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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
NETLIBRARY, INC.,
NL ▇▇.▇▇▇ ACQUISITION CORPORATION
AND
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
FEBRUARY 18, 2000
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TABLE OF CONTENTS
Page
SECTION ONE................................................................................2
1. The Merger........................................................................2
1.1 The Merger...............................................................2
1.2 Closing; Effective Time..................................................2
1.3 Effect of the Merger.....................................................2
1.4 Articles of Organization; Bylaws.........................................2
1.5 Directors and Officers...................................................2
1.6 Effect of Merger on Target and MergerSub Common Stock....................3
1.7 Delivery of Merger Consideration.........................................3
1.8 Stock Transfer Books.....................................................4
1.9 Target Stock Options.....................................................4
1.10 Escrow; Closing Adjustment...............................................4
1.11 Intended Tax Consequences................................................6
1.12 Taking of Necessary Action; Further Action...............................7
1.13 Withholding..............................................................7
SECTION TWO................................................................................8
2. Representations and Warranties of Target..........................................8
2.1 Organization; Subsidiaries...............................................8
2.2 Articles of Organization and Bylaws......................................8
2.3 Capital Structure........................................................9
2.4 Authority................................................................9
2.5 No Conflicts; Required Filings and Consents..............................9
2.6 Financial Statements....................................................10
2.7 Absence of Undisclosed Liabilities......................................10
2.8 Absence of Certain Changes..............................................11
2.9 Litigation..............................................................12
2.10 Restrictions on Business Activities.....................................13
2.11 Permits and Authorizations..............................................13
2.12 Title to Property.......................................................14
2.13 Intellectual Property...................................................14
2.14 Environmental Matters...................................................16
2.15 Taxes...................................................................18
2.16 Employee Benefit Plans..................................................18
2.17 Certain Agreements Affected by the Merger...............................20
2.18 Employee Matters........................................................21
2.19 Material Contracts......................................................21
2.20 Interested Party Transactions...........................................21
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2.21 Insurance...............................................................21
2.22 Compliance With Laws....................................................22
2.23 Minute Books............................................................22
2.24 Brokers' and Finders' Fees..............................................22
2.25 Board Approval..........................................................22
2.26 Customers and Suppliers.................................................22
2.27 Third Party Consents....................................................22
2.28 Representations Complete................................................23
SECTION THREE.............................................................................23
3. Representations and Warranties of Acquiror and MergerSub.........................23
3.1 Organization, Standing and Power; Capitalization........................23
3.2 Authority...............................................................24
3.3 No Conflict; Required Filings and Consents..............................25
3.4 Absence of Undisclosed Liabilities......................................25
3.5 Absence of Certain Changes..............................................25
3.6 Litigation..............................................................26
3.7 Permits and Authorizations..............................................26
3.8 Compliance With Laws....................................................26
3.9 Broker's and Finders' Fees..............................................26
3.10 Acquiror Stock..........................................................27
3.11 Restrictions on Business Activities.....................................27
3.12 Financial Statements....................................................27
3.13 Title to Property.......................................................27
3.14 Employee Matters........................................................28
3.15 Interested Party Transactions...........................................28
3.16 Minute Books............................................................28
3.17 Representations Complete................................................28
SECTION FOUR..............................................................................29
4. Conduct Prior to the Effective Time..............................................29
4.1 Conduct of Businesses of Target and Acquiror............................29
4.2 Restrictions on Actions of Target.......................................29
4.3 Restrictions on Actions of Acquiror.....................................32
4.4 No Solicitation.........................................................33
4.5 Assignment of Inventions by Employees & Consultants.....................34
4.6 Protection of Intellectual Property.....................................34
SECTION FIVE..............................................................................34
5. Additional Agreements............................................................34
5.1 Best Efforts and Further Assurances.....................................34
5.2 Consents; Cooperation...................................................34
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5.3 Access to Information...................................................35
5.4 Public Disclosure.......................................................35
5.5 Non-Competition Agreements..............................................35
5.6 Options and Warrants....................................................35
5.7 Lock-Up Agreements; Manner of Sale Requirements.........................35
5.8 Employment Agreements...................................................36
SECTION SIX...............................................................................36
6. Conditions to the Merger.........................................................36
6.1 Conditions to Obligations of Each Party to Effect the Merger............36
6.2 Additional Conditions to Obligations of Target..........................36
6.3 Additional Conditions to the Obligations of Acquiror and MergerSub......38
SECTION SEVEN.............................................................................40
7. Termination, Amendment and Waiver................................................40
7.1 Termination.............................................................40
7.2 Effect of Termination...................................................40
7.3 Expenses and Termination Fees...........................................40
7.4 Amendment...............................................................41
SECTION EIGHT.............................................................................41
8. Escrow and Indemnification.......................................................41
8.1 Survival of Covenants, Representations and Warranties...................41
8.2 Indemnification and Damages.............................................41
8.3 Damages Threshold.......................................................42
8.4 Expiration of Claims....................................................42
SECTION NINE..............................................................................42
9. General Provisions...............................................................42
9.1 Notices.................................................................42
9.2 Interpretation..........................................................43
9.3 Counterparts............................................................44
9.4 Entire Agreement; Nonassignability; Parties in Interest.................44
9.5 Severability............................................................44
9.6 Remedies Cumulative.....................................................44
9.7 Governing Law...........................................................44
9.8 Rules of Construction...................................................44
9.9 Amendments and Waivers..................................................45
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TARGET DISCLOSURE SCHEDULE
Section 2.1 Organization; Subsidiaries
Section 2.3 Capital Structure
Section 2.6 Financial Statements
Section 2.8 Absences of Certain Changes
Section 2.9 Litigation
Section 2.12(a) Title to Property
Section 2.12(b) Equipment
Section 2.13(a) Intellectual Property
Section 2.13(b) Patents, Trademarks, Servicemarks, Copyrights, Licenses
Section 2.16 Employee Benefit Plans
Section 2.17 Certain Agreements Affected by the Merger
Section 2.19(a) Material Contracts
Section 2.20 Interested Party Transactions
Section 2.26 Customers & Suppliers
Section 2.27 Third Party Consents
ACQUIROR DISCLOSURE SCHEDULE
Section 3.1 Organization; Standing and Power; Capitalization
Section 3.6 Litigation
Section 3.13 Title to Property
Section 3.15 Interested Party Transactions
EXHIBITS
Exhibit A Articles of Merger
Exhibit B Table of Target Shareholders
Exhibit C Terms of Acquiror Series D Stock
Exhibit D Target Stock Options
Exhibit E Escrow Agreement
Exhibit F Pro Forma Balance Sheet
Exhibit G Vesting of Target Stock Options
Exhibit H Non-Competition Agreements
Exhibit I Employment Agreement
Exhibit J Intentionally Deleted
Exhibit K Opinion of Acquiror and MergerSub Counsel
Exhibit L Visitation Rights Side Letter
Exhibit M Investors' Rights Agreement
Exhibit N Stockholders Agreement
Exhibit O Opinion of Target Counsel
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made and entered
into as of February 18, 2000, by and among netLibrary, Inc., a Delaware
corporation ("Acquiror"), NL ▇▇.▇▇▇ Acquisition Corporation, a Massachusetts
corporation ("MergerSub") and wholly owned subsidiary of Acquiror,
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Massachusetts corporation ("Target"), and the persons
identified as shareholders on the signature pages hereof (collectively, the
"Target Shareholders," and each a "Target Shareholder").
RECITALS
A. The Boards of Directors of Target, Acquiror and MergerSub believe it
is in the best interests of their respective companies and the stockholders of
their respective companies that Target and MergerSub combine into a single
company through the merger of MergerSub and Target (the "Merger") and, in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, (i) all issued and
outstanding shares of common stock of Target, $.01 par value per share (the
"Target Common Stock"), shall be exchanged for cash and shares of the $.001 par
value common stock of Acquiror (the "Acquiror Common Stock") in the amounts and
on the terms set forth herein and (ii) all issued and outstanding shares of
preferred stock of Target, $.01 par value per share (the "Target Preferred
Stock") shall be exchanged for cash, Acquiror Common Stock and shares of the
Series D Stock of Acquiror (the "Acquiror Series D Stock" and, together with the
Acquiror Common Stock the "Acquiror Stock") in the amounts and on the terms set
forth herein. (Target Common Stock and Target Preferred Stock are collectively
referred to as the "Target Stock.")
C. Target, Acquiror, MergerSub and Target's Major Shareholders desire
to make certain representations and warranties and other agreements in
connection with the Merger. "Target's Major Shareholders" shall mean ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (but only in his capacity as a
holder of Target Common Stock and options to acquire Target Common Stock), and
the following four people in their capacities as holders of options to acquire
Target Common Stock: ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ Gold, ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇.
Target's Major Shareholders shall not in any event include any other holders of
Target Common Stock or any other holders of options to acquire Target Common
Stock, Grand Central Holdings, LLC, a New York limited liability company, GCH
peanutpress, LLC, a New York limited liability company, ▇▇▇▇▇▇ Venture Partners,
L.P., a New York limited partnership, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. or R. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ in his capacity as a holder of Target Preferred Stock.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
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AGREEMENT
SECTION ONE
The parties hereby agree as follows:
1. THE MERGER.
1.1 THE MERGER. At the Effective Time (as defined in Section
1.2) and subject to and upon the terms and conditions of this Agreement, the
Articles of Merger attached hereto as EXHIBIT A (the "Articles of Merger") and
the applicable provisions of the Massachusetts Business Corporation Law
("Massachusetts Law"), MergerSub shall be merged with and into Target, the
separate corporate existence of MergerSub shall cease and Target shall continue
as the surviving corporation of the Merger. Target as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
1.2 CLOSING; EFFECTIVE TIME. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place as soon as
practicable after the satisfaction or waiver of each of the conditions set forth
in Section 6 below or at such other time as the parties agree (the "Closing
Date"). In connection with the Closing, the parties shall cause the Merger to be
consummated by filing the Articles of Merger with the Secretary of the
Commonwealth of the Commonwealth of Massachusetts, in accordance with the
relevant provisions of Massachusetts Law (the time of such filing being the
"Effective Time"). The Closing shall take place at the offices of Acquiror, or
at such other location as the parties agree.
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Articles of Merger and
the applicable provisions of Massachusetts Law. At the Effective Time, all the
property, rights, privileges, powers and franchises of Target and MergerSub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of Target and MergerSub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 ARTICLES OF ORGANIZATION; BYLAWS.
(a) At the Effective Time, the Restated Articles of
Organization of Target, as in effect immediately prior to the Effective Time,
shall be the Articles of Organization of the Surviving Corporation until
thereafter amended as provided by Massachusetts Law and such Restated Articles
of Organization.
(b) At the Effective Time, the Bylaws of Target, as
in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the Restated
Articles of Organization of the Surviving Corporation and such Bylaws.
1.5 DIRECTORS AND OFFICERS. At the Effective Time, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇ shall be the directors of
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the Surviving Corporation, and the officers of the Surviving Corporation shall
be as follows: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as Chief Executive Officer, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as Co-Presidents, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as Treasurer and ▇▇▇▇ ▇.
▇▇▇▇▇ as Clerk. In each case, the officers and directors of the Surviving
Corporation shall serve until their respective successors are duly elected or
appointed and qualified.
1.6 EFFECT OF MERGER ON TARGET AND MERGERSUB COMMON STOCK.
At the Effective Time, by virtue of the Merger and without any
action on the part of the parties hereto, or the holders of any of the following
securities:
(a) (i) Each share of Target Common Stock, issued and
outstanding prior to the Effective Time shall cease to be outstanding, shall
automatically be canceled and retired and shall cease to exist, and shall be
converted into (and each certificate previously representing any such shares
shall thereafter represent the right to receive) (A) $5.4440 in cash and (B)
57.0816 shares of Acquiror Common Stock.
(ii) Each share of Target Preferred Stock, issued and
outstanding prior to the Effective Time shall cease to be outstanding, shall
automatically be canceled and retired and shall cease to exist, and shall be
converted into (and each certificate previously representing any such shares
shall thereafter represent the right to receive) (A) $189.2744 in cash, (B)
1.9122 shares of Acquiror Common Stock and (C) 48.7236 shares of Acquiror Series
D Stock.
(iii) Certificates previously representing shares of
Target Stock shall be exchanged for the consideration as more fully described in
Section 1.7 below upon the surrender of such certificates in accordance with the
provisions of Section 1.7, without interest. EXHIBIT B sets forth a table
identifying each of the Target Shareholders and the number of shares of Acquiror
Stock that will be issued to each of such Target Shareholders in the Merger,
based on the representations set forth in this Agreement, without regard to any
adjustment under Section 1.10. The terms of the Acquiror Series D Stock shall be
as set forth on EXHIBIT C.
