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EXHIBIT 2.9
AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
dated as of
July 13, 2001
by and among
NEXPRISE, INC.,
VENTRO CORPORATION,
NEPTUNE MERGER CORP.,
▇▇▇ ▇▇▇▇▇▇
AS STOCKHOLDER REPRESENTATIVE
AND
U.S. BANK TRUST, NATIONAL ASSOCIATION
AS ESCROW AGENT
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions ...............................................
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger ................................................
SECTION 2.02. Merger Consideration ......................................
SECTION 2.03. Conversion of Shares ......................................
SECTION 2.04. Dissenting Shares .........................................
SECTION 2.05. Surrender and Payment .....................................
SECTION 2.06. Stock Options .............................................
SECTION 2.07. Warrants; Limitation on Issuance of Parent Stock ..........
SECTION 2.08. Fractional Shares .........................................
SECTION 2.09. Dissenting Shares after Payment of Fair Value .............
SECTION 2.10. Withholding Rights ........................................
SECTION 2.11. Lost Certificates .........................................
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation ..............................
SECTION 3.02. Bylaws ....................................................
SECTION 3.03. Directors and Officers ....................................
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power .............................
SECTION 4.02. Corporate Authorization ...................................
SECTION 4.03. Governmental Authorization ................................
SECTION 4.04. Noncontravention ..........................................
SECTION 4.05. Capitalization ............................................
SECTION 4.06. Subsidiaries ..............................................
SECTION 4.07. Financial Statements ......................................
SECTION 4.08. Absence of Certain Changes ................................
SECTION 4.09. No Undisclosed Material Liabilities .......................
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SECTION 4.10. Material Contracts ........................................
SECTION 4.11. Litigation ................................................
SECTION 4.12. Compliance with Laws and Court Orders .....................
SECTION 4.13. Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment ....................................
SECTION 4.14. Products ..................................................
SECTION 4.15. Intellectual Property .....................................
SECTION 4.16. Insurance Coverage ........................................
SECTION 4.17. Licenses and Permits ......................................
SECTION 4.18. Selling Documents .........................................
SECTION 4.19. Finders' Fees .............................................
SECTION 4.20. Employees .................................................
SECTION 4.21. Labor Matters .............................................
SECTION 4.22. Employee Benefit Plans ....................................
SECTION 4.23. Environmental Matters .....................................
SECTION 4.24. Taxes .....................................................
SECTION 4.25. Accounts Receivable .......................................
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 5.01. Corporate Existence and Power .............................
SECTION 5.02. Corporate Authorization ...................................
SECTION 5.03. Governmental Authorization ................................
SECTION 5.04. Non-contravention .........................................
SECTION 5.05. SEC Filings ...............................................
SECTION 5.06. Litigation ................................................
SECTION 5.07. Finders' Fees .............................................
SECTION 5.08. Financial Statements ......................................
SECTION 5.09. Parent Stock ..............................................
ARTICLE 6
COVENANTS OF THE PARENT AND THE COMPANY
SECTION 6.01. Conduct of the Company ....................................
SECTION 6.02. Stockholder Meeting; Proxy Material .......................
SECTION 6.03. No Solicitation ...........................................
SECTION 6.04. Break-up Fee ..............................................
SECTION 6.05. Access to Information; Confidentiality ....................
SECTION 6.06. Public Disclosure .........................................
SECTION 6.07. Consents ..................................................
SECTION 6.08. Reasonable Efforts ........................................
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SECTION 6.09. Notification of Certain Matters ...........................
SECTION 6.10. Regulatory Filings ........................................
SECTION 6.11. Additional Documents and Further Assurances ...............
SECTION 6.12. Stock Options; Certain Shares .............................
SECTION 6.13. Registered Offering .......................................
SECTION 6.14. Further Assurances ........................................
SECTION 6.15. Tax Matters ...............................................
SECTION 6.16. Indemnification ...........................................
SECTION 6.17. Employee Benefits .........................................
SECTION 6.18. Excise Tax Matters ........................................
SECTION 6.19. Operating Expenses ........................................
SECTION 6.20. Information and Computer Systems ..........................
ARTICLE 7
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to Obligations of Each Party ...................
SECTION 7.02. Conditions to the Obligations of Parent and Merger
Subsidiary ................................................
SECTION 7.03. Conditions to the Obligations of the Company ..............
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties ................
SECTION 8.02. Indemnification; Escrow Arrangements ......................
SECTION 8.03. Stockholder Representative ................................
ARTICLE 9
TERMINATION
SECTION 9.01. Termination ...............................................
SECTION 9.02. Effect of Termination .....................................
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices ..................................................
SECTION 10.02. Amendments; No Waivers ...................................
SECTION 10.03. Expenses .................................................
SECTION 10.04. Successors and Assigns ...................................
SECTION 10.05. Governing Law ............................................
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SECTION 10.06. Jurisdiction .............................................
SECTION 10.07. WAIVER OF JURY TRIAL .....................................
SECTION 10.08. Counterparts; Third Party Beneficiaries ..................
SECTION 10.09. Entire Agreement .........................................
SECTION 10.10. Captions .................................................
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AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement")
is made and entered into as of July 13, 2001 by and among Nexprise, Inc., a
Delaware corporation (the "Company"), Ventro Corporation, a Delaware corporation
("Parent"), Neptune Merger Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Subsidiary"), ▇▇▇ ▇▇▇▇▇▇ as Stockholder
Representative and U.S. Bank Trust, National Association as Escrow Agent.
W I T N E S S E T H :
WHEREAS, the Boards of Directors of each of the Company, Parent and
Merger Subsidiary believe it is in the best interests of each company and their
respective stockholders that Parent acquire the Company through the statutory
merger of Merger Subsidiary with and into the Company (the "Merger"), have
determined that this Agreement is advisable, and, in furtherance thereof, have
approved this Agreement and the Merger, and the Company's Board of Directors
shall recommend that its Shareholders approve this Agreement and Merger.
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's and Merger Subsidiary's willingness to
enter into this Agreement, each officer and director of the Company, and any of
their Affiliates (as defined herein) that are beneficial owners of any Company
Capital Stock (as defined herein), are entering into a Voting Agreement in the
form attached hereto as Exhibit A (the "Voting Agreements").
WHEREAS, the Company, on the one hand, and Parent and Merger Subsidiary,
on the other hand, desire to make certain representations, warranties, covenants
and other agreements in connection with the Merger.
WHEREAS, a portion of the Merger Consideration (as defined herein) shall
be placed in escrow by Parent for purposes of satisfying damages, losses,
expenses, breaches or unknown liabilities and other similar charges which may
result from breaches of the representations, warranties and covenants of the
Company contained herein.
WHEREAS, this Agreement contemplates that prior to the Effective Time
(as defined herein), all outstanding shares of Company Preferred Stock (as
defined
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herein) shall have been converted into shares of Company Common Stock (as
defined herein).
WHEREAS, this Agreement contemplates that prior to the Effective Time
all warrants to acquire Company Common Stock shall have been exercised for
Company Common Stock, expired or cancelled without consideration except for the
Covisint Warrant (as defined herein).
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"Acquisition Proposal" means any proposal or offer relating to (i) any
merger, consolidation, sale or license of substantial assets or similar
transactions involving the Company (other than sales or licenses of assets or
inventory in the ordinary course of business or as permitted by this Agreement)
or (ii) sales by the Company of any Company Capital Stock.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
"Average Price" means the per share price of the Parent Stock that
equals the average of the closing prices for the Parent Stock, as reported on
the Nasdaq National Market, for the 3 consecutive trading days ending on and
including the second trading day immediately prior to the Closing Date.
"Business Day" means a day, other than Saturday, Sunday or other day on
which commercial banks in San Francisco, California are authorized or required
by law to close.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and any rules or regulations promulgated
thereunder.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Company Capital Stock" means the Company Common Stock and the Company
Preferred Stock.
"Company Common Stock" means the common stock, $.001 par value, of the
Company.
"Company Preferred Stock" means the Series A Preferred Stock, $.001 par
value, and the Series B Preferred Stock, $.001 par value, of the Company.
"Covisint" means Covisint, LLC.
"Covisint Warrant" means the Amended and Restated Common Stock Purchase
Warrant issued to Covisint by the Company dated April 24, 2001.
"Delaware Law" means the General Corporation Law of the State of
Delaware.
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any governmental authority or
other third party, whether now or hereafter in effect, relating to human health
and safety, the environment or to pollutants, contaminants, wastes or chemicals
or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substances, wastes or materials.
"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the business of the Company as currently conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations promulgated thereunder.
"ERISA Affiliate" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Escrow Amount" means $1,500,000.
"Exchange Ratio" shall be 1:0.8 (representing that each right to acquire
Company Common Stock shall be exchanged for a similar right to acquire 0.8
shares of Parent Common Stock).
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"Federal Tax" means any Tax imposed under the Code.
"Hazardous Substances" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise
hazardous substance, waste or material, or any substance, waste or material
having any constituent elements displaying any of the foregoing characteristics,
including, without limitation, petroleum, its derivatives, by-products and other
hydrocarbons, and any substance, waste or material regulated under any
Environmental Law.
"Knowledge" of any Person that is not an individual means the knowledge
of such Person's officers and directors after reasonable inquiry.
"License Fee Make Whole" means the aggregate of any fees, payments or
good faith estimates of such fees and payments that Parent makes, or will be
required to make, in order to obtain licenses from Oracle Corporation and
Hummingbird (each as set forth on Schedule 6.07) (a "Critical Third Party"), for
which Company is unable to obtain the necessary consent to assignment from such
entities. Regardless of whether Parent waives any such consent as a condition to
Closing, the License Fee Make Whole shall include (i) the amount of any
additional payments or commitments to a Critical Third Party which may be
required in order to receive any necessary consents to assignment and (ii) the
cost to replace any such good, software or service if Company is unable to
obtain a consent to assignment, provided, however, that the License Fee Make
Whole shall only cover such replacement costs to the extent necessary to obtain
a substantially similar replacement for such good, software or service.
Notwithstanding the above, License Fee Make Whole shall not include fees,
payments or commitments which are incurred for inability to obtain such consents
primarily due to actions of or the identity of Parent, if, and only if, these
reasons are set forth in written correspondence by an authorized representative
of such Third Party to Parent, and such correspondence is received by the
Closing Date.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on the financial condition, business, assets or results of
operations of such Person and its Subsidiaries, taken as a whole, other than any
change or
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effect resulting from any termination of a customer or supplier relationship
that is directly attributable to the announcement of the Merger or the
transactions contemplated in connection therewith.
"Merger Consideration" means twenty million, two hundred and fifty
thousand dollars ($20,250,000), which shall be paid in accordance with Section
2.02 and 8.02 of this Agreement.
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Parent Stock" means the common stock, $0.0002 par value, of Parent.
"Parent 10-K" means Parent's annual report on Form 10-K for the fiscal
year ended December 31, 2000.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"Post-Closing Tax Period" means any Tax period beginning after the
Closing Date; and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period beginning after
the Closing Date.
"Pre-Closing Tax Period" means any Tax period ending on or before the
Closing Date; and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period ending on the
Closing Date.
"Schedule A Deductions" means the commitments and liabilities of the
Company set forth on Schedule A hereto (in an amount equal to the outstanding
balance of such commitments and liabilities at the date hereof) that will be
paid or assumed by the Parent at or following the Effective Time and deducted
from the amount available to the holders of Company Common Stock pursuant to
Section 2.02 hereof.
"SEC" means the Securities and Exchange Commission.
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"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Tax" means (i) any tax, governmental fee or other like assessment or
charge of any kind whatsoever (including, but not limited to, withholding on
amounts paid to or by any Person), together with any interest, penalty, addition
to tax or additional amount imposed by any governmental authority (a "Taxing
Authority") responsible for the imposition of any such tax (domestic or
foreign), and any liability for any of the foregoing as transferee, (ii) in the
case of the Company, liability for the payment of any amount of the type
described in clause (i) as a result of being or having been before the Closing
Date a member of an affiliated, consolidated, combined or unitary group, or a
party to any agreement or arrangement, as a result of which liability of the
Company to a Taxing Authority is determined or taken into account with reference
to the activities of any other Person, and (iii) liability of the Company for
the payment of any amount as a result of being party to any Tax Sharing
Agreement or with respect to the payment of any amount imposed on any person of
the type described in (i) or (ii) as a result of any existing express or implied
agreement or arrangement (including, but not limited to, an indemnification
agreement or arrangement).
"Tax Asset" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or tax
attribute that could be carried forward or back to reduce Taxes (including
without limitation deductions and credits related to alternative minimum Taxes).
"Tax Sharing Agreements" means all existing agreements or arrangements
(whether or not written) binding the Company that provide for the allocation,
apportionment, sharing or assignment of any Tax liability or benefit, or the
transfer or assignment of income, revenues, receipts, or gains for the purpose
of determining any person's Tax liability.
"Third Party" means any Person as defined in Section 13(d) of the 1934
Act, other than Parent or any of its Affiliates.
"Ventro Note" means the Promissory Note dated June 29, 2001 pursuant to
which Parent originally loaned the Company $500,000, as such principal amount
may be increased, from time to time, pursuant to Section 6.19 below.
Any reference in this Agreement to a statute shall be to such statute,
as amended from time to time, and to the rules and regulations promulgated
thereunder.
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(a) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Certificates 2.05
Closing 2.01
Closing Date 2.01
Company Balance Sheet 4.07
Company Balance Sheet Date 4.07
Company Disclosure Schedule 4
Company Indemnified Parties 6.16
Company Securities 4.05
Company Stock Option 2.06
Company Stockholder Meeting, Preferred Stock Conversion, Proxy
Materials, Consent Solicitation Materials 6.02
Continuing Employee 6.17
Dissenting Shares 2.04
Effective Time 2.01
Employee Plans 4.22
End Date 9.01
Escrow Fund, Indemnified Parties, Loss, Basket Amount, Escrow Period,
Officers' Certificate, Indemnified Party, Net Recoveries 8.02
Exchange Agent 2.05
Expiration Date 8.01
HSR Act 6.10
Intellectual Property, Patents, Copyrights, Maskworks, Trademarks,
Company Intellectual Property, Registered Intellectual Property,
Company Registered Intellectual Property, PTO, Company Owned
Intellectual Property, Development Plans, Employee Agreements 4.16
IT Escrow Sch. B.
Multiemployer Plan 4.22
Option Plan 4.05
Parent SEC Documents 5.05
Permits 4.17
Private Placement 6.13
Returns 4.24
Schedule 4
Stockholder 2.04
Stockholder Representative 8.03
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Term Section
Surviving Corporation 2.01
Warrant 2.07
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger. (a) At the Effective Time, Merger Subsidiary
shall be merged with and into the Company in accordance with Delaware Law,
whereupon the separate existence of Merger Subsidiary shall cease, and the
Company shall be the surviving corporation (the "Surviving Corporation").
(b) The closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than two (2) Business Days after the last
to occur of the satisfaction or, to the extent permitted hereunder, waiver of
all conditions to the Merger, at the offices of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another place or time is agreed to
in writing by Parent and the Company. The date upon which the Closing actually
occurs is herein referred to as the "Closing Date." On the Closing Date, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger with the Secretary of State of the State of Delaware in accordance
with the applicable provisions of Delaware Law (with the time of acceptance by
the Secretary of State of the State of Delaware being referred to herein as the
"Effective Time").
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under Delaware Law.
SECTION 2.02. Merger Consideration. (a) At the Effective Time, subject
to Section 2.02(b), each vested or unrestricted share of Company Common Stock
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares) (assuming consummation of the transaction contemplated hereby) shall be
converted into the right to receive an amount in cash per share equal to the
result obtained from the following formula:
Per Share Amount = (MC - VN - S - L)/CCS
where MC is the Merger Consideration; VN is the outstanding principal amount of
the Ventro Note plus accrued and unpaid interest through the Effective Time; S
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is the Schedule A Deductions; L is the License Fee Make Whole (if any at that
time) and CCS is the aggregate number of shares of Company Common Stock
outstanding at the Closing, after the conversion of all outstanding shares of
Company Preferred Stock and the conversion, expiration or cancellation of all
outstanding warrants to acquire Company Common Stock in accordance with the
terms of this Agreement, with the exception of the Covisint Warrant, which, if
exercised shall be addressed and satisfied pursuant to Section 2.02(b) or
Section 2.07 below (as of July 11, 2001, CCS is equal to 19,923,268, (i)
assuming conversion of all outstanding Company Preferred Stock to Company Common
Stock, (ii) exercise of all outstanding in the money warrants to acquire Company
Common Stock, with the exception of the Covisint Warrant, (iii) the cancellation
of the bridge warrants held by certain preferred stock holders and (iv) the
cancellation of shares contemplated by Section 6.12(b) hereby. The amount paid
pursuant to this Section or Section 2.02(b) at the Effective Time shall be
reduced by the Escrow Amount pursuant to Section 8.02 of this Agreement.
(b) In the event that the Covisint Warrant shall not have been amended
in accordance with Sections 2.07 and 6.07 prior to the Closing, and Covisint
shall have delivered an Article 14 Affirmation Notice pursuant to Section 4.1 of
the Covisint Warrant, and Covisint chooses to exercise the Covisint Warrant in
its entirety (all 3,000,000 shares of Company Common Stock), then the Covisint
Warrant shall be exercised for shares of Company Common Stock and converted into
the right to receive the payment set forth in Section 2.02(a). In such event,
prior to the Effective Time, Parent shall increase the Merger Consideration by
$600,000. Following any increase in the Merger Consideration pursuant to this
Section 2.02(b), the amount due holders of Company Common Stock pursuant to
Section 2.02(a) shall be calculated as described therein, except that "MC" shall
be increased as provided in this Section 2.02(b) and "CCS" shall be increased by
the number of shares of Company Common Stock issued in respect of the Covisint
Warrant.
SECTION 2.03. Conversion of Shares. At the Effective Time, each share of
common stock of the Merger Subsidiary outstanding immediately prior to the
Effective Time shall be converted into and become one share of common stock of
the Surviving Corporation with the same rights, powers, and privileges as the
shares so converted and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation.
SECTION 2.04. Dissenting Shares.
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(a) Notwithstanding any provision of this Agreement to the contrary, any
shares of Company Capital Stock issued and outstanding immediately prior to the
Effective Time that are held by a Company stockholder (each, a "Stockholder";
collectively, the "Stockholders") who has exercised and perfected appraisal
rights for such shares in accordance with Section 262 of Delaware Law or any
other applicable law or who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal rights ("Dissenting Shares"), shall not be
converted into or represent a right to receive the amount due such Stockholder
pursuant to Section 2.02, but the holder thereof shall only be entitled to such
rights as are granted by such applicable law.
(b) Notwithstanding the provisions of subsection(a) of this Section
2.04, if any holder of Dissenting Shares shall effectively withdraw or lose
(through failure to perfect or otherwise) his or her appraisal rights, then, as
of the later of the Effective Time and the occurrence of such event, such
holder's shares shall automatically be converted into and represent only the
right to receive the amount to which such Stockholder would otherwise be
entitled under Section 2.02 upon surrender of the certificate representing such
shares.
(c) The Company shall give Parent prompt notice of any written demand
for appraisal received by the Company pursuant to the applicable provisions of
applicable law and the opportunity to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any such demands or offer to settle or settle any such demands. To the extent
that Parent or the Company makes any payment or payments in respect of any
Dissenting Shares, Parent shall be entitled to recover under the terms of
Section 8.02(a) hereof the aggregate amount by which such payment or payments
exceed the aggregate consideration that otherwise would have been payable in
respect of such shares pursuant to Section 2.02. The amount of any such recovery
shall be deemed a "Loss" for purposes of Article 8 (except that such amount
shall be recoverable from the first dollar and shall not be required to exceed
the Basket Amount nor shall it be included in calculating whether the Basket
Amount has been exceeded) and shall be subject to all the terms and conditions
of Article 8 hereof.
SECTION 2.05. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent (the "Exchange Agent") for the purpose of
exchanging certificates representing shares of Company Common Stock (the
"Certificates") for the Merger Consideration. Parent shall enter into a
customary agreement with the Exchange Agent providing for the prompt mailing of
letters of transmittal and other required documents to holders of Company Common
Stock such that Stockholders are able to receive payments under Section 2.02
within 30
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days following the Closing. Parent will make available to the Exchange Agent, as
needed, the amounts to be paid in respect of the shares of Company Common Stock
pursuant to Section 2.02 above. Notwithstanding the foregoing, pursuant to
Section 8.02 hereof, Parent shall withhold and not issue to the Stockholders the
Escrow Amount but shall instead deposit such Escrow Amount into an escrow
account with the Escrow Agent on behalf of the Stockholders.
(b) If any portion of the Merger Consideration is to be issued to a
Person other than the Person in whose name the Certificate is registered on the
books of the Company, it shall be a condition to such issuance that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such issuance shall pay to the
Exchange Agent any transfer or other taxes required as a result of such payment
to a Person other than the registered holder of such Certificate or establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(c) After the Effective Time, there shall be no further registration of
or transfers of shares of Company Common Stock.
SECTION 2.06. Stock Options. (a) At the Effective Time, each outstanding
option to purchase shares of Company Common Stock under any employee stock
option plan or arrangement of the Company (each, a "Company Stock Option" and
collectively, the "Company Stock Options") shall be assumed by Parent subject to
the terms of such options in accordance with Section 6.12 hereof and this
Section 2.06. Each Company Stock Option so assumed by Parent at the Effective
Time will continue to have, and be subject to, the same terms and conditions as
were applicable under such Company Stock Option immediately prior to the
Effective Time (including, without limitation, any vesting or similar
provisions), except that (i) each Company Stock Option will be exercisable (or
will become exercisable in accordance with its terms) for that number of whole
shares of Parent Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Stock, and (ii) the
per share exercise price for the shares of Parent Stock issuable upon exercise
of such assumed Company Stock Option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Company Stock Option was exercisable immediately prior to the Effective Time by
the Exchange Ratio, rounded up to the nearest cent.
(b) Parent shall take such actions as are necessary for the assumption
of each Company Stock Option pursuant to this Section 2.06, including the
reservation of Parent Stock, as is necessary to effectuate the transactions
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contemplated by this Section 2.06. Promptly (and in any event no later than 10
Business Days) following the Effective Time, Parent shall prepare and file with
the SEC a registration statement on Form S-8 or other appropriate form with
respect to the shares of Parent Stock subject to the Company Stock Options and
shall use all reasonable efforts to have such registration statement declared
effective as soon as practicable following the Effective Time and to maintain
the effectiveness of such registration statement covering such Company Stock
Options (and to maintain the current status of the prospectus contained therein)
for so long as such Company Stock Options remain outstanding.
SECTION 2.07. Warrants; Limitation on Issuance of Parent Stock.
(a) Each outstanding warrant to acquire shares of Company Capital Stock
(each, a "Warrant" and collectively, the "Warrants"), except for the Covisint
Warrant, shall be exercised for shares of Company Common Stock or canceled
without consideration immediately prior to the Closing. If Covisint shall not
have delivered an Article 14 Affirmation Notice pursuant to Section 4.1 of the
Covisint Warrant and such warrant shall have been amended so that it is
mandatorily exercisable for Parent Stock one Business Day following the
Effective Time, then Parent shall assume the obligation subject to the same
terms and conditions as were applicable under such Covisint Warrant immediately
prior to the Effective Time (including, without limitation, any vesting or
similar provisions), except that (i) the Covisint Warrant will be exercisable
(or will become exercisable in accordance with its terms) for that number of
whole shares of Parent Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Covisint Warrant
immediately prior the Effective Time multiplied by the Exchange Ratio, rounded
down to the nearest whole number of shares of Parent Stock, and (ii) the per
share exercise price for the shares of Parent Stock issuable upon exercise of
such assumed Covisint Warrant will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Covisint Warrant was exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest cent.
(b) In no event shall Parent be required to issue or reserve for
issuance more than 9,000,000 shares of Parent Stock to satisfy its obligations
in connection with this Agreement. In the event that a greater number of shares
of Parent Stock is determined to be issuable under such provisions, then the
number of shares of Parent Stock issuable pursuant to Section 2.07(a) shall be
reduced such that the total number of shares issuable pursuant to this Agreement
shall be 9,000,000 and, in lieu of shares otherwise issuable pursuant to Section
2.07(a), Parent shall make a cash payment to Covisint equal to the number of
shares by which the obligation under Section 2.07(a) was reduced multiplied by
the Average Price. Such
18
payment, together with the issuance of shares under Section 2.07(a), shall be
deemed to satisfy in full the obligations of Parent and Company under the
Covisint Warrant and this Agreement.
SECTION 2.08. Fractional Shares. No fractional shares of Parent Stock
shall be issued in the Merger. All fractional shares of Parent Stock that a
holder of shares of Company Securities would otherwise be entitled to receive as
a result of the Merger shall be aggregated and if a fractional share results
from such aggregation, such holder shall be entitled to receive, in lieu
thereof, an amount in cash without interest determined by multiplying the
Average Price by the fraction of a share of Parent Stock to which such holder
would otherwise have been entitled.
SECTION 2.09. Dissenting Shares after Payment of Fair Value. After
payments of fair value in respect of Dissenting Shares have been made to
dissenting stockholders pursuant to Delaware Law or any other applicable law,
such Dissenting Shares shall be canceled.
SECTION 2.10. Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to this Article such amounts as it is required to
deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. If the Surviving
Corporation or Parent, as the case may be, so withholds amounts, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Capital Stock in respect of which the Surviving
Corporation or Parent, as the case may be, made such deduction and withholding.
SECTION 2.11. Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact and the
agreement to indemnify Parent for any losses relating to the lost certificate by
the Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the shares of
Company Common Stock represented by such Certificate, as contemplated by this
Article.
19
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation. The certificate of
incorporation of Merger Subsidiary in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 3.02. Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 3.03. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation and (ii) the officers of
Merger Subsidiary at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent that each of the
statements contained in this Article 4 are true and complete, except as
otherwise provided herein and except as specifically disclosed in the schedules
attached hereto (each, a "Schedule" and together, the "Company Disclosure
Schedule"). Each exception set forth in the Company Disclosure Schedule and each
other reference to this Agreement set forth in the Company Disclosure Schedule
is identified by reference to, or has been grouped under a heading referring to,
a specific individual section of this Agreement.
SECTION 4.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect. The Company has heretofore delivered to Parent true and
20
complete copies of the certificate of incorporation and bylaws of the Company as
currently in effect.
SECTION 4.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby are within the Company's corporate powers and
have been duly authorized by all necessary corporate action on the part of the
Company, other than approval and adoption of this Agreement and the Merger by
the Stockholders. The affirmative vote of the holders of (i) not less than a
majority of the outstanding shares of Company Preferred Stock, voting as a
class, and (ii) not less than a majority of the outstanding shares of Company
Common Stock and Company Preferred Stock voting together as a single class, with
each outstanding share of Company Preferred Stock having one vote, are the only
votes of the holders of any of the Company Capital Stock necessary in connection
with the consummation of the Merger. This Agreement constitutes a valid and
binding agreement of the Company and the Voting Agreements constitute a valid
and binding agreement of each signatory thereto.
(b) At a meeting duly called and held, the Company's Board of Directors
has (i) unanimously determined that this Agreement is advisable, and that the
Merger is fair to and in the best interests of the Stockholders and (ii)
unanimously approved and adopted this Agreement and the Merger.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any governmental body, agency or official other than (i) the filing
of a certificate of merger with respect to the Merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other states in which Company is qualified to do business, (ii) compliance with
any applicable requirements of the 1933 Act, the 1934 Act, and any other
applicable securities laws, whether state or foreign and (iii) any actions or
filings the absence of which would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or to
impair the ability of the Company to consummate the transactions contemplated by
this Agreement.
SECTION 4.04. Noncontravention. The execution, delivery and performance
by the Company of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (i) violate the certificate of
incorporation or bylaws of the Company, (ii) assuming compliance with the
matters referred to in Section 4.03, violate any applicable law, rule,
regulation, judgment, injunction, order or decree, (iii) require any consent or
other action by any Person under, constitute a default under, or give rise to
any right of
21
termination, cancellation or acceleration of any right or obligation of the
Company or to a loss of any benefit to which the Company is entitled under any
provision of any agreement or other instrument binding upon the Company or (iv)
result in the creation or imposition of any Lien on any asset of the Company.
The Company is free of any restriction based on any exclusivity letters or right
of first refusal or similar type of commitment and is free to enter into this
Agreement and to perform its obligations hereunder.
SECTION 4.05. Capitalization. (a) The authorized capital stock of the
Company consists of (i) 32,100,000 shares of authorized Common Stock, $.001 par
value, of which 6,952,597 shares are issued and outstanding as the date of this
Agreement and (ii) 14,962,188 shares of authorized Preferred Stock, $.001 par
value, of which 6,172,086 shares are designated Series A Preferred Stock, all of
which are issued and outstanding, and 8,790,102 shares are designated Series B
Preferred Stock, of which 7,253,585 are issued and outstanding. There are
outstanding warrants to purchase shares of Company Common Stock in an amount as
set forth in Schedule 4.05. As of the date hereof, each share of Company
Preferred Stock is convertible into one share of Company Common Stock and
neither the execution and delivery of this Agreement by the Company nor the
consummation of any of the transactions contemplated hereby will require any
adjustment to such conversion ratio. The Company Capital Stock and Warrants are,
as of the date of this Agreement, held by the persons with the domicile
addresses and in the amounts set forth in Schedule 4.05. All outstanding shares
of the Company are duly authorized, validly issued, fully paid and non-
assessable and not subject to preemptive rights created by statute, the
certificate of incorporation or bylaws of the Company, or any agreement to which
the Company is a party or by which it is bound and have been issued in
compliance with federal and state securities laws. The Warrants were duly and
validly issued and were issued in compliance with federal and state securities
law, the Company Capital Stock issuable upon exercise of the Warrants has been
duly reserved and, upon exercise, would be validly issued, fully paid and
non-assessable. There are no declared or accrued unpaid dividends with respect
to any shares of the Company Common Stock or the Company Preferred Stock. The
Company has no other capital stock authorized, issued or outstanding.
(b) The Company has reserved 4,755,545 shares of Company Common Stock
for issuance to employees and consultants pursuant to the 1997 Stock Plan (the
"Option Plan"), of which 2,423,875 shares are outstanding pursuant to option
exercises through the date hereof, 1,350,703 shares are exercised and subject to
repurchase, 1,904,092 shares are subject to outstanding unexercised options as
of the date hereof and 427,578 shares remain available for future grant as of
the date hereof. Schedule 4.05(b) sets forth for each Company Stock Option
outstanding, the name of the holder of such option, the domicile address of such
22
holder, the vesting commencement date and number of shares of Company Common
Stock subject to such option, the exercise price of such option and the vesting
schedule for such option, including the extent vested to date and whether the
exercisability of such option will be accelerated and become exercisable by the
transactions contemplated by this Agreement. Except for the Company Stock
Options and the Warrants outstanding as of the date hereof, there are no
options, warrants, calls, rights, commitments or agreements of any character,
written or oral, to which the Company is a party or by which it is bound,
obligating the Company to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any securities of the
Company or obligating the Company to grant, extend, accelerate the vesting of,
change the price of, otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. Except as set forth on Schedule 4.05(b),
no outstanding Company Capital Stock is subject to vesting. Schedule 4.05(b)
sets forth as of the date hereof the name of the holder of any Company Common
Stock subject to vesting or to a right of repurchase in favor of the Company,
the number of shares of Company Common Stock subject to vesting or repurchase
and the vesting schedule for such Company Common Stock, including the extent
vested to date and whether the vesting or lapse of such repurchase right of such
shares of Company Common Stock will be accelerated by the transactions
contemplated by this Agreement. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or other similar rights with
respect to the Company or any of its securities. There are no voting trusts,
proxies, or other agreements or understandings with respect to the voting stock
of the Company or any other matters involving any securities of the Company,
other than the Voting Agreements.
(c) Except as set forth in this Section 4.05, there are no outstanding
(i) shares of capital stock or voting securities of the Company, (ii) securities
of the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company or (iii) options or other rights to acquire
from the Company, or other obligation of the Company to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company (the items in clauses(i), (ii)
and (iii) being referred to collectively as the "Company Securities"). There are
no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any of the Company Securities.
SECTION 4.06. Subsidiaries. The Company has no Subsidiaries and has
never had any Subsidiaries at any time since inception.
SECTION 4.07. Financial Statements. The Company has previously delivered
to Parent (a) the Company's unaudited balance sheet as of May 31, 2001
23
and the unaudited statements of income and cash flows for the eight-month period
then ended and (b) the Company's audited balance sheets (the "Company Balance
Sheet") for the three years ended September 30, 2000 (the "Company Balance Sheet
Date") and the audited statements of income, cash flows and stockholders' equity
for each of the three years then ended, together with the related opinion of
Deloitte & Touche LLP, independent certified accountants.
These financial statements (i) are in accordance with the books and
records of the Company, (ii) present fairly the financial condition of the
Company at the dates therein specified and the results of its operations for the
periods therein specified and (iii) have been prepared in accordance with
generally accepted accounting principles, consistently applied.
SECTION 4.08. Absence of Certain Changes. Since the Company Balance
Sheet Date, the business of the Company has been conducted in the ordinary
course consistent with past practices and, except as reflected in the financial
statements delivered pursuant to Section 4.07(a) or as set forth on Schedule
4.08, there has not been:
(a) any event, occurrence, development or state of circumstances
or facts which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of the Company Capital
Stock, or any repurchase, redemption or other acquisition by the Company
of any outstanding shares of the Company Capital Stock or the Company
Securities;
(c) any amendment of any material term of any outstanding
Company Securities;
(d) any incurrence, assumption or guarantee by the Company of
any indebtedness for borrowed money;
(e) any creation or other incurrence by the Company of any Lien
on any asset other than in the ordinary course of business consistent
with past practices;
(f) any making of any loan, advance or capital contributions to
or investment in any Person;
24
(g) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the
Company in excess of $10,000;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Company of any contract or other right, in either
case, material to the Company, taken as a whole, other than transactions
and commitments in the ordinary course of business consistent with past
practices and those contemplated by this Agreement;
(i) any change in any method of accounting or accounting
practice by the Company;
(j) any (i) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any director,
officer or employee of the Company (or any amendment to any such
existing agreement), (ii) grant of any commissions or bonus plans to any
director, officer or employee of the company, (iii) grant of any
severance or termination pay to any director, officer or employee of the
Company, or (iv) change in compensation or other benefits payable to any
director, officer or employee of the Company pursuant to any severance
or retirement plans or policies thereof;
(k) any labor dispute, other than routine individual grievances,
or any activity or proceeding by a labor union or representative thereof
to organize any employees of the Company, which employees were not
subject to a collective bargaining agreement at the Company Balance
Sheet Date, or any lockouts, strikes, slowdowns, work stoppages or
threats thereof by or with respect to any employees of the Company;
(l) any capital expenditure, or commitment for a capital
expenditure, for additions or improvements to property, plant and
equipment exceeding $10,000 individually or $50,000 in the aggregate;
(m) any Tax election changed, any annual Tax accounting period
changed, any method of Tax accounting changed, any amended Tax Returns
or claims for Tax refunds filed, any closing agreement entered into, any
Tax claim, audit or assessment settled, or any right to claim a Tax
refund, offset or other reduction in Tax liability surrendered;
25
(n) any material change in pricing or royalties set or charged
by the Company to its customers or licensees or in pricing or royalties
set or charged by licensors to the Company; or
(o) any agreement by the Company or any officer or employee
thereof in their capacities as such to do any of the things described in
the preceding clauses (a) through (m) (other than negotiations with
Parent and its representatives regarding the transactions contemplated
by this Agreement).
SECTION 4.09. No Undisclosed Material Liabilities. There are no
liabilities of the Company of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than:
(a) liabilities provided for in the financial statements
delivered pursuant to Section 4.07;
(b) liabilities disclosed on Schedule 4.09; and
(c) other undisclosed liabilities which, individually or in the
aggregate, are not material to the Company.
SECTION 4.10. Material Contracts. (a) Except as disclosed in Schedule
4.10, the Company is neither a party to nor bound by:
(i) any lease (whether of real or personal property) in excess
of $10,000 individually, or $25,000 in the aggregate;
(ii) any agreement for the purchase of materials or equipment
providing for payments by the Company of $50,000 or more individually or
$100,000 in the aggregate or any agreement for the purchase of supplies,
goods, services, or other assets providing for payments by the Company
of $10,000 or more individually or $20,000 in the aggregate;
(iii) any license, sales, distribution or other similar
agreement providing for the license or sale by the Company of software,
materials, supplies, goods, services, equipment or other assets that
provides payments to the Company of $10,000 or more (other than end user
licenses entered into in the ordinary course of business consistent with
past practices);
26
(iv) any partnership, joint venture or other similar agreement
or arrangement;
(v) any agreement relating to the acquisition or disposition of
any business (whether by merger, sale of stock, sale of assets or
otherwise);
(vi) any agreement relating to: (A) indebtedness for borrowed
money or the deferred purchase price of property (in either case,
whether incurred, assumed, guaranteed or secured by any asset), (B)
obligations evidenced by bonds, debentures, notes or other similar
instruments, (C) obligations under any Leases in excess of $10,000
individually, or $25,000 in the aggregate, (D) all non-contingent
obligations to reimburse any bank or other Person in respect of amounts
paid under a letter of credit or similar instrument, (E) debt secured by
a Lien on any asset of such Person, whether or not such debt is
otherwise an obligation of such Person, and (F) guarantees of debt;
(vii) any option, license, franchise or similar agreement (other
than end user licenses entered into in the ordinary course of business
consistent with past practices);
(viii) any agency, dealer, sales representative, marketing or
other similar agreement;
(ix) any agreement that limits the freedom of the Company to
compete in any line of business or with any Person or in any area or
which would so limit the freedom of the Company after the Closing Date;
(x) any agreement with (A) any of its Affiliates, (B) any Person
directly or indirectly owning, controlling or holding with power to
vote, 5% or more of the outstanding voting securities of the Company or
any of its Affiliates, or (C) any director or officer of the Company or
any of its Affiliates or any "associates" or members of the "immediate
family" (as such terms are respectively defined in Rule 12b-2 and Rule
16a-1 of the ▇▇▇▇ ▇▇▇) of any such director or officer; or
(xi) any other agreement, commitment, arrangement or plan not
made in the ordinary course of business that is material to the Company.
(b) Each agreement, contract, plan, lease, arrangement or commitment
disclosed in any Schedule to this Agreement or required to be disclosed pursuant
to this Section is a valid and binding agreement of the Company, and is in full
force and effect, and none of the Company or, to the knowledge of the Company,
27
any other party thereto, is in default or breach in any material respect under
the terms of any such agreement, contract, plan, lease, arrangement or
commitment, and, to the Knowledge of the Company, no event or circumstance has
occurred that, with notice or lapse of time or both, would constitute any event
of default thereunder. True and complete copies of each such agreement,
contract, plan, lease, arrangement or commitment have been delivered to Parent.
SECTION 4.11. Litigation. There is no action, suit, investigation or
proceeding (or to the Company's Knowledge any basis therefor) pending against,
or to the knowledge of the Company, threatened against or affecting, the Company
or any of its respective properties before any court or arbitrator or any
governmental body, agency or official, or which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement.
SECTION 4.12. Compliance with Laws and Court Orders. The Company is not
in violation of, and has not since its inception violated, and to the Knowledge
of the Company is not under investigation with respect to and has not been
threatened to be charged with or given notice of any violation of, any
applicable law, rule, regulation, judgment, injunction, order or decree.
SECTION 4.13. Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment.
(a) The Company does not own any real property and has never owned any
real property. Schedule 4.13 sets forth a list of all real property currently
leased by the Company, the name of the lessor, the date of the lease and each
amendment thereto and, with respect to any current lease, the aggregate annual
rental and/or other fees payable under any such lease, the term and renewal
provisions of such lease the right to terminate the lease prior to the end of
the term, the right to transfer the lease, and the right to sublease. All such
leases are in full force and effect and enforceable by the Company, and there is
not, under any of such leases, any existing default by the Company or, to the
Knowledge of the Company, by the other party thereto or event of default (or
event which with notice or lapse of time, or both, would constitute such a
default).
(b) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the Company
Balance Sheet and except for Liens for Taxes not yet due and payable, municipal
and zoning ordinances, easements for public utilities and such imperfections of
title and encumbrances, if any, which are not material in character, amount or
extent, and which do not
28
materially detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby.
SECTION 4.14. Products. Each of the products produced, licensed, hosted,
subscribed or sold by the Company is, and at all times up to and including the
sale thereof has been, (i) in compliance in all material respects with all
applicable federal, state, local and foreign laws and regulations and (ii) fit
for the purposes for which it is intended to be used and conforms in all
material respects to any promises or affirmations of fact made in any agreement,
task order, container or label for such product or in connection with its sale.
To the Company's Knowledge, there is no design defect with respect to any of
such products. Each of such products contains adequate warnings, if any, and/or
limitations presented in a reasonably prominent manner, in accordance with
applicable laws, rules and regulations and current industry practice with
respect to its contents and use.
SECTION 4.15. Intellectual Property.
(a) For the purposes of this Agreement, the following terms have the
following definitions:
(i) "Intellectual Property" shall mean any or all of the
following and all rights in, arising out of, or associated therewith:
(A) all United States and foreign patents and applications therefor and
all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof ("Patents"); (B) all
inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know how, and
rights in technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (C) all copyrights,
copyright registrations and applications therefor and all other rights
corresponding thereto throughout the world ("Copyrights"); (D) all
rights to all mask works and reticles, mask work registrations and
applications therefor ("Maskworks"); (E) all industrial designs and any
registrations and applications therefor throughout the world; (F) all
trade names, logos, common law trademarks, service marks and domain
names, trademark, service ▇▇▇▇ and domain names registrations and
applications therefor and all goodwill associated therewith throughout
the world ("Trademarks"); (G) all rights in databases and data
collections and all rights therein throughout the world; (H) all rights
in computer software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of
the foregoing is recorded, all Web addresses, sites and domain names;
(I) any similar, corresponding or equivalent rights to any of the
29
foregoing; and (J) all rights in documentation related to any of the
foregoing.
(ii) "Company Intellectual Property" shall mean any Intellectual
Property that is owned by or licensed to the Company. Without in any way
limiting the generality of the foregoing, Company Intellectual Property
includes all Intellectual Property related to the Company's products,
including without limitation all rights in any code, documentation or
background information in connection with all current products and
products in design and development.
(iii) "Registered Intellectual Property" shall mean all United
States, international and foreign: (A) patents, patent applications
(including provisional applications); (B) registered trademarks,
applications to register trademarks, intent-to-use applications, or
other registrations or applications related to trademarks; (C)
registered copyrights and applications for copyright registration; (D)
any mask work registrations and applications to register mask works; and
(E) any other Company Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued
by, filed with, or recorded by, any state, government or other public
legal authority.
(b) Schedule 4.15 lists all Registered Intellectual Property owned by,
or filed in the name of, the Company (the "Company Registered Intellectual
Property") and lists any proceedings or actions before any court, tribunal
(including the United States Patent and Trademark Office (the "PTO") or
equivalent authority anywhere in the world) related to any of the Company
Registered Intellectual Property.
(c) Each item of Company Intellectual Property that is owned or
controlled by the Company ("Company Owned Intellectual Property"), including all
Company Registered Intellectual Property listed in Schedule 4.15 and all of
Company's rights in Company Intellectual Property licensed to the Company, is
held by the Company free and clear of any Liens, other than (i) Liens for Taxes
not yet due and payable, (ii) Liens which do not materially detract from the
value, or materially interfere with the present use, of the Company Intellectual
Property, and (iii) non-exclusive license rights of third parties who have been
granted such rights pursuant to agreements with the Company as listed on
Schedule 4.15. The Company (i) is the exclusive owner of all trademarks and
trade names used in connection with the operation or conduct of the business of
the Company, including the sale of any products or technology or the provision
of any services by the Company, and (ii) owns exclusively and has good title to,
all
30
copyrighted works that are Company products and that were developed by or
specifically on behalf of the Company.
(d) To the extent that any Intellectual Property has been developed or
created by any person other than the Company for which the Company has, directly
or indirectly, paid, the Company has a written agreement with such person with
respect thereto and the Company thereby has obtained ownership of, and is the
exclusive owner of, all such Intellectual Property by operation of law or by
valid assignment.
(e) The Company has not transferred ownership of or granted any license
of or right to use or authorized the retention of any rights to use any
Intellectual Property that is or was Company Owned Intellectual Property, to any
other person.
(f) The Company Intellectual Property constitutes all the Intellectual
Property used in and/or necessary to the conduct of its business: (i) as it
currently is conducted; and (ii) except as set forth in Schedule 4.15 and as set
forth below, to the Company's Knowledge as it is contemplated to be conducted as
reflected in the Company's development plan previously provided to Parent (the
"Project Roadmap"). Company shall use its best efforts specify in Schedule 4.15
what new intellectual property would be required for Parent to modify the
Company Intellectual Property to complete the releases set forth in the Project
Roadmap ("New Intellectual Property").
(g) Other than "shrink-wrap" and similar (whether or not required to be
signed on paper) generally available commercial end-user licenses, the
contracts, licenses and agreements listed in Schedule 4.15 include all
contracts, licenses and agreements to which the Company is a party with respect
to any Intellectual Property. No person who has licensed Intellectual Property
to the Company has ownership rights or license rights to improvements made by
the Company in such Intellectual Property which has been licensed to the
Company.
(h) The operation of the business of the Company as it currently is
conducted or, except for New Intellectual Property, is reasonably contemplated
to be conducted as described in the Project Roadmap, including but not limited
to the Company's design, development, use, import, manufacture and sale of the
products, technology or services of the Company does not infringe or
misappropriate the Intellectual Property of any person, violate the rights of
any person (including rights to privacy or publicity), or constitute unfair
competition or trade practices under the laws of any jurisdiction, and the
Company has not received notice from any person claiming that such operation or
any act, product, technology or service (including products, technology or
services currently under
31
development) of the Company infringes or misappropriates the Intellectual
Property of any person or constitutes unfair competition or trade practices
under the laws of any jurisdiction (nor does the Company have any knowledge of
any basis therefor).
(i) Each item of Company Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees in
connection with such Registered Intellectual Property owned by the Company have
been paid and all necessary documents and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. In each case in which the Company has acquired
any exclusive rights in Company Intellectual Property from any person, the
Company has obtained a valid and enforceable assignment sufficient to transfer
all rights in such Intellectual Property (including the right to seek past and
future damages with respect to such Intellectual Property) to the Company and,
except with respect to copyrights, to the maximum extent provided for by, and in
accordance with, applicable laws and regulations, the Company has recorded each
such assignment with the relevant governmental authorities, including the PTO,
or its equivalent in any relevant foreign jurisdiction, as the case may be.
(j) To the Knowledge of the Company, no person is infringing or
misappropriating any Company Owned Intellectual Property nor has any allegation
of such infringement or misappropriation been made.
(k) The Company has taken reasonable and customary steps to protect the
Company's rights in confidential information and trade secrets of the Company or
provided by any other person to the Company. Without limiting the foregoing, the
Company has, and enforces, a policy requiring each employee, consultant and
contractor who contributes to the development or support of the Company's
Intellectual Property to execute proprietary information, confidentiality and
assignment agreements substantially in the form of the Company's standard forms
(all of which have been provided to counsel to Parent) ("Employee Agreements"),
and no current or former employee of the Company has taken any exception to the
assignment provisions of the Employee Agreements.
(l) No Company Intellectual Property is subject to any proceeding or
outstanding decree, order, judgment or stipulation that (i) with respect to
Company Owned Intellectual Property, restricts in any manner the use, transfer
or licensing thereof by the Company or may affect the validity, use or
enforceability
32
of such Company Owned Intellectual Property; or (ii) restricts the use thereof
in the manner it is currently used by the Company.
(m) The Company has not given an indemnity in connection with any
Intellectual Property right to any third person.
(n) The Company has not entered into a contract with General Motors
Corporation ("GM") for custom services which transfers ownership of developed
Intellectual Property to GM. Additionally, the Company has not performed or
committed to perform services for Covisint or a Covisint customer for which
ownership of the developed Intellectual Property has transferred or will
transfer to Covisint or a Covisint customer (such as GM) for such past services
performed or committed to.
SECTION 4.16. Insurance Coverage. Schedule 4.16 lists all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company as of
the date hereof, including the policy coverage, amounts already paid under each
policy, dates of the beginning and end of coverage and the annual premiums of
each such policy. There is no claim by the Company pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid, and the Company is otherwise
in compliance with the terms of such policies and bonds (or other policies and
bonds providing substantially similar insurance coverage). The Company has no
Knowledge of any threatened termination of, or premium increase with respect to,
any of such policies.
SECTION 4.17. Licenses and Permits. Schedule 4.17 correctly describes
each license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or business of
the Company (the "Permits") together with the name of the government agency or
entity issuing such Permit. Except as set forth on the Schedule 4.17, (i) the
Permits are valid and in full force and effect, (ii) the Company is not in
default under, and no condition exists that with notice or lapse of time or both
would constitute a default under, the Permits and (iii) none of the Permits will
be terminated or impaired or become terminable, in whole or in part, as a result
of the transactions contemplated hereby.
SECTION 4.18. Selling Documents. None of the documents or information
delivered to Parent by the Company in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
33
contained therein not misleading; provided, however, that the foregoing shall
only be to the Company's Knowledge with respect to any sales and financial
forecasts, business development plans, marketing materials and presentations
about future product plans. The financial projections dated as of June 30, 2001
relating to the Company delivered to Parent are made in good faith and are based
upon reasonable assumptions, and the Company is not aware of any fact or set of
circumstances that would lead it to believe that such projections are incorrect
or misleading in any material respect.
SECTION 4.19. Finders' Fees. Except for Deutsche Bank, Alex. ▇▇▇▇▇ whose
fees are set forth as part of the Schedule A Deductions, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Company who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement.
SECTION 4.20. Employees. Schedule 4.20 sets forth a true and complete
list of (a) the names, titles, annual salaries and other compensation of all
officers of the Company and all other employees of the Company whose annual base
salary exceeds $150,000 and (b) the wage rates for non-salaried employees of the
Company (by classification). Except as specified on Schedule 4.20, none of such
employees and no other key employee of the Company has indicated to the Company
he intends to resign or retire as a result of the transactions contemplated by
this Agreement or otherwise within one year after the Closing Date.
SECTION 4.21. Labor Matters. The Company is in compliance with all
currently applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and are not engaged in any
unfair labor practice, failure to comply with which or engagement in which, as
the case may be, would reasonably be expected to have a Material Adverse Effect.
There is no unfair labor practice complaint pending or, to the knowledge of the
Company, threatened against the Company before the National Labor Relations
Board.
SECTION 4.22. Employee Benefit Plans. (a) Schedule 4.22 contains a
correct and complete list identifying each material "employee benefit plan", as
defined in Section 3(3) of ERISA, each employment, severance or similar
contract, plan, arrangement or policy and each other plan or arrangement
(written or oral) providing for compensation, commissions, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance (including any
self-insured arrangements), health or medical benefits, employee assistance
program, disability or sick leave benefits, workers' compensation, supplemental
unemployment
34
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance benefits)
which is maintained, administered or contributed to by the Company or any ERISA
Affiliate and covers any employee or former employee of the Company, or with
respect to which the Company has any material liability. Copies of such plans
(and, if applicable, related trust or funding agreements or insurance policies)
and all amendments thereto and written interpretations thereof have been
furnished or made known and available to Parent together with the most recent
annual report (Form 5500 including, if applicable, Schedule B thereto) and tax
return (Form 990) prepared in connection with any such plan or trust. Such plans
are referred to collectively herein as the "Employee Plans."
(b) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof sponsors, maintains, contributes to, or is obligated to contribute to,
or has in the past sponsored, maintained, contributed to, or been obligated to
contribute to, any Employee Plan subject to Title IV of ERISA.
(c) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof contributes to, or has in the past contributed to, any multiemployer
plan, as defined in Section 3(37) of ERISA (a "Multiemployer Plan").
(d) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination and/or opinion letter
(if applicable), or has pending or has time remaining in which to file, an
application for such determination from the Internal Revenue Service, and the
Company is not aware of any reason why any such determination letter should be
revoked. The Company has made available to Parent copies of the most recent
Internal Revenue Service determination and/or opinion letters with respect to
each such Employee Plan (if applicable). Each Employee Plan has been maintained
in material compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations, including but not limited
to ERISA and the Code, which are applicable to such Employee Plan. No material
events have occurred with respect to any Employee Plan that could result in
payment or assessment by or against the Company of any material excise taxes
under the Code.
(e) The consummation of the transactions contemplated by this Agreement
will not (either alone or together with any other event) entitle any employee or
independent contractor of the Company or any of its Subsidiaries to severance
pay or accelerate the time of payment or vesting or trigger any payment of
funding (through a grantor trust or otherwise) of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any Employee Plan. There is no contract, plan or arrangement
35
(written or otherwise) covering any employee or former employee of the Company
or any of its Subsidiaries that, individually or collectively, would entitle any
employee or former employee to any severance or other payment solely as a result
of the transactions contemplated hereby, or could give rise to the payment of
any amount that would not be deductible pursuant to the terms of Section 280G or
162(m) of the Code.
(f) The Company has no liabilities in respect of post-retirement,
including but not limited to, health, medical or life insurance benefits for
retired, former or current employees or relatives thereof of the Company except
as required to avoid excise tax under Section 4980B of the Code.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its Affiliates
relating to, or change in employee participation or coverage under, an Employee
Plan which would increase materially the expense of maintaining such Employee
Plan above the level of the expense incurred in respect thereof for the fiscal
year ended December 31, 2000.
(h) The Company is not a party to or subject to, or is currently
negotiating in connection with entering into, any collective bargaining
agreement or other contract or understanding with a labor union or organization.
(i) All contributions and payments accrued under each Employee Plan,
determined in accordance with prior funding and accrual practices, as adjusted
to include proportional accruals for the period ending as of the date hereof,
have been discharged and paid on or prior to the date hereof except to the
extent reflected as a liability on the Company Balance Sheet.
(j) There is no action, suit, investigation, audit or proceeding pending
against or involving or, to the Knowledge of the Company, threatened against or
involving, any Employee Plan before any court or arbitrator or any state,
federal or local governmental body, agency or official.
(k) No employee, former employee consultant or former consultant of the
Company will become entitled to any bonus, retirement, severance, job security
or similar benefit or enhanced such benefit (including acceleration of vesting
or exercise of an incentive award) as a result of the transactions contemplated
hereby.
SECTION 4.23. Environmental Matters. (a) Except as disclosed on Schedule
4.23,
36
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been
filed, no penalty has been assessed and no investigation, action, claim,
suit, proceeding or review is pending, or to the Company's Knowledge,
threatened by any governmental entity or other Person with respect to
any matters relating to the Company and relating to or arising out of
any Environmental Law;
(ii) there are no liabilities of or relating to the Company of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, arising under or relating to any
Environmental Law, and there are no facts, conditions, situations or set
of circumstances which could reasonably be expected to result in or be
the basis for any such liability;
(iii) no polychlorinated biphenyls, radioactive material, lead,
asbestos-containing material, incinerator, sump, surface impoundment,
lagoon, landfill, septic, wastewater treatment or other disposal system
or underground storage tank (active or inactive) is or has been present
at, on or under any property now or previously owned, leased or operated
by the Company;
(iv) no Hazardous Substance has been discharged, disposed of,
dumped, injected, pumped, deposited, spilled, leaked, emitted or
released at, on or under any property now or previously owned, leased or
operated by the Company;
(v) no property now or previously owned, leased or operated by
the Company or any property to which the Company has, directly or
indirectly, transported or arranged for the transportation of any
Hazardous Substances is listed or, to the Company's Knowledge, proposed
for listing, on the National Priorities List promulgated pursuant to
CERCLA, on CERCLIS (as defined in CERCLA) or on any similar federal,
state or foreign list of sites requiring investigation or clean-up; and
(vi) The Company is in compliance with all Environmental Laws
and has obtained and is in compliance with all Environmental Permits;
such Environmental Permits are valid and in full force and effect and
will not be terminated or impaired or become terminable, in whole or in
part, as a result of the transactions contemplated hereby.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Company has Knowledge in
37
relation to the current or prior business of the Company or any property or
facility now or previously owned, leased or operated by the Company which has
not been delivered to Parent at least ten days prior to the date hereof.
(c) The Company does not own, lease or operate and has not owned, leased
or operated any property or conducted any operations in New Jersey or
Connecticut.
SECTION 4.24. Taxes. (a) Filing and Payment. Except as set forth on
Schedule 4.24, (i) all Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with any
Taxing Authority with respect to any Pre-Closing Tax Period by or on behalf of
the Company (collectively, the "Returns"), have, to the extent required to be
filed on or before the date hereof, been properly filed when due in accordance
with all applicable laws; (ii) as of the time of filing, the Returns were true
and complete in all material respects; and (iii) all Taxes shown as due and
payable on the Returns that have been filed have been timely paid, or withheld
and remitted to the appropriate Taxing Authority.
(b) Financial Records. Except as set forth on Schedule 4.24, (i) the
charges, accruals and reserves for Taxes with respect to the Company reflected
on the books of the Company (excluding any provision for deferred income taxes
reflecting differences between the treatment of items for accounting and income
tax purposes) are adequate to cover Tax liabilities accruing through the end of
the last period for which the Company ordinarily records items on its books;
(ii) since the end of the last period for which the Company ordinarily records
items on its books, the Company has not engaged in any transaction, or taken any
other action, other than in the ordinary course of business; and (iii) all
information set forth in the Company Balance Sheet (including the notes thereto)
relating to Tax matters has been prepared in accordance with GAAP, applied on a
consistent basis.
(c) Procedure and Compliance. Except as set forth on Schedule 4.24, (i)
all Returns filed with respect to Tax years of the Company through the Tax year
ended September 30, 2000 have been examined and closed or are Returns with
respect to which the applicable period for assessment under applicable law,
after giving effect to extensions or waivers, has expired; (ii) the Company has
not requested any extension of time within which to file any Return which Return
has not yet been filed; (iii) the Company (or any member of any affiliated,
consolidated, combined or unitary group of which the Company is or has been a
member) has not granted any extension or waiver of the statute of limitations
period applicable to any Return, which period (after giving effect to such
extension or waiver) has not yet expired; (iv) there is no claim, audit, action,
suit,
38
proceeding, or investigation now pending or threatened against or with respect
to the Company in respect of any Tax or Tax Asset; (v) no adjustment that would
increase the Tax liability, or reduce any Tax Asset, of the Company has been
made, proposed or threatened by a Taxing Authority during any audit of a Pre-
Closing Tax Period which could reasonably be expected to be made, proposed or
threatened in an audit of any subsequent Pre-Closing Tax Period or Post-Closing
Tax Period; (vi) there are no requests for rulings or determinations in respect
of any Tax or Tax Asset pending between the Company and any Taxing Authority;
and (vii) during the five-year period ending on the date hereof, the Company has
not changed any tax election, changed any annual tax accounting period, or
changed any method of tax accounting (to the extent that any such action may
materially affect the Company), nor has it filed any amended Return, entered
into any closing agreement, settled any Tax claim or assessment, or surrendered
any right to claim a Tax refund, offset or other reduction in Tax liability.
(d) Tax Sharing, Consolidation and Similar Arrangements. Except as set
forth on Schedule 4.24, (i) the Company has not been a member of an affiliated,
consolidated, combined or unitary group; (ii) the Company is not party to any
Tax Sharing Agreement or to any other agreement or arrangement referred to in
clause (ii) or (iii) of the definition of "Tax"; (iii) no amount of the type
described in clause (ii) or (iii) of the definition of "Tax" is currently
payable by the Company, regardless of whether such Tax is imposed on the
Company; and (iv) the Company has not entered into any agreement or arrangement
with any Taxing Authority with regard to the Tax liability of the Company
affecting any Tax period for which the applicable statute of limitations, after
giving effect to extensions or waivers, has not expired.
(e) Certain Agreements and Arrangements. Except as set forth on Schedule
4.24, (i) the Company is not a direct or indirect beneficiary of a guarantee of
tax benefits or any other arrangement that has the same economic effect
(including an indemnity from a seller or lessee of property, or other insurance)
with respect to any transaction or tax opinion relating to the Company; (ii) the
Company is not a party to any understanding or arrangement described in Section
6111(d) or Section 6662(d)(2)(C)(iii) of the Code; (iii) during the five- year
period ending on the date hereof, the Company was neither a distributing
corporation or a controlled corporation in a transaction intended to be governed
by Section 355 of the Code; and (iv) the Company has not participated in or
cooperated with an international boycott within the meaning of Section 999 of
the Code or has been requested to do so in connection with any transaction or
proposed transaction.
(f) Post-Closing Attributes. Except as set forth on Schedule 4.24, (i)
the Company will not be required to include any adjustment in taxable income
39
for any Post-Closing Tax Period under Section 481(c) of the Code (or any similar
provision of the Tax laws of any jurisdiction) as a result of a change in method
of accounting for a Pre-Closing Tax Period; and (ii) no Tax Asset of the Company
is currently subject to a limitation under Section 382 or Section 383 of the
Code.
(g) Certain Elections. Except as set forth on Schedule 4.24, none of the
Company, and any other person on behalf of the Company, has entered into any
agreement or consent pursuant to Section 341(f) of the Code.
(h) Property and Leases. Except as set forth on Schedule 4.24, the
Company does not own an interest in real property in any jurisdiction in which a
Tax is imposed, or the value of the interest is reassessed, on the transfer of
an interest in real property and which treats the transfer of an interest in an
entity that owns an interest in real property as a transfer of the interest in
real property.
(i) Taxing Jurisdictions. Schedule 4.24 contains a list of all
jurisdictions (whether foreign or domestic) to which any Tax is properly payable
by the Company.
SECTION 4.25. Accounts Receivable. Except as listed on Schedule 4.25,
the Company has no accounts receivable as of the date hereof. All accounts
receivable so listed on Schedule 4.25 were made in the ordinary course of
business and are undisputed and collectible in full in accordance with their
terms unless otherwise indicated on Schedule 4.25.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as of the date hereof and
as of the Closing Date that:
SECTION 5.01. Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware and has all corporate powers and all
material governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted. Since the date of its
incorporation, Merger Subsidiary has not engaged in any activities other than in
connection with or as contemplated by this Agreement.
SECTION 5.02. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
40
consummation of the transactions contemplated hereby are within the corporate
powers of Parent and Merger Subsidiary and have been duly authorized by all
necessary corporate action on the part of Parent and Merger Subsidiary. This
Agreement constitutes a valid and binding agreement of Parent and Merger
Subsidiary.
SECTION 5.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any governmental
body, agency, official or authority, domestic, foreign or supranational, other
than (i) the filing of a certificate of merger with respect to the Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which Parent is qualified to do business, (ii)
compliance with any applicable requirements of the 1933 Act, the 1934 Act and
any other securities laws, whether state or foreign and (iii) any actions or
filings the absence of which would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent or
materially to impair the ability of Parent and Merger Subsidiary to consummate
the transactions contemplated by this Agreement.
SECTION 5.04. Non-contravention. The execution, delivery and performance
by Parent and Merger Subsidiary of this Agreement and the consummation by Parent
and Merger Subsidiary of the transactions contemplated hereby do not and will
not (i) contravene, conflict with, or result in any violation or breach of any
provision of the certificate of incorporation or bylaws of Parent or Merger
Subsidiary, (ii) assuming compliance with the matters referred to in Section
5.03, contravene, conflict with or result in a violation or breach of any
provision of any law, rule, regulation, judgment, injunction, order or decree,
(iii) require any consent or other action by any Person under, constitute a
default under, or cause or permit the termination, cancellation, acceleration or
other change of any right or obligation or the loss of any benefit to which
Parent or any of its Subsidiaries is entitled under any provision of any
agreement or other instrument binding upon Parent or any of its Subsidiaries or
any license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or business of
the Parent and its Subsidiaries or (iv) result in the creation or imposition of
any Lien on any asset of the Parent or any of its Subsidiaries.
SECTION 5.05. SEC Filings. (a) Parent has delivered or made available to
the Company all of its reports, statements, schedules and registration
statements filed with the SEC under the 1934 Act since December 31, 2000 (the
documents referred to in this Section 5.05, collectively, the "Parent SEC
Documents").
41
(b) As of its filing date, each Parent SEC Document complied as to form
in all material respects with the applicable requirements of the 1934 Act.
(c) As of its filing date, each Parent SEC Document did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 5.06. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Parent threatened against or
affecting, Parent before any court or arbitrator or any governmental body,
agency or official which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement.
SECTION 5.07. Finders' Fees. Except for Broadview International LLC
whose fees will be paid by Parent, there is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of Parent who might be entitled to any fee or commission upon
consummation of the transactions contemplated by this Agreement.
SECTION 5.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Parent
included in the Parent SEC Documents (i) complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) were prepared in conformity with GAAP (except as may be indicated
in the notes thereto), and (iii) fairly present in all material respects the
consolidated financial position of Parent and its Subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements).
SECTION 5.09. Parent Stock. All Parent Stock issuable pursuant to
Sections 2.06 and 2.07 of this Agreement has been duly and validly authorized
and will be, at the time of issuance, fully paid and non-assessable.
ARTICLE 6
COVENANTS OF THE PARENT AND THE COMPANY
SECTION 6.01. Conduct of the Company. From the date hereof until the
earlier to occur of the Effective Time, or the termination of this Agreement
pursuant to Section 9.01, except as contemplated by this Agreement the Company
shall conduct its businesses in the ordinary course consistent with past
practice and use its best efforts to preserve intact its business organizations
and
42
relationships with third parties and to keep available the services of its
present officers and employees (with the exception of terminations for cause).
Without limiting the generality of the foregoing, from the date hereof until the
Effective Time, without prior written authorization from Parent's Vice President
of Finance, Chief Financial Officer, Corporate Counsel or Vice President of
Human Resources, the Company will not (except as contemplated by this
Agreement):
(a) adopt or propose any change in its certificate of
incorporation or bylaws;
(b) merge or consolidate with any other Person or acquire a
material amount of assets from any other Person;
(c) sell, lease, license or otherwise dispose of any assets or
property with a value or cost or make any payment exceeding ten thousand
dollars ($10,000);
(d) execute any sales contracts or license agreements with new
customers;
(e) amend any existing contracts or agreements, except as
expressly provided in this Agreement;
(f) effect any changes in its compensation structure;
(g) hire any new employees;
(h) declare, set aside or pay any dividend or other distribution
with respect to the Company Capital Stock or Company Securities;
(i) amend a material term of any outstanding Company Securities;
(j) incur, assume or guarantee any indebtedness;
(k) create or otherwise incur any Lien on any asset;
(l) make any contract or commitment relating to its business or
relinquish any contract or other right material to the Company, other
than those transactions made in the ordinary course of business;
(m) change its method of accounting or accounting practice;
43
(n) make any capital expenditure or commitment for a capital
expenditure for additions or improvements to property, plant or
equipment;
(o) change (i) any Tax election, (ii) Tax accounting period,
(iii) method of Tax accounting, (iv) any amended Tax returns or claims
for Tax refunds already filed, (v) any closing agreement already entered
into, (vi) any Tax claim, audit or assessment already settled, or (vii)
any right to claim a Tax refund, offset or other reduction in Tax
liability already surrendered;
(p) make any material change in pricing or royalties charged to
customers or licensees; or
(q) agree or commit to do any of the foregoing.
The Company will not (i) take or agree or commit to take any action that would
make any representation or warranty of the Company hereunder inaccurate in any
respect at, or as of any time prior to, the Effective Time or (ii) omit or agree
or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time.
SECTION 6.02. Stockholder Meeting; Proxy Material. The Company shall
either (a) cause a meeting of its Stockholders (the "Company Stockholder
Meeting") to be duly called and held for the purposes of approving and adopting
this Agreement and the Merger and the conversion of all outstanding shares of
Company Preferred Stock into Company Common Stock (the "Preferred Stock
Conversion"); or (b) request the Stockholders to consent in writing without a
meeting pursuant to Section 228 of Delaware Law (the "Company Stockholder
Consent") to the Merger, this Agreement and the Preferred Stock Conversion, in
either case as soon as reasonably practicable, and in no event more than 20 days
following the date of this Agreement. The Board of Directors of the Company
shall recommend approval and adoption of this Agreement and the Merger by the
Stockholders and approval of the Preferred Stock Conversion by the holders of
the Company Preferred Stock. In connection with the Company Stockholder Meeting,
the Company will (i) promptly prepare and thereafter mail to the Stockholders as
promptly as practicable, and in no event more than 5 days following the date of
this Agreement, a proxy statement and all other proxy materials for such meeting
("Proxy Materials"), which materials must be submitted for review and comments
by Parent not less than 2 days prior to mailing, (ii) use its best efforts to
obtain the necessary approvals by the Stockholders of this Agreement, the
transactions contemplated hereby and the Preferred Stock Conversion, and (iii)
otherwise comply with all legal
44
requirements applicable to such meeting. In connection with the Company
Stockholder Consent, the Company will (i) promptly prepare resolutions and
related materials (the "Consent Solicitation Materials") and submit them for
review and comments by Parent no more than 4 days following the date of this
Agreement, (ii) use its best efforts to obtain the necessary consents by the
Stockholders approving this Agreement, the transactions contemplated hereby and
the Preferred Stock Conversion and (iii) otherwise comply with all legal
requirements applicable to such consent solicitation. Such Proxy Materials and
Consent Solicitation Materials shall not contain any untrue statement or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 6.03. No Solicitation. The Company shall not, and shall not
authorize or permit any of its officers, directors, employees, investment
bankers, attorneys, accountants, consultants or other agents or advisors to,
directly or indirectly, (i) solicit, initiate or take any action to facilitate
or encourage the submission of any Acquisition Proposal, (ii) enter into or
participate in any discussions or negotiations with, furnish any information
relating to the Company or afford access to the business, properties, assets,
books or records of the Company, otherwise cooperate in any way with, or
knowingly assist, participate in, facilitate or encourage any effort by any
Third Party that is seeking to make, or has made, an Acquisition Proposal or
(iii) grant any waiver or release under any standstill or similar agreement with
respect to any class of equity securities of the Company.
SECTION 6.04. Break-up Fee. If, following the date of this Agreement, an
offer to acquire or merge with the Company is made by any party to an existing
exclusivity agreement in effect between such party and the Company and such
party successfully completes such an acquisition or merger, the Company, or its
successor, shall pay the Parent a cash fee of ten million dollars ($10,000,000)
simultaneously with the closing of such acquisition or merger; provided, that no
such fee shall be due and payable if this Agreement is terminated by (i) Parent
pursuant to Section 9.01(b); (ii) Company pursuant to Section 9.01(d); or (iii)
Company and Parent pursuant to Section 9.01(a).
SECTION 6.05. Access to Information; Confidentiality. (a) From the date
hereof until the Effective Time, the Company will (i) give Parent, its counsel,
financial advisors, auditors and other authorized representatives reasonable
access to the offices, properties, books and records of, (ii) furnish to Parent,
its counsel, financial advisors, auditors and other authorized representatives
such financial and operating data and other information relating to the Company
as such Persons may reasonably request and (iii) instruct the employees, counsel
and financial advisors
45
of the Company to cooperate with Parent in its investigation of the Company. No
investigation by Parent or other information received by Parent shall operate as
a waiver or otherwise affect any representation, warranty or agreement given or
made by the Company hereunder.
(b) Each of the parties hereto hereby agrees that the information
obtained in any investigation pursuant to Section 6.05, or pursuant to the
negotiation and execution of this Agreement or the effectuation of the
transaction contemplated hereby shall be governed by the terms of the
confidentiality agreement between the Company and Parent entered into effective
as of May 18, 2001.
SECTION 6.06. Public Disclosure. Unless otherwise required by law, prior
to the Effective Time, no disclosure (whether or not in response to an inquiry)
of the subject matter of this Agreement shall be made by any party hereto unless
approved by Parent and the Company prior to release, provided that such approval
shall not be unreasonably withheld or delayed, subject, in the case of Parent,
to Parent's obligation to comply with applicable securities laws and the rules
and regulations of the Nasdaq National Market by issuing a press release and
filing a Form 8-K with the SEC immediately following the effectiveness of this
Agreement. In the event that Parent determines that it is desirable to disclose
information regarding the subject matter of this Agreement pursuant to
applicable law or regulation, the Company shall be afforded the opportunity to
review and comment on such disclosure a reasonable period of time prior to its
release.
SECTION 6.07. Consents. The Company shall use all reasonable efforts to
obtain the consents, waivers, assignments and approvals as may be required from
Third Parties in connection with the transactions contemplated hereby, including
without limitation those on Schedule 6.07. The Company shall promptly provide
the notice required by third parties in connection with the transactions
contemplated hereby, including without limitation, in connection with the
Covisint Warrant, the Lockheed Warrant, and such other required notices as set
forth on Schedule 6.07. The Company shall use good faith efforts to cause the
Covisint Warrant to be amended (the terms and form of such amendment to be
satisfactory to Parent) to provide for mandatory exercise in full one Business
Day following the Effective Time and otherwise to permit the treatment set forth
in Section 2.07 hereof.
SECTION 6.08. Reasonable Efforts. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use commercially
reasonable efforts to take promptly, or cause to be taken, all actions, and to
do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
46
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement.
SECTION 6.09. Notification of Certain Matters. Any party shall give
notice to the other parties hereto as promptly as is reasonably practicable of
(i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of
such party contained in this Agreement to be untrue or inaccurate at or prior to
the Effective Time in such a manner or to such an extent as would cause the
condition to the obligation of Parent and Merger Subsidiary to consummate the
Merger set forth in Section 7.02(a)(ii) to fail to be satisfied, and (ii) any
failure of such party to comply with or satisfy in all material respects any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.09 shall not limit or otherwise affect any remedies available to the
party receiving such notice; and provided further, that no disclosure by the
Company pursuant to this Section 6.09 shall be deemed to amend or supplement any
Schedule hereto or prevent or cure any misrepresentations, breach of warranty or
breach of covenant.
SECTION 6.10. Regulatory Filings.
If either Company or Parent may determine, by written notice to the
other party, that notification and report forms are required to be filed by each
of Company and Parent with regard to the Merger pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976, as amended (the "HSR Act"),
in which case, both Company and Parent shall file a notification and report
form, and comply with all obligations under the HSR Act within five Business
Days of such notice, and Company and Parent shall respond as promptly as
practicable to any inquires or requests received from the Federal Trade
Commission, the Department of Justice, any state attorney general or other
governmental or regulatory body for additional information or documentation in
connection with antitrust or related matters. Except as may be prohibited by
law, Company and Parent will consult and cooperate with one another, and will
consider in good faith the views of one another, in connection with such
determination that notification and report forms are required to be filed and
any analysis, appearance, presentation, memorandum, brief, argument, opinion or
proposal made or submitted in connection with or relating to the HSR Act or any
other federal or state antitrust or fair trade law.
47
SECTION 6.11. Additional Documents and Further Assurances. Each party
hereto, at the request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
SECTION 6.12. Stock Options; Certain Shares. (a) Pursuant to Section
2.06 hereof, at the Effective Time, each outstanding Company Stock Option,
whether or not exercisable, will be assumed by Parent and become an option to
acquire Parent Stock. After the Effective Time, Parent will issue to each holder
of an outstanding Company Stock Option a notice describing the assumption of
such Company Stock Option by Parent. It is intended that Company Stock Options
assumed by Parent shall qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent such Company Stock
Options qualified as incentive stock options immediately prior to the Effective
Time and the provisions of this Section 6.12 shall be applied consistent with
such intent. Parent will reserve sufficient shares of Parent Stock for issuance
under Section 2.06 hereof. Prior to the Effective Time the Company shall cause
its 1997 Stock Plan to be amended as may be required to permit such assumption.
(b) Prior to the Effective Time, the Company shall cancel the shares of
Company Common Stock set forth next to the names of the individuals identified
on Schedule C hereto and, in lieu thereof, grant to such individuals Company
Stock Options in the amounts, and at the exercise prices, set forth thereon.
Such Company Stock Options shall be subject to the customary terms and
conditions of the Company's 1997 Stock plan; provided, however, that such
options shall vest as provided on Schedule C.
SECTION 6.13. Registered Offering. The parties hereto shall take all
action necessary to permit any delivery of Parent Stock to Covisint pursuant to
Section 2.07(a) of this Agreement to be accomplished by means of an exemption
from the registration requirements under the 1933 Act (a "Private Placement"),
provided that Covisint makes all representations, warranties and covenants
necessary to make such exemption available in the reasonable judgment of Parent.
If the Parent Stock will be issued in a Private Placement, Parent will agree,
pursuant to a registration rights agreement consistent with such agreements as
Parent has entered into in connection with similar transactions, to file a
registration statement covering the resale of the Parent Stock beginning on the
first anniversary after the Closing, and it shall be a condition to the
inclusion of any Parent Stock in such registration that the holder thereof enter
into such registration rights agreement with Parent.
48
SECTION 6.14. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
SECTION 6.15. Tax Matters. (a) Without the consent of the Parent, the
Company shall not make or change any Tax election, change any annual tax
accounting period, adopt or change any method of tax accounting, file any
material amended Tax Returns or claims for Tax refunds, enter into any closing
agreement, surrender any Tax claim, audit or assessment, surrender any right to
claim a Tax refund, offset or other reduction in Tax liability surrendered,
consent to any extension or waiver of the limitations period applicable to any
Tax claim or assessment or take or omit to take any other action, if any such
action or omission would have the effect of increasing the Tax liability or
reducing any Tax Asset of the Company.
(b) The Company has established in its financial statements delivered
under Section 4.07, and the Schedule A Deductions reflect, an adequate accrual
for all Taxes due and unpaid with respect to any period ending prior to or as of
the Effective Time.
SECTION 6.16. Indemnification.
(a) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, fulfill and honor in all respects the obligations of
the Company under any indemnification provisions set forth in the Company's
certificate of incorporation or bylaws, in each case as in effect on the date
hereof, and under any indemnification agreements between the Company and its
directors and officers as in effect on the date hereof copies of which have been
provided to counsel to Parent (collectively, the "Company Indemnified Parties").
The certificate of incorporation and bylaws of the Surviving Corporation shall
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Company Indemnified Parties as those set forth in the
Company's certificate of incorporation and bylaws, in each case as in effect on
the date hereof, and no such provisions shall be amended, repealed or otherwise
modified for a period of six (6) years following the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who,
immediately prior to the Effective Time, were directors, officers, employees or
agents of the
49
Company unless such amendment, repeal or other modification is required by
applicable law.
(b) The provisions of this Section 6.16 shall operate for the benefit
of, and shall be enforceable by, each of the Company Indemnified Parties, and
their respective heirs, representatives, successors and assigns.
SECTION 6.17. Employee Benefits.
(a) As soon as practicable following the date hereof, but in any event,
no later than within 3 days of the date hereof, Parent and the Company shall
identify the employees of the Company who will be offered employment with Parent
effective as of the Effective Time. Company will identify Company employees that
will not be offered employment with Parent and shall terminate such employees
within three (3) days of the date first set forth above. Each remaining employee
of the Company who is offered and accepts employment with Parent is hereinafter
referred to as a "Continuing Employee" and collectively, as"Continuing
Employees." Each Continuing Employee shall continue to participate after the
Closing Date in the Company's Employee Plans to the same extent as each such
Company Employee was participating therein prior to the Closing Date, subject to
terms of such Plans. As soon as reasonably practicable following the Closing
Date, Parent shall take such steps as are reasonably required to provide
Continuing Employees with employee benefits (including, without limitation,
eligibility to participate in incentive and other bonus plans) that are
substantially comparable in the aggregate to the employee benefits provided to
similarly situated employees of Parent.
(b) To the extent permitted by the terms of Parent's plans and subject
to Section 6.17(a) above, (i) each Continuing Employee shall be entitled to
service credit for purposes of eligibility and vesting under all employee
benefit plans of Parent for credited service time of such Continuing Employee
under all corresponding employee benefit plans of the Company as of the
Effective Time, (ii) any service of a Continuing Employee prior to the Effective
Time which was recognized under any medical plan of the Company for purposes of
medical or dental coverage shall be recognized by the corresponding employee
benefit plans of Parent, and (iii) any service of a Continuing Employee prior to
the Effective Time which was recognized under the Company's vacation policy
shall be recognized under the vacation policy of Parent. Parent shall cause any
and all pre- existing condition (or actively-at-work or similar) limitations,
eligibility waiting periods and evidence of insurability requirements under any
health plans of Parent to be waived with respect to each Continuing Employee and
their eligible dependents, to the extent such limitations, waiting periods or
evidence of insurability requirements would not have applied under the Company
plan, and
50
shall provide all Continuing Employees and their eligible dependents with credit
for any co-payments, deductibles, and offsets (or similar payments) prior to the
Effective Time for purposes of satisfying any applicable deductible,
out-of-pocket, or similar requirements under an employee benefit plans of Parent
in which such persons are eligible to participate after the Effective Time.
SECTION 6.18. Excise Tax Matters. Prior to the Effective Time, the
Company shall endeavor to obtain the approval of more than 75% of disinterested
Stockholders with respect to all potential 280G benefits that are or may be
payable to any disqualified individual in connection with or as a result of the
Merger.
SECTION 6.19. Operating Expenses. Parent agrees to make available to the
Company up to $500,000 to fund operating expenses of the Company prior to the
Effective Time. Company may request such funding by submitting a written request
of the Company's Chief Financial Officer to Parent's Chief Financial Officer
setting forth in reasonable detail the expenses to be covered and stating that
the Company does not have sufficient cash available to pay the expense. Any
funding made available by Parent pursuant to this Section 6.19 shall be in the
form of an additional advance pursuant to the Ventro Note; provided that the
amount of any such advance will not be deducted from the Merger Consideration
pursuant to Section 2.02 if the Closing shall occur; and provided, further, if
the Closing does not occur because this Agreement is terminated pursuant to
Section 9.01(d), then the amount of any such advance shall be forgiven.
SECTION 6.20. Information and Computer Systems. The Company will compile
the information and perform the procedures set forth in Schedule B attached
hereto.
ARTICLE 7
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to Obligations of Each Party. The obligations
of the Company, Parent and Merger Subsidiary to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) this Agreement and the Preferred Stock Conversion shall have been
approved and adopted by the Company's Stockholders in accordance with Delaware
Law and the certificate of incorporation of the Company;
(b) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger;
51
(c) all actions by or in respect of, or filings with, any governmental
body, agency, official or authority, domestic, foreign or supranational,
required to permit the consummation of the Merger shall have been taken, made or
obtained; and
(d) no temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding brought by an administration, 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 by any administration, agency or commission or other governmental
authority or instrumentality, domestic or foreign, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
SECTION 7.02. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) (i) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time; (ii) the representations and warranties of the Company contained
in this Agreement and in any certificate or other writing delivered by the
Company pursuant hereto shall be true in all material respects at and as of the
Effective Time as if made at and as of such time except for (a) changes
contemplated by this Agreement and (b) those representations and warranties that
address matters only as of a particular date (which shall remain true and
correct as of such date); (iii) no Material Adverse Effect with respect to
Company shall have occurred; and (iv) Parent shall have received a certificate
signed by the Chief Executive Officer and Chief Financial Officer of Company to
the foregoing effect;
(b) The Covisint Warrant shall have been amended as required by Sections
2.07 and 6.07 hereof, or the 20-day period during which Covisint is required to
make an election pursuant to Section 4.1 and Section 7 of the Covisint Warrant
shall have expired or Covisint shall have made the required election;
(c) no proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially delay
the Merger shall have been instituted by any Person before any court, arbitrator
or governmental body, agency or official, domestic or foreign, and be pending;
52
(d) there shall not have been instituted or pending any action or
proceeding (or any investigation or other inquiry that might result in such
action or proceeding) by any government or governmental authority or agency,
domestic, foreign or supranational, or by any other Person, domestic, foreign or
supranational, before any court or governmental authority or agency, domestic,
foreign or supranational, (i) seeking to restrain or prohibit Parent's ownership
or operation (or that of its respective Subsidiaries or Affiliates) of all or
any material portion of the business or assets of the Company, or of Parent and
its Subsidiaries, taken as a whole, or to compel Parent or any of its
Subsidiaries or Affiliates to dispose of or hold separate all or any material
portion of the business or assets of the Company, or of Parent and its
Subsidiaries, taken as a whole, in any case under a claim based upon antitrust
or other similar laws relating to competition and restraint on trade, or (ii)
that otherwise, in the judgment of Parent, relates to the transactions
contemplated hereby and is likely to have a Material Adverse Effect on the
Company or Parent;
(e) there shall not have been any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Merger, by any court, government
or governmental authority or agency, domestic, foreign or supranational, that,
in the reasonable judgment of Parent, is likely, directly or indirectly, to
result in any of the consequences referred to in clauses (i) through (iii) of
paragraph(a) above;
(f) Parent shall have received an opinion of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ &
Freidenrich LLP, counsel to the Company, covering the matters set forth in
Exhibit A;
(g) the Company shall have obtained each consent identified in Schedule
6.07 hereto.
(h) the Company shall have provided each notice identified in Schedule
6.07 hereto, and all relevant notice periods shall have either lapsed or been
waived in writing;
(i) the Dissenting Shares shall constitute not more than 5% of the
issued and outstanding shares of Company Common Stock;
(j) all Warrants issued by the Company (other than the Covisint Warrant
but including the warrant dated April 2, 1997 issued to Lockheed ▇▇▇▇▇▇
Corporation) shall have been exercised for Company Common Stock or shall have
expired or been cancelled without consideration as required by Section 2.07
above;
53
(k) ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ shall have executed an
agreement of employment with Parent in substantially the form previously
delivered to them by Parent; and
(l) Company shall have completed the termination of its consultants and
employees as contemplated by Section 6.17(a) above.
(m) the number represented by CCS (as defined in Section 2.02 above)
shall not have decreased in an amount greater than 1% from 19,923,268 (CCS as of
July 11, 2001), unless otherwise as contemplated herein;
SECTION 7.03. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) each of Parent and Merger Subsidiary shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time;
(b) the representations and warranties of Parent contained in this
Agreement and in any certificate or other writing delivered by Parent pursuant
hereto shall be true (disregarding each exception therein for materiality and
Material Adverse Effect), except for such exceptions in each case as would not
have a Material Adverse Effect on Parent, at and as of the Effective Time as if
made at and as of such time;
(c) the Company shall have received a certificate signed by the Chief
Financial Officer or any Vice President of Parent to the foregoing effect; and
(d) Company shall have received an opinion of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇,
counsel to Parent, covering the matters set forth in Exhibit B.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties. All of the
Company's representations and warranties in this Agreement, as modified by the
Company Disclosure Schedule or in any certificate or other writing delivered by
the Company pursuant to this Agreement, shall survive the Merger and continue
until the date which is one year following the Closing Date (the "Expiration
Date"). All of Parent's and Merger Subsidiary's representations and warranties
54
contained herein or in any certificate or other writing delivered by Parent
pursuant to this Agreement shall terminate 30 days following the Closing.
SECTION 8.02. Indemnification; Escrow Arrangements.
(a) Escrow Fund. As security for the indemnity provided for in this
Article 8 and by virtue of this Agreement, the Parent will deposit with the
Escrow Agent the Escrow Amount without any act of any Stockholder. As soon as
practicable after the Effective Time, the Escrow Amount, without any act of any
Stockholder, will be deposited with the Escrow Agent (or other institution
acceptable to Parent and the Stockholder Representative (as defined in this
Article 8)), such deposit to constitute an escrow fund (the "Escrow Fund") to be
governed by the terms set forth herein. The Escrow Agent may execute this
Agreement following the date hereof, and such later execution, if so executed
after the date hereof, shall not affect the binding nature of this Agreement as
of the date hereof between the other signatories hereto. The portion of the
Escrow Amount contributed on behalf of each Stockholder shall be in proportion
to the Merger Consideration contributed at the Closing to which such holder
would otherwise be entitled under Section 2.02. The Stockholders shall indemnify
and hold Parent and its officers, directors and affiliates (the "Indemnified
Parties") harmless against all claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses of investigation (hereinafter individually a "Loss" and collectively
"Losses") incurred by Parent, its officers, directors, or affiliates (including
the Surviving Corporation) directly or indirectly as a result of (i) any
inaccuracy or breach of a representation or warranty of the Company contained in
this Agreement, (ii) any failure by the Company to perform or comply with any
covenant contained in this Agreement, (iii) the Company's commitments and
liabilities in accordance with Generally Accepted Accounting Principles ("GAAP")
at the date hereof being in excess of the amount set forth in Schedule A (such
excess commitments and liabilities can be offset by a corresponding asset
recordable under GAAP, (iv) any action, suit or proceeding which is pending or
threatened against the Company as of the Effective Time, (v) any liabilities of
the Company for Taxes attributable to a Pre- Closing Tax Period ending prior to
the Closing Date which are not reserved for on Schedule A, (vi) any payments in
respect of Dissenting Shares that are recoverable pursuant to Section 2.04(c)
(which shall include Parent's reasonable legal and other fees incurred in
connection with any appraisal proceeding), or (vii) any License Fee Make Whole
which arises after the Closing Date. No Stockholder shall have any right to
contribution from the Company for any claim made by Parent after the Effective
Time. Notwithstanding anything in the preceding language to the contrary, and
subject to the procedures set forth in paragraphs (e) and (f) of this Section
8.02, Parent may not receive any of the Escrow Amount from the Escrow Fund
unless and until Officer's Certificates (as defined in
55
paragraph (e) below) identifying Losses, which in the aggregate exceed $100,000
(the "Basket Amount"), have been delivered to the Escrow Agent as provided in
paragraph (e) below in which case Parent shall be entitled to recover all Losses
including the Basket Amount; provided, however, that any Loss pursuant to
Sections 2.04(c) hereof shall be recoverable from the first dollar and not
subject to the Basket Amount nor shall it be included in calculating whether the
Basket Amount has otherwise been exceeded.
(b) Limitation on Liability. Parent and the Company hereby agree that,
except in the event of fraud, Parent's sole and exclusive recourse against the
Company and the Stockholders for any Loss or claim of Losses arising out of or
relating to this Agreement shall be expressly limited to the Escrow Fund and in
accordance with the indemnification provisions of this Article 8.
(c) Escrow Period; Distribution upon Termination of Escrow Period.
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate, and the portion of
the Escrow Amount (together with any earnings thereon) remaining in the Escrow
Fund shall be distributed to Stockholders, at 5:00 p.m., P.S.T. on the
Expiration Date (the "Escrow Period"); provided, however, that the Escrow Period
shall not terminate with respect to any amount which, in reasonable judgement of
Parent, subject to the objection of the Stockholder Representative and the
subsequent arbitration of the matter in the manner provided in Section 8.02(c)
hereof, is necessary to satisfy any unsatisfied claims specified in any
Officer's Certificate delivered to the Escrow Agent prior to termination of such
Escrow Period with respect to facts and circumstances existing prior to the
termination of such Escrow Period. As soon as all such claims have been
resolved, the Escrow Agent shall deliver to the Stockholders any remaining
portion of the Escrow Amount then held in the Escrow Fund not required to
satisfy such claims. Deliveries of the remaining Escrow Amount to the
Stockholders pursuant to this Section 8.02(c) shall be made in proportion to
their respective original contributions to the Escrow Fund.
(d) Protection of Escrow Fund; Voting. The Escrow Agent shall hold and
safeguard the Escrow Fund during the Escrow Period, shall treat such fund as a
trust fund in accordance with the terms of this Agreement and not as the
property of Parent and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof. The Escrow Agent is authorized to, and shall
invest the Escrow Fund in a U.S. Bank Money Market account, unless otherwise
directed by written notification signed by Parent and the Stockholder
Representative.
(e) Claims Upon Escrow Fund; Limitations on Claims.
56
(i) Subject to subsection (f) below, thirty (30) calendar days
after the Escrow Agent has received, provided such receipt is on or
before the Expiration Date, a certificate signed by any officer of
Parent (an "Officer's Certificate") (A) stating that Parent has paid or
properly accrued or reasonably anticipates that it will have to pay or
accrue Losses, and (B) specifying in reasonable detail the individual
items of Losses included in the amount so stated, the date each such
item was paid or properly accrued, or the basis for such commitment
anticipated liability or loss contract, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is
related, the Escrow Agent shall deliver to Parent out of the Escrow
Fund, as promptly as practicable, a portion of the Escrow Amount held in
the Escrow Fund equal to such Losses.
(ii) The amount of Losses for which indemnification is available
to any Person under Section 8.02 (the "Indemnified Party") shall be
reduced, and offset on a dollar-for-dollar basis, by any recoveries
actually received by any Indemnified Party under any insurance policies
or other similar indemnity payments received from third parties in
respect of the subject matter giving rise to such Losses, net of any
expenses of such Indemnified Person incurred in securing such recoveries
("Net Recoveries"). In the event that Parent actually receives any Net
Recoveries, Parent shall (i) in the event the Escrow Period has not
expired, promptly redeposit in the Escrow Fund that portion of the
Escrow Amount equal in value to the amount of such Net Recoveries, or
(ii) in the event that the Escrow Period has expired, promptly
distribute to the Stockholders (in accordance with their pro rata
interest in the Escrow Fund, a portion of the Escrow Amount equal in
value to the amount of such Net Recoveries less administrative fees
associated with such distribution.
(f) 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 Stockholder Representative, and for a period of thirty
(30) calendar days after such delivery, the Escrow Agent shall make no delivery
to Parent of any Escrow Amounts pursuant to Section 8.02 hereof unless the
Escrow Agent shall have received written authorization from the Stockholder
Representative to make such delivery. After the expiration of such thirty (30)
calendar day period, the Escrow Agent shall make delivery of the Escrow Amount
from the Escrow Fund in accordance with Section 8.02 hereof; provided, however,
that no such payment or delivery may be made if the Stockholder Representative
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
prior to the
57
expiration of such thirty (30) calendar day period, with a copy of such
objection to be simultaneously transmitted to Parent.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Stockholder Representative shall object in
writing to any claim or claims made in any Officer's Certificate, such
Stockholder Representative and Parent shall attempt in good faith to
agree upon the rights of the respective parties with respect to each of
such claims. If the Stockholder Representative and Parent 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
distribute the Escrow Amount from the Escrow Fund in accordance with the
terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Stockholder Representative may 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 one arbitrator mutually
agreeable to Parent and such Stockholder Representative. In the event
that within thirty (30) days after submission of any dispute to
arbitration, Parent and such Stockholder Representative cannot mutually
agree on one arbitrator, Parent and such Stockholder Representative
shall each select one arbitrator, and the two arbitrators so selected
shall select a third arbitrator. The arbitrator or arbitrators, as the
case may be, shall set a limited time period and establish procedures
designed to reduce the cost and time for discovery while allowing the
parties an opportunity, adequate in the sole judgement of the arbitrator
or majority of the arbitrators, as the case may be, to discover relevant
information from the opposing parties about the subject matter of the
dispute. The arbitrator or a majority of the arbitrators, as the case
may be, shall rule upon motions to compel or limit discovery and shall
have the authority to impose sanctions, including attorneys' fees and
costs, to the same extent as a competent court of law or equity, should
the arbitrators or a majority of the arbitrators, as the case may be,
determine that discovery was sought without substantial justification or
that discovery was refused or objected to without substantial
justification. The decision of the arbitrator or a majority of the
arbitrators, as the case may be, 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. Such decision shall be written and shall
be supported by written findings of fact and
58
conclusions which shall set forth the award, judgment, decree or order awarded
by the arbitrator(s).
(iii) Judgment upon any award rendered by the arbitrator(s) may
be entered in any court having jurisdiction. Any such arbitration shall
be held in the County of Santa Clara, California, in accordance with the
Commercial Arbitration Rules then in effect of the American Arbitration
Association. The arbitrator(s) shall determine how all expenses relating
to the arbitration shall be paid, including without limitation, the
respective expenses of each party, the fees of each arbitrator and the
administrative fee of the American Arbitration Association.
(h) Third-Party Claims. In the event Parent becomes aware of a third-
party claim which Parent believes may result in a demand in excess of $250,000
against the Escrow Fund, Parent shall notify the Stockholder Representative of
such claim, and the Stockholders shall be entitled, at their expense, to
participate in any defense of such claim. Parent shall have the right in its
sole discretion to settle any such claim; provided, however, that except with
the consent of the Stockholder Representative, no settlement of any such claim
with third-party claimants shall be determinative of the amount of any claim
against the Escrow Fund. In the event that the Stockholder Representative has
consented to any such settlement, the Stockholders shall have no power or
authority to object under any provision of this Article 8 to the amount of any
claim by Parent against the Escrow Fund with respect to such settlement.
(i) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth herein, and as set forth in
any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer
of Parent and the Stockholder Representative, and may rely and shall be
protected in relying or refraining from acting on any instrument
reasonably believed to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall not be liable for
any act done or omitted hereunder as Escrow Agent while acting in good
faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence
of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by
any other person, excepting only orders or process of courts of law, and
is
59
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case the Escrow Agent obeys or complies with
any such order, judgment or decree of any court, the Escrow Agent shall
not be liable to any of the parties hereto or to any other person by
reason of such compliance, notwithstanding any such order, judgment or
decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of
any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the Escrow
Agent shall not be liable to any party for damages, losses, or expenses,
except for negligence or willful misconduct on the part of the Escrow
Agent. The Escrow Agent shall not incur any such liability for (A) any
act or failure to act made or omitted in good faith, or (B) any action
taken or omitted in reliance upon any instrument, including any written
statement of affidavit provided for in this Agreement that the Escrow
Agent shall in good faith believe to be genuine, nor will the Escrow
Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In addition, the
Escrow Agent may consult with legal counsel in connection with Escrow
Agent's duties under this Agreement and shall be fully protected in any
act taken, suffered, or permitted by the Escrow Agent in good faith in
accordance with the advice of counsel. The Escrow Agent is not
responsible for determining and verifying the authority of any person
acting or purporting to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of
this Agreement, its terms or conditions, the Escrow Agent will not be
required to determine the controversy or to take any action regarding
it. The Escrow Agent may hold all documents and the Escrow Amount and
may wait for settlement of any such controversy by final appropriate
legal proceedings or other means as, in the Escrow Agent's discretion,
required, despite what may be set forth elsewhere in this Agreement. In
such event, the Escrow Agent will not be liable for damages.
Furthermore, the Escrow
60
Agent may at its option, file an action of interpleader requiring the
parties to answer and litigate any claims and rights among themselves.
The Escrow Agent is authorized to deposit with the clerk of the court
all documents and the Escrow Amount held in escrow, except all cost,
expenses, charges and reasonable attorney fees incurred by the Escrow
Agent due to the interpleader action and which the parties jointly and
severally agree to pay. Upon initiating such action, the Escrow Agent
shall be fully released and discharged of and from all obligations and
liability imposed by the terms of this Agreement.
(vii) The parties hereto and their respective successors and
assigns agree jointly and severally to indemnify and hold Escrow Agent
harmless against any and all losses, claims, damages, liabilities, and
expenses, including reasonable costs of investigation, counsel fees,
including allocated costs of in-house counsel and disbursements that may
be imposed on Escrow Agent or incurred by Escrow Agent in connection
with the performance of the Escrow Agent's duties under this Agreement,
including but not limited to any Litigation arising from this Agreement
or involving its subject matter other than arising out of its negligence
or willful misconduct.
(viii) The Escrow Agent may resign at any time upon giving at
least thirty (30) calendar days written notice to the parties hereto;
provided, however, that no such resignation shall become effective until
the appointment of a successor escrow agent which shall be accomplished
as follows: the parties hereto shall use all reasonable efforts to
mutually agree on a successor escrow agent within thirty (30) calendar
days after receiving such notice. If the parties hereto fail to agree
upon a successor escrow agent within such time, the Escrow Agent shall
have the right to appoint a successor escrow agent authorized to do
business in the State of California. The successor escrow agent shall
execute and deliver an instrument accepting such appointment and the
terms of this Article 8 and it shall, without further acts, be vested
with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent. Upon
appointment of a successor escrow agent, the Escrow Agent shall be
discharged from any further duties and liability under this Agreement.
