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EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
XXXXX.XXX, INC.,
CONFER ACQUISITION CORP.,
AND
CONFER SOFTWARE, INC.
DATED AS OF MAY 14, 2001
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER..........................................................1
1.1 The Merger..................................................1
1.2 Effective Time..............................................1
1.3 Effect of the Merger........................................2
1.4 Articles of Incorporation; Bylaws...........................2
1.5 Directors and Officers......................................2
1.6 Effect of Merger on the Capital Stock of the Constituent
Corporations..............................................2
1.7 Dissenting Shares...........................................5
1.8 Surrender of Certificates...................................6
1.9 No Further Ownership Rights in Company Capital Stock........7
1.10 Lost, Stolen or Destroyed Certificates......................8
1.11 Taking of Necessary Action; Further Action..................8
1.12 Accounting Consequences.....................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................8
2.1 Organization of the Company.................................8
2.2 No Subsidiaries.............................................9
2.3 Company Capital Structure...................................9
2.4 Authority..................................................10
2.5 No Conflict................................................10
2.6 Consents...................................................11
2.7 Company Financial Statements...............................11
2.8 No Undisclosed Liabilities.................................11
2.9 No Changes.................................................11
2.10 Tax Matters................................................13
2.11 Restrictions on Business Activities........................16
2.12 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment...................................16
2.13 Intellectual Property......................................17
2.14 Agreements, Contracts and Commitments......................21
2.15 Interested Party Transactions..............................23
2.16 Governmental Authorization.................................23
2.17 Litigation.................................................23
2.18 Accounts Receivable........................................24
2.19 Minute Books...............................................24
2.20 Environmental Matters......................................24
2.21 Brokers' and Finders' Fees; Third Party Expenses...........25
2.22 Employee Benefit Plans and Compensation....................25
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2.23 Insurance..................................................29
2.24 Compliance with Laws.......................................30
2.25 Warranties; Indemnities....................................30
2.26 Complete Copies of Materials...............................30
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.................30
3.1 Organization, Standing and Power...........................30
3.2 Authority..................................................30
3.3 Capital Structure..........................................31
3.4 No Conflict................................................31
3.5 Consents...................................................31
3.6 SEC Documents; Parent Financial Statements.................32
3.7 Tax-Free Reorganization....................................32
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME...............................34
4.1 Conduct of Business of the Company.........................34
4.2 No Solicitation............................................36
ARTICLE V ADDITIONAL AGREEMENTS..............................................37
5.1 Shareholder Approval.......................................37
5.2 Securities Laws............................................37
5.3 Restrictions on Transfer...................................37
5.4 Access to Information......................................38
5.5 Confidentiality; Public Disclosure.........................38
5.6 Consents...................................................38
5.7 Reasonable Efforts.........................................38
5.8 Notification of Certain Matters............................38
5.9 Additional Documents and Further Assurances................39
5.10 FIRPTA Compliance..........................................39
5.11 Expenses...................................................39
5.12 Termination of 401(k) Plan.................................39
5.13 Employee Benefits..........................................39
5.14 Employment Offers..........................................40
5.15 Shareholder List...........................................40
5.16 Affiliate Voting Agreements................................40
5.17 Registration Rights Agreement..............................40
5.18 Preparation Delivery of Estimated Balance Sheet and
Statement of Expenses....................................40
5.19 Indemnification............................................40
5.20 Tax Matters................................................41
5.21 Reorganization Matters.....................................41
5.22 Solicitation Materials.....................................41
ARTICLE VI CONDITIONS TO THE MERGER..........................................41
6.1 Conditions to Obligations of Each Party to Effect the
Merger...................................................41
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6.2 Additional Conditions to Obligations of Company............42
6.3 Additional Conditions to the Obligations of Parent and
Sub......................................................42
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION......45
7.1 Survival of Representations and Warranties.................45
7.2 Indemnification and Escrow.................................45
7.3 Shareholders' Representative...............................46
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...............................47
8.1 Termination................................................47
8.2 Effect of Termination......................................48
8.3 Termination Fees...........................................48
8.4 Amendment..................................................49
8.5 Extension; Waiver..........................................49
ARTICLE IX GENERAL PROVISIONS................................................49
9.1 Notices....................................................49
9.2 Interpretation.............................................50
9.3 Counterparts; Facsimile....................................50
9.4 Entire Agreement; Assignment...............................50
9.5 Severability...............................................51
9.6 Other Remedies; Specific Performance.......................51
9.7 Governing Law; Dispute Resolution..........................51
9.8 Rules of Construction......................................53
9.9 Attorneys Fees.............................................53
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INDEX OF EXHIBITS
EXHIBITS DESCRIPTION
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Exhibit A Agreement of Merger
Exhibit B Form of Affiliate Voting Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Legal Opinion of Counsel to Parent
Exhibit E Form of Legal Opinion of Counsel to the Company
Exhibit F Form of Tenant Estoppel Certificates
Exhibit G Form of Escrow Agreement
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (this "Agreement")
is made and entered into as of May 14, 2001 among XXxxx.xxx, Inc., a Delaware
corporation ("Parent"), Confer Acquisition Corp., a California corporation and
wholly-owned subsidiary of Parent ("Sub"), and Confer Software, Inc., a
California corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Sub
believe it is in the best interests of each company and their respective
stockholders that Parent acquire the Company through the statutory merger of
Company with and into the Sub (the "Merger") and, in furtherance thereof, have
approved the Merger.
B. Pursuant to the Merger, among other things, all of the issued and
outstanding shares of capital stock of the Company shall be converted into the
right to receive shares of common stock of Parent as set forth herein, all
outstanding options to acquire shares of common stock of the Company shall be
terminated, and all outstanding warrants to acquire shares of capital stock of
the Company shall be cancelled and extinguished.
C. The Company, on the one hand, and Parent and Sub, on the other hand,
desire to make certain representations, warranties, covenants and other
agreements in connection with the Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California General Corporation Law (the "CGCL"),
the Company shall be merged with and into Sub, the separate corporate existence
of the Company shall cease and Sub shall continue as the surviving corporation
and as a wholly-owned subsidiary of Parent. The surviving corporation after the
Merger is hereinafter sometimes referred to as the "Surviving Corporation."
1.2. Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Merger (the "Closing") will take
place as promptly as practicable, but not later than five (5) business days
following satisfaction or waiver of the conditions set forth in Article VI, at
the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 000
Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, unless another place or time is
agreed to in writing by Parent and the
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Company. The date upon which the Closing occurs is herein referred to as the
"Closing Date." On the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing an Agreement of Merger (or like instrument) in the
form attached hereto as Exhibit A, with an officers certificate of each
constituent corporation attached, with the Secretary of State of the State of
California (the "Merger Agreement"), in accordance with the applicable
provisions of the CGCL (the time of acceptance by the Secretary of State of the
State of California of such filing being referred to herein as the "Effective
Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the CGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time, the Articles of Incorporation of Sub
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Articles of Incorporation;
provided, however that Article I of the Articles of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is Confer Software, Inc."
(b) The Bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The directors of the Surviving Corporation
immediately after the Effective Time shall be the directors of Sub immediately
prior to the Effective Time, each to hold the office of director of the
Surviving Corporation in accordance with the provisions of the CGCL and the
Articles of Incorporation and Bylaws of the Surviving Corporation until his or
her successor is duly qualified and elected. The officers of the Surviving
Corporation immediately after the Effective Time shall be the officers of Sub
immediately prior to the Effective Time, each to hold office in accordance with
the provisions of the Bylaws of the Surviving Corporation.
1.6 Effect of Merger on the Capital Stock of the Constituent
Corporations.
(a) Certain Definitions. For all purposes of this Agreement,
the following terms shall have the following meanings:
"Company Capital Stock" shall mean shares of Company
Common Stock, Company Preferred Stock and shares of any other capital stock of
the Company.
"Company Debt" shall mean indebtedness for borrowed money
incurred by the Company after March 31, 2001.
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"Company Option" shall mean an option to acquire shares of
Company Common Stock.
"Company Preferred Stock" shall mean shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D-1
Preferred Stock, Series D-2 Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock and all other shares of preferred stock of the Company.
"Company Series A Preferred Stock" shall mean shares of
Series A Preferred Stock of the Company.
"Company Series B Preferred Stock" shall mean shares of
Series B Preferred Stock of the Company.
"Company Series C Preferred Stock" shall mean shares of
Series C Preferred Stock of the Company.
"Company Series D-1 Preferred Stock" shall mean shares of
Series D-1 Preferred Stock of the Company.
"Company Series D-2 Preferred Stock" shall mean shares of
Series D-2 Preferred Stock of the Company.
"Company Series E Preferred Stock" shall mean shares of
Series E Preferred Stock of the Company.
"Company Series F Preferred Stock" shall mean shares of
Series F Preferred Stock of the Company.
"Company Warrants" shall mean warrants to purchase shares
of Company Capital Stock.
"Covered Expenses" shall mean the sum of (x) the dollar
amount of cash and cash equivalents standing on the Estimated Balance Sheet
(excluding any cash or securities held in the Lease Collateral Account) plus (y)
$300,000.
"Escrow Fund" shall mean the Escrow Shares deposited with
the Escrow Agent (as such term is defined in the Form of Escrow Agreement
attached hereto as Exhibit G).
"Escrow Shares" shall mean ten percent (10%) of the Merger
Shares.
"Estimated Balance Sheet" shall mean the estimated
unaudited balance sheet of the Company dated the Closing Date which shall be (i)
prepared in accordance with GAAP (except that such unaudited balance sheet does
not contain the footnotes required by GAAP) and
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prepared by the Company in good faith and based upon reasonable assumptions and
(ii) approved by Parent, which approval shall not be unreasonably withheld.
"Estimated Net Liabilities" shall mean the amount by which
total liabilities of the Company as of the Closing Date, other than Company
Debt, as determined in accordance with GAAP ("Total Liabilities"), but excluding
Estimated Third Party Expenses, exceed total current assets of the Company as
determined in accordance with GAAP ("Total Current Assets"), each as reflected
in the Estimated Balance Sheet.
"Estimated Third Party Expenses" shall mean Third Party
Expenses (as defined in Section 5.11) of the Company on the Closing Date as
estimated by the Company in good faith and based on reasonable assumptions and
as reflected on the Statement of Expenses (as defined in Section 5.18).
"Exchange Ratio" shall mean the quotient obtained by
dividing (x) the Merger Shares by (y) the Total Outstanding Series F Shares,
rounded to the fourth decimal place; provided, that the Exchange Ratio shall be
appropriately adjusted to reflect fully the effect of any stock split, reverse
stock split, stock dividend, reorganization or like change with respect to
Parent Common Stock occurring after the date of this Agreement and prior to the
Effective Time.
"GAAP" shall mean U.S. generally accepted accounting
principles consistently applied.
"Lease Collateral Account" shall mean the cash and
securities pledged by the Company to State Street Bank and Trust Company
securing a demand loan facility of the Company.
"Merger Shares" shall mean 594,103 shares of Parent Common
Stock, subject to downward adjustment as provided below under the definition of
"Total Consideration."
"Net Liabilities" shall mean the amount by which Total
Liabilities exceed Total Current Assets as of the Closing Date.
"Net Liabilities Adjustment" shall mean the amount by
which Estimated Net Liabilities exceed $650,000.
"Parent Common Stock" shall mean shares of the common
stock, par value $0.01 per share, of Parent.
"Shareholder" shall mean each holder of any Company
Capital Stock immediately prior to the Effective Time.
"Total Consideration" shall mean that number of shares of
Parent Common Stock equal to the quotient obtained by dividing (A) $4,050,000
minus the sum of (1) the amount by which the Company's Estimated Third Party
Expenses exceed the Covered Expenses, (2) the amount of any Company Debt and
accrued interest thereon outstanding immediately prior to the Effective
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Time and that has not been converted into Company Capital Stock prior to the
Effective Time and (3) the Net Liabilities Adjustment; by (B) 6.817.
"Total Outstanding Series F Shares" shall mean the
aggregate number of shares of Company Series F Preferred Stock issued and
outstanding immediately prior to the Effective Time.
(b) Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Sub, the Company or
the Shareholders, upon the terms and conditions set forth below in this Section
1.6(b) and elsewhere in this Agreement:
(i) Each share of Company Capital Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
Company Capital Stock to be canceled pursuant to Section 1.6(b)(ii) hereof and
any Dissenting Shares (as defined in Section 1.7 hereof)) shall be canceled and
extinguished and, with respect to shares of Company Series F Preferred Stock,
automatically converted into the right to receive, upon surrender of the
certificate representing such share of Company Series F Preferred Stock in the
manner set forth in Section 1.8(c) hereof, a fraction of a share of Parent
Common Stock equal to the Exchange Ratio.
(ii) At the Effective Time, by virtue of the Merger
and without any action on the part of Parent, Sub, the Company or the
Shareholders, each share of Company Capital Stock, if any, owned by Parent or
the Company, or any subsidiary of Parent or the Company, immediately prior to
the Effective Time, shall be automatically canceled and extinguished without any
conversion thereof.
(c) Termination of Company Stock Options. At the Effective
Time, each outstanding Company Option shall be terminated. Prior to the
Effective Time, the Company shall take all action necessary to effect the
transactions anticipated by this Section 1.6(c) under all Company Option
agreements and any other plan or arrangement of the Company.
(d) Cancellation of Company Warrants. At the Effective Time,
each outstanding Company Warrant shall be cancelled and extinguished. Prior to
the Effective Time, the Company shall take all action necessary to effect the
transactions anticipated by this Section 1.6(d) under all Company Warrant
agreements and any other plan or arrangement of the Company.