(b) All shares of Target Stock held in the treasury of Target
immediately prior to the Effective Time shall be canceled and extinguished and
no payment shall be made with respect thereto.
(c) At the Effective Time, each share of outstanding capital
stock of MergerSub shall be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
1.7 DELIVERY OF MERGER CONSIDERATION. At the Closing, subject
to Section 1.10:
(a) (i) Acquiror shall pay or cause to be delivered to each
Target Shareholder of Target Common Stock the following, to the extent
attributable to the Target Common Stock owned by such Target Shareholder as of
the Effective Time, as set forth on EXHIBIT B: (A) cash and (B) a certificate
evidencing the shares of Acquiror Common Stock.
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(ii) Acquiror shall pay or cause to be delivered to
each Target Shareholder of Target Preferred Stock the following, to the extent
attributable to the Target Preferred Stock owned by such Target Shareholder as
of the Effective Time, as set forth on EXHIBIT B: (A) cash, (B) a certificate
evidencing the shares of Acquiror Common Stock and (C) a certificate evidencing
the shares of Acquiror Series D Stock.
(b) Certificates representing all of the issued and
outstanding shares of Target Stock shall be surrendered for cancellation in the
Merger. Each such certificate shall be delivered to MergerSub and canceled, and,
simultaneously with such delivery and cancellation, the consideration into which
such capital stock shall have been converted in the Merger shall be delivered to
the persons entitled thereto under this Agreement. From and after the Effective
Time, each certificate which prior to the Effective Time represented shares of
capital stock of Target shall be deemed to represent only the right to receive
the consideration contemplated herein, and the Target Shareholders shall cease
to have any rights with respect to the shares of capital stock formerly
represented thereby, except as otherwise provided herein or by law.
(c) No fractional shares of Acquiror Common Stock or Acquiror
Series D Stock shall be issued pursuant to the Merger. In lieu of fractional
shares, Acquiror shall pay to any Target Shareholder otherwise entitled to a
fractional share a cash payment equal to the value of such fractional share
based on (i) a value of $17.675 for one share of the Acquiror Series D Stock and
(ii) a value of $17.675 for one share of the Acquiror Common Stock.
1.8 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of Target with respect to all shares of capital stock of Target
shall be closed and no further registration of transfers of such shares of
capital stock shall thereafter be made on the records of Target.
1.9 TARGET STOCK OPTIONS. On the Closing Date, the options to
purchase stock of Target issued and outstanding pursuant to the Stock Option
Plan of Target, as set forth on EXHIBIT D, shall be converted into options to
purchase Acquiror Common Stock on the basis of 57.0816 shares Acquiror Common
Stock for each share of Target Common Stock subject to such option, with the
aggregate exercise price payable on exercise of such option allocated ratably
among the shares subject to the option. EXHIBIT D sets forth the options to
acquire stock of Target immediately prior to the Closing Date and the options to
acquire Acquiror Common Stock immediately following the Closing Date, including
the applicable vesting schedules. All other options or warrants to purchase
stock or securities of Target shall be exercised, or shall be extinguished and
expire, on or prior to the Closing.
1.10 ESCROW; CLOSING ADJUSTMENT.
(a) At the Closing, 91,865 shares of the Acquiror Common
Stock, which shares are included in the aggregate number of shares described in
Section 1.7(a)(i) and otherwise would be deliverable as provided in Section
1.7(a)(i), and options to acquire 49,578 shares of Acquiror Common Stock as
described in Section 1.9 and otherwise would be deliverable as provided in
Section 1.9 (such shares and options together representing $2,500,000)
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shall be deposited into an escrow account pursuant to the Escrow Agreement
attached as EXHIBIT E (the "Escrow Agreement"). As provided in the Escrow
Agreement, a portion of the Acquiror Common Stock and options to acquire
Acquiror Common Stock held pursuant to the Escrow Agreement shall be cancelled
and returned to Acquiror, as appropriate to account for (i) the amount of any
post-closing adjustment pursuant to Section 1.10(b) below, and (ii) amounts
covered by the indemnity provisions of Section 8 below.
(b) PRO FORMA CLOSING BALANCE SHEET AND PURCHASE PRICE
ADJUSTMENT. Attached as part of EXHIBIT F is a pro forma balance sheet of Target
(the "Pro Forma Balance Sheet"), including a calculation of Target's projected
Net Assets (the "Estimated Net Assets") as of February 22, 2000. "Net Assets,"
for purposes of this Agreement, shall mean an amount equal to Target's total
assets less the total liabilities (but not including liabilities related to
accrued compensation expense for employee stock options) determined in
accordance with GAAP applied on a consistent basis.
After the Closing, there shall be a final
determination of Net Assets as of the Closing Date (the "Final Net Assets") as
follows:
(A) If the Closing occurs after February 22,
2000, for purposes of calculating the Net Assets the Pro Forma Balance
Sheet will be deemed to reflect an average of $5,625 per day decrease
to the total assets and the Estimated Net Assets will be adjusted
downward to reflect such decrease (the "Adjusted Estimated Net
Assets"). If the Closing occurs on or before February 11, 2000, the Pro
Forma Balance Sheet and Estimated Net Assets will not be adjusted.
(B) Within thirty (30) days following the
date of Closing, Acquiror shall deliver to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as a
representative of the Target Shareholders (the "Shareholders'
Representative") a consolidated balance sheet of Target as of the date
of Closing (the "Closing Balance Sheet"). The Closing Balance Sheet
shall be prepared in accordance with GAAP applied on a consistent basis
and shall include a calculation of the Net Assets as of the Closing,
based on the information contained in the Closing Balance Sheet (the
"Closing Net Assets"). The Shareholders' Representative is hereby
authorized to take all actions by or on behalf of the Target
Shareholders under this Section 1.10, and decisions by the
Shareholders' Representative shall be binding upon the Target
Shareholders.
(C) The Shareholders' Representative shall
have ten (10) days from receipt of the Closing Balance Sheet (the
"Verification Period") to verify the Closing Net Assets. Any
disagreements as to the Closing Balance Sheet or the Closing Net Assets
shall be described in a written notice to Acquiror within the
Verification Period (an "Adjustment Notice"), setting forth such
disagreements in reasonable detail. If the Shareholders' Representative
does not deliver an Adjustment Notice to Acquiror within the
Verification Period, the Closing Balance Sheet shall be deemed final
and binding on all parties and the Final Net Assets shall be equal to
the Closing Net Assets.
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(D) If the Shareholders' Representative
delivers an Adjustment Notice and Acquiror and the Shareholders'
Representative are unable to agree upon the amount of the Final Net
Assets within fifteen (15) days after delivery of such Adjustment
Notice, then a nationally recognized independent public accounting firm
to be mutually agreed upon by Acquiror and the Shareholders'
Representative (the "Auditor") shall be requested to conduct a review
and determine any amounts in dispute between the parties relating to
the calculation of the Final Net Assets. The Auditor shall be
instructed in performing the review that Acquiror and the Shareholders'
Representative shall each be provided with copies of any and all
correspondence and drafts distributed to any party and that the review
shall be done as soon as is practicable. Acquiror and the Shareholders'
Representative shall be granted reasonable access to all documents made
available to the Auditor by the other party, provided that any
information contained in the documents shall be subject to the
confidentiality provisions set forth in this Agreement. Prior to the
Auditor's issuance of its final determination, Acquiror and the
Shareholders' Representative shall have the opportunity to provide the
Auditor with input and any additional information that they deem
relevant, provided that the Auditor shall not be required to use any
such input or information in connection with its review and
determination. The Auditor shall promptly deliver copies of its report
to Acquiror and the Shareholders' Representative, setting forth its
determination of any amount due between the parties relating to the
calculation of the Final Net Assets (the "Auditor's Report"). The
Auditor's Report will be conclusive and binding upon all parties to
this Agreement; and the Final Net Assets shall be calculated based on
the determinations set forth in the Auditor's Report. The costs and
expenses of the Auditor and the Auditor's Report contemplated by this
paragraph shall be borne by Acquiror, subject to recovery of fifty
percent (50%) of such costs as provided in subparagraph (E) below.
(E) (i) If the Closing occurs on or before
February 22, 2000 then an adjustment (if any) shall be based on the
following: if Estimated Net Assets exceed Final Net Assets by more than
$50,000, then there shall be released from escrow and returned to
Acquiror a number of shares of Acquiror Common Stock and options to
acquire Acquiror Common Stock equal to the amount by which the
difference between Estimated Net Assets and Final Net Assets exceeds
$50,000 (plus, as applicable, fifty percent (50%) of the costs of the
Auditor and the Auditor's Report). If Estimated Net Assets are equal to
or less than the sum of Final Net Assets and $50,000, no adjustment
shall be made. (ii) If the Closing occurs after February 11, 2000 then
an adjustment (if any) shall be based on the following: if Adjusted
Estimated Net Assets exceed Final Net Assets by more than $50,000, then
there shall be released from escrow and returned to Acquiror a number
of shares of Acquiror Common Stock and options to acquire Acquiror
Common Stock equal to the amount by which the difference between
Adjusted Estimated Net Assets and Final Net Assets exceeds $50,000
(plus, as applicable, fifty percent (50%) of the costs of the Auditor
and the Auditor's Report). If the Adjusted Estimated Net Assets are
equal to or less than the sum of Final Net Assets and $50,000, no
adjustment shall be made.
1.11 INTENDED TAX CONSEQUENCES. It is intended by the parties
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code. Target
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and the Target Shareholders shall be solely responsible for all tax planning,
and for obtaining advice with respect to the federal and state income tax
consequences to Target and the Target Shareholders of the Merger and all related
transactions. Target and the Target Shareholders are not relying on Acquiror,
MergerSub or any advisors to Acquiror or MergerSub for any tax advice with
respect to the Merger or related transactions, and shall have no claim against
Acquiror, MergerSub, or any officers, directors, employees or advisors of
Acquiror with respect to any tax consequences of the Merger or any related
transactions. Acquiror and MergerSub shall be solely responsible for all tax
planning, and for obtaining advice with respect to the federal and state income
tax consequences to Acquiror and MergerSub of the Merger and all related
transactions. Acquiror and MergerSub are not relying on Target, the Target
Shareholders or any advisors to Target and the Target Shareholders for any tax
advice with respect to the Merger or related transactions, and shall have no
claim against Target and the Target Shareholders, or any officers, directors,
employees or advisors of Target with respect to any tax consequences of the
Merger or any related transactions.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If at any
time after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest (a) the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Target and MergerSub or (b) the
Target Shareholders with the Merger consideration as described in Sections 1.6
and 1.7, including the options described in Section 1.9, but subject to Section
1.10, the officers and directors of Target, Acquiror and MergerSub are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action, so long as such action is
not inconsistent with this Agreement.
1.13 WITHHOLDING. Each of the Surviving Corporation and
Acquiror shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Target
Common Stock and Target Preferred Stock such amounts as it is required to deduct
and withhold with respect to the making of such payment under the Code or any
provision of applicable state, local or foreign tax laws. To the extent that
amounts are so withheld by the Surviving Corporation or Acquiror, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to such holder in respect of which such deduction
and withholding was made by the Surviving Corporation or Acquiror, as the case
may be.
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SECTION TWO
2. REPRESENTATIONS AND WARRANTIES OF TARGET.
For purposes of this Section 2, any reference to a "Material
Adverse Effect" with respect to Target means any event, change or effect that,
when taken individually or together with all other adverse changes and effects,
is or is reasonably likely to (a) be materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations
or results of operations of Target, taken as a whole, (b) prevent or materially
delay consummation of the Merger or otherwise to prevent Target from performing
its obligations under this Agreement or (c) cause this Agreement not to be legal
or enforceable against Target. For purposes of clause (a) of this definition and
without limiting the generality of the foregoing, any event, effect or change
that individually or in the aggregate with respect to which Target would
reasonably be expected to have damages being asserted against, imposed upon or
sustained by it of $25,000 or more shall constitute a "material adverse" effect
or change.
In this Agreement, any reference to a party's "knowledge"
means such party's actual knowledge after due and diligent inquiry of officers,
directors and other employees of such party reasonably believed to have
knowledge of or responsibility for the matter in question.
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Target to Acquiror prior to the execution and
delivery of this Agreement and referring to the representations and warranties
in this Agreement (the "Target Disclosure Schedule"), Target and Target's Major
Shareholders jointly and severally represent and warrant to Acquiror and
MergerSub as follows:
2.1 ORGANIZATION; SUBSIDIARIES. Target is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Target has the requisite corporate power and
authority and all necessary government approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Target.
Target is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction identified in Section 2.1 of the
Target Disclosure Schedule, which schedule includes each jurisdiction where the
character of the properties owned, leased or operated by Target or the nature of
Target's business makes such qualification or licensing necessary, except for
such failures to be so qualified or licensed and in good standing that would
not, individually or in the aggregate, have a Material Adverse Effect on Target.
