or indirect Subsidiary of Holding, by Parent, by Merger Sub, or by any
Subsidiary of Parent, shall
24
automatically be canceled and shall cease to exist, and no cash or other
consideration shall be delivered or deliverable in exchange therefor.
(c) Each share of Holding Preferred Stock issued and outstanding
immediately prior to the First Effective Time (other than shares to be cancelled
in accordance with Section 3.2(b) and any Dissenting Shares) will, by virtue of
the First Merger and without any action on the part of the holder thereof, be
converted into the right to receive that portion of the Cash Consideration equal
to the liquidation value (as defined in the Holding Certificate of
Incorporation) plus any accrued but unpaid dividends, calculated as of the First
Effective Time, net to the holder thereof in cash, payable to the holder
thereof, without any interest thereon, upon surrender and exchange of the
Certificate representing such share of Holding Preferred Stock or the delivery
of an affidavit and the posting of a bond as described in Section 4.1(e). As of
the First Effective Time, all such shares of Holding Preferred Stock shall no
longer be outstanding and shall automatically be cancelled and shall cease to
exist, and each holder of a Certificate which immediately prior to the First
Effective Time represented any such shares of Holding Preferred Stock shall
cease to have any rights with respect thereto, except the right to receive, upon
the surrender of such Certificate or the delivery of an affidavit and the
posting of a bond as described in Section 4.1(e), the consideration described
above.
(d) Each share of Holding Common Stock issued and outstanding
immediately prior to the First Effective Time (other than shares to be cancelled
in accordance with Section 3.2(b) and any Dissenting Shares) will, by virtue of
the First Merger and without any action on the part of the holder thereof, be
converted into the right to receive the First Merger Consideration per share. As
of the First Effective Time, all such shares of Holding Common Stock shall no
longer be outstanding and shall automatically be cancelled and shall cease to
exist, and each holder of a Certificate which immediately prior to the First
Effective Time represented any such shares of Holding Common Stock shall cease
to have any rights with respect thereto, except the right to receive, upon the
surrender of such Certificate or the delivery of an affidavit and the posting of
a bond as described in Section 4.1(e), the First Merger Consideration per share.
SECTION 3.3 EFFECT ON CAPITAL STOCK IN THE SECOND MERGER. As of the
Second Effective Time, by virtue of the Second Merger and without any action on
the part of Holding Stockholders or the holders of any membership interests in
Merger LLC:
(a) All membership interests of Merger LLC issued and outstanding
immediately prior to the Second Effective Time shall, by virtue of the Second
Merger and without any action on the part of the holder thereof, be converted
into and shall become one membership interest of the Second Surviving Company
following the Second Merger, and such membership interest shall constitute the
only outstanding membership interests of the Second Surviving Company.
(b) Each share of Holding Stock that is owned by Holding, by any
direct or indirect Subsidiary of Holding, by Parent, by Merger LLC, or by any
Subsidiary of Parent, shall automatically be canceled and shall cease to exist,
and no cash or other consideration shall be delivered or deliverable in exchange
therefor.
25
SECTION 3.4 EFFECT ON CAPITAL STOCK IN THE THIRD MERGER. As of the Third
Effective Time, by virtue of the Third Merger and without any action on the part
of the holders of any shares of the Company Stock (each a "Company Stockholder,"
and collectively, the "Company Stockholders") or the holders of any shares of
capital stock of Merger Sub II:
(a) Each share of common stock, par value $0.01 per share, of Merger
Sub II issued and outstanding immediately prior to the Third Effective Time
shall, by virtue of the Third Merger and without any action on the part of the
holder thereof, be converted into and shall become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Third
Surviving Corporation following the Third Merger, and such share shall
constitute the only outstanding shares of capital stock of the Third Surviving
Corporation.
(b) Each share of Company Stock that is owned by the Company, by any
direct or indirect Subsidiary of the Company, by Parent, by the Second Surviving
Company, or by any Subsidiary of Parent, shall automatically be canceled and
shall cease to exist, and no cash or other consideration shall be delivered or
deliverable in exchange therefor.
(c) Each share of Company Stock other than Company Class H Common
Stock issued and outstanding immediately prior to the Third Effective Time
(other than shares to be cancelled in accordance with Section 3.4(b) and any
Dissenting Shares) will, by virtue of the Third Merger and without any action on
the part of the holder thereof, be converted into the right to receive the Third
Merger Consideration per share. As of the Third Effective Time, all such shares
of Company Stock shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist, and each holder of a Certificate which
immediately prior to the Third Effective Time represented any such shares of
Company Stock shall cease to have any rights with respect thereto, except the
right to receive, upon the surrender of such Certificate or the delivery of an
affidavit and the posting of a bond as described in Section 4.1(e), the Third
Merger Consideration per share.
(d) Each share of Company Class H Common Stock issued and
outstanding immediately prior to the Third Effective Time (other than shares to
be cancelled in accordance with Section 3.4(b) and any Dissenting Shares) will,
by virtue of the Third Merger and without any action on the part of the holder
thereof, automatically be canceled and shall cease to exist, and no cash or
other consideration shall be delivered or deliverable in exchange therefor.
SECTION 3.5 EFFECT ON CAPITAL STOCK IN THE FOURTH MERGER. As of the
Fourth Effective Time, by virtue of the Fourth Merger and without any action on
the part of the holders of any shares of Fluent Stock (each a "Fluent
Stockholder," and collectively, the "Fluent Stockholders") or the holder of any
shares of capital stock of Merger Sub III:
(a) Each share of common stock, par value $0.01 per share of Merger
Sub III issued and outstanding immediately prior to the Fourth Effective Time
shall, by virtue of the Fourth Merger and without any action on the part of the
holder thereof, be converted into and shall become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Fourth
Surviving Corporation following the Fourth Merger.
26
(b) Each share of Fluent Stock that is owned by Fluent, by any
direct or indirect Subsidiary of Fluent, by Parent, by Second Surviving Company,
by Third Surviving Corporation or by any Subsidiary of Parent, shall
automatically be canceled and shall cease to exist, and no cash or other
consideration shall be delivered or deliverable in exchange therefor.
(c) Each share of Incentive Stock issued and outstanding immediately
prior to the Fourth Effective Time (other than shares to be cancelled in
accordance with Section 3.5(b) and any Dissenting Shares) will, by virtue of the
Fourth Merger and without any action on the part of the holder thereof, be
converted into the right to receive, net of any applicable withholding for
Taxes, (i) from Fluent the cash portion of the Fourth Merger Consideration per
share and (ii) from Parent the stock portion of the Fourth Merger Consideration
per share. Notwithstanding any other provision of this Agreement, no entity that
owns, directly or indirectly, any interest in Fluent shall be liable for the
obligation of Fluent in the immediately preceding sentence. As of the Fourth
Effective Time, all such shares of Incentive Stock shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist, and
each holder of a Certificate which immediately prior to the Fourth Effective
Time represented any such shares of Incentive Stock shall cease to have any
rights with respect thereto, except the right to receive, upon the surrender of
such Certificate or the delivery of an affidavit and the posting of a bond as
described in Section 4.1(e), the Fourth Merger Consideration per share as
provided above.
SECTION 3.6 PAYMENTS AT CLOSING FOR INDEBTEDNESS.
(a) Immediately following the Fourth Effective Time, Parent shall
provide, or cause to be provided, sufficient funds to the Third Surviving
Corporation to enable the Third Surviving Corporation to repay all indebtedness
then outstanding under that certain Loan and Security Agreement dated as of July
31, 2002 (the "Senior Indebtedness"). Each of Parent, Merger Subs and the
Company shall cooperate in connection with the repayment of such Senior
Indebtedness and shall take such commercially reasonable actions as may be
necessary to facilitate such repayment and to facilitate the release, in
connection with such repayment, of any Liens securing such Senior Indebtedness.
(b) Immediately following the Fourth Effective Time, Parent shall
provide, or cause to be provided, sufficient funds to Third Surviving
Corporation to enable Third Surviving Corporation to repay all indebtedness then
outstanding under the Company's notes issued pursuant to that certain Indenture
dated as of February 2, 2000 among the Company, the guarantors named therein and
Bankers Trust Company as trustee (the "Subordinated Indebtedness"). Each of
Parent, Merger Subs and the Company shall cooperate in connection with the
repayment of such Subordinated Indebtedness and shall take such commercially
reasonable actions as may be necessary to facilitate such repayment and to
facilitate the release, in connection with such repayment, of any Liens securing
such Subordinated Indebtedness.
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SECTION 3.7 WORKING CAPITAL ADJUSTMENT.
(a) Estimated Closing Balance Sheet.
(i) Prior to the Closing Date, the Selling Companies shall
prepare, or cause to be prepared, in good faith an estimated consolidated
balance sheet of the Selling Companies and their Subsidiaries as of the
Closing Date (the "Estimated Closing Balance Sheet") prepared in
accordance with GAAP using the Working Capital Accounting Principles, and
a calculation based upon such Estimated Closing Balance Sheet setting
forth in reasonable detail as of immediately prior to the scheduled
Closing the estimated amount of Net Working Capital (the "Estimated Net
Working Capital"). Not later than ten (10) Business Days prior to the
Closing Date, the Selling Companies shall deliver to Parent (A) the
Estimated Closing Balance Sheet, together with worksheets and data that
support the Estimated Closing Balance Sheet and the Estimated Net Working
Capital and (B) a certificate of an executive officer of each of the
Selling Companies certifying that the Estimated Closing Balance Sheet and
the Estimated Net Working Capital were prepared in accordance with this
Section 3.7. Each of the Selling Companies shall also certify that,
assuming that Parent pays off all of the outstanding Indebtedness of the
Selling Companies and their Subsidiaries, immediately following the
Effective Times, the Selling Companies and their Subsidiaries shall have
no Indebtedness outstanding. The Selling Companies shall give, and shall
cause its advisers to give, Parent and its advisers reasonable access to
such books, records and personnel of the Selling Companies (including the
work papers of the Selling Companies and their accountants relating to the
preparation of the Estimated Closing Balance Sheet and the Estimated Net
Working Capital) as may be necessary to enable Parent and its advisers to
review the Estimated Closing Balance Sheet and the Estimated Net Working
Capital prior to the Closing. Parent shall have five (5) Business Days
following the receipt of the Estimated Closing Balance Sheet to review the
same and the calculation of the Estimated Net Working Capital. On or prior
to the expiration of such five-Business Day period, Parent may deliver to
the Selling Companies a written statement ("Parent Notice") accepting or
objecting in good faith to the Estimated Closing Balance Sheet and/or the
calculation of the Estimated Net Working Capital (or any portion thereof).
In the event that Parent shall object to the Estimated Closing Balance
Sheet and/or the Estimated Net Working Capital, such Parent Notice shall
include a detailed itemization of Parent's objections and reasons
therefor, and prior to the Closing, Parent and the Company shall in good
faith mutually agree on the amount of Estimated Net Working Capital. If
Parent does not deliver the Parent Notice to the Selling Companies within
such five-Business Day period, Parent shall be deemed to have accepted the
Estimated Closing Balance Sheet and the calculation of the Estimated Net
Working Capital; provided that, nothing in this Section 3.7(a)(i) shall
prohibit or otherwise limit Parent or the Selling Companies in any way
from making any change or objection (including, without limitation, a
change or objection not otherwise raised with respect to the Estimated
Closing Balance Sheet and/or the Estimated Net Working Capital) pursuant
to Section 3.8 following the Closing.
(ii) As provided in Section 3.1(a) hereof, the Adjusted Cash
Consideration to be paid at Closing shall be adjusted, dollar for dollar,
up or down, as appropriate, to the extent that the Estimated Net Working
Capital agreed upon in
28
accordance with the provisions of Section 3.7(a)(i) exceeds or is less
than the Base Net Working Capital.
(b) For purposes of this Section 3.7 and Section 3.8 below, "Net
Working Capital" means Current Assets minus Current Liabilities; "Current
Assets" means and includes all accounts receivable, unbilled receivables,
prepaid expenses and Intercompany Receivables and specifically excludes cash,
cash equivalents, and deferred Taxes, in each case as determined in accordance
with GAAP, consistently applied; and "Current Liabilities" means and includes
all accounts payable, accrued expenses (other than expenses with respect to the
Senior Indebtedness and the Subordinated Indebtedness), Intercompany Payables
and accrued but unpaid Taxes (giving effect to the utilization of current period
Tax losses and Tax net operating losses solely for the purpose of determining
Taxes payable from periods ending on or prior to the Closing Date, and excluding
any general Tax reserve not specifically owing as of the Closing Date for
periods prior to the Closing Date), and deferred revenues, in each case as
determined in accordance with GAAP, consistently applied. For purposes of the
preceding sentence, the amount of accrued but unpaid Taxes of the Selling
Companies and their Subsidiaries shall be determined by excluding the effect of
the transactions contemplated by this Agreement; provided, however, that the
Spin-Off shall be given effect for purposes of calculating accrued but unpaid
Taxes (giving effect to the utilization of all available Tax basis, current
period Tax losses and Tax net operating losses solely for the purpose of
determining Taxes payable from periods ending on or prior to the Closing Date),
and provided, further, that a deduction for the payment of each item of
Transaction Expenses shall be given effect for purposes of calculating accrued
but unpaid Taxes, but only to the extent that an opinion of tax counsel selected
by the Selling Companies and reasonably acceptable to Parent (with ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ LLP and Ernst & Young LLP being deemed to be acceptable to Parent for this
purpose) to the effect that the deduction of such items is more likely than not
the proper treatment of such items. Furthermore notwithstanding any provision of
GAAP to the contrary, for all purposes of the calculation of Net Working
Capital, Current Liabilities shall include any and all unpaid expenses related
to the Mergers or the transactions contemplated herein payable by the Selling
Companies and their Subsidiaries, but shall be deemed to be limited to any
attorneys' fees, investment banking fees, accountant fees, and any expenses
related to the purchase of an extended reporting period endorsement under each
of the Selling Companies existing directors' and officers' liability coverage in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction Expenses").
SECTION 3.8 POST CLOSING ADJUSTMENT.
(a) Following the Closing Date, Parent shall prepare, or cause to be
prepared, a consolidated balance sheet of the Selling Companies and their
Subsidiaries as of the Closing Date (the "Closing Balance Sheet") prepared in
accordance with GAAP using the Working Capital Accounting Principles and a
calculation based upon such Closing Balance Sheet setting forth in reasonable
detail the amount of Net Working Capital as of the Closing Date (the "Closing
Net Working Capital"). Within 60 days of the Closing Date, Parent shall deliver,
or cause to be delivered, to the Stockholders' Representative (i) the Closing
Balance Sheet, together with worksheets and data that support the Closing
Balance Sheet and the Closing Net Working Capital and (ii) a certificate of an
executive officer of each of the Surviving Companies certifying that the Closing
Balance Sheet and the Closing Net Working Capital were prepared in
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accordance with Section 3.7(b) and this Section 3.8. Each of the Surviving
Companies shall give, and shall cause its advisers to give, the Stockholders'
Representative and its advisers reasonable access to such books, records and
personnel of each of the Surviving Companies (including the work papers of each
of the Surviving Companies and their accountants relating to the preparation of
the Closing Balance Sheet and the Closing Net Working Capital) as may be
necessary to enable the Stockholders' Representative and its advisers to review
the Closing Balance Sheet and the Closing Net Working Capital. The preparation
of the Closing Balance Sheet shall be for the sole purpose of determining the
Closing Net Working Capital. The Stockholders' Representative shall have 30 days
following its receipt of the Closing Balance Sheet to review the same (the
"Closing Review Period"). On or before the expiration of the Closing Review
Period, the Stockholders' Representative may deliver to Parent a written
statement ("Stockholders' Representative Notice") accepting or objecting in good
faith to the Closing Balance Sheet and/or the calculation of the Closing Net
Working Capital (or any portion thereof). In the event that the Stockholders'
Representative shall object to the Closing Balance Sheet and/or the Closing Net
Working Capital, the Stockholders' Representative Notice shall include a
detailed itemization of the Stockholders' Representative's objections, the
reasons therefor and a revised calculation of the Net Working Capital based
thereon. If the Stockholders' Representative does not deliver such Stockholders'
Representative Notice to Parent within the Closing Review Period, the
Stockholders' Representative shall be deemed to have accepted the calculation of
the Closing Net Working Capital.
(b) In the event that the Stockholders' Representative shall timely
object to the Closing Net Working Capital pursuant to Section 3.8(a), Parent and
the Stockholders' Representative shall promptly meet and in good faith attempt
to resolve such objections. In the event that the Stockholders' Representative
and Parent are not able to resolve such objections as may be raised with respect
to the Closing Net Working Capital, within the ten (10) day period following the
Closing Review Period, the matter shall be submitted to BDO ▇▇▇▇▇▇▇ (the
"Accounting Referee") immediately following the expiration of such ten-day
period for review and resolution, with instructions to complete the same as
promptly as practicable but in any event within 60 days of the expiration of
such ten (10) day period. In making such determination, the Accounting Referee
may only consider those items and amounts as to which Parent and the
Stockholders' Representative have disagreed within the time period and on the
terms specified above and must resolve the matter in accordance with the terms
and provisions of this Agreement; provided that the determination of the
Accounting Referee will neither be more favorable to Parent than the Closing Net
Working Capital set forth in the Closing Balance Sheet nor more favorable to the
Stockholders' Representative than the revised Net Working Capital set forth in
the Stockholders' Representative Notice. Such Accounting Referee shall deliver a
written report setting forth the resolution of each disputed item and the
calculation of the Net Working Capital as of the Closing Date (the "Final Net
Working Capital") as determined in accordance with the terms of this Agreement
as soon as practicable following the submission of the matter to such firm but
in any event within the 60 day period referred to above, which calculation,
absent manifest error, shall be binding and conclusive on the parties and not
subject to appeal and may be enforced in any court having jurisdiction. The fees
and costs of the Accounting Referee, if one is required, shall be borne
proportionally by (i) the Stockholders on one hand and (ii) Parent and Fluent
(on a pro rata basis based on the Holding Working Capital Escrow Amount and the
Fluent Working Capital Escrow Amount, respectively) on the other hand, on the
basis, for each such party, of the ratio of (A) the difference between the
amount of
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Net Working Capital submitted by each of Parent and the Stockholders'
Representative to the Accounting Referee and the Final Net Working Capital
determined by the Accounting Referee to (B) the difference between the Net
Working Capital amounts submitted by each of Parent and the Stockholders'
Representative to the Accounting Referee. In the event that the Stockholders are
obligated to pay any amounts pursuant to the immediately foregoing sentence,
such amounts shall be deducted from the Working Capital Escrow Amounts on a pro
rata basis based on the Holding Working Capital Escrow Amount and the Fluent
Working Capital Escrow Amount.
(c) Within two (2) Business Days following the determination of the
Final Net Working Capital as calculated in accordance with Section 3.8(b) or the
deemed acceptance of the Closing Net Working Capital in accordance with Section
3.8(a) (for the purpose of this Section 3.8(c), the Final Net Working Capital),
Parent shall deliver to the Stockholders' Representative a notice (the "Parent
Payment Notice") setting forth (i) the amount of the Final Net Working Capital;
and (ii) the difference between the amount of the Final Net Working Capital and
the Base Net Working Capital ("Final Amount"). To the extent that the Final Net
Working Capital is greater than the Base Net Working Capital, Parent and Fluent
shall each pay to the Working Capital Escrow Agent an amount equal to such
entity's pro rata share (based on the Holding Working Capital Escrow Amount and
the Fluent Working Capital Escrow Amount) of the Final Amount, after making
appropriate adjustment to reflect any payments previously made or benefits
received at the Closing pursuant to Section 3.7(a)(ii) ("Net Working Capital
Overage") for inclusion in the Holding Working Capital Escrow Amount and the
Fluent Working Capital Escrow Amount, respectively. Notwithstanding any other
provision of this Agreement, no entity that owns, directly or indirectly, any
interest in Fluent shall be liable for the obligation of Fluent in the
immediately preceding sentence. To the extent the Base Net Working Capital is
greater than the Final Net Working Capital, the Working Capital Escrow Agent
shall pay to Parent and Fluent, from the Holding Working Capital Escrow Amount
and the Fluent Working Capital Escrow Amount, respectively, such entity's pro
rata share (based on the Holding Working Capital Escrow Amount and the Fluent
Working Capital Escrow Amount) of the Final Amount, after making appropriate
adjustment to reflect any payments previously made or benefits received at the
Closing pursuant to Section 3.7(a)(ii) ("Net Working Capital Shortfall"). To the
extent the Final Net Working Capital is the same as the amount of the Base Net
Working Capital, no payments shall be made except that if the Adjusted Cash
Consideration was adjusted at Closing pursuant to Section 3.7(a)(ii) and (A) the
Stockholders received the benefit of such adjustment, the Working Capital Escrow
Agent shall pay to Parent and Fluent an amount equal to such entities'
respective shares (on a pro rata basis based on the Holding Working Capital
Escrow Amount and the Fluent Working Capital Escrow Amount) of the benefit
amount paid at Closing from the Holding Working Capital Escrow Amount and the
Fluent Working Capital Escrow Amount, or (B) Parent and Fluent received the
benefit of such adjustment, Parent and Fluent shall pay to the Working Capital
Escrow Agent an amount equal to each entity's benefit amount received at Closing
for inclusion in the Holding Working Capital Escrow Amount and the Fluent
Working Capital Escrow Amount. Notwithstanding any other provision of this
Agreement, no entity that owns, directly or indirectly, any interest in Fluent
shall be liable for the obligation of Fluent in the immediately preceding
sentence. Any payment made pursuant to this Section 3.8(c) shall be made via
wire transfer of immediately available funds within one (1) Business Day of the
date of Parent Payment Notice.
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SECTION 3.9 WORKING CAPITAL ESCROWS.
(a) At the Fourth Effective Time, Parent shall deduct from the cash
portion of the First Merger Consideration and the cash portion of the Third
Merger Consideration and pay to an escrow agent selected by Parent and
reasonably acceptable to the Selling Companies (the "Working Capital Escrow
Agent") an amount in cash equal to $3,000,000 minus the Fluent Working Capital
Escrow Amount (the "Holding Working Capital Escrow Amount") and Fluent shall
deduct from the cash portion of the Fourth Merger Consideration and pay to the
Working Capital Escrow Agent an amount in cash equal to $3,000,000 multiplied by
the percentage of the Adjusted Cash Consideration to be received by the Fluent
Stockholders pursuant to this Agreement (the "Fluent Working Capital Escrow
Amount" and, collectively with the Holding Working Capital Escrow Amount, the
"Working Capital Escrow Amounts"). The Working Capital Escrow Amounts will be
held by the Working Capital Escrow Agent pending calculation of the Final Net
Working Capital pursuant to Section 3.8 and the payment or receipt, if any, of
the Net Working Capital Shortfall or Net Working Capital Overage, as applicable,
pursuant to Section 3.8(c).
(b) The Holding Working Capital Escrow Amount remaining after any
payment or receipt of Net Working Capital Shortfall or Net Working Capital
Overage, as applicable, in accordance with Section 3.8(c) shall be paid by the
Working Capital Escrow Agent to the Holding Master Escrow, and, to the extent
released from the Holding Master Escrow, by the Master Escrow Agent to the
Exchange Agent (or to the Second Surviving Company and the Third Surviving
Corporation if the Exchange Agent has distributed all remaining funds in
accordance with Section 4.1(i)) and then by the Exchange Agent (or the Second
Surviving Company and the Third Surviving Corporation if they have succeeded to
the obligations of the Exchange Agent pursuant to Section 4.1(i)) to the Holding
Stockholders and the Company Stockholders who have executed the contribution
agreement referred to in Section 11.3(i) based on each such Stockholder's pro
rata amount of the cash portion of the First Merger Consideration and the Third
Merger Consideration as set forth in the Schedule provided by the Selling
Companies at the Closing (each amount, the "Holding Stockholder's Pro Rata Cash
Amount"), and the Fluent Working Capital Escrow Amount remaining after any
payment or receipt of Net Working Capital Shortfall or Net Working Capital
Overage, as applicable, in accordance with Section 3.8(c) shall be paid by the
Working Capital Escrow Agent to the Fluent Master Escrow, and, to the extent
released from the Fluent Master Escrow, by the Master Escrow Agent to the
Exchange Agent (or to the Fourth Surviving Corporation if the Exchange Agent has
distributed all remaining funds in accordance with Section 4.1(i)) and then by
the Exchange Agent (or the Fourth Surviving Corporation if it has succeeded to
the obligations of the Exchange Agent pursuant to Section 4.1(i)) to the Fluent
Stockholders who have executed the contribution agreement referred to in Section
11.3(i) based on such Stockholder's pro rata amount of the cash portion of the
Fourth Merger Consideration set forth in the Schedule provided by the Selling
Companies at the Closing (each amount, the "Fluent Stockholder's Pro Rata Cash
Amount"). Pending such payments, the Working Capital Escrow Agent shall invest
the Working Capital Escrow Amounts in short term obligations of, or obligations
fully guaranteed by, the United States of America, or any agency of the United
States of America. Until distributed by the Working Capital Escrow Agent, all
amounts included in the Holding Working Capital Escrow Amount shall be the
property of the Holding Stockholders and the Company Stockholders and any
interest accrued thereon shall be included in the Holding Working Capital Escrow
Amount
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and distributed in accordance with Section 3.8(c) or this Section 3.9(b), as
applicable, and all amounts included in the Fluent Working Capital Escrow Amount
shall be the property of the Fluent Stockholders and any interest accrued
thereon shall be included in the Fluent Working Capital Escrow Amount and
distributed in accordance with Section 3.8(c) or this Section 3.9(b), as
applicable. Parent and the Stockholders' Representative agree to cooperate to
the extent necessary to deliver instructions to the Working Capital Escrow Agent
to release any undisputed amounts from the Holding Working Capital Escrow Amount
as soon as practicable following any mutual determination that such amounts are
undisputed, and Fluent and the Stockholders' Representative agree to cooperate
to the extent necessary to deliver instructions to the Working Capital Escrow
Agent to release any undisputed amounts from the Fluent Working Capital Escrow
Amount as soon as practicable following any mutual determination that such
amounts are undisputed.
SECTION 3.10 VESTING OF INCENTIVE STOCK. Parent and Merger Subs
acknowledge that all shares of Incentive Stock that are unvested immediately
prior to the Fourth Effective Time shall immediately vest and the restrictions
expiring upon vesting associated therewith shall automatically be deemed waived
as provided by the Company Incentive Plan.
SECTION 3.11 NO STOCK OPTION PLANS. The Surviving Companies acknowledge
that there are no outstanding options to purchase any Selling Companies Stock
and that none of the Selling Companies has any plan, program or practice that
provides for the issuance or purchase of any equity of the Selling Companies,
other than the Warrants, the Holding Preferred Stock, the Company Preferred
Stock and the Company Incentive Plan.
ARTICLE IV - PAYMENT FOR SHARES; DISSENTING SHARES
SECTION 4.1 PAYMENT FOR SHARES OF STOCK OF THE SELLING COMPANIES.
(a) As soon as practicable following the date of this Agreement and
in any event not less than 20 days before the Closing Date, Parent shall appoint
a national bank or trust company reasonably acceptable to the Selling Companies
to act as Exchange Agent (the "Exchange Agent"). The Exchange Agent shall,
pursuant to irrevocable instructions, make the payments provided for in Section
4.1(c) out of any deposits made with the Exchange Agent from the Holding Master
Escrow and the Fluent Master Escrow, and such deposits shall not be used for any
other purpose, except as provided in this Agreement.
(b) As soon as reasonably practicable following the Fourth Effective
Time, Parent shall, or shall cause the Surviving Companies to, cause the
Exchange Agent to mail to each record holder of an outstanding Certificate or
Certificates that immediately prior to the applicable Effective Time represented
outstanding shares of Selling Companies Stock (i) a form of letter of
transmittal reasonably acceptable to Parent (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration relating thereto, with respect to each share
formerly represented by such Certificate; provided that Parent shall assist the
Selling Companies in developing arrangements for the delivery of such materials
prior to Closing to all Persons
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entitled to receive Merger Consideration and to facilitate the delivery of the
payments pursuant to Section 3.2(c) and (d) to certain significant Holding
Stockholders (by wire transfer in the case of cash) as soon as practicable
following the Fourth Effective Time; provided that such Holding Stockholders
shall have first complied with the requirements set forth in Section 11.3(i).
(c) Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal properly completed and duly
executed, and such other documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor the portion of the Merger Consideration that such holder has
the right to receive in respect of the shares formerly represented by such
Certificate, provided that such portion of the Merger Consideration has been
released from the Holding Master Escrow and the Fluent Master Escrow. Any
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on any of the Merger Consideration payable to the holders of
Certificates, except to the extent interest is included in the amounts released
from the Holding Master Escrow and the Fluent Master Escrow.
(d) If payment is to be made to a Person other than the Person in
whose name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and delivered to the Exchange Agent with
all documents required to evidence and effect such transfer and that the Person
requesting such payment pay any transfer or other taxes required by reason of
the payment to a Person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Surviving Companies that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 4.1(d), each Certificate (other than Certificates representing
shares of Selling Companies Stock to be canceled in accordance with Sections
3.2(b), 3.3(b), 3.4(b) and 3.5(b) and Dissenting Shares) shall at any time after
the applicable Effective Time represent solely the right to receive upon such
surrender the Merger Consideration, as applicable, as contemplated by this
Section 4.1.
(e) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate and the posting by such Person of a bond in such reasonable amount
as Parent or the Surviving Companies may direct as indemnity against any claim
that may be made against it with respect to such Certificate to be lost, stolen
or destroyed, the Exchange Agent will deliver in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration with respect to the shares
formerly represented thereby.
(f) To the extent permitted by applicable Law, none of Parent,
Merger Subs, Merger Sub III, the Selling Companies, the Surviving Companies or
the Exchange Agent shall be liable to any Person in respect of any Merger
Consideration from the deposits described in Section 4.1(a) properly delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar Law. If any Certificate shall not have been surrendered immediately
prior to the date on which any shares of Selling Companies Stock would otherwise
escheat to, or become the property of, any Governmental Authority, any such
shares shall, to the extent permitted by applicable Law, become the property of
the Surviving Companies, free and clear of all claims or interest of any Person
previously entitled thereto.
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(g) Each of the Exchange Agent, Parent and the Surviving Companies
shall be entitled to deduct and withhold from the applicable Merger
Consideration or amounts otherwise payable pursuant to this Agreement to any
holder of shares such amounts as are required to be withheld with respect to the
making of such payment under the Code, and the Regulations promulgated
thereunder, or any provision of United States federal, state or local tax Laws
and shall instead pay such amount to the applicable Tax Authority. To the extent
that amounts are so withheld by the Exchange Agent, Parent or the Surviving
Companies, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares in respect of which
such deduction and withholding was made by the Exchange Agent, Parent or the
Surviving Companies.
(h) All Merger Consideration paid upon the surrender of a
Certificate in accordance with the terms of this Section 4.1 shall be deemed to
have been paid in full satisfaction of all rights pertaining to the shares
formerly represented by such Certificate. At the applicable Effective Time, the
stock transfer books of each of the Selling Companies shall be closed and no
further registration of transfers of shares shall thereafter be made on the
records of the Selling Companies. If, after the applicable Effective Time,
Certificates are presented to the Surviving Companies for transfer, they shall
be canceled and exchanged for the Merger Consideration relating thereto, as
provided in this Section 4.1, subject to applicable Law in the case of
Dissenting Shares.