(e) Merger Consideration. The maximum number of shares of
Parent Common Stock to be issued in exchange for the acquisition by Parent of
all outstanding Company Capital Stock shall be the Merger Shares.
(f) Fractional Shares. No fractional share of Parent Common
Stock shall be issued in the Merger. In lieu thereof, any fractional share,
after aggregating all shares held by a Shareholder, shall be rounded up to the
nearest whole share of Parent Common Stock.
1.7 Dissenting Shares.
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(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has exercised
and perfected appraisal or dissenters' rights for such shares in accordance with
applicable law and who, as of the Effective Time, has not effectively withdrawn
or lost such appraisal or dissenters' rights ("Dissenting Shares"), shall not be
converted into or represent a right to receive the consideration for Company
Capital Stock pursuant to Section 1.6, but the holder thereof shall only be
entitled to such rights as are granted by applicable law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her appraisal or dissenters' rights under
applicable law, then, as of the later of Effective Time and the occurrence of
such event, the shares of Company Capital Stock held by such Shareholder that
formerly constituted Dissenting Shares shall automatically be converted into and
represent only the right to receive the consideration for Company Capital Stock
as provided in Section 1.6, without interest thereon, upon surrender of the
certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of its
receipt of any written demand for appraisal in respect of any shares of Company
Capital Stock, withdrawals of such demands and any other instruments relating to
the Merger served pursuant to applicable law and received by the Company, and
(ii) the opportunity to participate in all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to any such demands
or offer to settle or settle any such demands. To the extent that Parent, the
Company or the Surviving Corporation makes any payment or payments in respect of
any Dissenting Shares, Parent shall be entitled to recover under the terms of
Article VII hereof the aggregate amount by which such payment or payments exceed
the aggregate consideration that otherwise would have been issuable in respect
of such shares.
1.8 Surrender of Certificates.
(a) Exchange Agent. Xxxx Xxxxxxxxx shall serve as exchange
agent (the "Exchange Agent") for the Merger.
(b) Parent to Provide Shares. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, certificates representing the Merger Shares
issuable to the Shareholders pursuant to Section 1.6(b); provided, however, that
on behalf of the Shareholders, pursuant to Article VII hereof, Parent shall
deposit into an escrow account the Escrow Shares. The portion of the Escrow
Shares contributed on behalf of each Shareholder shall be in proportion to the
aggregate number of Merger Shares that such Shareholder would otherwise be
entitled to receive in the Merger pursuant to Section 1.6(b) by virtue of
ownership of outstanding shares of Company Capital Stock.
(c) Exchange Procedures. Promptly after the Effective Time,
but in any event no later than five (5) business days after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) of a certificate or certificates (the
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"Certificates") which immediately prior to the Effective Time represented
outstanding shares of Company Capital Stock whose shares were converted into the
right to receive shares of Parent Common Stock pursuant to Section 1.6, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holders of
such Certificates shall be entitled to receive, within five (5) business days
following such surrender, in exchange therefor certificates representing the
number of whole shares of Parent Common Stock, and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered, outstanding
Certificates will be deemed from and after the Effective Time, for all corporate
purposes, subject to Section 1.8(d) as to the payment of dividends, to evidence
the ownership of the number of full shares of Parent Common Stock into which
such shares of Company Capital Stock shall have been so converted and the right
to receive any dividends or distributions payable pursuant to Section 1.8(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered Certificates
with respect to the shares of Parent Common Stock represented thereby until the
holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates, Parent
shall cause the Exchange Agent to deliver to the record holders thereof, without
interest, certificates representing whole shares of Parent Common Stock issued
in exchange therefor and the amount of any such dividends or other distributions
with a record date after the Effective Time payable with respect to such whole
shares of Parent Common Stock.
(e) Transfers of Ownership. If certificates for shares of
Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificates surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Company Capital Stock for
any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Company Capital Stock. All
consideration paid in respect of the surrender for exchange of shares of Company
Capital Stock in accordance with the
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terms hereof, shall be deemed to be full satisfaction of all rights pertaining
to such shares of Company Capital Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, Parent shall cause the Exchange Agent to issue in exchange
for such lost, stolen or destroyed certificates, upon the making of an affidavit
of that fact by the holder thereof, such shares of Parent Common Stock as may be
required pursuant to Section 1.8; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver a bond in such
sum as it may reasonably direct against any claim that may be made against
Parent or the Exchange Agent with respect to the certificates alleged to have
been lost, stolen or destroyed.
1.11 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 the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Sub, the officers and directors of the
Company, Parent and Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
1.12 Accounting Consequences. The parties hereto intend that the Merger
be treated as a purchase for financial accounting purposes. Each party has
consulted with its own accountants with respect to the accounting consequences
of the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub, subject
to such exceptions as are specifically disclosed in writing in the disclosure
schedule (referencing the appropriate section and paragraph numbers) supplied by
the Company to Parent and dated as of the date of this Agreement (the
"Disclosure Schedule"), that on the date of this Agreement and as of the
Effective Time as though made at the Effective Time as follows:
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
in which such qualification is required except where such failure to qualify
would not have a Company Material Adverse Effect (as defined in Section 2.9).
The Company has delivered a true and correct copy of its Amended and Restated of
Articles of Incorporation and Bylaws, each as amended to date, to Parent.
Section 2.1 of the Disclosure Schedule lists the directors and officers of
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the Company. The operations now being conducted by the Company have not been
conducted under any other name.
2.2 No Subsidiaries. The Company does not have, and has never had, any
subsidiaries or affiliated companies and does not otherwise own, and has not
otherwise owned, any shares in the capital of or any interest in, or control,
directly or indirectly, any corporation, partnership, association, joint venture
or other business entity. The Company has never been a subsidiary of any other
company.
2.3 Company Capital Structure.
(a) The authorized Company Capital Stock consists of
71,000,000 shares of authorized Company Common Stock, with a par value of $0.001
per share, and 52,271,751 shares of Preferred Stock, with a par value of $0.001
per share, 236,842 of which shares are designated Series A Preferred Stock,
2,475,000 of which shares are designated Series B Preferred Stock, 4,212,475 of
which shares are designated Series C Preferred Stock, 13,913,803 of which shares
are designated Series D-1 Preferred Stock, 7,399,443 of which shares are
designated Series D-2 Preferred Stock, 21,434,188 of which shares are designated
Series E Preferred Stock, and 2,600,000 of which shares are designated Series F
Preferred Stock. 7,649,612 shares of Common Stock, 236,842 shares of Series A
Preferred Stock, 2,475,000 shares of Series B Preferred Stock, 3,908,794 shares
of Series C Preferred Stock, 13,913,803 shares of Series D-1 Preferred Stock,
7,399,443 shares of Series D-2 Preferred Stock, 21,367,520 shares of Series E
Preferred Stock, and 1,515,775 shares of Series F Preferred Stock are issued and
outstanding as of the date of this Agreement. Each share of Company Series A
Preferred Stock, each share of Company Series B Preferred Stock, each share of
Company Series C Preferred Stock, each share of Company Series D-1 Preferred
Stock, each share of Company Series D-2 Preferred Stock, and each share of
Company Series F Preferred Stock is convertible into 1.0 shares of Company
Common Stock. Each share of Company Series E Preferred Stock is convertible into
1.1101 of Company Common Stock. The Company Capital Stock is held by the
persons, with the domicile addresses and in the amounts set forth in Section
2.3(a) of the Disclosure Schedule. All outstanding shares of Company Capital
Stock are duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, the Articles of Incorporation
or Bylaws of the Company or any agreement to which the Company is a party or by
which it is bound and have been issued in compliance with federal and state
securities laws. There are no declared or accrued unpaid dividends with respect
to any shares of the Company's Capital Stock. The Company has no other capital
stock authorized, issued or outstanding.
(b) Except for the Company's 1997 Stock Plan (the "Stock
Plan") and the 1996 Stock Plan, which was assumed in the Stock Plan, the Company
has never adopted or maintained any stock option plan or other plan providing
for equity compensation of any person. The Company has reserved 12,262,970
shares of Company Common Stock for issuance to employees and consultants
pursuant to the Stock Plan, of which 3,010,023 shares have been exercised and
4,887,448 shares are subject to outstanding unexercised options as of the date
of this Agreement. In addition, 39,749 shares have been exercised and 15,501
shares are subject to outstanding unexercised options under the 1996 Stock Plan
as of the date of the Agreement. Section 2.3(b) of the Disclosure
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Schedule sets forth for each outstanding Company Option, the name and the
domicile address of the holder, the number of shares of Company Common Stock
subject to such Company Option, the exercise price of such Company Option and
the vesting schedule of such Company Option. Except as set forth on Section
2.3(b) of the Disclosure Schedule, there is no outstanding Company Capital Stock
which is subject to vesting. Except as set forth on Section 2.3(b) of the
Disclosure Schedule, there are no options, warrants, calls, rights, commitments
or agreements of any character, written or oral, to which the Company is a party
or by which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of the Company. As a result of
the Merger, Parent will be the record and sole beneficial owner of all
outstanding Company Capital Stock and all rights to acquire or receive any
Company Capital Stock, whether or not such Company Capital Stock is outstanding.
2.4 Authority. The Company has all requisite power and authority to
enter into this Agreement and any Related Agreements (as hereinafter defined) to
which the Company is a party and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and any Related
Agreements to which the Company is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, and no further action is
required on the part of the Company to authorize the Agreement, any Related
Agreements to which the Company is a party and the transactions contemplated
hereby and thereby, subject only to the approval of this Agreement by the
Shareholders. The Board of Directors of the Company has unanimously approved
this Agreement and the Merger. This Agreement and any Related Agreements to
which the Company is a party have been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by the other
parties hereto and thereto, constitute the valid and binding obligation of the
Company enforceable in accordance with their respective terms, subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and to rules of law governing specific performance, injunctive relief or
other equitable remedies. The "Related Agreements" shall mean all such ancillary
agreements required in this Agreement to be executed and delivered in connection
with the transactions contemplated hereby, including, without limitation, the
Escrow Agreement and the Registration Rights Agreement.
2.5 No Conflict. The execution and delivery of this Agreement and any
Related Agreements to which the Company is a party by the Company do not, and,
the consummation of the transactions contemplated hereby and thereby 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, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the Amended
and Restated Articles of Incorporation and Bylaws of the Company, (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise or license to which the Company or any of its
respective properties or assets (including intangible assets) are subject, (iii)
any judgment, order or decree applicable to the Company or its respective
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properties or assets, or (iv) any material statute, law ordinance, rule or
regulation applicable to the Company or its respective properties or assets.
2.6 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") is
required by or with respect to the Company in connection with the execution and
delivery of this Agreement and any Related Agreements to which the Company is a
party or the consummation of the transactions contemplated hereby and thereby,
except for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
securities laws and (ii) the filing of the Merger Agreement with the Secretary
of State of the State of California.
2.7 Company Financial Statements. Section 2.7 of the Disclosure
Schedule contains (i) the Company's unaudited balance sheet as of December 31,
2000, and the related unaudited statements of income, cash flow and
stockholders' equity for the period ended December 31, 2000 (collectively, the
"Year-End Financials"), and (ii) the Company's unaudited balance sheet as of
March 31, 2001, (the "Current Balance Sheet") and the related unaudited
statements of income, cash flow and stockholders' equity for the three month
period ended March 31, 2001 (the "Quarterly Financials"). The Year-End
Financials and the Quarterly Financials are correct in all material respects and
have been prepared in accordance with GAAP applied on a basis consistent
throughout the periods indicated and consistent with each other, subject to
normal year-end audit reclassifications. The Year-End Financials and the
Quarterly Financials present fairly the financial condition, operating results
and cash flows of the Company as of the dates and during the periods indicated
therein.
2.8 No Undisclosed Liabilities. The Company has no material liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other, of
a type that should appear on a balance sheet prepared in accordance with GAAP,
which individually or in the aggregate (i) has not been reflected in the Current
Balance Sheet or (ii) has not arisen in the ordinary course of business
consistent with past practices since the date of the Current Balance Sheet, none
of which is material, either individually or in the aggregate, to the business,
results of operations or condition (financial or otherwise) of the Company.