Except as set forth in Section 2.1 of the Target Disclosure Schedule, Target
does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, limited liability company,
joint venture or other business association or entity. Target has no
subsidiaries.
2.2 ARTICLES OF ORGANIZATION AND BYLAWS. Target has delivered
a true and correct copy of its Articles of Organization and Bylaws or other
charter documents, each as
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amended to date, to Acquiror. Target is not in violation of any of the
provisions of its Articles of Organization or Bylaws or equivalent
organizational documents.
2.3 CAPITAL STRUCTURE. The authorized capital stock of Target
consists solely of (a) 200,000 shares of Target Common Stock, $.01 par value per
share, of which (i) as of the date of this Agreement, 10,049 shares are issued
and outstanding and (ii) as of the Effective Time, 9,248.67 shall be issued and
outstanding and 800.33 shall be issued and held in treasury and (b) 8,876 shares
of Target Preferred Stock, $.01 par value per share, which consists of 8,876
shares of Series A Convertible Preferred Stock of Target, of which 8,876 are
issued and outstanding. The shares of the issued and outstanding capital stock
of Target are owned by the Target Shareholders in accordance with Section 2.3 of
the Target Disclosure Schedule. Other than the Target Common Stock and the
Target Preferred Stock, there is no other class or series of Target capital
stock. Except as set forth in Section 2.3 of the Target Disclosure Schedule,
there are no outstanding subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other contracts, commitments,
understandings, restrictions, arrangements or agreements of any character
relating to the issuance, sale, transfer or voting of any issued or unissued
Target Common Stock, Target Preferred Stock or other securities of Target,
including any rights of conversion or exchange under any outstanding securities
or other instruments or otherwise obligating Target to issue, transfer, sell,
purchase, redeem or otherwise acquire any such securities. All outstanding
shares of Target Common Stock and Target Preferred Stock have been validly
issued and are fully paid, nonassessable and, except as set forth on Section 2.3
of the Target Disclosure Schedule, free of preemptive or similar rights. Target
is not party to any phantom stock plans, stock appreciation rights plans,
phantom stock agreements or stock appreciation rights agreements. EXHIBIT D
identified in Section 1.9 accurately and completely sets forth all issued and
outstanding options to purchase Target Stock.
2.4 AUTHORITY. Target has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Target, subject only to the
approval of the Merger by Target Shareholders. Target's Board of Directors has
unanimously approved the Merger and this Agreement. This Agreement has been duly
executed and delivered by Target and assuming due authorization, execution and
delivery by Acquiror and MergerSub, constitutes the valid and binding obligation
of Target enforceable against Target in accordance with its terms except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights and
(b) general principles of equity that restrict the availability of equitable
remedies.
2.5 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by
Target do not, and the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under
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(i) any provision of the Articles of Organization or Bylaws of Target, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Target
or any of its properties or assets, where such conflict, violation or default
would have a Material Adverse Effect on Target or its properties or assets.
Target is not in conflict with or in default or violation of any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or any of its properties or
assets, where such conflict, violation or default would have a Material Adverse
Effect on Target or its properties or assets.
(b) No consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Target in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Articles of Merger as
provided in Section 1.2 and (ii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on Target and would not prevent, materially alter or
delay any of the transactions contemplated by this Agreement.
2.6 FINANCIAL STATEMENTS. Section 2.6 of the Target Disclosure
Schedule includes a true, correct and complete copy of Target's unaudited
financial statements (balance sheet, statement of operations and statement of
cash flows) on a consolidated basis for the fiscal years ended December 31,
1999, respectively (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") (except that the Financial Statements do not (a) have notes
thereto or (b) reflect the liabilities related to accrued compensation expense
for employee stock options) applied on a consistent basis throughout the periods
indicated and with each other. The Financial Statements accurately set out and
describe the financial condition and operating results of Target as of the
dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments. Target maintains and until the Closing will continue to maintain a
standard system of accounting established and administered in accordance with
GAAP applied on a consistent basis.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (a) those set forth or adequately provided for in the
balance sheet for the period ended December 31, 1999 (the "Target Balance
Sheet"), (b) those incurred in the ordinary course of business consistent with
prudent business practices and not required to be set forth in the Target
Balance Sheet under GAAP, (c) those incurred in the ordinary course of business
since December 31, 1999 (the "Target Balance Sheet Date") and consistent with
prudent business practices and that, if any obligations or liabilities other
than trade payables had occurred prior to the Target Balance Sheet Date, would
not be required to be set forth in the Target Balance Sheet under GAAP and (d)
those incurred in connection with the execution of this Agreement. None of the
liabilities set forth on the Target Balance Sheet is subject to any prepayment
penalty or similar charge.
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2.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section
2.8 of the Target Disclosure Schedule, since the Target Balance Sheet Date there
has not been, occurred or arisen any:
(a) transaction by Target except in the ordinary
course of business as conducted on that date and consistent with prudent
business practices;
(b) amendments or changes to the Articles of
Organization or Bylaws of Target;
(c) except as otherwise expressly provided in this
Agreement, capital expenditure or commitment by Target, in any individual amount
exceeding $40,000, or in the aggregate, exceeding $100,000;
(d) destruction of, damage to, or loss of any assets
(including, without limitation, intangible assets), business or customer of
Target (whether or not covered by insurance) which would constitute a Material
Adverse Effect;
(e) labor trouble or claim of wrongful discharge or
other unlawful labor practice or action;
(f) change in accounting methods or practices
(including any change in depreciation or amortization policies or rates, any
change in policies in making or reversing accruals, or any change in
capitalization of software development costs) by Target or any revaluation by
Target of any of its assets;
(g) declaration, setting aside, or payment of a
dividend or other distribution in respect to the Target Common Stock or Target
Preferred Stock, or any direct or indirect redemption, purchase or other
acquisition by Target of any Target Common Stock or Target Preferred Stock;
(h) except as otherwise expressly provided in this
Agreement, increase in the salary or other compensation payable or to become
payable by Target to any officers, directors, employees or advisors of Target,
except in the ordinary course of business consistent with prudent business
practices, or the declaration, payment, or commitment or obligation of any kind
for the payment by Target of a bonus or other additional salary or compensation
to any such person, the establishment of any bonus, insurance, deferred
compensation, pension, retirement, profit sharing, stock option (including
without limitation, the granting of stock options, stock appreciation rights,
performance awards), stock purchase or other employee benefit plan;
(i) sale, lease, license of other disposition of any
of the assets or properties of Target, except in the ordinary course of business
consistent with prudent business practices and not in excess of $25,000 in the
aggregate;
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(j) termination or material amendment of any material
contract, agreement or license (including any distribution agreement) to which
Target is a party or by which it is bound;
(k) loan by Target to any person or entity, or
guaranty by Target of any loan, except for (i) travel or similar advances made
to employees in connection with their employment duties in the ordinary course
of business, consistent with prudent business practices and (ii) trade payables
not in excess of $10,000 in the aggregate and in the ordinary course of
business, consistent with prudent business practices;
(l) waiver or release of any right or claim of
Target, including any write-off or other compromise of any account receivable of
Target, in excess of $10,000 in the aggregate;
(m) commencement or notice, or to Target's knowledge
threat of commencement, of any lawsuit or proceeding against Target or, to
Target's or Target's officers' or directors' knowledge, commencement or notice
or threat of commencement of any investigation of Target's affairs;
(n) notice to Target of any claim of ownership by a
third party of Target's Intellectual Property (as defined in Section 2.13 below)
or of infringement by Target of any third party's intellectual property rights;
(o) issuance or sale by Target of any of its shares
of capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(p) material change in pricing or royalties set or
charged by Target to its customers or licensees or in pricing or royalties set
or charged by persons who have licensed Intellectual Property to Target; or
(q) agreement by Target or any officer or employee on
behalf of Target to do any of the things described in the preceding clauses (a)
through (p) (other than negotiations with Acquiror and its representatives
regarding the transactions contemplated by this Agreement).
2.9 LITIGATION. Except as set forth on Section 2.9 of the
Target Disclosure Schedule, there is no private or governmental action, suit,
proceeding, claim or arbitration, or to the knowledge of Target, investigation,
pending before any agency, court or tribunal, foreign or domestic, or, to the
knowledge of Target, threatened against Target or any of its properties or any
of its officers or directors (in their capacities as such) that, individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
on Target. There is no judgment, decree or order against Target or, to the
knowledge of Target, any of its directors or officers (in their capacities as
such), that could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on Target. All litigation to which
Target is a party (or, to the knowledge
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of Target Shareholders or Target, threatened to become a party) is disclosed in
Section 2.9 of the Target Disclosure Schedule.
2.10 RESTRICTIONS ON BUSINESS ACTIVITIES. To the knowledge of
Target, there is no agreement, judgment, injunction, order or decree binding
upon Target which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any current or presently-planned future
business practice of Target, any acquisition of property by Target or the
overall conduct of business by Target as currently conducted or as of the date
hereof proposed to be conducted by Target that could reasonably be expected to
have a Material Adverse Effect on Target. To the knowledge of Target, Target has
not entered into any agreement under which Target is restricted from selling,
licensing or otherwise distributing any of its products to any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.11 PERMITS AND AUTHORIZATIONS. Target is in possession of
all franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders necessary for Target,
to own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Target Authorizations") and no suspension or
cancellation of any Target Authorization is pending or, to the best of Target's
knowledge, threatened, except where the failure to have, or the suspension or
cancellation of, any Target Authorization would not have a Material Adverse
Effect on Target. Target is not in material violation of any Target
Authorizations. The execution and delivery of this Agreement by Target and the
consummation of the transactions contemplated hereby, will neither cause Target
to be in material violation or default under any such Target Authorization, nor
entitle any other party to any such Target Authorization to terminate or modify
such Target Authorization. Target reasonably believes it can obtain, without
undue burden or expense, any similar authority for the conduct of its future
business as such business is presently planned to be conducted. Target has
obtained, in all countries where Target is marketing or has marketed its
products and services, all applicable licenses, registrations, approvals,
clearances and authorizations required by local, state or federal agencies in
such countries regulating the safety, effectiveness and market clearance of the
products and services currently or previously marketed by Target in such
countries, except where the failure to obtain such licenses, registrations,
approvals, clearances and authorizations would not have a Material Adverse
Effect on Target.
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2.12 TITLE TO PROPERTY.
(a) Except as set forth on Section 2.12(a) of the
Target Disclosure Schedule, Target has good and marketable title to all of its
respective properties, interests in properties and assets, real and personal,
reflected in the Target Balance Sheet or acquired after the Target Balance Sheet
Date (except properties, interests in properties and assets sold or otherwise
disposed of since the Target Balance Sheet Date in the ordinary course of
business, consistent with prudent business practices), or with respect to leased
properties and assets, valid leasehold interests in, free and clear of all
mortgages, liens, superliens, pledges, charges or encumbrances of any kind or
character, except for such mortgages, liens, superliens, pledges, charges or
encumbrances which could not reasonably be expected to result in a Material
Adverse Effect on Target. All properties used in the operations of Target are
reflected in the Target Balance Sheet to the extent GAAP requires the same to be
reflected. Section 2.12(a) of the Target Disclosure Schedule sets forth a true,
correct and complete list of all real property leased by Target, the name of the
lessor, the date of the lease and each amendment thereto and the aggregate
annual rental and other fees payable under such lease. Such leases are in good
standing, are valid and effective in accordance with their respective terms, and
there is not under any such leases any existing default or event of default (or
event which with notice or lapse of time, or both, would constitute a default),
except for such events of default which could not reasonably be expected to
result in a Material Adverse Effect on Target. Target does not own or have any
ownership interest in any real property.
(b) Section 2.12(b) of the Target Disclosure Schedule
also sets forth a true, correct and complete list of all equipment (the
"Equipment") owned or leased by Target, and such Equipment is, taken as a whole,
(i) adequate for the conduct of Target's business, consistent with its past
practice and (ii) in good operating condition (ordinary wear and tear excepted).
2.13 INTELLECTUAL PROPERTY.
(a) Except as set forth on Section 2.13(a) of the
Target Disclosure Schedule, Target owns, or is licensed or otherwise possesses
legally enforceable rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, copyrights, and
any applications for any of the foregoing, maskworks, net lists, schematics,
industrial models, inventions, technology, know-how, trade secrets, inventory,
ideas, algorithms, processes, computer software programs or applications (in
both source code and object code form), and tangible or intangible proprietary
information or material ("Intellectual Property") that are used or proposed to
be used in the business of Target as currently conducted or as proposed to be
conducted by Target, except to the extent that the failure to have such rights
have not had and could not reasonably be expected to have a Material Adverse
Effect on Target.
