EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
COVAD COMMUNICATIONS GROUP, INC.,
LIGHTSABER ACQUISITION CO.
AND
LASER XXXX.XXX, INC.
dated as of
MARCH 8, 2000
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Closing; Effective Time . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation; Bylaws . . . . . . . . . . . . . 2
1.5 Directors and Officers . . . . . . . . . . . . . . . . . . 3
1.6 Effect on Capital Stock . . . . . . . . . . . . . . . . . . 3
1.7 Surrender of Certificates . . . . . . . . . . . . . . . . . 5
1.8 No Further Ownership Rights in Company Capital Stock . . . 7
1.9 Lost, Stolen or Destroyed Certificates . . . . . . . . . . 7
1.10 Tax Consequences . . . . . . . . . . . . . . . . . . . . . 7
1.11 Exemption from Registration . . . . . . . . . . . . . . . . 7
1.12 Taking of Necessary Action; Further Action . . . . . . . . 8
1.13 Alternate Transaction Structures . . . . . . . . . . . . . 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . 9
2.1 Organization, Standing and Power . . . . . . . . . . . . . . 9
2.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . 10
2.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4 Financial Statements . . . . . . . . . . . . . . . . . . . . 12
2.5 Absence of Certain Changes . . . . . . . . . . . . . . . . . 13
2.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . 15
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.8 Restrictions on Business Activities . . . . . . . . . . . . 15
2.9 Governmental Authorization . . . . . . . . . . . . . . . . . 16
2.10 Title to Property . . . . . . . . . . . . . . . . . . . . . 16
2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . 16
2.12 Environmental Matters . . . . . . . . . . . . . . . . . . . 18
2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 20
2.15 Employee Matters . . . . . . . . . . . . . . . . . . . . . . 21
2.16 Transactions with Affiliates . . . . . . . . . . . . . . . . 23
2.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.18 Compliance With Laws . . . . . . . . . . . . . . . . . . . . 23
2.19 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . 24
2.20 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . 24
2.21 Voting Agreements; Irrevocable Proxies . . . . . . . . . . . 24
2.22 Vote Required . . . . . . . . . . . . . . . . . . . . . . . 24
2.23 Board Approval . . . . . . . . . . . . . . . . . . . . . . . 24
2.24 Accounts Receivable . . . . . . . . . . . . . . . . . . . . 24
2.25 Customers and Suppliers . . . . . . . . . . . . . . . . . . 24
2.26 Material Contracts . . . . . . . . . . . . . . . . . . . . . 25
i
2.27 Third Party Consents . . . . . . . . . . . . . . . . . . . 27
2.28 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.29 Representations Complete . . . . . . . . . . . . . . . . . 28
2.30 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIRER . . . . . . 28
3.1 Organization, Standing and Power . . . . . . . . . . . . . 28
3.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . 29
3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.4 SEC Documents; Financial Statements . . . . . . . . . . . . 30
3.5 Board Approval . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME . . . . . . . . 31
4.1 Conduct of Business of the Company . . . . . . . . . . . . 31
4.2 Restriction on Conduct of Business of the Company . . . . . 31
4.3 No Solicitation . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . 34
5.1 Information Statement . . . . . . . . . . . . . . . . . . . 34
5.2 Meeting of Shareholders . . . . . . . . . . . . . . . . . . 35
5.3 Access to Information . . . . . . . . . . . . . . . . . . . 35
5.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 36
5.5 Public Disclosure . . . . . . . . . . . . . . . . . . . . . 36
5.6 Consents; Cooperation . . . . . . . . . . . . . . . . . . . 36
5.7 Voting Agreements/Irrevocable Proxies/Shareholder
Representation Agreement . . . . . . . . . . . . . . . . 37
5.8 Legal Requirements . . . . . . . . . . . . . . . . . . . . 38
5.9 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . 38
5.10 Employee Benefit Plans; Assumption of Options . . . . . . . 38
5.11 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . 39
5.12 Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.13 Listing of Additional Shares . . . . . . . . . . . . . . . 39
5.14 Employees . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.15 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.16 Treatment as Reorganization . . . . . . . . . . . . . . . . 41
5.17 Best Efforts and Further Assurances . . . . . . . . . . . . 41
5.18 Company Warrants . . . . . . . . . . . . . . . . . . . . . 41
5.19 Indemnification of Directors, Officers, etc. . . . . . . . 41
ARTICLE VI
CONDITIONS TO THE MERGER . . . . . . . . . . . 42
6.1 Conditions to Obligations of Each Party to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2 Additional Conditions to Obligations of the Company . . . . 43
ii
6.3 Additional Conditions to Obligations of Acquirer . . . . . 43
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . 46
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 46
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 47
7.3 Expenses and Termination Fees . . . . . . . . . . . . . . . 47
7.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VIII
ESCROW AND INDEMNIFICATION . . . . . . . . . . . 48
8.1 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . 48
8.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . 49
8.3 Damage Threshold . . . . . . . . . . . . . . . . . . . . . 49
8.4 Escrow Period . . . . . . . . . . . . . . . . . . . . . . . 50
8.5 Claims upon Escrow Fund . . . . . . . . . . . . . . . . . . 50
8.6 Objections to Claims . . . . . . . . . . . . . . . . . . . 50
8.7 Resolution of Conflicts; Arbitration . . . . . . . . . . . 51
8.8 Shareholders' Agent . . . . . . . . . . . . . . . . . . . . 52
8.9 Actions of the Shareholders' Agent . . . . . . . . . . . . 53
8.10 Third-Party Claims . . . . . . . . . . . . . . . . . . . . 53
8.11 Treatment of Options . . . . . . . . . . . . . . . . . . . 53
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . 54
9.1 Non-Survival at Effective Time . . . . . . . . . . . . . . 54
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . 55
9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 55
9.5 Entire Agreement; Nonassignability; Parties in Interest . . 55
9.6 Severability . . . . . . . . . . . . . . . . . . . . . . . 55
9.7 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . 56
9.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 56
9.9 Rules of Construction . . . . . . . . . . . . . . . . . . . 56
COMPANY DISCLOSURE SCHEDULE
Schedule 2.1 - Interests
Schedule 2.2 - Capital Structure
Schedule 2.4 - Financial Statements
Schedule 2.5 - Changes
Schedule 2.6 - Obligations/Liabilities
Schedule 2.7 - Litigation
Schedule 2.8 - Restrictions on Business Activities
Schedule 2.10 - Real Property
iii
Schedule 2.11 - Intellectual Property
Schedule 2.14 - Employee Benefit Plans
Schedule 2.15 - Employee Matters
Schedule 2.16- Transactions with Affiliates
Schedule 2.17- Insurance
Schedule 2.25 - Customers and Suppliers
Schedule 2.26- Material Contracts
Schedule 2.27- Third Party Consents
Schedule 2.28- Year 2000 Compliance
Schedule 5.7 - Affiliates
Schedule 5.10 - Optionholders
Schedule 5.14 - Employees to Sign Employment & Non-Competition
Agreements
Schedule 6.3- Certain Required Individuals
EXHIBITS
Exhibit A - Exchange Ratio
Exhibit B - Voting Agreement
Exhibit C - Confidentiality Agreement
Exhibit D - Shareholder Representation Agreement
Exhibit E - Escrow Agreement
Exhibit F - Employment and Non-Competition Agreement
Exhibit G - FIRPTA Certificate
Exhibit H - IRS Notice
Exhibit I - Escrow Agreement of Xxxxxx XxXxxxxx and Xxxxxx Xxxxxxxx
xx
INDEX
Page(s)
401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Acquirer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Acquirer Class B Common Stock . . . . . . . . . . . . . . . . . . . . . . . 25
Acquirer Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Acquirer Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . 25
Acquirer SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Acquirer Stock Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Antitrust Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Class A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Class B Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Commercial Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Company Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Company Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . 9
Company Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Company Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Company Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Company Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . . . 31
Company Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Company Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . 15
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 31
Controlled Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Delaware Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Dissenting Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Employee benefit plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
i
Employment Commencement Date . . . . . . . . . . . . . . . . . . . . . . . 35
Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Escrow Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
HSR Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Indemnified Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Indemnified Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Irrevocable Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Pennsylvania Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Shareholder Representation Agreement . . . . . . . . . . . . . . . . . . . 33
Shareholders' Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Takeover Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Tax Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Total Acquirer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Trigger Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of March 8, 2000, among COVAD COMMUNICATIONS GROUP, INC.,
a Delaware corporation ("Acquirer"), LIGHTSABER ACQUISITION CO., a Delaware
corporation and a direct, wholly owned subsidiary of Acquirer ("Merger Sub")
and LASER XXXX.XXX, INC., a Pennsylvania corporation (the "Company").
RECITALS
A. The Boards of Directors of the Acquirer and Company
believe it is in the best interests of their respective companies and the
shareholders of their respective companies that the Company and Merger Sub
combine into a single company through the statutory merger of the Company
with and into Merger Sub (the "Merger") and, in furtherance thereof, have
approved the Merger.
B. Pursuant to the Merger, among other things, each
outstanding share of capital stock of the Company ("Company Capital Stock")
shall be converted into shares of common stock of Acquirer ("Acquirer Common
Stock"), in the manner set forth herein.
C. The Acquirer, Merger Sub and Company 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 of the
Internal Revenue Code of 1986, as amended (the "Code"), and to cause the
Merger to qualify as a reorganization under the provisions of Sections 368(a)
of the Code.
E. As an inducement to Acquirer and Merger Sub to enter
into this Agreement, the officers and directors (in their capacities as
shareholders) and certain of the shareholders of the Company have previously
entered into an agreement to, among other things, vote the shares of Company
Capital Stock owned by such person or entity to approve the Merger.
NOW, THEREFORE, in consideration of the covenants 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 Delaware General Corporation
Law ("Delaware Law") and the Pennsylvania Business Corporation Law of 1988,
as amended ("Pennsylvania Law"), the Company shall be merged with and into
Merger Sub, the separate corporate existence of the Company shall cease and
Merger Sub shall continue as the surviving corporation. Merger Sub as the
surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation".
1.2 Closing; Effective Time. The closing of the
transactions contemplated hereby (the "Closing") shall take place on March
20, 2000, or as soon as practicable thereafter following the satisfaction or
waiver of each of the conditions set forth in Article VI hereof, or at such
other time as the parties hereto agree (the "Closing Date"). The Closing
shall take place at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 425 Lexington
Avenue, New York, New York, or at such other location as the parties hereto
agree. In connection with the Closing, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger (the "Certificate
of Merger") with the Secretary of State of the State of Delaware and shall
make all other filings or recordings required under Delaware Law and
Pennsylvania Law. The Merger shall become effective at such time as the
Certificate of Merger shall have been duly filed with the Secretary of State
of the State of Delaware, or at such later time as is agreed by Acquirer and
the Company and specified in the Certificate of Merger (the time the Merger
becomes effective under Delaware Law and Pennsylvania Law being the
"Effective Time").
1.3 Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement and the
applicable provisions of Delaware Law and Pennsylvania Law. 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
shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be
the Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Articles of Incorporation.
(b) The Bylaws of Merger 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. At the Effective Time, the
directors of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the directors of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified. The
officers of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the officers of the Surviving Corporation, until their respective
successors are duly elected or appointed and qualified.
1.6 Effect on Capital Stock. By virtue of the Merger and
without any action on the part of Acquirer, Merger Sub, the Company or the
holders of any of the Company's securities:
(a) Conversion of Company Capital Stock. The number of
shares of Acquirer Common Stock to be issued (including Acquirer
Common Stock to be reserved for future issuance upon exercise of all
outstanding options to purchase shares of Company Capital Stock
("Company Options") and all outstanding warrants to acquire shares of
Company Capital Stock ("Company Warrants") assumed by Acquirer) in
exchange for the acquisition by Acquirer of all outstanding Company
Common Stock and all unexpired and unexercised outstanding Company
Options and Company Warrants shall be 4,292,695 shares of Acquirer
Common Stock (the "Total Acquirer Shares"), reduced as a result of
any Dissenting Shares (as defined below) and subject to reduction for
fractional shares. No other adjustment shall be made in the number
of shares of Acquirer Common Stock issued in the Merger as a result
of (x) any increase or decrease in the market price of Acquirer
Common Stock prior to the Effective Time, or (y) any cash proceeds
received by the Company from the date hereof to the Closing Date
pursuant to the exercise of currently outstanding options or warrants
to acquire Company Capital Stock. Subject to the terms and
conditions of this Agreement, as of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any
shares of Company Capital Stock:
(i) At the Effective Time, each share of Company
Capital Stock issued and outstanding immediately prior to
the Effective Time (other than shares, if any, held by
persons who have not voted such shares for approval of the
Merger and have perfected dissenters' rights in accordance
with Pennsylvania Law ("Dissenting Shares")) shall be
converted into and exchanged for the right to receive such
number of shares of Acquirer Common Stock as shall be
determined in accordance with items (i) and (ii) of Exhibit
A hereof (the "Exchange Ratio").
(ii) At the Effective Time, each Company Option granted
and outstanding immediately prior to the Effective Time
shall be assumed by the Acquirer in accordance with Section
5.10 and thereafter shall constitute the right to purchase
such number of shares of Acquirer Common Stock as shall be
determined in accordance with item (iii) of Exhibit A
hereof.
(b) Cancellation of Company Capital Stock Owned by the
Company. At the Effective Time, all shares of Company Capital Stock
that are owned by the Company as treasury stock shall be canceled and
extinguished without any conversion thereof.
(c) Adjustments to Exchange Ratio. The Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split,
reverse stock split, stock dividend (including any dividend or
distribution of securities convertible or exchangeable into Acquirer
Common Stock or Company Capital Stock), reorganization,
recapitalization or other like change (including the 3-for-2 stock
split announced by the Acquirer on March 7, 2000) with respect to
Acquirer Common Stock or Company Capital Stock occurring after the
date hereof and prior to the Effective Time.
(d) Fractional Shares. No fraction of a share of Acquirer
Common Stock will be issued, but in lieu thereof each holder of
shares of Company Capital Stock who would otherwise be entitled to a
fraction of a share of Acquirer Common Stock (after aggregating all
fractional shares of Acquirer Common Stock to be received by such
holder) shall receive from Acquirer an amount of cash (rounded to the
nearest whole cent) equal to the product of (i) such fraction,
multiplied by (ii) the price of a share of Acquirer Common Stock as
of the close of business on March 8, 2000 (the "Acquirer Stock
Price").