2.9 No Changes. Since March 31, 2001, there has not been, occurred
or arisen any:
(a) amendments or changes to the Amended and Restated Articles
of Incorporation or Bylaws of the Company;
(b) capital expenditure or commitment by the Company,
exceeding $50,000 individually or $100,000 in the aggregate;
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(c) destruction of, damage to or loss of any asset with a
value of $10,000 or greater, business or customer of the Company (whether or not
covered by insurance);
(d) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(e) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(f) revaluation by the Company of any of its assets;
(g) declaration, setting aside or payment of a dividend or
other distribution with respect to the capital stock of the Company or any
direct or indirect redemption, purchase or other acquisition by the Company of
its capital stock;
(h) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment, by the Company of a bonus or other additional salary or
compensation to any such person;
(i) agreement, contract, covenant, instrument, lease, license
or commitment to which the Company is a party or by which it or any of its
assets (including intangible assets) are bound or any termination, extension,
amendment or modification the terms of any agreement, contract, covenant,
instrument, lease, license or commitment to which the Company is a party or by
which it or any of its assets are bound;
(j) sale, lease, license or other disposition of any of the
assets or properties of the Company or any creation of any security interest in
such assets or properties;
(k) loan by the Company to any person or entity, incurring by
the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, except for advances to employees
for travel and business expenses in the ordinary course of business, consistent
with past practice;
(l) waiver or release of any right or claim of the Company
including any write-off or other compromise of any account receivable of the
Company;
(m) the commencement or notice or threat of any lawsuit or, to
the Company's knowledge, proceeding or investigation against the Company or its
affairs;
(n) of any claim or potential claim of ownership by any person
other than the Company of the Company Intellectual Property (as defined in
Section 2.13) or of infringement by the Company of any other person's
Intellectual Property (as defined in Section 2.13);
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(o) issuance or sale, or contract to issue or sell, by the
Company of any shares of its capital stock or securities exchangeable,
convertible or exercisable therefor, or any securities, warrants, options or
rights to purchase any of the foregoing, except for options to purchase common
stock of the Company granted to employees of the Company in the ordinary course
of business consistent with past practices;
(p) (i) sale or license of any Company Intellectual Property
or entering into of any agreement with respect to the Company Intellectual
Property with any person or entity or with respect to the Intellectual Property
of any person or entity or (ii) purchase or license of any Intellectual Property
or entering into of any agreement with respect to the Intellectual Property of
any person or entity or (iii) change in pricing or royalties set or charged by
the Company to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Intellectual Property to the Company
except, in each case, in the ordinary course of business;
(q) event or condition of any character that has had a Company
Material Adverse Effect (as defined below);
(r) transaction by the Company except in the ordinary course
of business as conducted on that date and consistent with past practices; or
(s) negotiation or agreement by the Company or any officer or
employee thereof to do any of the things described in the preceding clauses (a)
through (r) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
For all purposes of this Agreement, the term "Company Material Adverse
Effect" means any change, event or effect that is or is reasonably likely to be
materially adverse to the business, assets (including intangible assets),
properties, liabilities (including contingent liabilities), condition (financial
or otherwise), operations or results of operations of the Company.
2.10 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes", means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts.
(b) Tax Returns and Audits.
(i) As of the Effective Time, the Company will have
prepared and timely filed all required federal, state, local and foreign
returns, estimates, information statements and reports ("Tax Returns") relating
to any and all Taxes concerning or attributable to the Company or its operations
and such Tax Returns were when filed and are true and correct in all material
respects.
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(ii) The unpaid Taxes of the Company (i) did not, as
of the date of the Current Balance Sheet, exceed the reserve for Tax liability
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on balance sheets contained
in the Unaudited Financials, and (ii) will not exceed that reserve as adjusted
for operations and transactions through the Effective Date in accordance with
the past custom and practice of the Company in filing its Tax Returns.
(iii) The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third
party.
(iv) The Company is not currently delinquent in the
payment of any Tax nor is there any Tax deficiency outstanding, assessed or
proposed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(v) To the knowledge of the Company, no audit or
other examination of any Tax Return of the Company is presently in progress, nor
has the Company been notified of any request for such an audit or other
examination.
(vi) The Company has made available to Parent or its
legal counsel, copies of all foreign, federal and state income and all state
sales and use Tax Returns for the Company filed for all periods since its
inception.
(vii) There are (and immediately following the
Effective Time there will be) no liens, pledges, charges, claims, restrictions
on transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company relating to or attributable
to Taxes other than Liens for Taxes not yet due and payable.
(viii) The Company has no knowledge of any claim
relating or attributable to Taxes which, if adversely determined, would result
in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as
"tax-exempt use property", within the meaning of Section 168(h) of the Code.
(x) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(4) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(xi) The Company is not, and has never been at any
time, a party to any tax sharing, indemnification or allocation agreement.
(xii) The Company is not and has never been at any
time, a "United States Real Property Holding Corporation" within the meaning of
Section 897(c)(2) of the Code.
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(xiii) No adjustment relating to any Tax Return filed
by the Company has been proposed formally or, to the knowledge of the Company,
informally by any tax authority to the Company or any representative thereof.
(xiv) The Company has not constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (x) in the
two years prior to the date of this Agreement or (y) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) that includes the Merger.
(xv) The Company is not and has never been a member
of an affiliated group of corporations within the meaning of Section 1504 of the
Code or of any group that has filed a combined consolidated or unitary state or
local return.
(xvi) The Company does not have any Liability for the
Taxes of any Person (other than Taxes of the Company) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, or by contract.
(c) Executive Compensation Tax. There is no contract,
agreement, plan or arrangement to which the Company is a party as of the date of
this Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Company, individually or
collectively, that could give rise to the payment of any amount that would not
be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
(d) Tax -Free Reorganization.
(i) At the Effective Time, the Company will hold at
least 90 percent of the fair market value of its net assets and at least 70
percent of the fair market value of its gross assets held immediately prior to
the Effective Time. For purposes of this representation, amounts paid by the
Company to dissenting the Company Shareholders, amounts used by the Company to
pay Merger expenses, amounts paid by the Company to redeem stock, securities,
warrants or options of the Company as part of any overall plan of which the
Merger is a part, and amounts distributed by the Company to Company Shareholders
(except for any regular, normal dividends) as part of an overall plan of which
the Merger is a part, in each case will be treated as constituting assets of the
Company immediately prior to the Effective Time.
(ii) The Company has not made and has no plan or
intention to make any distribution with respect to its stock, and neither the
Company nor any person related to the Company within the meaning of Treas. Reg.
Sections 1.368-1(e)(3), (e)(4) and (e)(5) has redeemed or acquired or has any
plan or intention to redeem or acquire shares of Company Capital Stock, in each
case using consideration that would be treated as money or other property for
purposes of Section 356 of the Code, or would be so treated if the shareholder
in respect of whose Company Capital Stock the distribution is made or whose
Company Capital Stock is redeemed or acquired also had received stock of Parent
in exchange for Company Capital Stock owned by the shareholder.
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(iii) The liabilities of the Company assumed by Sub
and the liabilities to which the transferred assets are subject were incurred by
the Company in the ordinary course of its business.
(iv) The fair market value of the assets of the
Company transferred to Sub will equal or exceed the sum of the liabilities
assumed by Sub, plus the amount of liabilities, if any, to which the transferred
assets are subject.
(v) Except for those expenses paid by Parent pursuant
to Section 5.11 of the Merger Agreement (which expenses are solely and directly
related to the Merger), the Company will pay its expenses, if any, incurred in
connection with the Merger.
(vi) The Company is not and will not be at the
Effective Time an "investment company" as defined in Section 368(a)(2)(F)(iii)
and (iv) of the Code.
(vii) The Company is not, and will not be at the
Effective Time, under the jurisdiction of a court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
2.11 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
may have the effect of prohibiting or impairing any business practice of the
Company, any acquisition of property (tangible or intangible) by the Company or
the conduct of business by the Company. Without limiting the foregoing, the
Company has not entered into any agreement under which it is restricted from
selling, licensing or otherwise distributing any technology or products to or
providing services to, customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
(a) The Company does not own any real property, nor has the
Company ever owned any real property. Section 2.12(a) of the Disclosure Schedule
sets forth a list of all real property currently leased or subleased by or from
the Company, the name of the lessor, master lessor and/or lessee, the date of
the lease or sublease (collectively, "Lease") and each amendment thereto
(collectively, "Leased Properties") and, with respect to any current Lease, the
aggregate annual rental and/or other fees payable under any such Lease. All such
current Leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
Leases, any existing material default or material event of default (or event
which with notice or lapse of time, or both, would constitute a default) by the
Company or to the Company's knowledge any other party to such Leases. To the
knowledge of the Company, neither the operations of the Company on the Leased
Properties, nor such Leased Properties, including the improvements thereon,
violate in any material manner any applicable building code, zoning requirement,
or classification or statute relating to the particular property or such
operations, and such non-violation is not dependent,
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in any instance, on so-called non-conforming use exceptions. There are no other
parties occupying, or with a right to occupy the Leased Properties except as
identified on Section 2.12(a) of the Disclosure Schedule.
(b) The Company has good and valid title to, or, in the case
of Leased Properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Liens, except as reflected in the Current
Balance Sheet or otherwise disclosed in Section 2.12(b) of the Disclosure
Schedule and except for Liens for Taxes not yet due and payable which, if
required to be reflected, are reflected in the Current Balance Sheet and such
non-monetary imperfections of title and encumbrances, if any, which are not
material in character, amount or extent, and which do not detract from the
value, or interfere with the present use, of the property subject thereto or
affected thereby.
(c) Section 2.12(c) of the Disclosure Schedule lists a
computer printout based on the Company's books and records of all material items
of equipment, machinery, furniture, fixtures and tangible personal property
(collectively, the "Equipment") owned or leased by the Company and such
Equipment, taken as a whole, (i) is adequate for the conduct of the business of
the Company as currently conducted and (ii) is in good operating condition,
regularly and properly maintained, subject to normal wear and tear and
reasonably fit and usable for the purposes for which they are being used.
(d) The Company has sole and exclusive ownership, free and
clear of any Liens, of all customer files and other customer information
relating to customers of the Company's current and former customers (the
"Customer Information"). No person other than the Company possesses any claims
or rights with respect to use of the Customer Information.
2.13 Intellectual Property.
(a) For the purposes of this Agreement, the following terms
have the following definitions:
"Intellectual Property" shall mean any or all of the
following (i) works of authorship including, without limitation, computer
programs, source code and executable code, whether embodied in software,
firmware or otherwise, documentation, designs, files, records, data and mask
works, (ii) inventions (whether or not patentable), improvements, and
technology, (iii) proprietary and confidential information, trade secrets and
know how, (iv) databases, data compilations and collections and technical data,
(v) logos, trade names, trade dress, trademarks and service marks, (vi) domain
names, web addresses and sites, (vii) tools, methods and processes, and (viii)
all instantiations of the foregoing in any form and embodied in any media.
"Intellectual Property Rights" shall mean any or all of
the following and all rights in, arising out of, or associated therewith: (i)
all United States and foreign patents and utility models and applications
therefor and all reissues, divisions, re-examinations, renewals, extensions,
provisionals, continuations and continuations-in-part thereof, and equivalent or
similar rights
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anywhere in the world in inventions and discoveries including without limitation
invention disclosures ("Patents"); (ii) all trade secrets and other rights in
know how and confidential or proprietary information; (iii) all copyrights,
copyrights registrations and applications therefor, and mask works and mask work
registrations and applications therefor, and all other rights corresponding
thereto throughout the world ("Copyrights"); (iv) all rights in World Wide Web
addresses and domain names and applications and registrations therefor, all
trade names, logos, common law trademarks and service marks, trademark and
service xxxx registrations and applications therefor and all goodwill associated
therewith throughout the world ("Trademarks"); and (v) any similar,
corresponding or equivalent rights to any of the foregoing anywhere in the
world.
"Company Intellectual Property" shall mean any
Intellectual Property and Intellectual Property Rights, including Registered
Intellectual Property Rights, that are owned or licensed by the Company.
"Registered Intellectual Property Rights" shall mean all
United States, international and foreign: (i) Patents, including applications
therefor; (ii) registered Trademarks, applications to register Trademarks,
including intent-to-use applications, or other registrations or applications
related to Trademarks; (iii) Copyrights registrations and applications to
register Copyrights; and (iv) any other Intellectual Property Right that is the
subject of an application, certificate, filing, registration or other document
issued by, filed with, or recorded by, any state, government or other public
legal authority at any time.
(b) Section 2.13(b) of the Disclosure Schedule lists all
Registered Intellectual Property Rights owned or exclusively licensed by, or
filed in the name of, or applied for by the Company (the "Company Registered
Intellectual Property Rights") and lists any proceedings or actions before any
court, tribunal (including the United States Patent and Trademark Office (the
"PTO") or equivalent authority anywhere in the world) related to any of the
Company Registered Intellectual Property Rights or Company Intellectual
Property.
(c) To the knowledge of the Company, there are no facts or
circumstances that would render any Company Intellectual Property invalid or
unenforceable. Without limiting the foregoing, the Company knows of no
information, materials, facts, or circumstances, including any information or
fact that would constitute prior art, that would render any of the Company
Registered Intellectual Property Rights invalid or unenforceable, or would
adversely affect any pending application for any Company Registered Intellectual
Property Right and the Company has not misrepresented, or failed to disclose,
any facts or circumstances in any application for any Company Registered
Intellectual Property Right that would constitute fraud or a misrepresentation
with respect to such application or that would otherwise affect the validity or
enforceability of any Company Registered Intellectual Property Right.
(d) To the knowledge of the Company, each item of Company
Intellectual Property, including all Company Registered Intellectual Property
Rights listed in Section 2.13(b) of the Disclosure Schedule and all Intellectual
Property licensed to the Company, is free and clear of
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any Liens or other encumbrances against the Company. The Company is the
exclusive owner of all owned Company Intellectual Property.
(e) To the extent that any Intellectual Property has been
developed or created independently or jointly by any person other than the
Company for which the Company has paid, the Company has a written agreement with
such person with respect thereto, and the Company thereby has obtained ownership
of, and is the exclusive owner of, all such Intellectual Property and associated
Intellectual Property Rights by operation of law or by valid assignment.
(f) The Company has not transferred ownership of or granted
any license of or right to use or authorized the retention of any rights to use
or joint ownership of any Intellectual Property or Intellectual Property Rights
that is or was Company Intellectual Property, to any other person, except (i)
pursuant to Company's standard agreements used in the ordinary course of the
Company's business, the forms of which are substantially in the forms as listed
in Section 2.13(f) of the Disclosure Schedule; and (ii) pursuant to the
agreements listed in Section 2.13(f) of the Disclosure Schedule.