(b) Section 2.13(b) of the Target Disclosure Schedule
lists (i) all patents and patent applications and all registered and
unregistered trademarks, trade names and service marks, registered and
unregistered copyrights, and maskworks, included in the Intellectual Property,
including the jurisdictions in which each such Intellectual Property right
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has been issued or registered or in which any application for such issuance and
registration has been filed, (ii) all licenses, sublicenses and other agreements
as to which Target is a party and pursuant to which any person is authorized to
use any Intellectual Property (provided, that, with respect to licenses by
Target to its retail customers on uniform terms, Section 2.13(b) of the Target
Disclosure Schedule only identifies the forms of such licenses accepted by
Target's customers), and (iii) all licenses, sublicenses and other agreements as
to which Target is a party and pursuant to which Target is authorized to use any
third party patents, trademarks or copyrights, including software ("Third Party
Intellectual Property Rights") which are incorporated in, are, or form a part of
any Target product that is material to its business. Target is not in violation
of any license, sublicense or agreement described in Section 2.13(b) of the
Target Disclosure Schedule. The execution and delivery of this Agreement by
Target and the consummation of the transactions contemplated hereby, will
neither cause Target to be in violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement. Except as set forth in Section 2.13(b) of the Target Disclosure
Schedule, Target is the sole and exclusive owner or licensee of, with all right,
title and interest in and to (free and clear of any liens), the Intellectual
Property, and has sole and exclusive rights (and is not contractually obligated
to pay any compensation to any third party in respect thereof) to the use
thereof or the material covered thereby in connection with the services or
products in respect of which Intellectual Property is being used.
(c) All Intellectual Property developed by or for
Target was developed by employees, contractors or consultants of Target who were
at all times subject to agreements assigning to Target all rights in any
intellectual property created by the employees, consultants or contractors.
There is no material unauthorized use, disclosure, infringement or
misappropriation of any Intellectual Property rights of Target, any trade secret
material to Target or any Intellectual Property right of any third party to the
extent licensed by or through Target, by any third party, including any employee
or former employee of Target. Target has not entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property, other than indemnification provisions contained in
purchase orders arising in the ordinary course of business consistent with
prudent business practices.
(d) All patents, registered trademarks, service marks
and copyrights held by Target are valid and existing and there is no assertion
or claim (or basis therefor) challenging the validity of any Intellectual
Property of Target. Target has not been sued in any suit, action or proceeding
which involves a claim of infringement of any patents, trademarks, service
marks, copyrights or violation of any trade secret or other proprietary right of
any third party. Neither the conduct of the business of Target currently
conducted or contemplated nor the manufacture, sale, licensing or use of any of
the products of Target as now manufactured, sold or licensed or used, nor the
use in any way of the Intellectual Property in the manufacture, use, sale or
licensing by Target of any products currently proposed, infringes on or will
infringe or conflict with, in any way, any license, trademark, trademark right,
trade name, trade name right, patent, patent right, industrial model, invention,
service ▇▇▇▇ or copyright of any third party that, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on Target. To
Target's knowledge, no third party is challenging the ownership by Target, or
the validity or
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effectiveness of, any of the Intellectual Property. Target has not brought any
action, suit or proceeding for infringement of Intellectual Property or breach
of any license or agreement involving Intellectual Property against any third
party. There are no pending, or to the best of Target's knowledge, threatened
interference, re-examinations, oppositions or nullities involving any patents,
patent rights or applications therefor of Target, except such as may have been
commenced by Target. There is no breach or violation of or actual or, to
Target's knowledge, threatened loss of rights under any material license
agreement to which Target is a party.
2.14 ENVIRONMENTAL MATTERS.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall
mean any federal, state or local laws, ordinances, codes, regulations,
rules, policies, common law and orders, as each may be amended from
time to time, that are intended to assure the protection of the
environment, or that classify, regulate, address the remediation of,
require reporting with respect to, or list or define solid waste,
hazardous or toxic substances, materials, wastes, pollutants or
contaminants; which regulate the manufacture, handling, transport, use,
treatment, storage or disposal of Hazardous Materials or materials
containing Hazardous Materials; or which are intended to assure the
protection, safety and good health of employees, workers or other
persons, including the public, including but not limited to the federal
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), or any state analog thereof.
(ii) "Hazardous Materials" shall mean any
toxic or hazardous substance, material or waste or any pollutant or
contaminant, or infectious or radioactive substance or material,
including without limitation, those substances, materials and wastes
defined in or regulated under any Environmental and Safety Laws;
petroleum and petroleum products including crude oil and any fractions
thereof; natural gas, synthetic gas, and any mixtures thereof; radon;
asbestos.
(iii) "Property" shall mean all real
property leased or owned by Target either currently or in the past.
(iv) "Facilities" shall mean all buildings
and improvements on the Property.
(v) "Release" shall have the meaning set
forth in CERCLA.
(b) Target represents and warrants as follows:
(i) no methylene chloride, polychlorinated
biphenyls, formaldehyde, urea formaldeyhde, or asbestos is or has been
contained in, stored, used, or otherwise located at, in, on, or under
the Property or the Facilities;
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(ii) Target has complied and is in
compliance with all Environmental and Safety Laws;
(iii) there are no pending or, to the
knowledge of Target, threatened actions, suits, orders, claims, legal
proceedings or other proceedings based on, and neither Target, nor any
officer, director or stockholder thereof has received any notice of any
complaint, order, directive, citation, notice of responsibility, notice
of potential responsibility, or information request from any
governmental authority or any other person or entity or knows or
suspects any fact(s) which might reasonably form the basis for any such
actions or notices relating to Hazardous Materials or any actual,
alleged, or potential violations of or liabilities under any
Environmental and Safety Laws;
(iv) except for small quantities of
Hazardous Materials in the useful, ordinary, and prudent course of
business, there has not been in the past, and is not now, any use,
storage, handling or Release of Hazardous Materials, nor is there or
has there been any Release, contamination, storage, treatment or
handling of Hazardous Materials on, under or migrating to or from the
Facilities or Property (including without limitation, soils and surface
and ground waters) such that Target is or could reasonably be expected
to be held liable for the cleanup, removal, or remediation of Hazardous
Materials;
(v) none of the Property is or has been used
as a dump or landfill or consists of or contains filled in land or
wetlands, and no Property or other property to which Hazardous
Materials originating on or from such properties or the businesses or
assets of the Target has been sent for treatment or disposal is listed
or proposed to be listed on the National Priorities List or CERCLIS or
on any other governmental database or list of properties that may or do
require investigation or cleanup under Environmental and Safety Laws;
(vi) there have not been in the past, and
are not now, any underground tanks or underground improvements at, on
or under the Property including without limitation, treatment or
storage tanks, sumps, or water, gas or oil ▇▇▇▇▇;
(vii) no authorization, notification,
recording, filing, consent, waiting period, remediation, investigation,
or approval is required under any Environmental and Safety Law in order
to consummate the transaction contemplated hereby;
(viii) Target has all Target Authorizations
required under Environmental and Safety Laws and is and has been in
full compliance with the terms and conditions of the same, all of which
are in full force and effect, and none of which require the consent,
notification, or other action of any person in order to remain in full
force and effect following consummation of the transaction contemplated
hereby;
(ix) Target has no liability, known or
unknown, contingent or non-contingent, under any Environmental and
Safety Laws, and is not responsible for the liabilities under
Environmental and Safety Laws of any other person, by contract, by
operation of law, or otherwise; and
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(x) Target has furnished to Acquiror true
and complete copies of all environmental assessments, reports, audits
and other documents in its possession or under its control that relate
to the Property, the Facilities, or Target's compliance with
Environmental and Safety Laws. Any information Target has furnished to
Acquiror concerning the environmental history of the Property and the
Facilities related to compliance with Environmental and Safety Laws is
accurate and complete.
2.15 TAXES.
(a) Target has timely filed or caused to be filed
with the appropriate federal, state and local governmental authority all tax
returns, declarations, reports, forms, estimates and any other related
information ("Returns") required to be filed with respect to or attributable to
Target and each such Return is true, complete and correct in all respects, and
has made available to representatives of Acquiror copies of all Returns filed by
or on behalf of Target since its inception. All taxes and charges of any kind,
including interest and penalties ("Taxes"), shown to be due on such Returns, all
Taxes required to be paid by Target, and all Taxes required to be withheld by or
with respect to Target have been timely paid or, if applicable, withheld and
paid to the appropriate governmental authority. There are (i) no deficiencies or
assessment of Taxes from any taxing authority with respect to or attributable to
Target, and (ii) no ongoing audits or examinations of any of the Returns
relating to or attributable to Target. Target has not granted any requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to the assessment of any Taxes with respect to or attributable to
Target.
(b) Target has not made any payments, is not
obligated to make any payments, nor is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code section 280G. Target has not been a United States real
property holding corporation within the meaning of Code section 897(c)(2) during
the applicable period specified in Code section 897(c)(1)(A)(ii).
(c) Target is not a party to any tax allocation or
sharing agreement. Target (i) has not been a member of an affiliated group
filing a consolidated federal income Return or (ii) has no liability for the
Taxes of any person (other than Target) under Regulations section 1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
2.16 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Section 2.16 of the Target
Disclosure Schedule, Target (i) does not maintain or ever has maintained any
Plan or Other Arrangement, (ii) is or ever has been a party to any Plan or Other
Arrangement or (iii) has obligations under any Plan or Other Arrangement.
(b) Target has furnished to Acquiror true and
complete copies of each of the following documents: (i) documents setting forth
the terms of each Plan; (ii) all related trust agreements or annuity agreements
(and any other funding document) for each Plan; (iii) for
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the most recent plan year, the annual report (Form 5500 series) on each Plan
that has been filed with any governmental agency; (iv) the current summary plan
description and subsequent summaries of material modifications for each Title IV
Plan; and (v) all IRS rulings, opinions or technical advice relating to any Plan
and all correspondence relating to the request for and receipt of each ruling,
opinion or technical advice.
(c) No Plan is a Multiemployer Plan.
(d) No Plan is an ESOP.
(e) No Plan is a Defined Benefit Plan.
(f) Except as set forth in Section 2.16 of the Target
Disclosure Schedule, Target has made all contributions and other payments
required by and due under the terms of each Plan and Other Arrangement and has
taken no action (including, without limitation, actions required by any law)
relating to any Plan or Other Arrangement that will increase Target's or
Acquiror's obligation under any Plan or Other Arrangement.
(g) Target has complied with all applicable
provisions of the Code, ERISA, the National Labor Relations Act, Title VII of
the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair
Labor Standards Act, the Securities Act, the Securities Exchange Act of 1934,
and all other laws pertaining to the Plans, Other Arrangements and other
employee or employment related benefits, and all premiums and assessments
relating to all Plans or Other Arrangements. Target has no liability for any
delinquent contributions within the meaning of Section 515 of ERISA (including,
without limitation, related attorneys' fees, costs, liquidated damages and
interest) or for any arrearages of wages. Except as set forth in Section 2.16 of
the Target Disclosure Schedule, Target has no pending unfair labor practice
charges, contract grievances under any collective bargaining agreement, other
administrative charges, claims, grievances or lawsuits before any court,
governmental agency, regulatory body, or arbiter arising under any law governing
any Plan, and, to the knowledge of Target, no facts exist that could give rise
to such a claim.
(h) With respect to each Plan, Target complied with
(i) the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
proposed regulations thereunder and (ii) the applicable requirements of the
Family and Medical Leave Act of 1993, as amended, and the regulations
thereunder.
(i) Definitions:
"Code" means the Internal Revenue Code of 1986, as
amended, and all laws promulgated pursuant
thereto or in connection therewith.
"Defined Benefit Plan" means a Plan that is or was a "defined
benefit plan" as such term is defined in
Section 3(35) of ERISA.
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"DOL" means the United States Department of Labor
or its successors.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and all
laws promulgated pursuant thereto or in
connection therewith.
"ESOP" means employee stock option plan.
"Multiemployer Plan" means a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA.
"Other Arrangement" means a benefit program or practice
providing for bonuses, incentive
compensation, vacation pay, severance pay,
insurance, restricted stock, stock options,
employee discounts, company cars, tuition
reimbursement or any other perquisite or
benefit (including, without limitation, any
fringe benefit under Section 132 of the
Code) to employees, officers or independent
contractors that is not a Plan.
"Pension Plan" means an "employee pension benefit
plan" as such term is defined in Section
3(2) of ERISA.
"Plan" means any plan, program or arrangement,
whether or not written, that is or was an
"employee benefit plan" as such term is
defined in Section 3(3) of ERISA and (i)
which was or is established or maintained by
Target; (ii) to which Target contributed or
was obligated to contribute or to fund or
provide benefits; or (iii) which provides or
promises benefits to any person who performs
or who has performed services for Target and
because of those services is or has been (A)
a participant therein or (B) entitled to
benefits thereunder.