(e) Dissenters' Rights. Any Dissenting Shares shall not be
converted into Acquirer Common Stock but shall instead be converted
into the right to receive such consideration as may be determined to
be due with respect to such Dissenting Shares pursuant to
Pennsylvania Law. The Company agrees that, except with the prior
written consent of Acquirer, or as required under Pennsylvania Law,
it will not voluntarily make any payment with respect to, or settle
or offer to settle, any such purchase demand. Each holder of
Dissenting Shares ("Dissenting Shareholder") who, pursuant to the
provisions of Pennsylvania Law, becomes entitled to payment of the
fair value for shares of Company Capital Stock shall receive payment
therefor (but only after the value therefor shall have been agreed
upon or finally determined pursuant to such provisions). If, after
the Effective Time, any Dissenting Shares shall lose their status as
Dissenting Shares, Acquirer shall issue and deliver, upon surrender
by such shareholder of a certificate or certificates representing
shares of Company Capital Stock, the number of shares of Acquirer
Common Stock (and cash in lieu of fractional shares) to which such
shareholder would otherwise be entitled under this Section 1.6 less
the number of shares allocable to such shareholder that are deposited
in the Escrow Fund (as defined below) in respect of such shares of
Acquirer Common Stock pursuant to Section 1.7(c) and Article VIII
hereof.
1.7 Surrender of Certificates.
(a) Exchange Agent. Acquirer's transfer agent shall act as
exchange agent (the "Exchange Agent") in the Merger, at Acquirer's expense.
(b) Acquirer to Provide Acquirer Common Stock and Cash.
Promptly after the Effective Time, Acquirer shall make available to the
Exchange Agent for exchange in accordance with this Article I, through such
reasonable procedures as Acquirer may adopt, (i) the shares of Acquirer
Common Stock issuable pursuant to Section 1.6(a) in exchange for shares of
Company Capital Stock outstanding immediately prior to the Effective Time
less the number of shares of Acquirer Common Stock to be deposited into an
escrow fund (the "Escrow Fund") pursuant to the requirements of Article VIII
and (ii) cash in an amount sufficient to permit payment of cash in lieu of
fractional shares pursuant to Section 1.6(d).
(c) Exchange Procedures. At or prior to the Closing, the
Company shall provide to Acquirer a schedule of all holders of Company
Capital Stock and Company Options, containing such information in such format
as shall be reasonably requested by Acquirer or the Exchange Agent, and such
schedule shall be certified as complete and correct by an authorized officer
of the Company. Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the Effective
Time represented outstanding shares of Company Capital Stock, whose shares
were converted into the right to receive shares of Acquirer Common Stock (and
cash in lieu of fractional shares) 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 receipt of the
Certificates by the Exchange Agent, and shall be in such form and have such
other provisions as Acquirer may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Acquirer Common Stock (and cash in lieu
of fractional shares). Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Acquirer, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Acquirer Common Stock
less the number of shares of Acquirer Common Stock to be deposited in the
Escrow Fund on such holder's behalf pursuant to Article VIII hereof and
payment in lieu of fractional shares which such holder has the right to
receive pursuant to Section 1.6, and the Certificate so surrendered shall
forthwith be canceled. Until so surrendered, each outstanding Certificate
that, prior to the Effective Time, represented shares of Company Capital
Stock will be deemed from and after the Effective Time, for all corporate
purposes, other than the payment of dividends (which are treated in the
manner contemplated by Section 1.7(d) below), to evidence the ownership of
the number of full shares of Acquirer Common Stock into which such shares of
Company Capital Stock shall have been so converted and the right to receive
an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6. As soon as practicable after the Effective Time,
and subject to and in accordance with the provisions of Article VIII hereof,
Acquirer shall cause to be distributed to the Escrow Agent (as defined in
Section 8.1 hereto) a certificate or certificates representing 429,270 (which
number shall be adjusted in the same manner as provided for in Section 1.6(c)
and taking into account shares subject to outstanding, unexercised Company
Options) shares of Acquirer Common Stock issuable in the Merger pursuant to
Section 1.6(a)(i)(the "Escrow Shares") which shall be registered in the name
of the Escrow Agent as nominee for the holders of Certificates cancelled
pursuant to this Section 1.7. The Escrow Shares shall be vested shares not
subject to any repurchase rights, shall be beneficially owned by such holders
and shall be held in escrow and shall be available to compensate Acquirer for
certain damages as provided in Article VIII. To the extent not used for such
purposes, such shares shall be released, all as provided in Article VIII
hereof.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Acquirer Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Acquirer Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Acquirer Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the
amount of any such dividends or other distributions with a record date after
the Effective Time theretofore payable (but for the provisions of this
Section 1.7(d)) with respect to such shares of Acquirer Common Stock.
(e) Transfers of Ownership. If any certificate for shares
of Acquirer Common Stock is to be issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Acquirer or any agent
designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Acquirer Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Acquirer or any agent designated by it
that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary
in this Section 1.7, none of the Exchange Agent, the Surviving Corporation,
Acquirer or any party hereto shall be liable to any person for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(g) Dissenting Shares. The provisions of this Section 1.7
shall also apply to Dissenting Shares that lose their status as such, except
that the obligations of Acquirer under this Section 1.7 shall commence on the
date of loss of such status and the holder of such shares shall be entitled
to receive in exchange for such shares the number of shares of Acquirer
Common Stock and cash in lieu of any fractional shares to which such holder
is entitled pursuant to Section 1.6 hereof.
1.8 No Further Ownership Rights in Company Capital Stock.
All shares of Acquirer Common Stock issued upon the surrender for exchange of
shares of Company Capital Stock in accordance with the terms hereof
(including any cash paid in lieu of fractional shares) shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares
of Company Capital Stock, and following the Effective Time 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.
1.9 Lost, Stolen or Destroyed Certificates. In the event
any Certificates shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof, such shares of Acquirer Common Stock (and cash in lieu of fractional
shares) as may be required pursuant to Section 1.6; provided, however, that
Acquirer may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Acquirer, the Surviving Corporation or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning
of Section 368 of the Code.
1.11 Exemption from Registration. The shares of Acquirer
Common Stock to be issued in connection with the Merger will be issued in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), by reason of Section 4(2) thereof. Acquirer
shall use commercially reasonable efforts to prepare, file and have declared
effective, as promptly as practicable, and, in any event, within ninety (90)
days following the Closing, a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") covering
the resale of such shares of Acquirer Common Stock issued in connection with
the Merger, and Acquirer shall use commercially reasonable efforts to cause
the Registration Statement to become effective as promptly as practicable
after filing; provided that Acquirer may postpone effectiveness of the
Registration Statement for a period not to exceed sixty (60) days if Acquirer
determines in good faith that such effectiveness would adversely affect
Acquirer. Acquirer's obligation in the preceding sentence to file the
Registration Statement within ninety (90) days is subject to the condition
that the holders of Company Capital Stock provide Acquirer promptly, but in
no event more than twenty (20) days after the Closing, all information
relating to them requested by Acquirer for inclusion in the Registration
Statement, and such obligation shall be postponed to the extent of any delay
in providing such information. Acquirer shall pay all costs and expenses
incident to the performance of its obligations pursuant to this Section 1.11
(and each of such holder's officers, directors, agents, employees and each
person controlling such holder) and shall indemnify each holder of the shares
of Acquirer Common Stock to be registered pursuant to this Section 1.11
against all claims, losses, damages and liabilities (including reimbursement
of legal expenses) arising out of or based on any untrue statement of a
material fact contained in any prospectus, offering circular or other
document prepared by Acquirer incident to any such registration,
qualification or compliance, or based on any omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading (provided that Acquirer will not be liable
in any such case to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission
based upon written information furnished to Acquirer by an instrument duly
executed by such holder and stated to be specifically for use therein) on
terms customary for transactions of this kind. If the indemnification
provided for in this Section 1.11 is unavailable with respect to any loss,
liability, claim, damage or expense referred to herein, then Acquirer shall
contribute to the amount paid by the holder or other party having a right to
indemnification as a result of such loss, liability, claim, damage or expense
in such proportion as appropriate to reflect the relative fault of Acquirer
on the one hand and the holder or the other party having a right to
indemnification on the other in connection with the statements or omissions
which result in such loss, liability, claim, damage or expense as well as any
other relevant equitable considerations.
1.12 Taking of Necessary Action; Further Action. If, at
any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company, the
officers and directors of the Company and the Surviving Corporation are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action, so long as such action
is not inconsistent with this Agreement.
1.13 Alternate Transaction Structures. The parties agree
that Acquirer may at any time change the method of effecting the Merger,
including by merging Company with and into Acquirer or by merging Company
with and into a direct or indirect wholly-owned subsidiary of Acquirer, and
Company shall cooperate in such efforts, including by entering into an
appropriate amendment to this Agreement; provided, however, that any such
actions shall not (a) alter or change the amount or kind of consideration to
be issued to holders of Company Capital Stock as provided for in this
Agreement, (b) adversely affect the tax treatment to Company's shareholders
as a result of receiving Acquirer Common Stock pursuant to Section 1.6, (c)
materially delay the consummation of the transactions contemplated by this
Agreement or (d) otherwise materially adversely affect the shareholders of
the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In this Agreement, any reference to any event, change,
condition or effect being "material" with respect to any entity or group of
entities means any material event, change, condition or effect related to the
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business, prospects, operations or results of
operations of such entity or group of entities. In this Agreement, any
reference to a "Material Adverse Effect" with respect to any entity or group
of entities means any event, change or effect that is materially adverse to
the condition (financial or otherwise), properties, assets (including
intangible assets), liabilities, business, prospects, operations or results
of operations of such entity and its subsidiaries, taken as a whole.
In this Agreement, any reference to a party's "knowledge"
means actual knowledge of such party's officers and directors, provided that
such persons shall have made due and diligent inquiry of those employees of
such party whom such officers and directors reasonably believe would have
actual knowledge of the matters represented. In particular, the knowledge or
awareness of Xxxxxx X. XxXxxxxx III and Xxxxxx X. Xxxxxxxx shall be imputed
to the Company.
The Company represents and warrants to Acquirer as follows:
2.1 Organization, Standing and Power. The Company is a
corporation duly organized, validly existing, duly qualified to do business
and is a subsisting corporation under the laws of Pennsylvania. The Company
has the corporate power to own its properties and to carry on its business as
now being conducted and as currently proposed to be conducted and is duly
qualified to do business and is in good standing in each other jurisdiction
in which the failure to be so qualified and in good standing would have a
Material Adverse Effect on the Company. The Company has delivered a true and
correct copy of the Articles of Incorporation and Bylaws or other charter
documents, as applicable, of the Company, each as amended to date, to
Acquirer. The Company is not in violation of any of the provisions of its
Articles of Incorporation or Bylaws. Except as set forth on Schedule 2.1 to
the disclosure schedule attached as an exhibit to this Agreement and
delivered by the Company to Acquirer concurrently with the execution and
delivery of this Agreement and referring to the representations and
warranties in this Agreement (the "Company Disclosure Schedule"), the Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity. The Company has never had any subsidiary.
2.2 Capital Structure. (a) The authorized capital stock
of the Company consists of 140,000,000 shares, no par value per share,
including 130,000,000 shares designated as Common Stock ("Company Common
Stock"), and 10,000,000 shares designated as Preferred Stock ("Company
Preferred Stock"), of which there are issued and outstanding 26,074,860
shares of Company Common Stock and 20,000 shares of Company Preferred Stock
as of the date hereof. The shares of Company Common Stock are designated as
follows: (i) 100,000,000 shares are designated as Class A Common Stock (the
"Class A Common Stock"), of which 9,227,260 are issued and outstanding; and
(ii) 25,000,000 shares are designated as Class B Common Stock (the "Class B
Common Stock"), of which 16,847,600 are issued and outstanding. The shares
of Company Preferred Stock are designated as 10,000,000 shares of Class A
Preferred Stock (the "Class A Preferred Stock"), of which 20,000 shares are
outstanding.
(b) Except as set forth on Schedule 2.2 to the Company
Disclosure Schedule, there are no other outstanding shares of capital stock
or voting securities and no outstanding commitments to issue any shares of
capital stock or voting securities, other than pursuant to the exercise of
options outstanding as of such date under the Company Stock Option Plan.
Attached to or as set forth on Schedule 2.2 to the Company Disclosure
Schedule is a true and correct list of the Company's shareholders,
optionholders and warrantholders as of the date hereof, and any other persons
with any rights to acquire Company securities from the Company as of the date
hereof, which list will be promptly updated from time to time prior to
Closing to reflect any changes thereto (which changes are in any event
subject to the restrictions imposed under Section 4.2 below).
(c) Except as set forth on Schedule 2.2, all outstanding
shares of Company Capital Stock are duly authorized, validly issued, fully
paid and non-assessable and are free of any liens or encumbrances other than
any liens or encumbrances created by or imposed upon the holders thereof, and
are not subject to preemptive rights or rights of first refusal 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. The
Company has reserved (i) 10,000,000 shares of Company Common Stock for
issuance to employees and consultants pursuant to the Company's 1997 Stock
Option Plan (the "Company Stock Plan"), of which, as of the date hereof, no
shares have been issued pursuant to Company Option exercises, 8,214,500
shares are subject to outstanding, unexercised Company Options, and 1,785,500
shares are available for issuance thereunder, and (ii) 2,816,560 shares of
Company Common Stock for issuance upon exercise of outstanding Company
Warrants. Except for (i) the rights created pursuant to this Agreement, (ii)
outstanding Company Options, (iii) outstanding Company Warrants to purchase
2,816,560 shares of Company Common Stock and (iv) the redemption rights with
respect to Company Preferred Stock set forth in the Company's Articles of
Incorporation, there are no other options, warrants, calls, rights,
commitments or agreements of any character 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 capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement.
(d) Except as set forth in Section 2.2 and for the
agreements contemplated by this Agreement, there are no contracts,
commitments or agreements relating to voting, purchase or sale of the
Company's capital stock either (i) between or among the Company and any of
its securityholders or (ii) to the Company's knowledge, between or among any
of the Company's securityholders. The terms of the Company Stock Plan and
the applicable stock option agreements permit the assumption or substitution
of options to purchase Acquirer Common Stock, as provided in this Agreement,
without the consent or approval of the holders of such securities, the
Company's shareholders or otherwise. True and complete copies of all
agreements and instruments relating to or issued under the Company Stock Plan
have been provided to Acquirer and such agreements and instruments have not
been amended, modified or supplemented, and there are no agreements to amend,
modify or supplement any of such agreements or instruments in any manner.
All outstanding shares of Company Common Stock and Company Preferred Stock
were issued in compliance with all applicable federal and state securities
laws.