(g) The Company Intellectual Property constitutes all the
Intellectual Property and Intellectual Property Rights used in and/or necessary
to the conduct of the business of the Company as it currently is conducted or
planned to be conducted, including, without limitation, the design, development,
manufacture, use, import and sale of products, technology and services
(including products, technology or services currently under development).
(h) Other than inbound "shrink-wrap" and similar generally
available commercial binary code end-user licenses, the contracts, licenses and
agreements listed in Section 2.13(h) of the Disclosure Schedule include all
contracts, licenses and agreements to which the Company is a party with respect
to any Intellectual Property and Intellectual Property Rights. To the knowledge
of the Company, all such contracts, licenses and agreements are in full force
and effect. Except as listed in Section 2.13(h) of the Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination or
suspension of such contracts, licenses or agreements pursuant to express
provisions of such contracts, licenses or agreements. The Company is not in
breach of nor has the Company failed to perform under, any of the foregoing
contracts, licenses or agreements and, to the Company's knowledge, no other
party to any such contract, license or agreement is in breach thereof or has
failed to perform thereunder. Except as listed in Section 2.13(h) of the
Disclosure Schedule, following the Closing Date, the Surviving Corporation will
be permitted to exercise all of Company's rights under such contracts, licenses
and agreements to the same extent Company would have been able to had the Merger
not occurred and without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments which Company would otherwise be
required to pay. No person who has licensed Intellectual Property or
Intellectual Property Rights to the Company has ownership rights or license
rights to improvements made by the Company in such Intellectual Property which
has been licensed to the Company.
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(i) Section 2.13(i) of the Disclosure Schedule lists all
contracts, licenses and agreements between the Company and any other person
wherein or whereby the Company has agreed to, or assumed, any obligation or duty
to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other person of
the Intellectual Property Rights of any person other than the Company.
(j) To the knowledge of the Company, operation of the business
of the Company as it currently is conducted or is contemplated to be conducted
by the Company, including but not limited to the design, development, use,
import, manufacture and sale of the products, technology or services (including
products, technology or services currently under development) of the Company
does not, and will not, except as listed in Section 2.13(h) of the Disclosure
Schedule, when conducted by Surviving Corporation in substantially the same
manner following the Closing, infringe or misappropriate any Intellectual
Property Right of any person, violate any right of any person (including any
right to privacy or publicity) or constitute unfair competition or trade
practices under the laws of any jurisdiction, and the Company has not received
notice from any person claiming that such operation or any act, product,
technology or service (including products, technology or services currently
under development) of the Company infringes or misappropriates any Intellectual
Property Right of any person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor does the Company have
knowledge of any basis therefor).
(k) Each item of Company Registered Intellectual Property
Rights is valid and subsisting, and all necessary registration, maintenance and
renewal fees in connection with such Company Registered Intellectual Property
Rights have been paid and all necessary documents and certificates in connection
with such Company Registered Intellectual Property Rights have been filed with
the relevant patent, copyright, trademark or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Company Registered Intellectual Property Rights. There are no
actions that must be taken by the Company within sixty (60) days of the Closing
Date, including the payment of any registration, maintenance or renewal fees or
the filing of any responses to the PTO office actions, documents, applications
or certificates for the purposes of maintaining, perfecting or preserving or
renewing any Company Registered Intellectual Property Rights. In each case in
which the Company has acquired ownership of any Intellectual Property from any
person, the Company has obtained a valid and enforceable assignment sufficient
to irrevocably transfer all rights in such Intellectual Property and the
associated Intellectual Property Rights (including the right to seek past and
future damages with respect thereto) to the Company. The Company has not claimed
a particular status, including "Small Business Status," in the application for
any Intellectual Property Rights, which claim of status was at the time made
inaccurate or false.
(l) There are no contracts, licenses or agreements between the
Company and any other person with respect to Company Intellectual Property under
which there is, to the knowledge of the Company, any dispute regarding the
rights and obligations specified in such agreement, or performance under such
agreement including with respect to any payments to be made or received by the
Company thereunder.
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(m) To the knowledge of the Company, no person is infringing
or misappropriating any Company Intellectual Property.
(n) The Company has taken commercially reasonable steps to
protect the Company's rights in confidential information and trade secrets of
the Company or as required by any other person who has provided its confidential
information or trade secrets to the Company. Without limiting the foregoing, the
Company has, and enforces, a policy requiring each employee, consultant and
contractor to execute proprietary information, confidentiality and assignment
agreements substantially in the form attached hereto as Section 2.13(n) of the
Disclosure Schedule, and, to the knowledge of the Company, all current and
former employees, consultants and contractors of the Company have executed such
an agreement.
(o) No Company Intellectual Property Rights or service of the
Company is subject to any proceeding or outstanding decree, order, judgment,
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Company or affects the validity or enforceability of
such Company Intellectual Property.
(p) To the knowledge of the Company, no (i) product,
technology, service or publication of the Company, (ii) material published or
distributed by the Company or (iii) conduct or statement of Company constitutes
a defamatory statement or material, false advertising or otherwise violates any
law or regulation.
(q) Except as listed in Section 2.13(h) of the Disclosure
Schedule, all Company Intellectual Property that is owned by the Company will be
fully (subject only to non-exclusive licenses granted by the Company with
respect thereto) transferable, alienable or licensable by Surviving Corporation
without restriction and without payment of any kind to any third party.
(r) Neither this Agreement nor the transactions contemplated
by this Agreement, including the assignment to Parent or Surviving Corporation,
by operation of law or otherwise, of any contracts or agreements to which the
Company is a party, will result in (i) Parent's or the Surviving Corporation's
granting to any third party any right to or with respect to any Intellectual
Property or Intellectual Property Right owned by, or licensed to, either of
them, (ii) either Parent's or the Surviving Corporation's being bound by, or
subject to, any non-compete or other restriction on the operation or scope of
their respective businesses, or (iii) either Parent's or the Surviving
Corporation's being contractually obligated to pay any royalties or other
amounts to any third party in excess of those payable by Parent or Surviving
Corporation, respectively, prior to the Closing, pursuant to agreements that
Parent, Surviving Corporation or the Company may have with a third party.
(s) None of the Company Intellectual Property was developed by
or on behalf of or using grants of any Governmental Entity.
2.14 Agreements, Contracts and Commitments.
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(a) Except as set forth in Sections 2.13(i), 2.13(k) or
2.14(a) of the Disclosure Schedule, the Company is not a party to nor is it
bound by:
(i) any employment or consulting agreement, contract
or commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization;
(ii) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property having a value
individually in excess of $10,000 individually or $50,000 in the aggregate;
(v) any agreement, contract or commitment containing
any covenant limiting the freedom of the Company to engage in any line of
business or to compete with any person;
(vi) any agreement, contract or commitment relating
to capital expenditures and involving future payments in excess of $10,000
individually or $50,000 in the aggregate;
(vii) any agreement, contract or commitment relating
to the disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's business;
(viii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
(ix) any outstanding purchase orders or contracts for
the future purchase of materials involving in excess of $10,000 individually or
$50,000 in the aggregate;
(x) any dealer, distribution, joint marketing or
development agreement;
(xi) any sales representative, original equipment
manufacturer, value added, remarketer, reseller or independent software vendor
or other agreement for use or distribution of the Company's products, technology
or services;
(xii) any sales or other customer contract; or
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(xiii) any other agreement, contract or commitment
that involves $10,000 individually or $50,000 in the aggregate or more or is not
cancelable without penalty within thirty (30) days.
(b) The Company is in compliance with and has not breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under, any of the terms or conditions of any material agreement,
contract, covenant, instrument, lease, license or commitment to which it is a
party or by which it is bound (collectively a "Contract"), nor does the Company
have knowledge of any event that would constitute such a breach, violation or
default with the lapse of time, giving of notice or both. To the knowledge of
the Company, each Contract is in full force and effect and is not subject to any
default thereunder by any party obligated to the Company pursuant thereto. The
Company has obtained, or will use its reasonable best efforts to obtain prior to
the Closing Date, all necessary consents, waivers and approvals of parties to
any Contract as are required thereunder in connection with the Merger or for
such Contracts to remain in effect without modification after the Closing.
Following the Effective Time, the Company will be permitted to exercise all of
its rights under the Contracts without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Company
would otherwise be required to pay had the transactions contemplated by this
Agreement not occurred.
(c) The Company will use its reasonable best efforts to obtain
any and all consents, waivers, assignments and approvals under any of the
Contracts as may be required in connection with the Merger (all such consents,
waivers and approvals are set forth in the Disclosure Schedule) so as to
preserve all rights of, and benefits to, the Company thereunder.
2.15 Interested Party Transactions. To the knowledge of the 9Company,
no officer, director, Shareholder (nor any ancestor, sibling, descendant or
spouse of any of such persons, or any trust, partnership or corporation in which
any of such persons has or has had an interest) or employee of the Company, has
or has had, directly or indirectly, (i) an interest in any entity which
furnished or sold, or furnishes or sells, services, products or technology that
the Company furnishes or sells, or proposes to furnish or sell, or (ii) any
interest in any entity that purchases from or sells or furnishes to the Company
any goods or services or (iii) a beneficial interest in any Contract; provided,
that ownership of no more than one percent (1%) of the outstanding voting stock
of a publicly traded corporation shall not be deemed an "interest in any entity"
for purposes of this Section 2.15.
2.16 Governmental Authorization. Section 2.16 of the Disclosure
Schedule accurately lists each consent, license, permit, grant or other
authorization issued to the Company by a Governmental Entity (i) pursuant to
which the Company currently operates or holds any interest in any of their
properties or (ii) which is required for the operation of its business or the
holding of any such interest (herein collectively called "Company
Authorizations"). The Company Authorizations are in full force and effect and
constitute all Company Authorizations required to permit the Company to operate
or conduct its business or hold any interest in its properties or assets.
2.17 Litigation. There is no action, suit, claim or proceeding of any
nature pending, or, to the Company's knowledge, threatened, against the Company,
its properties (tangible or intangible) or
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any of their officers or directors, nor, to the knowledge of the Company, is
there any reasonable basis therefor. To the Company's knowledge, there is no
investigation pending or threatened against the Company, its properties or any
of their officers or directors (nor, to the knowledge of the Company, is there
any reasonable basis therefor) by or before any Governmental Entity. No
Governmental Entity has at any time challenged or questioned the legal right of
the Company to conduct its operations as presently or previously conducted.
2.18 Accounts Receivable.
(a) The Company has made available to Parent a list of all
accounts receivable of the Company ("Accounts Receivable") as of March 31, 2001
along with a range of days elapsed since invoice.
(b) All Accounts Receivable of the Company arose in the
ordinary course of business and are collectible except to the extent of reserves
therefor set forth in the Current Balance Sheet. No person has any Lien on any
of such Accounts Receivable and no request or agreement for deduction or
discount has been made with respect to any of such Accounts Receivable.
2.19 Minute Books. The minutes of the Company made available to counsel
for Parent are the only minutes of the Company and contain a reasonably accurate
summary of all meetings of the Board of Directors (or committees thereof) of the
Company and its respective stockholders or actions by written consent since the
time of incorporation of the Company.
2.20 Environmental Matters.
(a) Hazardous Material. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, and urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws (a
"Hazardous Material"), but excluding normal amounts of office and janitorial
supplies properly and safely maintained. To the knowledge of the Company, no
Hazardous Materials are present in, on or under any property, including the land
and the improvements, ground water and surface water thereof, that the Company
has at any time owned, operated, occupied or leased in a manner that could give
rise to any Company liability.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Effective Time, nor has either of them disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all of
the
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foregoing being collectively referred to as "Hazardous Materials Activities") in
violation of any law, rule, regulation, ordinance, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date of this
Agreement.
(c) Permits. The Company currently holds and is in material
compliance with all environmental approvals, permits, licenses, clearances and
consents (the "Environmental Permits") necessary for the conduct of the
Company's Hazardous Material Activities, respectively, and other businesses of
the Company as such activities and businesses are currently being conducted.
(d) Environmental Liabilities. To the knowledge of the
Company, no action, proceeding, revocation proceeding, amendment procedure,
writ, injunction or claim is pending or threatened concerning any Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of the Company.
The Company has no knowledge of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.
(e) Environmental Reports. The Company has provided to Parent
copies of all environmental reports, assessments or studies in the Company's
possession regarding the Leased Properties.
2.21 Brokers' and Finders' Fees; Third Party Expenses. Except for fees
payable to CIBC World Markets Corp. pursuant to an engagement letter dated
November 20, 2000, a copy of which has been provided to Parent, the Company has
not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Agreement or any transaction contemplated hereby. Section
2.21 of the Disclosure Schedule sets forth the Company's current reasonable
estimate of all Third Party Expenses expected to be incurred by the Company in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby.
2.22 Employee Benefit Plans and Compensation.
(a) The following terms shall have the meanings set forth
below:
(i) "Affiliate" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(iii) "DOL" shall mean the U.S. Department of Labor;
(iv) "Employee" shall mean any current or former
employee, consultant or director of the Company or any Affiliate;
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(v) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or other agreement, contract or understanding between the Company or
any Affiliate and any Employee;
(vi) "Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written, unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has or may have any liability or obligation;
(vii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act
of 1993, as amended;
(ix) "IRS" shall mean the Internal Revenue Service;
(x) "International Employee Plan" shall mean each
Employee Plan that has been adopted or maintained by the Company or any
Affiliate, whether informally or formally, or with respect to which the Company
or any Affiliate will or may have any liability, for the benefit of Employees
who perform services outside the United States;
(xi) "Multiemployer Plan" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan," as defined in Section
3(37) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "Pension Plan" shall mean each Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Schedule 2.22(b) contains an accurate and
complete list of each Employee Plan and each Employee Agreement under each
Employee Plan or Employee Agreement. The Company does not have any plan or
commitment to establish any new Employee Plan, International Employee Plan or
Employee Agreement, to modify any Employee Plan or Employee Agreement (except to
the extent required by law or to conform any such Employee Plan or Employee
Agreement to the requirements of any applicable law, in each case as previously
disclosed to Parent in writing, or as required by this Agreement), or to enter
into any Employee Plan, International Employee Plan or Employee Agreement.