"Qualified Plan" means a Pension Plan that satisfies, or is
intended by Target to satisfy, the
requirements for tax qualification described
in Section 401 of the Code.
2.17 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Except as set
forth on Section 2.17 of the Target Disclosure Schedule, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (a) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of Target, (b) materially
increase any benefits otherwise payable by Target or (c) result in the
acceleration of the time of payment or vesting of any such benefits.
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2.18 EMPLOYEE MATTERS. Target is in compliance in all material
respects with all currently applicable federal, state, local and foreign laws
and regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
employment practices and is not engaged in any unfair labor practice. There are
no pending claims against Target under any workers compensation plan or policy
or for long term disability. Target has no material obligations under COBRA with
respect to any former employees or qualifying beneficiaries thereunder. There
are no controversies pending or, to the knowledge of Target, threatened, between
Target and any of its employees, including but not limited to any claims of
sexual harassment, which controversies have or could reasonably be expected to
have a Material Adverse Effect on Target. Target is not party to any collective
bargaining agreement or other labor unions contract nor does Target know of any
activities or proceedings of any labor union or other group to organize any such
employees.
2.19 MATERIAL CONTRACTS.
(a) Section 2.19(a) of the Target Disclosure Schedule
contains a list of all contracts, arrangements, licenses and agreements to which
Target is a party and that are material to the business, results of operations,
or condition (financial or otherwise), of Target (such contracts, agreements and
arrangements as are required to be set forth in Section 2.19(a) of the Target
Disclosure Schedule being referred to herein collectively as the "Material
Contracts"). Without limiting the generality of the foregoing, the Material
Contracts include all agreements with publishers or proprietors of books or
other materials authorizing Target to distribute, license or otherwise make
available to Target's customers access to such books or other information.
(b) Each Material Contract is a legal, valid and
binding agreement of Target, and to Target's knowledge of the other parties
thereto, and none of the Material Contracts is in default by its terms or has
been canceled by the other party; Target is not in receipt of any claim of
default under any such agreement and Target does not anticipate any termination
or change to, or receipt of a proposal with respect to, any such agreement as a
result of the Merger or otherwise. Target has furnished Acquiror with true and
complete copies of all Material Contracts together with all amendments, waivers
or other changes thereto.
(c) Target has furnished Acquiror in hard copy format
true and complete copies the standard licenses, consents and agreements for
customers that are displayed on Target's website. Target is not in receipt of
any claim of default under any such agreement or any notice or claim that such
standard licenses, consents and agreements are unenforceable as written.
2.20 INTERESTED PARTY TRANSACTIONS. Except as otherwise
disclosed on the Financial Statements or on Section 2.20 of the Target
Disclosure Schedule, Target is not indebted to any director, officer, employee
or agent of Target (except for amounts due as normal salaries and bonuses), and
no such person is indebted to Target.
2.21 INSURANCE. Target has made available to representatives
of Acquiror copies or summaries of all insurance policies and bonds. There is no
material claim pending
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under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Target is
otherwise in compliance with the terms of such policies and bonds. Target has no
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.22 COMPLIANCE WITH LAWS. Target has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not reasonably be expected to
have a Material Adverse Effect on Target.
2.23 MINUTE BOOKS. The minute books of Target have been made
available to Acquiror, and such minute books contain a true and complete summary
of all actions of directors and stockholders at meetings thereof or actions by
written consent since the time of incorporation of Target through the date of
this Agreement, and reflect all transactions referred to in such minutes
accurately in all material respects.
2.24 BROKERS' AND FINDERS' FEES. Target has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
2.25 BOARD APPROVAL. The Board of Directors of Target has
unanimously (a) approved this Agreement and the Merger, (b) determined that the
Merger is in the best interests of the stockholders of Target and is on terms
that are fair to such stockholders and (c) recommended that the stockholders of
Target approve this Agreement and the Merger.
2.26 CUSTOMERS AND SUPPLIERS. As of the date hereof and except
as set forth on Section 2.26 of the Target Disclosure Schedule, no customer
which individually accounted for more than ten percent (10%) of Target's gross
revenues during the 12-month period preceding the date hereof, and no supplier
of Target has canceled or otherwise terminated, or made any written threat to
Target to cancel or otherwise terminate its relationship with Target, or has
decreased materially its services or supplies to Target in the case of any such
supplier, or its usage of the services or products of Target in the case of such
customer, and to Target's knowledge, no such supplier or customer intends to
cancel or otherwise terminate its relationship with Target or to decrease
materially its services or supplies to Target or its usage of the services or
products of Target, as the case may be. Without limiting the generality of this
Section 2.26, no supplier of books or other information to Target for delivery
to Target's customers over the internet, and no such supplier has given notice
to Target of any intent to terminate or reduce such business activity.
2.27 THIRD PARTY CONSENTS. Except as set forth in Section 2.27
of the Target Disclosure Schedule, no consent or approval is needed from any
third party in order to effect the Merger, this Agreement or any of the
transactions contemplated hereby.
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2.28 REPRESENTATIONS COMPLETE. Target has delivered or made
available true and complete copies of each document that exists and is the
possession or control of Target and has been requested in writing by Acquiror or
its counsel in connection with their legal and accounting review of Target. To
the knowledge of Target, none of the representations or warranties made by
Target herein or in any Schedule hereto, including the Target Disclosure
Schedule, or certificate furnished by Target pursuant to this Agreement, when
all such documents are read together in their entirety, contains or will contain
at the Effective Time any untrue statement of a material fact, or omits or will
omit at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
SECTION THREE
3. REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGERSUB.
For purposes of this Section 3, any reference to a "Material
Adverse Effect" with respect to Acquiror or MergerSub means any event, change
or effect that, when taken individually or together with all other adverse
changes and effects, is or is reasonably likely to (a) be materially adverse to
the condition (financial or otherwise), properties, assets, liabilities,
business, operations, results of operations or prospects of Acquiror or
MergerSub, taken as a whole, (b) prevent or materially delay consummation of the
Merger or otherwise to prevent Acquiror or MergerSub from performing their
respective obligations under this Agreement or (c) cause this Agreement not to
be legal or enforceable against Acquiror or MergerSub. For purposes of clause
(a) of this definition and without limiting the generality of the foregoing, any
event, effect or change that individually or in the aggregate with respect to
which Acquiror or MergerSub would reasonably be expected to have damages being
asserted against, imposed upon or sustained by it of $250,000 or more shall
constitute a "material adverse" effect or change.
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Acquiror to Target prior to the execution and
delivery of this Agreement and referring to the representations and warranties
in this Agreement (the "Acquiror Disclosure Schedule"), Acquiror and MergerSub
hereby jointly and severally represent and warrant to Target as follows:
3.1 ORGANIZATION, STANDING AND POWER; CAPITALIZATION.
(a) Each of Acquiror and MergerSub is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Each of Acquiror and MergerSub has the corporate
power to own its properties and to carry on its business as now being conducted
and as proposed to be conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified and
in good standing would have a Material Adverse Effect on Acquiror or MergerSub,
as applicable. Acquiror has delivered to Target a true and correct copy of the
Certificate or Articles of Incorporation and Bylaws or other charter documents,
as applicable, of Acquiror and MergerSub, each as amended to date. Neither
Acquiror nor MergerSub is in violation of any material
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provisions of their respective Certificates of Incorporation or Bylaws or
equivalent organizational documents.
(b) The authorized capital stock of the Company as of the date
of this Agreement, consists of (a) thirty-five million (35,000,000) shares of
Acquiror Common Stock, par value $.001 per share, four million four hundred
seventeen thousand one hundred fifty-three (4,417,153) shares of which are
issued and outstanding and three million three hundred eighty-four thousand five
hundred thirteen (3,384,513) shares of which are reserved for future issuance to
employees pursuant to the Acquiror's Stock Option Plan (in each case subject to
adjustment for options exercised after January 10, 2000), (b) five million two
hundred fifty thousand (5,250,000) shares of Acquiror's Series A Preferred
Stock, par value $.001 per share (the "Series A Stock"), five million two
hundred twenty-five thousand (5,225,000) of which are issued and outstanding,
(c) six million eight hundred twenty-eight thousand one hundred seventy-six
(6,828,176) shares of Acquiror's Series B Preferred Stock, par value $.001 per
share (the "Series B Stock"), six million eight hundred twenty-eight thousand
one hundred seventy-six (6,828,176) shares of which are issued and outstanding,
(d) five million seven hundred twenty-six thousand five hundred seventy-four
(5,726,574) shares of Acquiror's Series C Preferred Stock, par value $.001 per
share (the "Series C Stock"), five million seven hundred twenty-six thousand
five hundred seventy-four (5,726,574) of which are issued and outstanding and
(e) one million four hundred fourteen thousand four hundred fifty (1,414,450)
shares of Acquiror Series D Stock, eight hundred forty-eight thousand six
hundred fifty-seven (848,657) of which are issued and outstanding. (Series A
Stock, Series B Stock, Series C Stock and Acquiror Series D Stock is
collectively referred to as "Acquiror Preferred Stock.") All issued and
outstanding shares of Acquiror Common Stock and Acquiror Preferred Stock (a)
have been duly authorized and validly issued, (b) are fully paid and
nonassessable and (c) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. Except as set forth in
Section 3.1 of the Acquiror Disclosure Schedule, there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal), proxy or stockholder agreements, or agreements of any kind,
written or oral, for the purchase or acquisition from Acquiror of any of its
securities.
3.2 AUTHORITY. Acquiror and MergerSub have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Acquiror and
MergerSub (other than, with respect to the Merger, the filing and recordation of
appropriate merger documents as required by Massachusetts Law). This Agreement
has been duly executed and delivered by each of Acquiror and MergerSub and
assuming the due authorization, execution and delivery by Target and Target
Shareholders, constitutes the valid and binding obligation of each of Acquiror
and MergerSub enforceable against each of Acquiror and MergerSub in accordance
with its terms except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights and (b) general principles of equity that
restrict the availability of equitable remedies.
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3.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by
Acquiror and MergerSub do not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any material violation
of, or default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of a benefit under (i) any provision of the Certificate or Articles of
Incorporation or Bylaws of Acquiror or MergerSub, as amended (it being
understood that the issuance of the Acquiror Stock is subject to the approval of
an appropriate amendment to the Amended and Restated Certificate of
Incorporation of Acquiror by the holders of Acquiror's outstanding equity
securities) or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Acquiror or MergerSub or their properties or assets, where such conflict,
violation or default would have a Material Adverse Effect on Acquiror, MergerSub
or their properties or assets.
(b) No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, is
required by or with respect to Acquiror or MergerSub in connection with the
execution and delivery of this Agreement by Acquiror and MergerSub or the
consummation by Acquiror and MergerSub of the transactions contemplated hereby,
except for (i) the filing of the Articles of Merger as provided in Section 1.2,
(ii) any filings as may be required under applicable state securities laws and
the securities laws of any foreign country, (iii) the filing of an amendment to
Acquiror's Certificate of Incorporation and (iv) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Acquiror and would not
prevent, materially alter or delay any the transactions contemplated by this
Agreement.
3.4 ABSENCE OF UNDISCLOSED LIABILITIES. Acquiror has no
material obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (a) those set forth or adequately provided for in the
balance sheet for the period ended December 31, 1999 (the "Acquiror Balance
Sheet"), (b) those incurred in the ordinary course of business consistent with
past practice and not required to be set forth in the Acquiror Balance Sheet
under GAAP and (c) those incurred in the ordinary course of business since the
December 31, 1999 (the "Acquiror Balance Sheet Date") and consistent with past
practice and that, if any obligations or liabilities (other than trade payables)
had occurred prior to the Acquiror Balance Sheet Date, would not be required to
be set forth in the Acquiror Balance Sheet under GAAP and (d) those incurred in
connection with the execution of this Agreement. None of the liabilities set
forth on the Acquiror Balance Sheet is subject to any prepayment penalty or
similar charge.
3.5 ABSENCE OF CERTAIN CHANGES. Since the Acquiror Balance
Sheet Date, there has not occurred: (a) any change, event or condition (whether
or not covered by insurance) that has resulted in, or might reasonably be
expected to result in, a Material Adverse Effect to Acquiror; (b) any
declaration, setting aside, or payment of a dividend or other distribution with
respect to the shares of Acquiror, or any direct or indirect redemption,
purchase or other acquisition by Acquiror of any of its shares of capital stock;
(c) any material amendment or
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change to Acquiror's Certificate of Incorporation or Bylaws except amendments or
changes contemplated by this Agreement or by the issuance of Acquiror Series D
Stock; or (d) any negotiation or agreement by Acquiror to do any of the things
described in the preceding clauses (a) through (c) (other than negotiations with
Target and its representatives regarding the transactions contemplated by this
Agreement).