(i) Promptly following the date that is six (6) months after the
Fourth Effective Time, the Exchange Agent shall deliver (i) to Parent all cash,
shares of Parent Common Stock, Certificates and other documents in its
possession relating to the First Merger, the Second Merger or the Third Merger
and (ii) to Fluent, all cash, shares of Parent Common Stock, Certificates and
other documents in its possession relating to the Fourth Merger, and the
Exchange Agent's duties shall then terminate. Any former Stockholders who have
not complied with Section 4.1 prior to the end of such six (6) month period
shall thereafter look only to Parent or Fluent, as appropriate, (subject to
abandoned property, escheat or other similar Laws) for payment of their claim
for the Merger Consideration relating thereto, without any interest thereon.
SECTION 4.2 APPRAISAL RIGHTS.
(a) Notwithstanding anything in this Agreement to the contrary, any
shares of the Selling Companies Stock that are issued and outstanding
immediately prior to the applicable Effective Time and that are held by
Stockholders who, in accordance with Section 262 of the DGCL (the "Appraisal
Rights Provisions") (i) have not consented in the respective Stockholder Written
Consent to adopt and approve this Agreement, (ii) shall have demanded properly
in writing appraisal for such shares, and (iii) have not effectively withdrawn,
lost or failed to perfect their rights to appraisal (collectively, the
"Dissenting Shares"), will not be converted as described in Sections 3.2, 3.3,
3.4 and 3.5, as applicable, but at the applicable Effective Time, by virtue of
the applicable Merger and without any action on the part of the holder thereof,
shall be cancelled and shall cease to exist and shall represent the right to
receive only those rights provided under the Appraisal Rights Provisions;
provided, however, that all shares of Selling Companies Stock held by
Stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such shares of Selling Companies
Stock under
35
the Appraisal Rights Provisions shall thereupon be deemed to have been canceled
and to have been converted, as of the applicable Effective Time, into the right
to receive the Merger Consideration relating thereto, without interest, in the
manner provided in Sections 3.2, 3.3, 3.4 or 3.5 as applicable. Persons who have
perfected statutory rights with respect to Dissenting Shares (the "Dissenting
Stockholders") as aforesaid will not be paid as provided in this Agreement and
will have only such rights as are provided by the Appraisal Rights Provisions
with respect to such Dissenting Shares.
(b) The Selling Companies shall give Parent and Merger Subs prompt
notice of any demands received by the Selling Companies for the exercise of
appraisal rights with respect to shares of Selling Companies Stock and Parent
shall have the right to participate in all negotiations and proceedings with
respect to such demands. None of the Selling Companies shall, except with the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands.
(c) Each Dissenting Stockholder who becomes entitled under the
Appraisal Rights Provisions to payment for Dissenting Shares of Holdings or the
Company shall receive payment therefor after the Fourth Effective Time from the
Second Surviving Company or the Third Surviving Corporation, as appropriate (but
only after the amount thereof shall have been agreed upon or finally determined
pursuant to the Appraisal Rights Provisions), and such shares of Holding Stock
and/or Company Stock shall be canceled. Each Dissenting Stockholder who becomes
entitled under the Appraisal Rights Provisions to payment for Dissenting Shares
of Fluent shall receive payment therefor after the Fourth Effective Time from
the Fourth Surviving Corporation (but only after the amount thereof shall have
been agreed upon or finally determined pursuant to the Appraisal Rights
Provisions), and such shares of Fluent Stock shall be canceled.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE SELLING COMPANIES
The Selling Companies hereby jointly and severally represent and warrant
to Parent and Merger Subs that, except as disclosed by the Selling Companies in
the disclosure schedule, dated as of the date of this Agreement and delivered by
the Selling Companies to Parent and Merger Subs simultaneously herewith (the
"Selling Companies Disclosure Schedule") with any information or item disclosed
in one section of the Selling Companies Disclosure Schedule deemed to be
disclosed in all other relevant sections of the Selling Companies Disclosure
Schedule without regard to whether an explicit cross-reference is included
therein where such disclosure would be appropriate and reasonably apparent;
provided that, except as otherwise specifically set forth herein, the Selling
Companies are not making any representations and warranties regarding the
Spin-Off Entities, the Spin-Off, the transactions contemplated thereby, or the
assets, liabilities, businesses and entities included therein; and provided,
further that the Spin-Off and the transactions contemplated thereby shall
constitute exceptions to the following representations and warranties (other
than the representations and warranties contained in Sections 5.13(q) and 5.29)
in all respects without any specific references thereto in the Selling Companies
Disclosure Schedule:
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SECTION 5.1 ORGANIZATION; STANDING AND AUTHORITY.
(a) Holding has been duly incorporated and is a validly existing
corporation in good standing under the laws of Delaware. Holding has all
requisite corporate power and authority to own, operate, lease its properties
and carry on its business as currently conducted. Holding is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction listed on Section 5.1(a) of the Selling Companies
Disclosure Schedule and each other jurisdiction in which the character of its
properties or in which the transaction of its business makes such qualification
necessary, except where the failure to be so licensed or qualified would not
reasonably be expected to have, individually or in the aggregate, a Selling
Companies Material Adverse Effect. Copies of the Holding Certificate of
Incorporation and the by-laws of Holding, each as amended to date and made
available to Parent's and Merger Subs' counsel, are complete and correct, and no
amendments thereto are pending, and Holding is not in violation of any term of
the Holding Certificate of Incorporation or its by-laws.
(b) The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of Delaware. The Company has all
requisite corporate power and authority to own, operate, lease its properties
and carry on its business as currently conducted. The Company is duly licensed
or qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction listed on Section 5.1(b) of the Selling
Companies Disclosure Schedule and each other jurisdiction in which the character
of its properties or in which the transaction of its business makes such
qualification necessary, except where the failure to be so licensed or qualified
would not reasonably be expected to have, individually or in the aggregate, a
Selling Companies Material Adverse Effect. Copies of the Company Certificate of
Incorporation and the by-laws of the Company, each as amended to date and made
available to Parent's and Merger Subs' counsel, are complete and correct, and no
amendments thereto are pending, and the Company is not in violation of any term
of the Company Certificate of Incorporation or its by-laws.
(c) Fluent has been duly incorporated and is a validly existing
corporation in good standing under the laws of Delaware. Fluent has all
requisite corporate power and authority to own, operate, lease its properties
and carry on its business as currently conducted. Fluent is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction listed on Section 5.1(c) of the Selling Companies
Disclosure Schedule and each other jurisdiction in which the character of its
properties or in which the transaction of its business makes such qualification
necessary, except where the failure to be so licensed or qualified would not
reasonably be expected to have, individually or in the aggregate, a Selling
Companies Material Adverse Effect. Copies of the Fluent Certificate of
Incorporation and the by-laws of Fluent, each as amended to date and made
available to Parent's and Merger Subs' counsel, are complete and correct, and no
amendments thereto are pending, and Fluent is not in violation of any term of
the Fluent Certificate of Incorporation or its by-laws.
(d) The Selling Companies have the respective corporate power and
authority to execute and deliver this Agreement, the respective Certificates of
Merger and any other agreement, certificate or instrument to be executed and
delivered pursuant to the terms of this Agreement, to perform their respective
obligations hereunder and thereunder, and to
37
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement, the performance by the Selling Companies of their
respective obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by the Selling Companies Boards
and, other than the Stockholder Written Consents, no other corporate proceeding
or approval on the part of the Selling Companies or any of their Stockholders is
required to authorize the execution, delivery or performance of this Agreement.
This Agreement has been duly and validly executed and delivered by the Selling
Companies and, assuming the due authorization, execution and delivery of this
Agreement by each of the other parties hereto, constitutes a legal, valid and
binding obligation of each of the Selling Companies, enforceable against the
Selling Companies in accordance with its terms.
SECTION 5.2 CAPITALIZATION.
(a) The authorized capital stock of Holding consists of (i)
9,500,000 shares of Holding Class A Common Stock, of which 6,532,500.79 shares
are issued and outstanding; (ii) 9,500,000 shares of Holding Class B Common
Stock, of which 6,532,500.79 shares are issued and outstanding; (iii) 1,500,000
shares of Holding Series A Preferred Stock, of which 1,424,146.27 shares are
issued and outstanding; (iv) 1,500,000 shares of Holding Series B Preferred
Stock, of which 1,424,146.27 shares are issued and outstanding; (v) 600,000
shares of Holding Series C Preferred Stock, of which 512,805.48 shares are
issued and outstanding; and (vi) 600,000 shares of Holding Series D Preferred
Stock, of which 512,805.48 shares are issued and outstanding. Section 5.2(a) of
the Selling Companies Disclosure Schedule sets forth a true and complete list,
as of the date hereof, of each record owner of the issued and outstanding shares
of Holding Stock, together with the number of such shares owned by each such
Person. All of the issued and outstanding shares of Holding Stock have been, and
with respect to any shares of Holding Common Stock to be issued to holders of
Holding Preferred Stock will be, duly authorized and validly issued, and are (or
will be) fully paid and nonassessable. All issued and outstanding shares of
Holding Stock have been offered, sold and delivered by Holding in compliance in
all material respects with applicable securities Laws.
(b) The authorized capital stock of the Company consists of (i)
1,400 shares of Company Class A Common Stock, of which 1,018.871 shares are
issued and outstanding; (ii) 1,400 shares of Company Class B Common Stock, of
which 1,078.871 shares are issued and outstanding; (iii) 200 shares of Company
Class H Common Stock, of which 40 shares are issued and outstanding; (iv) 100
shares of Company Series A Preferred Stock, of which 67.71 shares are issued and
outstanding; and (v) 100 shares of Company Series B Preferred Stock, of which
67.71 shares are issued and outstanding. Section 5.2(b) of the Selling Companies
Disclosure Schedule sets forth a true and complete list, as of the date hereof,
of each record and beneficial owner of the shares of all Company Stock, together
with the number and percentage of such shares owned by each such Person. All of
the issued and outstanding shares of Company Stock have been, and with respect
to any shares of Company Common Stock to be issued to Holding as the owner of
the Company Preferred Stock will be, duly authorized and validly issued, and are
(or will be) fully paid and nonassessable. All issued and outstanding shares of
Company Stock have been offered, sold and delivered by the Company in compliance
in all material respects with applicable securities and corporate laws.
38
(c) The authorized capital stock of Fluent consists of (i) 300,000
shares of Fluent Common Stock, of which 280,017.25 shares are issued and
outstanding; and (ii) 200,000 shares of preferred stock, par value $0.01 per
share of Fluent, of which 160,000 shares have been designated Fluent Preferred
Stock, of which 48,133 shares are issued and outstanding. Section 5.2(c) of the
Selling Companies Disclosure Schedule sets forth a true and complete list, as of
the date hereof, of each record owner of the issued and outstanding shares of
Fluent Stock, together with the number of such shares owned by each such Person.
All of the issued and outstanding shares of Fluent Stock have been duly
authorized and validly issued, and are fully paid and nonassessable. All issued
and outstanding shares of Fluent Stock have been offered, sold and delivered by
Fluent in compliance in all material respects with applicable securities Laws.
(d) Except for the Warrants, as set forth in the Holding Certificate
of Incorporation, the Company Certificate of Incorporation and the Fluent
Certificate of Incorporation and as set forth on Section 5.2(d) of the Selling
Companies Disclosure Schedule, there are no outstanding subscriptions, options,
commitments, preemptive rights, deferred compensation rights, agreements,
arrangements or commitments of any kind to which the Selling Companies or any of
their Subsidiaries is a party or by which any of them is bound relating to the
voting, issuance, transfer, sale, or redemption, repurchase or acquisition of,
or outstanding securities convertible into or exercisable or exchangeable for,
any shares of Selling Companies Stock or other equity interests of the Selling
Companies. Except as provided in Section 3.10, none of the options, warrants,
subscriptions, commitments, agreements, arrangements or rights disclosed on
Section 5.2(d) of the Selling Companies Disclosure Schedule, except as otherwise
provided therein, is subject to accelerated vesting by reason of the
transactions contemplated hereby or any subsequent sale (or change in control)
of the Selling Companies. Except as provided herein, none of the Selling
Companies has any obligation to purchase, redeem, or otherwise acquire any of
its capital stock or any interests therein, or has redeemed any shares of their
respective capital stock in the past three (3) years. Except as set forth on
Section 5.2(d) of the Selling Companies Disclosure Schedule, there are no
agreements to which the Selling Companies or any of their Subsidiaries is a
party or by which any of them is bound with respect to the voting of any shares
of capital stock of the Selling Companies or which restrict the transfer of any
such shares.
SECTION 5.3 SUBSIDIARIES.
(a) Section 5.3(a) of the Selling Companies Disclosure Schedule sets
forth a true and complete list of each of the Selling Companies' Subsidiaries,
together with the jurisdiction of incorporation or organization of each
Subsidiary, the percentage of each Subsidiary's outstanding capital stock or
other equity or similar interest owned by the applicable Selling Company or
another Subsidiary of such Selling Company and, if the outstanding capital stock
or other equity or similar interest in any such Subsidiary is not wholly owned
by the applicable Selling Company or another Subsidiary of such Selling Company,
the names and percent ownership interest of each any other Person. Except as set
forth on Section 5.3(a) of the Selling Companies Disclosure Schedule, neither
the Selling Companies nor any of their respective Subsidiaries owns (or has any
right, obligation, agreement or understanding to acquire) or controls, directly
or indirectly, any capital stock, partnership, membership or similarly interest
in, or equity or other ownership interest in any other Person. All of the
39
outstanding shares issued by each Subsidiary of the Selling Companies have been
duly authorized, validly issued and are fully paid and non-assessable. All such
issued and outstanding shares have been offered, sold and delivered in
compliance in all material respects with applicable securities Laws.
(b) Each Subsidiary of the Selling Companies is a corporation duly
incorporated or organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization and has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as currently conducted. Each such Subsidiary is duly
licensed or qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction listed on Section 5.3(b) of the
Selling Companies Disclosure Schedule and each other jurisdiction in which the
character of its properties or in which the transaction of its business makes
such qualification necessary, except where the failure to be so licensed or
qualified would not reasonably be expected to have, individually or in the
aggregate, a Selling Companies Material Adverse Effect. The copies of the
organizational documents of each such Subsidiary, in each case as amended to
date and made available to Parent's and Merger Sub's counsel, are complete and
correct, no amendments thereto are pending and no Subsidiary is in violation of
any term therein.
(c) Merger Sub III was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement. All of the issued and
outstanding capital stock of Merger Sub III is validly issued, fully paid and
non-assessable and is owned, beneficially and of record, by the Company free and
clear of all claims, stockholder agreements, limitations on the Company's voting
rights and Liens of any nature whatsoever. As of the date hereof and as of the
First Effective Time, except for (i) Liabilities incurred in connection with its
incorporation and (ii) this Agreement and any other agreements or arrangements
contemplated by this Agreement or in furtherance of the transactions
contemplated hereby, Merger Sub III has not incurred, directly or indirectly,
through any of its Subsidiaries or Affiliates, any Liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person.
SECTION 5.4 NO CONFLICT; CONSENTS.
(a) Subject to the adoption and approval of this Agreement by the
Stockholders, the execution, delivery and performance by each of the Selling
Companies of this Agreement and the consummation by each of the Selling
Companies of the transactions in accordance with the terms hereof, including,
without limitation, the consummation of the Spin-Off, do not, except as set
forth on Section 5.4(a) of the Selling Companies Disclosure Schedule, (i)
violate or conflict with any of the Charter Documents or the respective by-laws
of the Selling Companies or the organizational documents of any of their
Subsidiaries, (ii) violate, breach or conflict with or result in a default
(whether after the giving of notice, lapse of time or both) under, or give rise
to a right of termination, amendment, prepayment, additional or increased
payments, acceleration or cancellation of, any Contract, permit, authorization
or obligation to which the Selling Companies or any of their Subsidiaries is a
party or by which the Selling Companies or any of their Subsidiaries or any of
their respective assets are bound (other than the Senior Indebtedness, the
Subordinated Indebtedness and any Fourth Merger Indebtedness), (iii) violate or
result in a violation of, or conflict with, or constitute a default (whether
after the
40
giving of notice, lapse of time or both) under, any provision of any Law,
Regulation, or any Order of, or any restriction imposed by, any Court or other
Governmental Authority applicable to, binding upon or enforceable against, the
Selling Companies or any of their Subsidiaries, except in the case of clauses
(ii) and (iii) of this Section 5.4(a), such conflicts, defaults, violations,
terminations or breaches that would not reasonably be expected to have,
individually or in the aggregate, a Selling Companies Material Adverse Effect.
(b) Except as set forth in Section 5.4(b) of the Selling Companies
Disclosure Schedule, no notice to, declaration or filing with, or consent or
approval of any Governmental Authority or other third party is required by or
with respect to the Selling Companies or any of their respective Subsidiaries in
connection with the execution and delivery by the Selling Companies of this
Agreement and the consummation by Selling Companies of the transactions in
accordance with the terms hereof, including, without limitation, the Spin-Off,
except for: (i) the Stockholder Written Consents, (ii) filing of a pre-merger
notification and report form by Parent under the HSR Act and the expiration or
termination of the applicable waiting period thereunder, (iii) the filing of the
Certificates of Merger with the Secretary of State of the State of Delaware, and
(iv) such other consents, approvals, notices, or declarations or filings, which
if not obtained or made, would not reasonably be expected to have, individually
or in the aggregate, a Selling Companies Material Adverse Effect.
SECTION 5.5 REQUIRED VOTE. Each of the Selling Companies Boards has, at a
meeting duly called and held or by written consent, (a) unanimously approved and
declared advisable this Agreement, (b) determined that the transactions
contemplated hereby are advisable, fair to and in the best interests of its
Stockholders, (c) resolved to recommend adoption and approval of this Agreement
and the Mergers to its Stockholders, and (d) directed that this Agreement be
submitted to its respective Stockholders for their adoption and approval. The
affirmative vote of holders of a majority of the outstanding voting power of
Holding Common Stock and Holding Preferred Stock (on an as-converted basis),
voting together as a single class, is the only vote of the holders of any class
or series of Holding Stock necessary to approve and authorize the adoption of
this Agreement, the First Merger, the Second Merger and the transactions
contemplated hereby ("Holding Stockholder Vote"). The affirmative vote of
Holding, as the holder of a majority of the outstanding voting power of Company
Common Stock and Company Preferred Stock (on an as-converted basis), voting
together as a single class, is the only vote of the holders of any class or
series of Company Stock necessary to approve and authorize the adoption of this
Agreement, the Third Merger and the transactions contemplated hereby ("Company
Stockholder Vote"). The affirmative vote of the Company, as the holder of a
majority of the outstanding voting power of Fluent Preferred Stock, is the only
vote of the holders of any class or series of Fluent Stock necessary to approve
and authorize the adoption of this Agreement, the Fourth Merger and the
transactions contemplated hereby ("Fluent Stockholder Vote").
SECTION 5.6 SECURITIES LAW MATTERS. To the Knowledge of the Selling
Companies, no more than 35 of the Stockholders entitled to receive Parent Common
Stock pursuant to Sections 3.2, 3.4 or 3.5 of this Agreement are not "accredited
investors" (as defined in Regulation D under the Securities Act) and, other than
with respect to employees and former employees of Fluent, each such Stockholder,
either alone or with his, her or its "purchaser representative(s)" (as defined
in Regulation D under the Securities Act) has such knowledge and
41
experience in financial and business matters that he, she or it is capable of
evaluating the merits and risks of his, her or its investment in Parent Common
Stock pursuant to the Mergers.
SECTION 5.7 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES;
INDEBTEDNESS.
(a) The Company has delivered to Parent and Merger Subs true and
complete copies of the following financial statements (collectively, the
"Company Financial Statements"):
(i) Audited consolidated balance sheets of the Company and its
Subsidiaries (including the Spin-Off Entities) as of December 31, 2004,
2003 and 2002, and the related consolidated audited statements of
operations, cash flows and change in stockholders' deficit for each of the
years then ended, certified by the Company's independent public
accountants and accompanied by a copy of such auditor's report as filed
with the SEC;
(ii) An unaudited consolidated balance sheet of the Company
and its Subsidiaries (including the Spin-Off Entities) as of September 30,
2005 as filed with the SEC; and
(iii) Unaudited consolidated statements of operations and cash
flows of the Company and its Subsidiaries (including the Spin-Off
Entities) for the nine-month period ended September 30, 2005 as filed with
the SEC.
Subject to the absence of footnotes and year-end audit adjustments with
respect to any unaudited Company Financial Statements which in the aggregate are
not or will not be material in amount or effect, the Company Financial
Statements have been prepared in accordance with GAAP consistently applied and
present fairly in all material respects the consolidated financial condition of
the Company and consolidated results of the Company's operations at and for the
periods presented.
(b) Fluent has delivered to Parent and Merger Subs true and complete
copies of the following financial statements (collectively, the "Fluent
Financial Statements"):
(i) Audited consolidated balance sheets of Fluent and its
Subsidiaries as of December 31, 2004, 2003 and 2002, and the related
consolidated audited statements of operations, cash flows and
stockholders' equity (deficit) for each of the years then ended, certified
by Fluent's independent public accountants and accompanied by a copy of
such auditor's report;
(ii) An unaudited consolidated balance sheet of Fluent and its
Subsidiaries as of September 30, 2005; and
(iii) Unaudited consolidated statements of operations of
Fluent and its Subsidiaries for the nine-month period ended September 30,
2005.
Subject to the absence of footnotes and year-end audit adjustments with
respect to any unaudited Fluent Financial Statements which in the aggregate are
not or will not be material in amount or effect, the Fluent Financial Statements
have been prepared in accordance with GAAP
42
consistently applied and present fairly in all material respects the
consolidated financial condition of Fluent and consolidated results of Fluent's
operations at and for the periods presented.
(c) None of the Selling Companies or any of its Subsidiaries has or
is subject to any material Liabilities of any kind, other than those (i) fully
reflected in, reserved against or otherwise described in the audited
consolidated balance sheets of the Company and its Subsidiaries as of December
31, 2004 (the "Company Balance Sheet") or the notes thereto, (ii) fully
reflected in, reserved against or otherwise described in the audited
consolidated balance sheets of Fluent and its Subsidiaries as of December 31,
2004 (the "Fluent Balance Sheet") or the notes thereto, (iii) incurred in the
ordinary course of business consistent with past practice or pursuant to the
transactions contemplated by this Agreement, or (iv) set forth on Section 5.7(c)
of the Selling Companies Disclosure Schedule or as otherwise disclosed in
writing to Parent.
(d) Giving effect to the Spin-Off, except for the Senior
Indebtedness, the Subordinated Indebtedness, the Fourth Merger Indebtedness, the
Intercompany Payables, capitalized leases included in Indebtedness and any other
Indebtedness set forth on Section 5.7(d) of the Selling Companies Disclosure
Schedule, none of the Selling Companies or any of its Subsidiaries has or is
subject to any Indebtedness, including, without limitation, any intercompany
payables between the Selling Companies or their respective Subsidiaries and any
Spin-Off Entity or their respective Subsidiaries and any mortgage related
Indebtedness.
SECTION 5.8 SEC FILINGS; INFORMATION PROVIDED.
(a) The Company has filed all registration statements, forms,
reports and other documents required to be filed by the Company with the SEC by
applicable Law or contractual agreement since January 1, 2003. All such
registration statements, forms, reports and other documents (including those
that the Company may file after the date hereof until the Closing) are referred
to herein as the "Company SEC Reports." The Company SEC Reports (i) were or will
be filed on a timely basis, (ii) at the time filed, complied, or will comply
when filed, as to form in all material respects with the applicable requirements
of the Securities Act and the Exchange Act, as the case may be, and the
Regulations of the SEC thereunder applicable to such Company SEC Reports, and
(iii) did not or will not at the time they were or are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Company SEC Reports or necessary in order to make the statements
in such Company SEC Reports, in the light of the circumstances under which they
were made, not misleading. No Subsidiary of the Company is subject to the
reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act.
(b) The certificates of the Chief Executive Officer and Chief
Financial Officer of the Company required by Rules 13a-14 and 15d-14 of the
Exchange Act or 18 U.S.C. Section 1350 (Section 906 of SOX) with respect to the
Company SEC Reports, as applicable, were true and correct in all material
respects as of their respective dates.
(c) None of the information supplied by or on behalf of the Selling
Companies for inclusion or incorporation by reference in the Section 262 Notice
to be sent to the Stockholders or in the registration statement on Form S-3 to
be filed with the SEC in connection
43
with the Parent Common Stock (the "Registration Statement") will, on the date
the Section 262 Notice is first mailed to the Stockholders, or on the date the
Registration Statement is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any statement which, at such time and in light of the circumstances
under which it shall be made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements made in the Section 262 Notice or the Registration Statement not
false or misleading. If at any time prior to the First Effective Time, any fact
or event relating to the Selling Companies or any of its Affiliates which should
be set forth in a supplement to the Section 262 Notice or the Registration
Statement should be discovered by any of the Selling Companies or should occur,
the Selling Companies shall, promptly after becoming aware thereof, inform
Parent and Merger Subs of such fact or event. Notwithstanding the foregoing, no
representation is made by the Selling Companies with respect to the information
that has been or will be supplied by Parent, Merger Subs or their respective
auditors, attorneys, financial advisors or other consultants or advisers for
inclusion in the Section 262 Notice or the Registration Statement.
SECTION 5.9 ABSENCE OF CERTAIN CHANGES. Except as expressly provided by
this Agreement or as set forth in Section 5.9 of the Selling Companies
Disclosure Schedule, since September 30, 2005, the Selling Companies and their
Subsidiaries have operated only in the ordinary course of business consistent
with past practices and there has been no event, occurrence, development or
effect that has had or resulted in or would reasonably be expected to have or
result in, individually or in the aggregate, a Selling Companies Material
Adverse Effect. Since September 30, 2005, except as set forth in Section 5.9 of
the Selling Companies Disclosure Schedule or as expressly provided by this
Agreement, none of the Selling Companies or any of their Subsidiaries has:
(a) made any sale, assignment, license or other disposition, of any
material asset or property of the Selling Companies or any of their
Subsidiaries, except in the ordinary course of business consistent with past
practice;
(b) other than upon conversion of currently outstanding convertible
securities and upon exercise of currently outstanding Warrants, authorized for
issuance, issued, sold, delivered or agreed or committed to issue, sell or
deliver (i) any equity interests or capital stock of or other equity or voting
interest in, the Selling Companies or any of their Subsidiaries or (ii) any
equity rights in respect of, security convertible into, exchangeable for or
evidencing the right to subscribe for or acquire either any (A) equity interests
or shares of capital stock of, or other equity or voting interest in, the
Selling Companies or any of their Subsidiaries or (B) securities convertible
into, exchangeable for, or evidencing the right to subscribe for or acquire any
shares of the capital stock of, or other equity or voting interest in, the
Selling Companies or any of their Subsidiaries;
(c) entered into, became subject to, amended, terminated or modified
any material Contract to which the Selling Companies or any of their
Subsidiaries was or is a party, except for new Contracts, amendments,
terminations, or modifications made in the ordinary course of business
consistent with past practice;
44
(d) made any increase in the salary or other compensation of any
director, officer or other employee of the Selling Companies or any of their
Subsidiaries, or any increase in or any addition to other benefits to which any
such director, officer or other employee may be entitled, other than any
increase in the ordinary course of business consistent with past practice or
pursuant to the terms of any Employee Benefit Plan or Employment Agreement
listed on Section 5.14(a) of the Selling Companies Disclosure Schedule or except
as necessary to comply with any applicable minimum wage Law;
(e) granted or agreed to grant any severance or termination pay or
entered into any Contract to make or grant any severance or termination pay or
paid or agreed to pay any bonus or other incentive compensation to any director,
officer or other employee of the Selling Companies or any of their Subsidiaries
or granted or agreed to grant or accelerate the time of vesting or payment of
any benefits or awards under a Employee Benefit Plan, other than compensation or
other benefits in the ordinary course of business consistent with past practice
and in accordance with the 2006 Compensation Plan attached hereto as Section
5.9(e) of the Selling Companies Disclosure Schedule (the "2006 Compensation
Plan") or pursuant to the terms of any Employee Benefit Plan or Employment
Agreement listed on Section 5.14(a) of the Selling Companies Disclosure
Schedule;
(f) established, adopted, amended, modified or terminated any
Employee Benefit Plan in any material respect;
(g) (i) changed any of the accounting principles adopted by the
Selling Companies or any of their Subsidiaries, other than as required by GAAP
or by applicable Law or as described in either of the Company Financial
Statements or the Fluent Financial Statements or (ii) made any material change
in the Selling Companies' or any of their Subsidiaries' accounting policies,
procedures, practices or methods with respect to applying such principles, other
than as required by GAAP or by applicable Law or as described in either of the
Company Financial Statements or the Fluent Financial Statements;
(h) canceled or forfeited any material debts or claims of the
Selling Companies or any of their Subsidiaries or waived any rights of material
value to the Selling Companies or any of their Subsidiaries, other than in the
ordinary course of business consistent with past practice;
(i) made any adjustment, split, combination, reclassification or
similar transaction in respect of any of the shares of Selling Companies Stock,
or made any distribution, declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) in respect of the
capital stock of the Selling Companies or any of their Subsidiaries (other than
dividends and distributions paid to the Selling Companies or their
Subsidiaries), or any repurchase, redemption or other acquisition by the Selling
Companies or any of their Subsidiaries of any outstanding shares of capital
stock or other securities of, or other ownership interests in, the Selling
Companies or any of their Subsidiaries, other than acquisitions of convertible
securities upon conversion of such securities or acquisitions of exercisable
securities upon exercise of such securities or acquisitions of Incentive Stock;
45
(j) acquired or disposed of, whether by purchase, merger,
consolidation or sale, lease, pledge or other encumbrance of stock or assets or
otherwise, any (i) material interest in any corporation, partnership or other
Person or (ii) assets comprising a material business or any other material
property or assets, in a single transaction or in a series of transactions;
(k) made any loans or advances of borrowed money or capital
contributions to, or investments in, any other Person, other than in the
ordinary course of business consistent with past practice and in amounts in the
aggregate not in excess of $100,000 and other than investments in any
Subsidiaries of the Selling Companies; or
(l) paid, discharged, settled or satisfied any material Action, or
waived any material rights or material claims, other than in the ordinary course
of business consistent with past practice.
Since September 30, 2005, except as set forth in Section 5.9 of the Selling
Companies Disclosure Schedule or as expressly provided by this Agreement, as of
the date of this Agreement, none of the Selling Companies or any of their
Subsidiaries has (i) changed any material method of Tax accounting or any Tax
election (including making or revoking such an election) except as required by
Law, (ii) amended any Tax Return, (iii) made any settlement or compromise of any
material liability for Taxes, or (iv) changed any Tax practice or policy of the
Selling Companies or any of their Subsidiaries.
Neither the Selling Companies nor any of their Subsidiaries has committed or
agreed, whether or not in writing, to undertake any of the foregoing actions.
SECTION 5.10 CUSTOMERS. During the 12 month period ended December 31,
2005, none of Fluent's customers accounted for more than 2.5% of Fluent's
revenues. Since December 31, 2004, none of the 20 largest customers of Fluent
during the 12 month period ended December 31, 2005, (a) has cancelled,
terminated or materially adversely altered its relationship with the Selling
Companies or their Subsidiaries, other than in the ordinary course of business
consistent with past practice or (b) to the Knowledge of the Selling Companies,
has threatened, or indicated its intention in writing, to cancel, terminate or
materially adversely alter its relationship with the Selling Companies or their
Subsidiaries or to reduce substantially its purchase from or sale to the Selling
Companies or any of their Subsidiaries of any products, goods or services other
than in the ordinary course of business consistent with past practice. As of the
date of this Agreement, to the Knowledge of the Selling Companies, no customer
of any of the Selling Companies or its Subsidiaries has threatened or indicated
its intention to such Selling Company or Subsidiary to cancel, terminate or
materially adversely alter its relationship with any such Selling Company or
Subsidiary as a result of the Mergers or any similar transaction.