(c) Documents. The Company has provided, or made available
upon request, to Parent: (i) correct and complete copies of all documents
embodying each Employee Plan,
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International Employee Plan and each Employee Agreement including (without
limitation) all amendments thereto and all related trust documents,
administrative service agreements, group annuity contacts, group insurance
contracts, and policies pertaining to fiduciary liability insurance covering the
fiduciaries for each Plan; (ii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Employee Plan;
(iii) the most recent actuarial valuations, if any, prepared for each Company
Employee Plan; (iv) if the Employee Plan is funded, the most recent annual and
periodic accounting of Employee Plan assets; (v) the most recent summary plan
description together with the summary(ies) of material modifications thereto, if
any, required under ERISA with respect to each Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and all applications
and correspondence to or from the IRS or the DoL with respect to any such
application or letter; (vii) all communications material to any Employee or
Employees relating to any Employee Plan and any proposed Employee Plans, in each
case, relating to any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting schedules or other
events which would result in any liability to the Company; (viii) all
correspondence to or from any governmental agency relating to any Employee Plan;
(ix) all COBRA forms and related notices (or such forms and notices as required
under comparable law); (x) all policies pertaining to fiduciary liability
insurance covering the fiduciaries for each Employee Plan; (xi) the three (3)
most recent plan years' discrimination tests for each Employee Plan; and (xii)
all registration statements, annual reports (Form 11-K and all attachments
thereto) and prospectuses prepared in connection with each Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.22(d), (i) The Company has performed all material obligations required to be
performed by it under, is not in default or violation of, and has no knowledge
of any default or violation by any other party to each Employee Plan, and each
Employee Plan has been established and maintained in accordance with its terms
and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) each Company
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code has either received a
favorable determination, opinion, notification or advisory letter from the IRS
with respect to each such Company Employee Plan as to its qualified status under
the Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Company Employee Plan; (iii) to the
knowledge of the Company, no "prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 408 of ERISA, has occurred with respect to any Employee
Plan; (iv) to the knowledge of the Company, there are no actions, suits or
claims pending or threatened or reasonably anticipated (other than routine
claims for benefits) against any Employee Plan or against the assets of any
Employee Plan; (v) each Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to Parent, the Company or any Affiliate (other than ordinary
administration expenses); (vi) to the knowledge of the Company, there are no
audits, inquiries or proceedings pending or threatened
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by the IRS or DOL with respect to any Employee Plan; and (vii) neither the
Company nor any Affiliate is subject to any penalty or tax with respect to any
Employee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the
Code.
(e) No Pension Plans. Neither the Company nor any Affiliate
has ever maintained, established, sponsored, participated in, or contributed to,
any Pension Plan which is subject to Title IV of ERISA or Section 412 of the
Code.
(f) Collectively Bargained, Multiemployer and Multiple
Employer Plans. At no time has the Company or any Affiliate contributed to or
been obligated to contribute to any Multiemployer Plan. Neither the Company, nor
any Affiliate has at any time ever maintained, established, sponsored,
participated in, or contributed to any multiple employer plan, or to any plan
described in Section 413 of the Code.
(g) No Post-Employment Obligations. No Employee Plan provides,
or reflects or represents any liability to provide, retiree life insurance,
retiree health or other retiree employee welfare benefits to any person for any
reason, except as may be required by COBRA or other applicable statute, and the
Company has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
or any other person that such Employee(s) or other person would be provided with
retiree life insurance, retiree health or other retiree employee welfare
benefit, except to the extent required by statute.
(h) Health Care Compliance. Neither the Company nor any
Affiliate has, prior to the Effective Time and in any material respect, violated
any of the health care continuation requirements of COBRA, the requirements of
FMLA, the requirements of the Health Insurance Portability and Accountability
Act of 1996, the requirements of the Women's Health and Cancer Rights Act of
1998, the requirements of the Newborns' and Mothers' Health Protection Act of
1996, or any amendment to each such act, or any similar provisions of state law
applicable to its Employees.
(i) Effect of Transaction. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(j) Excise Tax. No payment or benefit which will or may be
made by the Company or its Affiliates with respect to any Employee or any other
"disqualified individual" (as defined in Code Section 280G and the regulations
thereunder) will be characterized as a "parachute payment," within the meaning
of Section 280G(b)(2) of the Code.
(k) Employment Matters. The Company: (i) is in compliance, in
all material respects, with all applicable foreign, federal, state and local
laws, rules and regulations respecting
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34
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, with respect to Employees; (ii) has withheld and
reported all amounts required by law or by agreement to be withheld and reported
with respect to wages, salaries and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund governed by or maintained by or on behalf of any
governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). To the knowledge of the Company, there are no pending,
threatened or reasonably anticipated claims or actions against the Company under
any worker's compensation policy or long-term disability policy.
(l) Labor. No work stoppage or labor strike against the
Company is pending, or to the knowledge of the Company, threatened or reasonably
anticipated. The Company does not know of any activities or proceedings of any
labor union to organize any Employees. There are no actions, suits, claims,
labor disputes or grievances pending, or, to the knowledge of the Company,
threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints. The Company has
not engaged in any unfair labor practices within the meaning of the National
Labor Relations Act. The Company is not presently, nor has it been in the past,
a party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company.
(m) International Employee Plan. The Company does not now, nor
has it ever had the obligation to, maintain, establish, sponsor, participate in,
or contribute to any International Employee Plan.
(n) No Interference or Conflict. To the knowledge of the
Company, no stockholder, officer, or employee of the Company is obligated under
any contract or agreement subject to any judgment, decree or order of any court
or administrative agency that would interfere with such person's efforts to
promote the interests of the Company or that would interfere with the Company's
business. Neither the execution nor delivery of this Agreement, nor the carrying
on of the Company's business as presently conducted or presently proposed to be
conducted nor any activity of such officers, directors, employees or consultants
in connection with the carrying on of the Company's business as presently
conducted or currently proposed to be conducted, will, to the knowledge of the
Company, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract or agreement under
which any of such officers, directors, employees or consultants is now bound.
2.23 Insurance. Section 2.23 of the Disclosure Schedule lists all
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company. There
is no claim by the Company pending 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,
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and the Company is otherwise in compliance with the terms of such policies and
bonds (or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
premium increase with respect to, any of such policies.
2.24 Compliance with Laws. The Company has complied with, is not in
violation of, and has not received any written notices of violation with respect
to, any material foreign, federal, state or local statute, law or regulation.
2.25 Warranties; Indemnities. Except for the warranties and indemnities
contained in those contracts and agreements set forth in Section 2.13(k) of the
Disclosure Schedule, the Company has not given any contractual warranties or
indemnities relating to products or technology sold or licensed or services
rendered by the Company.
2.26 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested by Parent or its counsel.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company that on the date of
this Agreement and as of the Effective Time as though made at the Effective
Time, as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub is a corporation duly organized, validly existing and in good
standing under the laws of California. Each of Parent and Sub has the corporate
power to own its properties and to carry on its business as now being conducted
and is duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed would have a
material adverse effect on the business, assets (including intangible assets),
condition (financial or otherwise), results of operations or capitalization of
Parent (a "Parent Material Adverse Effect"); provided, however, changes in the
trading prices of Parent Common Stock (in and of itself) shall not be deemed a
Parent Material Adverse Effect.
3.2 Authority. Each of Parent and Sub has all requisite corporate power
and authority to enter into this Agreement and any Related Agreements to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Parent and Sub. This Agreement to
which Parent and Sub are parties have been duly executed and delivered by Parent
and Sub and constitute the valid and binding obligations of Parent and Sub,
enforceable in accordance with their terms, except as such enforceability may be
limited by principles of public policy and subject to the laws of general
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application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
3.3 Capital Structure.
(a) The authorized stock of Parent consists of 100,000,000
shares of Common Stock, $0.01 par value, of which 16,391,376 shares were issued
and outstanding as of April 30, 2001, and 5,000,000 shares of undesignated
Preferred Stock, $0.01 par value, of which no shares are issued or outstanding.
The authorized capital stock of Sub consists of 1,000 shares of Common Stock,
all of which shares, as of the date hereof, are issued and outstanding and are
held by Parent. All such shares of Parent and Sub have been duly authorized, and
all such issued and outstanding shares have been validly issued, are fully paid
and nonassessable, are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof, are not subject to
preemptive rights created by statute, the charter documents or Bylaws of Parent
as currently in effect or any agreement to which Parent is a party or by which
it is bound, and have been issued in compliance with federal and state
securities laws. As of April 30, 2001, Parent has reserved 4,075,606 shares of
Common Stock for issuance pursuant to its employee and director stock and option
plans.
(b) The shares of Parent Common Stock to be issued pursuant to
the Merger will be duly authorized, validly issued, fully paid, non-assessable,
free of any liens or encumbrances and not subject to any preemptive rights or
rights of first refusal created by statute or the charter documents or Bylaws of
Parent or Sub or any agreement to which Parent or Sub is a party or is bound and
will be issued in compliance with federal and state securities laws.
3.4 No Conflict. The execution and delivery of this Agreement does 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 Conflict under (i) any provision of
the certificate of incorporation, as amended, and Bylaws of Parent or Sub, (ii)
any mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise or license to which Parent or any of its
respective properties or assets are subject and which has been filed as an
exhibit to Parent's filings under the Securities Act or the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or Sub or their respective properties or assets, except in each case where such
Conflict will not have a Parent Material Adverse Effect or will not affect on
the legality, validity or enforceability of this Agreement.
3.5 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, or any
third party is required by or with respect to Parent or Sub in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable securities laws, (ii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings
which, if not obtained or made, would not have a Material
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Adverse Effect, and (iii) the filing of the Merger Agreement with the Secretary
of State of the State of California.
3.6 SEC Documents; Parent Financial Statements. Parent has made
available to the Company a true and complete copy of each annual, quarterly and
other report, registration statement (without exhibits) and definitive proxy
statement filed by Parent with the Securities and Exchange Commission (the
"SEC") since February 9, 2000 (the "Parent SEC Documents"). As of their
respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC Documents, and none of the Parent SEC Documents
contained on their filing dates any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except to the extent corrected by a subsequently filed
Parent SEC Document. The financial statements of Parent included in the Parent
SEC Documents (the "Parent Financial Statements") complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP applied on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited financial statements, as permitted under
Form 10-Q under the Exchange Act) and fairly presented the consolidated
financial position of Parent and its consolidated subsidiaries as of the
respective dates thereof and the consolidated results of Parent's operations and
cash flows for the periods indicated (subject to, in the case of unaudited
statements, to normal and recurring year-end audit adjustments).
3.7 Tax-Free Reorganization.
(a) Except with respect to (i) open-market purchases of
Parent's stock pursuant to a general stock repurchase program of Parent that has
not been created or modified in connection with the Merger, or (ii) repurchases
in the ordinary course of business of unvested shares, if any, acquired from
terminated employees, neither Parent nor any person related to Parent within the
meaning of Treas. Reg. Sections 1.368-1(e)(3), (e)(4) and (e)(5) has any plan or
intention to, redeem or otherwise acquire any of the stock of Parent issued to
the Company Shareholders pursuant to this Agreement following the Merger. In
addition, for purposes of the foregoing representation, the payment of cash in
lieu of the issuance of fractional shares of Parent Common Stock will be
disregarded provided the fractional share interests of the Shareholder are
aggregated, no Company Shareholder will receive cash in an amount equal to or
greater than the value of one full share of Parent Common Stock and the total
cash consideration that will be paid in the transaction to the Shareholder
instead of issuing fractional shares of Parent Common Stock will not exceed 1%
of the total consideration that will be issued in the transaction to the
Shareholder in exchange for its shares of the Company stock. Neither Parent nor
any person related to Parent (within the meaning of Treas. Reg. Sections
1.368-1(e)(3), (e)(4) and (e)(5)) has acquired any Company Stock in
contemplation of the Merger or otherwise as part of a plan of which the Merger
is part.
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(b) Parent has no plan or intention to cause the Surviving
Corporation, after the Merger, to issue additional shares of Surviving
Corporation Capital Stock that would result in Parent losing control of the
Surviving Corporation within the meaning of Section 368(c) of the Code.
(c) Except for transfers of stock and assets described in
Treas. Reg. Section 1.368-2(k) or reincorporation of the Surviving Corporation
into Delaware, Parent has no plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with or into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation; or, except for dispositions made in the ordinary course of
business, to cause the Surviving Corporation to sell or otherwise dispose of any
of its assets.
(d) Parent will cause the Surviving Corporation to continue
the Company's historic business or use a significant portion of the Company's
historic business assets in a business. For purposes of this representation,
Parent will be deemed to satisfy the foregoing representation if (a) the members
of Parent's qualified group (as defined in Treas. Reg. Section
1.368-1(d)(4)(ii)), in the aggregate, continue the historic business of the
Company or use a significant portion of the Company's historic business assets
in a business, or (b) the foregoing activities are undertaken by a partnership
as contemplated by Treas. Reg. Section 1.368-1(d)(4).