3.6 LITIGATION. Except as set forth in Section 3.6 of the
Acquiror Disclosure Schedule, there is no private or governmental action, suit,
proceeding, claim or arbitration, or to the knowledge of Acquiror or any of its
subsidiaries investigation, pending before any agency, court or tribunal,
foreign or domestic, or, to the knowledge of Acquiror or any of its
subsidiaries, threatened against Acquiror or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Acquiror. There is
no judgment, decree or order against Acquiror or any of its subsidiaries or, to
the knowledge of Acquiror or any of its subsidiaries, any of their respective
directors or officers (in their capacities as such) that could prevent, enjoin,
or materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Acquiror. All litigation to which Acquiror is a party (or, to the
knowledge of Acquiror, threatened to become a party) is disclosed in Section 3.6
of the Acquiror Disclosure Schedule.
3.7 PERMITS AND AUTHORIZATIONS. Each of Acquiror and its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders necessary for Acquiror and its subsidiaries to own, lease
and operate their properties or to carry on their business as it is now being
conducted (the "Acquiror Authorizations") and no suspension or cancellation of
any Acquiror Authorization is pending or, to the best of Acquiror's knowledge,
threatened, except where the failure to have, or the suspension or cancellation
of, any Acquiror Authorization would not have a Material Adverse Effect on
Acquiror. Acquiror is not in material violation of any Acquiror Authorizations.
The execution and delivery of this Agreement by Acquiror and MergerSub and the
consummation of the transactions contemplated hereby, will neither cause
Acquiror or MergerSub to be in material violation or default under any such
Acquiror Authorization, nor entitle any other party to any such Acquiror
Authorization to terminate or modify such Acquiror Authorization.
3.8 COMPLIANCE WITH LAWS. Each of Acquiror and its
subsidiaries has complied with, is not in violation of, and has not received any
notices of violation with respect to, any federal, state, local or foreign
statute, law or regulation with respect to the conduct of its business, or the
ownership or operation of its business, except for such violations or failures
to comply as could not reasonably be expected to have a Material Adverse Effect
on Acquiror.
3.9 BROKER'S AND FINDERS' FEES. Acquiror has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
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3.10 ACQUIROR STOCK. The Acquiror Stock which will be
delivered under Section 1.7, when issued on the Closing Date in accordance with
the terms of this Agreement, will be validly issued, fully paid and
nonassessable. Acquiror Common Stock issuable upon the conversion of the
Acquiror Series D Stock ("Conversion Stock") has been reserved for issuance.
When issued in compliance with the provisions of this Agreement, the Certificate
of Incorporation, as amended and the Delaware General Corporation Law the
Conversion Stock will be validly issued, fully paid and nonassessable, and will
be free of any liens or encumbrances; provided, however, that the Acquiror Stock
and the Conversion Stock may be subject to restrictions on transfer under state
and/or federal securities laws, lock-up agreements or as otherwise required by
such laws at the time a transfer is proposed.
3.11 RESTRICTIONS ON BUSINESS ACTIVITIES. To the knowledge of
Acquiror, there is no agreement, judgment, injunction, order or decree binding
upon Acquiror which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any current or future business practice of
Acquiror, any acquisition of property by Acquiror or the overall conduct of
business by Acquiror as currently conducted or as proposed to be conducted by
Acquiror that could reasonably be expected to have a Material Adverse Effect on
Acquiror. To the knowledge of Acquiror, Acquiror has not entered into any
agreement under which Acquiror is restricted from selling, licensing or
otherwise distributing any of its products to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
3.12 FINANCIAL STATEMENTS. Acquiror has provided to Target a
true, correct and complete copy of Acquiror's audited financial statements for
each of the fiscal year ended March 31, 1999, and its unaudited financial
statements (balance sheet, statement of operations and statement of cash flows)
on a consolidated basis as at, and for the nine (9) month period ended December
31, 1999 (collectively, the "Acquiror Financial Statements"). The Acquiror
Financial Statements have been prepared in accordance with GAAP (except that the
unaudited financial statements do not have notes thereto) applied on a
consistent basis throughout the periods indicated and with each other. The
Acquiror Financial Statements accurately set out and describe the financial
condition and operating results of Acquiror as of the dates, and for the
periods, indicated therein, subject to normal year-end audit adjustments.
Acquiror maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP.
3.13 TITLE TO PROPERTY. Except as set forth in Section 3.13 of
the Acquiror Disclosure Schedules, Acquiror has good and marketable title to all
of its respective properties, interests in properties and assets, real and
personal, necessary to Acquiror's business as presently conducted, or with
respect to leased properties and assets, valid leasehold interests in, free and
clear of all mortgages, liens, pledges, charges or encumbrances of any kind or
character, except for such mortgages, liens, pledges, charges or encumbrances
which could not reasonably be expected to result in a Material Adverse Effect to
Acquiror. The plants, property and equipment of Acquiror that are used in the
operations of its business are in good operating condition and repair. All
properties used in the operations of Target are reflected in the Acquiror
Balance Sheet to the extent GAAP requires the same to be reflected. All real
property leased by Acquiror is subject to leases which are in good standing, are
valid and effective in accordance with their
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respective terms, and there is not under any such leases any existing default or
event of default (or event which with notice or lapse of time, or both, would
constitute a default), except for such events of default which could not
reasonably be expected to result. All equipment owned or leased by Acquiror is
taken as a whole, (a) adequate for the conduct of Acquiror's business,
consistent with its past practice, and (b) in good operating condition (ordinary
wear and tear excepted).
3.14 EMPLOYEE MATTERS. Acquiror is in compliance in all
material respects with all currently applicable federal, state, local and
foreign laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices and is not engaged in any unfair
labor practice. There are no pending claims against Acquiror under any workers
compensation plan or policy or for long term disability. Acquiror has no
material obligations under COBRA with respect to any former employees or
qualifying beneficiaries thereunder. There are no controversies pending or, to
the knowledge of Acquiror, threatened, between Acquiror and any of its
employees, including but not limited to any claims of sexual harassment, which
controversies have or could reasonably be expected to have a Material Adverse
Effect on Acquiror. Acquiror is not party to any collective bargaining agreement
or other labor unions contract nor does Acquiror know of any activities or
proceedings of any labor union or other group to organize any such employees.
3.15 INTERESTED PARTY TRANSACTIONS. Except as otherwise
disclosed on the Acquiror Financial Statements or on Section 3.15 of the
Acquiror Disclosure Schedule, Acquiror is not indebted to any director, officer,
employee or agent of Acquiror (except for amounts due as normal salaries and
bonuses), and no such person is indebted to Acquiror.
3.16 MINUTE BOOKS. The minute books of Acquiror have been made
available to Target, and such minute books contain a true and complete summary
of all actions of directors and stockholders at meetings thereof or actions by
written consent since the time of incorporation of Acquiror through the date of
this Agreement, and reflect all transactions referred to in such minutes
accurately in all material respects.
3.17 REPRESENTATIONS COMPLETE. Acquiror has delivered or made
available to Target true and complete copies of each document that exists and is
the possession or control of Acquiror and has been requested in writing by
Target or its counsel in conjunction with their legal and accounting review of
Acquiror. To the knowledge of Acquiror, none of the representations or
warranties made by Acquiror herein or in any Schedule hereto including the
Acquiror Disclosure Schedule, or certificate furnished by Acquiror pursuant to
this Agreement, when all such documents are read together in their entirety,
contains or will contain at the Effective Time any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
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SECTION FOUR
4. CONDUCT PRIOR TO THE EFFECTIVE TIME.
4.1 CONDUCT OF BUSINESSES OF TARGET AND ACQUIROR.
(a) During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, Target agrees (except to the extent expressly contemplated by
this Agreement or as consented to in writing by Acquiror), to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and consistent with prudent business practices,
to pay debts and Taxes when due subject (i) to good faith disputes over such
debts or Taxes and (ii) to Acquiror's consent to the filing of material Tax
Returns if applicable, to pay or perform other obligations when due, and to use
all reasonable efforts consistent with past practice and policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, to the end that its goodwill and ongoing businesses
shall be unimpaired at the Effective Time. Target agrees to promptly notify
Acquiror of any event or occurrence not in the ordinary course of its business,
and of any event which could have a Material Adverse Effect on Target.
(b) During the period from the date of this Agreement
and continuing until the earlier of termination of this Agreement or the
Effective Time, Acquiror agrees (except to the extent expressly contemplated by
this Agreement or as consented to in writing by Target), to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and consistent with prudent business practices,
to pay debts and Taxes when due subject to good faith disputes over such debts
or Taxes, to pay or perform other obligations when due, and to use all
reasonable efforts consistent with past practice and policies to preserve intact
its present business organization, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, to the end that its goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Notwithstanding the foregoing, Acquiror shall
be permitted to do things which may be considered outside of the ordinary course
of its business provided that such actions are consistent with prudent business
practices as determined by Acquiror's officers and board of directors, as
applicable. Acquiror agrees to promptly notify Target of any event or occurrence
not in the ordinary course of its business, and of any event which could have a
Material Adverse Effect on Acquiror.
4.2 RESTRICTIONS ON ACTIONS OF TARGET. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, except as expressly contemplated by
this Agreement, Target shall not do, cause or permit any of the following:
(a) MATERIAL CONTRACTS. Except with the consent of
Acquiror which consent shall not be unreasonably withheld, delayed or
conditioned, enter into any material contract or commitment, or violate, amend
or otherwise modify or waive any of the terms of any
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of its Material Contracts, other than in the ordinary course of business
consistent with prudent business practices and in any event not more than
$40,000 individually or $100,000 in the aggregate;
(b) ISSUANCE OF SECURITIES. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
described in Section 2.3 of the Target Disclosure Schedule and outstanding as of
the date of this Agreement;
(c) INTELLECTUAL PROPERTY. Transfer to any person or
entity any rights to its Intellectual Property except for licenses granted to
customers in the ordinary course of business consistent with prudent business
practices;
(d) EXCLUSIVE RIGHTS. Enter into or amend any
agreements pursuant to which any other party is granted exclusive marketing or
other exclusive rights of any type or scope with respect to any of its products
or technology; or enter into any noncompetition, confidentiality or
nonsolicitation agreements;
(e) DISPOSITIONS. Except with the consent of Acquiror
which consent shall not be unreasonably withheld, delayed or conditioned, sell,
lease, license or otherwise dispose of or encumber any of its properties or
assets which are material, individually or in the aggregate, to its business,
taken as a whole, except in the ordinary course of business consistent with
prudent business practices;
(f) INDEBTEDNESS. Incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others, except for ordinary trade payables;
(g) LEASES. Except with the consent of Acquiror which
consent shall not be unreasonably withheld, delayed or conditioned, enter into
any operating lease involving aggregate payments in excess of $5,000 in any
calendar year;
(h) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy
in an amount in excess of $1,000 in any one case or $5,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than obligations arising in the ordinary
course of business consistent with prudent business practices, other than the
payment, discharge or satisfaction of liabilities reflected or reserved against
in the Target Financial Statements; provided, however, Target shall be
authorized to pay no more than a total of $269,650 to fully satisfy "Deferred
Salaries" as identified on Target's Financial Statements, including all
applicable withholding and payroll taxes related thereto (the $269,650 is
allocated as follows: $250,000 to Deferred Salaries, $19,125 to applicable
withholding taxes and $525 to state unemployment insurance tax);
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(i) CAPITAL EXPENDITURES. Except with the consent of
Acquiror which consent shall not be unreasonably withheld, delayed or
conditioned, make any capital expenditures, capital additions or capital
improvements except in the ordinary course of business and consistent with
prudent business practices but in no event to exceed $40,000 in any one
expenditure, addition or improvement or $100,000 in the aggregate;
(j) INSURANCE. Except with the consent of Acquiror
which consent shall not be unreasonably withheld, delayed or conditioned,
materially reduce the amount of any material insurance coverage provided by
existing insurance policies;
(k) TERMINATION OR WAIVER. Except with the consent of
Acquiror which consent shall not be unreasonably withheld, delayed or
conditioned, terminate or waive any right of substantial value, other than in
the ordinary course of business consistent with prudent business practices;
(l) EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES.
Adopt or amend any employee benefit or stock purchase or option plan, or hire
any new director level or officer level employee (except that Target may hire a
replacement for any current director level or officer level employee if Target
first provides Acquiror advance notice regarding such hiring decision), except
with the consent of Acquiror which consent shall not be unreasonably withheld,
delayed or conditioned, pay any special bonus or special remuneration to any
employee or director, or increase the salaries or wage rates of its employees or
otherwise transfer any property to any employees, consultants or shareholders;
(m) SEVERANCE ARRANGEMENTS. Grant any severance or
termination pay (i) to any director or officer or (ii) to any other employee
except payments made pursuant to standard written agreements with such other
employees in effect on the date of this Agreement;
(n) LAWSUITS. Except with the consent of Acquiror
which consent shall not be unreasonably withheld, delayed or conditioned,
commence a lawsuit other than (i) for the routine collection of bills, (ii) in
such cases where Target in good faith determines that failure to commence suit
would result in the material impairment of a valuable aspect of Target's
business, provided that Target consults with Acquiror prior to the filing of
such a suit or (iii) for a breach of this Agreement;
(o) ACQUISITIONS. 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, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to its business, taken as a whole;
(p) TAXES. Other than in the ordinary course of
business consistent with prudent business practices, make or change any material
election in respect of Taxes, adopt or change any accounting method in respect
of Taxes, file any material Tax Return or any amendment to a material Tax
Return, enter into any closing agreement, settle any claim or
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assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
(q) NOTICES. Except with the consent of Acquiror
which consent shall not be unreasonably withheld, delayed or conditioned, fail
to give any notices or other information required to be given to employees of
Target, any collective bargaining unit representing any group of employees of
Target, and any applicable government authority under the Worker Adjustment and
Retraining Notification Act, the National Labor Relations Act, the Code, COBRA,
and any other applicable law in connection with the transactions provided for in
this Agreement;
(r) REVALUATION. Except with the consent of Acquiror
which consent shall not be unreasonably withheld, delayed or conditioned,
revalue any of its assets, including without limitation writing down the value
of inventory or writing off notes or accounts receivable other than in the
ordinary course of business consistent with prudent business practices;
(s) CHARTER DOCUMENTS. Cause or permit any amendments
to its Articles of Organization or Bylaws;
(t) DIVIDENDS; CHANGES IN COMMON STOCK. Declare or
pay any dividends on or make any other distributions (whether in cash, stock or
property) in respect of any Target Stock, or split, combine or reclassify any
Target Stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of Target Stock, or
repurchase or otherwise acquire, directly or indirectly, any shares of Target
Stock except (i) from former employees, directors and consultants in accordance
with agreements providing for the repurchase of shares in connection with any
termination of service to it or (ii) from existing employees or directors in
accordance with agreements providing for the repurchase of Target Stock at a
nominal price in conjunction with funding Target's employee stock option plan;
(u) ACCOUNTING PRACTICES. Change its accounting
practices or policies from those currently in effect, except as required in
accordance with GAAP;
(v) VESTING OF OPTIONS. Accelerate the vesting of
subscriptions, options, warrants, calls, rights contracts, commitments,
understandings, restrictions or arrangements relating to Target Stock or any
other security convertible into Target Common Stock or whose value is based on
Target Common Stock except as set forth on EXHIBIT G; or
(w) OTHER. Take or agree in writing or otherwise to
take, any of the actions described in Sections 4.2(a) through (v) above, or any
action which would make any of its representations or warranties contained in
this Agreement untrue or incorrect or prevent it from performing or cause it not
to perform its covenants hereunder.
4.3 RESTRICTIONS ON ACTIONS OF ACQUIROR. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the
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Effective Time, except as expressly contemplated by this Agreement, Acquiror
shall not do, cause or permit any of the following:
(a) DIVIDENDS; CHANGES IN COMMON STOCK. Declare or
pay any dividends on or make any other distributions (whether in cash, stock or
property) in respect of any Acquiror Common Stock or Acquiror Preferred Stock,
or split, combine or reclassify any Acquiror Common Stock or Acquiror Preferred
Stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of Acquiror Common Stock or Acquiror
Preferred Stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of Acquiror Common Stock or Acquiror Preferred Stock except from former
employees, directors and consultants in accordance with agreements providing for
the repurchase of shares in connection with any termination of service to it or
its subsidiaries;
(b) ACCOUNTING PRACTICES. Change its accounting
practices or policies from those currently in effect, except as required in
accordance with GAAP;
(c) ACQUISITIONS. Permit it to be acquired or permit
all or substantially all of its assets to be acquired in any manner by any other
person, business or any corporation, partnership, association or other business
organization or division thereof;
(d) INDEBTEDNESS. Incur any funded indebtedness in
excess of ten million dollars; or
(e) ISSUANCE OF SECURITIES. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of any equity of Acquiror
(or securities exerciseable for or convertible into such equity) other than (i)
the issuance of shares of Acquiror Common Stock pursuant to the exercise of
stock options, warrants or other rights therefor, (ii) shares of Acquiror Common
Stock or Acquiror Preferred Stock for cash in an amount not to exceed fifty
million dollars and (iii) shares of Acquiror Common Stock or Acquiror Preferred
Stock for non-cash consideration in conjunction with any acquisition(s) by
Acquiror with a value not in excess of twenty five million dollars. Any issuance
of Acquiror Preferred Stock as permitted by this Section 4.3(e)(ii) and (iii)
shall be done at no less than $17.675 per share. Any issuance of Acquiror Common
Stock as permitted by this Section 4.3(e)(ii) and (iii) shall be done at no less
than $15.00 per share.
4.4 NO SOLICITATION. Target and the officers, directors,
employees or other agents of Target will not, directly or indirectly, (a) take
any action to solicit, initiate or encourage any Takeover Proposal (as defined
below) or (b) engage in negotiations with, or disclose any nonpublic information
relating to Target to, or afford access to the properties, books or records of
Target to, any person that has advised Target that it may be considering making,
or that has made, a Takeover Proposal. For purposes of this Agreement, "Takeover
Proposal" means any offer or proposal for, or any indication of interest in, a
merger or other business combination involving Target or the acquisition of any
significant equity interest in, or a significant portion of the assets of,
Target, other than the transactions contemplated by this Agreement.
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4.5 ASSIGNMENT OF INVENTIONS BY EMPLOYEES & CONSULTANTS.
Target shall secure valid written assignments from all consultants and employees
who contributed to the creation or development of Intellectual Property of the
rights to such contributions that Target does not already own by operation of
law.
4.6 PROTECTION OF INTELLECTUAL PROPERTY. Target shall take all
necessary and appropriate steps to protect and preserve the confidentiality of
all Intellectual Property not otherwise protected by patents, patent
applications or copyright ("Confidential Information"). Target shall institute a
policy requiring each employee, consultant and independent contractor to execute
proprietary information and confidentiality agreements substantially in
Acquiror's standard forms which have been provided to Target by Acquiror and all
current employees, consultants and independent contractors of Target shall have
executed such an agreement. All use, disclosure or appropriation of Confidential
Information owned by Target by or to a third party shall be made pursuant to the
terms of a written agreement between Target and such third party. All use,
disclosure or appropriation of Confidential Information not owned by Target
shall be pursuant to the terms of a written agreement between Target and the
owner of such Confidential Information, or if no such agreement exists, shall be
by otherwise lawful means.
SECTION FIVE
5. ADDITIONAL AGREEMENTS.
5.1 BEST EFFORTS AND FURTHER ASSURANCES. Each of the parties
to this Agreement shall use its best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement. Each party hereto, at the 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. Without limiting the generality of the foregoing, each
Target Shareholder agrees to vote all Target Stock owned by such Target
Shareholder to approve the Merger. Acquiror agrees not to take any action
following the Closing which would violate the continuity of business enterprise
requirements as set forth in Section 1.368-1(d) of the Income Tax Regulations.
5.2 CONSENTS; COOPERATION. Each of Acquiror and Target shall
use its reasonable best efforts to promptly (i) obtain from any Governmental
Entity any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by Acquiror or Target or any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated hereunder
and (ii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under any
applicable federal, state, local or foreign laws.
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5.3 ACCESS TO INFORMATION.
(a) Target shall afford Acquiror and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (i) all of Target's
properties, books, contracts, commitments and records and (ii) all other
information concerning the business, properties and personnel of Target as
Acquiror may reasonably request. Target agrees to provide to Acquiror and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request. Acquiror shall afford Target and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (x) all of
Acquiror's and its subsidiaries' properties, books, contracts, commitments and
records, and (y) all other information concerning the business, properties and
personnel of Acquiror and its subsidiaries as Target may reasonably request.
Acquiror agrees to provide to Target and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
(b) Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of Acquiror and Target shall
confer on a regular and frequent basis with one or more representatives of the
other party to report material operational matters and the general status of
ongoing operations.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 5.3 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 PUBLIC DISCLOSURE. Unless otherwise permitted by this
Agreement, Acquiror and Target shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other, except as may
be required by law.
5.5 NON-COMPETITION AGREEMENTS. Prior to the Closing, Target
will use reasonable best efforts to cause ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ Gold, ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ to
execute and deliver to Acquiror Non-Competition Agreements substantially in the
form of EXHIBIT H attached hereto (the "Non-Competition Agreements").
5.6 OPTIONS AND WARRANTS. Prior to the Closing Date, Target
will use its best efforts and take all actions necessary to cause the exercise
or cancellation of all options and warrants to purchase stock or securities of
Target.
5.7 LOCK-UP AGREEMENTS; MANNER OF SALE REQUIREMENTS. If
requested by the managing underwriter in connection with any public offering of
Acquiror Stock or any other securities of Acquiror, the Target Shareholders
shall agree not to offer, sell, contract to sell, or
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otherwise dispose of any of the Acquiror Stock during the period beginning on
the date that Acquiror executes an underwriting agreement with respect to such
public offering and continuing to and including 180 days following the
completion of the public offering, provided that the terms of such agreements
shall be no less favorable than the terms of corresponding agreements signed by
Acquiror's management or substantially all holders of Acquiror Preferred Stock.
5.8 EMPLOYMENT AGREEMENTS. At the request of Acquiror, Target
will use its reasonable best efforts to ensure that certain key personnel of
Target, including ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ Gold, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ enter into mutually agreeable employment agreements, the form of which
is attached hereto as EXHIBIT I (each an "Employment Agreement").
SECTION SIX
6. CONDITIONS TO THE MERGER.
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to this Agreement to consummate
and effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction on or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) APPROVAL. This Agreement and the Merger shall
have been duly approved and adopted by the Board of Directors of Acquiror.
Acquiror shall have received all amendments to its Certificate of Incorporation
and approvals of its stockholders, required to authorize and approve the Merger
and the transactions contemplated by this Agreement.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, which makes the consummation of the Merger
illegal. In the event an injunction or other order shall have been issued, each
party agrees to use its reasonable diligent efforts to have such injunction or
other order lifted.
(c) GOVERNMENTAL APPROVAL. Acquiror, Target and
MergerSub and their respective subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the Merger and the several transactions
contemplated hereby.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET. The
obligations of Target to consummate and effect this Agreement and the
transactions contemplated hereby shall
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be subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by Target:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i)
Each of the representations and warranties of Acquiror and MergerSub in this
Agreement that is expressly qualified by a reference to materiality shall be
true in all respects as so qualified, and each of the representations and
warranties of Acquiror and MergerSub in this Agreement that is not so qualified
shall be true and correct in all material respects, on and as of the Effective
Time as though such representation or warranty had been made on and as of such
time (except that those representations and warranties which address matters
only as of a particular date shall remain true and correct as of such date) and
(ii) Acquiror and MergerSub shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by them as of the Effective Time
(provided that the obligations set forth in Section 4.3 shall not be qualified
by materiality, unless specifically set forth therein).
(b) NO MATERIAL ADVERSE CHANGES. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or presently-identified prospects of Acquiror
and its subsidiaries, taken as a whole.
(c) GOOD STANDING. Target shall have received a
certificate or certificates of the Secretary of State of the State of Delaware
and any applicable franchise tax authority of such state, certifying as of a
date no more than 5 business days prior to the Effective Time that Acquiror has
filed all required reports, paid all required fees and taxes and is, as of such
date, in good standing and authorized to transact business as a domestic
corporation.
(d) OFFICER'S CERTIFICATE. Acquiror shall have
delivered to Target a certificate, executed by a senior officer of Acquiror on
behalf of Acquiror, certifying that the statements in 6.2(a) and (b) are true
and correct as of the Closing Date.
(e) MERGER CONSIDERATION. At Closing, Acquiror shall
transfer to the Target Shareholders (i) cash, (ii) shares of Acquiror Common
Stock and (iii) shares of Acquiror Series D Stock as described in Section 1.6(a)
above, and subject to the Escrow Agreement described in Section 1.10 above.
(f) OPINION OF COUNSEL. At Closing, Target shall
receive an opinion of counsel to Acquiror substantially in the form attached as
EXHIBIT K.
(g) VISITATION RIGHTS. At Closing, Target
Shareholders who become holders of Acquiror Common Stock shall receive an
agreement by Acquiror, substantially in the form attached as EXHIBIT L granting
such holders board observer rights generally on the same basis as holders of
Acquiror Series D Stock. Target Shareholders who become holders of Acquiror
Series D Stock hereunder shall be granted board observer rights pursuant to the
Second Amended and Restated Investors' Rights Agreement, as amended, attached
hereto as EXHIBIT M.
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(h) AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
AND STOCKHOLDER AGREEMENT. At Closing, Acquiror shall have amended (as
necessary) the existing Second Amended and Restated Investors' Rights Agreement,
as amended (attached as EXHIBIT M hereto) and the existing Second Amended and
Restated Stockholders Agreement, as amended (which agreement shall be attached
hereto as EXHIBIT N) to accommodate the holders of Acquiror Series D Stock and
Target Shareholders who become holders of Acquiror Series D Stock hereunder
shall become party to those amended agreements as applicable.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ACQUIROR AND
MERGERSUB. The obligations of Acquiror and MergerSub to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Acquiror:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i)
Each of the representations and warranties of Target and Target's Major
Shareholders in this Agreement that is expressly qualified by a reference to
materiality shall be true in all respects as so qualified, and each of the
representations and warranties of Target and Target's Major Shareholders in this
Agreement that is not so qualified shall be true and correct in all material
respects, on and as of the Effective Time as though such representation or
warranty had been made on and as of such time (except that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date) and (ii) Target shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by it as of the
Effective Time (provided that the obligations set forth in Section 4.2 shall not
be qualified by materiality unless specifically set forth therein).
(b) NO MATERIAL ADVERSE CHANGES. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or presently-identified prospects of Target.
(c) RESIGNATION OF DIRECTORS AND OFFICERS. Acquiror
shall have received letters of resignation from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, as directors of Target and R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as officers of Target prior to the Effective Time, which
resignations in each case shall be effective as of the Effective Time.
(d) NON-COMPETITION AGREEMENTS. Each of the persons
set forth in Section 5.5 above shall have executed a Non-Competition.
(e) GOOD STANDING. Acquiror and MergerSub shall have
received a certificate or certificates of the Secretary of the Commonwealth of
the Commonwealth of Massachusetts and any applicable franchise tax authority of
such commonwealth, certifying as of a date no more than 5 business days prior to
the Effective Time that Target has filed all required reports, paid all required
fees and taxes and is, as of such date, in good standing and authorized to
transact business as a domestic corporation.
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(f) PRESIDENT'S OR CEO'S CERTIFICATE. Target shall
have delivered to Acquiror a certificate, executed by the President or CEO of
Target on behalf of Target, certifying that the statements in 6.3(a) and (b) are
true and correct as of the Closing Date.
(g) CERTIFICATES. At Closing, Target shall surrender
to Acquiror certificates representing all of the Target Common Stock and Target
Preferred Stock, as set forth in Section 1.7 above.
(h) ASSIGNMENT OF INVENTIONS BY EMPLOYEES &
CONSULTANTS. Target shall have secured valid written assignments from all
employees and shall use its best commercial efforts to secure from consultants
and independent contractors who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Target does not
already own by operation of law.
(i) PROTECTION OF INTELLECTUAL PROPERTY. Target shall
have taken all necessary and appropriate steps to protect and preserve the
confidentiality of all Confidential Information. Target shall have instituted a
policy requiring each employee, consultant and independent contractor to execute
proprietary information and confidentiality agreements substantially in
Acquiror's standard forms. All current employees shall have executed such an
agreement and Target shall use its best commercial efforts to obtain such
agreements from consultants and independent contractors of Target. All use,
disclosure or appropriation of Confidential Information owned by Target by or to
a third party shall be governed by the terms of a written agreement between
Target and such third party. All use, disclosure or appropriation of
Confidential Information not owned by Target shall be governed by the terms of a
written agreement between Target and the owner of such Confidential Information
or, if no written agreement exists, Target shall certify to Acquiror and
MergerSub that such use, disclosure or appropriation shall be by otherwise
lawful means.
(j) OPINION OF COUNSEL. Acquiror and MergerSub shall
have received an opinion of counsel to Target in the form attached as EXHIBIT O.
(k) OPTIONS AND WARRANTS. All options and warrants to
acquire any capital stock or securities of Target issued and outstanding as of
the date of this Agreement, other than the options described in Section 1.9,
shall have been cancelled, exercised or shall have expired and the persons
identified on EXHIBIT D shall have executed option agreements reflecting the
options and the vesting schedule(s) as set forth on EXHIBIT D and subject to
Section 1.10.
(l) ESCROW AGREEMENT. The Target's Major Shareholders
shall have executed the Escrow Agreement attached as EXHIBIT E.
(m) EMPLOYMENT AGREEMENT. Each of the persons set
forth in Section 5.8 above shall have executed an Employment Agreement.
(n) AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
AND STOCKHOLDER AGREEMENT. At Closing, each Target Shareholder who becomes a
holder of Acquiror Series D Stock hereunder shall have executed the Second
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Amended and Restated Investors' Rights Agreement, as amended and the existing
Second Amended and Restated Stockholders Agreement, as amended, as applicable.
SECTION SEVEN
7. TERMINATION, AMENDMENT AND WAIVER.
7.1 TERMINATION. At any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with the
Merger by the stockholders of Target, this Agreement may be terminated and the
Merger may be abandoned:
(a) by mutual consent duly authorized by the Boards
of Directors of each of Acquiror and Target;
(b) by either Acquiror or Target, if, without fault
of the terminating party the Effective Time shall not have occurred on or before
February 28, 2000 (or such later date as may be agreed upon in writing by the
parties);
(c) by Acquiror, if Target shall materially breach
(provided that the obligations set forth in Section 4.2 shall not be so
qualified unless specifically set forth therein) any of its representations,
warranties or obligations hereunder and such breach shall not have been cured
within ten (10) business days following receipt by Target of written notice of
such breach, provided that Acquiror is not in material breach of any of its
representations, warranties or obligations hereunder, and provided further, that
no cure period shall be required for a breach which by its nature cannot be
cured;
(d) by Target, if Acquiror shall materially breach
(provided that the obligations set forth in Section 4.3 shall not be so
qualified unless specifically set forth therein) any of its representations,
warranties or obligations hereunder and such breach shall not have been cured
within ten (10) business days following receipt by Acquiror of written notice of
such breach, provided that Target is not in material breach of any of its
representations, warranties or obligations hereunder, and provided further, that
no cure period shall be required for a breach which by its nature cannot be
cured.
7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquiror, MergerSub
or Target or their respective officers, directors, stockholders or affiliates,
except to the extent that such termination results from the breach by a party
hereto of any of its representations, warranties or covenants set forth in this
Agreement; provided that, the provisions of Section 5.4 (Public Disclosure),
Section 7.3 (Expenses and Termination Fees) and this Section 7.2 shall remain in
full force and effect and survive any termination of this Agreement.
7.3 EXPENSES AND TERMINATION FEES. All costs and expenses
incurred in connection with this Agreement and the transactions contemplated
including, without limitation,
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filing fees and the fees and expenses of advisors, accountants, legal counsel
and financial printers, shall be paid by the party incurring such expense.
7.4 AMENDMENT. The boards of directors of the parties may
cause this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties.
SECTION EIGHT
8. ESCROW AND INDEMNIFICATION.
8.1 SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. All
covenants to be performed prior to the Effective Time shall survive the
consummation of the Merger and continue until the Survival Time (as defined
below). Notwithstanding the foregoing, the covenants contained in Sections 5.1,
5.2 and 5.4 shall continue without expiration. All representations and
warranties in this Agreement, or in any instrument delivered pursuant to this
Agreement shall survive the consummation of the Merger and continue until the
Survival Time (as defined below). "Survival Time" shall mean the earlier to
occur of (a) the first anniversary of the Effective Time or (b) expiration of
the lock-up period pursuant to Section 5.7 of this Agreement.
8.2 INDEMNIFICATION AND DAMAGES.
(a) Subject to the limitations set forth in this
Section 8, from and after the Effective Time, Target's Major Shareholders shall
protect, defend, indemnify and hold harmless Acquiror and the Surviving
Corporation and their respective affiliates, officers, directors, employees,
representatives and agents (Acquiror, Surviving Corporation and each of the
foregoing persons or entities is hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and against
any and all losses, costs, damages, liabilities, fees (including without
limitation attorneys' fees) and expenses (collectively, the "Damages"), that any
of the Indemnified Persons incurs by reason of or in connection with any claim,
demand, action or cause of action alleging misrepresentation, breach of, or
default in connection with, any of the representations, warranties, covenants or
agreements of Target or Target's Major Shareholders contained in this Agreement,
including any exhibits or schedules attached hereto, and the Articles of Merger,
which becomes known to Acquiror. Damages in each case shall be net of the amount
of any insurance proceeds and indemnity and contribution actually recovered by
the Indemnified Person.
(b) All Damages recoverable under this Section 8.2
(other than Damages attributable to fraud or intentional misrepresentation)
shall be recoverable from, and solely from, shares of Acquiror Common Stock and
options to acquire Acquiror Common Stock deposited into escrow pursuant to
Section 1.10. Except for Damages attributable to fraud or intentional
misrepresentation, and except for recovery from the Acquiror Stock and options
to acquire Acquiror Common Stock held in escrow, neither Acquiror no the
Surviving Corporation shall have any recourse against any Target Shareholder for
any Damages. Claims for Damages, and release of shares from escrow, shall be
governed by the terms of the Escrow Agreement
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attached as EXHIBIT E. Absent fraud or intentional misrepresentation, to the
extent Damages exceed the amounts represented by the shares held under the
Escrow Agreement, no Indemnified Person shall have any claim against any Target
Shareholder or any assets of any Target Shareholder.
8.3 DAMAGES THRESHOLD. Notwithstanding the foregoing, an
Indemnified Person may not seek indemnification under this Section 8 until
Damages in the aggregate amount in excess of $25,000 are payable.
8.4 EXPIRATION OF CLAIMS. An Indemnified Person shall provide
notice to the Shareholders' Representative of any potential indemnifiable claim
for Damages under this Section 8 prior to the expiration of the Survival Time.
Any claim for which notice has not been provided to the Shareholders'
Representative prior to the expiration of the Survival Time shall be deemed
waived.
SECTION NINE
9. GENERAL PROVISIONS.
9.1 NOTICES. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or by courier, overnight delivery service or confirmed
facsimile, or 48 hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice,
(a) if to Acquiror or MergerSub, to:
netLibrary, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
with copies to:
netLibrary, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
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▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to Target and/or to Shareholders'
Representative, to:
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, CEO
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Bowditch & ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Grand Central Holdings, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Member
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Winston & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.2 INTERPRETATION. When a reference is made in this Agreement
to Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to
this Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation" even if not actually
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followed by such phrase unless the context expressly provides otherwise. The
phrase "made available" in this Agreement shall mean that the information
referred to has been made available if requested by the party to whom such
information is to be made available. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
9.3 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.4 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST.
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including
Attachments, Exhibits, Schedules (including the Target Disclosure Schedule and
the Acquiror Disclosure Schedule) (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, except for the Mutual Nondisclosure
Agreement between Target and Acquiror, dated December 17, 1999, which shall
continue in full force and effect, and shall survive any termination of this
Agreement or the Closing, in accordance with its terms (b) are not intended to
confer upon any other person any rights or remedies hereunder and (c) shall not
be assigned by operation of law or otherwise except as otherwise specifically
provided.
9.5 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith, in order to maintain the economic
position enjoyed by each party as close as possible to that under the provision
rendered unenforceable. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
9.6 REMEDIES CUMULATIVE. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
9.7 GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Colorado, without giving effect to principles of conflicts of
law. Each of the parties to this Agreement consents to the jurisdiction and
venue of the courts of the state and federal courts serving Boulder County,
Colorado.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they
have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing
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that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
9.9 AMENDMENTS AND WAIVERS . Any term of this Agreement may be
amended or waived only with the written consent of the parties or their
respective successors and assigns. Any amendment or waiver effected in
accordance with this Section 9.9 shall be binding upon the parties and their
respective successors and assigns.
[Signature Page Follows]
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Target, Target Shareholders, Target's Major Shareholders, Acquiror and
MergerSub have executed this Agreement as of the date and year first written
above.
TARGET:
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Treasurer
ACQUIROR:
NETLIBRARY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
MERGERSUB:
NL ▇▇.▇▇▇ ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
By: /s/ F. ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: F. ▇▇▇▇▇ ▇▇▇▇▇
Title: Treasurer
SHAREHOLDERS REPRESENTATIVE:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
52
TARGET SHAREHOLDERS:
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
GRAND CENTRAL HOLDINGS, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Member
GCH PEANUTPRESS, LLC
By: Grand Central Holdings, LLC,
its Managing Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Member
▇▇▇▇▇▇ VENTURE PARTNERS, L.P.
By: Grand Central Holdings, LLC, holder of
an irrevocable proxy
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Member
53
/s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ GOLD
------------------------------------
▇▇▇▇▇▇ Gold
/s/ ▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