SECTION 5.11 TRANSACTIONS WITH AFFILIATES.
(a) Other than as set forth in Section 5.11(a) of the Selling
Companies Disclosure Schedule (which shall include a list of any of Messrs.
▇▇▇▇▇ and Boysan, the Identified Employees and the employees set forth in
Schedule 10.2(k) with any immediate familial relationships with other
employees), matters relating to employment and the stock of the Selling
Companies or as disclosed in either of the Company Financial Statements or the
Fluent Financial
46
Statements, no current stockholder, director, officer or employee of any of the
Selling Companies or any of their Subsidiaries or, to the Knowledge of the
Selling Companies, any member of any such person's immediate family is currently
(i) a party to any material transaction with the Selling Companies or any of
their Subsidiaries or, to the Knowledge of the Selling Companies, any member of
any such person's immediate family (including, but not limited to, any Contract
providing for the furnishing of goods or services by, rental of real or personal
property from, borrowing money from or lending money to, or otherwise requiring
payments to, any such Person), or (ii) the direct or indirect owner of a
material interest in any Person which is a competitor, supplier or customer of
the Selling Companies or any of their Subsidiaries.
(b) Except as set forth in Section 5.11(b) of the Selling Companies
Disclosure Schedule, and except with respect to the notes referred to in Section
9.22, no current stockholder, director, officer or employee of the Selling
Companies or any of their Subsidiaries or, to the Knowledge of the Selling
Companies, any member of any such Person's immediate family has any outstanding
Indebtedness payable to the Selling Companies or any of their Subsidiaries and
neither the Selling Companies nor any of their Subsidiaries has guaranteed any
obligation or Indebtedness of any such Person to a third party.
SECTION 5.12 LITIGATION.
(a) Except as set forth on Section 5.12 of the Selling Companies
Disclosure Schedule, none of the Selling Companies or any of their Subsidiaries
is involved in any material Action or, to the Knowledge of the Selling Companies
is, any such material Action threatened against any of the Selling Companies or
any of their Subsidiaries. Section 5.12 of the Selling Companies Disclosure
Schedule includes a description of all material Actions and, to the Knowledge of
the Selling Companies, investigations of a Governmental Authority involving any
of the Selling Companies respective officers, directors, stockholders or key
employees in connection with the business of any of the Selling Companies
occurring, arising or existing during the past three (3) years.
(b) None of the Selling Companies or any of their Subsidiaries is
subject to any outstanding Order of any Governmental Authority.
SECTION 5.13 TAXES. Except as set forth on Section 5.13 of the Selling
Companies Disclosure Schedule:
(a) Each Selling Company and its Subsidiaries has timely filed or
been included in, or will timely file or be included in, all material Tax
Returns required to be filed by it or in which it is to be included with respect
to Taxes for any period ending on or before the date of this Agreement, taking
into account any extension of time to file granted to or obtained on behalf of
the Selling Company or any of its Subsidiaries and all such Tax Returns are
true, correct and complete in all material respects.
(b) Each Selling Company and its Subsidiaries has paid or caused to
be paid all material Taxes due and payable by such Selling Company or Subsidiary
(whether or not shown on such Tax Returns).
47
(c) Each Selling Company has delivered to Buyer correct and complete
copies of all federal and state income Tax Returns, examination reports, and
statements of deficiencies filed or received by the Selling Company and its
Subsidiaries with respect to the 2002, 2003 and 2004 taxable years of the
Selling Company and its Subsidiaries. No Selling Company or any of its
Subsidiaries has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to any Tax payment, assessment, deficiency
or collection.
(d) No Selling Company or any of its Subsidiaries has received
notice in writing of any audit or of any proposed deficiencies from the IRS or
any other Tax Authority (other than routine audits undertaken in the ordinary
course and which have been resolved on or prior to the date hereof). Neither the
IRS nor any other Tax Authority is now asserting or, to the Knowledge of any
Selling Company, threatening in writing to assert against any Selling Company or
any of its Subsidiaries any deficiency or claim for additional Taxes.
(e) No Selling Company or any of its Subsidiaries has any Liability
for Taxes of any Person (other than such Selling Company or its Subsidiaries)
under Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or otherwise.
(f) The taxable year of each Selling Company and each Subsidiary for
federal and state income tax purposes is the fiscal year ended December 31st,
and each Selling Company and each of its Subsidiaries uses the accrual method of
accounting in keeping its books and in computing its taxable income.
(g) Each Selling Company and each of its Subsidiaries has provided
Parent with copies of all private letter rulings, determination letters, closing
agreements and other correspondence issued by or received from the IRS or any
other Tax Authority since January 1, 2001.
(h) No Selling Company or any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code at any time during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. No Selling Company or any of its Subsidiaries is a
party to any Tax allocation, indemnification or sharing arrangement.
(i) Other than with respect to the Spin-Off, no Selling Company or
any of its Subsidiaries has distributed stock of another Person, or had its
stock distributed by another Person, in a transaction that was purported or
intended to be governed in whole or in part by Section 355 or Section 361 of the
Code.
(j) No Selling Company or any of its Subsidiaries is a party to any
Contract, plan or arrangement that has resulted or would result, separately or
in the aggregate, in the payment of any "excess parachute payment" within the
meaning of Section 280G of the Code (or any corresponding provision of state,
local or foreign law).
(k) No Selling Company or any of its Subsidiaries has participated
in a listed transaction within the meaning of Treasury Regulations Section
1.6011-4 (or any predecessor provision).
48
(l) No Selling Company or any of its Subsidiaries will be required
to include any material item of income in, or exclude any material item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any:
(i) change in method of accounting for a taxable period ending
on or prior to the Closing Date;
(ii) "closing agreement" as described in Section 7121 of the
Code (or any corresponding or similar provision of state, local or foreign
income Tax Law) executed on or prior to the Closing Date, other than as
provided to Parent under Section 5.13(g);
(iii) intercompany transactions or any excess loss account
described in Treasury Regulations under Section 1502 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax
Law);
(iv) installment sale or open transaction disposition made on
or prior to the Closing Date; or
(v) prepaid amount received on or prior to the Closing Date.
(m) There are no material Liens for Taxes with respect to any assets
of the Selling Companies or any of their Subsidiaries other than for Taxes that
are not yet due or payable.
(n) All material Taxes and other assessments and levies which the
Selling Companies and their Subsidiaries were or are required to withhold or
collect have been withheld and collected and have been paid over to the proper
Tax Authorities.
(o) No claim has been made by any Tax Authority that any Selling
Company or any of its Subsidiaries is subject to Tax or required to file a Tax
Return in a jurisdiction where it does not file Tax Returns, which could
reasonably be expected to have, individually or in the aggregate, a Selling
Companies Material Adverse Effect.
(p) As of the Closing, the accrued but unpaid Taxes of the Selling
Companies and their Subsidiaries will not exceed the amounts set forth in Final
Net Working Capital (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income).
(q) To the Knowledge of the Selling Companies, as of the date of
this Agreement, the amount of gain that will be recognized for federal income
Tax purposes by the Selling Companies and their Subsidiaries in connection with
the Spin Off shall not in the aggregate exceed the Company's losses for the
taxable period ending on the Closing Date and the Company's net operating loss
carryforwards from prior taxable periods, in each case to the extent such losses
or carryforwards are available to offset such gain.
(r) No entity in which any Selling Company holds an interest is or
has been a passive foreign investment company within the meaning of Section
1297(a) of the Code.
49
(s) Since January 1, 2001, no Selling Company or any of its
Subsidiaries has made an election under Section 965(f) of the Code.
(t) No Selling Company or any of its Subsidiaries has an overall
foreign loss within the meaning of Section 904(f)(2) of the Code.
SECTION 5.14 EMPLOYEE BENEFIT PLANS.
(a) Section 5.14(a) of the Selling Companies Disclosure Schedule
sets forth a complete list of all material Employee Benefit Plans and all
Employment Agreements, including, without limitation, any Contract requiring the
payment of severance with any director, officer, employee or consultant or any
Contract involving the payment of pension, profit sharing or retirement amounts.
With respect to each Employee Benefit Plan, the Selling Companies have made
available to Parent, or will make available to Parent prior to the Closing, a
true, correct and complete copy of: (i) all documents embodying or governing
such Plan, and any funding medium for the Plan (including, without limitation,
trust agreements); (ii) each writing constituting a part of such Plan or a
written summary in the case of any oral Plan; (iii) the annual report (Form 5500
Series) and accompanying schedules, and all non-discrimination testing for the
last three (3) years; (iv) the current summary plan description and any material
modifications thereto, if any (in each case, whether or not required to be
furnished under ERISA); (v) the most recent annual financial and actuarial
report, if any; (vi) the most recent determination letter from the IRS, if any;
and (vii) any insurance policy related to such Plan. The Selling Companies have
delivered or made available to Parent a true, correct and complete copy of each
Employment Agreement. Except as specifically provided in the foregoing documents
made available to Parent, there are no amendments to any Plan or Employment
Agreement that have been adopted or approved nor has the Selling Companies or
any of their Subsidiaries undertaken to make any such amendments or to adopt or
approve any new Plan or Employment Agreement. Each of the Employee Benefit Plans
and Employment Agreements is in full force and effect and none of the Selling
Companies or any of their Subsidiaries or, to the Knowledge of the Selling
Companies, any other party thereto is in material default or breach under the
terms of any such Employee Benefit Plan or Employment Agreement. Each of the
Employee Benefit Plans and Employment Agreements is a valid and binding
obligation of the applicable Selling Company and/or its Subsidiaries and, to the
Knowledge of the Selling Companies, each of the other parties, enforceable
against them in accordance with its terms. The applicable Selling Company and/or
its Subsidiaries has duly performed all of its material obligations under each
such Employee Benefit Plan and Employment Agreement to the extent that such
obligations have accrued.
(b) With respect to each Plan that is intended to be a "qualified
plan" within the meaning of Section 401(a) of the Code ("Qualified Plans"), the
IRS has issued a favorable determination letter with respect to each Qualified
Plan and the related trust that has not been revoked, and there are no existing
circumstances and no events have occurred that would reasonably be expected to
adversely affect the qualified status of any Qualified Plan or the related
trust. All contributions, premiums and benefit payments under or in connection
with the Qualified Plans that are required to have been made in accordance with
the terms of such Qualified Plans have been timely made.
50
(c) With respect to each Employee Benefit Plan, the Selling
Companies and their Subsidiaries have complied, and are now in compliance, in
all material respects, with all provisions of ERISA, the Code and all Laws and
Regulations applicable to such Employee Benefit Plans. Each Plan has been
administered in all material respects in accordance with its terms. Except as
set forth in Section 5.14(c) of the Selling Companies Disclosure Schedule, each
Employee Benefit Plan specifically provides that it may be amended or terminated
at any time without any liability to any of the Selling Companies (other than
with respect to accrued benefits), any of their Subsidiaries or any of their
respective ERISA Affiliates and no representation to the contrary has been made.
There is not now, nor do any circumstances exist that would reasonably be
expected to give rise to, any requirement for the posting of security with
respect to a Plan or the imposition of any Lien on the assets of the Selling
Companies or any of their Subsidiaries or any of their respective ERISA
Affiliates under ERISA or the Code or any other Laws. None of the Selling
Companies, their Subsidiaries, any of their respective ERISA Affiliates, or any
other Person, including any fiduciary, has engaged in any "prohibited
transaction" (as defined in Section 4975 of the Code or Section 406 of ERISA),
which would reasonably likely be subject any of the Employee Benefit Plans or
their related trusts, any of the Selling Companies, any of their Subsidiaries,
any of their respective ERISA Affiliates or any Person that any of the Selling
Companies, any of their Subsidiaries or any of their respective ERISA Affiliates
has an obligation to indemnify, to any tax or penalty imposed under Section 4975
of the Code or Section 502 of ERISA. Each Employee Benefit Plan that is an
employee welfare benefit plan under Section 3(1) of ERISA (a "Welfare Plan")
either (i) is funded through an insurance company contract and is not a "welfare
benefit fund" within the meaning of Section 419 of the Code or (ii) is unfunded.
No Welfare Plan is self-insured or self-funded (except for a flexible health
spending account), or subject to regulation under Section 419 or 419A under the
Code, or maintains a trust.
(d) (i) no Employee Benefit Plan is a Multiemployer Plan or a plan
that has two (2) or more contributing sponsors at least two (2) of whom are not
under common control, within the meaning of Section 4063 of ERISA (a "Multiple
Employer Plan"); (ii) none of the Selling Companies and their Subsidiaries or
any of their respective ERISA Affiliates has ever contributed to or been
obligated to contribute to any Multiemployer Plan, a Multiple Employer Plan or
an employee benefit plan subject to Title IV of ERISA; and (iii) none of the
Selling Companies and their Subsidiaries or any ERISA Affiliates has incurred
any Withdrawal Liability that has not been satisfied in full.
(e) No Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. There does not now exist, nor do any
circumstances exist that would reasonably be expected to result in, any
Controlled Group Liability that would be a liability of the Selling Companies,
any of their Subsidiaries, or any of their respective ERISA Affiliates
(including the Surviving Companies and their ERISA Affiliates) following the
Closing. Except as set forth in Section 5.14(e) of the Selling Companies
Disclosure Schedule, none of the Selling Companies or any of their Subsidiaries
has any liability for life, health, medical or other welfare benefits to former
employees or beneficiaries or dependents thereof including retiree medical,
health or life benefits, except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA or state health
continuation law and at no expense to the Selling Companies and their
Subsidiaries. Except as set forth on Section 5.14(e) of the Selling Companies
Disclosure Schedule, the Selling Companies and each of their Subsidiaries has
51
reserved the right to amend, terminate or modify at any time all plans or
arrangements providing for retiree health or life insurance coverage.
(f) Except as set forth on Section 5.14(f) of the Selling Companies
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (either alone or
in conjunction with any other event) result in, cause the accelerated vesting,
funding or delivery of, or increase the amount or value of, any payment or
benefit to any employee, officer or director of any of the Selling Companies or
any of their Subsidiaries or any of their respective ERISA Affiliates, or result
in any limitation on the right of any of the Selling Companies or any of their
Subsidiaries to amend, merge, terminate or receive a reversion of assets from
any Employee Benefit Plan or related trust or any Material Employment Agreement
or related trust. Without limiting the generality of the foregoing, no amount
required to be paid to or with respect to any employee or other service provider
of any of the Selling Companies or any of their Subsidiaries (whether in cash,
in property, or in the form of benefits) in connection with the transactions
contemplated hereby (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) could be an "excess parachute
payment" within the meaning of Section 280G of the Code.
(g) There are no pending or, to the Knowledge of the Selling
Companies, threatened Actions (other than claims for benefits in the ordinary
course), which have been asserted or instituted (i) against any of the Selling
Companies pursuant to any Employment Agreement or in connection or as a result
of the termination thereof, or (ii) against any Employee Benefit Plan, any
fiduciaries thereof with respect to their duties to any Employee Benefit Plan or
the assets of any of the trusts under any of the Plans, in each case which would
reasonably be expected to result in any liability of any of the Selling
Companies, any of their Subsidiaries or any of their respective ERISA Affiliates
to the Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor, any Multiemployer Plan, any Plan, any participant in a
Plan, or any other party, except as would not reasonably be expected to have,
individually or in the aggregate, a Selling Companies Material Adverse Effect.
Each individual who renders services to any of the Selling Companies, any of
their Subsidiaries or any of their respective ERISA Affiliates who is classified
by such Selling Company or such Subsidiary, as applicable, as having the status
of an independent contractor or other non-employee status for any purpose
(including for purposes of taxation and tax reporting and under Employee Benefit
Plans) is properly so characterized, except as would not reasonably be expected
to have, individually or in the aggregate, a Selling Companies Material Adverse
Effect.
(h) Each Employee Benefit Plan which is a nonqualified deferred
compensation plan is in "good faith compliance" in all material respects, in
both form and operation, with Section 409A of the Code and the guidance
thereunder. No payment to be made under any Employee Benefit Plan is, or to the
Knowledge of the Selling Companies will be, subject to the penalties of Section
409A(a)(1) of the Code.
(i) For purposes of this Section 5.14, references to the "Selling
Companies" or their "Subsidiaries" shall include and incorporate each of their
respective ERISA Affiliates.
52
SECTION 5.15 REAL AND PERSONAL PROPERTY.
(a) Section 5.15(a) of the Selling Companies Disclosure Schedules
sets forth a complete and accurate list as of the date of this Agreement of (i)
addresses of all real property owned by the Selling Companies or any of their
Subsidiaries (the "Real Property") and (ii) all loans secured by mortgages
encumbering the Real Property. The applicable Selling Company or the applicable
Subsidiary of the Selling Companies owns fee simple title to all of the Real
Property and such Real Property is (A) free and clear of Liens other than
Permitted Liens and (B) not subject to any easements, rights of way, covenants,
conditions, restrictions or other written agreements, laws affecting building
use or occupancy, or reservations of interest in title, which prohibit or
materially adversely restrict the use of such Real Property as currently used by
the Selling Companies or their Subsidiaries.
(b) The Real Property complies in all material respects with the
requirements of all applicable building, zoning, subdivisions, health, safety
and other land use Laws (collectively, the "Real Property Regulations"), except
where noncompliance would not prohibit or materially adversely restrict the use
of such Real Property as currently used by the Selling Companies or their
Subsidiaries. Except as listed in Section 5.15(b) of the Selling Companies
Disclosure Schedule and for any material violation, since January 1, 2003 that
has not been cured, none of the Selling Companies or any of their Subsidiaries
has received notice from any Governmental Authority that it is in material
violation of any Law affecting any portion of the Real Property.
(c) Section 5.15(c) of the Selling Companies Disclosure Schedule
sets forth a list of all real property leased by the Selling Companies or any of
their Subsidiaries as of the date of this Agreement (the "Leased Real
Property"). True and complete copies of all leases relating to Leased Real
Property identified on Section 5.15(c) of the Selling Companies Disclosure
Schedule (the "Leases") have been made available to Parent and Merger Subs. With
respect to each Lease, except as would not reasonably be expected to prohibit or
materially adversely restrict the use of such Leased Real Property as currently
used by the Selling Companies and their Subsidiaries:
(i) a Selling Company or a Subsidiary of the Selling
Companies, as applicable, has a valid and enforceable leasehold interest
to the leasehold estate in the Leased Real Property granted to such
Selling Company or such Subsidiary, as applicable, pursuant to each
pertinent Lease free and clear of Liens other than Permitted Liens,
subject only to the landlord's right of reversion under such Leases;
(ii) each of said Leases has been duly authorized and executed
by a Selling Company or such Subsidiary of the Selling Companies, as
applicable, and is in full force and effect;
(iii) none of the Selling Companies or any of the Subsidiaries
is in material default under any of said Leases, nor, to the Knowledge of
the Selling Companies, has any event occurred which, with notice or the
passage of time, or both, would give rise to such a material default by
the applicable Selling Company or such Subsidiary, as applicable;
53
(iv) to the Knowledge of the Selling Companies, no landlord is
in material default under any of said Leases, nor, to the Knowledge of the
Selling Companies, has any event occurred which, with notice or the
passage of time, or both, would give rise to such a material default by a
landlord; and
(v) except with respect to the Senior Indebtedness and except
as listed in Section 5.15(c) of the Selling Companies Disclosure Schedule,
none of the Selling Companies or any of their Subsidiaries have assigned,
sub-let, transferred, conveyed, mortgaged, deeded in trust or encumbered
any interest in any Lease.
(d) Except as set forth on Section 5.15(d) of the Selling Companies
Disclosure Schedule or as specifically disclosed in either the Company Balance
Sheet or the Fluent Balance Sheet, and except with respect to leased personal
property, the Selling Companies and each of their Subsidiaries has good title to
all of their tangible personal property and assets shown on either the Company
Balance Sheet or the Fluent Balance Sheet or acquired after December 31, 2004
(except for assets which have been disposed of since December 31, 2004 in the
ordinary course of business consistent with past practice), free and clear of
any Liens other than Permitted Liens.
(e) Each of the Selling Companies and their Subsidiaries owns all
shares of capital stock and other securities held by it, free and clear of any
Liens, except for Permitted Liens and to the extent such securities are pledged
in the ordinary course of business consistent with past practice to secure
obligations of the Selling Companies or any of their Subsidiaries.
SECTION 5.16 LABOR AND EMPLOYMENT MATTERS.
(a) Except as set forth on Section 5.16(a) of the Selling Companies
Disclosure Schedule or as otherwise would not reasonably be expected to have,
individually or in the aggregate, a Selling Companies Material Adverse Effect,
the Selling Companies and each of their Subsidiaries are and have been, in
compliance with all applicable Laws and Regulations respecting labor,
employment, fair employment practices, terms and conditions of employment,
occupational safety and health, civil rights, family and medical leaves and
military leaves, and wages and hours. Without limiting the foregoing, the
Selling Companies are, and at all times the Selling Companies have been, in
compliance in all material respects with the requirements of the Immigration
Reform Control Act of 1986.
(b) Except as set forth in Section 5.16(b) of the Selling Companies
Disclosure Schedule, as of the date of this Agreement, there are no changes
pending or, to the Knowledge of the Selling Companies, threatened with respect
to (including, without limitation, the resignation of) the senior management or
key supervisory personnel or independent contractors of each of the Selling
Companies nor have the Selling Companies received any notice or information
concerning any prospective change with respect to such senior management or key
supervisory personnel.
(c) Except as set forth on Section 5.16(c) of the Selling Companies
Disclosure Schedule, none of the Selling Companies or any of their Subsidiaries
is a party to or otherwise bound by any collective bargaining agreement,
contract or other agreement or understanding
54
with a labor union or labor organization. None of the Selling Companies or any
of their Subsidiaries is subject to any charge, demand, petition or
representation proceeding seeking to compel, require or demand it to bargain
with any labor union or labor organization nor is there pending or, to the
Knowledge of the Selling Companies, threatened, any labor strike, dispute,
walkout, work stoppage, slow-down or lockout involving any of the Selling
Companies or any of their Subsidiaries.
(d) Since January 1, 1996, none of the Selling Companies or any of
their Subsidiaries has implemented a "mass layoff" or "plant closing" within the
meaning of the Worker Adjustment and Retraining Notification Act of 1988, as
amended, and any similar state or local "mass layoff" or "plant closing" law,
and no layoffs that could implicate such Laws or Regulations are currently
contemplated.
(e) Since January 1, 1996, none of the Selling Companies or any of
their Subsidiaries has received notice of (i) any unfair labor practice charge,
complaint, grievance or arbitration pending or threatened before the National
Labor Relations Board or any other Governmental Authority against them, (ii) any
charge or complaint with respect to or relating to them pending before the Equal
Employment Opportunity Commission or any other Governmental Authority
responsible for the prevention of unlawful employment practices, (iii) the
intent of any Governmental Authority responsible for the enforcement of labor,
employment, wages and hours of work, child labor, immigration, or occupational
safety and health laws to conduct an investigation with respect to or relating
to them or notice that such investigation is in progress, or (iv) any Action
pending or threatened in any forum by or on behalf of any present or former
employee of such entities, any applicant for employment or classes of the
foregoing alleging breach of any express or implied contract of employment, any
applicable Law governing employment or the termination thereof or other
discriminatory, wrongful or tortuous conduct in connection with the employment
relationship, except, for purposes of this Section 5.16(e), in each case as
would not reasonably be expected to have, individually or in the aggregate, a
Selling Companies Material Adverse Effect.
SECTION 5.17 CONTRACTS AND COMMITMENTS. Section 5.17 of the Selling
Companies Disclosure Schedule is a correct and complete list of each currently
effective Contract to which any of the Selling Companies or any of their
Subsidiaries is a party as of the date hereof and which constitutes any of the
following (collectively, the "Material Contracts"):
(a) a partnership, joint venture, strategic alliance or similar
Contract;
(b) a Contract providing for the indemnification by any of the
Selling Companies or a Subsidiary of the Selling Companies of any Person, other
than in the ordinary course of business consistent with past practice;
(c) an agreement, arrangement or obligation with another Person
which purports to limit in any material respect (i) the ability of any of the
Selling Companies or any of their Subsidiaries to solicit customers, (ii) the
localities in which all or any significant portion of the business and
operations of any of the Selling Companies or any of their Subsidiaries or,
following the consummation of the transactions contemplated by this Agreement,
the business
55
and operations of Parent and its Affiliates, is or would be conducted, or (iii)
the scope of the business and operations of the Selling Companies and their
Subsidiaries, taken as a whole;
(d) any material licenses, sublicenses and other agreements to which
the Selling Companies or their Subsidiaries are a party (i) granting any other
Person the right to use intellectual property, other than in the ordinary course
of business consistent with past practice, (ii) restricting the right of any of
the Selling Companies or their Subsidiaries to use intellectual property, other
than in the ordinary course of business consistent with past practice, or (iii)
pursuant to which any of the Selling Companies or any of their Subsidiaries are
authorized to use any third party intellectual property, which are incorporated
in, are, or form a part of any Selling Companies Product or which are otherwise
used (or currently proposed to be used) by any of the Selling Companies or any
of their Subsidiaries in the Business (other than readily available commercial
off-the-shelf software having an acquisition price of less than $20,000 in the
aggregate for all such related software);
(e) a Contract that contains any royalty, dividend or similar
arrangement based on the revenues or profits of any of the Selling Companies;
(f) a material Contract with any Governmental Authority;
(g) a Contract for the acquisition or disposition of any material
interest in, or any material amount of, property or assets of any of the Selling
Companies or any of their Subsidiaries other than in the ordinary course of
business consistent with past practice or for the grant to any Person of any
preferential rights to purchase any of their assets;
(h) a Contract under which any Selling Company or any of their
Subsidiaries has made advances or loans in excess of $100,000 to any other
Person (which shall not include advances made to an employee of the Selling
Companies or any of their Subsidiaries in the ordinary course of business
consistent with past practice); or
(i) any other agreement (or group of related agreements) the
performance of which requires aggregate payments to or from the Selling
Companies or any of their Subsidiaries in excess of $200,000, other than
agreements entered into in the ordinary course of business consistent with past
practice.
The Selling Companies have made available or delivered to Parent true and
complete copies of all written and accurate and complete descriptions of all
material terms of all oral Material Contracts. Each Material Contract is in full
force and effect and none of the Selling Companies or any of their Subsidiaries
or, to the Knowledge of the Selling Companies, any other party thereto is in
material default or breach under the terms of any such Material Contract. Each
Material Contract is a valid and binding obligation of the applicable Selling
Company and/or its Subsidiaries and, to the Knowledge of the Selling Companies,
each of the other parties, enforceable against them in accordance with its
terms. The applicable Selling Company and/or each of its Subsidiaries has duly
performed all of its material obligations under each such Material Contract to
the extent that such obligations have accrued.
56
SECTION 5.18 INTELLECTUAL PROPERTY.
(a) Section 5.18 of the Selling Companies Disclosure Schedule
contains a complete and accurate list of all Marks owned by or licensed to a
Selling Company or any of its Subsidiaries or used or held for use by a Selling
Company or any of its Subsidiaries in the Business ("Selling Companies Marks"),
including each jurisdiction in which Selling Companies Marks have been filed or
registered and all applicable serial or registration numbers. Except as set
forth on Section 5.18 of the Selling Companies Disclosure Schedule:
(i) each Selling Company and its Subsidiaries exclusively owns
or possesses adequate and enforceable rights to use, without payment to a
third party, all of the Intellectual Property Assets necessary for the
operation of the Business, free and clear of all Liens other than
Permitted Liens;
(ii) each Selling Company and its Subsidiaries is not now nor
has it ever been a member or promoter of, or a contributor to, any
industry standards body or similar organization that could require or
obligate it to grant or offer to any other Person any license or right to
any Intellectual Property Asset;
(iii) all Intellectual Property Assets are valid and
enforceable in all material respects, and all Selling Companies Marks
which have been issued or registered by, or are the subject of an
application filed with, as applicable, the U.S. Patent and Trademark
Office or in any similar office or agency anywhere in the world, are in
compliance in all material respects with formal legal requirements
(including without limitation, as applicable, payment of filing,
examination and maintenance fees, proofs of working or use, timely
post-registration filing of affidavits of use and incontestability and
renewal applications), and all documents and instruments necessary to
perfect the rights of such Selling Company in and to the Intellectual
Property Assets have been validly executed, delivered and filed in a
timely manner with the appropriate Governmental Authority, except as would
not reasonably be expected to have, individually or in the aggregate, a
Selling Companies Material Adverse Effect;
(iv) there are no pending, or, to the Knowledge of the Selling
Companies, threatened claims against any of the Selling Companies or any
of their Subsidiaries or any of their respective employees alleging that
any of the operations of the Business, any activity by the Selling
Companies or their Subsidiaries, any computer programs and/or services and
related documentation that the Selling Companies or their Subsidiaries
design, manufacture, market, sell and/or distribute for itself, a customer
or a third party (each such product or service shall be referred to herein
as a "Selling Companies Product") infringes on or violates (or in the past
infringed or violated) the rights of others in or to any Intellectual
Property Assets ("Third Party Rights") or constitutes a misappropriation
of (or in the past constituted a misappropriation of) any Intellectual
Property Assets of any Person or that any of the Intellectual Property
Assets is invalid or unenforceable, nor is there any interference,
opposition, reissue, reexamination or other proceeding of any nature
pending or, to the Knowledge of the Selling Companies, threatened, in
which the scope, validity and/or enforceability of any Intellectual
Property Asset is being, has been or could reasonably be expected to be
57
contested or challenged, except as would not reasonably be expected to
have, individually or in the aggregate, a Selling Companies Material
Adverse Effect;
(v) neither the operation of the Business nor any activity by
the Selling Companies or their Subsidiaries, nor any Selling Companies
Product infringes on or violates (or in the past infringed on or violated)
any Third Party Right or constitutes a misappropriation of (or in the past
constituted a misappropriation of) any Intellectual Property Assets of any
Person, except as would not reasonably be expected to have, individually
or in the aggregate, a Selling Companies Material Adverse Effect;
(vi) all former and current employees, consultants and
contractors of the Selling Companies or their Subsidiaries with technical
responsibilities or involved in the creation of Intellectual Property
Assets have executed written instruments with the applicable Selling
Company or Subsidiary that irrevocably assign to the applicable Selling
Company or Subsidiary all rights, title and interest to any inventions,
improvements, discoveries, writings or other works of authorship, or
information relating to the business of such Selling Company or Subsidiary
or any of the products or services being researched, developed,
manufactured or sold by such Selling Company or Subsidiary or which may be
used with any such products or services;
(vii) no employee, consultant or contractor of the Selling
Companies or their Subsidiaries has any claim, right (whether or not
currently exercisable) or interest to or in any Intellectual Property
Asset, except as would not reasonably be expected to have, individually or
in the aggregate, a Selling Companies Material Adverse Effect;
(viii) to the Knowledge of the Selling Companies, no employee
or independent contractor of any of the Selling Companies or any of their
Subsidiaries is: (i) bound by or otherwise subject to any Contract
restricting him or her from performing his or her duties for such Selling
Company or Subsidiary or (ii) in breach of any Contract with any former
employer or other Person concerning intellectual property rights or
confidentiality;
(ix) the Selling Companies and their Subsidiaries own all
Intellectual Property Assets resulting from development funded by the
Selling Companies and their Subsidiaries;
(x) to the Knowledge of the Selling Companies, (i) there is
no, nor has there been any, infringement or violation by any Person of any
of the Selling Companies' or their Subsidiaries' rights in or to the
Intellectual Property Assets and (ii) there is no, nor has there been any,
misappropriation by any Person of any of the Intellectual Property Assets;
(xi) the Selling Companies and their Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and
value of all Trade Secrets owned by the Selling Companies or their
Subsidiaries or used or held for use by the Selling Companies or their
Subsidiaries in the Business (the "Selling Companies Trade Secrets");
58
(xii) none of the Selling Companies or any of their
Subsidiaries has assigned, sold, exclusively licensed or otherwise
transferred, or agreed to assign, sell, exclusively license or otherwise
transfer, ownership of any Intellectual Property Assets to any Person;
(xiii) other than in the ordinary course of business
consistent with past practice, (A) none of the Selling Companies or any of
their Subsidiaries has directly or indirectly granted any rights, licenses
or interests in the source code of the Selling Companies Products, or to
use the source code to create derivative works, and (B) since such Selling
Company or Subsidiary developed the source code of the Selling Companies
Products, such Selling Company or Subsidiary has not provided or disclosed
the source code of the Selling Companies Products to any Person;
(xiv) the Selling Companies Products perform in all material
respects in accordance with their documented specifications and as the
Selling Companies and their Subsidiaries have warranted to its customers;
(xv) to the Knowledge of the Selling Companies, the Selling
Companies Products do not contain any "viruses," "time-bombs,"
"key-locks," "worms," or any other code that could disrupt, disable or
interfere with the operation of the Selling Companies Products or the
integrity of the data, information or signals they produce, or provide
unauthorized access to a computer system or network or other device on
which such Selling Companies Product is stored or installed, or otherwise
cause adverse consequences to the Selling Companies, their Subsidiaries or
to any licensee or recipient;
(xvi) neither Selling Companies nor any of their Subsidiaries
are obligated to deliver or otherwise provide access to any third party
to, or permit any third party to copy, modify or distribute, the source
code of any Selling Companies Product;
(xvii) all software (other than commercially available desktop
software) that is offered, distributed, marketed or sold to customers of
the Selling Companies or any of their Subsidiaries as a program or as part
of a product or service (or that is currently being developed by the
Selling Companies or their Subsidiaries to be offered, distributed,
marketed or sold to such customers) (A) is owned or licensed by the
Selling Companies or a Subsidiary of the Selling Companies free and clear
of any limitations or Liens, other than Permitted Liens and obligations
set forth in Section 5.18(a)(xvi) hereof; and (B) with respect to owned
software, is not subject to any claim of ownership of any third party,
including, but not limited to, claims pursuant to any Contract between any
of Selling Companies or their Subsidiaries and such third party granting
work-product ownership rights to such third party (e.g., work-for-hire
provisions);
(xviii) the source code for any software (other than
commercially available desktop software) that is offered, distributed,
marketed or sold to customers of the Selling Companies or any of their
Subsidiaries as a program or as part of a product or service (or that is
currently being developed by the Selling Companies or their Subsidiaries
to be offered, distributed, marketed or sold to such customers) has not
been delivered, licensed or made available and the Selling Companies and
their Subsidiaries
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have no duty or obligation (whether present, contingent or otherwise) to
deliver, license or make available the source code for any such software
to any Person who is not an employee or consultant of the Selling
Companies or their Subsidiaries, other than to escrow agents pursuant to
licenses entered into in the ordinary course of business consistent with
past practice and whose obligations are triggered by bankruptcy or similar
events;
(xix) no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could
reasonably be expected to, result in the delivery, license or disclosure
of any source code, for any software that is offered, distributed,
marketed or sold to customers of the Selling Companies or any of their
Subsidiaries as a program or as part of a product or service (or is
currently being developed by the Selling Companies or their Subsidiaries
to be offered, distributed, marketed or sold to such customers), to any
other Person who is not an employee or independent contractor of the
Selling Companies or their Subsidiaries; and
(xx) all software (other than commercially available desktop
software) that is used by the Selling Companies or any of their
Subsidiaries to support its business is owned by the Selling Companies or
a Subsidiary of the Selling Companies, or the Selling Companies and their
Subsidiaries have the right to use or modify or customize (to the extent
such modification or customization is necessary to conduct Business) such
software.
(b) There are no Patents owned by or licensed to a Selling Company
or any of its respective Subsidiaries or used or held for use by a Selling
Company or any of its Subsidiaries in the Business.
SECTION 5.19 ENVIRONMENTAL MATTERS. Except as set forth on Section 5.19 of
the Selling Companies Disclosure Schedule:
(a) the Selling Companies and their Subsidiaries are in material
compliance with all Environmental Laws applicable to their operations and use of
the Real Property or the Leased Real Property;
(b) none of the Selling Companies or any of their Subsidiaries has
generated, transported, treated, stored, or disposed of any Hazardous Material,
except in material compliance with all applicable Environmental Laws, and there
has been no Release or threat of Release of any Hazardous Material by any of the
Selling Companies or their Subsidiaries at or on the Real Property or the Leased
Real Property that requires reporting, investigation or remediation by the
Selling Companies or their Subsidiaries pursuant to any Environmental Law;
(c) none of the Selling Companies or any of their Subsidiaries has
(i) received notice under the citizen suit provisions of any Environmental Law;
(ii) received any written request for information, notice, demand letter,
administrative inquiry or written complaint or claim under any Environmental
Law; (iii) been subject to or, to the Knowledge of the Selling Companies,
threatened with any governmental or citizen enforcement action with respect to
any
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Environmental Law or (iv) received written notice of or otherwise has knowledge
of any unsatisfied liability under any Environmental Law in excess of $75,000;
and
(d) to the Knowledge of the Selling Companies, there are no
underground storage tanks, landfills, current or former waste disposal areas or
polychlorinated biphenyls at or on the Real Property or the Leased Real Property
that require reporting, investigation, cleanup, remediation or any other type of
response action by any of the Selling Companies or any of their Subsidiaries
pursuant to any Environmental Law.
(e) For the purposes of this Agreement:
(i) "Environment" means soil, surface waters, groundwater,
land, stream sediments, surface or subsurface strata and ambient air and
biota living in or on such media.
(ii) "Environmental Laws" means all Laws relating to
protection of the Environment, including, without limitation, the federal
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water
Act, the Toxic Substances Control Act, the Endangered Species Act and
similar federal, state and local laws as in effect on the Closing Date.
(iii) "Hazardous Material" means any pollutant, toxic
substance, hazardous waste, hazardous materials, hazardous substances,
petroleum or petroleum-containing products as defined in, or listed under,
any Environmental Law.
(iv) "Release" means any releasing, disposing, discharging,
injecting, spilling, leaking, pumping, dumping, emitting, escaping or
emptying of a Hazardous Material into the Environment.
SECTION 5.20 NO BROKERS. None of the Selling Companies or any of their
Subsidiaries has entered into any Contract, arrangement or understanding with
any Person or firm that may result in the obligation of the Selling Companies or
any of their Subsidiaries or Parent or Merger Subs or Merger Sub III to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or consummation of
the Mergers.
SECTION 5.21 BOOKS AND RECORDS. The books, records and accounts of each of
the Selling Companies and each of their Subsidiaries are true, accurate and
complete in all material respects and reflect actual, bona fide transactions,
and have been maintained in accordance with GAAP and, in all material respects,
with applicable Laws. The Selling Companies maintain a system of internal
accounting controls, policies and procedures sufficient to provide reasonable
assurances regarding the reliability of financial reporting and the preparation
of financial statements in accordance with GAAP, including that (a) the
maintenance of records is in reasonable detail to accurately and fairly reflect
the transactions and dispositions of the assets of the Selling Companies and
their Subsidiaries, (b) all transactions are executed in accordance with
management's general or specific authorization, (c) all transactions are
recorded as necessary to permit the preparation of financial statements in
conformity with GAAP, and (d) access to the
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property and assets of the Selling Companies and their Subsidiaries is permitted
only in accordance with management's general or specific authorization. To the
extent that the Selling Companies or their Subsidiaries use the services of a
third party service provider to manage any of their or any other party's assets
or transactions, to the Knowledge of the Selling Companies, such provider
maintains in all material respects the standards described in the preceding
sentence and, to the Knowledge of the Selling Companies, each such provider is
duly qualified and has met all applicable regulatory requirements to provide
such services. The Selling Companies and their Subsidiaries have made available
to Parent true, accurate and complete copies of all internal and external audit
control recommendations and exception items contained in written reports made
within the 12 months prior to the date hereof relating to the Selling Companies
and their Subsidiaries and the responses of the Selling Companies and their
Subsidiaries thereto, as applicable. Each of the Selling Companies and each of
their Subsidiaries have, to the extent and at or before the times set forth in
such responses, materially complied with or substantially addressed such
recommendations, exceptions and deficiency items.
SECTION 5.22 INSURANCE POLICIES. The Selling Companies and their
Subsidiaries are covered by valid and currently effective insurance policies
with reputable insurers. Each such policy is in full force and effect and is
adequate in coverage and amount to insure against risks to which the Selling
Companies and their Subsidiaries and their employees, business, properties and
other assets could reasonably be expected to be exposed, except as would not
reasonably be expected to have a Selling Companies Material Adverse Effect. All
premiums with respect to the Selling Companies' and their Subsidiaries'
insurance policies have been paid through the date hereof and other than in the
ordinary course of business no written notice of termination or cancellation has
been received by the Selling Companies or any of their Subsidiaries with respect
to any such policy. There are no material pending claims against such insurance
with respect to any of the Selling Companies or their Subsidiaries as to which
the insurers have denied coverage or otherwise reserved rights. Section 5.22 of
the Selling Companies Disclosure Schedule sets forth all material outstanding
claims against such insurance as of the date hereof, and, to the Knowledge of
the Selling Companies, all material claims that can be made against such
insurance have been made.
SECTION 5.23 COMPLIANCE WITH LAWS. Except as would not reasonably be
expected to have, individually or in the aggregate, a Selling Companies Material
Adverse Effect, none of the Selling Companies or any of their officers,
Affiliates, agents or employees in his, her or its capacity as such is currently
in default or violation in any material respect under, any Law or Order
applicable to the Selling Companies or any of their assets and properties, and
to the Knowledge of the Selling Companies, no claim of violation of any such Law
or Order has been threatened against any of the Selling Companies or any of
their officers, Affiliates, agents or employees in his, her or its capacity as
such. Except as would not reasonably be expected to have, individually or in the
aggregate, a Selling Companies Material Adverse Effect, none of the Selling
Companies or any of their Subsidiaries has received any notice to the effect
that, or otherwise been advised that, it is not currently in compliance in all
material respects with any Law or Order or has otherwise engaged in any unlawful
business practice. This Section 5.23 shall not apply to any Tax matters, which
shall be covered exclusively by Section 5.13.
SECTION 5.24 LICENSES AND PERMITS. Each of the licenses, permits,
approvals, authorizations, registrations and certifications of any Governmental
Authority, which have been
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issued to any of the Selling Companies or any of their Subsidiaries and are
currently in effect (the "Selling Companies Licenses") is valid and in full
force and effect, except to the extent the failure of any such Selling Companies
License to be valid and in full force and effect would not reasonably be
expected to have, individually or in the aggregate, a Selling Companies Material
Adverse Effect. The Selling Companies Licenses are all of the federal, state,
local, and foreign governmental authorizations necessary for each of the Selling
Companies to own or lease its respective properties and assets and to carry on
its respective business as it is now conducted, except as would not otherwise
reasonably be expected to have, individually or in the aggregate, a Selling
Companies Material Adverse Effect. There is no investigation or proceeding
pending or, to the Knowledge of the Selling Companies, threatened that could
result in the termination, revocation, suspension or restriction of any Selling
Companies License or the imposition of any fine, penalty or other sanctions for
violation of any legal or regulatory requirements relating to any Selling
Companies License. Each of the Selling Companies has, to the extent required,
made all filings necessary to request the timely renewal or issuance of all
Selling Companies Licenses prior to the Closing for each Selling Company and
their Subsidiaries to own, operate and maintain its assets and to conduct its
business as it is currently being conducted. Except as set forth in Section 5.24
of the Selling Companies Disclosure Schedule, none of the Selling Companies
Licenses shall be affected in any material respect by the consummation of the
transactions contemplated hereby, except to the extent such effect would not
reasonably be expected to have, individually or in the aggregate, a Selling
Companies Material Adverse Effect.
SECTION 5.25 ACCOUNTS RECEIVABLE. The accounts receivable of the Selling
Companies reflected on either the Company Financial Statements or the Fluent
Financial Statements, and all accounts receivable arising subsequent to December
31, 2004, (a) arose from bona fide sales transactions in the ordinary course of
business consistent with past practice, and are payable in ordinary trade terms
and (b) are recorded in accordance with GAAP, consistently applied.
SECTION 5.26 WARRANTY AND RELATED MATTERS. There are no existing or, to
the Knowledge of the Selling Companies, threatened, claims against any of the
Selling Companies or any of their Subsidiaries relating to any work performed by
any of the Selling Companies or any of their Subsidiaries, product liability,
warranty or other similar claims against any of the Selling Companies or any of
their Subsidiaries alleging that any Selling Companies Product is defective or
fails to meet any product or service warranties which would reasonably be
expected to have a Selling Companies Material Adverse Effect. There are (a) no
inherent design defects or systemic or chronic problems in any Selling Companies
Product and (b) no Liabilities for warranty or other claims or returns with
respect to any Selling Companies Product relating to any such defects or
problems which would reasonably be expected to have a Selling Companies Material
Adverse Effect.
SECTION 5.27 ILLEGAL PAYMENTS. None of the Selling Companies or their
Subsidiaries, or, to the Selling Companies' Knowledge, any Person affiliated
with the Selling Companies or their Subsidiaries has ever offered, made or
received on behalf of the Selling Companies or their Subsidiaries any illegal
payment or contribution of any kind, directly or indirectly, including, without
limitation, payments, gifts or gratuities, to any person, entity, or United
States or foreign national, state or local government officials, employees or
agents or candidates therefor or other Persons.
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SECTION 5.28 STATE TAKEOVER STATUTES. Each of the Selling Companies Boards
has unanimously approved this Agreement, the Merger and the other transactions
contemplated hereby, and such approval is sufficient to render inapplicable to
this Agreement, the Merger and the other transactions contemplated hereby any
state takeover or similar statute or regulation, including, without limitation
Section 203 of the DGCL, that would otherwise be applicable to this Agreement,
the Merger or the other transactions contemplated by this Agreement.
SECTION 5.29 SPIN-OFF. Holding and the Company hereby represent and
warrant that Holding and the Company shall take all actions necessary to (a)
complete the transfer of the Spin-Off Entities and (b) cause all of the Other
Business Liabilities to be transferred to and paid, performed or assumed by the
Spin-Off Entities in accordance with the terms and conditions of those
agreements and other documents attached hereto as Exhibit A and in compliance
will all applicable Law. Holding and the Company hereby represent and warrant
that no assets of Fluent will be transferred in connection with the Spin-Off and
that the Selling Companies do not hold and will not incur any of the Other
Business Liabilities or any other Liabilities of or related to the Spin-Off.
Except as set forth in Section 5.29 of the Selling Companies Disclosure
Schedule, Holding and the Company hereby represent and warrant that the assets
to be held by the Selling Companies and their Subsidiaries following the Mergers
represent all of the assets used or held for use in the business of Fluent as
the same has been operated prior to the date hereof and such assets constitute
all of the assets necessary for Parent to continue to operate the business of
Fluent as it has been operated prior to the Closing.
SECTION 5.30 DISCLOSURE. No representation or warranty made by the Selling
Companies contained in this Agreement, and no statement contained in the Selling
Companies Disclosure Schedule or in any certificate furnished to Parent pursuant
to any provision of this Agreement (including the Company Financial Statements
and the Fluent Financial Statements and the notes to each) contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDERS
SECTION 6.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with the each of the Principal Stockholders in reliance upon each Principal
Stockholder's representation to Parent, that the Parent Common Stock issuable
upon conversion of the Selling Companies Stock will be acquired for investment
for such Principal Stockholder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof in violation of
federal securities laws, and that such Principal Stockholder has no present
intention of selling or otherwise distributing the same in violation of federal
securities laws.
SECTION 6.2 INVESTMENT EXPERIENCE. Each of the Principal Stockholders is
experienced in evaluating and investing in securities of companies and
acknowledges that each is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the Parent Common Stock. The foregoing, however, does not limit or
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modify the representations and warranties of the Selling Companies in Article V
hereof or the right of the Principal Stockholders to rely thereon.
SECTION 6.3 ACCREDITED INVESTOR. Each of the Principal Stockholders is an
accredited investor as defined in Rule 501(a) of Regulation D promulgated under
the Securities Act.
SECTION 6.4 AUTHORITY. Each of the Principal Stockholders has the
respective partnership power and authority to execute and deliver this Agreement
and any other agreement, certificate or instrument to be executed and delivered
pursuant to the terms of this Agreement, to perform their obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, the performance by the
Principal Stockholders of their respective obligations hereunder and the
consummation of the transactions contemplated hereby have been duly authorized
by the General Partner of each such Principal Stockholder and no other
partnership proceeding or approval on the part of each such Principal
Stockholder is required to authorize the execution, delivery or performance of
this Agreement. This Agreement has been duly and validly executed and delivered
by the Principal Stockholders and, assuming the due authorization, execution and
delivery of this Agreement by each of the other parties hereto, constitutes a
legal, valid and binding obligation of each of the Principal Stockholders,
enforceable against the Principal Stockholders in accordance with its terms.
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUBS
Parent and Merger Subs hereby jointly and severally represent and warrant
to the Selling Companies that, except as disclosed by Parent and Merger Subs in
the disclosure schedule, dated as of the date of this Agreement and delivered by
Parent and Merger Subs to the Selling Companies simultaneously herewith (the
"Parent Disclosure Schedule") with any information or item disclosed in one
section of the Parent Disclosure Schedule deemed to be disclosed in all other
relevant sections of the Parent Disclosure Schedule without regard to whether an
explicit cross-reference is included therein where such disclosure would be
appropriate and reasonably apparent:
SECTION 7.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of Parent,
Merger Sub and Merger Sub II is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and each
has all requisite corporate power and authority to own, operate, lease and
encumber its properties and to carry on its respective business as currently
conducted. Merger LLC is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite limited liability company power and authority to own, operate,
lease and encumber its properties and to carry on its business as currently
conducted. Each of Parent and Merger Subs is duly licensed or qualified to do
business as a foreign corporation or company and is in good standing under the
laws of each jurisdiction in which the character of its properties or in which
the transaction of its business makes such qualification necessary, except where
the failure to be so licensed or qualified would not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
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SECTION 7.2 FORMATION AND OWNERSHIP OF MERGER SUBS; NO PRIOR ACTIVITIES.
(a) Each of Merger Sub, Merger Sub II and Merger LLC was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement. All of the issued and outstanding membership interests of Merger LLC
are validly issued, fully paid and non-assessable and owned, beneficially and of
record, by Parent free and clear of all claims, member agreements, limitations
on Parent's voting rights, and Liens of any nature whatsoever. All of the issued
and outstanding capital stock of Merger Sub and Merger Sub II is validly issued,
fully paid and non-assessable and is owned, beneficially and of record, by
Merger LLC free and clear of all claims, stockholder agreements, limitations on
Merger LLC's voting rights and Liens of any nature whatsoever.
(b) As of the date hereof and as of the First Effective Time, except
for (i) Liabilities incurred in connection with its incorporation and (ii) this
Agreement and any other agreements or arrangements contemplated by this
Agreement or in furtherance of the transactions contemplated hereby, none of the
Merger Subs has incurred, directly or indirectly, through any of its
Subsidiaries or Affiliates, any Liabilities or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any Person.
SECTION 7.3 CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of Parent consists of (i) 2,000,000 shares of
undesignated preferred stock, par value $.01 per share, none of which are issued
and outstanding, and (ii) 50,000,000 shares of Parent Common Stock, of which, as
of February 13, 2006, 32,083,122 shares are issued and outstanding.
SECTION 7.4 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION. Each
of Parent, Merger Sub and Merger Sub II has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its respective
obligations hereunder, and Merger LLC has all requisite limited liability
company power and authority to execute and deliver this Agreement and to perform
its respective obligations hereunder. The execution and delivery of this
Agreement and the performance by each of Parent, Merger Sub, Merger Sub II and
Merger LLC of its respective obligations under this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action by the respective Boards of Directors of Parent, Merger
Sub and Merger Sub II, and by all necessary action by the Managing Member of
Merger LLC, and other than the Merger Sub Consents, no other action on the part
of Parent or any of the Merger Subs is necessary to authorize the execution and
delivery by Parent and Merger Subs of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and Merger Subs and, assuming due and valid authorization,
execution and delivery hereof by the other parties hereto, constitutes a legal,
valid and binding obligation of each of Parent and Merger Subs, as the case may
be, enforceable against each of them in accordance with its terms. Each of
Parent Board and the Boards of Directors of each of the Merger Sub and Merger
Sub II has, at a meeting duly called and held or by written consent, unanimously
approved and declared advisable this Agreement, and determined that the
transactions contemplated hereby are advisable, and in the best interests of its
stockholders. The Managing Member of Merger LLC has by written consent approved
and declared advisable this Agreement, and determined that the transactions
contemplated hereby are advisable and in the best interest of
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its sole member. The Mergers and the issuance of Parent Common Stock
contemplated by this Agreement do not require approval by the stockholders of
Parent.
SECTION 7.5 NO CONFLICT; CONSENTS. The execution and delivery by Parent
and Merger Subs of this Agreement, and the consummation by Parent and Merger
Subs of the transactions in accordance with the terms hereof, do not (a) violate
or conflict with any of the respective charters, operating agreement or by-laws
of Parent or Merger Subs, (b) violate, breach or conflict with or result in a
default (whether after the giving of notice, lapse of time or both) under, or
give rise to a right of termination, amendment, prepayment, additional or
increased payments, acceleration or cancellation of, any Contract, permit,
authorization or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent or any of its Subsidiaries or any of their respective
assets are bound, (c) violate or result in a violation of, or conflict with, or
constitute a default (whether after the giving of notice, lapse of time or both)
under, any provision of any Law, Regulation, or any Order of, or any restriction
imposed by, any Court or other Governmental Authority applicable to, binding
upon or enforceable against, Parent or any of its Subsidiaries, except in the
case of clauses (ii) and (iii) of this Section 7.5, such conflicts, defaults,
violations, terminations or breaches that would not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect. The
execution and delivery by Parent and Merger Subs of this Agreement, and the
consummation by Parent and Merger Subs of the transactions in accordance with
the terms hereof, do not require from Parent or any of the Merger Subs any
notice to, declaration or filing with, or consent or approval of any
Governmental Authority or other third party, except for (i) the Merger Sub
Consents, (ii) the filing of a pre-merger notification and report from by Parent
under the HSR Act, and the expiration or termination of applicable waiting
periods thereunder, and (iii) such other consents, approvals, notices,
declaration or filings, which if not obtained or made, would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
SECTION 7.6 SEC FILINGS; FINANCIAL STATEMENTS; INFORMATION PROVIDED.
(a) Parent has filed all registration statements, forms, reports and
other documents required to be filed by Parent with the SEC since January 1,
2003. All such registration statements, forms, reports and other documents
(including those that Parent may file after the date hereof until the Closing)
are referred to herein as the "Parent SEC Reports." The Parent SEC Reports (i)
were or will be filed on a timely basis, (ii) at the time filed, complied, or
will comply when filed, as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
the Regulations of the SEC thereunder applicable to such Parent SEC Reports, and
(iii) did not or will not at the time they were or are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Parent SEC Reports or necessary in order to make the statements
in such Parent SEC Reports, in the light of the circumstances under which they
were made, not misleading. No Subsidiary of Parent is subject to the reporting
requirements of Section 13(a) or Section 15(d) of the Exchange Act.
(b) The certificates of the Chief Executive Officer and Chief
Financial Officer of Parent required by Rules 13a-14 and 15d-14 of the Exchange
Act or 18 U.S.C. Section 1350 (Section 906 of SOX) with respect to the Parent
SEC Reports, as applicable, were true and correct in all material respects as of
their respective dates.
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(c) Each of the consolidated balance sheets of Parent included in or
incorporated by reference into the Parent SEC Reports (including, in each case,
any related notes) fairly presents in all material respects the consolidated
financial position of Parent and its Subsidiaries as of its date and each of the
consolidated statements of income, cash flow and stockholders' equity of Parent
included in or incorporated by reference in the Parent SEC Reports (including,
in each case, any related notes) fairly presents in all material respects the
consolidated results of operations, cash flows and stockholders' equity of
Parent and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which in the
aggregate were not or will not be material in amount or effect), in each case in
accordance with GAAP consistently applied during the periods involved, except as
may be noted therein.
(d) None of Parent or any of its Subsidiaries has or is subject to
any material Liabilities of any kind, other than those (i) fully reflected in,
reserved against or otherwise described in the audited consolidated balance
sheets of Parent and its Subsidiaries as of December 31, 2004 or the notes
thereto, or (ii) incurred in the ordinary course of business consistent with
past practice or pursuant to the transactions contemplated by this Agreement, or
(iii) set forth on Section 7.6(d) of the Parent Disclosure Schedule or as
otherwise disclosed in writing to the Company.
(e) None of the information supplied by or on behalf of Parent or
any of the Merger Subs for inclusion or incorporation by reference in the
Section 262 Notice to be sent to the Stockholders or in the Registration
Statement will, on the date the Section 262 Notice is first mailed to the
Stockholders, or on the date the Registration Statement is filed with the SEC,
at any time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any statement which, at such time and in light
of the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made in the Section 262 Notice or the Registration
Statement not false or misleading. If at any time prior to the First Effective
Time, any fact or event relating to Parent or any of its Affiliates which should
be set forth in a supplement to the Section 262 Notice or the Registration
Statement should be discovered by Parent or should occur, Parent shall, promptly
after becoming aware thereof, inform the Selling Companies of such fact or
event. Notwithstanding the foregoing, no representation is made by Parent or
Merger Subs with respect to the information that has been or will be supplied by
the Selling Companies, their Subsidiaries or their respective auditors,
attorneys, financial advisors or other consultants or advisers for inclusion in
the Section 262 Notice or the Registration Statement.
SECTION 7.7 NO BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Mergers based upon arrangements made by or on behalf of Parent, Merger Subs or
any of their Affiliates, other than Credit Suisse Securities (USA) LLC, which
will be paid in full by Parent.
SECTION 7.8 CUSTOMERS. During the 12 month period ended December 31, 2005,
none of Parent's customers accounted for more than 2.5% of Parent's revenues.
Since December 31, 2004, none of the 20 largest customers of Parent during the
12 month period ended December 31, 2005, (a) has cancelled, terminated or
materially adversely altered its relationship
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with Parent or its Subsidiaries, other than in the ordinary course of business
consistent with past practice or (b) to the Knowledge of Parent, has threatened,
or indicated its intention in writing, to cancel, terminate or materially
adversely alter its relationship with Parent or its Subsidiaries or to reduce
substantially its purchase from or sale to Parent or any of its Subsidiaries of
any products, goods or services, other than in the ordinary course of business
consistent with past practice. As of the date of this Agreement, to the
Knowledge or Parent, no customer of Parent or any of its Subsidiaries has
threatened or indicated its intention to Parent or such Subsidiary to cancel,
terminate or materially adversely alter its relationship with Parent or such
Subsidiary as a result of the Mergers or any similar transaction.
SECTION 7.9 LITIGATION. Except as set forth in the Parent SEC Reports,
there is no material Action pending or, to the Knowledge of Parent, threatened
in writing, against Parent or any of the Merger Subs and neither Parent nor any
of the Merger Subs is subject to any outstanding Order of any Governmental
Authority that, in either case, would be reasonably likely, individually or in
the aggregate, to (a) prevent or materially delay the consummation of the
Mergers, (b) otherwise prevent or materially delay performance by Parent or any
of the Merger Subs of any of their material obligations under this Agreement, or
(c) which would reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
SECTION 7.10 ABSENCE OF CERTAIN CHANGES. Except as contemplated by this
Agreement, since September 30, 2005 through the date hereof, Parent and its
Subsidiaries have conducted their businesses in the ordinary course and in a
manner consistent with past practices, and there has not been any change, event
or circumstance that has had, or would reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Since
September 30, 2005, except as set forth in Section 7.10 of the Parent Disclosure
Schedule or as contemplated by this Agreement, none of Parent or any of its
Subsidiaries has:
(a) (i) changed any of the accounting principles adopted by Parent
or any of its Subsidiaries, other than as required by GAAP or by applicable Law
or as described in the financial statement of Parent included in the Parent SEC
Reports, or (ii) made any material change in Parent's or any of its
Subsidiaries' accounting policies, procedures, practices or methods with respect
to applying such principles, other than as required by GAAP or by applicable Law
or as described in any of the Parent SEC Reports;
(b) made any adjustment, split, combination, reclassification or
similar transaction in respect of any of the shares of Parent Common Stock, or
made any distribution, declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) in respect of the Parent
Common Stock, or any repurchase, redemption or other acquisition by Parent of
any outstanding shares of Parent Common Stock;
(c) amended, restated or otherwise changed any term of any
outstanding equity security of Parent or its Subsidiaries or of any of their
respective organizational documents; or
(d) acquired or disposed of, whether by purchase, merger,
consolidation or sale, lease, pledge or other encumbrance of stock or assets or
otherwise, any (i) material interest
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in any corporation, partnership or other Person or (ii) assets comprising a
material business or any other material property or assets, in a single
transaction or in a series of transactions.
Neither Parent nor any of its Subsidiaries has committed or agreed, whether or
not in writing, to undertake any of the foregoing actions.
SECTION 7.11 INTELLECTUAL PROPERTY. Except as set forth on Section 7.11 of
the Parent Disclosure Schedule:
(a) Parent and its Subsidiaries exclusively owns or possesses
adequate and enforceable rights to use, without payment to a third party, all of
the Intellectual Property Assets necessary for the operation of Parent's
business, free and clear of all Liens other than Permitted Liens;
(b) there are no pending, or, to the Knowledge of Parent, threatened
claims against any of Parent or its Subsidiaries or any of their respective
employees alleging that any of the operations of Parent's business, any activity
by Parent or its Subsidiaries, any computer programs and/or services and related
documentation that Parent or its Subsidiaries design, manufacture, market, sell
and/or distribute for itself, a customer or a third party (each such product or
service shall be referred to herein as a "Parent Product") infringes on or
violates (or in the past infringed or violated) any Third Party Rights in or to
any Intellectual Property Assets or constitutes a misappropriation of (or in the
past constituted a misappropriation of) any Intellectual Property Assets of any
Person, except as would not reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect;
(c) neither the operation of Parent's business nor any activity by
Parent or its Subsidiaries, nor any Parent Product infringes on or violates (or
in the past infringed on or violated) any Third Party Right or constitutes a
misappropriation of (or in the past constituted a misappropriation of) any
Intellectual Property Assets of any Person, except as would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect;
(d) no employee, consultant or contractor of Parent or its
Subsidiaries has any claim, right (whether or not currently exercisable) or
interest to or in any Intellectual Property Asset, except as would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect; and
(e) to the Knowledge of Parent, (i) there is no, nor has there been
any, infringement or violation by any Person of any of Parent's or its
Subsidiaries' rights in or to the Parent's Intellectual Property Assets and (ii)
there is no, nor has there been any, misappropriation by any Person of any of
the Parent's Intellectual Property Assets.
SECTION 7.12 COMPLIANCE WITH LAWS. Except as would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, none of Parent or any of its officers, Affiliates, agents or employees
in his, her or its capacity as such is currently in default or violation in any
material respect under, any Law or Order applicable to Parent or any of its
assets and properties, and to the Knowledge of Parent, no claim of violation of
any such Law or Order has been threatened against any of Parent or any of its
officers, Affiliates, agents
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or employees in his, her or its capacity as such. Except as would not reasonably
be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, none of Parent or any of its Subsidiaries has received any notice to the
effect that, or otherwise been advised that, it is not currently in compliance
in all material respects with any Law or Order or has otherwise engaged in any
unlawful business practice.
SECTION 7.13 WARRANTY AND RELATED MATTERS. There are no existing or, to
the Knowledge of Parent, threatened, claims against any of Parent or any of its
Subsidiaries relating to any work performed by any of Parent or any of its
Subsidiaries, product liability, warranty or other similar claims against any of
Parent or any of its Subsidiaries alleging that any Parent Product is defective
or fails to meet any product or service warranties which would reasonably be
expected to have a Parent Material Adverse Effect. There are (a) no inherent
design defects or systemic or chronic problems in any Parent Product and (b) no
Liabilities for warranty or other claims or returns with respect to any Parent
Product relating to any such defects or problems which would reasonably be
expected to have a Parent Material Adverse Effect.
SECTION 7.14 BOOKS AND RECORDS. The books, records and accounts of Parent
and each of its Subsidiaries are true, accurate and complete in all material
respects and reflect actual, bona fide transactions, and have been maintained in
accordance with GAAP and, in all material respects, with applicable Laws. Parent
and its Subsidiaries have made available to the Company true, accurate and
complete copies of all internal and external audit control recommendations and
exception items contained in written reports made within the 12 months prior to
the date hereof relating to Parent and its Subsidiaries and the responses of
Parent and its Subsidiaries thereto, as applicable. Each of Parent and its
Subsidiaries have, to the extent and at or before the times set forth in such
responses, materially complied with or substantially addressed such
recommendations, exceptions and deficiency items.
SECTION 7.15 ILLEGAL PAYMENTS. None of Parent or its Subsidiaries, to
Parent's Knowledge, any Person affiliated with Parent or its Subsidiaries has
ever offered, made or received on behalf of Parent or their Subsidiaries any
illegal payment or contribution of any kind, directly or indirectly, including,
without limitation, payments, gifts or gratuities, to any person, entity, or
United States or foreign national, state or local government officials,
employees or agents or candidates therefor or other Persons.
SECTION 7.16 MERGER CONSIDERATION.
(a) All of the Parent Common Stock to be issued by Parent hereunder
has been, or prior to the Closing will be, duly authorized and, upon the
issuance thereof in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable and not subject to any preemptive or
similar rights.
(b) Parent has executed financing commitment letters in place from
Bank of America, N.A. and Banc of America Securities LLC, pursuant to which such
financial institutions have committed, upon the terms and subject to the
conditions set forth therein, to provide financing to Parent in an amount up to
$200,000,000 and to provide financing to Fluent in an amount of $23,000,000 (the
"Fourth Merger Indebtedness") each in connection with the transactions
contemplated by this Agreement (the "Commitment Letters"); provided that the
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Fourth Merger Indebtedness shall be made without any guarantee, asset pledge or
other form of credit support from any entity which owns, directly or indirectly,
any interest in Fluent. In addition, after the Fourth Effective Time, Parent
will not, and will not permit any of its Subsidiaries other than Fluent and its
Subsidiaries to, repay any portion of the Fourth Merger Indebtedness or
contribute or loan any funds to Fluent for such purpose or become liable for the
Fourth Merger Indebtedness through a refinancing or otherwise. The Fourth Merger
Indebtedness shall be repaid by Fluent solely through its own earnings and cash
flow. The Commitment Letters are in full force and effect; all commitment fees
required to be paid thereunder have been paid in full or will be duly paid in
full if and when due; and the Commitment Letters have not been amended or
terminated. Parent has no reason to believe that any condition to the Commitment
Letters which is within its control will not be satisfied or waived prior to the
First Effective Time. As of the Closing, Parent will have sufficient funds to
pay all cash amounts required to be paid by it, the Surviving Companies and
Merger Subs in connection with the First, Second and Third Mergers, including
the cash portion of the First Merger Consideration and the cash portion of the
Third Merger Consideration and all payments, fees and expenses related to or
arising out of the First, Second and Third Mergers. Immediately following the
Fourth Effective Time, Fluent will have sufficient funds to pay all cash amounts
required to be paid by it or Merger Sub III in connection with the Fourth
Merger, including the cash portion of the Fourth Merger Consideration and all
payments, fees and expenses related to or arising out of the Fourth Merger.
SECTION 7.17 DISCLOSURE. No representation or warranty made by Parent
contained in this Agreement, and no statement contained in the Parent Disclosure
Schedule or in any certificate furnished to the Selling Companies pursuant to
any provision of this Agreement (including the Parent SEC Reports and the
financial statements included in the Parent SEC Reports) contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE VIII - CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 8.1 CONDUCT OF SELLING COMPANIES BUSINESS PRIOR TO CLOSING. During
the period commencing on the date of this Agreement and ending at the First
Effective Time or such earlier date as this Agreement may be terminated in
accordance with its terms (the "Pre-Closing Period"), the Selling Companies
agree (unless it is required to take such action pursuant to this Agreement or
Parent shall give its prior written consent, in its sole discretion) to, and to
cause each of their Subsidiaries to, carry on their business in the usual,
regular and ordinary course consistent with past practice, including with
respect to working capital management, pay their Liabilities and Taxes
consistent with the Selling Companies' past practices (and in any event when
due), pay or perform other obligations when due consistent with the Selling
Companies' past practices (other than Liabilities, Taxes and other obligations,
if any, contested in good faith through appropriate proceedings), and use all
commercially reasonable efforts to preserve intact their present business
organization, keep available (and cooperate in any reasonable measures by Parent
for the purposes of keeping available) the services of its present officers and
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, independent contractors and other Persons
having business dealings with it, all with the express
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purpose and intent of preserving unimpaired its goodwill and ongoing businesses.
In addition, unless required by Law, none of the Selling Companies or any of
their Subsidiaries shall, without the prior written consent of Parent, in its
sole discretion, take or agree in writing or otherwise to take, any action that
would result in the occurrence of any of the changes described in Section 5.9 or
any other action that would make any of the Selling Companies' representations
or warranties contained in this Agreement untrue or incorrect in any material
respect or prevent the Selling Companies from performing or cause the Selling
Companies not to perform their agreements and covenants hereunder or cause any
condition to Parent's closing obligations in Section 10.1 or Section 10.2 (or
the Selling Companies' closing obligations in Section 10.1 or Section 10.3) not
to be satisfied. Without limiting the generality of the foregoing, during the
Pre-Closing Period, except as set forth in Schedule 8.1 or as required by Law,
the Selling Companies shall not do, cause or permit, and shall cause their
Subsidiaries not to do, cause or permit, any of the following actions, without
the prior written consent of Parent, in its sole discretion, except as expressly
provided or permitted in this Agreement, including without limitation in
connection with the Spin-Off (for the avoidance of doubt, the parties hereto
acknowledge and agree that the following covenants shall not restrict any
actions prior to the First Effective Time by Holding, the Company or any of
their Subsidiaries or Affiliates solely with regard to the Spin-Off, the Other
Business Transfer and the transactions contemplated thereby taken in accordance
with the terms set forth in Exhibit A):
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, securities or other property) in respect
of, any of their capital stock (other than dividends and distributions paid to
the Selling Companies or their Subsidiaries), (ii) split, combine or reclassify
any of their capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of their
capital stock or any of its other securities, or (iii) purchase, redeem or
otherwise acquire any shares of their capital stock or any securities or
obligations convertible into or exchangeable for any shares of their capital
stock or any other of their securities or any rights, warrants or options to
acquire any such shares or other securities (other than acquisitions of
convertible securities upon conversion of such securities or acquisitions of
exercisable securities upon exercise of such securities or acquisitions of
Incentive Stock);
(b) (i) authorize for issuance, issue, deliver or sell or agree or
commit to issue or sell (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities or equity equivalents (including, without
limitation, stock appreciation rights) of the Selling Companies and their
respective Subsidiaries (other than issuances upon conversion or exercise of
currently outstanding securities, or (ii) enter into any Contract with respect
to the foregoing, or (iii) permit any additional shares of capital stock of the
Selling Companies or any of their Subsidiaries to become subject to new grants
of non-voting restricted stock or similar stock-based employee rights;
(c) cause, make or permit any change or amendment to the
organizational documents of Selling Companies or any of their respective
Subsidiaries, or change the authorized capital stock or equity interests of the
Selling Companies or any of their respective Subsidiaries;
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(d) enter into or amend any agreement pursuant to which any other
party is granted any joint or exclusive marketing or other joint or exclusive
right of any type or scope with respect to any of the Selling Companies Products
or technology, other than in the ordinary course of business consistent with
past practice, and provided that any such agreement may be terminated without
penalty by the Selling Companies or their Subsidiaries upon not more than 90
days notice;
(e) (i) other with respect to capitalized leases or pursuant to the
Senior Indebtedness, incur any Indebtedness or guarantee any Indebtedness of
another Person, (ii) issue, sell or amend any debt securities or warrants or
other rights to acquire any debt securities of the Selling Companies or any of
their respective Subsidiaries, guarantee any debt securities of another Person,
or enter into any arrangement having the economic effect of any of the
foregoing, (iii) make any loans, advances or capital contributions to, or
investment in, any other Person, other than the Selling Companies or any of
their direct or indirect wholly owned Subsidiaries, and other than loans in the
ordinary course of business consistent with past practice to employees of the
Selling Companies and their Subsidiaries, (iv) mortgage, pledge or otherwise
encumber any material assets, or create or suffer any material Lien thereupon,
except, in each case, in the ordinary course of business consistent with past
practice pursuant to credit facilities in existence on the date hereof (or any
extensions or renewals thereof) and Permitted Liens;
(f) (i) prepay any loans (if any) from its stockholders, officers or
directors or any Person affiliated with any of the foregoing, (ii) amend its
borrowing arrangements or (iii) waive, release or assign any material rights or
claims, other than in the ordinary course of business consistent with past
practice;
(g) materially reduce the amount of any insurance coverage provided
by their existing insurance policies;
(h) materially change or implement accounting policies, methods or
procedures, except as required by GAAP;
(i) except for the acceleration of unvested Incentive Stock, (i)
increase the rates of base salary, bonus compensation or any other form of
compensation payable or to become payable to any officer, employee, agent or
consultant of the Selling Companies or any of their respective Subsidiaries,
except in the ordinary course of business consistent with past practice and in
accordance with the 2006 Compensation Plan; or (ii) grant or agree to grant or
accelerate any right to any severance or termination pay or enter into any
Contract to make or grant any severance or termination pay or pay or agree to
pay any bonus or other incentive compensation to any officer or employee;
(j) enter into, establish, adopt or amend (except, in each case, (i)
as may be required by applicable Laws, or (ii) to satisfy contractual
obligations existing as of the date hereof, or (iii) except in the ordinary
course of business consistent with past practice and in accordance with the 2006
Compensation Plan any pension, retirement, stock purchase, savings, profit
sharing, deferred compensation, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, plan or arrangement, or any
trust agreement (or similar arrangement) related thereto, or communicate any
intention to take such foregoing actions, in
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respect of any director, officer or employee of the Selling Companies or any of
their respective Subsidiaries;
(k) hire any employee or consultant with an annual salary in excess
of $100,000;
(l) make any material acquisition or capital expenditure in excess
of $250,000 in the aggregate for the Selling Companies and their respective
Subsidiaries, taken as a whole, other than in the ordinary course of business
consistent with past practice;
(m) sell, lease, license, pledge or otherwise dispose of, distribute
or encumber any properties or assets of the Selling Companies or any of their
respective Subsidiaries other than in the ordinary course of business consistent
with past practice;
(n) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof;
(o) other than in the ordinary course of business consistent with
past practice, (i) dispose of, license, grant, or obtain, or permit to lapse any
rights to, any Intellectual Property Assets (other than non-exclusive licenses
in connection with the sale of the Selling Companies Products), or (ii) dispose
of or disclose to any Person, other than representatives of Parent or Merger
Subs, any Selling Companies Trade Secret;
(p) other than in the ordinary course of business consistent with
past practice, enter into, modify, amend, violate or terminate any Material
Contract or agreement to which the Selling Companies or any of their respective
Subsidiaries is party, or knowingly waive, release or assign any rights or
claims (other than any write-off or other compromise of any accounts receivable
of the Selling Companies or any of their respective Subsidiaries in accordance
with GAAP);
(q) except as otherwise required by applicable Law, as determined in
the good faith judgment of the Selling Companies, make or change any Tax
election, change any method of Tax accounting, file or amend any income Tax
Return, settle any audit, claim, examination or deficiency litigation with
respect to a material amount of Taxes, request any private letter or similar Tax
ruling, enter into any closing agreement with any Taxing Authority with respect
to any amount of Taxes or consent to any extension or wavier of the limitation
period applicable to any claim or assessment in respect of Taxes, without, in
each case, providing at least ten (10) days notice to Parent and, to the extent
that Parent notifies the Selling Companies within such ten-day period that
Parent reasonably believes that such action will cause a material adverse effect
on Parent's Tax Returns for periods following the Closing, the Selling Companies
shall use reasonable best efforts to accommodate any reasonable requests by
Parent;
(r) enter into any material lease of real property, or take any
action under any of the Leased Real Property not otherwise required to be taken
pursuant to the terms of each such Lease, other than in the ordinary course of
business consistent with past practice; provided that, the Selling Companies
shall promptly notify Parent of, and furnish Parent with information
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relating to, any actual or threatened breach of any material term of any such
Lease upon the Selling Companies having Knowledge of such actual or threatened
breach;
(s) settle or compromise any pending or threatened Action (whether
or not commenced prior to the date of this Agreement) for an amount in excess of
$50,000;
(t) revalue any of their assets, including writing down the value of
inventory or writing off notes or accounts receivable, except as required by
GAAP; or
(u) agree, commit to or enter into any Contract or arrangement to
take any of the actions referred to in Section 8.1(a) through Section 8.1(t)
above, or any other action that would prevent the Selling Companies from
performing, or cause the Selling Companies not to perform, any of its covenants
and agreements hereunder.
Notwithstanding the foregoing, nothing contained in this Agreement shall
give Parent, directly or indirectly, the right to control or direct the
operations of the Selling Companies prior to the applicable Effective Time.
Prior to the applicable Effective Time, the Selling Companies shall exercise,
consistent with the terms and conditions of this Agreement, control and
supervision over their respective Subsidiaries' operations.
SECTION 8.2 CONDUCT OF PARENT'S BUSINESS PRIOR TO CLOSING. During the
Pre-Closing Period, Parent agrees (unless it is required to take such action
pursuant to this Agreement or the Selling Companies shall give their prior
written consent, in their sole discretion) to, and to cause each of its
Subsidiaries to, carry on their business in the usual, regular and ordinary
course consistent with past practice. Without limiting the generality of the
foregoing, during the Pre-Closing Period, except as set forth in Schedule 8.2,
Parent shall not do, cause or permit, and shall cause its Subsidiaries not to
do, cause or permit, any of the following actions, without the prior written
consent of the Selling Companies, in their sole discretion, except as expressly
provided or permitted herein:
(a) cause, make or permit any change or amendment to the
organizational documents of Parent, or change the authorized capital stock or
equity interests of Parent;
(b) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any material business;
(c) sell, lease, license, pledge or otherwise dispose of, distribute
or encumber any properties or assets of Parent or any of its Subsidiaries if
such transaction would be required to be reported on a current report on Form
8-K under the rules and regulations of the Securities and Exchange Commission;
(d) make any adjustment, split, combination, reclassification or
similar transaction in respect of any of the shares of Parent Common Stock, or
make any distribution, declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) in respect of the Parent
Common Stock, or any repurchase, redemption or other acquisition by Parent of
any outstanding shares of Parent Common Stock; and
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(e) agree, commit to or enter into any Contract or arrangement to
take any of the actions referred to in Section 8.2(a) through Section 8.2(d)
above, or any other action that would prevent Parent from performing, or cause
Parent not to perform, any of its covenants and agreements hereunder.
ARTICLE IX - ADDITIONAL AGREEMENTS
SECTION 9.1 STOCKHOLDERS' CONSENT AND NOTICES.
(a) Selling Companies' Consent.
(i) Immediately following the execution of this Agreement (but
no later than one (1) day thereafter), Holding, acting through the Holding
Board, shall obtain, in accordance with applicable Law, and deliver to
Parent, the Holding Stockholder Written Consent setting forth the
irrevocable approval and adoption of this Agreement, the First Merger, the
Second Merger and the transactions contemplated hereby executed by such
Holding Stockholders that constitute the Holding Stockholder Vote, which
shall also include and constitute the irrevocable approval and adoption by
the Holding Stockholders of: (A) the escrow and indemnification
obligations of the Holding Stockholders set forth in Article XI and
Article XII hereof and the deposit of the Merger Consideration into the
escrow funds and (B) the terms provided in Section 11.6 hereof. Such
Holding Stockholder Written Consent shall be executed and delivered to
Holding no later than one (1) day after the execution of this Agreement
and in accordance with the applicable provisions of the DGCL.
(ii) Immediately following the execution of this Agreement
(but no later than one (1) day thereafter), the Company, acting through
the Company Board, shall obtain, in accordance with applicable Law, and
deliver to Parent, the Company Stockholder Written Consent setting forth
the irrevocable approval and adoption of this Agreement, the Third Merger
and the transactions contemplated hereby executed by such Company
Stockholders that constitute the Company Stockholder Vote, which shall
also include and constitute the irrevocable approval and adoption by the
Company Stockholders of: (A) the escrow and indemnification obligations of
the Company Stockholders set forth in Article XI and Article XII hereof
and the deposit of the Merger Consideration into the escrow funds and (B)
the terms provided in Section 11.6 hereof. Such Company Stockholder
Written Consent shall be executed and delivered to Company no later than
one (1) day after the execution of this Agreement and in accordance with
the applicable provisions of the DGCL.
(iii) Immediately following the execution of this Agreement
(but no later than one (1) day thereafter), Fluent, acting through the
Fluent Board, shall obtain, in accordance with applicable Law, and deliver
to Parent, the Fluent Stockholder Written Consent setting forth the
irrevocable approval and adoption of this Agreement, the Fourth Merger and
the transactions contemplated hereby executed by such Fluent Stockholders
that constitute the Fluent Stockholder Vote, which shall also include and
constitute the irrevocable approval and adoption by the Fluent
Stockholders of: (A) the escrow and
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indemnification obligations of the Fluent Stockholders set forth in
Article XI and Article XII hereof and the deposit of the Merger
Consideration into the escrow funds and (B) the terms provided in Section
11.6 hereof. Such Fluent Stockholder Written Consent shall be executed and
delivered to Fluent no later than one (1) day after the execution of this
Agreement and in accordance with the applicable provisions of the DGCL.
(b) Selling Companies Notices.
(i) Promptly, but in no event later than seven (7) Business
Days after the date hereof, each of Holding and Fluent shall deliver
notice to its respective Stockholders of the approval by such Stockholders
of this Agreement, the Mergers and the transactions contemplated hereby,
including each of the matters set forth in Section 9.1(a), pursuant to and
in accordance with the applicable provisions of DGCL, including Section
228(d), and the Charter Documents (the "Stockholder Notices").
(ii) Promptly but in no event later than seven (7) Business
Days after the date hereof, each of the Selling Companies shall provide to
each Stockholder whose consent was not obtained as provided pursuant to
Section 9.1(a) a copy of the notice required pursuant to Section 262 of
the DGCL informing them that appraisal rights are available for their
shares pursuant to Section 262 of the DGCL along with such other
information as required by Section 262 of the DGCL and applicable Law (the
"Section 262 Notice").
(c) Section 262 Notice. The Section 262 Notice, including any
amendments or supplements thereto, shall be subject to review and approval by
Parent.
(d) Cooperation. Each party shall provide to the other any
information for inclusion in preparation for any Stockholder Written Consent or
Stockholder Notices that may be required under applicable Law and that is
reasonably requested by the other party.
SECTION 9.2 MERGER SUB CONSENTS.
(a) Immediately following the execution of this Agreement by Merger
Sub, Merger LLC, as sole stockholder of Merger Sub, shall adopt and approve, in
accordance with applicable Law, this Agreement by written consent as permitted
by its certificate of incorporation and by-laws (the "Merger Sub Consent").
(b) Immediately following the execution of this Agreement by Merger
LLC, Parent, as sole member of Merger LLC, shall adopt and approve, in
accordance with applicable Law, this Agreement by written consent as permitted
by its operating agreement (the "Merger LLC Consent").
(c) Immediately following the execution of this Agreement by Merger
Sub II, Merger LLC, as sole stockholder of Merger Sub II, shall adopt and
approve, in accordance with applicable Law, this Agreement by written consent as
permitted by its certificate of incorporation and by-laws (the "Merger Sub II
Consent").
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(d) Immediately following the execution of this Agreement by Merger
Sub III, the Company, as sole stockholder of Merger Sub III, shall adopt and
approve, in accordance with applicable Law, this Agreement by written consent as
permitted by its certificate of incorporation and by-laws (the "Merger Sub III
Consent," and together with Merger Sub Consent, Merger LLC Consent, and Merger
Sub II Consent, the "Merger Sub Consents").
SECTION 9.3 ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Closing Date, the
Selling Companies shall, and shall cause each of their Subsidiaries and each of
the Selling Companies' and their Subsidiaries' officers, employees, accountants,
counsel and other representatives and agents to, give Parent and Merger Subs and
their representatives reasonable access upon reasonable notice and during times
mutually convenient to Parent and Merger Subs and senior management of the
Selling Companies to the facilities, properties, employees, books and records of
the Selling Companies and their Subsidiaries and financial and operating data
and other information with respect to the business and operations of the Selling
Companies and their Subsidiaries as from time to time may be reasonably
requested, provided that nothing in this Agreement shall require Fluent to
provide to Parent and the Merger Subs any information reasonably deemed by
Fluent in good faith to be competitively sensitive. The Selling Companies shall
provide such financial and other information regarding the business that is
available and is reasonably requested by Parent. The Selling Companies shall
make available to the officers, employees, accountants, counsel and other
representatives of Parent upon the reasonable request of Parent and during
normal working hours all officers, accountants, counsel and other
representatives or agents of the Selling Companies or their Subsidiaries for
discussion of the Selling Companies' or any of their Subsidiaries' businesses,
properties or personnel as Parent may reasonably request. All requests for
access to the officers, employees, accountants, counsel and other
representatives of the Selling Companies or any information concerning their
businesses, properties, books, Contracts, records and personnel shall be
submitted or directed by Parent exclusively to an individual or individuals to
be designated by the Selling Companies. Prior to the Fourth Effective Time,
Parent and Merger Subs shall hold in confidence all such information on the
terms and subject to the conditions contained in the Confidentiality Agreement.
(b) Upon reasonable notice, Parent shall afford Holding and the
Company, and their representatives reasonable access, upon reasonable notice and
during times mutually convenient to Holding and the Company and Parent to such
information regarding Parent and its Subsidiaries as shall be reasonably
requested by Holding and the Company. Prior to the Fourth Effective Time,
Holding and the Company shall hold in confidence all such information on the
terms and subject to the conditions contained in the Confidentiality Agreement.
SECTION 9.4 CONFIDENTIALITY. The parties shall adhere to the terms and
conditions of that certain confidentiality agreement dated April 22, 2004, as
amended March 8, 2005, by and between the Company and Parent (the
"Confidentiality Agreement").
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SECTION 9.5 REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each party hereto shall use its commercially reasonable best efforts
to take, or cause to be taken, all actions, and do, or cause to be done, and to
assist and cooperate with the other party or parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Mergers and the other transactions
contemplated hereby and to satisfy or cause to be satisfied all of the
conditions precedent that are set forth in Article X, as applicable to each of
them. Each party hereto, at the reasonable request of another party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
(b) The Selling Companies, Merger Sub III, Parent and Merger Subs
shall use reasonable best efforts to obtain the authorizations, consents, orders
and approvals and to make filings from or with any Governmental Authority or
other third party necessary for their execution and delivery of, and the
performance of their obligations pursuant to, this Agreement. The parties hereto
will not take any action that will have the effect of delaying, impairing or
impeding the receipt of any required approvals and shall promptly respond to any
requests for additional information from any Governmental Authority. Each of
Parent and Merger Subs hereby covenants and agrees to use its reasonable best
efforts to secure termination of any waiting periods under the HSR Act or any
other applicable domestic or foreign Law set forth in Schedule 9.5(b) and to
obtain the approval of the Federal Trade Commission, the Antitrust Division of
the United States Department of Justice or any other Governmental Authority set
forth in Schedule 9.5(b), as applicable, for the Mergers and the other
transactions contemplated hereby. Notwithstanding the foregoing, nothing herein
shall require Parent, in connection with the receipt of any regulatory approval,
to agree to sell, divest or license any assets or business or agree to restrict
any business conducted by or proposed to be conducted by Parent, the Selling
Companies or any of their Subsidiaries, or to litigate or formally contest any
proceedings relating to any regulatory approval process in connection with the
Mergers.
(c) Parent and each of the Selling Companies will (i) promptly
notify the other party of any written or oral communication to that party or its
Affiliates from any Governmental Authority and, subject to applicable Law
(including Regulations, codes, plans, Orders and charges thereunder), permit the
other party to review in advance any proposed written communication to any
Governmental Authority, in each case concerning the review, clearance or
approval of any of the transactions contemplated hereby under the HSR Act or any
similar applicable foreign Laws; (ii) not agree to participate, or to permit its
Affiliates to participate, in any substantive meeting or discussion with any
Governmental Authority in respect of any filings, investigation or inquiry
concerning the review, clearance or approval of any of the transactions
contemplated hereby under the HSR Act or any similar applicable foreign Laws
unless it consults with the other party in advance and, to the extent permitted
by such Governmental Authority, gives the other party or its counsel the
opportunity to attend and participate in such meeting; provided that if the
Governmental Authority or applicable Law (including Regulations, codes, plans,
Orders and charges thereunder) does not permit such participation by the other
party or its counsel, or if Parent and Selling Companies' counsel both agree in
good faith that participation of the Selling Companies or the Selling Companies'
counsel
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would not be advisable, Parent meeting with such Governmental Authority may
proceed without the participation of Selling Companies or their counsel; and
(iii) furnish the other party with copies of all correspondence, filings, and
communications (and memoranda setting forth the substance thereof) drafted by or
in conjunction with outside counsel between it and its Affiliates and its
respective representatives on the one hand, and any Governmental Authority or
members of such Governmental Authority's staff on the other hand, concerning the
review, clearance or approval of any of the transactions contemplated hereby
under the HSR Act or any similar applicable foreign Law, except to the extent
prohibited by applicable Law (including Regulations, codes, plans, Orders and
charges thereunder) or the instructions of such Governmental Authority.
(d) The Selling Companies and Parent shall furnish to each other all
information required for any application or other filing under the rules and
regulations of any applicable law in connection with the transactions
contemplated by this Agreement.
(e) The Selling Companies shall use their commercially reasonable
best efforts to obtain all of the consents of third parties listed in Schedule
9.5(e) (the "Third Party Consents") and each of Parent and Merger Subs shall
cooperate with any reasonable request of the Selling Companies in connection
with obtaining the Third Party Consents; provided, however, nothing in this
Section 9.5(e) shall require Parent to expend any amounts in connection with
obtaining any such Third Party Consents.
SECTION 9.6 REGISTRATION OF SHARES. Parent agrees to file with the SEC,
as early as possible following the Fourth Effective Time, but in any event
within one (1) Business Day, the Registration Statement covering the resale of
the Parent Common Stock issued pursuant to the Mergers (the "Registrable
Securities"). Parent will use its commercially reasonable best efforts to
maintain such effectiveness in accordance with, and subject to, the provisions
contained in the Registration Rights Agreement. To the extent Parent's Statement
of Company Policy on ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and Disclosure applies to any holders of
Registrable Securities, such holders shall be subject to such policy.
SECTION 9.7 DIRECTOR. Immediately following the Fourth Effective Time,
Parent Board shall in accordance with provisions contained in Parent's
certificate of incorporation and bylaws, take such action as necessary to (a)
increase the size of its Board by one (1) and (b) elect ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ or a
replacement named by the Stockholders' Representative; provided that such
nominee or and any named replacement shall meet the criteria provided in
Alaska's Corporate Governance Guidelines, as the same may be amended from time
to time (such nominee or replacement, the "Holding Designee") as a Class III
Director of Parent Board to hold office in accordance with Parent Charter and
its bylaws and until his successor is duly elected or qualified, or his earlier
death, resignation or removal. Each of the Holding Designee and the Principal
Stockholders will be subject to Parent's Statement of Company Policy on ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and Disclosure and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Procedures and each shall execute an
acknowledgement to such effect upon the election of the Holding Designee to
Parent Board. In addition, such director shall acknowledge Parent's Code of
Business Conduct and Ethics. For so long as the holders of Fluent Stock and
Holding Stock immediately prior to the First Effective Time continue to hold at
least five percent (5%) of the issued and outstanding shares of the Parent
Common Stock, Parent agrees to nominate the Holding Designee as a Class III
Director to serve on Parent's board and
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use commercially reasonable best efforts to solicit proxies from Parent's
stockholders to elect the Holding Designee as a director of Parent.
SECTION 9.8 PRESS RELEASES. Prior to the First Effective Time, the parties
hereto will, and will cause each of their Affiliates and representatives to,
consult with and obtain the approval of (which approval shall not be
unreasonably withheld) the other party before issuing any press release or other
public announcement with respect to this Agreement or the transactions
contemplated hereby, and no party hereto shall issue or cause to be issued any
such press release prior to such consultation and approval; provided, however,
that a party may, without the prior consent of the other parties hereto, issue
or cause publication of any such press release or public announcement to the
extent that such party reasonably determines, after consultation with outside
legal counsel, such action to be required by Law or by the rules of any
applicable self-regulatory organization, in which event such party will use its
commercially reasonable efforts to allow the other parties hereto reasonable
time to comment on such press release or public announcement in advance of its
issuance. Upon the execution of this Agreement and at the Closing, Parent and
the Selling Companies shall issue a mutually agreed upon press release
announcing the transactions contemplated hereby.
SECTION 9.9 NO SOLICITATIONS.
(a) Until the earlier of the Fourth Effective Time and the date of
termination of this Agreement pursuant to the provisions of Section 13.1, none
of the Selling Companies or any of their Subsidiaries shall take nor shall the
Selling Companies permit any of the Selling Companies' or their Subsidiaries'
directors, officers, employees, advisors, representatives or agents to take
(directly or indirectly) any of the following actions with any Person other than
Parent and its designees: (i) solicit, entertain, initiate, facilitate or
encourage any proposal or offer from, or participate or engage in or conduct any
discussions or negotiations with, any Person relating to any inquiry, contact,
offer or proposal, oral, written or otherwise, formal or informal, with respect
to any possible Acquisition Proposal for the Selling Companies or any of their
Subsidiaries (whether such Subsidiary is in existence on the date hereof or is
hereafter organized), (ii) provide any information with respect to the Selling
Companies or any of their Subsidiaries (whether such Subsidiary is in existence
on the date hereof or is hereafter organized) to any Person other than Parent,
relating to (or which the Selling Companies believes would be used for the
purpose of formulating) an offer or proposal with respect to, or otherwise
assist, cooperate with, facilitate or encourage any effort or attempt by any
such Person with regard to, any possible Acquisition Proposal for any of the
Selling Companies or any of their Subsidiaries (whether such Subsidiary is in
existence on the date hereof or is hereafter organized), (iii) approve or agree
to or enter into a Contract with any Person other than Parent providing for an
Acquisition Proposal for the Selling Companies or any of their Subsidiaries
(whether such Subsidiary is in existence on the date hereof or is hereafter
organized), (iv) make or authorize any statement, recommendation, solicitation
or endorsement in support of any possible Acquisition Proposal for the Selling
Companies or any of their Subsidiaries (whether such Subsidiary is in existence
on the date hereof or is hereafter organized) other than the acquisition
proposal from Parent contemplated by this Agreement, or (v) authorize or permit
any of the Selling Companies' directors, officers, employees, advisors,
representatives or agents to take any such action; provided, however, that, at
any time prior to the approval and adoption of this Agreement by the
Stockholders, if the Selling Companies receive a bona fide written Acquisition
82
Proposal that was unsolicited and that did not otherwise result from a breach of
this Section 9.9, the Selling Companies may furnish non-public information with
respect to the Selling Companies and their respective Subsidiaries to the Person
who made such Acquisition Proposal and may participate in discussions regarding
such Acquisition Proposal if (A) the Selling Companies Boards determine in good
faith, after receiving advice from their outside counsel, that failure to do so
would violate their fiduciary duties to the Stockholders under applicable Law,
and (B) the Selling Companies Boards determine that such Acquisition Proposal is
a Superior Proposal.
(b) The Selling Companies shall immediately cease and cause to be
terminated any such Contacts or negotiations with any Person relating to any
such transaction or Acquisition Proposal. In addition to the foregoing, if
(after this Agreement is executed and delivered by the Selling Companies and
prior to the First Effective Time or the earlier termination of this Agreement
in accordance with Section 13.1) the Selling Companies receive any offer or
proposal (formal or informal, oral, written or otherwise) relating to, or any
inquiry or contact from any Person with respect to, an Acquisition Proposal, the
Selling Companies shall immediately notify Parent thereof and provide Parent
with the details thereof, including the identity of the Person or Persons making
such offer, proposal, inquiry or contact and shall keep Parent fully informed on
a current basis of the status and details of any such offer or proposal and of
any modifications to the terms thereof.
(c) Each of the Selling Companies and Parent acknowledge that this
Section 9.9 was a significant inducement for Parent to enter into this Agreement
and the absence of such a provision would have resulted in either (i) a material
reduction in the consideration to be paid to the Stockholders in the Mergers or
(ii) the failure to induce Parent to enter into this Agreement.
SECTION 9.10 OFFICERS' AND DIRECTORS' INDEMNIFICATION.
(a) Subject to applicable Laws, Parent and Merger Subs agree that
all rights to indemnification or exculpation existing in favor of, and all
limitations on the personal liability of, each present and former director,
officer, employee, fiduciary and agent of any of the Selling Companies and their
Subsidiaries on or prior to the First Effective Time provided for in the
respective charters or by-laws of the Selling Companies and their Subsidiaries
or otherwise in effect as of the date hereof shall continue in full force and
effect in all material respects for a period of six (6) years from the Fourth
Effective Time; provided, however, that all rights to indemnification in respect
of any claims asserted or made within such period shall continue until the
disposition of such claim. Notwithstanding the foregoing, no right to
indemnification or exculpation shall exist with respect to any liabilities of a
stockholder of any of the Selling Companies in their capacity as a stockholder
regarding any claim related to or in connection with any breach of the
representations and warranties contained in Article V hereof, in the Selling
Companies Disclosure Schedule or in the Ancillary Agreements.
(b) Prior to the First Effective Time, the Selling Companies shall
purchase an extended reporting period endorsement under each of the Selling
Companies' existing directors' and officers' liability insurance coverage for
the Selling Companies' directors and officers immediately prior to the First
Effective Time in a form and in coverage amounts acceptable to
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the Selling Companies that shall provide such directors and officers with
coverage for six (6) years following the Fourth Effective Time. Parent shall,
and shall cause the Surviving Companies to, maintain such policy in full force
and effect, and continue to honor the obligations thereunder.
SECTION 9.11 EMPLOYEE BENEFIT ARRANGEMENTS. Following the Fourth Effective
Time, the employees of the Surviving Companies and their Subsidiaries who remain
employed after the Fourth Effective Time (the "Selling Companies Employees")
will be entitled to participate in either (a) the Employee Benefit Plans (other
than equity-based plans) on the same terms, or terms which in the aggregate
provide substantially comparable benefits, as those in effect immediately prior
to the First Effective Time, (b) the employee benefit plans of Parent and its
Subsidiaries on the same terms as similarly-situated employees of Parent and its
Subsidiaries or (c) a combination of (a) and (b), and in each case in the
discretion of Parent, and Parent may terminate any of the Employee Benefit Plans
or merge any of the Employee Benefit Plans with Parent's employee benefit plans
as Parent deems appropriate. Subject to the requirements of applicable Law and
unless such recognition of service would result in a duplication of benefits,
Parent shall, and shall cause the Surviving Companies to, treat, and cause the
applicable benefit plans to treat, the service of Selling Companies Employees
with the Selling Companies or their Subsidiaries attributable to any period
before the First Effective Time as service rendered to Parent or the Surviving
Companies for all purposes, including but not limited to, eligibility to
participate, vesting and for other appropriate benefit accruals, including, but
not limited to, applicability of any minimum waiting periods for participation,
excluding for these purposes benefit accrued under any defined benefit plan.
Without limiting the foregoing, Parent shall not, and shall cause the Surviving
Companies not to, treat any Selling Companies Employee as a "new" employee for
purposes of any exclusions under any health or similar plan of Parent or the
Surviving Companies for a pre-existing medical condition, except to the extent
such exclusions were applicable under a Plan of a Selling Company immediately
before the First Effective Time.
SECTION 9.12 TAKEOVER STATUTES. If any takeover statute is or becomes
applicable to this Agreement, the Mergers or the other transactions contemplated
by this Agreement, each of Parent and the Selling Companies and their respective
boards of directors shall (a) take all necessary action to ensure that such
transactions may be consummated as promptly as practicable upon the terms and
subject to the conditions set forth in this Agreement and (b) otherwise act to
eliminate the effects of such takeover statute an any of the transactions
contemplated hereby.
SECTION 9.13 DELIVERY OF STOCK LEDGER AND MINUTE BOOKS OF THE SELLING
COMPANIES. The Selling Companies shall deliver their respective stock ledgers
and minute books and the stock ledgers and minute books for each of their
Subsidiaries to Parent at the Closing. After the date hereof, to the extent
there are any changes to Sections 5.2(a), 5.2(b) or 5.2(c) of the Selling
Companies Disclosure Schedule, the Selling Companies shall promptly deliver to
Parent a revised and updated Schedule reflecting such changes.
SECTION 9.14 SELLING COMPANIES AUDITORS. The Selling Companies shall use
commercially reasonable best efforts to cause their management and their
independent auditors to facilitate on a timely basis (a) the preparation of
financial statements (including pro forma financial statements if required) as
required by Parent to comply with applicable ▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇▇, (▇) the review of any Selling Companies audit or review work
papers, including the examination of selected interim financial statements and
data, and (c) the securing of a binding fee commitment (on terms similar to
those in place on the date of this Agreement) with respect to consents and
comfort letters requested by Parent after the Closing.
SECTION 9.15 COMPANY AUDIT. The Company shall take all necessary action to
complete in a timely manner an audit of the Company and its consolidated
Subsidiaries for the year ended December 31, 2005.
SECTION 9.16 CERTAIN ACTIONS RELATING TO THE HOLDERS OF WARRANTS AND
HOLDING PREFERRED STOCK. The Selling Companies shall take all requisite
commercially reasonable best efforts to cause the holders of (a) all of the
outstanding Warrants to execute and deliver to the Selling Companies a consent
(i) accepting the consideration that such Warrant holder would have obtained
pursuant to the Mergers if such Warrant holder had fully exercised its Warrants
immediately prior to the Mergers in lieu of any other consideration that might
be claimed by any such holder pursuant to the agreements relating to such
Warrants and (ii) unconditionally and irrevocably waiving and releasing all
rights or claims that such holder might have or assert in respect of such
consideration pursuant to such agreements, in form reasonably acceptable to
Parent (the "Warrant Consent"); and (b) a majority of the shares of Holding
Preferred Stock in accordance with the Holding Certificate of Incorporation to
(i) consent to receive upon the consummation of the First Merger either the
liquidation value (as defined in the Holding Certificate of Incorporation) or
(ii) elect to convert such shares into the applicable Conversion Stock (as
defined in the Holding Certificate of Incorporation) immediately prior to the
consummation of the First Merger (the "Holding Preferred Stock Consent"). Each
of the Warrant Consent and the Holding Preferred Stock Consent shall be
delivered to Parent prior to the Closing.
SECTION 9.17 FIRPTA COMPLIANCE.
(a) Holding shall deliver to Parent a properly executed statement in
a form reasonably acceptable to Parent and in accordance with the certification
requirements set forth in Treasury Regulations Section 1.1445-2(c)(3).
(b) Company shall deliver to Parent a properly executed statement in
a form reasonably acceptable to Parent and in accordance with the certification
requirements set forth in Treasury Regulations Section 1.1445-2(c)(3).
(c) Fluent shall deliver to the Third Surviving Corporation a
properly executed statement in a form reasonably acceptable to the Third
Surviving Corporation and in accordance with the certification requirements set
forth in Treasury Regulations Section 1.1445-2(c)(3).
SECTION 9.18 NOTIFICATION OF CERTAIN MATTERS. The Selling Companies shall
give prompt notice to Parent of (i) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty of the Selling Companies in this Agreement to be
untrue or inaccurate at or prior to the First Effective Time and (ii) any
failure of the Selling Companies to comply with or satisfy any covenant,
condition
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or agreement to be complied with or satisfied by it hereunder, and Parent shall
give prompt notice to the Selling Companies of (A) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any representation or warranty of Parent in this Agreement to be untrue
or inaccurate at or prior to the First Effective Time and (B) any failure of
Parent 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 9.18 shall not limit or otherwise affect
any remedies available to the party receiving such notice.
SECTION 9.19 INTELLECTUAL PROPERTY. The Selling Companies shall give
Parent prompt notice if any Person prior to the First Effective Time or the
earlier valid termination of this Agreement commenced, or shall have provided
written notice to the Selling Companies, any of their Subsidiaries or any of
their respective directors, officers or principal stockholders that it intends
to commence, an Action alleging that, or shall have provided written notice to
the Selling Companies, any of their Subsidiaries or any of their respective
directors, officers or principal stockholders alleging that, in each case (a)
any of the intellectual property, including the Intellectual Property Assets,
presently embodied, or proposed to be embodied, in any of the Selling Companies
Products or utilized in the Business or in any Selling Company-designed or
modified development tools or design environments infringes or otherwise
violates the intellectual property rights of such Person, or (b) otherwise
alleges that the Selling Companies or any of their Subsidiaries does not own or
have the right to exploit such intellectual property, including the Intellectual
Property Assets. Between the date of this Agreement and the Fourth Effective
Time (or the earlier valid termination of this Agreement), the Selling Companies
shall and shall cause its Subsidiaries to take commercially reasonable actions
(i) to maintain, perfect, preserve or renew the Intellectual Property Assets,
including the payment of any registration, maintenance, renewal fees, annuity
fees and Taxes or the filing of any documents, applications or certificates
related thereto, and (ii) to promptly respond and prepare to respond to all
requests, related to the Intellectual Property Assets, received from
Governmental Authorities. At the Closing, the Selling Companies shall notify
Parent of all material actions which must be taken within the 180 days following
the Closing Date and which are necessary to maintain, perfect, preserve or renew
the Intellectual Property Assets.
SECTION 9.20 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES; COOPERATION.
Parent and the Selling Companies, at the request of the other party, 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
(including all action reasonably necessary to seek and obtain any and all
approvals of any Governmental Authority or other Person required in connection
with the Mergers; provided, however, that neither Parent nor (unless approved
and so directed by Parent in advance) the Selling Companies shall be obligated
to make or consent to any divestiture or operational limitation or activity in
connection therewith, or any waiver or modification of any right, or any payment
of money or grant of any other commercial concession as a condition to obtaining
any such approval). Each party agrees to use commercially reasonable best
efforts to cause the conditions set forth in Article X to be satisfied, where
the satisfaction of such conditions depends on action or forbearance from action
by such party.
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SECTION 9.21 SPIN-OFF. Prior to the First Effective Time, Holding, the
Company and their Affiliates shall take all actions necessary to (a) complete
the transfer of the Spin-Off Entities, and (b) cause all of the Other Business
Liabilities to be transferred to and paid, performed or assumed by the Spin-Off
Entities in accordance with the terms and conditions of those agreements and
other documents attached hereto as Exhibit A. Except as set forth in Section
5.29 of the Selling Companies Disclosure Schedule, the assets of the Spin-Off
Entities shall not include assets used or held for use in the business of Fluent
as the same was operated prior to the date of the Other Business Transfer or any
assets necessary for Parent and Subsidiaries to continue to operate the business
of Fluent as it has been operated prior to Closing.
SECTION 9.22 FLUENT STOCKHOLDER NOTES. Following the Fourth Effective
Time, the principal and accrued interest owed on any outstanding promissory
notes held by Fluent at the Closing Date that were issued by a Fluent employee
or former employee to acquire Incentive Stock (the "Fluent Notes") shall be
offset against the cash portion of the Fourth Merger Consideration otherwise
owed to such employee or former employee by Fluent. Prior to the Fourth
Effective Time, Fluent shall deliver to Parent Schedule 9.22 which sets forth as
of the Closing Date the outstanding principal and accrued interest owed on any
such Fluent Note and the names of each employee or former employee that
delivered such Fluent Note.
ARTICLE X - CONDITIONS TO THE MERGERS
SECTION 10.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE
MERGERS. The respective obligations of each party to effect the Mergers are
subject to the fulfillment or waiver by consent of the other party, where
permissible, at or prior to the First Effective Time, of each of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been adopted and
approved the Stockholder Written Consents in accordance with the DGCL and the
Charter Documents and the respective by-laws of the Selling Companies.
(b) Merger Subs Approval. This Agreement shall have been adopted and
approved by the Merger Sub Consents in accordance with the DGCL and the DLLCA
and each of the Merger Subs' certificates of incorporation, by-laws and
operating agreement.
(c) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and Foreign Laws. The waiting period (and
any extension thereof) applicable to the consummation of the Mergers under the
HSR Act and any waiting period under any applicable foreign Law set forth in
Schedule 9.5(b) shall have expired or been terminated.
(d) No Injunctions, Orders or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other Order issued by
any Court or other Governmental Authority of competent jurisdiction or other
legal or regulatory restraint or prohibition against the consummation of the
Mergers or any of the other transactions contemplated by this Agreement shall be
in effect; nor shall there be any action taken, or any Law or Order enacted,
entered, enforced or deemed applicable to the Mergers or any of the other
transactions contemplated by this Agreement that would prohibit the consummation
of the Mergers or any of the other transactions contemplated by this Agreement
or that would permit
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consummation of the Mergers or such transactions only if certain divestitures
were made or if Parent, the Surviving Corporations or the Selling Companies were
to agree to limitations on their business activities or operations.
SECTION 10.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUBS. The obligations of Parent and Merger Subs to effect the Mergers are
further subject to the satisfaction of the following conditions, any one or more
of which may be waived by Parent and any of the Merger Subs at or prior to the
First Effective Time:
(a) Representations and Warranties. The representations and
warranties of the Selling Companies contained in this Agreement shall each be
true, correct and complete in all material respects (other than representations
and warranties qualified by "material," "in all material respects," or "Selling
Companies Material Adverse Effect," which shall be true, correct and complete)
as of the date of this Agreement and as of the Closing Date as if made on and as
of the Closing Date (other than representations and warranties which by their
express terms are made solely as of a specified earlier date, which shall be
true, correct and complete in all material respects (other than representations
and warranties qualified by "material," "in all material respects," or "Selling
Companies Material Adverse Effect," which shall be true, correct and complete as
of such specified earlier date) and Parent shall have received a certificate
signed on behalf of each of the Selling Companies by their respective Chief
Executive Officers or Chief Financial Officers, dated as of the Closing Date, to
the foregoing effect.
(b) Performance and Obligations of the Selling Companies. The
Selling Companies shall have performed or complied in all material respects with
all agreements, obligations and covenants required by this Agreement to be
performed or complied with on or prior to the First Effective Time, and Parent
shall have received a certificate signed on behalf of each of the Selling
Companies by their respective Chief Executive Officers or Chief Financial
Officers, dated as of the Closing Date, to the foregoing effect.
(c) Secretary's Certificates. Each of the Selling Companies shall
have delivered a certificate of the Secretary of each of the Selling Companies,
dated as of the Closing Date, certifying as to (i) the incumbency of officers of
each Selling Companies executing documents executed and delivered in connection
herewith, (ii) the copies of the Charter Documents and by-laws of each of the
Selling Companies, each as in effect from the date of this Agreement until the
Closing Date, (iii) a copy of each of the resolutions of the Selling Companies
Boards authorizing and approving the applicable matters contemplated hereunder
and (iv) a copy of each of the Stockholder Written Consents.
(d) Governmental Consents. All licenses, permits, consents,
authorizations, approvals, qualifications and orders of Governmental Authorities
set forth in Schedule 10.2(d) of this Agreement shall have been obtained.
(e) Third Party Consents. Each of the Third Party Consents set forth
in Schedule 9.5(e) shall have been received in form and substance reasonably
satisfactory to Parent and shall be in full force and effect.
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(f) Good Standing Certificates. The Selling Companies shall have
delivered to Parent with respect to each Selling Company and its respective
Subsidiaries, a certificate of corporate good standing from the applicable
Governmental Authority of its jurisdiction of incorporation or organization.
(g) Spin-Off. Prior to the First Effective Time, the Spin-Off and
the Other Business Transfer shall have been completed pursuant to documents set
forth in Exhibit A or as otherwise agreed to in writing by Parent and the
Selling Companies.
(h) Legal Opinion. Parent shall have received a legal opinion from
Bartlit ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, legal counsel to the Selling
Companies, as to the matters set forth in Exhibit O.
(i) Waiver Letters. Each of the Waiver Letters shall have been
executed by the employees identified therein and delivered to Parent without
amendment or modification thereto in any respect and shall be in full force and
effect as of the Fourth Effective Time.
(j) Delivery of Consents and Agreements.
(i) Each of the Stockholder Written Consents shall have been
duly executed, dated and delivered to Parent in accordance with applicable
Law and each such consent shall be in full force and effect as of the
applicable Effective Time.
(ii) Each of the Spin-Off Entities Non-Competition Agreements
and the Principal Stockholder Non-Solicitation Agreement shall be in full
force and effect as of the Fourth Effective Time.
(iii) The Voting Agreement shall be in full force and effect
as of the Fourth Effective Time.
(iv) Each of the Employment Letters shall be in full force and
effect as of the Fourth Effective Time.
(v) Each of the Boysan Employment Agreement and the Consulting
Agreement shall be in full force and effect as of the Fourth Effective
Time.
(k) Employees.
(i) The Identified Employees shall continue to be employed by
the Selling Companies at the Closing, shall not have given any notice or
other indication that they are not willing or do not intend to be employed
by Parent, the Surviving Companies or a Subsidiary of Parent or the
Surviving Companies (as Parent or the Surviving Companies shall
designate), following the Mergers.
(ii) At least ten (10) of the employees identified on Schedule
10.2(k) shall continue to be employed by the applicable Selling Company or
Subsidiary at the Fourth Effective Time and shall not have given any
notice or other indication that they are not willing or do not intend to
be employed by Parent, the Surviving Companies or a
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Subsidiary of Parent or the Surviving Companies (as Parent or the
Surviving Companies shall designate) following the Mergers. At least ten
(10) of the employees identified on Schedule 10.2(k) shall have executed
and delivered an Employment Letter to Parent or the Surviving Companies
without amendment or modification thereto in any respect.
(l) No Selling Companies Material Adverse Change. There shall not
have occurred, after the date hereof and prior to the First Effective Time, any
change, event or circumstance that has resulted in, or would reasonably be
expected to result in, a Selling Companies Material Adverse Effect.
(m) Dissenting Shares. Appraisal rights shall not have been demanded
in accordance with the provisions of Section 262 of the DGCL by holders of more
than two and one half percent (2.5%) of the aggregate issued and outstanding
shares of Selling Companies Stock (including shares of preferred stock of
Holding and the Company on an as-if converted basis) as of immediately prior to
the First Effective Time, and Parent shall have received a certificate signed on
behalf of each of the Selling Companies by their respective Chief Executive
Officers and Chief Financial Officers to such effect.
(n) FIRPTA Certificates. Each Selling Company shall have satisfied
its obligations under Section 9.17.
SECTION 10.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE SELLING
COMPANIES. The obligation of the Selling Companies to effect the Mergers is
further subject to the satisfaction of the following conditions, any one or more
of which may be waived by the Selling Companies at or prior to the First
Effective Time:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Subs contained in this Agreement shall each be
true, correct and complete in all material respects (other than representations
and warranties qualified by "material," "in all material respects," or "Parent
Material Adverse Effect," which shall be true, correct and complete) as of the
date of this Agreement and as of the Closing Date as if made on and as of the
Closing Date (other than representations and warranties which by their express
terms are made solely as of a specified earlier date, which shall be true,
correct and complete in all material respects (other than representations and
warranties qualified by "material," "in all material respects," or "Parent
Material Adverse Effect," which shall be true, correct and complete as of such
specified earlier date), and the Selling Companies shall have received a
certificate signed on behalf of Parent and Merger Subs by their respective Chief
Executive Officer or Chief Financial Officer to the foregoing effect.
(b) Performance of Obligations of Parent and Merger Subs. Each of
Parent and Merger Subs shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with on or prior to the First Effective Time, and the Selling Companies
shall have received a certificate signed on behalf of Parent and Merger Subs by
their respective Chief Executive Officer or Chief Financial Officer of Parent,
dated as of the Closing Date, to the foregoing effect.
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(c) No Parent Material Adverse Change. There shall not have
occurred, after the date hereof and prior to the Effective Time, any change,
event or circumstance that has resulted in, or would reasonably be expected to
result in, a Parent Material Adverse Effect.
(d) Registration Rights Agreement. The Registration Rights Agreement
shall have been executed and delivered to the stockholders of the Selling
Companies and shall be in full force and effect as of the First Effective Time.
Parent shall have completed in all material respects the Registration Statement
covering the resale of the Parent Common Stock issued pursuant to the Mergers.
(e) Legal Opinion. The Selling Companies shall have received a legal
opinion from ▇▇▇▇▇▇▇ Procter LLP, legal counsel to Parent and Merger Subs, as to
the matters set forth in Exhibit P.
ARTICLE XI - SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE SELLING COMPANIES; ESCROW PROVISIONS; INDEMNIFICATION
SECTION 11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE SELLING COMPANIES. Subject to the limitations and other
provisions of this Agreement, the representations, warranties, agreements,
covenants and obligations of Selling Companies herein, in the Selling Companies
Disclosure Schedule or in the Ancillary Agreements shall survive the Closing
regardless of any investigation on the part of Parent or any of its
representatives and shall remain in full force and effect until 11:59 p.m. New
York City time on the day which is one (1) year from the Closing Date (such
actual termination date shall be referred to herein as the "Indemnification
Cut-Off Date"); provided that, such period shall not apply to the
representations and warranties set forth in Sections 5.1, 5.2, 5.13, 5.20 and
5.29 (collectively, the "Excluded Representations and Warranties") and such
Excluded Representations and Warranties shall, in the case of Sections 5.1 and
5.2, survive forever and, in the case of Sections 5.13, 5.20 and 5.29 survive
until the 30th day after the expiration of the statute of limitations with
respect thereto; and provided further that any claim that has been duly
submitted by a Parent Indemnified Party for recourse or indemnification
hereunder prior to the applicable expiration date and that has not been
completely and finally resolved prior to such expiration date shall survive
until such time as such claim is resolved, completely and finally, provided that
such claim by a Parent Indemnified Party shall (i) specify the applicable
provision of this Agreement under which the claim is brought, (ii) set out in
reasonable detail the specific basis for the claim, and (iii) identify the
amount of damages sought.
SECTION 11.2 INDEMNIFICATION.
(a) Each of the Stockholders agree, subject to the provisions and
limitations set forth in this Article XI, to severally, with respect to their
pro rata amount of the Merger Consideration, and not jointly, indemnify Parent,
the Surviving Companies, their respective Subsidiaries, successors and assignees
and their respective officers, directors, employees, stockholders, agents and
Affiliates (other than any officer, director, employee or stockholder of the
Selling Companies immediately prior to the applicable Effective Time) (each a
"Parent
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Indemnified Party" and collectively the "Parent Indemnified Parties") against
and hold them harmless to the extent of any Losses (other than Losses
attributable to Taxes, for which Article XII shall be the exclusive remedy), as
the same are incurred, of any kind or nature whatsoever, which may be sustained
or suffered by any such Parent Indemnified Party based upon, arising out of, or
by reason of (i) any breach or violation of, inaccuracy in or omission from any
representation or warranty, other than any representation or warranty contained
in Section 5.13, when made or deemed made as of the Closing Date of the Selling
Companies contained in this Agreement, the Selling Companies Disclosure
Schedules, any of the Ancillary Agreements or any certificate, agreement or
instrument delivered in connection herewith or therewith or any claim by any
third party alleging, constituting or involving such a breach, violation,
inaccuracy or omission, (ii) any breach or violation of any covenant or
agreement of the Selling Companies contained in this Agreement, any of the
Ancillary Agreements or any certificate, agreement or instrument delivered in
connection herewith or therewith or any claim by any third party alleging,
constituting or involving such a breach or violation, (iii) the Other Business,
the Other Business Transfer, the Other Business Liabilities, or any other
Liabilities or matters relating to the Spin-Off or the Spin-Off Entities, or
(iv) any deficit in the Working Capital Escrow Amounts. In addition, each of the
Stockholders agrees, subject to the provisions and limitations set forth in this
Article XI, to severally, and not jointly, indemnify the Parent Indemnified
Parties against and hold them harmless to the extent of any Losses, as the same
are incurred, of any kind or nature whatsoever, which may be sustained or
suffered by any such Parent Indemnified Party based upon, arising out of, or by
reason of acts of fraud, intentional misrepresentation or willful breach by such
Stockholder.
(b) The Parent Indemnified Parties shall not be entitled to any
indemnification for any amount of indemnifiable Losses in excess of the
Indemnification Escrow Funds. Notwithstanding the foregoing, the Principal
Stockholders on their own behalf and on behalf of their successors, executors,
administrators, estate, heirs and assigns (collectively, the "Principal
Stockholder Indemnifying Parties," and each individually, a "Principal
Stockholder Indemnifying Party") agree, subject to the provisions and
limitations set forth in this Article XI, severally, with respect to their pro
rata amount of the Merger Consideration, and not jointly, to indemnify and hold
the Parent Indemnified Parties harmless from and against any and all Losses
(other than Losses attributable to Taxes, for which Article XII shall be the
exclusive remedy), which may be sustained or suffered by any such Parent
Indemnified Party based upon, arising out of, or by reason of (i) a breach by
the Selling Companies of any of the Excluded Representations or Warranties,
other than a breach of Section 5.13, (ii) a breach by the Selling Companies of
Section 5.7(d), (iii) the Other Business, the Other Business Transfer, the Other
Business Liabilities, or any other Liabilities or matters relating to the
Spin-Off or the Spin-Off Entities, (iv) any deficit in the Working Capital
Escrow Amounts, or (v) acts of fraud, intentional misrepresentation or willful
breach by such Principal Stockholder Indemnifying Party. Each of the
Stockholders agrees severally, with respect to their pro rata amount of the
Merger Consideration, and not jointly, to contribute to any amounts paid by the
Principal Stockholders pursuant to this Section 11.2(b) in accordance with the
terms of the Holding Master Escrow, the Fluent Master Escrow and, as applicable,
the contribution agreement referred to in Section 11.3(i). The Parent
Indemnified Parties' indemnification rights pursuant to this Section 11.2(b) and
Article XII in the aggregate shall be limited to the amount of proceeds received
by the Principal Stockholder Indemnifying Parties in connection with the
transactions contemplated by this Agreement. For purposes of this Agreement, if
a Principal Stockholder
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Indemnifying Party sells or otherwise transfers any Parent Common Stock received
in the Mergers, the proceeds received by such Principal Stockholder Indemnifying
Party shall mean the cash proceeds received by such Principal Stockholder
Indemnifying Party in connection with such sale (net of any commissions).
(c) The Parent Indemnified Parties shall first seek recovery for any
indemnifiable Losses from the Indemnification Escrow Funds in accordance with
the provisions of Section 11.3; provided, however, that, notwithstanding the
foregoing, with respect to Losses which may be sustained or suffered by any such
Parent Indemnified Party as set forth in Section 11.2(b), the Parent Indemnified
Parties shall prior to the Indemnification Cut-Off Date first seek recovery for
up to $5,000,000 of any indemnifiable Losses from the Indemnification Escrow
Funds in accordance with the provisions of Section 11.3 and thereafter may seek
indemnification, without regard to the Indemnification Escrow Funds, from the
Principal Stockholder Indemnifying Parties.
(d) The amount of any indemnifiable Loss shall be calculated net of
any insurance proceeds received by the Parent Indemnified Party on account of
such Loss. In the event that an insurance recovery is received by any Parent
Indemnified Party with respect to any Loss for which any such Person has been
indemnified hereunder, then a refund equal to the aggregate amount of the
recovery shall be either (i) made promptly to the Indemnification Escrow Funds
or distributed in accordance with Section 11.3(d), as applicable, if such Loss
was paid from the Indemnification Escrow Funds or (ii) delivered to the
Principal Stockholder Indemnifying Parties if such Loss was paid by the
Principal Stockholder Indemnifying Parties. To the extent that a Parent
Indemnified Party recognizes a Tax benefit with respect to a Loss that is the
subject of an indemnification payment pursuant to this Article XI, the
indemnifying party shall be entitled to such Tax benefit and the Parent
Indemnified Party shall pay to the Master Escrow Agent for the benefit of the
indemnifying party the amount of such Tax benefit (but not in excess of the
indemnification payment or payments actually received with respect to such Loss)
at such time or times as and to the extent that the Parent Indemnified Party
actually realizes such benefit through a refund of Tax or reduction in the
actual amount of Taxes which such Parent Indemnified Party would otherwise have
had to pay if such Loss had not been incurred, calculated by computing the
amount of Taxes before and after inclusion of any Tax items attributable to such
Loss for which indemnification was made and treating such Tax items as the last
items claimed for any taxable year; provided that any such Tax benefit shall be
reduced by the amount of Tax detriment (including the tax effect of any item of
income or gain or other item (including any decrease in Tax basis) which
increases any amounts paid or payable with respect to Taxes, any reduction in
the amount of any refund of Tax which would otherwise have been available, the
utilization of any net operating loss or capital loss or the utilization of any
Tax credits or other Tax attributes) that the Parent Indemnified Party suffered
as a result of any indemnification payment pursuant to this Article XI.
SECTION 11.3 ESCROW PROVISIONS.
(a) Establishment of the Indemnification Escrow Funds. Immediately
after the Third Effective Time, without any act of any Person who was a holder
of Selling Companies Stock immediately prior to the applicable Effective Time,
Parent shall cause to be delivered to an escrow agent selected by Parent and
reasonably acceptable to the Selling Companies (the
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"Indemnification Escrow Agent") (i) an amount of cash equal to $10,000,000 less
the Fluent Cash Escrow Amount provided below (the "Holding Cash Escrow Amount")
and (ii) that number of shares of Parent Common Stock (the "Stock Escrow
Amount") having a value equal to $20,000,000 based on the average closing price
of Parent Common Stock for the ten (10) days prior to, and not including, the
Closing Date (the "Closing Price"). Immediately after the Fourth Effective Time,
without any act of any Person who was a holder of Selling Companies Stock
immediately prior to the applicable Effective Time, Fluent shall cause to be
delivered to the Indemnification Escrow Agent an amount of cash equal to
$10,000,000 multiplied by the percentage of the Adjusted Cash Consideration to
be received by the Fluent Stockholders pursuant to Section 3.5 of this Agreement
(the "Fluent Cash Escrow Amount"). The Holding Cash Escrow Amount, the Fluent
Cash Escrow Amount and the Stock Escrow Amount shall constitute the
Indemnification Escrow Funds (the "Indemnification Escrow Funds"). The
Indemnification Escrow Funds shall be governed by the terms set forth in this
Article XI. The portion of the Holding Cash Escrow Amount and the Stock Escrow
Amount contributed in respect of each Stockholder shall equal such Stockholder's
Holding Stockholder's Pro Rata Cash Amount or Stockholder's Pro Rata Stock
Amount, respectively, and the portion of the Fluent Cash Escrow Amount
contributed in respect of each Fluent Stockholder shall equal such Fluent
Stockholder's Cash Pro Rata Amount. Any payments from the cash held in the
Indemnification Escrow Funds (whether to Parent, for expenses, or otherwise)
shall be allocated on a pro rata basis based on the Holding Cash Escrow Amount
and the Fluent Cash Escrow Amount.
(b) Recourse to the Indemnification Escrow Funds. The
Indemnification Escrow Funds shall be available to compensate the Parent
Indemnified Parties for any and all Losses paid, incurred, sustained or accrued
by Parent or any other Parent Indemnified Party arising from, relating to or
resulting from (i) any breach or violation of, inaccuracy in or omission from
any representation or warranty, when made or deemed made as of the Closing Date
of the Selling Companies contained in this Agreement, the Selling Companies
Disclosure Schedules, any of the Ancillary Agreements or any certificate,
agreement or instrument delivered in connection herewith or therewith or any
claim by any third party alleging, constituting or involving such a breach,
violation, inaccuracy or omission, (ii) any breach or violation of any covenant
or agreement of the Selling Companies contained in this Agreement, any of the
Ancillary Agreements or any certificate, agreement or instrument delivered in
connection herewith or therewith or any claim by any third party alleging,
constituting or involving such a breach or violation, (iii) the Other Business,
the Other Business Transfer, the Other Business Liabilities, or any other
Liabilities or matters relating to the Spin-Off or the Spin-Off Entities, (iv)
any deficit in the Working Capital Escrow Amounts, (v) the Tax Indemnification
pursuant to Section 12.1 or (vi) acts of fraud, intentional misrepresentations
or willful breach.
(c) Limitation to Recourse.
(i) Parent Indemnified Party may not make any claims against
the Indemnification Escrow Funds pursuant to Section 11.3(b) above
(including, for the avoidance of doubt, any claim arising under Article
XII) unless and until the aggregate Losses paid, incurred, sustained or
accrued (or anticipated to be paid, incurred, sustained or accrued) equal
or exceed $1,000,000 (the "Deductible Amount"), and then only such Losses
that exceed the Deductible Amount shall be recoverable by the Parent
Indemnified Parties in accordance with the terms hereof; provided,
however, that the
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Parent Indemnified Parties shall not be subject to any limitations
pursuant to this Section 11.3(c) or otherwise, including, without
limitation, such Deductible Amount, in respect of claims and shall be
entitled to recover from the first dollar from the Indemnification Escrow
Funds for Losses in connection with (i) a breach by the Selling Companies
of any of the Excluded Representations or Warranties (other than Section
5.13), (ii) a breach by the Selling Companies of Section 5.7(d), (iii) the
Other Business, the Other Business Transfer, the Other Business
Liabilities, or any other Liabilities or matters relating to the Spin-Off
or the Spin-Off Entities, (iv) any deficit in the Working Capital Escrow
Amounts, (v) any indemnification pursuant to Section 12.1 for Losses or
Taxes relating to the Spin-Off, or (vi) acts of fraud, intentional
misrepresentation or willful breach. Any claims by a Parent Indemnified
Party against the Indemnification Escrow Funds with respect to acts of
fraud, intentional misrepresentation or willful breach shall be solely to
the portion of such Indemnification Escrow Funds which the Stockholder
committing the acts of fraud, intentional misrepresentation or willful
breach would otherwise be entitled, and following any such recovery by a
Parent Indemnified Party from the Indemnification Escrow Funds, the
amounts that such Stockholder would be entitled to receive under this
Agreement shall be reduced by the amount of any such recovery.
(ii) All indemnifiable Losses of the Parent Indemnified
Parties shall first be paid from the Holding Cash Escrow Amount and the
Fluent Cash Escrow Amount, pro rata on the basis of such amounts, and then
only after such Holding Cash Escrow Amount and Fluent Cash Escrow Amount
is depleted from the Stock Escrow Amount.
(d) Indemnification Escrow Period; Distribution of Indemnification
Escrow Funds upon Termination of Indemnification Escrow Period. Subject to the
following requirements, the Indemnification Escrow Funds shall be in existence
immediately following the Fourth Effective Time and shall terminate at 11:59
p.m. New York City time on the Indemnification Cut-Off Date (the period of time
from the Fourth Effective Time through and including 11:59 p.m. New York City
time on the Indemnification Cut-Off Date is referred to herein as the
"Indemnification Escrow Period"); and any Holding Cash Escrow Amount, Fluent
Cash Escrow Amount or Stock Escrow Amount thereafter remaining in the
Indemnification Escrow Funds shall be distributed as set forth in the last
sentence of this Section 11.3(d); provided, however, that the Indemnification
Escrow Period shall not terminate with respect to such amount of the Holding
Cash Escrow Amount, Fluent Cash Escrow Amount and/or Stock Escrow Amount as may
be necessary in the good faith judgment of Parent, subject to the objection of
the Stockholders' Representative and the subsequent arbitration of the matter in
the manner as provided in Section 11.3(h), to satisfy any unsatisfied claims
under Section 11.3 concerning facts and circumstances existing prior to the
termination of the Indemnification Escrow Period which claims are specified in
any Officer's Certificate delivered to the Indemnification Escrow Agent and the
Stockholders' Representative prior to termination of the Indemnification Escrow
Period. As soon as all such claims, if any, have been resolved, the
Indemnification Escrow Agent shall deliver to the Master Escrow Agent the
remaining portion of the Indemnification Escrow Funds not required to satisfy
such claims, with any remaining Holding Cash Escrow Amount and/or Stock Escrow
Amount delivered to the Master Escrow Agent for deposit into the Holding Master
Escrow Fund and any remaining Fluent Cash Escrow
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Amount in the Indemnification Escrow Funds delivered to the Master Escrow Agent
for deposit into the Fluent Master Escrow Fund.
(e) Protection of Indemnification Escrow Funds. The Indemnification
Escrow Agent shall hold and safeguard the Indemnification Escrow Funds during
the Indemnification Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Indemnification Escrow Funds only in
accordance with the terms hereof. At all times during which the Indemnification
Escrow Agent shall hold all or any portion of the Indemnification Escrow Funds,
the Indemnification Escrow Agent shall invest and reinvest the Indemnification
Escrow Funds, at the written direction of the Stockholders' Representative, in
one or more of the following investments: (i) direct obligations of, or
obligations the principal and interest on which are unconditionally guaranteed
by, the United States of America, (ii) repurchase agreements with the
Indemnification Escrow Agent involving securities of the kind described in the
immediately preceding clause (i), or (iii) money market funds authorized to
invest in short term securities issued or guaranteed as to principal and
interest by the United States government and repurchase agreements with respect
to such securities. Any interest, dividends or other income earned as a result
of such investments shall be added to and become part of the Indemnification
Escrow Funds and shall be retained in the Indemnification Escrow Funds and shall
be available to satisfy any claims made upon the Indemnification Escrow Funds
and shall thereafter be distributed pursuant to Section 11.3(d), provided,
however that within thirty (30) days of the end of each calendar quarter,
commencing March 31, 2007, the Indemnification Escrow Agent shall deliver to the
Master Escrow Agent from the Indemnification Escrow Fund an amount equal to
forty percent (40%) of the income earned for U.S. federal income tax purposes on
the Indemnification Escrow Fund during such immediately preceding calendar
quarter. Any interest or other income earned on the Indemnification Escrow Funds
will be included in the gross income of the Stockholders. In connection with the
letter of transmittal to be completed after Closing, each Stockholder shall
provide the Indemnification Escrow Agent with a certified tax identification
number by furnishing form W-9 or W-8, as appropriate, and any other forms and
documents that the Indemnification Escrow Agent may reasonably request. If such
Stockholders do not provide the information required in the prior sentence, the
Indemnification Escrow Agent may withhold a portion of any interest or other
income earned on the investment of the Indemnification Escrow Funds in
accordance with applicable requirements of the Code.
(f) Claims Upon Indemnification Escrow Funds.
(i) Upon receipt by the Indemnification Escrow Agent at any
time on or before the last day of the Indemnification Escrow Period of a
certificate signed by any officer of Parent (an "Officer's Certificate"):
(A) stating that Parent or another Parent Indemnified Party has paid,
incurred, sustained or accrued (or anticipates that it will pay, incur,
sustain or accrue) Losses and (B) specifying in reasonable detail the
individual items of Loss included in the amount so stated, the date (if
known) when each such item of Loss was incurred or sustained (or, in the
case of anticipated Losses, the basis for such anticipated Loss), and the
general nature of the representation, warranty, agreement or covenant or
other matter to which such item of Loss or anticipated Loss is related,
the Indemnification Escrow Agent shall, subject to the provisions of
Section 11.3(g), deliver
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to Parent out of the Indemnification Escrow Funds, as promptly as
practicable, cash and/or Parent Common Stock (subject to Section
11.3(c)(ii)) out of the Indemnification Escrow Funds in an amount equal to
such Losses. Where the basis for a claim upon the Indemnification Escrow
Funds by Parent is that Parent (or another Parent Indemnified Party)
anticipates that it will pay, incur, sustain or accrue a Loss, no payment
will be made from the Indemnification Escrow Funds for such Loss unless
and until such Loss is actually incurred or sustained.
(ii) For purposes of determining the number of shares of
Parent Common Stock for any distribution from the Indemnification Escrow
Funds, the per share value of the Parent Common Stock shall equal the
Closing Price.
(g) Objections to Claims. A copy of the Officer's Certificate shall
be delivered to the Stockholders' Representative substantially contemporaneously
with the delivery of the Officer's Certificate to the Indemnification Escrow
Agent, and for a period of ten (10) Business Days after such delivery to the
Stockholders' Representative and the Indemnification Escrow Agent, the
Indemnification Escrow Agent shall make no delivery to Parent of any portion of
the Indemnification Escrow Funds pursuant to Section 11.3(f) unless the
Indemnification Escrow Agent shall have received written authorization from the
Stockholders' Representative to make such delivery. After the expiration of such
ten (10) Business Day period, the Indemnification Escrow Agent shall make
delivery of cash and/or Parent Common Stock from the Indemnification Escrow
Funds in accordance with Section 11.3(f), provided that no such payment or
delivery may be made if the Stockholders' Representative shall object in a
written statement to the claim made in the Officer's Certificate setting forth
in reasonable detail the basis for objection, and such statement shall have been
delivered to the Indemnification Escrow Agent prior to 5:00 p.m. New York City
time on the last day of such ten (10) Business Day period.
(h) Resolution of Conflicts; Arbitration.
(i) If the Stockholders' Representative has objected in
writing to any claim or claims made in any Officer's Certificate in
accordance with the procedures of this Section 11.3(h), the Stockholders'
Representative and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If
the Stockholders' Representative and Parent so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties and
shall be furnished to the Indemnification Escrow Agent. The
Indemnification Escrow Agent shall be entitled to rely on any such
memorandum and to distribute cash and/or Parent Common Stock from the
Indemnification Escrow Funds in accordance with the terms thereof.
(ii) If no such agreement is reached after good-faith
negotiations, either Parent or the Stockholders' Representative may demand
arbitration of the dispute unless the amount of the Loss is at issue in a
pending Action involving a Third Party Claim, in which event arbitration
shall not be commenced until such amount is determined in such Action
(whether by verdict, judgment, finding of fact, settlement or other order,
stipulation or agreement) or otherwise ascertained, or both parties agree
to arbitration; and in either event, the matter shall be resolved by
confidential arbitration
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conducted by three arbitrators, one selected by Parent, one selected by
the Stockholders' Representative, and the third selected jointly by the
two (2) arbitrators previously selected by Parent and the Stockholders'
Representative. The arbitrators shall set a limited time period and
establish procedures designed to reduce the cost and time for discovery of
information relating to any dispute while allowing the parties an
opportunity, adequate as determined in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties
about the subject matter of the dispute. The arbitrators shall rule upon
motions to compel, limit or allow discovery as they shall deem appropriate
given the nature and extent of the disputed claim. The arbitrators shall
also have the authority to impose sanctions, including attorneys' fees and
other costs incurred by the parties, to the same extent as a court of law
or equity, if the arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or objected to by
a party without substantial justification. The decision of a majority of
the three arbitrators as to the validity and amount of any claim in such
Officer's Certificate shall be binding and conclusive upon the parties to
this Agreement and the Stockholders, and, notwithstanding anything in
Section 11.3(g), the Indemnification Escrow Agent shall be entitled to act
in accordance with such decision and make or withhold payments out of the
Indemnification Escrow Funds in accordance therewith. Such decision shall
be written and shall be supported by written findings of fact and
conclusions of law regarding the dispute, which shall set forth the award,
judgment, decree or order of the arbitrators.
(iii) Judgment upon any award, judgment, decree or order
rendered by the arbitrators may be entered in any court having competent
jurisdiction. Any such arbitration shall be held in Boston, Massachusetts
under the commercial rules of arbitration then in effect of the American
Arbitration Association. The expenses, fees of each arbitrator and
administrative costs of the arbitration shall be borne fifty percent (50%)
by the Parent Indemnified Parities (which amount shall be payable from the
Indemnification Escrow Funds) and fifty percent (50%) by the Principal
Stockholders (on a pro rata basis).
(i) Master Escrow Funds. Immediately following the Fourth Effective
Time, Parent shall deposit with an escrow agent selected by Parent and
reasonably acceptable to the Selling Companies (the "Master Escrow Agent"), (i)
for the benefit of the holders of shares of Holding Stock and Company Stock
outstanding immediately prior to the applicable Effective Time, for payment
through the Exchange Agent in accordance with Section 4.1, cash in an amount
equal to the portion of the Adjusted Cash Consideration to be received by the
Holding Stockholders, less the Holding Working Capital Escrow Amount less the
Holding Cash Escrow Amount and (ii) for the benefit of the holders of shares of
Holding Stock, Company Stock and Fluent Stock outstanding immediately prior to
the applicable Effective Time, for payment through the Exchange Agent in
accordance with Section 4.1, shares of Parent Common Stock equal to the Stock
Consideration less the Stock Escrow Amount (the "Holding Master Escrow").
Immediately following the Fourth Effective Time, Fluent shall deposit with the
Master Escrow Agent, for the benefit of the holders of shares of Fluent
outstanding immediately prior to the Fourth Effective Time, for payment through
the Exchange Agent in accordance with Section 4.1, cash in an amount equal to
the portion of the Adjusted Cash Consideration to be received by the Fluent
Stockholders, less the Fluent Working Capital Escrow Amount less the Fluent Cash
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Escrow Amount (the "Fluent Master Escrow"). The Holding Master Escrow and the
Fluent Master Escrow shall be available to compensate (A) the Principal
Stockholder Indemnifying Parties for any amounts paid and expenses incurred in
connection with the indemnification provisions of this Agreement, and (B) the
Stockholders' Representative for any amounts paid and expenses incurred in
connection with this Agreement. The Master Escrow Agent shall invest and
reinvest the Holding Master Escrow and the Fluent Master Escrow at the written
direction of the Stockholders' Representative. To the extent that there are
losses with respect to such investments, none of Parent, its Subsidiaries or the
Surviving Companies shall be responsible for such losses. The Holding Master
Escrow and the Fluent Master Escrow shall terminate when the Principal
Stockholder Indemnifying Parties and the Stockholders' Representative have
notified the Master Escrow Agent in writing that no further claims will be made
by the Principal Stockholder Indemnifying Parties and the Stockholders'
Representative against the Holding Master Escrow and the Fluent Master Escrow.
Notwithstanding the foregoing, upon delivery to the Stockholders' Representative
of a contribution agreement in form and substance satisfactory to the
Stockholders' Representative, the portion of the Holding Master Escrow or the
Fluent Master Escrow, as applicable, that would be payable to the delivering
Person (in accordance with such Person's Holding Stockholder's Pro Rata Cash
Amount, Stockholder's Pro Rata Stock Amount and/or Fluent Stockholder's Pro Rata
Cash Amount) shall be delivered to the Exchange Agent for delivery pursuant to
Article IV.
SECTION 11.4 THIRD PARTY CLAIMS.
(a) A Parent Indemnified Party shall give the Stockholders'
Representative written notice of any claim, assertion, event or proceeding by or
in respect of a third party (a "Third Party Claim") in respect of which such
Parent Indemnified Party may seek (i) recourse from the Indemnification Escrow
Funds or as to which the Deductible Amount may be applied or (ii)
indemnification from the Principal Stockholder Indemnifying Parties as soon as
is practicable and in any event within 20 Business Days after the receipt of
such written Third Party Claim or proceeding; provided, however, that the
failure to so notify the Stockholders' Representative shall not affect rights of
the Parent Indemnified Parties to indemnification hereunder except to the extent
that the rights of the Stockholders hereunder are materially prejudiced by such
failure. Within 15 Business Days after the receipt of such notice, the
Stockholders' Representative shall have the right to elect, at its option and
through counsel of its own choosing (who shall be reasonably acceptable to
Parent and the Surviving Companies), to assume the defense or settlement of any
such Third Party Claim or proceeding at its own expense; provided that in
connection with such assumption the Stockholders' Representative provides such
applicable Parent Indemnified Party a full release of any costs or other
expenses in connection therewith. If the Stockholders' Representative elects to
assume the defense of any such Third Party Claim or proceeding and complies with
the foregoing sentence, the Stockholders' Representative shall (A) provide
prompt notice of such election (and in any event within 15) Business Days after
the receipt of such written Third Party Claim) to the Parent Indemnified Party,
(B) promptly provide to Parent and its counsel all material information related
to such Third Party Claim and related proceedings (including copies of written
information), (C) consider in good faith the views of Parent and its counsel
regarding such Third Party Claim and (D) seek the consent of Parent and its
counsel (not to be unreasonably withheld, it being agreed that a material
adverse effect on Parent's business and operations shall be deemed to be a
reasonable basis to withhold consent) prior to any settlement or compromise of
such Third Party Claim and related proceedings unless
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such settlement or compromise shall consist only of the payment of money by the
Stockholders' Representative and includes a full release of such Parent
Indemnified Party. Notwithstanding anything herein to the contrary, such Parent
Indemnified Party shall at all times have the right to fully participate in such
defense at its own expense directly or through counsel; provided, however, if
the named parties to the action or proceeding include both a Stockholder and a
Parent Indemnified Party and representation of both parties by the same counsel
would be inappropriate under applicable standards of professional conduct, the
reasonable expense of separate counsel for such Parent Indemnified Party shall
be paid from the Indemnification Escrow Funds or by the Principal Stockholder
Indemnifying Parties, as applicable, provided that only one counsel for the
Parent Indemnified Parties in any jurisdiction shall be required. Subject to
applicable Laws, a Parent Indemnified Party shall provide, upon reasonable
notice, the Stockholders' Representative and counsel with reasonable access to
its records and personnel reasonably relating to any such Third Party Claim,
assertion, event or proceeding during normal business hours and shall otherwise
cooperate with any reasonable request of the Stockholders' Representative in the
defense or settlement thereof; provided that (x) that such cooperation does not
unduly interfere with the business of any such Parent Indemnified Party, (y)
such Parent Indemnified Party shall be reimbursed from the Indemnification
Escrow Funds or by the Principal Stockholder Indemnifying Parties, as
applicable, for all reasonable and necessary out-of-pocket costs and expenses
incurred by such Parent Indemnified Party in connection with any such request
and (z) such Parent Indemnified Party shall not be required to permit any of the
foregoing activities that would (1) result in the disclosure of any trade
secrets of third parties, or any trade secrets of any Parent Indemnified Party
or of any of their respective Affiliates unrelated to the transactions
contemplated by this Agreement, (2) violate any obligations of any Parent
Indemnified Party or their respective Affiliates to any third party with respect
to confidentiality or (3) reasonably be expected, in the opinion of counsel, to
have the effect of causing the waiver of any attorney-client privilege. If the
Stockholders' Representative elects to direct the defense of any such claim or
proceeding, Parent Indemnified Party shall not pay, or permit to be paid, any
part of any claim or demand arising from such asserted liability unless the
Stockholders' Representative consents in writing to such payment or unless the
Stockholders' Representative, subject to the last sentence of this Section
11.4(a), withdraws from the defense of such asserted liability or unless a final
judgment from which no appeal may be taken is entered against Parent Indemnified
Party for such liability. If the Stockholders' Representative receiving notice
of a Third Party Claim does not elect to defend such Third Party Claim or if the
Stockholders' Representative fails to defend in good faith or if, after
commencing or undertaking any such defense, the Stockholders' Representative
fails to prosecute in good faith or withdraws from such defense, Parent
Indemnified Party shall have the right, in addition to any other right or remedy
it may have hereunder, to undertake the defense or settlement thereof (with
counsel selected by the Parent Indemnified Party), and such expenses incurred by
a Parent Indemnified Party shall be recoverable from the Indemnification Escrow
Funds or the Principal Stockholder Indemnifying Parties, as applicable;
provided, however, that the Parent Indemnified Party shall not settle,
compromise or discharge, or admit any liability with respect to, any such Third
Party Claim without the written consent of the Stockholders' Representative
(which consent will not be unreasonably withheld or delayed).
(b) No Parent Indemnified Party shall be entitled to indemnification
hereunder for any Loss arising from a breach of any representation, warranty or
covenant set forth herein (and the amount of any Loss incurred in respect of
such breach shall not be included in the
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calculation of any limitations on indemnification set forth herein) to the
extent that such liability is accrued in the Estimated Net Working Capital or
the Closing Net Working Capital.
(c) The Parent Indemnified Parties shall not be entitled to
indemnification for any consequential, exemplary or punitive damages unless such
damages are assessed against any of the Parent Indemnified Parties in a Third
Party Claim.
SECTION 11.5 INDEMNIFICATION ESCROW AGENT'S DUTIES.
(a) Limitation on Duties of Indemnification Escrow Agent. The
Indemnification Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein, and as set forth in any additional
written escrow instructions which the Indemnification Escrow Agent may receive
after the date of this Agreement which are signed by an officer of Parent and
the Stockholders' Representative, and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed to be genuine
and to have been signed or presented by the proper party or parties. The
Indemnification Escrow Agent shall not be liable for any act done or omitted
hereunder as Indemnification Escrow Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith.
(b) Compliance with Orders. The Indemnification Escrow Agent is
hereby expressly authorized to comply with and obey Orders of any Governmental
Authority, notwithstanding any notice, warning or other communication from any
party or any other Person to the contrary. In case the Indemnification Escrow
Agent obeys or complies with any such Order, the Indemnification Escrow Agent
shall not be liable to any of the parties hereto or to any other Person by
reason of such compliance, notwithstanding any such Order being subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered
without jurisdiction or proper authority.
(c) Limitations on Liability of Indemnification Escrow Agent. The
Indemnification Escrow Agent shall not be liable in any respect on account of
(i) the identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder; or (ii) the expiration of any rights under
any statute of limitations with respect to this Agreement or any documents
deposited with the Indemnification Escrow Agent.
(d) Good Faith of Indemnification Escrow Agent. In performing any
duties under the Agreement, the Indemnification Escrow Agent shall not be liable
to any party for damages, Losses, or expenses, except for gross negligence or
willful misconduct on the part of the Indemnification Escrow Agent. The
Indemnification Escrow Agent shall not incur any such liability for (i) any act
or failure to act made or omitted in good faith, or (ii) any action taken or
omitted in reliance upon any instrument, including any written statement or
affidavit provided for in this Agreement that the Indemnification Escrow Agent
shall in good faith believe to be genuine, nor will the Indemnification Escrow
Agent be liable or responsible for forgeries, fraud, impersonations or
determining the scope of any representative authority. In addition, the
Indemnification Escrow Agent may consult with legal counsel in connection with
the Indemnification Escrow Agent's duties under this Agreement and shall be
fully protected in any
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act taken, suffered, or permitted by him, her or it in good faith in accordance
with the advice of counsel. The Indemnification Escrow Agent is not responsible
for determining and verifying the authority of any Person acting or purporting
to act on behalf of any party to this Agreement.
(e) Non-Responsibility of Indemnification Escrow Agent. If any
controversy arises between or among the parties to this Agreement, or with any
other Person, concerning the subject matter of this Agreement, its terms or
conditions, the Indemnification Escrow Agent will not be required to determine
the controversy or to take any action regarding it. The Indemnification Escrow
Agent may hold all documents and cash and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Indemnification Escrow Agent's discretion, the Indemnification Escrow Agent may
be required, despite what may be set forth elsewhere in this Agreement. In such
event, the Indemnification Escrow Agent will not be liable for any damages.
Furthermore, the Indemnification Escrow Agent may at its option file an action
of interpleader requiring the parties to answer and litigate any claims and
rights among themselves. The Indemnification Escrow Agent is authorized to
deposit with the clerk of the court all documents and cash and/or Parent Common
Stock held in escrow, except all costs, expenses, charges and reasonable
attorney fees incurred by the Indemnification Escrow Agent due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon commencing such action and making such deposit, the Indemnification Escrow
Agent shall be fully released and discharged of and from all obligations and
liability imposed by the terms of this Agreement.
(f) Indemnification of Indemnification Escrow Agent. Parent and its
successors and assigns agree to indemnify and hold the Indemnification Escrow
Agent harmless against any and all Losses incurred by the Indemnification Escrow
Agent in connection with the performance of the Indemnification Escrow Agent's
duties under this Agreement, including any litigation arising from this
Agreement or involving its subject matter.
(g) Resignation of Indemnification Escrow Agent. The Indemnification
Escrow Agent may resign at any time upon giving at least 30 calendar days'
written notice to the parties; provided, however, that no such resignation shall
become effective until the appointment of a successor Indemnification Escrow
Agent which shall be accomplished as follows: Parent and Stockholders'
Representative shall use their reasonable best efforts to mutually agree on a
successor Indemnification Escrow Agent within 30 calendar days after receiving
such notice. If the parties fail to agree upon a successor escrow agent within
such time, the Indemnification Escrow Agent shall have the right to appoint a
successor escrow agent authorized to do business in the State of Delaware. The
successor escrow agent shall execute and deliver an instrument accepting such
appointment and it shall, without further acts, be vested with all the estates,
properties, rights, powers, and duties of the predecessor depositary agent as if
originally named as Indemnification Escrow Agent. The Indemnification Escrow
Agent shall thereupon be discharged from any further duties and liability under
this Agreement.
(h) Fees. All fees of the Indemnification Escrow Agent for
performance of its duties hereunder shall be paid by Parent. In the event that
the conditions of this Agreement are not promptly fulfilled, or if the
Indemnification Escrow Agent renders any service not provided for in this
Agreement, or if the parties request a substantial modification of its terms, or
if any controversy arises (other than claims against the Indemnification Escrow
Funds, objections to
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claims and arbitrations as contemplated by Sections 11.3(f), (g) and (h)), or if
the Indemnification Escrow Agent is made a party to, or intervenes in, any
Action pertaining to the Escrow, this Article XI or its subject matter, the
Indemnification Escrow Agent shall be entitled to be reasonably compensated by
Parent and the Stockholders' Representative.
SECTION 11.6 STOCKHOLDERS' REPRESENTATIVE.
(a) Appointment. The Stockholders' Representative may act in the
manner contemplated in this Section 11.6. The Stockholders' Representative
agrees to act as the Stockholders' representative hereunder.
(b) Stockholders' Representative Actions. A decision, act, consent,
exercise of discretion or instruction of the Stockholders' Representative as
contemplated by this Section 11.6 shall be final, binding and conclusive upon
the Stockholders; and the Indemnification Escrow Agent, Parent and the Surviving
Companies may rely upon any such decision, act, consent or instruction of the
Stockholders' Representative. The Indemnification Escrow Agent, Parent and the
Surviving Companies are hereby relieved from any Liability to any Person for any
acts done by them in accordance with such decision, act, consent, exercise of
discretion or instruction of the Stockholders' Representative. Parent and the
Surviving Companies shall be entitled to rely exclusively upon any communication
given or other action taken by the Stockholders' Representative pursuant to this
Section 11.6 and shall not be liable for any action taken or not taken in
reliance upon the Stockholders' Representative. Parent and the Surviving
Companies shall not be obligated to inquire as to the authority of the
Stockholders' Representative with respect to the taking of any action that the
Stockholders' Representative takes or purports to take on behalf of any
Stockholder. For the avoidance of doubt, no term or provision of this Section
11.6 shall apply to Parent or Surviving Companies unless expressly provided
herein and shall not effect, impair, restrict or modify any of their rights
under this Agreement (including Section 11.2).
(c) Authorization. The Stockholders' Representative shall have full
power and authority to take all actions under this Agreement that are to be
taken by the Stockholders' Representative, including any and all actions which
it believes are necessary or appropriate under this Agreement, including,
without limitation, giving and receiving any notice or instruction permitted or
required under this Agreement by the Stockholders' Representative, interpreting
all of the terms and provisions of this Agreement, authorizing payments to be
made with respect hereto or thereto, defending all indemnity claims against the
Indemnification Escrow Funds pursuant to Section 11.4 of this Agreement,
consenting to, compromising or settling all such claims, conducting negotiations
with Parent and its agents regarding such claims, dealing with Parent and the
Indemnification Escrow Agent under this Agreement, taking any all other actions
specified in or contemplated by this Agreement. Without limiting the generality
of the foregoing, the Stockholders' Representative shall have the full power and
authority to interpret all the terms and provisions of this Agreement and to
consent to any amendment hereof or thereof in its capacity as Stockholders'
Representative. The Stockholders' Representative is authorized to:
(i) Receive all notices or documents given or to be given to
Stockholders' Representative pursuant hereto or in connection herewith and
to receive
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and accept services of legal process in connection with any suit or
proceeding arising under this Agreement;
(ii) Engage counsel, and such accountants and other advisors
and incur such other expenses in connection with this Agreement and the
transactions contemplated hereby as the Stockholders' Representative may
in its sole discretion deem appropriate; and
(iii) After the Fourth Effective Time, take such action as the
Stockholders' Representative may in its sole discretion deem appropriate
in respect of: (A) taking such other action as the Stockholders'
Representative is authorized to take under this Agreement; (B) receiving
all documents or certificates and making all determinations, in its
capacity as Stockholders' Representative, required under this Agreement;
and (C) all such actions as may be necessary to carry out any of the
transactions contemplated by this Agreement, including, without
limitation, the defense and/or settlement of any claims for which recourse
is sought pursuant to Section 11.2 and any waiver of any obligation of
Parent or the Surviving Companies.