(e) Parent nor Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(f) Following the Merger and assuming the accuracy of the
Company's representation contained in Section 2.7(d)(i), the Surviving
Corporation will hold at least 90 percent of the fair market value of the
Company's net assets and at least 70 percent of the fair market value of the
Company's gross assets and at least 90 percent of the fair market value of Sub's
net assets and at least 70 percent of the fair market value of Sub's gross
assets held immediately prior to the Effective Time. For purposes of this
representation, amounts paid by the Company to dissenting the Company
Shareholders, amounts used by the Company to pay Merger expenses, amounts paid
by the Company to redeem stock, securities, warrants or options of the Company
as part of any overall plan of which the Merger is a part, and amounts
distributed by the Company to Company Shareholders (except for any regular,
normal dividends) as part of an overall plan of which the Merger is a part, in
each case will be treated as constituting assets of the Company immediately
prior to the Effective Time. The foregoing sentence shall apply to Sub, mutatis
mutandis.
(g) Except for those expenses paid by Parent pursuant to
Section 5.11 of this Agreement (which expenses are directly related to the
Merger), Parent and Sub will pay their respective expenses, if any, incurred in
connection with the Merger. In the Merger, no liabilities of the shareholders of
the Company will be assumed by Parent, and Parent will not assume any liens,
encumbrances or any similar liabilities relating to any Company Capital Stock
acquired by Parent in the Merger.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing), to carry on the Company's business
in the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of the Company when due, to pay
or perform other obligations when due, and, to the extent consistent with such
business, use their reasonable best efforts consistent with past practice and
policies to preserve intact the Company's present business organizations, keep
available the services of the Company's present officers and key employees and
preserve the Company's relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, all with the
goal of preserving unimpaired the Company's goodwill and ongoing businesses at
the Effective Time. The Company shall promptly notify Parent of any event or
occurrence or emergency not in the ordinary course of business of the Company
and any material event involving the Company.
Except as expressly contemplated by this Agreement as set forth in
Section 4.1 of the Disclosure Schedule, the Company shall not, without the prior
written consent of Parent:
(a) Make any expenditures or enter into any commitment or
transaction exceeding $10,000 individually or $50,000 in the aggregate or any
commitment or transaction of the type described in Section 2.9 hereof;
(b) (i) Sell any Company Intellectual Property or enter into
any agreement with respect to the Company Intellectual Property with any person
or entity, (ii) buy any Intellectual Property or enter into any agreement with
respect to the Intellectual Property of any person or entity, (iii) enter into
any agreement with respect to development of any Intellectual Property with a
third party;
(c) Transfer to any person or entity any rights to any Company
Intellectual Property, other than non-exclusive licenses to Company's customers
in the ordinary course of business consistent with past practice;
(d) Enter into or amend any Contract pursuant to which any
other party is granted marketing, distribution, development or similar rights of
any type or scope with respect to any products or technology of the Company;
(e) Amend or otherwise modify (or agree to do so) or violate
the terms of, any of the Contracts set forth or described in the Disclosure
Schedule;
(f) Commence or settle any litigation;
(g) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, or split, combine or
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reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
capital stock of the Company, or repurchase, redeem or otherwise acquire,
directly or indirectly, any shares of the capital stock of the Company (or
options, warrants or other rights exercisable therefor);
(h) Except for the issuance of shares of Company Capital Stock
upon the exercise or conversion of options outstanding on the date of this
Agreement and except for the issuance of options to purchase shares of the
Company's Common Stock as contemplated by Section 5.12 of this Agreement, issue,
grant, deliver or sell or authorize or propose the issuance, grant, delivery or
sale of, redeem or purchase or propose the purchase of or redemption 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 or purchase any such shares or other
convertible securities.
(i) Cause or permit any amendments to its Articles of
Incorporation or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any 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 the
Company's business;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets, except properties or assets in the ordinary course of
business and consistent with past practices;
(l) 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;
(m) Grant any loans to others or purchase debt securities of
others or amend the terms of any outstanding loan agreement;
(n) Grant any severance or termination pay (i) to any director
or officer or (ii) to any other employee except payments made pursuant to
written agreements outstanding on the date of this Agreement and disclosed in
the Disclosure Schedule;
(o) Adopt any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salary or wage rates
or other compensation (including accelerating any options) of its officers,
directors or employees;
(p) 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;
(q) Pay, discharge or satisfy, in an amount in excess of
$10,000 in any one case or $50,000 in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted,
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contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected or reserved against in
the Current Balance Sheet;
(r) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(s) Enter into any strategic alliance or joint marketing
arrangement or agreement;
(t) Amend or modify the terms of any of the outstanding
Company Options, Company Warrants or Company Capital Stock to accelerate the
vesting thereof;
(u) Hire or terminate employees or encourage employees to
resign; or
(v) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (u) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder, or any other action not in the ordinary course of the
Company's business and consistent with past practice.
4.2 No Solicitation. Until the earlier of the Effective Time or the
date of termination of this Agreement pursuant to the terms and provisions of
Section 8.1 hereof, Company shall not (nor will it permit any of its officers,
directors (subject to the performance of their fiduciary duty), employees,
stockholders, agents, representatives or affiliates to), directly or indirectly,
take any of the following actions with any party other than Parent and its
designees: (i) solicit, encourage, initiate or participate in any negotiations
or discussions with respect to any offer or proposal to acquire or license all
or any material part of the Company's business and properties or a majority of
the Company Capital Stock, whether by merger, purchase of assets (including,
without limitation, any technology or proprietary information of the Company),
tender offer, license or otherwise, or effect any such transaction, (ii)
disclose any information not customarily disclosed to any person concerning the
Company's business and properties or afford to any person or entity access to
its properties, books or records, (iii) assist or cooperate with any person or
entity to make any proposal to purchase or license all or any material part of
the Company's business and properties (including, without limitation, any
technology or proprietary information related to the Company's business), other
than inventory in the ordinary course of business consistent with past
practices, or a majority of the Company Capital Stock, or (iv) enter into any
agreement or arrangement with any person providing for the acquisition or
licensing (other than non-exclusive licenses in the ordinary course of business
consistent with past practice) of all or any material part of the Company's
business and properties or a majority of the Company Capital Stock, whether by
merger, purchase of assets (including, without limitation any technology or
proprietary information of Company), tender offer, license or otherwise. In the
event Company shall receive any offer or proposal, directly or indirectly, of
the type referred to in clause (i) or (iii) above, or any request for disclosure
or access pursuant to clause (ii) above, it shall immediately inform Parent that
it has received same, furnish to Parent any other information that Parent may
reasonably request (including without limitation the identity of the
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party making the offer, request or proposal and all terms and conditions of the
offer, request or proposal), and provide Parent with a complete copy of any
written offer, request or proposal and any related correspondence. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth above by any officer, director, employee, stockholder, agent,
representative or affiliate of Company shall be deemed to be a breach of this
paragraph by Company. The Company agrees that its obligations under this Section
4.2 are necessary and reasonable to protect Parent and its business, and
expressly agrees that monetary damages would be inadequate to compensate Parent
for any breach of this Section 4.2. Accordingly, the Company agrees and
acknowledges that any such violation or threatened violation will cause
irreparable injury to Parent and that, in addition to any other remedies that
may be available, in law, in equity or otherwise, Parent shall be entitled to
obtain injunctive relief against the threatened breach of this Section 4.2 or
the continuation of any such breach, without the necessity of proving damages,
and to enforce specifically the terms and provisions of this Section 4.2 in any
court of the United States or any state having jurisdiction.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Shareholder Approval. As promptly as practicable after the
execution of this Agreement, the Company shall submit this Agreement and the
transactions contemplated hereby to its stockholders for approval and adoption
as provided by the CGCL and its Articles of Incorporation and Bylaws. Such
submission shall also include a solicitation of approval of (i) the escrow and
indemnification obligations of the stockholders set forth in Article VII of this
Agreement and the deposit of the Escrow Shares into the Escrow Fund and (ii) the
appointment of Yag Xxxxx as Shareholder Representative under and as defined in
the Escrow Agreement. Unless the Company's Board of Directors reasonably
determines, in the exercise of its fiduciary duty, that it is necessary to
withdraw its recommendation in favor of the Merger, the Company shall use its
commercially reasonable efforts to solicit and obtain the consent of its
Shareholders sufficient to approve the Merger and this Agreement and to enable
the Closing to occur as promptly as practicable. The materials submitted to the
Company's Shareholders shall be subject to review and approval by Parent and
include information regarding the Company; the terms of the Merger; the
Agreement and the Related Agreements; and the unanimous recommendation of the
Board of Directors of the Company in favor of the Merger, this Agreement and
Related Agreements.
5.2 Securities Laws. Parent and the Company shall use commercially
reasonable efforts to cause the Parent Common Stock to be issued in a
transaction exempt from registration pursuant to Regulation D promulgated under
the Securities Act of 1933, as amended from time to time. In connection
therewith, the Company shall use its reasonable best efforts to ensure
compliance with such exemption, including without limitation, delivering
executed shareholder Investment Representation Statements from each holder of
Company Series F Preferred Stock.
5.3 Restrictions on Transfer. Each share of Parent Common Stock to be
issued hereunder shall be issued without any legend restricting such transfer of
shares except (i) as it relates to restrictions on transfer pursuant to Rule 144
under the Securities Act or (ii) any other legend in the opinion of counsel for
Parent required to comply with the Securities Act.
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5.4 Access to Information. The Company shall afford Parent and its
accountants, counsel and other representatives reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of the
Company's properties, books, contracts, commitments and records, (b) all other
information concerning the business, properties and personnel of the Company as
Parent may reasonably request and (c) all key employees of the Company as
identified by Parent. The Company agrees to provide to Parent and its
accountants, counsel and other representatives copies of internal financial
statements (including Tax returns and supporting documentation) promptly upon
request. No information or knowledge obtained in any investigation pursuant to
this Section 5.4 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.
5.5 Confidentiality; Public Disclosure.
(a) Each of Parent, Sub and the Company hereby agrees that the
information obtained in any investigation pursuant to Section 5.4, or pursuant
to the negotiation and execution of this Agreement or the effectuation of the
transaction contemplated hereby shall be governed by the terms of the letter
agreement dated April 20, 2001 by and between the Company and Parent.
(b) Unless otherwise required by law, no disclosure (whether
or not in response to an inquiry) of the subject matter of this Agreement shall
be made by any party hereto unless approved by Parent and the Company prior to
release subject, in the case of Parent, to Parent's obligation to comply with
the rules and regulations of the National Association of Securities Dealers,
Inc.
5.6 Consents. The Company shall use its commercially reasonable efforts
to obtain the consents, waivers, assignments and approvals under any of the
Contracts as may be required in connection with the Merger (all of such
consents, waivers and approvals are set forth in the Disclosure Schedule) so as
to preserve all rights of, and benefits to, the Company thereunder.
5.7 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement.
5.8 Notification of Certain Matters. Each of Parent and the Company
shall give prompt notice to the other of (i) the occurrence or non-occurrence of
any event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty of Parent or the Company, as applicable, contained in
this Agreement to be untrue or inaccurate and (ii) any failure of Parent or the
Company, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be
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complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.8 shall not limit or otherwise affect
any remedies available to either party. Further, disclosure by Parent or the
Company pursuant to this Section 5.8 shall not be deemed to amend or supplement
the Disclosure Schedule or prevent or cure any misrepresentations, breach of
warranty or breach of covenant.
5.9 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.10 FIRPTA Compliance. On the Closing Date, the Company shall deliver
to Parent a properly executed statement in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2) and in a form reasonably acceptable to
Parent for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
5.11 Expenses.
(a) Except as set forth in Section 5.11(b), whether or not the
Merger is consummated, all fees and expenses incurred in connection with the
Merger including, without limitation, all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties ("Third Party
Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses.
(b) In the event that the Merger is consummated, Parent agrees
to pay the Company's expenses equal to the lesser of (i) the Company's Estimated
Third Party Expenses, documented to Parent's reasonable satisfaction, or (ii)
the Covered Expenses. Subject to Section 7.2, the Company and the Shareholders
agree that Parent shall have full recourse to the Escrow Fund for payment of all
Third Party Expenses of the Company that exceed the Covered Expenses and were
not deducted from the Total Consideration as of the Closing Date.
5.12 Termination of 401(k) Plan. The Company agrees to terminate its
401(k) plan immediately prior to the Closing, unless Parent, in its sole and
absolute discretion, agrees to sponsor and maintain such plan by providing the
Company with notice of such election at least two days before the Effective
Time.
5.13 Employee Benefits. Each employee of the Company who remains an
employee of the Company after the Effective Time shall be eligible, upon
completion of Parent's standard employee background and reference check, upon
proof of appropriate employment authorization from the U.S. Immigration and
Naturalization Service or the U.S. Department of State reflecting a right to
work in the United States, to receive salary and benefits (such as medical
benefits, bonuses and 401(k) plan participation) consistent with Parent's
standard human resource policies.
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5.14 Employment Offers. The Company shall use commercially reasonable
efforts to encourage each of its employees to accept the offer of employment
made by Parent, including without limitation executing and delivering to such
employees Parent's standard confidentiality and assignment of inventions
agreement.
5.15 Shareholder List. Immediately prior to the Closing, the Company
shall provide Parent a statement certified by any officer of the Company setting
forth any changes which would have been required to be set forth on Section
2.2(a) and Section 2.2(b) of the Disclosure Schedule as if such sections of
Disclosure Schedules had been made and delivered as of Closing.