(j) Fees. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Parent in accordance with the standard fee schedule
of the Escrow Agent attached hereto as Exhibit C. It is understood that the fees
and usual charges agreed upon for services of the Escrow Agent shall be
considered compensation for ordinary services as contemplated by this Agreement.
In the
61
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties hereto request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to the Escrow Fund or its subject matter, the Escrow
Agent shall be reasonably compensated for such extraordinary services and
reimbursed for all costs, attorney's fees, including allocated costs of in-house
counsel, and expenses occasioned by such default, delay, controversy or
litigation.
(k) Consequential Damages. In no event shall the Escrow Agent be liable
for special, indirect or consequential loss or damages of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damages and regardless of the form of
action.
(l) Successor Escrow Agents. Any corporation into which the Escrow Agent
in its individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Escrow Agreement without further act.
SECTION 8.03. Stockholder Representative.
(a) In the event that the Merger is approved, effective upon the
Closing, and without further act of any stockholder, ▇▇▇ ▇▇▇▇▇▇ shall be
appointed as agent and attorney-in-fact (the "Stockholder Representative") for
each Stockholder, for and on behalf of the Stockholders, to give and receive
notices and communications, to authorize delivery to Parent of Escrow Amounts
from the Escrow Fund in satisfaction of claims by Parent, 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 Stockholder Representative for the
accomplishment of the foregoing. Such agency may be changed by the Stockholders
from time to time upon not less than thirty (30) calendar days prior written
notice to Parent; provided, however, that the Stockholder Representative may not
be removed unless holders of a majority in interest in the Escrow Fund agree to
such removal and to the identity of the substituted agent. Any vacancy in the
position of Stockholder Representative may be filled by approval of the holders
of a majority in interest in the Escrow Fund. No bond shall be required of the
Stockholder Representative, and the Stockholder Representative shall not receive
compensation for his or her services. Notices or
62
communications to or from the Stockholder Representative shall constitute notice
to or from each of the Stockholders.
(b) The Stockholder Representative shall not be liable for any act done
or omitted hereunder as Stockholder Representative while acting in good faith
and in the exercise of reasonable judgment; and any act done or omitted pursuant
to the reasonable advice of counsel shall be conclusive evidence of such good
faith. The Stockholders on whose behalf the Escrow Amount was contributed to the
Escrow Fund shall severally indemnify the Stockholder Representative and hold
the Stockholder Representative harmless against any loss, liability or expense
incurred without negligence or bad faith on the part of the Stockholder
Representative and arising out of or in connection with the acceptance or
administration of the Stockholder Representative's duties hereunder, including
the reasonable fees and expenses of any legal counsel retained by the
Stockholders.
(c) A decision, act, consent or instruction of the Stockholder
Representative shall constitute a decision, act, consent or instruction of all
Stockholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such Stockholders, and the Escrow Agent and Parent may rely upon any
such decision, act, consent or instruction of the Stockholder Representative as
being the decision, act, consent or instruction of each and every such
Stockholder. The Escrow Agent and Parent are hereby relieved from any liability
to any person for any acts done by them in accordance with such decision, act,
consent or instruction of the Stockholder Representative.
(d) Immediately prior to the termination of the Escrow Period and prior
to the delivery of any shares of Escrow Amounts held in the Escrow Fund to the
Stockholders, and to the extent that there are Escrow Amounts remaining in the
Escrow Fund at that time that are not subject to claims of the Parent, the
Stockholder Representative shall be entitled to receive from the Escrow Fund
that portion of the Escrow Amount with a value equal to the Stockholder
Representative's expenses in reimbursement for services rendered to the
Stockholders hereunder, or if there is not enough remaining in the Escrow Fund
at such time that equal such expenses, then the Stockholder Representative shall
be entitled to such lesser remaining in the Escrow Fund.
63
ARTICLE 9
TERMINATION
SECTION 9.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the Stockholders):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated on or before September
30, 2001 (the "End Date"), provided that the right to terminate this
Agreement pursuant to this Section 9.01 shall not be available to any
party whose breach of any provision of this Agreement results in the
failure of the Merger to be consummated by such time;
(ii) there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or any
judgment, injunction, order or decree of any court or governmental body
having competent jurisdiction enjoining Company or Parent from
consummating the Merger is entered and such judgment, injunction,
judgment or order shall have become final and nonappealable;
(c) by Parent, if (i) a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement shall have occurred that would cause the condition set
forth in Section 7.02 not to be satisfied, and such condition is incapable of
being satisfied by the End Date or (ii) the Company shall have willfully and
materially breached its obligations under Sections 6.01, 6.02, 6.03, 6.04, 6.07,
6.15, 6.17 and 6.20; or
(d) by the Company, if a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the Parent or
Merger Subsidiary set forth in this Agreement shall have occurred that would
cause the condition set forth in Section 7.03 not to be satisfied, and such
condition is incapable of being satisfied by the End Date.
The party desiring to terminate this Agreement pursuant to this Section 9.01
(other than pursuant to Section 9.01(a)) shall give written notice of such
termination to the other party.
SECTION 9.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 9.01, this Agreement shall become void and of no effect
64
without liability of any party (or any stockholder, director, officer, employee,
agent, consultant or representative of such party) to the other party hereto,
provided that, if such termination shall result from the willful (i) failure of
either party to fulfill a condition to the performance of the obligations of the
other party or (ii) failure of either party to perform a covenant hereof, such
party shall be fully liable for any and all liabilities and damages incurred or
suffered by the other party as a result of such failure. The provisions of this
Section 9.02 and Sections 6.04, 6.05(b), 6.06 and Article 10 shall survive any
termination hereof pursuant to Section 9.01.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Parent or Merger Subsidiary, to:
Ventro Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company (prior to the Effective Time), to:
Nexprise, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
65
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Stockholder Representative, to:
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Escrow Agent, to:
U.S. Bank Trust, National Association
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding Business Day in the place of receipt.
SECTION 10.02. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Effective Time if, but only if,
such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement or, in the case of a waiver, by each
party against whom the waiver is to be effective, provided that, after the
adoption of this Agreement by the Stockholders and without their further
approval, no such
66
amendment or waiver shall reduce the amount or change the kind of consideration
to be received in exchange for any shares of Company Common Stock.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.03. Expenses. Except as otherwise provided in Section 2.02,
all costs and expenses incurred in connection with this Agreement shall be paid
by the party incurring such cost or expense.
SECTION 10.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Parent or Merger
Subsidiary may transfer or assign, in whole or from time to time in part, to one
or more of their Affiliates, the right to enter into the transactions
contemplated by this Agreement, but any such transfer or assignment will not
relieve Parent or Merger Subsidiary of its obligations hereunder.
SECTION 10.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of California, without regard
to the conflicts of law rules of such state.
SECTION 10.06. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be
brought in the United States District Court for the Northern District of
California or any California State court sitting in California, so long as one
of such courts shall have subject matter jurisdiction over such suit, action or
proceeding, and that any cause of action arising out of this Agreement shall be
deemed to have arisen from a transaction of business in the State of California,
and each of the parties hereby irrevocably consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether
67
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 10.01 hall be deemed effective service of process on such party.
SECTION 10.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 10.08. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
SECTION 10.09. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.
SECTION 10.10. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
VENTRO CORPORATION
By:
---------------------------------
Name:
Title:
NEXPRISE, INC.
By:
---------------------------------
Name:
Title:
NEPTUNE MERGER CORP.
By:
---------------------------------
Name:
Title:
STOCKHOLDER REPRESENTATIVE
By:
---------------------------------
Name:
Title:
ESCROW AGENT
By:
---------------------------------
Name:
Title:
69
EXHIBIT A
FORM OF OPINION OF COUNSEL
TO THE COMPANY
This opinion will be preceded by precatory language containing customary
qualifications and limitations to the opinions given in the following
paragraphs, which language will include, but not be limited to, an exclusion of
the enforceability of (a) the no shop provisions of Section 6.03(ii) of the
Merger Agreement, (b) the amount of the break-up fee set forth in Section 6.04
of the Merger Agreement and (c) any non-compete provisions entered into in
connection with the Merger or the transactions contemplated thereby.
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. The Company has all
requisite corporate power and authority to carry on its businesses as now
conducted and as proposed to be conducted as of the date hereof. The
Company is duly qualified to do business as a foreign corporation in
California.
2. The execution, delivery of the Merger Agreement and performance by the
Company of its obligations under the Merger Agreement and the consummation
of the transactions contemplated thereby are within the Company's corporate
powers and have been duly authorized by all necessary corporate action on
the part of the Company and its shareholders.
3. The Merger Agreement constitutes a valid and binding agreement of the
Company.
4. The execution, delivery and performance by the Company of the Merger
Agreement and the consummation of the transactions contemplated thereby
require no action by or in respect of, or filing with, any governmental
body, agency or official other than the filing of a certificate of merger
with respect to the Merger with the Delaware Secretary of State.
5. Except as disclosed on the Company's Schedule of Exceptions, the execution,
delivery and performance by the Company of the Merger Agreement and the
consummation of the transactions contemplated thereby do not and will not
(i) violate the certificate of incorporation or bylaws of the Company, (ii)
to our Knowledge violate any applicable law, rule, regulation, judgment,
injunction, order or decree, (iii) except as listed in Schedule 4.10 of the
Company's Schedule of Exceptions, require any
Exhibit A
70
consent or other action by any Person under, constitute a default under, or
give rise to any right of termination, cancellation or acceleration of any
right or obligation of the Company or to a loss of any benefit to which the
Company is entitled under any provision of any agreement or other
instrument binding upon the Company or (iv) result in the creation or
imposition of any Lien on any asset of the Company. To our knowledge, the
Company is free of any restriction from entering into the Merger Agreement
and performing its obligations thereunder based on any existing exclusivity
agreement or other agreement in effect between the Company and a Third
Party.
6. The authorized capital stock of the Company consists of (i) 32,100,000
shares of authorized Common Stock, $.001 par value, of which 6,952,597
shares are issued and outstanding at the date of the Agreement and (ii)
14,962,188 shares of authorized Preferred Stock, $.001 par value, of which
6,172,086 shares are designated Series A Preferred Stock, all of which
were issued and outstanding at the date of the Agreement, and 8,790,102
shares designated Series B Preferred Stock, of which 7,253,585 were issued
and outstanding at the date of the Agreement. There are outstanding
warrants to purchase [_________] shares of Company Common Stock. As of the
date hereof, each share of Company Preferred Stock has been duly converted
into one share of Company Common Stock. All outstanding shares of Company
Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute,
the certificate of incorporation or bylaws of the Company, or any
agreement to which the Company is a party or by which it is bound and have
been issued in compliance with federal and state securities laws. The
Warrants were duly and validly issued and were issued in compliance with
federal and state securities law, the Company Capital Stock issuable upon
exercise of the Warrants has been duly reserved and, upon exercise, would
be validly issued, fully paid and non-assessable.
7. The Company and Covisint have duly and validly amended the Covisint Warrant
as set forth under Sections 2.07 of the Agreement. [The clause to be
removed in this opinion of counsel to Company if the Covisint Warrant is
not amended.]
8. The Company has reserved 4,755,545 shares of Company Common Stock for
issuance to employees and consultants pursuant to the Option Plan, of which
2,423,875 shares are outstanding pursuant to option exercises through the
date hereof, 1,350,703 shares are exercised, vested and subject to
repurchase, 1,904,092 shares are subject to outstanding unexercised
Exhibit A
71
options as of the date hereof and 427,578 shares remain available for
future grant as of the date hereof. The Option Plan was duly adopted by all
necessary corporate action on the part of the Company. The options were
duly and validly granted in compliance with federal and state securities
law and the Company Common Stock issuable upon exercise of the options will
be validly issued, fully paid and non-assessable. All corporate action on
the part of the Company has been taken so that Parent can assume all
outstanding options in accordance with the terms of the Agreement.
9. Except as set forth on the Company's Schedule of Exceptions, to our
knowledge, there is no action, suit, investigation or proceeding (or any
basis therefor) pending against, or threatened against or affecting, the
Company or any of its respective properties before any court or arbitrator
or any governmental body, agency or official, or which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by the Merger Agreement.
Exhibit A
72
EXHIBIT B
FORM OF OPINION OF COUNSEL
TO THE PARENT
1. Each of Parent and Merger Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware. Since the date
of its incorporation, Merger Subsidiary has not engaged in any activities other
than in connection with or as contemplated by this Agreement.
2. The execution, delivery and performance by Parent and Merger Subsidiary of
the Merger Agreement and the consummation of the transactions contemplated
thereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action on the part of Parent and
Merger Subsidiary. The Merger Agreement constitutes a valid and binding
agreement of Parent and Merger Subsidiary.
3. The execution, delivery and performance by Parent and Merger Subsidiary of
the Merger Agreement and the consummation by Parent and Merger Subsidiary of the
transactions contemplated thereby require no action by or in respect of, or
filing with, any governmental body, agency, official or authority, domestic,
foreign or supranational, other than the filing of a certificate of merger with
respect to the Merger with the Delaware Secretary of State.
4. The execution, delivery and performance by the Parent of the Merger Agreement
and the consummation of the transactions contemplated thereby do not and will
not (i) violate the certificate of incorporation or bylaws of the Parent or (ii)
to our knowledge, violate any application law, rule, regulation, judgment,
injunction, order or decree.
5. To our knowledge, there is no action, suit, investigation or proceeding (or
any basis therefor) pending against, or threatened against or affecting, the
Parent or any of its respective properties before any court or arbitrator or any
governmental body, agency or official, or which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by the Merger Agreement.
Exhibit B
73
Index of omitted Exhibits and Schedules
Registrant agrees to supplementally furnish to the Commission, upon its request,
a copy of any of the below listed omitted schedules.
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Item Title Description
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Exhibit C Escrow Agent Fee Schedule Summary of fees to be paid for
escrow services.
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Schedule A Net Liabilities Summary of liabilities of the
Company as of the effective date.
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Schedule B Company Information and List of certain procedures for
Procedures the Company to follow with
respect to its Information
Technology assets.
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Schedule C Cancellation of Company Description of option grants made
Stock; Grant of Company to certain executives of Company.
Stock Options
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