2.3 Authority. The Company has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, except for the approval of the Merger and this Agreement by the
shareholders of the Company and the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, together with any other
required filings and recordings under Delaware Law and Pennsylvania Law, as
provided in Section 1.2. This Agreement has been duly executed and delivered
by the Company and constitutes the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. Except
for (i) limitations by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, (ii) limitations relating to the availability of
specific performance, injunctive relief or other equitable remedies and (iii)
indemnification provisions contained herein that may be limited by applicable
federal or state securities laws, the execution and delivery of this
Agreement by the Company 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 right of termination, cancellation or acceleration of any
obligation or loss of any benefit under or make additional liabilities or
fees due under (i) any provision of the Articles of Incorporation or Bylaws
of the Company, as amended, or (ii) any Material Contract (as defined in
Section 2.26), or (iii) any statute, law, ordinance, rule, regulation,
judgment, decree, stipulation, settlement, injunction or other order, whether
temporary, preliminary or permanent (each, an "Order") applicable to the
Company or any of its properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to the
Company in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) the
filing of the Certificate of Merger, together with any other required filings
and recordings under Delaware Law and Pennsylvania Law, as provided in
Section 1.2; (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; and
(iii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material
Adverse Effect on the Company and would not prevent or materially alter or
delay any of the transactions contemplated by this Agreement.
2.4 Financial Statements. The Company has delivered to
Acquirer its audited financial statements as at and for the twelve-month
periods ended December 31, 1997 and December 31, 1998 and its unaudited
financial statements as at and for the twelve-month period ended December 31,
1999 (balance sheet, statement of operations and statement of cash flows)
(collectively, the "Financial Statements"), a copy of each of which is
attached as Schedule 2.4 to the Company Disclosure Schedule. The Financial
Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated and with each other. The Financial Statements fairly present the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein. The Company maintains and will continue
to maintain an adequate system of internal controls established and
administered in accordance with generally accepted accounting principles.
2.5 Absence of Certain Changes. (a) Except as set forth
on Schedule 2.5 to the Company Disclosure Schedule, since December 31, 1999
(the "Balance Sheet Date") the Company has conducted its business in the
ordinary course consistent with past practice and there has not occurred:
(i) any change, event or condition (whether or not covered
by insurance) that has resulted in, or might reasonably be expected
to result in, a Material Adverse Effect to the Company;
(ii) any acquisition, sale or transfer of any material
asset of the Company;
(iii) any change in accounting methods or practices
(including any change in depreciation or amortization policies or
rates) by the Company or any revaluation by the Company of any of its
assets;
(iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of the
Company, or any direct or indirect redemption, purchase or other
acquisition by the Company of any of its shares of capital stock,
other than repurchases of stock as a result of termination of
employees or the cashless exercise of Company Options, each in
accordance with the Company Stock Plan;
(v) any Material Contract entered into by the Company, or
any material amendment or termination of, or default by the Company,
or, to the Company's knowledge, any other party thereto, under, any
material contract to which the Company is a party or by which it is
bound;
(vi) any amendment or change to the Articles of
Incorporation or Bylaws of the Company;
(vii) any (x) increase in or modification of the
compensation or benefits payable or to become payable by the Company
to any current or former directors or employees in excess of $10,000
individually or $100,000 in the aggregate, (y) grant of severance or
termination pay to any current or former director or employee of the
Company or (z) establishment, adoption, entrance into, amendment or
termination of any Company Plan.
(viii) any issuance of notes, bonds or other debt
securities or any capital stock or other equity securities or any
securities convertible, exchangeable or exercisable into any capital
stock or other equity securities;
(ix) any borrowing of any amount or the incurrence of any
liabilities, except current liabilities incurred in the ordinary
course of business and liabilities under contracts entered into in
the ordinary course of business;
(x) any discharge or satisfaction of any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind
(including, without limitation, any conditional sale or other title
retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company or any of its
Affiliates, any filing or agreement to file a financing statement as
debtor under the Uniform Commercial Code or any similar statute other
than to reflect ownership by a third party of property leased to the
Company under a lease which is not in the nature of a conditional
sale or title retention agreement, or any subordination arrangement
in favor of another Person (collectively, a "Lien") or paid any
obligation or liability, other than current liabilities paid in the
ordinary course of business;
(xi) any declaration of or any payment or distribution of
cash or other property to its shareholders with respect to its
capital stock or other equity securities or purchased or redeemed any
shares of its capital stock or other equity securities (including,
without limitation, any warrants, options or other rights to acquire
its capital stock or other equity securities);
(xii) any mortgage or pledge of any of its properties or
assets or the incurrence of any Lien, except Liens for current
property taxes not yet due and payable;
(xiii) any sale, assignment or transfer of any of its
tangible assets, except in the ordinary course of business, or
canceled any debts or claims;
(xiv) any sale, assignment, transfer, license or other
disposition, in whole or in part, of any Intellectual Property except
nonmaterial ones in the ordinary course of business;
(xv) any extraordinary losses or any waiver of any rights
of value, whether or not in the ordinary course of business or
consistent with past practice;
(xvi) any capital expenditures or commitments therefor that
aggregate in excess of $500,000, which have not been paid for in
cash;
(xvii) any loans or advances to, guarantees for the benefit
of, any direct or indirect investments in, or any capital
contributions to, any Persons in excess of $10,000 in the aggregate;
(xviii) any charitable contributions or pledges;
(xix) any damage, destruction or casualty loss exceeding in
the aggregate $25,000, whether or not covered by insurance;
(xx) any direct or indirect investment in or taken steps to
incorporate any subsidiary;
(xxi) any agreement to do any of the things described in
the preceding clauses (i) through (xx) (other than negotiations with
Acquirer and its representatives regarding the transactions
contemplated by this Agreement); or
(xxii) any other transaction other than in the ordinary
course of business or entered into any other material transaction,
whether or not in the ordinary course of business.
(b) The Company has not at any time made any payments for
political contributions or made any bribes, kickback payments or other
illegal payments.
2.6 Absence of Undisclosed Liabilities. The Company has no
material obligations or liabilities of any nature (matured or unmatured,
fixed or contingent) other than (i) those set forth or adequately provided
for in the Balance Sheet included in the Financial Statements as of December
31, 1999 (the "Balance Sheet"), (ii) those incurred in the ordinary course of
business and not required to be set forth in the Balance Sheet under
generally accepted accounting principles, (iii) those incurred in the
ordinary course of business since the Balance Sheet Date and consistent with
past practice, and (iv) those incurred in connection with the execution and
performance of this Agreement.
2.7 Litigation. There is no private or governmental
action, suit, proceeding, claim, arbitration or investigation (each an
"Action") pending or, to the knowledge of the Company, threatened before any
agency, court or tribunal, foreign or domestic, against the Company or any of
its respective properties or any of its respective officers or directors (in
their capacities as such) or any Company Plan (as defined in Section 2.14(a))
or any fiduciary thereof. There is no Order against the Company, or, to the
knowledge of the Company, any of its respective directors or officers (in
their capacities as such), that could prevent, enjoin, or materially alter or
delay any of the transactions contemplated by this Agreement, or that could
reasonably be expected to have a Material Adverse Effect on the Company.
Schedule 2.7 of the Company Disclosure Schedule also lists all litigation
that the Company has pending against other parties.
2.8 Restrictions on Business Activities.
Except as set forth on Schedule 2.8, there is no agreement, judgment,
injunction, order or decree binding upon the Company which has or could
reasonably be expected to have the effect of prohibiting or impairing any
current or future business practice of the Company, any acquisition of
property by the Company or the conduct of business by the Company as
currently conducted or as proposed to be conducted by the Company.
2.9 Governmental Authorization. The Company has obtained
each federal, state, county, local or foreign governmental consent, license,
permit, grant, or other authorization of a Governmental Entity (i) pursuant
to which the Company currently operates or holds any interest in any of its
properties or (ii) that is required for the operation of the Company's
business or the holding of any such interest ((i) and (ii) herein
collectively called "Company Authorizations"), and all of such Company
Authorizations are in full force and effect, except where the failure to
obtain or have any such Company Authorizations could not reasonably be
expected to have a Material Adverse Effect on the Company.
2.10 Title to Property. The Company has good and
marketable title to all of its respective properties, interests in properties
and assets, real and personal, reflected in the Balance Sheet or acquired
after the Balance Sheet Date (except properties, interests in properties and
assets sold or otherwise disposed of since the Balance Sheet Date in the
ordinary course of business), or with respect to leased properties and
assets, valid leasehold interests in, free and clear of all Liens, except (i)
the lien of current taxes not yet due and payable, (ii) such imperfections of
title, liens and easements as do not and will not materially detract from or
interfere with the use of the properties subject thereto or affected thereby
in the manner currently used in the conduct of the Company's business, or
otherwise materially impair business operations involving such properties and
(iii) liens securing debt which is reflected on the Balance Sheet. The
plants, property and equipment of the Company that are used in the operations
of its business are in good operating condition and repair, subject to normal
wear and tear. All properties used in the operations of the Company are
reflected in the Balance Sheet to the extent generally accepted accounting
principles require them to be so reflected. Schedule 2.10 identifies each
parcel of real property owned or leased by the Company.
2.11 Intellectual Property.
(a) The Company owns, licenses or otherwise possesses
legally enforceable rights to use, all intellectual property, including
without limitation, patents, trademarks, trade names, service marks, domain
names, trade dress, copyrights, copyrightable works, mask works, hardware,
discoveries, databases, systems, networks, documentation, drawings, research
and development, schematics, technology, know-how, trade secrets, inventions,
ideas, algorithms, processes, computer software programs or applications (in
source code and/or object code form), and proprietary information or material
("Intellectual Property") that are used in the business of the Company as
currently conducted.
(b) Schedule 2.11 lists (i) all issued or registered
Intellectual Property and any applications therefor, (ii) all licenses,
sublicenses, royalty, consent and other agreements as to which the Company is
a party or is otherwise bound and which concern Intellectual Property,
including any Intellectual Property incorporated or included in any Company
product, but excluding Commercial Software. "Commercial Software" means
packaged commercially available software which has been licensed to the
Company pursuant to standard end-user licenses but is in no way a component
of, incorporated in or specifically required to develop or support any of the
Company's services, products and business.
(c) Except as set forth on Schedule 2.8, there is no
unauthorized use, disclosure, infringement or misappropriation (each an
"Infringement") of any Intellectual Property rights of the Company by any
third party, including any employee or former employee of the Company. The
Company has not agreed to indemnify any other person against any charge of
Infringement of any Intellectual Property, other than indemnification
provisions contained in end-user purchase orders or sales contracts arising
in the ordinary course of business.
(d) All material Intellectual Property owned or used by the
Company is valid and subsisting. The Company has not been sued in any Action
which involves a claim of Infringement of any third party. The
manufacturing, marketing, licensing or sale of the Company's products and
services and the operation of its business does not infringe any patent,
trademark, service xxxx, copyright, trade secret or other proprietary right
of any third party. The Company has not brought any Action for Infringement
of Intellectual Property or breach of any agreement involving Intellectual
Property against any third party. There are no outstanding or imminent
Actions or Orders nor, to the Company's knowledge, threatened Actions or
Orders that seek to limit or challenge the use, ownership, validity,
enforceability or value of any Intellectual Property of the Company, nor, to
the Company's knowledge, is there a valid basis for any such Action or Order.
(e) The Company has secured valid written assignments from
all consultants and employees who contributed to the creation or development
of the Company's Intellectual Property of the rights to such contributions
that the Company does not already own by operation of law.
(f) The Company has used commercially reasonable efforts to
protect and preserve the confidentiality of all Intellectual Property that is
confidential in nature ("Confidential Information"). All use, disclosure or
appropriation of material Confidential Information owned by the Company by or
to a third party has been pursuant to the terms of a written agreement
between the Company and such third party. All use, disclosure or
appropriation by the Company of material Confidential Information not owned
by the Company has been pursuant to the terms of a written agreement between
the Company and the owner of such Confidential Information, or is otherwise
lawful. The Company has used commercially reasonable efforts to protect and
preserve the integrity and security of its software, systems and networks and
the information thereon from any unauthorized use, access or appropriation.
(g) There are no actions that must be taken by the Company
within sixty (60) days of the Closing Date that, if not taken, will result in
the loss of any Intellectual Property right, including the payment of any
fees or the filing of any responses or documents needed to obtain, maintain,
perfect, preserve or renew any Intellectual Property.
2.12 Environmental Matters. (a) (i) The Company complies
and has complied with all applicable Environmental Laws, and possesses and
complies with and has possessed and complied with all Environmental Permits;
(ii) there are and have been no Materials of Environmental Concern, or other
conditions, at any property owned, operated, or otherwise used by the Company
now or in the past, or at any other location, in circumstances that would
reasonably be expected to result in liability to the Company under any
Environmental Law or result in costs to the Company arising out of any
Environmental Law; (iii) no judicial, administrative, or arbitral proceeding
(including any notice of violation or alleged violation) under any
Environmental Law to which the Company is, or to the knowledge of the Company
will be, named as a party is pending or, to the knowledge of the Company,
threatened, nor is the Company the subject of any investigation or the
recipient of any request for information in connection with any such
proceeding or potential proceeding; (iv) to the knowledge of the Company, the
foregoing representations and warranties are also true and correct with
respect to any entity for which the Company may be liable; and (v) the
Company has provided to Acquirer true and complete copies of all material
Environmental Reports in the possession or control of the Company.
(b) For purposes of this Agreement, the terms below shall be defined
as follows:
(i) "Environmental Laws" shall mean any and all laws,
rules, orders, regulations, statutes, ordinances, guidelines, codes,
decrees, or other legally enforceable requirement (including, without
limitation, common law) of any foreign government, the United States,
or any state, local, municipal or other governmental authority,
regulating, relating to or imposing liability or standards of conduct
concerning protection of the environment or of human health, or
employee health and safety.
(ii) "Environmental Permits" shall mean any and all
permits, licenses, registrations, notifications, exemptions and any
other authorization required under any applicable Environmental Law.
(iii) "Environmental Report" shall mean any report, study,
assessment, audit, or other similar document that addresses any issue
of actual or potential noncompliance with, actual or potential
liability under or cost arising out of, or actual or potential impact
on business in connection with, any Environmental Law or any proposed
or anticipated change in or addition to Environmental Law, that may
in any way affect the Company, or any entity for which it may be
liable.
(iv) "Materials of Environmental Concern" shall mean any
gasoline or petroleum (including crude oil or any fraction thereof)
or petroleum products, polychlorinated biphenyls, urea-formaldehyde
insulation, asbestos, pollutants, contaminants, radioactivity, and
any other substances of any kind, whether or not any such substance
is defined as hazardous or toxic under any Environmental Law, that is
regulated pursuant to or could give rise to liability under any
Environmental Law.
2.13 Taxes. The Company and any consolidated, combined,
unitary or aggregate group for Tax (as defined below) purposes of which the
Company is or has been a member, have properly completed and timely filed all
Tax Returns (as defined below) required to be filed by them and have paid all
Taxes shown thereon to be due, other than any Taxes for which adequate
reserves in accordance with generally accepted accounting principles have
been reflected in the Financial Statements. The Company's Financial
Statements reflect any Taxes of the Company that have not been paid, whether
or not shown as being due on any Tax Returns other than Taxes arising in the
ordinary course of business after the date of the Financial Statements. The
Company has not, or will not have at the Effective Time, any material
liability for unpaid Taxes accruing after the date of its latest Financial
Statements except for Taxes incurred in the ordinary course subsequent to
December 31, 1999. There is (i) no material claim for Taxes that is a lien
against the property of the Company or is being asserted against the Company
other than liens for Taxes not yet due and payable, (ii) no audit of any Tax
Return of the Company being conducted by a Tax Authority (as defined below),
(iii) no extension of the statute of limitations on the assessment of any
Taxes granted by the Company and currently in effect, and (iv) no agreement,
contract or arrangement to which the Company is a party that may result in
the payment of any amount that would not be deductible by reason of Section
280G or Section 404 of the Code. The Company has not been and will not be
required to include any material adjustment in Taxable income for any Tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code or
any comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger. The
Company has not filed and will not file any consent to have the provisions of
paragraph 341(f)(2) of the Code (or comparable provisions of any state Tax
laws) apply to the Company. The Company is not a party to any Tax sharing or
Tax allocation agreement nor does the Company have any liability or potential
liability to another party under any such agreement. The Company has not
filed any disclosures under Section 6662 or comparable provisions of state,
local or foreign law to prevent the imposition of penalties with respect to
any Tax reporting position taken on any Tax Return. The Company has not ever
been a member of a consolidated, combined or unitary group of which the
Company was not the ultimate parent corporation. For purposes of this
Agreement, the following terms have the following meanings: "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount imposed by
any governmental entity (a "Tax Authority") responsible for the imposition of
any such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period,
and (iii) any liability for the payment of any amounts of the type described
in (i) or (ii) as a result of being a transferee of or successor to any
person or as a result of any express or implied obligation to indemnify any
other person. As used herein, "Tax Return" shall mean any return, statement,
report or form (including, without limitation, estimated tax returns and
reports, withholding tax returns and reports and information reports and
returns) required to be filed with respect to Taxes. The Company has in its
possession receipts for any Taxes paid to foreign Tax authorities. For the
year ending December 28, 1998 and earlier the Company made a valid election
under 1362 of the Code to be an S Corporation and made similar elections
under all state and local laws that permit such election. The Company has
not ever been a "United States real property holding corporation" within the
meaning of Section 897 of the Code.
2.14 Employee Benefit Plans.
(a) Schedule 2.14 contains a true and complete list of each
"employee benefit plan" (within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including,
without limitation, multiemployer plans within the meaning of ERISA section
3(37)), and each stock purchase, stock option, severance, employment, change-
in-control, fringe benefit, collective bargaining, bonus, incentive, deferred
compensation and all other employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA (including
any funding mechanism therefor now in effect or required in the future as a
result of the transaction contemplated by this Agreement or otherwise),
whether oral or written, under which any current or former employee or
director of the Company (the "Company Employees") has any current or future
right to benefits or under which the Company has any current or future
liability. All such plans, agreements, programs, policies and arrangements
shall be collectively referred to as the "Company Plans".
(b) With respect to each Company Plan, the Company has
delivered to the Acquirer a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the
extent applicable: (i) any related trust agreement or other funding
instrument; (ii) the most recent determination letter; (iii) any summary plan
description and other written communications (or a description of any oral
communications) by the Company to the Company Employees concerning the extent
of the benefits provided under a Company Plan; and (iv) for the two most
recent years (A) the Form 5500 and attached schedules and (B) audited
financial statements.
(c) (i) Each Company Plan has been established and
administered in accordance with its terms, and in compliance with the
applicable provisions of ERISA, the Code and other applicable laws, rules and
regulations; (ii) each Company Plan which is intended to be qualified within
the meaning of Code section 401(a) is so qualified has received a favorable
determination letter as to its qualification, and nothing has occurred,
whether by action or failure to act, that could reasonably be expected to
cause the loss of such qualification; (iii) no event has occurred and no
condition exists that would subject the Company, either directly or by reason
of its affiliation with any member of their "Controlled Group" (within the
meaning of Section 414(b), (c), (m) or (o) of the Code), to any tax, fine,
lien, penalty or other liability imposed by ERISA, the Code or other
applicable laws, rules and regulations; and (iv) no "reportable event" (as
defined in Section 4043 of ERISA) or "prohibited transaction" (as defined in
Section 406 of ERISA and Section 4975 of the Code) has occurred with respect
to any Company Plan; (vi) no Company Plan provides retiree welfare benefits
and the Company has no obligations to provide any retiree welfare benefits.
(d) No Company Plan is subject to Title IV of ERISA or
Section 412 of the Code, and the Company could not have, directly or
indirectly, any current or future liability under Title IV of ERISA or
Section 412 of the Code (including, without limitation, an obligation to
indemnify any person or entity for liability related to a plan subject to
Title IV of ERISA or Section 412 of the Code). No Company Plan is a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA), and neither
the Company nor any member of its Controlled Group has any liability or
contributes (or has at any time contributed or had an obligation to
contribute) to any multiemployer plan.
(e) No Company Plan exists that, as a result of the
execution of this Agreement or the transaction contemplated by this
Agreement, could result in the payment to any Company Employee of any money
or other property or could result in the increase, acceleration or provision
of any other rights or benefits to any Company Employee.
2.15 Employee Matters. Except as set forth in Schedule
2.15, (1) the Company is in compliance in all material respects with all
applicable laws, regulations, agreements, contracts and policies relating to
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices; (2)
the Company has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries, and other payments to employees, and the
Company is not liable for any arrears of wages or any taxes or any penalty
for failure to comply with any of the foregoing; (3) the Company is not
liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to any unpaid 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); (4) as of the date hereof, there
are no pending claims against the Company under any workers compensation plan
or policy or for long-term disability; (5) there are no controversies pending
or, to the knowledge of the Company, threatened, between the Company and any
of its respective employees, which controversies have resulted, or could
reasonably be expected to result, in an action, suit, complaint, proceeding,
claim, arbitration or investigation before or by any governmental agency,
administrative agency, court, commission or tribunal, foreign or domestic by
or on behalf of any employee, prospective employee, former employee, retiree,
labor organization or other representative of the Company's employees; (6)
the Company is not a party to any collective bargaining agreement or other
labor union contract, and the Company does not know of any activities or
proceedings of any labor union in connection with an attempt to organize any
such employees; (7) to the Company's knowledge, no employees of the Company
are in violation of any term of any employment contract, patent disclosure
agreement, noncompetition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted by the Company or to
the use of trade secrets or proprietary information of others; (8) since
December 31, 1999, no employee of the Company has given notice to the
Company, and the Company is not otherwise aware, that any such employee
intends to terminate his or her employment with the Company; (9) the Company
is not a party to any employment agreement or consulting agreement with any
person or entity, nor is any such contract or agreement presently being
negotiated; (10) there is no unfair labor practice charge or complaint
pending or, to the best knowledge of the Company, threatened against or
otherwise affecting the Company; (11) there is no labor strike, slowdown,
work stoppage, dispute, lockout or other labor controversy in effect,
threatened against or otherwise affecting the Company, and the Company has
not experienced any such labor controversy within the past five years; (12)
no grievance is pending or, to the best knowledge of the Company, threatened
which, if adversely decided, could have a material adverse effect on the
Company; (13) the Company is not a party to, or otherwise bound by, any
consent decree with, or citation by, any Government agency relating to
employees or employment practices; (14) the Company has paid in full to all
employees of the Company all wages, salaries, commissions, bonuses, benefits
and other compensation due to such employees or otherwise arising under any
policy, practice, agreement, plan, program, statute or law; (15) the Company
is not liable for any severance pay or other payments to any employee or
former employee arising from the termination of employment, nor will the
Company have any liability under any benefit or severance policy, practice,
agreement, plan, or program which exists or arises, or may be deemed to exist
or arise, under any applicable law or otherwise, as a result of or in
connection with the transactions contemplated hereunder or as a result of the
termination by the Company of any persons employed by the Company on or prior
to the Closing Date; (16) the Company has not closed any plant or facility,
effectuated any layoffs of employees or implemented any early retirement,
separation or window program within the past five years, nor has the Company
planned or announced any such action or program for the future; (17) the
Company shall not, at any time within the 90-day period prior to the Closing
Date, effectuate a "plant closing" or "mass layoff", as those terms are
defined in the Worker Adjustment and Retraining Notification Act of 1988, as
amended ("WARN") or any state law, affecting in whole of in part any site of
employment, facility, operating unit or employee; and (18) the Company is in
compliance with its obligations pursuant to WARN, and all other notification
and bargaining obligations arising under any collective bargaining agreement,
statute or otherwise.
2.16 Transactions with Affiliates. Except as set forth on
Schedule 2.16, no officer, director, employee, stockholder of 10% of more of
the Company's common stock or Affiliates of the Company or any immediate
family member of any such individual or any entity in which any such Person
or individual owns at least a ten percent (10%) interest, is a party to any
agreement, contract, commitment or transaction with the Company or has any
material interest in any material property used by the Company; provided that
the following events need not be disclosed: (a) dividends, redemptions,
stock purchases and other distributions otherwise permitted under this
Agreement, (b) the payment of reasonable fees to directors of the Company who
are employees of the Company, (c) any transaction with an officer or member
of the board of directors of the Company in the ordinary course of business
involving compensation, indemnity, employee benefit arrangements or expense
reimbursement, (d) loans or advances to employees otherwise permitted under
this Agreement and (e) customary employment arrangements and benefit programs
on reasonable terms as approved by the board of directors of the Company or a
committee thereof.
2.17 Insurance. Schedule 2.17 of the Company Disclosure
Schedule sets forth all policies of insurance and bonds of the Company as of
the date hereof. There is no material claim 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 and the Company is
otherwise in compliance with the terms of such policies and bonds. The
Company has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.18 Compliance With Laws. The Company has complied with,
is not in violation of, and has not received any notices of violation with
respect to, any federal, state, local or foreign statute, law or regulation
with respect to the conduct of its business, or the ownership or operation of
its business, except for such violations or failures to comply as could not
be reasonably expected to have a Material Adverse Effect on the Company.
2.19 Minute Books. The minute books of the Company made
available to Acquirer contain a complete and accurate summary in all material
respects of all meetings or actions by written consent of directors and
shareholders from the time of incorporation of the Company through the date
of this Agreement, and reflect all transactions referred to in such minutes
accurately in all material respects.
2.20 Brokers' and Finders' Fees. The Company has not
incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or investment bankers' fees
or any similar charges in connection with this Agreement or any transaction
contemplated hereby, except with respect to Deutsche Banc Xxxx Xxxxx, the
terms of whose engagement have been disclosed to the Acquirer.
2.21 Voting Agreements; Irrevocable Proxies. All of the
persons and/or entities deemed "Affiliates" of the Company within the meaning
of Rule 145 promulgated under the Securities Act ("Rule 145") and certain
shareholders of the Company who collectively hold more than 50% of the
outstanding Company Common Stock and more than 50% of the outstanding Class A
Preferred Stock have agreed in writing to vote for approval of the Merger
pursuant to voting agreements attached hereto as Exhibit B ("Voting
Agreements"), and pursuant to Irrevocable Proxies attached thereto as Annex A
("Irrevocable Proxies").
2.22 Vote Required. The affirmative votes of the holders
of at least (i) a majority of the shares of Company Common Stock and (ii) a
majority of the shares of Class A Preferred Stock, each as outstanding on the
record date set for the Company Shareholders Meeting, are the only votes of
the holders of any of the Company's Capital Stock necessary to approve this
Agreement and the transactions contemplated hereby.
2.23 Board Approval. The Board of Directors of the Company
has (i) approved this Agreement and the Merger, (ii) determined that the
Merger is in the best interests of the shareholders of the Company and is on
terms that are fair to such shareholders and (iii) recommended that the
shareholders of the Company approve this Agreement and the Merger.
2.24 Accounts Receivable. Subject to any reserves set
forth in the Financial Statements, the accounts receivable shown on the
Financial Statements represent bona fide claims against debtors for sales and
other charges, and are not subject to discount except for normal cash and
immaterial trade discounts. The amount carried for doubtful accounts and
allowances disclosed in the Financial Statements was calculated in accordance
with generally accepted accounting principles and in a manner consistent with
prior periods.
2.25 Customers and Suppliers. Except as provided in
Schedule 2.25, no customer which individually accounted for more than five
percent (5%) of the Company's gross revenues during the twelve (12) month
period preceding the date hereof, and no supplier of the Company, has
canceled or otherwise terminated, or made any written threat to the Company
to cancel or otherwise terminate its relationship with the Company, or has
decreased materially its services or supplies to the Company in the case of
any such supplier, or its usage of the services or products of the Company in
the case of such customer, and to the Company's knowledge, no such supplier
or customer intends to cancel or otherwise terminate its relationship with
the Company or to decrease materially its services or supplies to the Company
or its usage of the services or products of the Company, as the case may be.
The Company has not knowingly breached, so as to provide a benefit to the
Company that was not intended by the parties, any agreement with, or engaged
in any fraudulent conduct with respect to, any customer or supplier of the
Company. As of the date hereof, the Company provides services to customers,
who in turn have not less than 750,000 subscriber accounts.
2.26 Material Contracts. Except for the contracts and
agreements described in Schedule 2.26 (collectively, the "Material
Contracts"), the Company is not a party to or bound by any material contract,
including without limitation:
(a) any distributor, sales, advertising, agency or
manufacturer's representative contract;
(b) any contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contract more
than $50,000 over the life of the contract;
(c) any contract that expires or may be renewed at the
option of any person other than the Company so as to expire more than
one year after the date of this Agreement;
(d) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency
exchange, commodities or other hedging arrangement or any leasing
transaction of the type required to be capitalized in accordance with
generally accepted accounting principles, except for capital leases
of equipment (each such lease requiring payments of not in excess of
$25,000 over the life of the lease) as set forth in the Financial
Statements;
(e) any contract for capital expenditures in excess of
$50,000 in the aggregate;
(f) any contract limiting the freedom of the Company to
engage in any line of business or to compete with any other Person
(as that term is defined in the Exchange Act (as defined herein)) or
any confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which the Company is a lessor
of any machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property requiring payments in excess of
$25,000 per year;
(h) any contract with any person with whom the Company does
not deal at arm's length;
(i) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect
to, the obligations, liabilities (whether accrued, absolute,
contingent or otherwise) or indebtedness of any other Person;
(j) any pension, profit share, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to current, future, retired or terminated employees or
any other employee benefit plan or arrangement, or any collective
bargaining agreement or any other contract with any labor union, or
severance agreements, programs, policies or arrangements;
(k) any contract for the employment of any officer,
individual employee or other Person on a full-time, part-time,
consulting or other basis providing annual compensation in excess of
$50,000 or contract relating to loans to officers, directors or
Affiliates;
(l) any contract under which the Company has advanced or
loaned any other Person amounts in the aggregate exceeding $25,000;
(m) any lease or agreement under which the Company is
lessee of or holds or operates any property, real or personal, owned
by any other party, except for any lease of real or personal property
under which the aggregate annual rental payments do not exceed
$100,000;
(n) any lease or agreement under which the Company is
lessor of or permits any third party to hold or operate any property,
real or personal, owned or controlled by the Company;
(o) any contract or group of related contracts with the
same party or group of affiliated parties the performance of which
involves consideration in excess of $25,000;
(p) any assignment, license, indemnification or agreement
with respect to any intangible property (including, without
limitation, any Intellectual Property);
(q) any warranty agreement with respect to its services
rendered or its products sold or leases;
(r) any agreement under which it has granted any Person any
registration rights (including, without limitation, demand and
piggyback registration rights);
(s) any sales, distribution or franchise agreement;
(t) any agreement with a term of more than six months which
is not terminable by the Company upon less than 30 days notice
without penalty;
(u) agreement under which the Company receives or provides
Internet access, telecommunications services or technical or other
support services; or
(v) any other agreement which is material to its operations
and business prospects or involves a consideration in excess of
$25,000 annually.