5.16 Affiliate Voting Agreements. The Company shall deliver or cause to
be delivered to Parent, concurrently with the execution of this Agreement, from
each Affiliate, an executed Voting Agreement with the Parent substantially in
the form attached hereto as Exhibit B.
5.17 Registration Rights Agreement. Parent shall deliver or cause to be
delivered to the Company and the Shareholders, concurrently with the Closing, an
executed Registration Rights Agreement in substantially in the form attached
hereto as Exhibit C, pursuant to which, among other things, Parent shall agree
to file, within thirty (30) days following the Closing Date, a registration
statement on Form S-3 to register shares of Parent Common Stock issuable
pursuant to the Merger.
5.18 Preparation Delivery of Estimated Balance Sheet and Statement of
Expenses. The Company shall prepare in good faith the Estimated Balance Sheet,
together with a written statement of the Estimated Third Party Expenses (the
"Statement of Expenses"), which together shall be delivered to Parent at least
two (2) business days prior to the Closing Date. Subject to Section 7.2, the
Company and the Shareholders agree that Parent shall have recourse to the Escrow
Fund for payment of any Net Liabilities in excess of the Estimated Net
Liabilities used in calculating the Net Liabilities Adjustment as of Closing
Date and were not deducted from the Total Consideration; provided, however, that
in no event shall Parent be entitled to recovery from the Escrow Fund unless the
Net Liabilities exceed $650,000.
5.19 Indemnification. Parent agrees that all rights to indemnification
or exculpation (including mandatory advancement of expenses) existing on the
date of this Agreement in favor of the directors or officers of the Company and
any person who served at the Company's request as a fiduciary or other
representative for any Employee Plan maintained by the Company (the "Company
Indemnified Parties") as provided in its articles of incorporation or bylaws or
indemnification agreements shall continue in full force and effect for a period
of not less than three years from the Closing Date, assuming the consummation of
the Merger; provided, however, that, in the event any claim or claims are
asserted or made within such three-year period, all rights to indemnification in
respect of any such claim or claims shall continue to disposition of any and all
such claims. Any determination required to be made with respect to whether a
Company Indemnified Party's conduct complies with the standards set forth in the
articles of incorporation or bylaws or indemnification agreements of the Company
or otherwise shall be made by independent counsel selected by Parent reasonably
satisfactory to the Company Indemnified Party (whose fees and expenses shall be
paid by the Parent or the Surviving Corporation), which such determination shall
be final and binding on the
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parties thereto. The Company hereby represents and warrants to Parent that no
claim for indemnification has been made by any director or officer of the
Company and, to the knowledge of the Company, no basis exists for any such claim
for indemnification.
5.20 Tax Matters.
(a) Tax Returns Due After the Closing Date. Parent shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company due after the Closing Date.
(b) Cooperation on Tax Matters. Parent and the Company shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Agreement and any
audit, litigation or other proceeding with respect to Taxes.
5.21 Reorganization Matters.
(a) The parties intend the Merger to qualify as a
reorganization under Section 368(a) of the Code. However, neither Parent nor the
Company makes any representation or warranty to the other or to any Company
Shareholder regarding the tax treatment of the Merger or whether the Merger will
qualify as a reorganization under the Code. Each of the Company and Parent
acknowledges that it is relying on its own advisors in connection with the Tax
treatment of the Merger and the other transactions contemplated by this
Agreement. The Company and Parent each agree to use their respective best
efforts to cause the Merger to qualify, and will not take any actions which
would reasonably be expected to prevent the Merger from qualifying, as a
reorganization under Section 368(a) of the Code.
(b) Each of the Company and Parent shall report the Merger as
a reorganization within the meaning of Section 368(a) of the Code, unless
otherwise required pursuant to a "determination" within the meaning of Section
1313(a) of the Code.
5.22 Solicitation Materials. All materials mailed or delivered to the
Shareholders for use in soliciting their consent to this Agreement and the
Merger will be prepared in good faith by the Company and shall contain all
information the Company believes in good faith to be material for the
Shareholders make a valid and informed decision to approve this Agreement and
the Merger.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of the Parent, Sub and Company to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) 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 restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor
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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 or otherwise
prohibits consummation of the Merger.
(b) Governmental Approvals. All authorizations, consents,
orders, declarations or approvals of, or filings with, or terminations or
expirations of waiting periods imposed by, any Governmental Entity which the
failure to obtain, make or occur would have a Material Adverse Effect on Parent
or the Surviving Corporation shall have been obtained, made or occurred.
6.2 Additional Conditions to Obligations of Company. The obligations of
the Company 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, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub in this Agreement shall be true and correct in all
material respects (if not qualified by materiality) and in all respects (if
qualified by materiality) on and as of the Effective Time as though such
representations and warranties were made on and as of such time except for
changes contemplated by this Agreement and except for representations and
warranties which address matters as of a particular date which shall remain true
and correct as of such particular date.
(b) Covenants. Each of Parent and Sub shall have performed and
complied in all material respects with all covenants and obligations of this
Agreement required to be so performed and complied with by Parent or Sub at or
before the Effective Time.
(c) Certificate of the Parent. Company shall have been
provided with a certificate executed on behalf of Parent by a Vice President
certifying as to the satisfaction of the conditions set forth in Section 6.2(a)
and Section 6.2(b) above.
(d) Escrow Agreement. The Escrow Agreement shall have been
executed and delivered by each of the parties thereto (other than the Company
and the Shareholder Representative).
(e) Registration Rights Agreement. The Registration Rights
Agreement shall have been executed and delivered by each of the parties thereto
(other than the Company and the Shareholders).
(f) Legal Opinion. The Company shall have received a legal
opinion from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, counsel
to Parent, in substantially the form attached hereto as Exhibit D.
6.3 Additional Conditions to the Obligations of Parent and Sub. The
obligations of Parent and Sub to consummate and effect this Agreement and the
transactions contemplated hereby
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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, exclusively
by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company in this Agreement shall be true and correct in all
material respects (if not qualified by materiality) and in all respects (if
qualified by materiality) on and as of the Effective Time as though such
representations and warranties were made on and as of such time except for
changes contemplated by this Agreement and except for representations and
warranties which address matters as of a particular date which shall remain true
and correct as of such particular date.
(b) Covenants. The Company shall have performed and complied
in all material respects with all covenants and obligations of this Agreement
required to be so performed and complied with by the Company at or before the
Effective Time.
(c) Company Shareholder Approval. This Agreement shall have
been approved and adopted, and the Merger shall have been duly approved, by the
requisite vote of the Shareholders under the CGCL, the Articles of Incorporation
and Bylaws of the Company, in each case as amended, and any agreements to which
the Company is a party or by which it is bound.
(d) Third Party Consents. Any and all consents, waivers,
assignments and approvals in Section 2.6 of the Disclosure Schedule shall have
been obtained.
(e) Legal Opinion. Parent shall have received a legal opinion
from Xxxxxx & Xxxxxxx, legal counsel to the Company, in substantially the form
attached hereto as Exhibit E.
(f) Escrow Agreement. The Escrow Agreement shall have been
executed and delivered by each of the parties thereto (other than Parent).
(g) Material Adverse Change. No Company Material Adverse
Effect shall have occurred from the date of this Agreement to the Closing Date.
(h) Estimated Balance Sheet and Statement of Expenses. Parent
shall have received the Estimated Balance Sheet and Statement of Expenses from
the Company no later than two (2) business days prior to the Closing Date.
(i) Termination of 401(k) Plan. Unless otherwise requested by
Parent pursuant to Section 5.12, the Board of Directors of the Company shall
have adopted resolutions terminating the Company's 401(k) Plan as of immediately
prior to the Closing.
(j) Termination of Company Warrants. Each unexercised Company
Warrant, whether vested or unvested, that has not been exercised in full prior
to the Effective Time shall have been terminated at the Effective Time and
Parent shall have received evidence of such termination in form and substance
reasonably satisfactory to Parent, including without limitation a written
consent from each holder of each such Company Warrant acknowledging and
consenting to the termination at the Effective Time of such holder's unexercised
Company Warrants and waiving any notice
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requirements relating to such termination (the form and substance of which shall
have been subject to review and approval by Parent).
(k) Termination of Company Options. All Company Options shall
have been terminated prior to the Closing.
(l) Employment Arrangements. At least 75% of Company's
employees that were offered regular "at-will" employment with Parent or the
Surviving Corporation shall have accepted "at-will" employment with Parent or
the Surviving Corporation under terms that are substantially the same as the
terms of such employees' employment with the Company and reasonably satisfactory
to Parent.
(m) Termination of Amended and Restated Rights Agreement. The
Amended and Restated Investors' Rights Agreement effective as of January 26,
2001 by and between the Company and the investors named therein (the "Rights
Agreement"), shall have been terminated, effective as of the day immediately
preceding the Closing Date, and Parent shall have received evidence of such
termination in form and substance reasonably satisfactory to Parent, including
without limitation a written consent from the investors named therein
acknowledging and consenting to the termination of the Rights Agreement (the
form and substance of which shall have been subject to review and approval by
Parent).
(n) Certificate of the Company. Parent shall have been
provided with a certificate executed by the Chief Executive Officer as to the
satisfaction of the conditions set forth in Sections 6.3(a) and (b).
(o) Secretary's Certificate. Parent shall have received from
the Company a certificate, validly executed by the Secretary of the Company,
certifying as to (i) the terms and effectiveness of the Company's certificate of
incorporation and bylaws, in each case as amended, and (ii) the accuracy and
completeness of the resolutions of the Board of the resolutions of the Board of
Directors of the Company and the Shareholders approving this Agreement, the
Merger and the other transactions contemplated hereby.
(p) Tenant Estoppel Certificates. Parent shall have received a
completed, validly executed copy of a Tenant Estoppel Certificate from Company's
sublessor (Benefit Consultants, Inc.) and Company's sub-sublessee (xxXxxxxx.xxx)
in substantially the form attached hereto as Exhibit F.
(q) Securities Compliance. Parent and the Company shall have
reasonably determined, after consultation with their respective counsel, that
the issuance of Parent Common Stock in the Merger is in compliance with all
federal and state securities laws and exemptions.
(r) Investment Representation Statements. Parent shall have
received from each holder of Company Series F Stock entitled to receive shares
of Parent Common Stock pursuant to
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Section 1.6(b) of this Agreement an Investment Representation Statement
reasonably satisfactory in substance and form to Parent.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.1 Survival of Representations and Warranties. The Company's
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger and shall continue until the
date that is one year after the Closing Date; provided, however, that the
representations and warranties of the Company contained in Section 2.10 shall
survive for the longer of (i) one year after the Closing Date or (ii) the
expiration of the applicable statute of limitations; and provided, further, that
claims based on the tort of fraud may be brought by Parent until the expiration
of the applicable statute of limitations. All of Parent's and Sub's
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Closing; provided, however,
that the representations and warranties made by Parent in Section 3.7 shall
survive until the expiration of the applicable statute of limitations.
7.2 Indemnification and Escrow.
(a) Indemnification. The Shareholders agree to indemnify and
hold Parent and its officers, directors and affiliates harmless against all
claims, losses, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses of investigation and defense
(hereinafter individually a "Loss" and collectively "Losses") incurred by
Parent, its officers, directors, or affiliates (including the Surviving
Corporation) directly or indirectly as a result of (i) any breach of a
representation or warranty of the Company contained in this Agreement or any
Related Agreements, (ii) any failure by the Company to perform or comply with
any covenant contained in this Agreement or any Related Agreements, (iii) the
Net Liabilities exceeding the Estimated Net Liabilities, (iv) the Third Party
Expenses exceeding the Estimated Third Party Expenses and/or (v) the exercise of
any dissenters' rights with respect to Company Capital Stock other than Series F
Preferred Stock. The Shareholders shall not have any right of indemnification or
contribution from the Company with respect to any Loss claimed by an indemnified
party. Parent may not receive any Escrow Shares from the Escrow Fund unless and
until Parent identifies Losses, the aggregate of which exceeds $50,000 (the
"Basket Amount"), as provided in the Escrow Agreement, in which case Parent
shall be entitled to recover all Losses excluding the first $50,000 of such
Losses. The Escrow Fund shall constitute the sole and exclusive remedy of Parent
with respect to Losses under this Section 7.2 and the Shareholders of the
Company shall not have any further liability arising out of breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any agreements contemplated by this Agreement, or in any instrument
delivered pursuant to this Agreement, in excess of the amounts on deposit in the
Escrow Fund, except in the event of the tort of fraud by the Company.
(b) Sole Security for Indemnification Obligations. As sole
security for the indemnity provided for in Section 7.2(a) and by virtue of this
Agreement, the Shareholders will be
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deemed to have received and deposited the Escrow Shares with the Escrow Agent
without any additional act of any Shareholder. The portion of the Escrow Shares
contributed on behalf of the Shareholder shall be in proportion to the aggregate
number of Merger Shares that such Shareholder would otherwise be entitled to
receive in the Merger pursuant to Section 1.6(b) of this Agreement by virtue of
ownership of outstanding shares of Company Capital Stock. The procedure for
satisfaction of claims in respect of Losses is set forth in the Escrow Agreement
attached hereto as Exhibit G (the "Escrow Agreement").