(iv) The intent of the Stockholders is that the Stockholders'
Representative will act in the best interest of the Stockholders. The
Stockholders' Representative shall have no duties to the Stockholders or
Liability to the Stockholders with respect to any action taken, decision
made or instruction given by the Stockholders' Representative in
connection with this Agreement.
(d) Access to Information. The Stockholders' Representative shall
have the access and information rights set forth in Section 11.4(a).
(e) Reasonable Reliance. The Stockholders' Representative may rely
upon any document or instrument reasonably believed to be genuine, accurate as
to content and signed by any Stockholder or any party hereunder and the
Stockholders' Representative may assume that any person purporting to give any
notice in accordance with the provisions hereof has been duly authorized to do
so.
(f) Orders. The Stockholders' Representative (i) may, in its sole
discretion, comply with final, nonappealable Orders with respect to the
Indemnification Escrow Funds, (ii) if any portion of the Indemnification Escrow
Funds is disbursed to the Stockholders' Representative and is at any time
attached, garnished or levied upon under any Order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any Order, or in case any Order affecting such property or
any part thereof, then and in any such event, the Stockholders' Representative
may, in its sole discretion, but in good faith, rely upon and comply with any
such Order which it is advised by legal counsel selected by it is binding upon
it without the need for appeal or other action; and (iii) if the Stockholders'
Representative complies with any such Order, he shall not be liable to any
Stockholder or to any other Person by reason of such compliance even though such
Order may be subsequently reversed, modified, annulled set aside or vacated.
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(g) Removal of Stockholders' Representative; Authority of
Stockholders' Representative. A majority in interest of the Stockholders shall
have the right at any time during the Indemnification Escrow Period to remove
the then-acting Stockholders' Representative to appoint a successor
Stockholders' Representative; provided, however, that neither such removal of
the then acting Stockholders' Representative nor such appointment of a successor
Stockholders' Representative shall be effective until the delivery to the
Indemnification Escrow Agent of executed counterparts of a writing signed by
each Stockholder comprising such majority in interest with respect to such
removal and appointment, together with an acknowledgement signed by the
successor Stockholders' Representative appointed in such writing that he, she or
it accepts the responsibility of successor Stockholders' Representative and
agrees to perform and be bound by all of the provisions of this Agreement
applicable to the Stockholders' Representative. For all purposes hereunder, a
majority in interest of the Stockholders shall be determined on the basis of
each Stockholder's Pro Rata Stock Amount. Each successor Stockholders'
Representative shall have all of the power, authority, rights and privileges
conferred by this Agreement upon the original Stockholders' Representative, and
the term "Stockholders' Representative" as used herein shall be deemed to
include any interim or successor Stockholders' Representative.
(h) Expenses of the Stockholders' Representative. All costs and
expenses incurred by the Stockholders' Representative (including legal,
accounting and other advisors' fees and expenses, if applicable) in performing
under this Agreement shall be borne in accordance with the Holding Master Escrow
and the Fluent Master Escrow and the contribution agreements referred to in
Section 11.3(i).
(i) Irrevocable Appointment. Subject to Section 11.6(g), the
appointment of the Stockholders' Representative hereunder is irrevocable and any
action taken by the Stockholders' Representative pursuant to the authority
granted in this Section 11.6 shall be effective and absolutely binding as the
action of the Stockholders' Representative under this Agreement.
SECTION 11.7 TREATMENT OF INDEMNITY PAYMENTS. All payments made pursuant
to this Article XI or pursuant to Article XII shall be treated as adjustments to
the Merger Consideration for Tax purposes, and such agreed treatment shall
govern for purposes of this Agreement.
SECTION 11.8 REMEDIES EXCLUSIVE.
(a) Parent and Merger Subs hereby acknowledge and agree that prior
to the Closing, Parent and Merger Subs shall have no right or remedy to take any
action in respect of any breach by the Selling Companies or the Principal
Stockholders, as applicable, of any representations or warranties contained
herein or any failure to comply with any of the covenants, conditions or
agreements contained herein, except (i) to terminate this Agreement pursuant to
Section 13.1 hereof, in which event, the Selling Companies and the Principal
Stockholders shall thereupon have no Liability to Parent or Merger Subs
whatsoever hereunder, except as specifically provided in Section 13.2, (ii) to
seek injunctive relief, (iii) any cause of action or liability for fraud,
intentional misrepresentation or willful breach, and (iv) to waive any such
breach or failure in connection with the Closing and immediately thereafter seek
indemnification for such breach pursuant to Section 11.2. It is specifically
understood and
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agreed that any breach of the provisions of this Agreement, the Ancillary
Agreements, or any other certificate, agreement or instrument executed and
delivered pursuant to this Agreement by any Person subject hereto will result in
irreparable injury to the other parties hereto, that the remedy at Law alone
will be an inadequate remedy for such breach, and that, in addition to any other
remedies which they may have, such other parties may enforce their respective
rights by actions for specific performance (to the extent permitted by Law).
(b) From and after the Closing, the rights of the Parent Indemnified
Parties to recourse for, and indemnification relating to, breaches of
representations, warranties, covenants or agreements in this Agreement shall be
limited to those contained in this Article XI and in Article XII, and such
recourse and indemnification rights shall be the sole and exclusive remedies of
the Parent Indemnified Parties subsequent to the Closing Date with respect to
any matter in any way relating to this Agreement or arising in connection
herewith. No holder of shares of the Selling Companies Stock shall have any
right to contribution from the Selling Companies (except to the extent covered
by any of the Selling Companies' insurance policies in effect immediately prior
to Closing) for any claim made by the Parent Indemnified Parties with respect to
any Loss claimed by the Parent Indemnified Parties after the Fourth Effective
Time. Notwithstanding anything to the contrary herein, in the event of any acts
of fraud, intentional misrepresentation or willful breach, the parties shall
have all remedies available at Law or in equity (including for tort) with
respect to such fraud, intentional misrepresentation or willful breach.
ARTICLE XII - TAX MATTERS
The following provisions shall govern the allocation of responsibility as
between Parent and the Selling Companies and Stockholders for certain Tax
matters following the Closing Date:
SECTION 12.1 TAX INDEMNIFICATION.
(a) Each of the Stockholders on their own behalf and on behalf of
their successors, executors, administrators, estate, heirs and assigns agree,
subject to the provisions and limitations set forth in this Article XII, to
severally, with respect to their pro rata amount of the Merger Consideration,
and not jointly, indemnify the Parent Indemnified Parties and hold them harmless
from and against (i) all Losses of any kind or nature whatsoever, which may be
sustained or suffered by any such Parent Indemnified Party based upon, arising
out of, or by reason of any breach or violation of, inaccuracy in or omission
from any representation or warranty contained in Section 5.13, when made or
deemed made as of the Closing Date of the Selling Companies; (ii) all Taxes (or
the non-payment thereof) of each Selling Company and its Subsidiaries (including
all Taxes relating to the Spin-Off) for all taxable periods ending on or before
the Closing Date and the portion through the end of the Closing Date for any
taxable period that includes (but does not end on) the Closing Date
("Pre-Closing Tax Period"), (iii) any and all Taxes of any member of an
affiliated, consolidated, combined, or unitary group of which any Selling
Company or of its Subsidiaries (or any predecessor of any of the foregoing) is
or was a member on or prior to the Closing Date, including pursuant to Treasury
Regulations Section 1.1502-6 or any analogous or similar state, local, or
foreign law or regulation, and (iv) any and all Taxes of any Person (other than
the applicable Selling Company and its
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Subsidiaries) imposed on any Selling Company or any of its Subsidiaries as a
transferee or successor, by contract or pursuant to any law, rule or regulation,
which Taxes relate to an event or transaction occurring before the Closing,
provided, however, that in the case of clauses (i) through (iv) above, the
Stockholders shall be liable only to the extent that such Losses or Taxes are in
excess of the amount, if any, accrued in the Final Net Working Capital for Taxes
and only after application of any net operating loss carryforwards from taxable
periods ending on or prior to the Closing Date and capital loss carryforwards
from taxable periods ending on or prior to the Closing Date of the Selling
Companies or its Subsidiaries to the extent such attributes existed on or prior
to the Closing Date, with any Tax benefit from such Tax attributes being taken
into account only at such time or times as and to the extent that the Parent
Indemnified Party actually realizes a Tax benefit from such attribute through a
refund of Tax or reduction in the actual amount of Taxes which such Parent
Indemnified Party would otherwise have had to pay if such Tax attribute had not
been available. Parent shall use reasonable commercial efforts to cause such Tax
attributes to be usable in determining such Tax liability. Any dispute as to the
amount or availability of any such Tax attributes that cannot be resolved in
good faith discussions between the applicable parties shall be submitted to the
Accounting Referee and resolved in accordance with the procedures set forth in
Section 3.8(b). To the extent that the Parent Indemnified Parties are entitled
to recover for any of the foregoing Losses or Taxes (to the extent related to
Income Taxes and Taxes attributable to the Spin-Off) and the amount in the
Indemnification Escrow Funds is insufficient or the Indemnification Escrow Funds
are not available, the Principal Stockholder Indemnifying Parties shall, subject
to the provisions and limitations set forth in this Article XII, severally, with
respect to their pro rata amount of the Merger Consideration, and not jointly,
reimburse the Parent Indemnified Parties therefor within 15 Business Days after
payment of such Taxes by a Parent Indemnified Party.
(b) Each of the Stockholders agrees severally, with respect to their
pro rata amount of the Merger Consideration, and not jointly, to contribute to
any amounts paid by the Principal Stockholders pursuant to Section 12.1(a) in
accordance with the terms of the Holding Master Escrow, the Fluent Master Escrow
and, as applicable, the contribution agreement referred to in Section 11.3(i).
(c) With respect to Taxes attributable to the Spin-Off and Income
Taxes which may be sustained or suffered by any Parent Indemnified Party as set
forth in Section 12.1(a), the Parent Indemnified Parties shall prior to the
Indemnification Cut-Off Date first seek recovery related thereto for up to
$5,000,000 from the Indemnification Escrow Funds in accordance with the
provisions of Section 11.3 and thereafter may seek indemnification, without
regard to the Indemnification Escrow Funds, from the Principal Stockholder
Indemnifying Parties.
(d) Parent Indemnified Party may not make any claims pursuant to
Section 12.1(a) above for the amount of any Taxes (other than Taxes attributable
to the Spin-Off) unless and until the aggregate indemnifiable Losses and Taxes
pursuant to this Article XII or Article XI equal or exceed the Deductible
Amount, and then only such Losses and Taxes that exceed the Deductible Amount
shall be recoverable by the Parent Indemnified Parties in accordance with the
terms hereof. Notwithstanding any other contrary provision of this Agreement,
any Taxes attributable to the Spin-Off shall not be subject to the Deductible
Amount.
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(e) Notwithstanding any other contrary provision of this Agreement,
(i) the amount of any Income Taxes and any Taxes attributable to the Spin-Off
and, in each case, any Losses relating thereto, that may be recovered by the
Parent Indemnified Parties pursuant to this Article XII and Section 11.2(b) in
the aggregate shall be limited to the amount of proceeds received by the
Principal Stockholder Indemnifying Parties in connection with the transactions
contemplated by this Agreement and (ii) the amount of any Taxes and Losses
related thereto other than those described in (i) that may be recovered by the
Parent Indemnified Parties shall be limited to the Indemnification Escrow Funds.
For purposes of this Agreement, if a Principal Stockholder Indemnifying Party
sells or otherwise transfers any Parent Common Stock received in the Mergers,
the proceeds received by such Principal Stockholder Indemnifying Party shall
mean the cash proceeds received by such Principal Stockholder Indemnifying Party
in connection with such sale (net of any commissions). Notwithstanding anything
herein to the contrary, (A) any Taxes recovered by Parent Indemnified Parties
pursuant to Article XII shall not be recoverable pursuant to any other Article
of this Agreement and (B) the Stockholders shall have no indemnification
obligation under this Agreement due to a reduction of net operating losses or
capital loss carryforwards (but, in each case, only to the extent such net
operating losses or carryforwards existed on or prior to the Closing Date)
carried forward to periods after the Closing or any limitations on the usability
of such Tax attributes unless such reduction or limitation actually increases
the Tax liability of a Parent Indemnified Party.
(f) Notwithstanding any other contrary provision of this Agreement,
in determining indemnifiable Losses and Taxes under this Article XII, the
provisions of Section 11.2(d) shall be applied.
SECTION 12.2 STRADDLE PERIODS. In the case of any taxable period that
includes (but does not end on) the Closing Date (a "Straddle Period"), the
amount of any Taxes for the applicable Pre-Closing Tax Period shall (a) in the
case of Taxes that are imposed on a periodic basis (such as real property
Taxes), be deemed to be the amount of such Taxes for the entire period (or in
the case of such Taxes determined on an arrears basis, the amount of such Taxes
for the immediately preceding period) multiplied by a fraction the numerator of
which is the number of calendar days in the applicable Pre-Closing Tax Period
and the denominator of which is the number of calendar days in the entire
relevant Straddle Period and (b) in the case of Taxes that are not described in
clause (a) above (such as Income Taxes, Taxes imposed in connection with any
sale or other transfer or assignment of property, and payroll and similar
Taxes), be deemed to be equal to the amount that would have been payable if the
taxable year or period of the Company ended on the Closing Date; provided, that,
in determining such amount, exemptions, allowances or deductions that are
calculated on a periodic basis, such as the deduction for depreciation, shall be
taken into account on a pro-rated basis in the manner described in clause (a)
above.
SECTION 12.3 RESPONSIBILITY FOR FILING TAX RETURNS. Parent shall prepare
or cause to be prepared at its own cost, all Tax Returns for the Selling
Companies and their Subsidiaries that are filed after the Closing Date. Parent
shall provide draft versions of such Tax Returns to the Stockholders'
Representative not later than 30 days prior to the extended due date for filing
such Tax Returns. The Stockholders' Representative shall notify Parent of any
proposed changes not later than 15 days after delivery of such draft Tax Returns
pursuant to the preceding sentence. Parent shall make changes to such draft Tax
Returns that are reasonably requested by the
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Stockholders' Representative to the extent such changes (a) are with respect to
a position or item that was initially reported on such draft Tax Returns in a
manner inconsistent with the past practices of the applicable Selling Company
and such changes, (b) if accepted, would cause such position or item to be
consistent with the past practices of such Selling Company; provided, that
Parent shall have no obligation to accept any changes requested by the
Stockholders' Representative if, in Parent's reasonable judgment, such changes
would result in a material increase in the amount of Taxes owed with respect to
a taxable period beginning after the Closing Date. Notwithstanding the
foregoing, Parent and the Stockholders' Representative shall have joint control
over the treatment of the Spin-Off and shall use their best efforts to mutually
agree on such treatment that is consistent with the intended Tax treatment
described in this Agreement; provided, however, that Parent and the
Stockholders' Representative agree that the Spin-Off shall be treated and
reported for all Tax purposes and for purposes of this Agreement as occurring in
the Pre-Closing Tax Period; and provided further that any dispute as to the
proper treatment of an item relating to the Spin Off that cannot be resolved in
good faith discussions between the Parent and the Stockholders' Representative
shall be submitted to the Accounting Referee and resolved in accordance with the
procedures set forth in Section 3.8(b). Parent shall cause the Selling Companies
and their Subsidiaries to file all Tax Returns described in this Section 12.3 on
or prior to their extended due dates.
SECTION 12.4 COOPERATION ON TAX MATTERS.
(a) Parent, the Principal Stockholders and the Selling Companies and
their Subsidiaries shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information that are reasonably relevant to any such
audit, litigation or other proceeding and making employees available, including,
without limitation, those employees identified on Schedule 12.4, on a mutually
convenient basis, without the incurrence by Parent of any fees or expenses
related thereto, to provide additional information and explanation of any
material provided hereunder. The Principal Stockholders and the Selling
Companies and their Subsidiaries agree (i) to retain all books and records with
respect to Tax matters pertinent to the Selling Companies and their Subsidiaries
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Parent,
any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any Tax Authority, and (ii) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
any Selling Company and its Subsidiaries or the Principal Stockholders, as the
case may be, shall allow the other party to take possession of such books and
records.
(b) Parent, the Principal Stockholders and the Selling Companies and
their Subsidiaries and the Principal Stockholders further agree, upon request,
to provide the other party with all information that either party may be
required to report pursuant to Section 6043 of the Code and all Treasury
Regulations promulgated thereunder.
(c) Except as otherwise required by applicable Law, as determined in
the good faith judgment of Parent, after the Closing, none of the Selling
Companies shall make or
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change any Tax election, change any method of Tax accounting, file or amend any
Tax Return, settle any audit, claim, examination or deficiency litigation with
respect to Taxes, request any private letter or similar Tax ruling or enter into
any closing agreement with any Tax Authority with respect to any amount of
Taxes, in each case with respect to a taxable period ending prior to the Closing
Date, without, in each case, providing at least ten (10) days notice to the
Stockholders' Representative and, to the extent that the Stockholders'
Representative notifies Parent within such ten-day period that the Stockholders'
Representative reasonably believes that such action will cause a material
adverse effect on the Stockholders' indemnity obligations under this Agreement,
Parent shall use reasonable best efforts to accommodate any reasonable requests
by the Stockholders' Representative.
SECTION 12.5 TAX-SHARING AGREEMENTS. All tax-sharing agreements or similar
agreements with respect to or involving any Selling Company or any of its
Subsidiaries shall be terminated as of the Closing Date and, after the Closing
Date, no Selling Company or any of its Subsidiaries shall be bound thereby or
have any liability thereunder.
SECTION 12.6 CERTAIN TAXES AND FEES. Notwithstanding the foregoing
provisions of this Article XII, all transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties, interest and additional
amounts with respect thereto) ("Transfer Taxes") incurred in connection with the
consummation of the transactions contemplated by this Agreement (other than the
Spin-Off) shall be borne fifty percent (50%) by Parent and fifty percent (50%)
by the Stockholders. For the avoidance of doubt, all Transfer Taxes relating to
the Spin-Off shall be subject to the provisions of Section 12.1.
ARTICLE XIII - TERMINATION, AMENDMENT AND WAIVER
SECTION 13.1 TERMINATION. This Agreement may be terminated at any time
prior to the First Effective Time, whether before or after the execution of the
Stockholder Written Consents:
(a) by the mutual written consent of Parent (on behalf of itself and
Merger Subs) and the Selling Companies;
(b) by either the Selling Companies, on the one hand, or Parent or
Merger Subs, on the other hand, by written notice to the other:
(i) if a Court or Governmental Authority shall have issued an
Order or taken any other action, in each case, which has become final and
non-appealable and which restrains, enjoins or otherwise prohibits the
Mergers; or
(ii) if the consummation of the Mergers shall not have
occurred after April 3, 2006 and on or before 5:00 p.m. New York City time
on July 31, 2006; provided that if the Mergers shall not have been
consummated solely due to any approval from the Federal Trade Commission,
the Antitrust Division of the United Stated Department of Justice or such
similar foreign or domestic Governmental Authority not having been
received, then such date shall be extended for not more than six (6)
months to allow more time for such approval to be obtained; and provided,
further, that the right to terminate
110
this Agreement under this Section 13.1(b)(ii) shall not be available to
any party whose failure to comply with any provision of this Agreement has
been the cause of, or resulted in, the failure of the Mergers to occur on
or before such date;
(c) by Parent, if the Mergers shall not have been approved as
provided in Section 10.1 hereof pursuant to the Stockholder Written Consents by
the applicable Stockholder Votes required in accordance with applicable Law and
the Charter Documents;
(d) by the Selling Companies, if the Selling Companies are not then
in material breach of any term of this Agreement, upon written notice to Parent,
upon a material breach of any representation, warranty or covenant of Parent or
Merger Subs contained in this Agreement, provided that such breach is not
capable of being cured or has not been cured within 30 days after the giving of
notice thereof by the Selling Companies to Parent, such that the conditions set
forth in Sections 10.1 and 10.3 cannot be satisfied or cured prior to the date
set forth in Section 13.1(b)(ii);
(e) by Parent, if neither Parent nor any of the Merger Subs is then
in material breach of any term of this Agreement, upon written notice to the
Selling Companies, upon a material breach of any representation, warranty or
covenant of the Selling Companies contained in this Agreement, provided that
such breach is not capable of being cured or has not been cured within 30 days
after the giving of notice thereof by Parent or Merger Subs to the Selling
Companies, such that the conditions set forth in Sections 10.1 and 10.2 cannot
be satisfied or cured prior to the date set forth in Section 13.1(b)(ii); or
(f) by Parent, if at any time after approval and adoption of the
Merger Agreement and the Mergers, holders of more than two and one half percent
(2.5%) of the outstanding shares of Selling Companies Stock (determined on an as
converted basis) shall have demanded appraisal, dissenters' or similar rights
under applicable Law with respect to their shares.
SECTION 13.2 EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement pursuant to
Sections 13.1(a), (b), (d), (e) or (f), this Agreement shall forthwith become
null and void and have no effect, without any Liability on the part of Parent,
Merger Subs or the Selling Companies and their respective directors, officers,
employees, partners or stockholders and all rights and obligations of any party
hereto shall cease, except for the agreements contained in Section 9.4, Section
9.8, this Section 13.2 and Article XIV; provided, however, that nothing
contained in this Section 13.2(a) shall relieve any party from Liabilities or
damages arising out of any fraud, intentional misrepresentation or willful
breach by such party of any of its representations, warranties, covenants or
other agreements contained in this Agreement.
(b) In the event of the termination of this Agreement pursuant to
Section 13.1(c), then the Selling Companies shall pay Parent for all of its out
of pocket expenses in connection with the negotiation and the transactions
contemplated by this Agreement, including all expenses related to attorneys,
auditors, investment bankers, experts or any other
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third-party consultant ("Parent Expenses"), and shall pay such Parent Expenses
by wire transfer of same day funds on the date of termination of this Agreement.
SECTION 13.3 AMENDMENT. This Agreement may be amended by the parties
hereto by an instrument in writing signed on behalf of each of the parties
hereto at any time before or after the execution of the Stockholder Written
Consents; provided, however, that after the execution of the Stockholder Written
Consents, no amendment shall be made that by Law requires further approval by
the Stockholders without obtaining such approval.
SECTION 13.4 EXTENSION; WAIVER. At any time prior to the First Effective
Time, the parties hereto may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto and
(c) waive compliance by the other party with any of the agreements or conditions
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 a written instrument
signed on behalf of the party against which such waiver or extension is to be
enforced. Waiver of any term or condition of this Agreement by a party shall not
be construed as a waiver of any subsequent breach or waiver of the same term or
condition by such party, or a waiver of any other term or condition of this
Agreement by such party.
ARTICLE XIV - GENERAL PROVISIONS
SECTION 14.1 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed given
if delivered personally, sent by overnight courier (providing proof of delivery)
or via facsimile to the parties at the following addresses (or at such other
address for a party as specified by like notice):
(a) if to Parent or Merger Subs, to:
ANSYS, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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(b) if to the Selling Companies, to:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇ & Partners
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Bartlit ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Principal Stockholders or the Stockholders'
Representative, to:
▇▇▇▇▇▇ ▇▇▇▇▇ & Partners
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Bartlit ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 14.2 ENTIRE AGREEMENT. This Agreement, together with the Schedules
and Exhibits hereto, the Ancillary Agreements, the Confidentiality Agreement and
any documents executed by the parties simultaneously herewith or pursuant
thereto, constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, written and oral, among the parties with respect to the subject
matter hereof, other than the Confidentiality Agreement (excluding the
provisions of this
113
Agreement), which shall survive the execution of this Agreement and any
termination of this Agreement.
SECTION 14.3 FURTHER ASSURANCES; POST-CLOSING COOPERATION. At any time or
from time to time after the Closing, the parties shall execute and deliver to
each other party such other documents and instruments, provide such materials
and information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other parties to fulfill their respective obligations
under this Agreement and the transactions contemplated hereby. Notwithstanding
the foregoing, the rights of the various parties and their obligations to
provide information as set forth in Article XI shall be controlled by that
section of the Agreement.
SECTION 14.4 THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of Parent and the Selling
Companies and, with respect to Article XI and Article XII only, the
Indemnification Escrow Agent, the Stockholders' Representative and the Principal
Stockholder Indemnifying Parties, and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights, and this Agreement does not confer any such rights, upon any
other Person other than any Person entitled to indemnification under Section
9.10 or to compensation from the Indemnification Escrow Funds under Article XI
and Article XII.
SECTION 14.5 ASSIGNMENT. Except as expressly permitted by the terms
hereof, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties; provided, however, that Parent may
designate, by written notice to the Selling Companies, another wholly-owned
direct or indirect Subsidiary to be a party hereto in lieu of any of the Merger
Subs (so long as such designation does not materially change the Tax treatment
of the Mergers or the Spin-Off), in which event all references herein to such
Merger Sub shall be deemed references to such other Subsidiary, except that any
representations and warranties made with respect to such Merger Sub as of the
date of this Agreement shall be deemed made with respect to such other
Subsidiary as of the date of such designation. Subject to the foregoing, this
Agreement and the rights and obligations set forth herein shall inure to the
benefit of, and be binding upon the parties hereto, and each of their respective
successors, heirs and permitted assign.
SECTION 14.6 SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 14.7 NO AGREEMENT UNTIL EXECUTED. Irrespective of negotiations
among the parties or the exchanging of drafts of this Agreement, this Agreement
shall not constitute or be deemed to evidence a contract, agreement, arrangement
or understanding among the parties hereto unless and until (a) each of the
Selling Companies Boards has approved for purposes of Section 251 of the DGCL
and any applicable provision of their respective certificates of incorporation,
the terms of this Agreement and (b) this Agreement is executed by the parties
hereto.
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SECTION 14.8 INTERPRETATION. When a reference is made in this Agreement to
an Article, Section, Schedule or Exhibit, such reference will be to an Article
or Section of, or a Schedule or Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they will be deemed to be followed by
the words "without limitation." The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement will refer to this Agreement
as a whole and not to any particular provision of this Agreement. All terms used
herein with initial capital letters have the meanings ascribed to them herein
and all terms defined in this Agreement will have such defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein, or in any
agreement or instrument that is referred to herein, means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
SECTION 14.9 SURVIVAL. None of the representations, warranties, covenants
and agreements in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Mergers, provided, however, that (a) those covenants
and agreements contained herein that by their terms are to be performed after
the applicable Effective Time shall survive, including, without limitation,
Articles III, XI and XII, (b) those representations and warranties contained in
Article V shall survive until the period provided in Article XI, and (c) the
provisions of this Article XIV shall survive indefinitely.
SECTION 14.10 FEES AND EXPENSES. Subject to Section 13.2(b) hereof, and
except as otherwise set forth in this Agreement, whether or not the Mergers are
consummated, Parent (on behalf of Parent and Merger Subs), on the one hand, and
the Selling Companies, on the other hand, shall bear their own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement.
SECTION 14.11 CHOICE OF LAW/CONSENT TO JURISDICTION. All disputes, claims
or controversies arising out of or relating to this Agreement, or the
negotiation, validity or performance of this Agreement, or the transactions
contemplated hereby shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to its rules of conflict of laws.
Each of the Selling Companies, Parent and Merger Subs hereby irrevocably and
unconditionally consents to submit to the sole and exclusive jurisdiction of the
courts of the State of Delaware and of the United States District Court for the
District of Delaware (the "Chosen Courts") for any litigation arising out of or
relating to this Agreement, or the negotiation, validity or performance of this
Agreement, or the transactions contemplated hereby (and agrees not to commence
any litigation relating thereto except in such courts), waives any objection to
the laying of venue of any such litigation in the Chosen Courts and agrees not
to plead or claim in any Chosen Court that such litigation brought therein has
been brought in any inconvenient
115
forum. Each of the parties hereto agrees, (a) to the extent such party is not
otherwise subject to service of process in the State of Delaware, to appoint and
maintain an agent in the State of Delaware as such party's agent for acceptance
of legal process and (b) that service of process may also be made on such party
by prepaid certified mail with a proof of mailing receipt validated by the
United States Postal Service constituting evidence of valid service. Service
made pursuant to (a) or (b) above shall have the same legal force and effect as
if served upon such party personally within the State of Delaware. For purposes
of implementing the parties' agreement to appoint and maintain an agent for
service of process in the State of Delaware, each of Parent and each of the
Merger Subs does hereby appoint The Corporation Trust Company, Corporation Trust
Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as such agent. 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 the Chosen Courts, this
being in addition to any other remedy to which they are entitled at law or in
equity.
SECTION 14.12 WAIVER OF TRIAL BY JURY. IN ANY ACTION OR PROCEEDING ARISING
HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO OR ITS SUCCESSORS AGAINST
ANY OTHER PARTY HERETO OR ITS SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF
OR RELATING TO, DIRECTLY OR INDIRECTLY, THE NEGOTIATION, EXECUTION OR
PERFORMANCE OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 14.13 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached. Except where this Agreement specifically provides for
arbitration, it is 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
or province having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
SECTION 14.14 MUTUAL DRAFTING. The parties hereto are sophisticated and
have been represented by attorneys throughout the transactions contemplated
hereby who have carefully negotiated the provisions hereof. As a consequence,
the parties do not intend that the presumptions of laws or rules relating to the
interpretation of contracts against the drafter of any particular clause should
be applied to this Agreement or any agreement or instrument executed in
connection herewith, and therefore waive their effects.
SECTION 14.15 MISCELLANEOUS. This Agreement (a) shall be binding upon and
inure to the benefits of the parties hereto and their respective successors and
assigns and is not intended to confer upon any other Person any rights or
remedies hereunder and (b) may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The Indemnification Escrow Agent may execute this
Agreement following the date hereof and prior to the Closing, and such later
execution, if so
116
executed after the date hereof, shall not affect the binding nature of this
Agreement as of the date hereof among the other signatories hereto.
[Remainder of page intentionally left blank.]
117
IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
ANSYS, INC.:
By:_______________________________________
Name:
Title:
ANSYS XL, LLC:
By: ANSYS, Inc.
Its: Sole Member
By:_______________________________________
Name:
Title:
BEN I, INC.:
By:_______________________________________
Name:
Title:
▇▇▇▇▇ II, INC.:
By:_______________________________________
Name:
Title:
MERGER AGREEMENT
HEAT HOLDING CORP.:
By:_______________________________________
Name:
Title:
AAVID THERMAL TECHNOLOGIES, INC.:
By:_______________________________________
Name:
Title:
FLUENT, INC.:
By:_______________________________________
Name:
Title:
▇▇▇▇ III, INC.:
By:_______________________________________
Name:
Title:
MERGER AGREEMENT
PRINCIPAL STOCKHOLDERS:
Solely for purposes of Section 9.7 and Articles VI,
XI, XII and XIV
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS III, L.P.
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS DUTCH III-A, L.P.
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS DUTCH III-B, L.P.
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS III-C, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Management III, L.P.
Its General Partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Management III, LLC
Its General Partner
By: _______________________________________________
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS II, L.P.
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS DUTCH, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Management II, L.P.
Its General Partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Management II, LLC
Its General Partner
By: _______________________________________________
Name:
Title:
MERGER AGREEMENT
STOCKHOLDERS' REPRESENTATIVE:
Solely for purposes of Sections 3.7, 3.8, 3.9 and
9.7 and Articles XI, XII and XIV
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS II, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Management II, L.P.
Its General Partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Management II, LLC
Its General Partner
By: _______________________________________________
Name:
Title:
MERGER AGREEMENT