The Company has performed all of the obligations required to be performed by
it and is entitled to all benefits under, and is not alleged to be in default
in respect of any Material Contract. Except as provided in Schedule 2.26,
each of the Material Contracts is in full force and effect, unamended, and
there exists no default or event of default or event, occurrence, condition
or act, with respect to the Company or to the Company's knowledge with
respect to the other contracting party, which, with the giving of notice, the
lapse of the time or the happening of any other event or conditions, would
become a default or event of default under any Material Contract. True,
correct and complete copies of all Material Contracts have been made
available to the Acquirer.
2.27 Third Party Consents. Schedule 2.27 to the Company
Disclosure Schedule lists all contracts of the Company that require a
novation or consent to assignment, as the case may be, prior to the Effective
Time so that the Company will continue to be provided with the full benefits
thereunder. Schedule 2.27 to the Company Disclosure Schedule sets forth
every contract of the Company which, if no consent to the transactions
contemplated by this Agreement were obtained, would have a Material Adverse
Effect on Acquirer's ability to operate the business of the Company in the
same manner as such business was operated by the Company prior to the
Effective Time.
2.28 Year 2000. Except as set forth on Schedule 2.28 to
the Company Disclosure Schedule, there have been no Year 2000 Compliance
problems with any of computer hardware, software, databases, automated
systems and other computer and telecommunications equipment owned or used by
the Company ("Systems") or any products designed, manufactured, distributed
or sold by the Company ("Products") that would result in a Material Adverse
Effect to the Company. "Year 2000 Compliance" means, with respect to the
Systems, Products or other equipment or materials in question, that such can
be used before, during and after the calendar year 2000 A.D., and will
operate during each such time period, either on a stand-alone basis or by
interacting or interoperating with third-party software (provided that such
third-party software is Year 2000 Compliant), without error relating to the
processing, calculating, comparing, sequencing or other use of date-related
data.
2.29 Representations Complete. None of the representations
or warranties made by the Company herein or in any Schedule hereto, including
the Company Disclosure Schedule, or in any certificate furnished by the
Company pursuant to this Agreement, when all such documents are read together
in their entirety, contains or will contain at the Effective Time any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
2.30 HSR Act. With respect to whether filings pursuant to
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the rules promulgated by the U.S. Federal Trade Commission
thereunder (the "HSR Rules"), are required in connection with the Merger, the
Company represents that (1) the Company, including all entities it "controls"
(as defined under 16 C.F.R. Section 801.1(b) of the HSR Rules) does not
"hold," as defined under 16 C.F.R. Section 801.1(c) of the HSR Rules, in the
aggregate, "total assets" of $10,000,000 or more or "annual net sales" of
$100,000,000 or more as defined under 16 C.F.R. Section 801.11 of the HSR
Rules; (2) the Company and all entities it "controls," are not "engaged in
manufacturing" as defined under 16 C.F.R. Section 801.1(j) of the HSR Rules;
and (3) each of the Company's shareholders (a) does not hold in the
aggregate, total assets of $10,000,000 or more or annual net sales of
$10,000,000 or more as defined under 16 C.F.R. Section 801.11 of the HSR
Rules, or (b) will hold, as a result of the Merger, 10% or less of the
outstanding voting securities of the Acquirer "solely for the purpose of
investment" as defined under 16 C.F.R. Section 802.9 of the HSR Rules.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIRER
Acquirer represents and warrants to the Company as follows:
3.1 Organization, Standing and Power. Acquirer is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Acquirer has the corporate power
to own its properties and to carry on its business as now being conducted and
as proposed to be conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified
and in good standing would have a Material Adverse Effect on Acquirer.
Acquirer is not in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents.
3.2 Capital Structure. The authorized capital stock of
Acquirer consists of 190,000,000 shares of Acquirer Common Stock, $0.001 par
value per share, 10,000,000 shares of Class B Common Stock ("Acquirer Class B
Common Stock"), $0.001 par value per share, and 5,000,000 shares of Preferred
Stock, $0.001 par value per share ("Acquirer Preferred Stock"), of which
there were issued and outstanding as of the close of business on March 6,
2000, 96,310,547 shares of Acquirer Common Stock, 2,392,191 shares of
Acquirer Class B Common Stock convertible into 3,588,286 shares of Acquirer
Common Stock and no shares of Acquirer Preferred Stock. The shares of
Acquirer Common Stock to be issued in to the Merger in exchange for Company
Capital Stock and upon the exercise of assumed Company Options will be duly
authorized, validly issued, fully paid, and non-assessable.
3.3 Authority. Acquirer has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Acquirer. This
Agreement has been duly executed and delivered by Acquirer and constitutes
the valid and binding obligation of Acquirer enforceable against Acquirer in
accordance with its terms. 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 right of
termination, cancellation or acceleration of any obligation or loss of a
benefit under (i) any provision of the Articles of Incorporation or Bylaws of
Acquirer, as amended, or (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Acquirer or its properties or assets. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity, is required by or with respect to Acquirer in connection
with the execution and delivery of this Agreement by Acquirer or the
consummation by Acquirer of the transactions contemplated hereby, except for
(i) the filing of the Certificate of Merger, together with any other required
filings and recordings under Delaware Law and Pennsylvania Law, as provided
in Section 1.2, (ii) the filing of a Form 8-K with the SEC and National
Association of Securities Dealers ("NASD") within fifteen (15) days after the
Closing Date, (iii) the filing of a registration statement on Form S-3 with
the SEC after the Closing Date covering the resale of the shares of Acquirer
Common Stock issued in the Merger, (iv) any filings as may be required under
applicable state securities laws and the securities laws of any foreign
country, (v) such filings as may be required under HSR, (vi) the filing with
the NASDAQ Stock Market of a Notification Form for Listing of Additional
Shares with respect to the shares of Acquirer Common Stock issuable upon
conversion of the Company Common Stock in the Merger and upon exercise of the
options under the Company Stock Plan assumed by Acquirer, (vii) the filing of
a registration statement on Form S-8 with the SEC, or other applicable form
covering the shares of Acquirer Common Stock issuable pursuant to outstanding
options under the Company Stock Plan assumed by Acquirer and (viii) such
other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on Acquirer
and would not prevent, materially alter or delay any of the transactions
contemplated by this Agreement.
3.4 SEC Documents; Financial Statements. Acquirer has made
available to the Company each statement, report, registration statement (with
the prospectus in the form filed pursuant to Rule 424(b) of the Securities
Act), definitive proxy statement, and other filing filed with the SEC by
Acquirer since December 31, 1998 (collectively, the "Acquirer SEC
Documents"). In addition, Acquirer has made available to the Company all
exhibits to the Acquirer SEC Documents filed prior to the date hereof, and
will promptly make available to the Company all exhibits to any additional
Acquirer SEC Documents filed prior to the Effective Time. As of their
respective filing dates, the Acquirer SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Securities Act, and none of the
Acquirer SEC Documents nor any information provided by the Acquirer pursuant
to the provisions of Section 5.1 contained 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 made therein, in light of the circumstances
in which they were made, not misleading, except to the extent corrected by a
subsequently filed Acquirer SEC Document. Acquirer has timely filed with the
SEC all required statements, reports, registration statements and documents
required to be filed by it with the SEC on or since December 31, 1998, all of
which complied as to form when filed in all material respects with the
applicable provisions of the Securities Act or the Exchange Act, as the case
may be. The financial statements contained in the Acquirer SEC Documents
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated and
with each other. Such financial statements fairly present the financial
condition and operating results of Acquirer as of the dates, and for the
periods, indicated therein, subject in the case of unaudited interim
financial statements, to normal year-end adjustments. Except as disclosed in
the Acquirer SEC Documents and any press releases of the Acquirer issued up
to and including the date hereof, there has not occurred any event, change or
effect that would result in a Material Adverse Effect on Acquirer, taken as a
whole.
3.5 Board Approval. The Boards of Directors of Acquirer
and Merger Sub have approved this Agreement and the Merger and each of the
other transactions and agreements contemplated hereby. No consent or
approval of the shareholders of Acquirer or Merger Sub is required or
necessary for Acquirer or Merger Sub to enter into this Agreement or to
consummate the transactions contemplated hereby.
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 expressly contemplated by this Agreement or as
consented to in writing by Acquirer), to carry on its business in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted. The Company further agrees to pay debts and Taxes when due
subject (i) to good faith disputes over such debts or Taxes and (ii) to
Acquirer's consent to the filing of material Tax Returns (which consent shall
not be unreasonably withheld or delayed), to pay or perform other obligations
when due, and to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organizations, keep
available the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, in order to preserve
its goodwill and ongoing business. The Company agrees to promptly notify
Acquirer of any event or occurrence not in the ordinary course of its
business, and of any event that could have a Material Adverse Effect on the
Company.
4.2 Restriction on 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 and as
expressly provided for in this Agreement, the Company shall not do, cause or
permit any of the following, without the prior written consent of Acquirer:
(a) Charter Documents. Cause or permit any amendments to
its Articles of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare 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 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 its capital stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of its capital
stock except from former employees, directors and consultants to the
extent required in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to
it;
(c) Stock Option Plans, Etc. Accelerate, amend or change
the period of exercisability or vesting of options or other rights
granted under its stock plans or authorize cash payments in exchange
for any options or other rights granted under any of such plans;
(d) Material Contracts. Enter into any material contract
or commitment, or violate, amend or otherwise modify or waive any of
the terms of any of its material contracts; provided, however, that
the Company shall not enter into any agreement or commitment for the
purchase of products or supplies in an amount in excess of $20,000 in
any one case or $300,000 in the aggregate;
(e) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase
or propose the purchase of, any shares of its capital stock or
securities convertible into, or subscriptions, rights, warrants or
options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities, other than the issuance of shares of Company Common Stock
pursuant to the exercise of stock options, warrants or other rights
therefor disclosed in Schedule 2.2 to the Company Disclosure Schedule
as outstanding as of the date of this Agreement;
(f) Intellectual Property. Transfer to any person or
entity any rights to its Intellectual Property other than pursuant to
non-exclusive, non-source code licenses in the ordinary course of
business consistent with past practice;
(g) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or
other exclusive rights of any type or scope with respect to any of
its products or technology;
(h) Dispositions. Sell, lease, license or otherwise
dispose of or encumber any of its properties or assets which are
material, individually or in the aggregate, to its business, taken as
a whole except for (i) sales of products and services in the ordinary
course of business or (ii) sales of obsolete or unused equipment;
(i) Indebtedness. Incur any indebtedness for borrowed
money in excess of $20,000 or guarantee any such indebtedness or
issue or sell any debt securities or guarantee any debt securities of
others;
(j) Leases. Enter into any operating lease in excess of
$20,000;
(k) Payment of Obligations. Pay, discharge or satisfy in
an amount in excess of $10,000 in any one case or $25,000 in the
aggregate, any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise) arising other than
in the ordinary course of business other than the payment, discharge
or satisfaction of liabilities reflected or reserved against in the
Company Financial Statements;
(l) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except in the ordinary
course of business and consistent with past practice;
(m) Insurance. Materially reduce the amount of any
insurance coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right of
substantial value;
(o) Employee Benefit Plans. (x) Increase or accelerate the
compensation or fringe benefits of any current or former director or
employee of the Company (except for increases in salary or wages in
the ordinary course of business consistent with past practice), (y)
grant any severance or termination pay to any current or former
director or employee of the Company or (z) establish, adopt, enter
into, amend or terminate any Company Plan or any plan, agreement,
program, policy, trust, or other arrangement that would be a Company
Plan if it were in existence as of the date of this Agreement.
(p) Lawsuits. Commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good
faith determines that failure to commence suit would result in the
material impairment of a valuable aspect of its business or result in
a loss of rights of substantial value, provided that it consults with
Acquirer prior to the filing of such a suit, or (iii) for a breach of
this Agreement;
(q) Acquisitions. Acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets which
are material, individually or in the aggregate, to its business,
taken as a whole;
(r) Taxes. Other than in the ordinary course of business,
make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any material
Tax Return or any amendment to a material Tax Return, enter into any
closing agreement, settle any claim or 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) Notices. The Company shall give all notices and other
information required to be given to the employees of the Company, any
collective bargaining unit representing any group of employees of the
Company, and any applicable government authority under the WARN Act,
the National Labor Relations Act, the Internal Revenue Code, the
Consolidated Omnibus Budget Reconciliation Act, and other applicable
law in connection with the transactions provided for in this
Agreement;
(t) Revaluation. 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; or
(u) Other. Take or agree in writing or otherwise to take,
any of the actions described in Sections 4.2(a) through (t) above, or
any action which would make any of its representations or warranties
contained in this Agreement untrue or incorrect or prevent it from
performing or cause it not to perform its covenants hereunder.
4.3 No Solicitation. The Company will not permit its
officers, directors, employees or other agents to, directly or indirectly,
(i) take any action to solicit, initiate or encourage any Takeover Proposal
(as defined in Section 7.3(e)) or (ii) engage in negotiations with, or
disclose any nonpublic information relating to the Company to, or afford
access to the properties, books or records of the Company to, any person that
has advised the Company that it may be considering making, or that has made,
a Takeover Proposal. The Company shall not, and shall not permit any of its
officers, directors, employees or other representatives to agree to or
endorse any Takeover Proposal. The Company will promptly notify Acquirer
after receipt of any Takeover Proposal or any notice that any person is
considering making a Takeover Proposal or any request for nonpublic
information relating to the Company or for access to the properties, books or
records of the Company by any person that has advised the Company that it may
be considering making, or that has made, a Takeover Proposal and will keep
Acquirer fully informed of the status and details of any such Takeover
Proposal notice, request or any correspondence or communications related
thereto and shall provide Acquirer with a true and complete copy of such
Takeover Proposal notice or request or correspondence or communications
related thereto, if it is in writing, or a written summary thereof, if it is
not in writing.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Information Statement. As promptly as practicable
after the execution of this Agreement, the Company shall prepare, with the
cooperation of Acquirer, the Information Statement. The Company shall mail
the Information Statement to all shareholders of the Company entitled to
receive such notice under Pennsylvania Law. The Information Statement shall
constitute a disclosure document for the offer and issuance of the shares of
Acquirer Common Stock to be received by the holders of Company Capital Stock
in the Merger and a proxy statement for solicitation of shareholder approval
of the Merger. Whenever any event occurs with respect to the Company that is
required to be set forth in an amendment or supplement to the Information
Statement, the Company shall promptly inform Acquirer of such occurrence and
cooperate in mailing to shareholders of the Company such amendment or
supplement. The Information Statement shall include the recommendation of
the Board of Directors of the Company in favor of the Merger Agreement and
the Merger and the conclusion of the Board of Directors that the terms and
conditions of the Merger are fair and reasonable to the shareholders of the
Company. Anything to the contrary contained herein notwithstanding, the
Company shall not include in the Information Statement any information with
respect to Acquirer or its affiliates or associates, the form and content of
which information shall not have been approved by Acquirer prior to such
inclusion (such approval not to be unreasonably withheld or delayed).
5.2 Meeting of Shareholders. The Company shall promptly
after the date hereof take all action necessary in accordance with
Pennsylvania Law and its Articles of Incorporation and Bylaws to convene a
meeting of the shareholders of the Company for the purpose of approving this
Agreement and the transactions contemplated hereby or to secure the written
consent of its shareholders thereto (referred to as the "Company Shareholders
Meeting") within thirty (30) days following the date of this Agreement. The
Company shall consult with Acquirer regarding the date of the Company
Shareholders Meeting and shall not postpone or adjourn the Company
Shareholders Meeting without the consent of Acquirer. The Company shall use
its best efforts to solicit from shareholders of the Company proxies in favor
of the Merger and shall take all other action necessary or advisable to
secure the vote or consent of shareholders required to effect the Merger.
5.3 Access to Information.
(a) The Company shall afford Acquirer and its accountants,
counsel and other representatives reasonable access during normal business
hours during the period prior to the Effective Time to (i) all of the
Company's properties, books, contracts, commitments and records, and (ii) all
other information concerning the business, properties, personnel of the
Company as Acquirer may reasonably request. The Company agrees to provide to
Acquirer and its accountants, counsel and other representatives copies of
internal financial statements promptly upon request.
(b) Subject to compliance with applicable law, from the
date hereof until the Effective Time, each of Acquirer and the Company shall
confer on a regular and frequent basis with one or more representatives of
the other party to report operational matters of materiality and the general
status of the Company's ongoing operations.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 5.3 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the Merger.
(d) The Company shall provide Acquirer and its accountants,
counsel and other representatives reasonable access, during normal business
hours, during the period prior to the Effective Time, to all of the Company's
Tax Returns and other records and workpapers relating to Taxes and shall
provide to Acquirer and its representatives, promptly upon request, the
following information: (i) the types of Tax Returns being filed by the
Company in each taxing jurisdiction, (ii) the year of the commencement of the
filing of each such type of Tax Return, (iii) all closed years with respect
to each such type of Tax Return filed in each jurisdiction, (iv) all material
Tax elections filed in each jurisdiction by the Company, (v) any deferred
intercompany gain with respect to transactions to which the Company has been
a party, and (vi) receipts for any Taxes paid to foreign Tax authorities.
5.4 Confidentiality. The parties acknowledge that Acquirer
and the Company have previously executed a non-disclosure agreement dated
January 20, 2000 and a non-solicitation agreement dated February 17, 2000
(collectively, the "Confidentiality Agreement"), a copy of which is attached
hereto as Exhibit C, which Confidentiality Agreement shall continue in full
force and effect in accordance with its terms.
5.5 Public Disclosure. Unless otherwise permitted by this
Agreement, each party shall consult with the other party before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions
contemplated hereby. The Company shall not issue any such press release or
make any such statement or disclosure without the prior approval of Acquirer.
5.6 Consents; Cooperation.
(a) Each of Acquirer and the Company shall promptly apply
for or otherwise seek, and use its best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger.
The Company shall use all commercially reasonable efforts to obtain all
necessary consents, waivers and approvals under any of its material contracts
in connection with the Merger for the assignment thereof or otherwise. The
parties hereto will consult and cooperate with one another, and consider in
good faith the views of one another, in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to federal or state antitrust or fair
trade law.
(b) Each of Acquirer and the Company shall use all
commercially reasonable efforts to resolve such objections, if any, as may be
asserted by any Governmental Entity with respect to the transactions
contemplated by this Agreement under the HSR, the Xxxxxxx Act, as amended,
the Xxxxxxx Act, as amended, the Federal Trade Commission Act, as amended,
and any other Federal, state or foreign statutes, rules, regulations, orders
or decrees that are designed to prohibit, restrict or regulate actions having
the purpose or effect of monopolization or restraint of trade (collectively,
"Antitrust Laws"). In connection therewith, if any administrative or
judicial action or proceeding is instituted (or threatened to be instituted)
challenging any transaction contemplated by this Agreement as violative of
any Antitrust Law, each of Acquirer and the Company shall cooperate and use
all commercially reasonable efforts vigorously to contest and resist any such
action or proceeding and to have vacated, lifted, reversed, or overturned any
Order that is in effect and that prohibits, prevents, or restricts
consummation of the Merger or any such other transactions, unless by mutual
agreement Acquirer and the Company decide that litigation is not in their
respective best interests. Notwithstanding the provisions of the immediately
preceding sentence, neither party shall have any obligation to litigate or
contest any administrative or judicial action or proceeding or any Order
beyond the earlier of (i) sixty (60) days after the date of this Agreement or
(ii) the date of a ruling preliminarily enjoining the Merger issued by a
court of competent jurisdiction. Each of Acquirer and the Company shall use
all commercially reasonable efforts to take such action as may be required to
cause the expiration of the notice periods under the HSR or other Antitrust
Laws with respect to such transactions as promptly as possible after the
execution of this Agreement.
(c) Notwithstanding anything to the contrary in Section
5.6(a) or (b), (i) Acquirer shall not be required to divest any of its or its
subsidiaries' businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation that could reasonably be
expected to have a Material Adverse Effect on Acquirer or of the Surviving
Corporation after the Effective Time and (ii) the Company may not agree to
divest any of its businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation without the consent of the
Acquirer.
5.7 Voting Agreements/Irrevocable Proxies/Shareholder
Representation Agreement.
(a) Acquirer shall be entitled to place appropriate legends
on the certificates evidencing any Acquirer Common Stock to be received by
any shareholder of the Company pursuant to the terms of this Agreement and to
issue appropriate stock transfer instructions to the transfer agent for
Acquirer Common Stock. At the request of any shareholder of the Company, all
legends on the certificates will be removed when and to the extent no longer
required.
(b) The Company has caused (i) all Affiliates of the
Company, (ii) shareholders of the Company who collectively hold more than 50%
of the outstanding Company Common Stock and (ii) shareholders of the Company
who hold more than 50% of the outstanding Class A Preferred Stock to execute
and deliver to Acquirer a Voting Agreement substantially in the form of
Exhibit B and an Irrevocable Proxy substantially in the form of Annex A
attached thereto concurrently with the execution of this Agreement.
(c) The Company shall use all commercially reasonable
efforts to deliver or cause to be delivered to Acquirer at or prior to the
Closing from each of the shareholders of the Company who has not executed a
Voting Agreement, an executed Shareholder Representation Agreement (the
"Shareholder Representation Agreement") in the form attached hereto as
Exhibit D.
5.8 Legal Requirements. Each of Acquirer and the Company
will, and Acquirer will cause its subsidiaries to, (i) take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed on them with respect to the consummation of the transactions
contemplated by this Agreement, (ii) promptly cooperate with and furnish
information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the
consummation of the transactions contemplated by this Agreement, and (iii)
take all reasonable actions necessary to obtain (and will cooperate with the
other parties hereto in obtaining) any consent, approval, order or
authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.9 Blue Sky Laws. Acquirer shall take such steps as may
be necessary to comply with the securities and blue sky laws of all
jurisdictions that are applicable to the issuance of the Acquirer Common
Stock in connection with the Merger and the assumption and exercise of
Company Options. The Company shall use its best efforts to assist Acquirer
as may be necessary to comply with the securities and blue sky laws of all
jurisdictions that are applicable in connection with the issuance of Acquirer
Common Stock in the Merger.
5.10 Employee Benefit Plans; Assumption of Options. At the
Effective Time, the Company Stock Plan, and each Company Option outstanding
under the Company Stock Plan or otherwise whether vested or unvested, will be
assumed by Acquirer. Schedule 5.10 hereto sets forth a true and complete
list as of the date hereof of all holders of outstanding Company Options
under the Company Stock Plan, including the number of shares of Company
Capital Stock subject to each such Company Option, the exercise or vesting
schedule, the exercise price per share and the term of each such Company
Option. On the Closing Date, the Company shall deliver to Acquirer an
updated Schedule 5.10 hereto current as of such date. Each such Company
Option so assumed by Acquirer under this Agreement shall continue to have,
and be subject to, the same terms and conditions set forth in the Company
Stock Plan and the applicable stock option agreement immediately prior to the
Effective Time, except that (i) such Company Option will be exercisable for
that number of whole shares of Acquirer Common Stock equal to the product of
the number of shares of Company Common Stock that were issuable upon exercise
of such assumed Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio (as defined in Exhibit A) and rounded down
to the nearest whole number of shares of Acquirer Common Stock, and (ii) the
per share exercise price for the shares of Acquirer Common Stock issuable
upon exercise of such assumed Company Option will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock
at which such option was exercisable immediately prior to the Effective Time
by the Exchange Ratio, rounded up to the nearest whole cent. Consistent with
the terms of the Company Stock Plan and the documents governing the
outstanding options, the Merger will not terminate any of the outstanding
options under the Company Stock Plan.
5.11 Escrow Agreement. On or before the Effective Time,
the Escrow Agent, the Shareholders' Agent (as defined in Section 8.8 hereto),
the Company and Acquirer will execute the Escrow Agreement contemplated by
Article VIII in substantially the form attached hereto as Exhibit E ("Escrow
Agreement").
5.12 Form S-8. Acquirer agrees to file, no later than
thirty (30) business days after the Closing, a registration statement on Form
S-8 covering the shares of Acquirer Common Stock issuable pursuant to
outstanding Company Options under the Company Stock Plan assumed by Acquirer,
provided that such Company Options qualify for registration on such Form S-8.
The Company agrees that it shall cause to be delivered to Acquirer prior to
the Closing all option documentation relating to the outstanding Company
Options, and, in the event such delivery is delayed, Acquirer's obligation to
file the registration statement on Form S-8 shall be commensurately delayed.
5.13 Listing of Additional Shares.
Prior to the Effective Time, Acquirer shall (i) file with the NASDAQ Market a
Notification Form for Listing of Additional Shares with respect to the shares
of Acquirer Common Stock issuable upon conversion of the Company Common Stock
in the Merger and upon exercise of the Company Options under the Company
Stock Plan assumed by Acquirer and (ii) cause such shares of Acquirer Common
Stock to be authorized for listing on the NASDAQ National Market.
5.14 Employees. (a) Set forth on Schedule 5.14 is a list
of employees of the Company to whom Acquirer will make an offer of employment
pursuant to an Employment and Non-Competition Agreement, substantially in the
form of Exhibit F hereto. Acquirer will negotiate in good faith to enter
into an agreement with the employees listed on Schedule 5.14. The Company
shall cooperate with Acquirer to assist Acquirer in entering into an
agreement with each such employee.
(b) The Surviving Corporation shall not terminate except
for Cause any of the employees who are actively employed in the Company
immediately preceding the day after the Closing Date (the "Employment
Commencement Date") during the twelve months following the Employment
Commencement Date. For the purposes of this Section, "Cause" shall mean,
with respect to each employee, (i) such employee's continued failure
substantially to perform his or her duties of employment (other than as a
result of total or partial incapacity due to physical or mental illness) for
a period of ten days following written notice by Acquirer or the Surviving
Corporation to such employee of such failure, (ii) dishonesty in the
performance of such employee's duties, (iii) an act or acts on such
employee's part constituting (A) a felony under the laws of the United States
or any state thereof or (B) a misdemeanor involving moral turpitude, (iv)
such employee's willful malfeasance or willful misconduct in connection with
his or her duties or any act or omission which is injurious to the financial
condition or business reputation of Acquirer, the Surviving Corporation or
any of their affiliates or (v) if applicable, such employee's breach of any
provisions of his or her employment agreement.
(c) After the Effective Time, Acquirer shall grant all the
employees of the Company credit for all service with the Company prior to the
Effective Time for all purposes for which such service was recognized by the
Company, and Acquirer shall provide that any expenses incurred on or before
the Effective Time by an employee of the Company or such employee's covered
dependents shall be taken into account for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions.
(d) The Company (i) covenants that Xxxxxx X. XxXxxxxx III
and Xxxxxx X. Xxxxxxxx shall continue to work at the Company for a period of
at least twelve months from the Effective Time hereof pursuant to the terms
of their respective Employment and Non-Competition Agreements substantially
in the form of Exhibit F attached hereto and (ii) shall cause each of Xxxxxx
X. XxXxxxxx III and Xxxxxx X. Xxxxxxxx to enter into an Escrow Agreement
substantially in the form of Exhibit I attached hereto, pursuant to which
certain shares of Acquirer Common Stock to be received by each of them as
consideration for the Merger shall be subject to forfeiture in the event that
their employment is terminated under certain circumstances within twelve
months from the Effective Time.
5.15 Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expense; provided, however, that the Company agrees that it
will not incur investment banking fees and expenses exceeding $3,025,000 and
legal fees and expenses exceeding $400,000 in connection with the Merger.
Any expenses (including any fees and expenses of legal counsel, financial
advisors and accountants) incurred by the Company in excess of $3,425,000 for
fees and expenses shall remain an obligation of the Company's shareholders.
If Acquirer or the Company receives any invoices for amounts in excess of
such amounts, the Company may, with Acquirer's written approval, pay such
fees; provided, however, that such payment shall, if not promptly reimbursed
by the Company shareholders at Acquirer's request, constitute Damages (as
defined in Section 8.2) recoverable under the Escrow Agreement and such
Damages shall not be subject to the Escrow Basket.
5.16 Treatment as Reorganization. Neither the Company nor
Acquirer shall take any action prior to or following the Closing that would
cause the merger to fail to qualify as a "reorganization" within the meaning
of Section 368(a) of the Code.
5.17 Best Efforts and Further Assurances. Subject to the
terms and conditions of this Agreement, each of the parties to this Agreement
shall use its best efforts to effectuate the transactions contemplated hereby
and to fulfill and cause to be fulfilled the conditions to closing under this
Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform
such other acts and things as may be necessary or desirable for effecting
completely the consummation of this Agreement and the transactions
contemplated hereby.
5.18 Company Warrants. The Company shall use its best
efforts to ensure that all outstanding warrants to acquire Company Capital
Stock have been cancelled or exercised at or prior to the Closing Date.
5.19 Indemnification of Directors, Officers, etc.
(a) Acquirer and the Surviving Corporation shall indemnify, defend and hold
harmless the present and former directors and officers of the Company and
Acquirer shall cause the Surviving Corporation to indemnify, defend and hold
harmless the present and former employees and agents of the Company
(collectively, the "Indemnified Parties"), in each case, against all losses,
claims, damages, expenses or liabilities arising out of actions or omissions
or alleged actions or omissions occurring at or prior to the Effective Time
to the same extent and on the same terms and conditions (including with
respect to advancement of expenses) permitted or required under applicable
law and the Company's Articles of Incorporation and By-Laws in effect at the
date hereof. Acquirer or the Surviving Corporation shall pay all reasonable
expenses, including attorneys' fees, that may be incurred by any Indemnified
Party in enforcing the indemnity and other obligations provided for in this
Section 5.19.
(b) For a period of six years after the Effective Time,
Acquirer shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company
(provided that Acquirer may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous); provided, however, that if the premiums with respect to such
insurance exceed 200% of the annual premiums paid as of the date hereof by
the Company for such insurance, Acquirer shall be obligated to purchase
directors' and officers' liability insurance with the maximum coverage as can
be obtained at an annual premium equal to 200% of the annual premiums paid by
the Company as of the date hereof.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to
consummate and effect the Merger and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing, by
agreement of all the parties hereto:
(a) Shareholder Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote of the
Company shareholders under Pennsylvania Law.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of
the Merger shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority
or instrumentality, domestic or foreign, seeking any of the foregoing
be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger or the assumption of the Company Options
hereunder, which makes the consummation of the Merger or the
assumption of the Company Options hereunder illegal. In the event an
injunction or other order shall have been issued, each party agrees
to use its reasonable efforts to have such injunction or other order
lifted.
(c) Governmental Approval. Acquirer and the Company and
their respective subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any,
necessary for the consummation of or in connection with the Merger
and the several transactions contemplated hereby, including such
approvals, waivers and consents as may be required under the
Securities Act, under state Blue Sky laws, and under HSR.
(d) Tax Opinion. Acquirer and the Company shall have
received written opinions of Acquirer's legal counsel and the
Company's legal counsel, respectively, in form and substance
reasonably satisfactory to them, and dated on or about the Closing
Date to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, and such opinions
shall not have been withdrawn. In rendering such opinions, counsel
shall be entitled to rely upon, among other things, reasonable
assumptions as well as representations of Acquirer and the Company.
(e) Escrow Agreement. Acquirer, the Company, Escrow Agent
and the Shareholder's Agent (as defined in Section 8.8 hereto) shall
have entered into an Escrow Agreement substantially in the form
attached hereto as Exhibit E.
6.2 Additional Conditions to Obligations of the 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, by the Company:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Acquirer in this Agreement shall be
true and correct in all material respects (except for such
representations and warranties that are qualified by their terms by a
reference to materiality, which representations and warranties as so
qualified shall be true in all respects) on and as of the date of
this Agreement and on and as of the Effective Time as though such
representations and warranties were made on and as of such time,
except to the extent that any representations and warranties
expressly relate to an earlier date in which case such
representations and warranties shall be as of such earlier date, and
(ii) Acquirer shall have performed and complied in all material
respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by Acquirer as
of the Effective Time.
(b) Certificate of Acquirer. The Company shall have been
provided with a certificate executed on behalf of Acquirer by an
officer of Acquirer to the effect set forth in Section 6.2(a).
(c) Redemption of Class A Preferred Stock and Repayment of
Senior Revolving Loan. The Class A Preferred Stock held by the State
Board of Administration of Florida will have been redeemed in
accordance with its terms and the senior revolving loan from the
State Board of Administration of Florida will have been repaid in
accordance with its terms.
6.3 Additional Conditions to Obligations of Acquirer.
The obligations of Acquirer to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Acquirer:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of the Company in this Agreement shall
be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms by a
reference to materiality, which representations and warranties as so
qualified shall be true in all respects) on and as of the date of
this Agreement and on and as of the Effective Time as though such
representations and warranties were made on and as of such time,
except to the extent that any representations and warranties
expressly relate to an earlier date in which case such
representations and warranties shall be as of such earlier date, and
(ii) the Company shall have performed and complied in all material
respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by the Company
as of the Effective Time.
(b) Certificate of the Company. Acquirer shall have been
provided with a certificate executed on behalf of the Company by its
Chairman to the effect set forth in Section 6.3(a).
(c) Third Party Consents. Acquirer shall have been
furnished with evidence satisfactory to it of the consent or approval
of those persons or entities whose consent or approval shall be
required in connection with the Merger under the contracts of the
Company set forth on Schedule 2.27 hereto.
(d) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other
legal or regulatory restraint provision limiting or restricting
Acquirer's conduct or the operation of the business of the Company
following the Merger shall be in effect, and no proceeding brought by
an administrative agency or commission or other Governmental Entity,
domestic or foreign, seeking the foregoing shall be pending.
(e) No Material Adverse Effect. There shall not have
occurred any Material Adverse Effect on the Company.
(f) FIRPTA Certificate. The Company shall, prior to the
Closing Date, provide Acquirer with a properly executed FIRPTA
Certificate, substantially in the form of Exhibit G attached hereto,
which states that shares of capital stock of the Company do not
constitute "United States real property interests" under Section
897(c) of the Code, for purposes of satisfying Acquirer's obligations
under Treasury Regulation Section 1.1445-2(c)(3). In addition,
simultaneously with delivery of such Notification Letter, the Company
shall have provided to Acquirer, as agent for the Company, a form of
notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2) and
substantially in the form of Exhibit H attached hereto, along with
written authorization for Acquirer to deliver such notice form to the
Internal Revenue Service on behalf of the Company upon the Closing of
the Merger.
(g) Resignation of Directors and Officers. The directors
and officers of the Company in office immediately prior to the
Effective Time shall have resigned as directors and officers, as
applicable, of the Company effective as of the Effective Time.
(h) Company Warrants. All outstanding warrants to acquire
Company Preferred Stock or Company Common Stock shall have been
cancelled or exercised in full.
(i) Employment and Non-Competition Agreements. At least
all but two of the employees of the Company (i) set forth on Schedule
5.14 shall have accepted employment with Acquirer and shall have
entered into an Employment and Non-Competition Agreement
substantially in the form attached hereto as Exhibit F and (ii)
holding stock options to acquire shares of Company Common Stock,
which options by their terms would accelerate as a result of the
transactions contemplated herein, shall have entered into written
consents, in form and substance satisfactory to Acquirer and
sufficient to effect an amendment of the terms of such stock options,
so that such acceleration shall be delayed until the one year
anniversary of the Employment Commencement Date (provided, however,
that the options of such employees shall otherwise continue to vest
according to the respective schedules and terms of such options
without giving effect to such acceleration provisions; and provided,
further, that the unvested portion of such options shall fail to vest
only under such circumstances described in the early resignation and
"Escrow Cause" provisions set forth in Section 4(d) of the Escrow
Agreement attached hereto as Exhibit I); provided that, without
exception, all the employees set forth on Schedule 6.3 shall have
entered into the agreements, consents and amendments referenced in
clauses (i) and (ii) of this paragraph (i).
(j) Certificates of Good Standing. The Company shall, on
or prior to the Closing Date, provide Acquirer a certificate from the
Secretary of the Commonwealth of Pennsylvania as to the Company's
good standing.
(k) Termination of 401(k) Plan. If required by
Acquirer in writing, the Company shall, immediately prior to
the Closing Date, terminate the Company 401(k) Plan (the
"401(k) Plan") and no further contributions shall be made to
the 401(k) Plan, provided that, as a condition of such
termination, the Company's employees shall be eligible to
participate in Acquirer's 401(k) plan promptly following the
Closing Date. The Company shall provide to Acquirer (i)
executed resolutions by the Board of Directors of the
Company authorizing such termination and (ii) an executed
amendment to the 401(k) Plan sufficient to assure compliance
with all applicable requirements of the Code and regulations
thereunder so that the tax-qualified status of the 401(k)
Plan will be maintained at the time of such termination
(l) Shareholder Representation Agreement. The Company
shall, prior to the Closing Date, provide Acquirer with an executed
Shareholder Representation Agreement, in the form attached hereto as
Exhibit D from at least all but two of the shareholders of the
Company who has not executed a Voting Agreement; provided that,
without exception, all the individuals set forth on Schedule 6.3
shall have entered into a Shareholder Representation Agreement.
(m) Escrow Agreement. The Escrow Agreement substantially in
the form of Exhibit I attached hereto shall have been executed and
delivered
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. At any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with
the Merger by the shareholders of the Company, this Agreement may be
terminated:
(a) by mutual consent duly authorized by the Board of
Directors of Acquirer and the Company;
(b) by either Acquirer or the Company, if the Closing shall
not have occurred on or before July 31, 2000; provided that the right
to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been the
cause or resulted in the failure of the Merger to occur on or before
such date and such action or failure to act constitutes a breach of
this Agreement;
(c) by Acquirer, if (i) the Company shall breach any
material representation, warranty, obligation or agreement hereunder
and such breach shall not have been cured within five (5) business
days of receipt by the Company of written notice of such breach,
provided that the right to terminate this Agreement by Acquirer under
this Section 7.1(c)(i) shall not be available to Acquirer in the
event Acquirer is at that time in material breach of this Agreement,
(ii) the Board of Directors of the Company shall have withdrawn or
modified its recommendation of this Agreement or the Merger, or shall
have recommended, endorsed, accepted or agreed to a Takeover
Proposal, or shall have resolved to do any of the foregoing, (iii)
the Company, or its officers, directors or other agents, shall have
materially failed to comply with Section 4.3, or (iv) for any reason
the Company fails to call and hold the Company Shareholders Meeting
by April 1, 2000;
(d) by the Company, if Acquirer shall breach any material
representation, warranty, obligation or agreement hereunder and such
breach shall not have been cured within five (5) days following
receipt by Acquirer of written notice of such breach, provided that
the right to terminate this Agreement by the Company under this
Section 7.1(d) shall not be available to the Company in the event the
Company is at that time in material breach of this Agreement;
(e) by Acquirer if a Trigger Event (as defined in Section
7.3(c)) or Takeover Proposal shall have occurred and the Board of
Directors of the Company, in connection therewith, does not within
five (5) business days of such occurrence (i) reconfirm its approval
and recommendation of this Agreement and the transactions
contemplated hereby and (ii) reject such Takeover Proposal or Trigger
Event.
7.2 Effect of Termination. In the event of termination of
this Agreement as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
Acquirer or the Company or their respective officers, directors, shareholders
or affiliates, except to the extent that such termination results from the
breach by a party hereto of any of its representations, warranties or
covenants set forth in this Agreement; provided, however, that the provisions
of Section 5.4 (Confidentiality), Section 7.3 (Expenses and Termination Fees)
and this Section 7.2 and of Article IX shall remain in full force and effect
and survive any termination of this Agreement.
7.3 Expenses and Termination Fees.
(a) Subject to Section 7.3(b), Section 7.3(c) and Section
5.15, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such
expense.
(b) In the event that (i) Acquirer shall terminate this
Agreement pursuant to Section 7.1(c)(ii), 7.1(c)(iii), 7.1(c)(iv) or 7.1(e),
then the Company shall promptly (but in no event later than five (5) business
days after the occurrence of the event giving Acquirer the right to so
terminate this Agreement) pay to Acquirer the amount of Two Million Dollars
($2,000,000).
(c) As used herein, a "Trigger Event" shall occur if any
Person (as that term is defined in Section 13(d) of the Exchange Act and the
regulations promulgated thereunder) either (i) acquires beneficial ownership
(as that term is defined in Section 13(d) of the Exchange Act and the
regulations promulgated thereunder) of securities representing ten percent
(10%) or more of the voting power of the Company, or (ii) commences a tender
or exchange offer for securities of the Company that, if successfully
consummated, would result in the acquisition by offeror and its affiliates of
beneficial ownership of securities representing ten percent (10%) or more of
the voting power of the Company.
(d) For purposes of this Agreement, "Takeover Proposal"
means any offer or proposal for, or any indication of interest in, (i) a
merger or other business combination involving the Company (other than the
Merger), (ii) the acquisition of twenty percent (20%) or more of the
outstanding shares of capital stock of the Company, or (iii) the acquisition
of a substantial portion of the assets of the Company (other than the sale or
disposition of inventory in the ordinary course of the Company's business).
7.4 Amendment. The boards of directors of the parties
hereto may cause this Agreement to be amended at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto;
provided, however, that an amendment made subsequent to adoption of the
Agreement by the shareholders of the Company shall not alter or change the
amount or kind of consideration to be received on conversion of the Company
Capital Stock.
7.5 Extension; Waiver. At any time prior to the Effective
Time any party hereto may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
ESCROW AND INDEMNIFICATION
8.1 Escrow Fund. As soon as practicable after the
Effective Time, the Escrow Shares shall be registered in the name of, and be
deposited with, an institution selected by Acquirer with the reasonable
consent of the Company, as escrow agent in connection with this Agreement
(the "Escrow Agent"), such deposit (together with interest and other income
thereon) to constitute the Escrow Fund and to be governed by the terms set
forth herein and in the Escrow Agreement substantially in the form attached
hereto as Exhibit E. The Escrow Fund shall be available to compensate
Acquirer solely pursuant to the indemnification obligations of the
shareholders of the Company.
8.2 Indemnification.
(a) Subject to the limitations set forth in this Article
VIII, subsequent to the Closing, the shareholders of the Company will
indemnify and hold harmless Acquirer and its officers, directors, agents and
employees, and each person, if any, who controls or may control Acquirer
within the meaning of the Securities Act (hereinafter referred to
individually as an "Indemnified Person" and collectively as "Indemnified
Persons") from and against any and all losses, costs, damages, liabilities
and expenses arising from claims, demands, actions or causes of action,
including, without limitation, reasonable legal fees, net of any recoveries
by Acquirer under existing insurance policies or indemnities from third
parties (collectively, "Damages"), arising out of any misrepresentation or
breach of or default in connection with any of the representations,
warranties, covenants and agreements given or made by the Company in this
Agreement, the Company Disclosure Schedules or any exhibit or schedule to
this Agreement. The Escrow Fund shall be security for this indemnity
obligation subject to the limitations in this Agreement. If the Merger is
consummated, recovery from the Escrow Fund in accordance with this Article
VIII shall be the exclusive remedy under this Agreement for any breach or
default in connection with any of the representations, warranties, covenants
or agreements set forth in this Agreement or any exhibit or schedule hereto,
except in the event of fraud or intentional misrepresentation or in the event
of a breach of any of the representations and warranties set forth in Section
2.1 (Organization, Standing and Power), Section 2.2 (Capital Structure),
Section 2.13 (Taxes) or Section 2.34 (Accounting and Tax Matters).
(b) Nothing in this Agreement shall limit the liability (i)
of the Company for any breach of any representation, warranty or covenant if
the Merger does not close, or (ii) of any Company shareholder in connection
with any breach by such shareholder of the Voting Agreement.
(c) Notwithstanding anything in this Agreement to the
contrary, neither the Company nor any shareholder of the Company shall have
any liability whether in contract, at law or otherwise with respect to a
breach of the covenant set forth in Section 5.14(d).
8.3 Damage Threshold. Notwithstanding the foregoing,
Acquirer may not receive any shares from the Escrow Fund unless and until one
or more Officer's Certificates (as defined in Section 8.5 below) identifying
Damages the aggregate amount of which exceeds $100,000 has been delivered to
the Escrow Agent as provided in Section 8.5 below and such amount is
determined pursuant to this Article VIII to be payable, in which case
Acquirer shall receive shares equal in value to the full amount of Damages;
provided, however, that in no event shall Acquirer receive more than the
number of shares of Acquirer Common Stock originally placed in the Escrow
Fund, as adjusted to reflect fully the effect of any stock split, reverse
stock split, stock dividend (including any dividend or distribution of
securities convertible or exchangeable into Acquirer Common Stock),
reorganization, recapitalization or other like change with respect to
Acquirer Common Stock occurring after the date hereof. In determining the
amount of any Damages resulting from any misrepresentation, breach or default
subject to indemnity under this Article VIII, any materiality standard
contained in the applicable representation, warranty, covenant or agreement
shall be disregarded.
8.4 Escrow Period. The Escrow Period shall terminate at
the one (1) year anniversary of the Effective Time; provided, however, that
such portion of the Escrow Shares necessary to satisfy any unsatisfied claims
specified in any Officer's Certificate or Certificates theretofore delivered
to the Escrow Agent prior to the termination of the Escrow Period, with
respect to facts and circumstances existing prior to expiration of the Escrow
Period, shall remain in the Escrow Fund until such claims have been resolved.
Acquirer shall deliver to the Escrow Agent a certificate specifying the
Effective Time. Any portion of the Escrow Fund for which there is no claim
pursuant to this Article VIII (net of expenses) shall be distributed
promptly by the Escrow Agent to the shareholders of the Company in accordance
with each shareholder's percentage of the Escrow Fund as set forth in the
Escrow Agreement.
8.5 Claims upon Escrow Fund.
(a) Upon receipt by the Escrow Agent on or before the last
day of the Escrow Period of a certificate signed by any officer of Acquirer
(an "Officer's Certificate")
(i) stating that, Damages exist in an aggregate amount
greater than $100,000; and
(ii) specifying in reasonable detail the individual items
of such Damages included in the amount so stated, the date each such
item was paid, or properly accrued or arose, and the nature of the
misrepresentation, breach of warranty or claim to which such item is
related,
the Escrow Agent shall, subject to the provisions of Section 8.6 and 8.7
below, deliver to Acquirer out of the Escrow Fund, as promptly as
practicable, Acquirer Common Stock or other assets held in the Escrow Fund
having a value equal to such Damages.
(b) For the purpose of compensating Acquirer for its
Damages pursuant to this Agreement, the Acquirer Common Stock in the Escrow
Fund shall be valued based on the average closing price for Acquirer Common
Stock for the twenty day trading period immediately prior to the date that an
indemnification claim is made.
8.6 Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Shareholders' Agent (defined in Section
8.8 below), and, for a period of thirty (30) days after such delivery to the
Escrow Agent of such Officer's Certificate, the Escrow Agent shall make no
delivery of Acquirer Common Stock or other property pursuant to Section 8.5
hereof unless the Escrow Agent shall have received written authorization from
the Shareholders' Agent to make such delivery. After the expiration of such
thirty (30) day period, the Escrow Agent shall make delivery of the Acquirer
Common Stock or other property in the Escrow Fund in accordance with Section
8.5 hereof, provided that no such payment or delivery may be made if the
Shareholders' Agent shall object in a written statement to the claim made in
the Officer's Certificate and such statement shall have been delivered to the
Escrow Agent and to Acquirer prior to the expiration of such thirty (30) day
period.
8.7 Resolution of Conflicts; Arbitration.
(a) In case the Shareholders' Agent shall so object in
writing to any claim or claims by Acquirer made in any Officer's Certificate,
Acquirer shall have twenty (20) days after receipt by the Escrow Agent of an
objection by the Shareholders' Agent to respond in a written statement to the
objection of the Shareholders' Agent. If after such twenty (20) day period
there remains a dispute as to any claims, the Shareholders' Agent and
Acquirer shall attempt in good faith for thirty (30) days to agree upon the
rights of the respective parties with respect to each of such claims. If the
Shareholders' Agent and Acquirer should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on
any such memorandum and shall distribute the Acquirer Common Stock or other
property from the Escrow Fund in accordance with the terms of such
memorandum.
(b) If no such agreement can be reached after good faith
negotiation, either Acquirer or the Shareholders' Agent may, by written
notice to the other, demand arbitration of the matter unless the amount of
the damage or loss is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such amount is
ascertained or both parties agree to arbitration; and in either such event
the matter shall be settled by arbitration conducted by three (3)
arbitrators. Within fifteen (15) days after such written notice is sent,
Acquirer and the Shareholders' Agent shall each select one arbitrator, and
the two arbitrators so selected shall select a third arbitrator. The
decision of the arbitrators as to the validity and amount of any claim in
such Officer's Certificate shall be binding and conclusive upon the parties
to this Agreement, and, notwithstanding anything in Section 8.6 hereof, the
Escrow Agent shall be entitled to act in accordance with such decision and
make or withhold payments out of the Escrow Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction. Any such arbitration shall be
held in New York, New York under the commercial rules then in effect of the
American Arbitration Association. Each party shall bear its own expenses
(including, attorneys' fees and expenses) incurred in connection with any
such arbitration, and the fees and expenses of each arbitrator and the
administrative fee of the American Arbitration Association shall be allocated
by the arbitrator or arbitrators, as the case may be (or, if not so
allocated, shall be borne equally by Acquirer, on the one hand, and the
Company shareholders, on the other hand.
8.8 Shareholders' Agent.
(a) Xxxxx Xxxxx shall be constituted and appointed as agent
("Shareholders' Agent") for and on behalf of the Company shareholders to give
and receive notices and communications, to authorize delivery to Acquirer of
the Acquirer Common Stock or other property from the Escrow Fund in
satisfaction of claims by Acquirer, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in
the judgment of the Shareholders' Agent for the accomplishment of the
foregoing. Such agency may be changed by the holders of a majority in
interest of the Escrow Fund from time to time upon not less than ten (10)
days' prior written notice to Acquirer. No bond shall be required of the
Shareholders' Agent, and the Shareholders' Agent shall receive no
compensation for services rendered. Notices or communications to or from the
Shareholders' Agent shall constitute notice to or from each of the Company
shareholders.
(b) The Shareholders' Agent shall not be liable for any act
done or omitted hereunder as Shareholders' except to the extent it has acted
with gross negligence or willful misconduct, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence that it did
not act with gross negligence or willful misconduct. The Company
shareholders shall severally indemnify the Shareholders' Agent and hold him
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Shareholders' Agent and arising
out of or in connection with the acceptance or administration of the duties
hereunder.
(c) The Shareholders' Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing its duties and exercising
its rights hereunder, provided that the Shareholders' Agent shall treat
confidentially and not disclose any nonpublic information from or about the
Company to anyone (except on a need to know basis to individuals who agree to
treat such information confidentially).
(d) The Shareholders' Agent shall be a third party
beneficiary of the terms of this Section 8.8.
8.9 Actions of the Shareholders' Agent. A decision, act,
consent or instruction of the Shareholders' Agent shall constitute a decision
of all Company shareholders for whom shares of Acquirer Common Stock
otherwise issuable to them are deposited in the Escrow Fund and shall be
final, binding and conclusive upon each such Company shareholder, and the
Escrow Agent and Acquirer may rely upon any decision, act, consent or
instruction of the Shareholders' Agent as being the decision, act, consent or
instruction of each and every such Company shareholder. The Escrow Agent and
Acquirer 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 Shareholders' Agent.
8.10 Third-Party Claims. In the event Acquirer becomes
aware of a third-party claim which Acquirer believes may result in a demand
against the Escrow Fund, Acquirer shall promptly notify the Shareholders'
Agent of such claim, and the Shareholders' Agent and the Company shareholders
for whom shares of Acquirer Common Stock otherwise issuable to them are
deposited in the Escrow Fund shall be entitled, at their expense, to
participate in any defense of such claim. Acquirer shall have the right in
its sole discretion to settle any such claim; provided, however, that
Acquirer may not effect the settlement of any such claim without the consent
of the Shareholders' Agent, which consent shall not be unreasonably withheld.
In the event that the Shareholders' Agent has consented to any such
settlement, the Shareholders' Agent shall have no power or authority to
object under Section 8.6 or any other provision of this Article VIII to the
amount of any claim by Acquirer against the Escrow Fund for indemnity with
respect to such settlement.
8.11 Treatment of Options. (a) During the Escrow Period
(as described in Section 8.4), ten percent of the shares issued upon the
exercise of any Company Options (after giving effect to the Exchange Ratio)
shall be deposited by Acquirer on behalf of the holder of such shares in the
Escrow Fund.
(b) Upon the expiration of the Escrow Period, the number of
shares issuable upon the exercise of any Company Options shall be the product
of (i) the number of shares issuable upon the exercise of such Company
Options after giving effect to the Exchange Ratio multiplied by (ii) the sum
of (A) 90% and (B) the percentage resulting from 10% multiplied by (1) the
aggregate number of shares of Acquirer Common Stock released from the Escrow
Fund to the shareholders of the Company at the expiration of the Escrow
Period divided by (2) the aggregate number of shares of Acquirer Common Stock
that were deposited in the Escrow Fund pursuant to Section 8.11(a) above and
the terms of the Escrow Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival at Effective Time. Each of the
representations and warranties set forth in Article II and Article III will
survive so long as the Escrow Period survives pursuant to Section 8.4, after
which time they will have no further force and effect. The agreements set
forth in this Agreement shall terminate at the Effective Time, except that
the agreements set forth in Article I, Section 5.4 (Confidentiality), 5.8
(Legal Requirements), 5.9 (Blue Sky Laws), 5.10 (Employee Benefit Plans),
5.12 (Form S-8), 5.14 (Employees), 5.17 (Best Efforts and Further
Assurances), 7.3 (Expenses and Termination Fees), 7.4 (Amendment), Article
VIII and this Article IX shall survive the Effective Time and the Closing.
9.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally or by commercial delivery service, or mailed by registered or
certified mail (return receipt requested) or sent via facsimile (with
confirmation of receipt) to the parties at the following address (or at such
other address for a party as shall be specified by like notice):
(a) if to Acquirer or Merger Sub, to:
Covad Communications Group, Inc.
0000 Xxxxxxx Xxxxxxxxxx
Xxxxx Xxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
Laser Xxxx.Xxx, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxx, XX 00000
Attn: Xxxxxx X. XxXxxxxx/Xxxxxx X. Xxxxxxxx/
Xxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Blank Rome Xxxxxxx & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. XxXxxxx, Esq.
Facsimile No.: (000) 000-0000
9.3 Interpretation. When a reference is made in this
Agreement to Exhibits, such reference shall be to an Exhibit to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by
the words "without limitation." The phrases "the date of this Agreement",
"the date hereof", and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to March 8, 2000. 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.
9.4 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
9.5 Entire Agreement; Nonassignability; Parties in
Interest. This Agreement and the documents and instruments and other
agreements specifically referred to herein or delivered pursuant hereto,
including the Exhibits and the Schedules, including the Company Disclosure
Schedule and the Acquirer Disclosure Schedule, (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, except for the
Confidentiality Agreement, which shall continue in full force and effect, and
shall survive any termination of this Agreement or the Closing, in accordance
with its terms (b) are not intended to confer upon any other person any
rights or remedies hereunder, except for the shareholders of the Company and
as set forth in Sections 1.6(a) and (c)-(e), 1.7, 1.9-1.11, 5.10 and 8.8(d);
and (c) shall not be assigned by operation of law or otherwise except as
otherwise specifically provided.
9.6 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
9.7 Remedies Cumulative. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of
any one remedy will not preclude the exercise of any other remedy.
9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York, except where
required to be governed by Delaware Law or Pennsylvania Law. Each of the
parties hereto irrevocably consents to the exclusive jurisdiction of any
court located within the State of New York in connection with any matter
based upon or arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any manner authorized
by the laws of the State of New York for such persons, and waives and
covenants not to assert or plead any objection which it might otherwise have
to such jurisdiction and such process.
9.9 Rules of Construction. Each of the parties hereto
acknowledges and agrees that such party has been represented by counsel
during the negotiation, preparation and execution of this Agreement and,
therefore, waives the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
[Signature page follows]
IN WITNESS WHEREOF, the Company and Acquirer have caused
this Agreement to be executed and delivered by their respective officers
thereunto duly authorized, all as of the date first written above.
COVAD COMMUNICATIONS GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx III
-------------------------------
Name: Xxxxxx X. Xxxxxxxxx III
Title: Executive Vice President
LIGHTSABER ACQUISITION CO.
By: /s/ Xxxxxx X. Xxxxxxxxx III
-------------------------------
Name: Xxxxxx X. Xxxxxxxxx III
Title: Executive Vice President
LASER XXXX.XXX, INC.
By: /s/ Xxxxxx X. XxXxxxxx III
-------------------------------
Name: Xxxxxx X. XxXxxxxx III
Title: Chairman and Chief Executive
Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