(c) Limitations. The maximum amount the indemnified parties
may recover from the Shareholders pursuant to the indemnity set forth in Section
7.2(a) shall be limited to an amount equal to (i) the number of shares of Parent
Common Stock equal to ten percent (10%) of the Total Consideration, in the
manner and pursuant to the procedures set forth in the Escrow Agreement and (ii)
90% of Losses for which Parent makes claims against the Escrow Fund. In the
event of the tort of fraud committed by the Company, Parent shall have all
remedies available at law or in equity with respect thereto; provided, however,
that notwithstanding anything to the contrary contained in this Agreement, in no
event shall any Shareholder have any liability for Losses or torts of fraud
committed by the Company in excess of the total consideration received by such
Shareholder hereunder.
7.3 Shareholders' Representative.
(a) By virtue of their approval of this Agreement, the
Shareholders will be deemed to have irrevocably constituted and appointed,
effective as of the Closing, Yag Xxxxx (the "Shareholder Representative"), as
their true and lawful agent and attorney-in-fact to enter into any agreement in
connection with the transactions contemplated by the Escrow Agreement,
including, without limitation, entering into the Escrow Agreement and exercising
on behalf of the Shareholders all or any of the powers, authority, rights and
discretion conferred on them under or the Escrow Agreement, including without
limitation waiving any terms and conditions of any such agreement (other than
the payment of the Escrow Fund), giving and receiving notices and
communications, authorizing delivery to Parent of the Escrow Fund or other
property from the Escrow Fund in satisfaction of claims by Parent, objecting to
such deliveries, agreeing to, negotiating, entering into settlements and
comprises of, and demanding arbitration and complying with orders of courts and
awards of arbitrators with respect to such claims, and taking all actions
necessary or appropriate in the judgment of the Shareholder Representative for
the accomplishment of the foregoing. The Shareholder Representative shall not be
liable for any act done or omitted hereunder as Shareholder Representative while
acting in good faith and in the exercise of reasonable judgment. This power of
attorney is coupled with an interest and is irrevocable. Notices or
communications to or from the Shareholder Representative shall constitute notice
to or from the Shareholders. A decision, act, consent or instruction of the
Shareholder Representative shall be final, binding and conclusive upon the
Shareholders, and the Escrow Agent and Parent may rely upon any such decision,
act, consent or instruction of the Shareholder Representative as being the
decision, act, consent or instruction of the Shareholders. The Escrow Agent and
Parent are hereby relieved from any liability to any person for any acts done by
them in accordance with such decision, act, consent or instruction of the
Shareholder Representative.
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(b) In the event that the Merger is approved by the
Shareholders, effective upon such vote, and without further act of any
Shareholder, the Shareholders shall agree, severally and not jointly, on a pro
rata basis based on their proportionate ownership interests in the Company, to
indemnify, defend and hold the Shareholder Representative harmless from and
against any loss, damage, tax, liability and expense that may be incurred by the
Shareholder Representative arising out of or in connection with the acceptance
or administration of the Shareholder Representative's duties, except as caused
by the Shareholder Representative's gross negligence or willful misconduct,
including the legal costs and expenses of defending such Shareholder
Representative against any claim or liability in connection with the performance
of the Shareholder Representative's duties.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2, this Agreement may
be terminated and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual consent of the Company and Parent, as evidenced
in a written agreement executed by both parties;
(b) by Parent or the Company if: (i) the Effective Time has
not occurred by the date that is thirty (30) days after the date this Agreement
is executed by Parent, Sub and the Company, provided, however, that the right to
terminate this Agreement under this Section 8.1(b)(i) shall not be available to
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date; (ii)
there shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Merger; or (iii) there shall be any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any Governmental Entity that would make consummation of the Merger
illegal;
(c) by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would: (i) prohibit
or materially restrict the Parent's or the Surviving Corporation's ownership or
operation of any portion of the business of the Company; or (ii) compel Parent
or the Company to dispose of or hold separate all or a portion of the business
or assets of the Company or Parent as a result of the Merger;
(d) by Parent if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement or
any Related Agreements on the part of the Company and such breach has not been
cured within ten (10) calendar days after written notice to the Company;
provided, however, that, no cure period shall be required for a breach which by
its nature cannot be cured;
(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or
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agreement contained in this Agreement or any Related Agreements on the part of
Parent and such breach has not been cured within ten (10) calendar days after
written notice to Parent; provided, however, that, no cure period shall be
required for a breach which by its nature cannot be cured;
(f) by Parent if: (i) the Board of Directors of the Company or
any committee thereof shall have approved or recommended any Company Acquisition
Proposal (as defined below); (ii) the Company shall have entered into any letter
of intent or similar document or any agreement, contract or commitment accepting
any Company Acquisition Proposal; or (iii) the Company shall have breached the
provisions of Section 4.2 of this Agreement; or
(g) by Parent if an event having a Company Material Adverse
Effect shall have occurred after the date of this Agreement.
For purposes of this Agreement, "Company Acquisition Proposal"
shall mean any offer or proposal (other than an offer or proposal by Parent)
relating to: (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company, pursuant to which the shareholders of the Company immediately preceding
such transaction hold less than 50% of the equity interest in the surviving or
resulting entity of such transaction; (ii) a sale or other disposition by the
Company of assets (excluding inventory and used equipment sold in the ordinary
course of business) representing in excess of 50% of the fair market value of
the Company's business immediately prior to such sale, or (iii) the acquisition
by any person or group, directly or indirectly, of beneficial ownership or a
right to acquire beneficial ownership of shares representing in excess of 50% of
the voting power of the then outstanding shares of capital stock of the Company.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Sub or the
Company, or their respective officers, directors or Shareholders, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; provided further that, the provisions of Sections 5.5 and 5.11(a),
Article IX and this Section 8.2 shall remain in full force and effect and
survive any termination of this Agreement.
8.3 Termination Fees.
(a) Company Payment. The Company shall pay to Parent in
immediately available funds, within two (2) business days after demand by
Parent, an amount equal to $250,000 (the "Termination Fee") if this Agreement is
terminated due to the Company's acceptance of any Company Acquisition Proposal.
(b) Parent Payment. Parent shall pay to the Company in
immediately available funds, within two (2) business days after demand by the
Company, an amount equal to the Termination Fee if this Agreement is terminated
by Purchaser for any reason other than due to (i) a breach by the Company of a
representation or warranty contained in this Agreement that has a Company
Material Adverse Effect; (ii) the failure of the Company to perform any covenant
or
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obligation under the agreement that has a Company Material Adverse Effect; or
(iii) the failure of any material condition to Parent's obligation to consummate
the Merger to be satisfied (except where such condition is solely within
Parent's control).
8.4 Amendment. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of Parent,
Sub and the Company.
8.5 Extension; Waiver. At any time prior to the Effective Time, Parent
and Sub, on the one hand, and the Company on the other hand, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations of the other party hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice), provided, however,
that notices sent by mail will not be deemed given until received:
(a) if to Parent or Sub, to:
XXxxx.xxx, Inc.
0000 X. Xxxxxxx'x Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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(b) if to the Company, to
Confer Software, Inc.
0000 Xxxxxxxxxx Xxxx
Xxx Xxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to (which shall not constitute notice
hereunder):
Xxxxxx & Xxxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxxxxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(c) If to the Shareholder Representative, to:
Rho Management
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Yag Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
9.2 Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The 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; Facsimile. This Agreement may be executed by
facsimile and in one or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other party, it
being understood that all parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the Related
Agreements, the Exhibits and Schedules hereto, the Non-Disclosure Agreement,
dated September 29, 2000, between the Company and Parent and the documents and
instruments and other agreements among the parties hereto referenced herein: (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings both written
and oral, among the parties with respect to the subject matter hereof; (b) are
not intended to confer upon any other person any rights or remedies hereunder;
and (c) shall not be assigned (other than by operation
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of law), except that Parent and Sub may assign their respective rights and
delegate their respective obligations hereunder to their respective affiliates.
9.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies; Specific Performance. Any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
9.7 Governing Law; Dispute Resolution.
(a) General. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. In the event of any dispute under this Agreement which the parties are
unable to resolve themselves, the matter, regardless of its nature, shall be
settled by arbitration in accordance with the commercial arbitration rules of
the American Arbitration Association then in effect conducted in the city and
county of Santa Clara, California, by three arbitrators, one selected by Parent
and one selected by the Shareholder Representative, and the two arbitrators
selected by Parent and the Shareholder Representative shall select a third
arbitrator from a list of nine arbitrators drawn by the two arbitrators at
random from the "Independent" or "Gold Card" list of retired judges. Any
arbitration shall be administered by the American Arbitration Association. In no
event shall a demand for arbitration be made after the date when legal or
equitable proceedings based on the dispute in question would be barred by an
applicable statute of limitations.
(b) Application of Procedures. This agreement to resolve any
disputes under this Agreement by binding arbitration shall extend to any claims
against any shareholder of any of the parties, any brother-sister company,
parent, subsidiary, Affiliate, any officer, director, employee or agent of any
of the parties, and shall apply as well to claims arising out of federal or
state Laws as well as to claims arising under common law. The arbitrators shall
apply the same substantive law,
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and may only utilize the same remedies, as would be applied or utilized, as
applicable, by a court having jurisdiction over the parties and their dispute.
The arbitrators shall, upon an appropriate motion, dismiss any claim brought in
arbitration if the arbitrators determine that the claim does not state a claim
or a cause of action which could have properly been pursued through court
litigation. Subject to the terms of this Agreement, the arbitrators shall have
the power to grant all appropriate legal and equitable relief (both by way of
interim relief and as part of a final award) as may be granted by any court of
the State of California to carry out the terms of this Agreement and to resolve
all disputes under this Agreement. All awards and orders of the arbitrators
(including but not limited to interim relief) shall be fixed and binding subject
to confirmation, correction or vacation pursuant to California Code of Civil
Procedure Section 1285 et.seq. In the event of a conflict between the then
applicable commercial arbitration rules of the American Arbitration Association
and these procedures, the provisions of these procedures shall govern.
(c) Timing. It is the intention of the parties that all arbitration
proceedings be conducted as expeditiously as reasonably possible in keeping with
fairness and with a minimum of legal formalities. Unless modified by the
arbitrators upon a showing of good cause, all arbitration proceedings shall
proceed upon the following schedule: (a) within one (1) month from the service
of the notice of the request to arbitrate, the parties shall select the
arbitrators; (b) within fifteen (15) days after selection of the arbitrators,
the parties shall conduct a pre-arbitration conference at which a schedule of
pre-arbitration discovery shall be set, all pre-arbitration motions scheduled
and any other necessary pre-arbitration matters decided; (c) all discovery
allowed by the arbitrators shall be completed within forty-five (45) days
following the pre-arbitration conference; (d) all pre-arbitration motions shall
be filed and briefed so that they may be heard no later than one (1) month
following the discovery cut-off; (e) the arbitration shall be scheduled to
commence no later than one (1) month after the decision on all pre-arbitration
motions but in any event no later than five (5) months following the service of
the notice of arbitration; and (f) the arbitrators shall render their written
decision (including without limitation any and all findings of fact and
conclusions of law) within one (1) month following submission of the matter.
(d) Discovery. The arbitrators shall set a limited time period and
establish procedures designed to reduce the cost and time for discovery of
information relating to any dispute while allowing the parties an opportunity,
adequate as determined in the sole judgment of the arbitrators, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrators shall rule upon motions to compel, limit or allow
discovery as they shall deem appropriate given the nature and extent of the
disputed claim. The arbitrators shall also have the authority to impose
sanctions, including attorneys' fees and other costs incurred by the parties, to
the same extent as a court of law or equity, should the arbitrators determine
that discovery was sought without substantial justification or that discovery
was refused or objected to by a party without substantial justification.
(e) Decision of Arbitrators. The decision of a majority of the three
arbitrators as to any claim, including as to the validity and amount of any
claim in such Officer's Certificate shall be binding and conclusive upon the
parties to this Agreement, and notwithstanding anything in the Escrow Agreement
or Section 7.2 or 7.3 hereof, the Escrow Agent shall be entitled to act in
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accordance with such decision and make or withhold payments in accordance
therewith. Such decision shall be written and shall be supported by written
findings of fact and conclusions regarding the dispute which shall set forth the
award, judgment, decree or order awarded by the arbitrators. In the event that a
court determines that the arbitration procedures set forth herein is not
absolutely final and binding, then it is the intent of the parties that any
arbitration decision should be fully admissible in evidence, given great weight
by any finder of fact and treated as determinative to the maximum extent
permitted by law.
(f) Judgment; Costs. Judgment upon any award rendered by the
arbitrators may be entered in any court having competent jurisdiction. The
arbitrators shall have the power to award the prevailing party in any
arbitration (as determined by the arbitrators) its costs and expenses incurred
in connection with the arbitration, including without limitation, reasonable
attorneys' fees and costs, the fees of each arbitrator and the administrative
costs of the arbitration.
9.8 Rules of Construction. The parties hereto agree that this Agreement
is the product of negotiation between sophisticated parties and individuals, all
of whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
preferentum.
9.9 Attorneys Fees. If any action or other proceeding relating to the
enforcement of any provision of this Agreement is brought by any party hereto,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the prevailing
party may be entitled).
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed, all as of the date first written above.
XXXXX.XXX, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------------------------
Name: Xxxx X. Xxxxxxxxx
-----------------------------------------------
Title: SVP Finance and CFO
----------------------------------------------
CONFER ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------------------------
Name: Xxxx X. Xxxxxxxxx
-----------------------------------------------
Title: President and Secretary
----------------------------------------------
CONFER SOFTWARE, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------------------------------
Name: Xxxxxxx Xxxxxxxxx
-----------------------------------------------
Title: Chairman
----------------------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION]