AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INFOUSA INC.
KAPALUA ACQUISITION CORP.
AND
CLICKACTION INC.
DATED AS OF OCTOBER 8, 2002
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of October 8, 2002 by and
among INFOUSA INC., a Delaware corporation ("BUYER"), KAPALUA ACQUISITION CORP.,
a Delaware corporation and wholly-owned subsidiary of Buyer ("MERGER SUB"), and
CLICKACTION INC., a Delaware corporation ("TARGET").
B A C K G R O U N D
The boards of directors of Buyer, Merger Sub and Target have approved
the merger of Merger Sub into Target upon the terms and subject to the
conditions set forth in this Agreement, having determined that the Merger is
fair to, and in the best interests of, their respective stockholders. Pursuant
to the Merger, the outstanding shares of Target common stock will be converted
into the right to receive a cash payment, as provided herein.
ACCORDINGLY, THE PARTIES HEREBY AGREE AS FOLLOWS:
ARTICLE I
DEFINED TERMS
1.1 DEFINITIONS. As used in this Agreement, these terms have these
meanings:
"401(k) PLANS" has the meaning specified in Section 6.18.
"ACQUISITION PROPOSAL" has the meaning specified in Section
6.2(c).
"ACTION" means a private or governmental claim, action, suit
(whether in law or in equity), arbitration, investigation or proceeding of any
nature.
"ADJUSTMENT CAP" means $650,000.
"ADJUSTMENTS" has the meaning specified in Section 3.3(a).
"ADJUSTMENT SCHEDULE" has the meaning specified in Section
3.3(b).
"AGREEMENT" means this Agreement and Plan of Merger, including
the exhibits hereto and the Target Disclosure Statement.
"ANCILLARY DOCUMENTS" means any document or certificate provided
pursuant to or in connection with this Agreement.
"BUSINESS DAY" means any day on which the NASDAQ SCM is open for
trading.
"BUYER" means Buyer Inc., a Delaware corporation.
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"BUYER SUBSIDIARIES" means the Subsidiaries of Buyer.
"CERTIFICATE OF MERGER" has the meaning specified in Section
2.2.
"CERTIFICATES" has the meaning specified in Section 3.4(b).
"CLOSING" means the closing of the Merger.
"CLOSING DATE" means December 3, 2002 or, if all of the
conditions have not been satisfied prior to such date, such other date that
Buyer and Target may agree.
"CLOSING BALANCE SHEET" has the meaning specified in Section
6.13.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON MERGER CONSIDERATION" means the dollar amount, rounded
down to the nearest whole cent, equal to the fraction, (a) the numerator of
which is the Merger Consideration minus $1,400,000 (which amount will be paid to
the holders of Preferred Stock as the Preferred Settlement Closing Payment
pursuant to Section 3.6.) and (b) the denominator of which is the aggregate
number of shares of Target Common Stock outstanding at the Effective Time
(including shares of Target Common Stock issued with respect to Target Options
which have been exercised prior to the Effective Time).
"CONFIDENTIALITY AGREEMENT" means the letter agreement dated
August 16, 2002 between Target and Buyer.
"CONTRACTOR" has the meaning specified in Section 4.20(a).
"DELAWARE LAW" means the Delaware General Corporations Law.
"DISSENTING SHARES" has the meaning specified in Section 3.11.
"EFFECTIVE TIME" has the meaning specified in Section 2.2.
"EMPLOYEE BENEFIT PLANS" has the meaning specified in Section
4.19.
"ENVIRONMENT" has the meaning specified in Subsection 4.20(a).
"ENVIRONMENTAL LAW" has the meaning specified in Subsection
4.20(a).
"ENVIRONMENTAL PERMIT" has the meaning specified in Subsection
4.20(a).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
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"ESCROW AGENT" means Greater Bay Trust Company or any successor
appointed pursuant to the Escrow Agreement.
"ESCROW AGREEMENT" means the escrow agreement to be entered into
at the Closing by and among Buyer, Target and the Escrow Agent in substantially
the form attached hereto as Exhibit C.
"ESCROW FUND" has the meaning set forth in Section 3.2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FLOOR AMOUNT" means $2,050,000.
"GAAP" means United States generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes to any particular financial statement).
"GOVERNMENT ENTITY" means a court, administrative agency,
commission, legislature or other governmental or regulatory body, authority or
instrumentality of any jurisdiction whatsoever.
"HAZARDOUS MATERIAL" has the meaning specified in Section
4.20(a).
"KEY EMPLOYEES" means Xxxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxx
and Kentyn Xxxxxxxx.
"LAW" means any applicable law (whether civil, criminal or
administrative), including, without limitation, any common law, statute, treaty,
regulation, directive, decision, code, order, decree, injunction, resolution or
judgment of any Governmental Entity.
"LIABILITY INSURANCE" means (a) representation and warranty
insurance covering the representations and warrants of Target herein other than
with respect to the accounts receivable and accounts payable of Target and (b)
loss mitigation insurance, with an aggregate coverage of $500,000 and other
terms satisfactory to Buyer.
"MERGER" means the merger of Merger Sub into Target.
"MERGER CONSIDERATION" means $4,100,000 in cash (a) decreased,
on a dollar for dollar basis, to the extent that (i) the Working Capital of
Target as reflected on the Closing Balance Sheet is less than $850,000, (ii) the
cash of the Target as reflected on the Closing Balance Sheet is less than
$600,000 (except that in the event that Target has not purchased servers
satisfactory to Buyer for cash prior to the Effective Time, $850,000), and (iii)
the Total Assets of Target as reflected on the Closing Balance Sheet are less
than $3,500,000, whichever disparity is greatest and (b) further decreased, on a
dollar for dollar basis, but only to the extent that the adjustments made
pursuant to this clause (b) cause the Working Capital of Target as of the
Closing Date to be less than $850,000, for (i) any accounts receivable of Target
reflected on the Closing Balance Sheet that are not collected by the Surviving
Corporation prior to the Reconciliation Date (excluding any noncollection
resulting from any claim or offset asserted
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against Surviving Corporation by the applicable account debtor as a result of
actions of the Surviving Corporation after the Effective Time other than actions
for collection) and (ii) any accounts payable of Target which were not reflected
on the Closing Balance Sheet which relate to the period prior to the Effective
Time which became known to Buyer or the Surviving Corporation prior to the
Reconciliation Date. The aggregate adjustment to the Merger Consideration
pursuant to Subsections (a) and (b) of this definition shall not exceed the
Adjustment Cap.
"MERGER SUB" means Kapalua Acquisition Corp., a Delaware
corporation.
"MERGER SUB COMMON STOCK" means the common stock of Merger Sub.
"MINIMUM COMMON MERGER CONSIDERATION" means the dollar amount,
rounded down to the nearest whole cent, equal to the fraction, (a) the numerator
of which is the Floor Amount and (b) the denominator of which is the aggregate
number of shares of Target Common Stock outstanding at the Effective Time
(including shares of Target Common Stock issued with respect to Target Options
which have been exercised prior to the Effective Time).
"NASDAQ" means the NASDAQ National Market System.
"NASDAQ SCM" means the NASDAQ Small Cap Market.
"PARTY" means Target, Buyer and Merger Sub.
"PAYING AGENT" means a nationally recognized bank or trust
company, or an affiliate thereof, designated by Buyer to act as agent for the
holders of Target Common Stock to receive funds pursuant to Section 3.4.
"PAYMENT DATE" means the 100th day after the Effective Time,
provided that if such date is not a Business Day, then the following Business
Day.
"PERMITTED LIENS" means any (a) mechanics', carriers', workers'
and other similar liens arising in the ordinary course of business which are not
delinquent and which in the aggregate are not material in amount, and do not
interfere with the use of the assets of Target or Target Subsidiary to which
they apply; (b) liens for current Taxes and assessments not yet due and payable;
(c) purchase money liens properly disclosed in the Target Disclosure Schedule;
and (d) with respect to any asset of Target or Target Subsidiary which consists
of a leasehold or other possessory interest in real property, all Encumbrances,
covenants, imperfections in title, easements, restrictions and other title
matters (whether or not the same are recorded) not known to Target or Target
Subsidiary to which the underlying fee estate in such real property is subject
which were not created by or incurred by Target or Target Subsidiary and which
do not currently and are not reasonably expected to interfere materially with
the operation of the business currently conducted by Target or Target Subsidiary
on such property.
"PERSON" means any individual or entity of any kind.
"POTENTIAL ACQUIROR" has the meaning specified in Section
6.2(a).
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"PREFERRED SETTLEMENT AGREEMENT" has the meaning specified in
Section 3.4.
"PREFERRED SETTLEMENT CLOSING PAYMENT" has the meaning specified
in Section 3.6.
"PROXY STATEMENT" has the meaning specified in Section 4.28.
"REAL PROPERTY" means any real property currently or previously
owned, leased or occupied by Target or Target Subsidiary.
"RECONCILIATION DATE" means the 90th day after the Effective
Time, provided that if such date is not a Business Day, then the following
Business Day.
"SEC" means the United States Securities and Exchange
Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSIDIARY", as used with respect to any Person, means any
entity of which: (a) at least a majority of the outstanding securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to that
entity is directly or indirectly owned or controlled by such Person (through
ownership of securities, by contract or otherwise) or (b) such Person or any
Subsidiary of such Person is a general partner of a general partnership or a
manager of a limited liability company.
"SUPERIOR PROPOSAL" has the meaning specified in Section 6.2(d).
"SURVIVING CORPORATION" means Target, on and after the Effective
Time.
"TAIL WIND" means The Tail Wind Fund, Ltd.
"TARGET" means Target Inc., a Delaware corporation.
"TARGET BALANCE SHEET" has the meaning specified in Section 4.8.
"TARGET COMMON STOCK" means the common stock, $0.001 par value
per share, of Target.
"TARGET CONTRACT" means the agreements and commitments
identified or required to be identified on Schedule 4.14 to the Target
Disclosure Statement.
"TARGET DISCLOSURE STATEMENT" has the meaning specified in the
preamble to Article IV.
"TARGET FINANCIAL STATEMENTS" has the meaning specified in
Section 4.8.
"TARGET IP RIGHTS" means all intellectual property used in or
necessary to conduct the business presently conducted by Target and Target
Subsidiary.
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"TARGET'S KNOWLEDGE" means the actual knowledge of Xxxxxx Xxxxx,
Xxxxxx Xxxxx, Kentyn Xxxxxxxx, Xxxxxx Xxxx and Xxxxxxx Xxxxxxx.
"TARGET MATERIAL ADVERSE EFFECT" means any change, event or
effect that is or is reasonably likely to become materially adverse to the
affairs, business, operations, prospects, assets, condition (financial or
otherwise) or results of operations of Target; provided, however, that Target
Material Adverse Effect shall exclude any change, event or effect due to (i)
changes in general economic, regulatory or political conditions or securities
markets in the United States or worldwide or any outbreak of hostility,
terrorist activities or war, (ii) any matter to the extent described as such in
the Target Disclosure Statement, (iii) a loss by Target of its relationship with
the confidential party identified on Schedule 1.1 that is directly and
principally related to Buyer being a party to this Agreement; or (iv) changes
that generally affect the industries in which the Target operates (other than
changes in Laws applicable to such industries).
"TARGET NEGATIVE VOTE" has the meaning specified in Section
8.1(d).
"TARGET OPTIONS" means options to purchase shares of Target
Common Stock issued by Target.
"TARGET PREFERRED STOCK" means the Series A 4% Cumulative
Convertible Preferred Stock, $0.001 par value per share, of Target.
"TARGET RESTRICTED STOCK" means share of Target's stock that are
subject to a repurchase option in favor of Target.
"TARGET RIGHTS" means the rights associated with Target Common
Stock issued in connection with the Target Rights Plan.
"TARGET RIGHTS PLAN" means the Rights Agreement dated June 6,
1998 between My Software Company (predecessor to the Target) and Banc Boston
N.A.
"TARGET SEC REPORT" has the meaning specified in Section 4.7.
"TARGET SPECIAL MEETING" has the meaning specified in Section
6.3.
"TARGET STOCKHOLDER" means each holder of an equity security of
Target.
"TARGET STOCK PLANS" means the 1995 Non-Employee Director Option
Plan of Target, the Amended and Restated 1995 Equity Incentive Plan of Target,
the Amended and Restated 1998 Non-Officer Stock Option Plan of Target, the 2001
Equity Incentive Plan of Target, the MarketHome 1997 Equity Incentive Plan.
"TARGET STOCK PURCHASE PLAN" means the 1999 Employee Stock
Purchase Plan of Target and the 2000 Employee Stock Purchase Plan of Target.
"TARGET SUBSIDIARY" means MarketHome, a California corporation.
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"TARGET WARRANT" means the Warrant dated March 30, 2001 issued
to Tail Wind and all other outstanding warrants of either the Target or the
Target Subsidiary.
"TAX" or "TAXES" means: (a) any and all federal, state, local
and foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities relating to taxes, including, without limitation,
taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, capital stock,
withholding, payroll, recapture, employment, excise, unemployment insurance,
social security, business license, occupation, business organization, stamp,
environmental and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts and (b) any and all obligations
imposed by Law or under any agreements or arrangements with any other Person
with respect to any such amounts and including any liability for taxes of a
predecessor entity.
"TAX RETURN" means any federal, state and local or foreign
return, schedule, estimate, information statement or report relating to Taxes.
"TOTAL ASSETS" means total assets of Target and Target
Subsidiary as determined in accordance with GAAP.
"WORKING CAPITAL" means current assets minus current liabilities
of Target and Target Subsidiary as determined in accordance with GAAP, accruing,
unless paid prior to the Effective Time, all costs incurred by Target in
connection with this Agreement (including without limitation attorneys,
accountants and investment banking fees, the cost of Liability Insurance, or if
an estimated cost is not available, then $200,000 (unless Liability Insurance is
acquired by Target for cash prior to the Effective Time), and $250,000 for the
purchase of servers (unless new servers satisfactory to Buyer are acquired by
Target for cash prior to the Effective Time) whether or not such expenses would
be accrued under GAAP.
1.2 CONSTRUCTION. In construing this Agreement, the following
principles shall be followed:
(a) the terms "herein," "hereof," "hereby," "hereunder" and
other similar terms refer to this Agreement as a whole and not only to the
particular Article, Section or other subdivision in which any such terms may be
employed;
(b) references to Articles, Sections, Schedules, Exhibits and
other subdivisions refer to the Articles, Sections, Schedules, Exhibits and
other subdivisions of this Agreement;
(c) a reference to any Person shall include such Person's
predecessors and successors;
(d) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
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(e) no consideration shall be given to the captions of the
articles, sections, subsections or clauses, which are inserted for convenience
in locating the provisions of this Agreement and not as an aid in its
construction;
(f) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
(g) the word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding syntactical variant
expressions;
(h) a defined term has its defined meaning throughout this
Agreement, regardless of whether it appears before or after the place in this
Agreement where it is defined; and
(i) the plural shall be deemed to include the singular and vice
versa.
ARTICLE II
THE MERGER
2.1 THE MERGER. At the Effective Time, subject to and upon the terms and
conditions of this Agreement and the Delaware Law: (a) Merger Sub will be merged
into Target, (b) the separate corporate existence of Merger Sub will cease and
(c) Target will be the surviving corporation.
2.2 CLOSING AND EFFECTIVE TIME. The Closing will take place at 10:00
a.m., California time, on the Closing Date. The Closing will take place at the
offices of Xxxxxx Xxxxxx White & XxXxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx, or at any other date or location as Buyer and Target agree. At the
Closing, the Parties shall cause the Merger to become effective by filing a
certificate of merger in the form adequate to effectuate the transactions
contemplated herein and reasonably satisfactory to Buyer, Target and Merger Sub
(the "CERTIFICATE OF MERGER") with the Secretary of State of the State of
Delaware in accordance with the relevant provisions of the Delaware Law. (The
time of the filing of the Certificate of Merger, or any later time that the
Parties may agree and specify in the Certificate of Merger, is referred to as
the "EFFECTIVE TIME".)
2.3 EFFECTS OF THE MERGER. The effects of the Merger will be as provided
in this Agreement, the Certificate of Merger and the Delaware Law. Without
limiting the foregoing, at the Effective Time all the property, rights,
privileges, powers and franchises of Target and Merger Sub will vest in the
Surviving Corporation, and all debts, liabilities and duties of Target and
Merger Sub will be debts, liabilities and duties of the Surviving Corporation.
2.4 CERTIFICATE OF INCORPORATION AND BYLAWS. At the Effective Time, the
certificate of incorporation of the Surviving Corporation shall be amended to
read in its entirety as the certificate of incorporation of Merger Sub prior to
the Effective Time, except that it will be modified so that the name of the
corporation reflected in that certificate of incorporation will be "Target Inc."
From and after the Effective Time, the bylaws of Merger Sub, as in effect
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immediately before the Effective Time, will become the bylaws of the Surviving
Corporation.
2.5 DIRECTORS AND OFFICERS OF THE TARGET. The directors and officers of
Merger Sub immediately prior to the Effective Time shall serve as the directors
and officers of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
3.1 CONVERSION OF STOCK. At the Effective Time and without any action on
the part of the holders of the outstanding shares of capital stock of Target or
Merger Sub:
(a) Each share of Target Common Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares as
provided in Section 3.9), together with the Target Rights associated with each
such share, will be automatically converted into solely the right to receive in
cash, without interest, (i) the Minimum Common Merger Consideration pursuant to
Article III after the Closing Date and (ii) the balance of the Merger
Consideration, if any, pursuant to Article III after the Payment Date.
(b) Each share of Merger Sub Common Stock issued and outstanding
immediately before the Effective Time will be converted into one fully paid and
nonassessable share of Target Common Stock.
3.2 ESCROW. On the Closing Date, Buyer will deposit an amount equal to
the Adjustment Cap with the Escrow Agent. Such amount is referred to herein as
the "ESCROW FUND" and will be governed by the terms of the Escrow Agreement
attached hereto as Exhibit C. and Section 3.3. The Escrow Fund shall not include
the Preferred Settlement Closing Payment or the Minimum Common Merger
Consideration nor shall the provisions related to the adjustment of the Common
Merger Consideration set forth in Section 3.3 affect or delay the payment of the
Preferred Settlement Closing Payment or the Minimum Common Merger Consideration.
3.3 ADJUSTMENT TO PURCHASE PRICE.
(a) The Merger Consideration will be adjusted pursuant to
Subsections (a) and (b) of the definition of the Merger Consideration in Section
1.1 (together, the "ADJUSTMENTS"). The Adjustments shall not exceed the
Adjustment Cap.
(b) Not later than the Business Day immediately preceding the
Payment Date, Buyer shall determine, in good faith, the amount of any
Adjustments, which determination shall be binding and conclusive on the Target
Stockholders unless Buyer shall have made a clear mistake in the determination
of the Adjustments.
(c) On or before the Business Day immediately preceding the
Payment Date, Buyer will provide written instructions to the Escrow Agent to (a)
release to Buyer from the Escrow Fund an amount equal to any Adjustments as
determined pursuant to Section 3.3(b), (b)
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release to Buyer from the Escrow Fund any interest earned on the Escrow Fund,
and (c) release the balance of the Escrow Fund to the Paying Agent, which
amount, together with the Minimum Common Merger Consideration will represent the
aggregate Common Merger Consideration. Escrow Agent will be entitled to rely
solely on the written instructions of Buyer.
3.4 EXCHANGE PROCEDURES.
(a) Merger Consideration. On the Closing Date, Buyer shall cause
Merger Sub to deposit with the Paying Agent, in trust for the benefit of the
holders of Target Common Stock, for exchange in accordance with this Article 3,
cash in an aggregate amount sufficient to pay the Minimum Common Merger
Consideration pursuant to Section 3.4.
(b) Deposit of Escrow Funds. On the Payment Date, the Escrow
Agent shall deposit with the Paying Agent, in trust for the benefit of the
holders of Target Common Stock, for exchange in accordance with this Article
III, the balance of the Escrow Fund after distributing to the Surviving
Corporation the amount of any Adjustments and any interest earned on the Escrow
Fund pursuant to Section 3.3.
(c) Exchange Procedures. As soon as practicable after (but in
any event not more than five (5) Business Days after) the Effective Time, Buyer
shall cause to be mailed to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented shares of
Target Common Stock (the "CERTIFICATES") and which shares of Target Common Stock
are exchanged for and represent the right to receive the Common Merger
Consideration pursuant to this Article III (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and which shall be in such form and have such
other provisions as Buyer may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Common Merger
Consideration, in each case, in form and substance reasonably satisfactory to
Target and Buyer. Upon surrender of a Certificate for cancellation to the Paying
Agent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefore that portion of
the Common Merger Consideration equal to the Minimum Common Merger Consideration
per share surrendered, and the Certificate so surrendered shall be canceled.
After the Payment Date, each person entitled to receive the Minimum Common
Merger Consideration shall be entitled to receive the Common Merger
Consideration per share surrendered less the Minimum Common Merger Consideration
previously paid with respect to such shares. Until surrendered, each outstanding
Certificate that, prior to the Effective Time, represented Target Common Stock
will be deemed after the Effective Time to evidence the right to receive the
Common Merger Consideration as provided in this Article III without any interest
thereon (except as provided in Section 3.3). If payment of the Common Merger
Consideration is to be made to a Person other than the Person in whose name the
surrendered Certificate is registered, it shall be a condition of payment that:
(i) the Certificate so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer, and (ii) that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Common Merger Consideration to a Person other than the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either has been paid or
is not applicable.
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(d) Transfer Books. At the Effective Time, the stock transfer
books of the Target shall be closed and thereafter there shall be no further
registration of transfers of shares of Target Common Stock.
(e) Remaining Funds. At any time following one year after the
Payment Date, the Surviving Corporation shall be entitled to require the Paying
Agent to deliver to it any funds (including any interest received with respect
thereto) which had been made available to the Paying Agent and which have not
been disbursed to holders of Certificates. Thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as a general creditor thereof with respect
to the Common Merger Consideration payable upon surrender of their Certificates,
without any interest thereon. Neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Common Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
3.5 TAX CONSEQUENCES. The Merger will constitute a taxable transaction
under the Code.
3.6 PREFERRED STOCK. As of the date hereof, Target, Buyer and Tail Wind
have entered into a Settlement Agreement (the "PREFERRED SETTLEMENT AGREEMENT"),
a copy of which is attached hereto as Exhibit B, pursuant to which Tail Wind has
agreed to accept an aggregate of $1.4 Million (the "PREFERRED SETTLEMENT CLOSING
PAYMENT") on the Closing Date in full satisfaction of its rights in the Target
Preferred Stock and any other rights of Tail Wind with respect to Target. Target
has provided a true and complete copy of the Preferred Settlement Agreement to
Buyer. On the Closing Date, and immediately prior to the Effective Time, Buyer
will pay to Tail Wind $1,400,000 to acquire all of the 3,000 outstanding shares
of Target Preferred Stock and all other rights of Tail Wind under contracts with
Target. Target will promptly notify Buyer of any notice or communication
received from or provided to Tail Wind with respect to the Preferred Settlement
Agreement or the Target Preferred Stock.
3.7 OPTIONS, WARRANTS AND RESTRICTED STOCK.
(a) Pursuant to the Target Stock Plans, immediately prior to the
Effective Time, all outstanding Target Options shall become fully vested and
exercisable and all repurchase rights with respect to Target Restricted Stock
issued under the Target Stock Plans will lapse. Pursuant to the terms of the
Target Stock Plans, any Target Options not exercised prior to the Effective Time
will be automatically terminated.
(b) Pursuant to the Preferred Settlement Agreement, the Target
Warrant will be terminated as of the Effective Time if not exercised prior to
the Effective Time and will thereafter be of no further force and effect.
3.8 NO FURTHER OWNERSHIP RIGHTS IN TARGET STOCK. The Common Merger
Consideration paid upon the surrender for exchange of shares of Target Common
Stock in accordance with the terms hereof shall be deemed to have been paid in
full satisfaction of all rights pertaining to such shares of Target Common
Stock. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and
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exchanged as provided in this Article 3.
3.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates evidencing shares of Target Stock shall have been lost, stolen or
destroyed, Buyer shall cause the Paying Agent to pay the portion of the Merger
Consideration applicable to such shares in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that fact by the
holder thereof; provided, however, that Buyer or Paying Agent may, in their
discretion and as a condition precedent to the payment thereof, require the
owner of such lost, stolen or destroyed Certificates to provide an indemnity
with respect to the Certificates alleged to have been lost, stolen or destroyed.
3.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Target, the officers and directors of the Surviving
Corporation and the Buyer are fully authorized to take, and will use their
reasonable efforts to take, all lawful and reasonable action.
3.11 DISSENTERS. Notwithstanding anything in this Agreement to the
contrary, shares of Target Common Stock outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such shares in
accordance with the Delaware Law ("DISSENTING SHARES") shall not be converted
into a right to receive the Common Merger Consideration unless and until such
holder fails to perfect or withdraws or otherwise loses such holder's right to
appraisal. A holder of Dissenting Shares shall be entitled to receive payment of
the appraisal value of such Shares held by such holder in accordance with the
provisions of Section 262 of the Delaware Law unless, after the Effective Time,
such holder fails to perfect or withdraws or loses such holder's right to
appraisal, in which case such shares shall be treated as if they had been
converted as of the Effective Time into the right to receive the Common Merger
Consideration, without interest thereon.
3.12 EMPLOYEE STOCK PURCHASE PLAN. Target shall amend the Target Stock
Purchase Plan so that as of the Effective Time: (i) the Target Stock Purchase
Plan shall terminate, and no additional purchase rights shall be issued under
it; and (ii) each purchase right granted under the Target Stock Purchase Plan
shall terminate (if it has not previously terminated by its terms) as of the
Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF TARGET
Target hereby makes the following representations and warranties to
Buyer and Merger Sub subject to the exceptions set forth in the disclosure
statement dated the date of this Agreement delivered by Target to Buyer and
Merger Sub (the "TARGET DISCLOSURE STATEMENT"). The Target Disclosure Statement
is arranged in schedules. Each such schedule corresponds to a
13
numbered or lettered section or subsection of this Article IV. The disclosure in
each such schedule qualifies any of the corresponding numbered or lettered
sections of this Article IV.
4.1 ORGANIZATION, ETC. Target is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Target
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. Target and Target Subsidiary
have all requisite corporate power and authority to own, lease and operate their
respective properties and to carry on their respective business as they are now
being conducted. Schedule 4.1 of the Target Disclosure Statement sets forth each
other jurisdiction in which Target or Target Subsidiary are qualified to do
business. Target and Target Subsidiary are duly qualified or licensed to do
business as a foreign corporation and in good standing (with respect to
jurisdictions that recognize such concept) in each jurisdiction where the
character of the properties owned, leased or operated by them or the nature of
their business makes such qualification or licensing necessary, except where the
failure to be so qualified would not, individually or in the aggregate, have a
Target Material Adverse Effect. Target and Target Subsidiary are not in
violation of any provision of their respective charters or bylaws. Target has
made available to Buyer accurate and complete copies of the charters and bylaws
as currently in effect of Target and Target Subsidiary.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Target has full corporate
power and authority to execute and deliver this Agreement and to complete the
Merger and the other transactions contemplated hereby. The execution and
delivery of this Agreement by Target and the completion of the Merger and the
other transactions contemplated hereby have been duly and validly authorized by
the unanimous vote or unanimous written consent of the board of directors of
Target, and, other than approval by Target's Stockholders, no other corporate
proceedings on the part of Target are necessary to authorize this Agreement or
to complete the Merger or any of the other transactions contemplated hereby,
other than the filing and recordation of the Certificate of Merger as required
by Delaware Law. This Agreement has been duly and validly executed and delivered
by Target and, assuming the due authorization, execution and delivery by Buyer
and Merger Sub, constitutes a valid and binding agreement of Target enforceable
against Target in accordance with its terms, except to the extent enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other Law affecting the enforcement of creditors' rights generally or by
general equitable principles.
4.3 NO VIOLATIONS, ETC. No filing with or notification to, and no
permit, authorization, consent or approval of, any Government Entity is
necessary on the part of Target for the completion by Target of the Merger or
any of the other transactions contemplated hereby, or for the exercise by Buyer
or Target of the full rights to own and operate the business of Target as it
presently is being conducted, except for the filing of the Certificate of Merger
as required by Delaware Law and the filing and approval of the Proxy Statement
by the SEC. None of the execution and delivery of this Agreement, the completion
of the Merger or any of the other transactions contemplated hereby, compliance
by Target with the provisions hereof, or the exercise by the Surviving
Corporation after the Merger of the full right to own and operate the business
of Target as it is presently conducted does or will: (i) conflict with or result
in any breach of any provision of the certificate of incorporation or bylaws of
Target, (ii) violate any Law applicable to Target or any of Target's properties
or assets or (iii) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default under, or result
14
in any change in, or give rise to any right of termination, cancellation,
acceleration, redemption or repurchase under, any material note, bond, mortgage,
indenture, deed of trust, license, lease, contract, agreement or other
instrument or obligation to which Target is a party or by which any of Target's
properties or assets is bound. Schedule 4.3 of the Target Disclosure Statement
lists all consents, waivers and approvals required to be obtained by Target in
connection with the completion of the Merger or any of the other transactions
contemplated hereby, including in order to enable Buyer or Target, after the
Merger, to exercise the full right to own and operate the business of Target as
it is presently conducted, under any such notes, bonds, mortgages, indentures,
deeds of trust, licenses or leases, contracts, agreements or other instruments.
4.4 BOARD RECOMMENDATION. The board of directors of Target has, at a
meeting of such board duly held on October 8, 2002, unanimously (i) approved,
adopted and declared advisable this Agreement, (ii) determined that this
Agreement is fair to and in the best interests of the Target Stockholders, (iii)
resolved to recommend approval of this Agreement to the Target Stockholders,
(iv) resolved that Target take any and all action necessary to exempt the
execution, delivery and performance of this Agreement from the restrictions on
"business combinations" set forth in Section 203 of the Delaware Law, and (v)
resolved to render the rights issued under the Target Rights Plan inapplicable
to the Merger and this Agreement, and the other transactions contemplated hereby
(including without limitation the Buyer Voting Agreements).
4.5 FAIRNESS OPINION. Target has received the opinion of Xxxxx Fargo
Securities dated the date of the approval of this Agreement by the board of
directors of Target to the effect that the Common Merger Consideration is fair
to the holders of Target Common Stock from a financial point of view.
4.6 CAPITALIZATION
(a) The authorized capital stock of Target consists of
60,000,000 shares of Target Common Stock of which, as of the close of business
on September 31, 2002, 13,401,347 shares were outstanding, and 2,000,000 shares
of Target Preferred Stock 3,000 shares of which are outstanding. Tail Wind is
the sole registered holder of all of the Target Preferred Stock.
(b) Other than the outstanding shares of Target Preferred Stock,
the rights issued under the Target Rights Plan, and the Target Options granted
under the Target Stock Plans, there are no warrants, options, convertible
securities, calls, rights, stock appreciation rights, preemptive rights, rights
of first refusal, or agreements or commitments of any nature whatsoever
obligating Target to issue, grant, deliver, sell or buy, or cause to be issued,
granted, delivered, sold or bought, any shares of capital stock or other equity
interests of Target or Target Subsidiary, except as disclosed in Schedule
4.06(b) of the Target Disclosure Schedule. Other than the Target Rights Plan,
Target is not a party to any voting trusts, proxies or other agreements or
understandings with respect to the voting of any capital stock or other equity
interests of Target. All of the Target Options granted under the Target Stock
Plans will accelerate and become fully exercisable immediately prior to the
Effective Time. The Target Warrant will be terminated as of the Effective Time.
15
(c) Target has no Subsidiaries other than Target Subsidiary.
Neither Target nor Target Subsidiary own any, or have any obligation, whether
conditional or otherwise, to purchase any, equity interests in any other entity.
(d) True and complete copies of the Target Stock Plans, and of
the forms of all agreements and instruments relating to or issued under each
thereof, have been made available to Buyer. Such agreements, instruments, and
forms have not been amended, modified or supplemented, and there are no
agreements to amend, modify or supplement any such agreements, instruments or
forms.
(e) Schedule 4.6(d) of the Target Disclosure Statement sets
forth the following information with respect to each outstanding Target Option:
the aggregate number of shares issuable thereunder, the type of option, the
grant date, the expiration date, the exercise price and the vesting schedule.
Each outstanding Target Option was granted in accordance with the terms of the
Target Stock Plan applicable thereto.
4.7 SEC FILINGS. Target has filed with the SEC all required forms,
reports, registration statements and documents required to be filed by it with
the SEC (collectively, all such forms, reports, registration statements and
documents filed since January 1, 1999 are referred to herein as the "TARGET SEC
REPORTS"). All of the Target SEC Reports complied as to form, when filed, in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act. Accurate and complete copies of the Target SEC Reports have been
made available to Buyer. As of their respective dates or, in the case of
registration statements, their effective dates (or, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing),
the Target SEC Reports (including all exhibits and schedules thereto and
documents incorporated by reference therein) did not contain any untrue
statement of a material fact 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. Target has been
advised by each of its current officers and directors that each such person and
such persons' affiliates have complied with all filing requirements under
Section 13 and Section 16(a) of the Exchange Act.
4.8 FINANCIAL STATEMENTS.
(a) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Target SEC Reports (the
"TARGET FINANCIAL STATEMENTS"), (x) was prepared in accordance with GAAP and (y)
fairly presented the consolidated financial position of Target and Target
Subsidiary as at the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated, consistent with the
books and records of Target, except that the unaudited interim financial
statements were or are subject to normal year-end adjustments. The balance sheet
of Target contained in Target's Form 10-Q for the quarter ended June 30, 2002 is
hereinafter referred to as the "TARGET BALANCE SHEET."
(b) Target maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
accordance with GAAP and to maintain accountability for assets,
16
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(c) The books and records of Target, in reasonable detail,
accurately and fairly reflect in all material respects the activities of Target
and the businesses of Target and Target Subsidiary and have been provided to
Buyer or made available for its inspection.
(d) Target has not engaged in any material transaction,
maintained any bank account or used any material corporate funds except for
transactions, bank accounts or funds which have been and are reflected in its
books and records.
(e) The stock records and minute books of the Target and Target
Subsidiary that have been made available to Buyer fully reflect all minutes of
meetings, resolutions and other material actions and proceedings of the Target
Stockholders, board of directors and all committees thereof, all issuances,
transfers and redemptions of capital stock of which Target or the Target
Stockholders are aware and contain true, correct and complete copies of their
respective Certificates of Incorporation and Bylaws and all amendments thereto
through the date hereof.
(f) The Closing Balance Sheet will fairly and accurately present
the consolidated financial position of Target and Target Subsidiary as of the
Effective Time including, specifically, the Working Capital, Cash, and Total
Assets of Target and Target Subsidiary.
4.9 ABSENCE OF UNDISCLOSED LIABILITIES. Target and Target Subsidiary do
not have any liabilities (absolute, contingent, known, unknown or otherwise)
other than: (a) liabilities reflected in the Target Balance Sheet, (b) normal or
recurring liabilities incurred since June 30, 2002 in the ordinary course of
business of Target consistent with past practice which, individually and in the
aggregate, do not exceed $50,000, (c) liabilities under this Agreement
(including, without limitation, liabilities for financial advisor, accounting
and legal fees and expenses incurred in connection with this Agreement), and (d)
other liabilities disclosed in Schedule 4.9 of the Target Disclosure Schedule.
4.10 ABSENCE OF CHANGES OR EVENTS. Since June 30, 2002, Target and
Target Subsidiary have conducted their businesses only in the ordinary course
consistent with past practice. No Target Material Adverse Effect has occurred
since June 30, 2002 no event has occurred and no circumstance exists that could
reasonably be expected to result in a Target Material Adverse Effect in the
future, except as set forth in Schedule 4.10 of the Target Disclosure Schedule.
Without limiting the foregoing, since June 30, 2002, Target and Target
Subsidiary have not, directly or indirectly:
(a) purchased, acquired, or agreed to purchase or acquire, any
shares of capital stock of Target, or declared, set aside or paid any dividend
or otherwise made a distribution (whether in cash, stock or property or any
combination thereof) in respect of any of its capital stock (other than the
declaration, setting aside or payment of required dividends with respect to the
Target Preferred Stock);
17
(b) created or incurred any indebtedness for borrowed money
exceeding $50,000 in the aggregate; assumed, guaranteed, endorsed or otherwise
as an accommodation become responsible for the obligations of any other Person;
made any loans or advances to any other Person (other than advances of less than
$1,500 to employees for reasonable business expenses incurred in the ordinary
course); entered into any oral or written agreement or any commitment or
transaction or incurred any liabilities involving in excess of $50,000;
(c) instituted any change in accounting methods, principles or
practices;
(d) revalued any assets, including, without limitation, written
down the value of any inventory or written off any notes or accounts receivable
in excess of amounts previously reserved, as reflected in the Target Balance
Sheet;
(e) suffered any damage, destruction or loss, whether or not
covered by insurance;
(f) increased in any manner the compensation of any of its
directors, officers or other employees; paid or granted rights to any severance
or termination pay to any Person; entered into any oral or written employment,
consulting, indemnification or severance agreement with any Person; or adopted,
become obligated under, or amended any Employee Benefit Plan;
(g) sold, transferred, leased, licensed, pledged, mortgaged,
encumbered, or otherwise disposed of, or agreed to sell, transfer, lease,
license, pledge, mortgage, encumber, or otherwise disposed of, any assets or
properties (whether tangible, intangible, real, personal or mixed) other than
the sale of inventory in the ordinary course of Target's business;
(h) amended its certificate of incorporation or bylaws, or
effected or been a party to any merger, consolidation, share exchange, business
combination, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(i) made capital expenditures exceeding $50,000 in the
aggregate;
(j) paid, discharged or satisfied any claims, liabilities or
obligations other than in the ordinary course of business consistent with past
practice, or collected, or accelerated the collection of, any amounts owed
(including accounts receivable) other than collections in the ordinary course of
business; or
(k) agreed or proposed to do any of the things described in the
preceding clauses (a) through (j) other than as expressly contemplated or
provided for in this Agreement.
4.11 CAPITAL STOCK OF SUBSIDIARIES. Target is directly or indirectly the
record and beneficial owner of all of the outstanding shares of capital stock or
other equity interests of Target Subsidiary. All of such shares have been duly
authorized and are validly issued, fully paid, nonassessable and free of
preemptive rights with respect thereto and are owned by Target free and clear of
any claim, lien or encumbrance of any kind with respect thereto. There are no
proxies or voting agreements with respect to such shares, and there are not any
existing options, warrants, calls, subscriptions, or other rights or other
agreements or commitments obligating Target or Target Subsidiary to issue,
transfer or sell any shares of capital stock or any other
18
securities convertible into, exercisable for, or evidencing the right to
subscribe for any shares of Target Subsidiary. Target does not directly or
indirectly own any interest in any Person except the Target Subsidiary.
4.12 LITIGATION. There is no Action pending or, to Target's Knowledge,
threatened against Target, Target Subsidiary or any of their respective officers
or directors (in their capacities as such), or involving any of Target's or
Target Subsidiary's assets. There is no Action pending or, to Target's
Knowledge, threatened which in any manner challenges, seeks to, or is reasonably
likely to, prevent, enjoin, alter or delay the Merger or any of the other
transactions contemplated by this Agreement. There is no outstanding judgment,
order, writ, injunction or decree of any Governmental Entity in a proceeding to
which Target or any of its assets is or was a party or by which Target or any of
its assets is bound.
4.13 INSURANCE. Schedule 4.13 of the Target Disclosure Statement lists
all insurance policies (including, without limitation, workers' compensation
insurance policies) covering any of the business, properties, assets or
operations of Target and Target Subsidiary, the premiums and coverages of such
policies, and all claims in excess of $25,000 made under any such policies since
1999. All such policies are in effect. True and complete copies of all such
policies have been made available to Buyer. Neither Target nor Target Subsidiary
has received notice of the cancellation or threat of cancellation of any such
policy.
4.14 CONTRACTS AND COMMITMENTS.
(a) Except as identified on Schedule 4.14, neither Target nor
Target Subsidiary is a party to or bound by any oral or written agreement or
commitment under which any party has continuing obligations:
(i) under which Target or Target Subsidiary may pay or
receive more than $50,000 in total;
(ii) to lease or sublease any real property (whether as
lessor, lessee, sublessor or sublessee);
(iii) respecting any Target IP Rights other than licenses
for standard off-the-shelf software with a retail value less than $5,000;
(iv) with any present or former employee or consultant of
or to Target or Target Subsidiary;
(v) with any officer or director of Target or Target
Subsidiary, any relative of such officer or director, or any entity in which any
such officer or director or any relative of such officer or director holds or
held any material ownership interest or serves or served any active role;
(vi) under which rights or benefits will be increased or
accelerated by the occurrence of any of the transactions contemplated by this
Agreement or under which the
19
value of rights or benefits will be calculated on the basis of any of the
transactions contemplated by this Agreement;
(vii) relating to the disposition or acquisition of any
assets (other than inventory in the ordinary course of Target's business) or
relating to an ownership interest in any entity or business;
(viii) for the purchase of materials, supplies or
equipment that provide for purchase prices substantially greater than those
presently prevailing for such materials, supplies or equipment, in quantities
substantially greater than past practice, or which are with sole or single
source suppliers;
(ix) guarantees or other agreements or commitments under
which Target or Target Subsidiary is absolutely or contingently liable for the
performance or liability of any other Person;
(x) which limit or restrict where Target or Target
Subsidiary may conduct any business or the type or lines of business (current or
future) in which Target or Target Subsidiary may engage;
(xi) with respect to a change of control of Target or
Target Subsidiary;
(xii) for the borrowing or lending of money, or the
availability of credit, whether secured or unsecured;
(xiii) respecting any hedging, option, derivative or
similar transaction or any foreign exchange position or contract for the
exchange of currency;
(xiv) any joint marketing, joint venture or development
agreement;
(xv) respecting licensing, distribution or sales
representation;
(xvi) that has an indefinite term or has a fixed term of
more than one year (other than those that are terminable by Target or Target
Subsidiary at will or upon not more than 30 days' notice without penalty); or
(xvii) respecting any other matter material to Target or
Target Subsidiary or their respective businesses.
(b) Target has not, nor to Target's Knowledge, has any other
party to a Target Contract, breached, violated or defaulted under, or received
any notice that it has breached, violated or defaulted under (nor does there
exist any condition under which, with the passage of time or the giving of
notice or both, could reasonably be expected to cause such a breach, violation
or default under), any Target Contract.
(c) Each Target Contract is a valid, binding and enforceable
obligation of Target or Target Subsidiary (as applicable) and, to Target's
Knowledge, of the other party or
20
parties thereto, in accordance with its terms, and is in full force and effect,
except to the extent enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or other Laws affecting the enforcement of creditors'
rights generally or by general principles of equity.
(d) Target has made available to Buyer a complete and accurate
copy of each Target Contract (including all amendments and waivers).
4.15 LABOR AND EMPLOYMENT MATTERS.
(a) Neither Target nor Target Subsidiary is a party to any union
contract or other collective bargaining agreement nor, to Target's Knowledge,
are there any activities or proceedings of any labor union to organize any of
Target's or Target Subsidiary's employees. Target and Target Subsidiary are each
in material compliance with Laws and agreements respecting employment and
employment practices, and the terms and conditions of employment of their
respective employees.
(b) Neither Target nor Target Subsidiary has ever experienced
any labor strike, slowdown or stoppage, or had any labor strike, slowdown or
stoppage threatened. No petition for certification has ever been filed before
the National Labor Relations Board with respect to any employees of Target or
Target Subsidiary. Except as disclosed in Schedule 4.15 of the Target Disclosure
Schedule, neither Target nor Target Subsidiary has any obligations under COBRA
with respect to any former employees or qualifying beneficiaries thereunder.
There are no controversies pending or, to Target's Knowledge, threatened,
between Target or Target Subsidiary and any of their employees.
4.16 COMPLIANCE WITH LAW. Target and Target Subsidiary are, and since
the date of their respective incorporations have been, in substantial compliance
with all material Laws, including, without limitation, all laws related to
e-mail marketing and solicitation and elections, lobbying, and political
contributions, except for any violations which, individually or in the
aggregate, would not reasonably be expected to have a Target Material Adverse
Effect. Target and Target Subsidiary each hold all permits, licenses and
franchises from all Governmental Entities required to conduct its businesses as
they are now being conducted, except for those whose absence would not
reasonably be expected to have a Target Material Adverse Effect. Schedule 4.16
contains a list of all such permits, licenses and franchises, including all
Environmental Permits. Target has made available all such items to Buyer.
4.17 INTELLECTUAL PROPERTY RIGHTS.
(a) Target owns or has the right to use, sell or license all
Target IP Rights. Except as set forth in Schedule 4.17(a), no royalties or other
payments are payable by Target or Target Subsidiary to any Person with respect
to any products formerly or presently sold or under development by, or services
provided using Target IP Rights by, Target or Target Subsidiary.
(b) The execution, delivery and performance of this Agreement
and the completion of the transactions contemplated by this Agreement does not
and will not: (i) breach any agreement or license governing any Target IP
Rights, (ii) cause the modification of any agreement or license relating to any
Target IP Rights, (iii) require the payment of any royalty or other payment with
respect to any Target IP Rights, (iv) cause the forfeiture or termination of
21
any Target IP Rights, (v) give rise to a right of forfeiture or termination of
any Target IP Rights or (vi) impair the right of Target, Target Subsidiary,
Surviving Corporation or Buyer to use, sell or license any Target IP Rights.
(c) The manufacture, marketing, license, sale and use of the
products and technologies formerly or currently licensed or sold, or under
development, by Target and Target Subsidiary do not and will not: (i) violate
any agreement or license between Target or Target Subsidiary and any Person or
(ii) infringe any intellectual property rights of any other Person. There is no
pending or, to Target's Knowledge, threatened, Action contesting the validity or
ownership, or Target's or Target Subsidiary's right to use, sell, license or
dispose of, any Target IP Rights, nor has Target or Target Subsidiary received
any written notice asserting that any Target IP Rights or any use, sale, license
or disposition thereof conflicts or will conflict with the rights of any other
Person. To the Target's Knowledge, no other Person is infringing any Target IP
Rights.
(d) Schedule 4.17 of the Target Disclosure Schedule contains a
list of all patents, copyrights, tradenames, trademarks and service marks, and
applications for any of the foregoing, owned or possessed by Target or Target
Subsidiary.
(e) Target has provided to Buyer a true and complete copy of its
standard form of employee confidentiality agreement. All employees of Target and
Target Subsidiary have executed such an agreement. All consultants and other
Persons with access to proprietary information of Target or Target Subsidiary
have executed non-disclosure agreements that protect the Target IP Rights.
Target has not entered into any agreement to indemnify any other Person,
including but not limited to any employee or consultant of Target or Target
Subsidiary, with respect to any infringement, misappropriation or misuse of any
intellectual property. All current and former employees and consultants of
Target and Target Subsidiary have signed written assignments to Target or Target
Subsidiary, as appropriate, of any and all rights and claims in any intellectual
property that any such employee or consultant has or may have by reason of any
contribution, participation or other role in the development, conception,
creation, reduction to practice or authorship of any invention, innovation,
development, work of authorship or any other intellectual property that is used
in the business of Target or Target Subsidiary.
4.18 TAXES
(a) All Tax Returns required to be filed before the date of this
Agreement by or on behalf of Target or Target Subsidiary have been duly filed on
a timely basis. All such Tax Returns are true, complete and correct in all
material respects. Schedule 4.18 of the Target Disclosure Statement lists all
jurisdictions in which Tax Returns are required to be filed by or for Target or
Target Subsidiary or have been required since the incorporation of Target or
Target Subsidiary, and the types of Tax Returns required to be filed in each
such jurisdiction. All Taxes shown to be payable on such Tax Returns and on any
subsequent assessments, and all payments of estimated Taxes required to be made
under Section 6655 of the Code or comparable provisions of state, local or
foreign law have been timely paid in full. No Taxes are payable by Target or
Target Subsidiary with respect to items or periods covered by such Tax Returns,
whether or not shown on or reportable on such Tax Returns. There are no liens on
any assets of
22
Target or Target Subsidiary with respect to Taxes, except for inchoate liens for
Taxes not yet due and payable.
(b) No Tax Return of Target or Target Subsidiary has ever been
audited by a Government Entity, nor is any such audit pending or, to Target's
Knowledge, threatened. No deficiencies in Taxes with respect to Target or Target
Subsidiary have been asserted by any Government Entity, and neither Target nor
Target Subsidiary has received any notice that it has not filed any Tax Return
or not paid any Taxes required to be filed or paid. Neither Target nor Target
Subsidiary is a party to any Action for the assessment or collection of Taxes.
Neither Target nor Target Subsidiary has: (i) granted any presently operative
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax (ii) granted a power of attorney to any
Person with respect to Taxes or (iii) availed itself of any Tax amnesty, Tax
holiday, or similar relief in any jurisdiction.
(c) Target and Target Subsidiary have withheld, collected and
paid over to the appropriate Government Entity (or is properly holding for such
payment) all Taxes required to have been withheld, collected or paid, and have
complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with its operations, including with respect to sales and use Taxes and amounts
paid or owing to any employee, independent contractor, consultant, creditor,
foreign Person or other payee.
(d) The amount of Target's and Target Subsidiary's liability for
unpaid Taxes for all periods through the date of the Target Balance Sheet does
not, in the aggregate, exceed the amount of the accruals for Taxes reflected on
the Target Balance Sheet, and the Target Balance Sheet reflects proper accruals
in accordance with GAAP of all liabilities for Taxes payable after the date of
the Target Balance Sheet attributable to transactions and events occurring
before that date. Neither Target nor Target Subsidiary have incurred any
liability for Taxes since that date other than in the ordinary course of
business.
(e) Neither Target nor Target Subsidiary is, nor has it been, a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the period specified in Section 897(c)(1)(A)(ii) of
the Code. Neither Target nor Target Subsidiary is a "consenting corporation"
under Section 341(f) of the Code. Neither Target nor Target Subsidiary has
entered into any agreements with respect to the performance of services which
could reasonably be expected to result in a nondeductible expense (after taking
into account any payments under or triggered by this Agreement) under Sections
280G, 404, or 162 of the Code or an excise tax under Code Section 4999. Neither
Target nor Target Subsidiary has agreed to, nor is it required to make, any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method, and does not have an application pending with the Internal Revenue
Service or any other Government Entity requesting permission for any change in
accounting method. Neither Target nor Target Subsidiary will have income
reportable for a period ending after the Effective Time but attributable to a
transaction (including an installment sale), occurring during a period ending on
or before the Effective Time. Target and Target Subsidiary have complied with
the information reporting and record maintenance requirements of Section 6038A
and the regulations thereunder.
23
(f) Neither Target nor Target Subsidiary has assumed any
liability and does not have any obligation, actual or contingent, with respect
to or for Taxes of another Person under any agreement or arrangement, including
any arrangement for the leasing of real or personal property. Neither Target nor
Target Subsidiary has been a member of an affiliated group of corporations
filing a consolidated federal income Tax Return (or a group of corporations
filing a consolidated, combined or unitary income Tax Return under comparable
provisions of state, local or foreign tax law) other than a consolidated group
of which Target is the common parent. Target has not been a party to a
transaction intended to qualify under Section 355 of the Code (whether as
distributing or distributed company) within the last five years. Neither Target
nor Target Subsidiary has any net operating losses or other tax attributes
currently subject to limitation under Sections 382, 383 or 384 of the Code.
4.19 EMPLOYEE BENEFIT PLANS AND ERISA
(a) There are no "employee pension benefit plans" as defined in
Section 3(2) of ERISA, "employee welfare benefit plans" (as defined in Section
3(l) of ERISA), stock bonus, stock option, restricted stock, stock appreciation
right, stock purchase, bonus, incentive, deferred compensation, severance,
holiday or vacation plans, or any other employee benefit plans, programs,
policies or arrangements which are currently maintained or sponsored by Target
or Target Subsidiary for the benefit of any employees (or former employees) of
Target or Target Subsidiary or to which Target or Target Subsidiary is obligated
to make any payments or otherwise may have any liability (collectively "EMPLOYEE
BENEFIT Plans"). Target has made available to Buyer true, complete and correct
copies of any Employee Benefit Plan (including any separate trust agreement) or,
if no plan document exists, a written description of any Employee Benefit Plan,
and with respect to any Employee Benefit Plan, the two most recent annual
reports on Form 5500 filed with the Internal Revenue Service (if any such report
was required), the most recent summary plan description, if required, and the
most recent Internal Revenue Service determination letter, if any.
(b) None of Target, Target Subsidiary nor any Person that is or
has been a member of any group of Persons described in Section 414(b), (c), (m)
or (o) of the Code that includes Target or Target Subsidiary maintains or
contributes to, or has ever maintained or contributed to, a pension plan subject
to Title IV of ERISA or a multiemployer plan as defined in Section 3(37) of
ERISA, and no Employee Benefit Plan provides benefits to former employees of
Target other than as necessary to comply with Section 4980B of the Code or other
Law. No Employee Benefit Plan has incurred an "accumulated funding deficiency"
within the meaning of Section 302 of ERISA or Section 412 of the Code.
(c) No "prohibited transaction" (as defined in Section 4975 of
the Code or Section 406 of ERISA) has occurred that involves any assets of any
Employee Benefit Plan and that is reasonably likely to subject Target, Target
Subsidiary or any of their employees to the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code or the sanctions imposed under
Title I of ERISA.
(d) Other than routine claims for benefits, there are no Actions
pending or, to Target's Knowledge, threatened, against any Employee Benefit
Plan, any fiduciary of any Employee Benefit Plan or against any assets of any
Employee Benefit Plan. Any Employee
24
Benefit Plan has been operated and administered in all material respects in
compliance with its terms and all Laws (including, but not limited to, ERISA and
the Code). Target has complied with the notice and continuation requirements of
Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and
the regulations thereunder.
(e) Except as set forth in Schedule 4.19(e), the completion of
the transactions contemplated by this Agreement will not result in an increase
in the amount of compensation or benefits or accelerate the vesting or timing of
payment of any benefits or compensation payable to or in respect of any employee
of Target or Target Subsidiary.
4.20 ENVIRONMENTAL MATTERS
(a) For purposes of this Agreement: (i) "CONTRACTOR" means any
Person with which Target or Target Subsidiary formerly or presently has or had
any agreement or arrangement (whether oral or written) under which such Person
has or had physical possession of, and was or is obligated to, develop, test,
process, manufacture or produce, any product or substance on behalf of Target or
Target Subsidiary; (ii) "ENVIRONMENT" means any land, structure, water or
ambient air; (iii) "ENVIRONMENTAL LAW" means any Law intended, at least in part,
to protect the health of humans, animals or plants; (iv) "ENVIRONMENTAL PERMIT"
means any permit, license, consent, approval, certificate, qualification or
other authorization required by any Governmental Entity pursuant to any
Environmental Law and (v) "HAZARDOUS MATERIAL" means any pollutant, contaminant,
or hazardous, toxic, medical, biohazardous, infectious or dangerous waste,
substance, gas, constituent or material, defined or regulated as such in, or for
purposes of, any Environmental Law, including, without limitation, asbestos,
petroleum, oil, radioactive substance, polychlorinated biphenyl, toxin,
chemical, virus, infectious disease or disease causing agent, and any other
substance that can give rise to liability under any Environmental Law.
(b) Target and Target Subsidiary possess all Environmental
Permits required under applicable Environmental Laws to conduct their current
businesses and to use and occupy the Real Property for their current businesses.
All Environmental Permits are in full force and effect and Target and Target
Subsidiary are, and at all times have been, in substantial compliance with all
such Environmental Permits. To Target's Knowledge, there are no facts or
circumstances indicating that any Environmental Permit possessed by Target or
Target Subsidiary would or might be revoked, suspended, canceled or not renewed,
and all appropriate necessary action in connection with the renewal or extension
of all Environmental Permits possessed by Target or Target Subsidiary relating
to their current business and the Real Property has been taken. The execution
and delivery of this Agreement, the completion by Target of the Merger and other
transactions contemplated hereby, and the exercise by Buyer and Target of the
full rights to own and operate the business of Target and to use and occupy the
Real Property substantially as presently conducted will not affect the validity
or require the transfer of any Environmental Permit held by Target or Target
Subsidiary and will not require any notification, disclosure, registration,
reporting, filing, investigation or remediation under any Environmental Law.
(c) Target is in substantial compliance with and, within the
period of all applicable statutes of limitation, have substantially complied
with, all applicable Environmental Laws and have not received notice of any
liability under any Environmental Law. To Target's
25
Knowledge, there is no: (i) Action pending or threatened to make good, repair,
reinstate or clean up any Real Property or (ii) any act, omission, event or
circumstance giving rise or likely to give rise in the future to any such Action
against Target, Target Subsidiary or any Person, including, without limitation,
any Contractor, in connection with which liability could reasonably be imputed
or attributed by Law or contract to Target or Target Subsidiary.
(d) There has not been any disposal, spill, discharge or release
of any Hazardous Material generated, used, owned, stored or controlled by Target
or Target Subsidiary on, at or under any property presently or formerly owned,
leased or operated by Target, Target Subsidiary, or, to Target's Knowledge, any
Contractor, and there are no Hazardous Materials located in, at, on or under, or
in the vicinity of, any such facility or property, or at any other location, in
either case that could reasonably be expected to require investigation, removal,
remedial or corrective action by Target or Target Subsidiary and that would
reasonably likely result in a Target Material Adverse Effect. No Hazardous
Materials have been generated, used, treated, handled, released or stored on, or
transported to or from, any Real Property or to Target's Knowledge, any property
adjoining any Real Property. To Target's Knowledge, Target and Target Subsidiary
have disposed of all wastes, including those wastes containing Hazardous
Materials, in substantial compliance with all applicable Environmental Laws and
Environmental Permits. Neither Target nor Target Subsidiary has transported or
arranged for the transportation of any Hazardous Materials to any location that
is listed or proposed for listing on the National Priorities List under CERCLA
or on the CERCLIS or any analogous state or other list. To Target's Knowledge,
there has not been any underground or above ground storage tank or other
underground storage receptacle or related piping, or any impoundment or other
disposal area containing, Hazardous Materials located on any Real Property
owned, leased or operated by Target, Target Subsidiary, or predecessors in
interest during the period of such ownership, lease or operation, and no
asbestos or polychlorinated biphenyls have been used or disposed of, or have
been located at, on or under any such facility or property during the period of
such ownership, lease or operation. Target and Target Subsidiary have taken all
actions necessary under Environmental Laws to register any products or materials
required to be registered by Target or any of its agents.
(e) Target has made available to Buyer all records and files in
its possession or under its control, including, but not limited to, all
assessments, reports, studies, audits, analyses, tests and data in the
possession of Target or Target Subsidiary, concerning the existence of Hazardous
Materials at facilities or properties currently or formerly owned, operated, or
leased by Target or Target Subsidiary or any predecessor in interest, or
concerning compliance by Target or Target Subsidiary with, or liability under,
any Environmental Law.
4.21 FINDERS OR BROKERS. Other than Xxxxx Fargo Securities, neither
Target nor Target Subsidiary has employed any investment banker, broker, finder
or intermediary in connection with the Merger or any other transaction
contemplated by this Agreement who might be entitled to a fee or any commission
for those efforts.
4.22 TITLE TO PROPERTY. Neither Target nor Target Subsidiary owns any
real property. Target or Target Subsidiary has good and marketable title to all
of the properties, interests in properties and assets reflected in the Target
Balance Sheet, acquired after June 30, 2002 or otherwise used in its business,
and has valid leasehold interests in all leased properties and
26
assets, in each such case free and clear of all mortgages, liens, pledges,
charges and encumbrances of every kind and character other than Permitted Liens.
Schedule 4.22 of the Target Disclosure Statement identifies each parcel of real
property leased by Target or Target Subsidiary.
4.23 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the
Target Balance Sheet and all current accounts receivable shown on the ledger of
Target or Target Subsidiary represent valid obligations arising from services
actually performed or sales actually made by Target or Target Subsidiary in the
ordinary course of its business. All of those accounts receivable are or will be
collectible at the full recorded amount thereof, less any applicable reserves
established in accordance with GAAP in the ordinary course of business
consistent with past practice and reflected in the Target Balance Sheet or
ledger. Target has provided to Buyer an accounts receivable aging report as of a
recent date reasonably acceptable to Buyer (both prior to the date hereof and
prior to the Closing Date).
4.24 CUSTOMER AND SUPPLIER RELATIONSHIPS. To Target's Knowledge, except
as set forth on Schedule 4.24 of the Target Disclosure Schedule, there are no
facts or circumstances, including the completion of the transactions
contemplated by this Agreement, that are reasonably likely to result in the loss
of any material customer, research sponsor, grant or supplier of Target or
Target Subsidiary or a material change in the relationship of Target or Target
Subsidiary with any such customer, research sponsor, grant or supplier.
4.25 RESTRICTIONS ON BUSINESS ACTIVITIES. None of Target, Target
Subsidiary nor any of their respective assets is bound by any agreement,
arrangement or order and, to Target's Knowledge, no such order is threatened,
that has or could reasonably be expected to have the effect of prohibiting or
materially impairing: (a) any business practice of Target or Target Subsidiary,
(b) any acquisition or disposition of assets or property by Target or Target
Subsidiary, (c) the provision of any service by Target or Target Subsidiary, (d)
the hiring of any employees by Target or Target Subsidiary or (e) the conduct of
any business by Target or Target Subsidiary.
4.26 CONDITION AND SUFFICIENCY OF ASSETS. The leaseholds, facilities,
equipment and other tangible assets and property owned or used by Target and
Target Subsidiary are structurally sound, are in good operating condition and
repair (normal wear and tear excepted), and are adequate for the uses to which
they are being put. No such facilities or other property and assets is in need
of maintenance or repairs, except for ordinary, routine maintenance and repairs
that are not material in nature or cost. The facilities and other tangible
assets and property owned or used by Target and Target Subsidiary are sufficient
for the continued conduct of Target's or Target Subsidiary's business after the
Closing in substantially the same manner as it was conducted before the Closing.
4.27 PROXY STATEMENT. The Proxy Statement to be sent to the Target
Stockholders in connection with the Target Special Meeting (such proxy
statement, as amended and supplemented is referred to herein as the "PROXY
STATEMENT"), at the date the Proxy Statement is first mailed to Target
Stockholders, at the time of the Target Special Meeting and at the Effective
Time shall not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the
27
circumstances under which they were made, not misleading. If at any time prior
to the Effective Time any event with respect to Target or Target Subsidiary
shall occur which is required to be described in the Proxy Statement, such event
shall be so described, and an amendment or supplement shall be promptly filed
with the SEC and, as required by Law, disseminated to the Target Stockholders.
The representation and warranty of Target made herein shall not apply to any
information in the Proxy Statement supplied by Buyer, Merger Sub or Xxxxx Fargo.
4.28 DISCLOSURE. No representation or warranty set forth in this Article
IV, the Target Disclosure Statement or any certificate to be delivered at
closing contains or will contain any material untrue or misleading statement of
fact or omits or will omit any fact necessary to make the statements contained
herein and therein not materially misleading. Target has no knowledge of any
fact, event or circumstance not set forth in this Article IV or the Target
Disclosure Statement that has or is likely to have a Target Material Adverse
Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub hereby make the following representations and
warranties to Target.
5.1 ORGANIZATION, ETC. Each of Buyer, Merger Sub and the other Buyer
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as it now is being conducted. None of Buyer or any Buyer
Subsidiary is in violation of its certificate or articles of incorporation,
bylaws or any other charter document.
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Buyer and Merger Sub
has full corporate power and authority to execute and deliver this Agreement and
to complete the Merger and the other transactions contemplated hereby. The
execution and delivery of this Agreement and the completion of the Merger and
the other transactions contemplated hereby have been duly and validly authorized
by the boards of directors of Buyer and Merger Sub, and by Buyer in its capacity
as Merger Sub's sole stockholder. No other corporate proceedings on the part of
Buyer or Merger Sub are necessary to authorize this Agreement or to complete the
Merger or the other transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Buyer and Merger Sub and, assuming
due authorization, execution and delivery by Target and approval by the Target
Stockholders in accordance with Delaware Law, constitutes a valid and binding
agreement of Buyer and Merger Sub, enforceable against each of them in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other Laws affecting the enforcement of creditors' rights generally or by
general equitable principles.
5.3 NO VIOLATIONS, ETC. No filing with or notification to, and no
permit, authorization, consent or approval of, any Government Entity is
necessary on the part of Buyer or Merger Sub to complete the Merger or the other
transactions contemplated hereby, except for the filing of the Certificate of
Merger. None of the execution and delivery of this Agreement, the
28
completion of the Merger or the other transactions contemplated hereby, or
compliance by Buyer or Merger Sub with any of the provisions of this Agreement
does or will: (i) conflict with or result in any breach of any provision of the
certificate or articles of incorporation or bylaws of Buyer or Merger Sub, (ii)
violate any Law applicable to Buyer or Merger Sub or by which any of its
properties or assets may be bound or (iii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default,
or give rise to any right of termination, cancellation, acceleration, redemption
or repurchase under, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Buyer or Merger Sub is a party or by which either of them or any of their
properties or assets may be bound.
5.4 CASH CONSIDERATION. Buyer currently has available, and at the
Effective Time will continue to have available, sufficient cash and cash
equivalents to enable it to perform its obligations under this Agreement.
5.5 LITIGATION. As of the date of this Agreement, there is no Action
pending or, to the knowledge of Buyer, threatened which in any manner
challenges, seeks to, or is reasonably likely to, prevent, enjoin, alter or
delay the Merger or any of the other transactions contemplated by this
Agreement.
ARTICLE VI
COVENANTS
6.1 CONDUCT OF BUSINESS DURING INTERIM PERIOD. Except as contemplated or
required by this Agreement or as expressly agreed to in writing by Buyer, during
the period from the date of this Agreement to the Effective Time, Target shall
(and shall cause Target Subsidiary to): (i) conduct its operations according to
its ordinary and usual course of business consistent with past practice, (ii)
collect all accounts receivable in a manner consistent with past practices,
(iii) pay all accounts payable in a manner consistent with past practice, (iv)
use commercially reasonable efforts to preserve intact its business
organization, keep available the services of its employees and maintain
satisfactory relationships with its suppliers, distributors, customers and
others having business relationships with it and (v) not take any action that
would adversely affect its ability to complete the Merger or any of the other
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing and except as otherwise expressly contemplated, required or
permitted by this Agreement or as set forth in Schedule 6.1, before the
Effective Time Target shall not (and Target shall not cause or permit Target
Subsidiary to), without the prior written consent of Buyer (which consent or
denial of consent will not be unreasonably delayed) directly or indirectly, do
any of the following:
(a) enter into, violate, extend, amend or otherwise modify or
waive any of the terms of any: (i) agreement relating to any Target IP Rights or
(ii) any other agreement, commitment or contract, in each case, except in the
ordinary course of business consistent with past practice;
(b) authorize, solicit, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement or agreement in
principle with any other
29
Person with respect to, any plan of liquidation or dissolution, any acquisition
of securities or any material amount of assets, any issuance or disposition of
any securities or any material amount of assets, any change in capitalization,
or any partnership, association, joint venture, joint development, technology
transfer, or other business alliance;
(c) fail to renew any insurance policy naming it as a
beneficiary or a loss payee, or take any steps or fail to take any steps that
would permit any insurance policy naming it as a beneficiary or a loss payee to
be canceled, terminated or materially altered, except in the ordinary course of
business consistent with past practice and following written notice to Buyer;
(d) maintain its books and records in a manner other than in the
ordinary course of business consistent with past practice;
(e) enter into any hedging, option, derivative or other similar
transaction or any foreign exchange position or contract for the exchange of
currency;
(f) institute any change in its accounting methods, principles
or practices or revalue any of its respective assets, including, without
limitation, writing down the value of any inventory or writing off any accounts
receivables;
(g) in respect of any Taxes, make or change any election, change
any accounting method, enter into any closing agreement, settle any claim or
assessment, or consent to any extension or waiver of the limitations period
applicable to any claim or assessment except as required by Law; or
(h) take or agree to take any of the actions described in
Section 4.10 or any action which would make any of its representations or
warranties contained in this Agreement untrue or incorrect in any material
respect or prevent it from performing or cause it not to perform any of its
covenants in this Agreement.
6.2 NO SOLICITATION.
(a) Target shall not, and shall cause Target Subsidiary not to,
and shall use its best efforts to cause its and Target Subsidiary's respective
officers, directors, employees not to, and shall use commercially reasonable
efforts to cause its investment bankers, attorneys or other agents retained by
or acting on behalf of Target or Target Subsidiary not to: (i) initiate, solicit
or encourage, directly or indirectly, any inquiries or the making of any
proposal that constitutes or is reasonably likely to lead to any Acquisition
Proposal (as defined in Section 6.2(c) hereof), (ii) engage in negotiations or
discussions (other than to advise as to the existence of the restrictions set
forth in this Section 6.2) with, or furnish any information or data to, any
third party relating to an Acquisition Proposal, or (iii) enter into any
agreement with respect to any Acquisition Proposal or approve any Acquisition
Proposal. Notwithstanding anything to the contrary contained in this Section 6.2
or in any other provision of this Agreement, Target and its officers, board of
directors, investment bankers, attorneys and agents (i) may participate in
discussions or negotiations with or furnish information to any third party
making an unsolicited Acquisition Proposal (a "POTENTIAL ACQUIROR") or approve
an unsolicited Acquisition Proposal if the board is advised by its financial
advisor that the Potential Acquiror submitting such Acquisition Proposal has the
financial wherewithal to be reasonably capable of consummating
30
such an Acquisition Proposal, and the board determines in good faith (A) after
receiving advice from its financial advisor, that such Acquisition Proposal is a
Superior Proposal (as defined in Section 6.2(d) hereof), and (B) after receiving
advice of outside legal counsel, that the failure to participate in such
discussions or negotiations or to furnish such information or approve an
Acquisition Proposal would be inconsistent with the board's fiduciary duties
under applicable law. Target agrees that any non-public information furnished to
a Potential Acquiror will be pursuant to a confidentiality, standstill and
nonsolicitation agreement containing provisions at least as favorable to Target
as the confidentiality, standstill and nonsolicitation provisions of the
Confidentiality Agreement. In the event that Target shall determine to provide
any information as described above, or shall receive any Acquisition Proposal
(or any material amendment to an Acquisition Proposal previously received), it
shall promptly, and in any event within 24 hours, inform Buyer in writing as to
that fact and shall furnish to Buyer the identity of the recipient of such
information to be provided and/or the Potential Acquiror and the terms of such
Acquisition Proposal (or material amendment).
(b) Except as provided in this Section 6.2(b), the board of
directors of Target shall recommend to the Target Stockholders approval of this
Agreement and the Merger. The board of directors of Target shall not (i)
withdraw or modify or propose to withdraw or modify, in any manner adverse to
Buyer, its approval and recommendation of this Agreement and the Merger or (ii)
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal unless, in each case, the board has (x) received a Superior Proposal,
(y) determined in good faith pursuant to Section 6.2(a), that the failure to
take such action would be inconsistent with the board's fiduciary duties under
applicable law and (z) gives at least 72 hours prior written notice to Buyer of
its determination under clause (y) of this Section 6.2(b).
(c) For purposes of this Agreement, "ACQUISITION PROPOSAL"
(i) shall mean any bona fide proposal, whether in writing
or otherwise, made by a third party to:
(x) acquire beneficial ownership (as defined under
Rule 13d-3 of the Exchange Act) of all or a material portion of the business of,
or any material equity interest in, Target or Target Subsidiary pursuant to a
merger, consolidation or other business combination, sale of shares of capital
stock, sale of assets, tender offer or exchange offer or similar transaction
involving Target or Target Subsidiary; or
(y) acquire, lease, exchange, transfer, license or
dispose of (other than in the ordinary course of business), a material portion
of the Target IP Rights.
Each of (x) or (y) above shall include any single or multi-step transaction or
series of related transactions which is structured to permit any transaction
described therein.
(d) The term "SUPERIOR PROPOSAL" means a bona fide Acquisition
Proposal for all of the Target Common Stock (or all or substantially all of the
assets of the Target), made in writing and not initiated, solicited or
encouraged in violation of Section 6.2(a) of this Agreement, on terms which the
board of directors of Target determines in good faith to be more favorable to
Target and the Target Stockholders than the Merger (based on the advice of
Target's financial
31
advisor that the value of the consideration provided for in such proposal is
superior to the value of the consideration provided for in the Merger), for
which financing, to the extent required, is then committed.
(e) Target shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement relating to an
Acquisition Proposal to which it or Target Subsidiary is a party.
6.3 SPECIAL MEETING; BOARD RECOMMENDATION.
(a) In order to obtain stockholder approval of this Agreement,
Target, acting through its board of directors, shall duly call, give notice of,
convene and hold a special meeting of the Target Stockholders for the purpose of
considering and voting on the approval of this Agreement (the "TARGET SPECIAL
MEETING"). The Target Special Meeting shall be held as soon as practicable after
the execution of this Agreement.
(b) As promptly as practicable after the execution of this
Agreement, Target and Buyer shall jointly prepare and Target shall file with the
SEC a preliminary form of the Proxy Statement. As promptly as practicable
following receipt of SEC comments on such preliminary Proxy Statement, Target
and Buyer shall jointly prepare a response to such comments. Upon resolution of
all comments or expiration of any waiting period, Target shall mail the
definitive Proxy Statement to Target Stockholders as of the record date for the
Target Special Meeting. Target shall use all commercially reasonable efforts to
have the preliminary Proxy Statement cleared by the SEC as promptly as
practicable. Buyer and Target shall promptly furnish to each other all
information, and take such other actions (including, without limitation, using
all commercially reasonable efforts to provide any required consents of their
respective independent auditors), as may reasonably be requested in connection
with any action by any of them in connection with the preceding sentences of
this Section 6.3(b).
(c) Subject to Section 6.2(b), the Proxy Statement shall contain
the recommendation of the board of directors of Target in favor of the approval
and adoption of this Agreement.
6.4 ACCESS TO INFORMATION. Except as set forth below in this Section
6.4, from the date of this Agreement until the Effective Time, Target shall
afford to Buyer and its authorized representatives (including counsel and
accountants) full access during normal business hours and upon reasonable notice
to all of its (and Target Subsidiary's) facilities, personnel and operations and
to all of its books and records, shall permit Buyer and its authorized
representatives to conduct inspections as they may reasonably request and shall
instruct its (and Target Subsidiary's) employees to furnish to Buyer and its
authorized representatives such financial and operating data and other
information with respect to its business and assets as Buyer may from time to
time request. All such information shall be considered "Confidential
Information" within the meaning of the Confidentiality Agreement and,
accordingly, shall be governed by the Confidentiality Agreement unless and until
the Merger is completed.
6.5 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and conditions
of this Agreement, the Parties shall use their commercially reasonable efforts
to take, or cause to be
32
taken, all actions and do, or cause to be done, all things necessary, proper or
appropriate under this Agreement and Law to complete and make effective the
transactions contemplated by this Agreement, including, without limitation,
obtaining all necessary third party consents, approvals and waivers.
6.6 PUBLIC ANNOUNCEMENTS. Before issuing any press release or otherwise
making any public statement with respect to the Merger or any of the other
transactions contemplated hereby, Buyer, Merger Sub and Target agree to consult
with each other as to its form and substance, and agree not to issue any such
press release or general communication to employees or make any public statement
prior to obtaining the consent of the other (which shall not be unreasonably
withheld or delayed), except as may be required by applicable Law or by the
rules and regulations or listing agreement with the Nasdaq or Nasdaq SCM or as
may otherwise be required by the Nasdaq, Nasdaq SCM or the SEC.
6.7 NOTIFICATION OF CERTAIN MATTERS. Each of Target and Buyer shall
promptly notify the other party of the occurrence or non-occurrence of any event
the respective occurrence or non-occurrence of which would be likely to cause
any condition to the obligations of the notifying party to effect the Merger not
to be fulfilled. Each of Target and Buyer shall also give prompt notice to the
other of any communication from any Person alleging that the consent of such
Person is or may be required in connection with the Merger or other transactions
contemplated hereby.
6.8 INDEMNIFICATION AND D&O INSURANCE. The certificate of incorporation
and bylaws of the Surviving Corporation shall contain the provisions with
respect to indemnification set forth in the certificate of incorporation and
bylaws of Target, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who, immediately
prior to the Effective Time, were directors and officers of Target, unless such
modification is required by law. Prior to the Effective Time, Target shall take
all necessary steps (other than payment) to acquire a directors' and officers'
liability insurance policy for the benefit of Target's directors and officers
with respect to claims arising from facts or events that occurred prior to the
Effective Time, in each case, which policy shall have a term of at least one
year following the Effective Time, with maximum liability coverage of not less
than $1,000,000, a deductible of not more than $100,000 and other terms that are
no less favorable than those under Target's existing directors' and officers'
liability insurance policy. Such policy will be paid for by Target after the
Effective Time.
6.9 EXPENSES. Buyer and Merger Sub, on one hand, and Target, on other
hand, shall bear their respective expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement, including,
without limitation, in connection with the negotiation and preparation of this
Agreement and the completion of the Merger.
6.10 VOTING AGREEMENTS. Concurrent with the execution hereof, Target
shall deliver to Buyer Voting Agreements executed by Tail Wind and each
executive officer and director of Target as of the date hereof, each
substantially in the forms of Exhibit A attached hereto.
6.11 SEC FILINGS. Target will deliver promptly to Buyer true and
complete copies of
33
each report, registration statement or statement mailed by it to its
securityholders generally or filed by it with the SEC, in each case subsequent
to the date hereof and prior to the Effective Time. As of their respective
dates, such reports, including the consolidated financial statements included
therein, and statements (excluding any information therein provided by Buyer or
Merger Sub, as to which Target makes no representation) will not contain any
untrue statement of a material fact 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 are made, not misleading and will comply in all
material respects with all applicable requirements of law. Each of the
consolidated financial statements (including, in each case, any related notes
thereto) contained in such reports, (x) shall comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, (y) shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (z) shall fairly present the consolidated
financial position of Target and its Subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal year-end adjustments.
6.12 STOCKHOLDER LITIGATION. Target and Buyer agree that in connection
with any third party or derivative litigation which may be brought against the
Target or its directors relating to the transactions contemplated hereby, Target
will keep Buyer, and any counsel which Buyer may retain, informed of the course
of such litigation, to the extent Buyer is not otherwise a party thereto, and
Target agrees that it will consult with Buyer prior to entering into settlement
or compromise of any such stockholder litigation; provided that no such
settlement or compromise will be entered into without Buyer's prior written
consent (which consent or denial of consent shall not be unreasonably delayed).
6.13 CLOSING BALANCE SHEET. Not more than three days and not less than
one day prior to the Closing Date, Target will deliver to Buyer a balance sheet
of Target (as a stand-alone company) which shall include line items for Working
Capital and Total Assets, prepared in accordance with GAAP (except for the
modifications thereto specified in the definition of Working Capital), as of a
date not more than three days and not less than one day prior to the Closing
Date (the "CLOSING BALANCE SHEET"). The Closing Balance Sheet will be certified
as (a) prepared in accordance with GAAP (except for the modifications thereto
specified in the definition of Working Capital) and (b) complete and accurate in
all material respects by the Senior Vice President, Finance and Chief Executive
Officer of Target. On the Closing Date, Target will provide a schedule,
certified as complete and accurate in all material respects by the Senior Vice
President, Finance and Chief Executive Officer of Target, of all transactions
which would reasonably be expected to have an impact on Working Capital or Total
Assets from the date of the Closing Balance Sheet until the Effective Time.
Target shall provide Buyer with access to the books and records of the Target
related to the Closing Balance Sheet at any time requested by Buyer.
6.14 RESIGNATIONS. Prior to the Effective Time, Target shall deliver to
Buyer at no cost the resignations of all of the directors and officers of Target
and Target Subsidiary, effective as of the Effective Time.
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6.15 OPTION EXERCISE. Promptly after the date hereof, Target will
prepare and mail to all holders of Target Options a conditional exercise notice,
in form reasonably satisfactory to Buyer, together with a Proxy Statement which
will (1) notify the optionholders of the acceleration of their options and (2)
permit the optionholders to exercise their options conditioned upon the Closing
of the Merger. Target Options which have not been exercised (or conditionally
exercised) prior to the Effective Time will be terminated in accordance with the
Target Stock Plans.
6.16 TAX MATTERS.
(a) Refunds. Any Tax refunds of Target that are received by
Buyer or Target and any amounts credited against Tax of Target to which Buyer or
Target become entitled, that relate to Tax periods or portions thereof ending on
or before the Closing Date shall be for the account of Buyer, and Buyer shall
not pay to Target Stockholders any amount attributable to such refund or credit
amount.
(b) FIRPTA Certificate. At the Closing, Target shall deliver to
Buyer a statement in accordance with Treasury Regulations Section 1.1445-2(c)(3)
and 1.897-2(h) certifying that Target is not, and has not been, a "United States
real property holding corporation" for purposes of Sections 897 and 1445 of the
Code. In addition, Target shall have delivered to Buyer on the Closing Date a
copy of the notification to the IRS, prepared in accordance with Treasury
Regulations Section 1.897-2(h)(2), of delivery of the statement referred to in
the preceding sentence, signed by a responsible corporate officer of Target.
Target acknowledges that Buyer may cause Target to file such notification with
the IRS on or after the Closing Date.
(c) Carrybacks. The parties agree and acknowledge that any net
operating losses or similar Tax attribute of Target is an asset of Target that
(subject to any applicable limitations imposed by law) is being acquired by
Buyer pursuant to the Merger, and that prior to the Effective Time Target shall
not elect to carryback any such Tax attributes to prior years of Target or
otherwise act so as to limit the ability of Buyer to use such attributes
subsequent to the Merger (subject to any applicable limitations imposed by Law).
6.17 EMPLOYEE BENEFIT PLANS. As soon as administratively practicable
after the Closing Date, Buyer shall provide that employees of Target who become
employees of Buyer or one of its Subsidiaries shall be entitled to participate
in the Employee Benefit Plans of Buyer. To the extent permitted under the
Buyer's Employee Benefit Plans, Buyer shall cause Buyer's Employee Benefit Plans
to take into account for purposes of eligibility and vesting thereunder the
service of such employees with Target to the same extent such service was
credited for such purposes by Target under comparable benefit plans.
6.18 TREATMENT OF TARGET 401(k) PLAN. Effective no later than the day
immediately preceding the Closing Date, Target shall terminate any and all
Employee Benefit Plans intended to include a cash or deferred arrangement that
is intended to qualify under Code Section 401(a) (the "401(k) PLANS"). Target
shall provide Buyer with evidence that such 401(k) Plans have been terminated
(effective no later than the day immediately preceding the Closing Date)
pursuant to resolutions of Target's board of directors. The form and substance
of such
35
resolutions shall be subject to the reasonable review and approval of Buyer,
such approval not to be unreasonably withheld. Target also shall take such other
actions in furtherance of terminating such 401(k) Plans as Buyer may reasonably
require.
6.19 DELISTING. Buyer, Merger Sub and Target agree to cooperate with
each other in taking, or causing to be taken, all actions necessary to delist
the Target Common Stock from the Nasdaq SCM and to terminate registration under
the Exchange Act, provided that such delisting and termination shall not be
effective until after the Effective Time.
6.20 NON-EMPLOYEE SOLICITATION. In the event this Agreement is
terminated pursuant to Article VIII, for a period from the date of such
termination until one (1) year from the date of such termination, Buyer shall
not without Target's prior written consent, directly solicit the employment of
any officer or senior manager of Target who first became known to Buyer during
its evaluation of a possible transaction with Target; provided, however that
this Section 6.21 shall not prohibit or prevent Buyer from general advertising
or other broad non-targeted forms of solicitation or from hiring any officer or
senior manager employed by Target who initiates contact with Buyer in the
absence of targeted solicitation.
6.21 COLLECTION OF THE RECEIVABLES. From and after the Effective Time,
the Surviving Corporation shall use commercially reasonable efforts to collect
accounts receivable of Target reflected on the Closing Balance Sheet prior to
the Reconciliation Date and neither Buyer nor the Surviving Corporation shall
take any actions that are reasonably likely to result in such accounts
receivable not being collected prior to the Reconciliation Date. Provided that
he is employed by the Surviving Corporation, Xxxxxx Xxxxx shall oversee the
accounts receivable collection process on behalf of the Surviving Corporation.
6.22 WARRANTS. Target shall cause all of the outstanding warrants,
options or other instruments which entitle any person to acquire any securities
of the Target to be terminated prior to the Effective Time.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS TO CLOSE
7.1 CONDITIONS TO THE OBLIGATION OF TARGET. The obligation of Target to
complete the Merger is subject to the fulfillment of each of the following
conditions, any one or more of which may be waived in writing by Target:
(a) The representations and warranties of Buyer and Merger Sub
contained in this Agreement (without regard to any materiality exceptions or
provisions set forth therein) shall be true and correct in all material respects
as of the Effective Time with the same force and effect as if made at the
Effective Time, except: (i) for any changes specifically permitted by this
Agreement and (ii) that the accuracy of any representations and warranties which
by their terms speak as of the date of this Agreement or some other date shall
be determined as of that date.
(b) Buyer and Merger Sub shall have performed, in all material
respects, all the covenants required by this Agreement to be performed by them
on or before the Closing.
36
(c) The approval of the adoption of this Agreement by a majority
of the outstanding shares of Target Common Stock and the shares of Target Common
Stock issuable upon conversion of Target Preferred Stock, voting together as a
single class, shall have been obtained at the Target Special Meeting or any
adjournment or postponement thereof.
(d) Buyer and Merger Sub shall have furnished an officer
certificate certifying to compliance with the conditions set forth in Sections
7.1(a) and (b).
(e) No Law shall be pending, enacted, entered, promulgated,
enforced or threatened by any Governmental Entity which prohibits or would
prohibit the completion of the Merger or otherwise makes or would make it
illegal, nor will any Governmental Entity have instituted or threatened to
institute any Action seeking to enjoin, restrain or prohibit completion of the
Merger.
7.2 CONDITIONS TO THE OBLIGATIONS OF BUYER AND MERGER SUB. The
obligations of Buyer and Merger Sub to complete the Merger are subject to the
fulfillment of each of the following conditions, any one or more of which may be
waived by Buyer:
(a) The representations and warranties of Target contained in
this Agreement (without regard to any materiality exceptions or provisions set
forth therein and as qualified by the Target Disclosure Statement) shall be true
and correct in all material respects as of the Effective Time with the same
force and effect as if made at the Effective Time, except: (i) for changes
specifically permitted by this Agreement, and (ii) that the accuracy of the
representations and warranties which, by their terms, speak as of the date of
this Agreement or some other date shall be determined as of that date.
(b) Target shall have performed, in all material respects, all
the covenants required by this Agreement to be performed by it on or before the
Closing.
(c) The approval of the adoption of this Agreement by a majority
of the outstanding shares of Target Common Stock and the shares of Target Common
Stock issuable upon conversion of Target Preferred Stock, voting together as a
single class, shall have been obtained at the Target Special Meeting or any
adjournment or postponement thereof.
(d) No Target Material Adverse Effect shall have occurred since
the date of this Agreement.
(e) Target shall have furnished a certificate, signed by the
Chief Executive Officer, certifying compliance with the conditions set forth in
Sections 7.2(a), (b) and (c) of this Agreement.
(f) All consents, approvals, notifications, disclosures, filings
and registrations listed or required to be listed in Schedule 4.3 of the Target
Disclosure Statement shall have been obtained or made.
(g) No Law shall be pending, enacted, entered, promulgated,
enforced or threatened by any Governmental Entity which prohibits or would
prohibit the completion of the Merger or otherwise makes or would make it
illegal, nor shall any Governmental Entity have
37
instituted or threatened to institute any Action seeking to enjoin, restrain or
prohibit completion of the Merger. No Action shall be pending or threatened
relating in any way to this Agreement or the transactions contemplated herein or
seeking to prohibit or limit, in any respect, Buyer's ability to vote or
otherwise exercise any rights with respect to any of the shares of Target Common
Stock or which could materially and adversely affect the business or prospects
of Target or the right of Buyer, Target or any other Buyer Subsidiary to own the
assets or operate the business of Target, or realize the benefits of this
Agreement.
(h) Buyer shall have received a written opinion from Xxxxxx
Xxxxxxxxxx & Sutcliffe LLP, counsel to Target dated the Closing Date, containing
the conclusions set forth on Exhibit D attached hereto.
(i) Each of the Key Employees shall remain continuously employed
by Target on substantially the same terms and with substantially the same
responsibilities as on the date hereof and the Target shall have no knowledge
that any of the Key Employees has any intention to terminate their employment
with the Surviving Corporation.
(j) Immediately prior to the Effective Time, Target will have
(i) Working Capital of not less than $850,000, (ii) Total Assets of not less
than $3.5 Million, and (iii) cash of not less than $600,000 (except that in the
event that Target has not purchased servers satisfactory to Buyer for cash prior
to the Effective Time, $850,000).
(k) Not more than 5% of the issued and outstanding shares of
Target Common Stock shall be Dissenting Shares.
(l) Xxxxxxx Xxxxxxx will enter into an agreement with the
Surviving Corporation amending or terminating his existing commission
arrangement with the Target on terms satisfactory to Buyer.
(m) There shall have been no indication that Tail Wind will not
accept the Preferred Settlement Closing Payment in full satisfaction of all
rights, claims and obligations of the Target, Surviving Corporation of Buyer to
Tail Wind (other than Tail Wind's rights contemplated under the Preferred
Settlement Agreement and the attachments thereto), and Tail Wind shall have
taken no action to exercise any right in may have as a holder of Target
Preferred Stock or under any contract or arrangement with Target, other than as
permitted in the Preferred Settlement Agreement.
ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned any time prior to the Effective Time, whether before or after approval
by the Target Stockholders:
(a) by mutual written consent of the parties duly authorized by
the boards of directors of Target and Merger Sub;
38
(b) by either Buyer or Target if the Merger shall not have been
consummated on or before December 31, 2002 (the "OUTSIDE DATE"), which date may
be extended by mutual consent of the parties hereto; provided, however, that the
party seeking to terminate this Agreement pursuant to this clause 8.1(b) shall
not have breached in any material respect its obligations under this Agreement
in any manner that shall have proximately contributed to the failure to
consummate the Merger on or before such date;
(c) by either Buyer or Target if (i) any law shall have been
enacted, entered or promulgated prohibiting the consummation of the Merger
substantially on the terms contemplated hereby or (ii) a court of competent
jurisdiction or other Government Entity shall have issued an order, decree,
ruling or injunction, or taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger
substantially on the terms contemplated hereby, and such order, decree, ruling,
injunction or other action shall have become final; provided, that the party
seeking to terminate this Agreement pursuant to this Section 8.1(c) shall have
used its reasonable commercial efforts to remove such order, decree, ruling or
injunction; or
(d) by either Buyer or Target if approval of the adoption of
this Agreement by a majority of the outstanding shares of Target Common Stock
and the shares of Target Common Stock issuable upon conversion of Target
Preferred Stock, voting together as a single class, at the Target Special
Meeting or any adjournment or postponement thereof is not obtained at the Target
Special Meeting (a "TARGET NEGATIVE VOTE").
8.2 TERMINATION BY BUYER. This Agreement may be terminated and the
Merger may be abandoned any time prior to the Effective Time, whether before or
after approval by the Target Stockholders, by Buyer, if:
(a) Target shall have failed to comply in any material respect
with any of the covenants or agreements contained in any Section of this
Agreement to be complied with or performed by Target at or prior to such date of
termination; provided, however, that if such failure or failures are capable of
being cured prior to the Effective Time, such failure or failures shall not have
been cured within thirty (30) days of delivery to Target of written notice of
such failure or failures;
(b) there exists a breach or breaches of any representation or
warranty of Target contained in this Agreement such that the closing condition
set forth in Section 7.2(a) would not be satisfied; provided, however, that if
such breach or breaches are capable of being cured prior to the Effective Time,
such breach or breaches shall not have been cured within thirty (30) days of
delivery to Target of written notice of such breach or breaches; or
(c) (i) the board of directors of Target fails to recommend the
approval of this Agreement to the Target Stockholders, or withdraws, amends or
modifies in a manner adverse to Buyer its recommendation to the Target
Stockholders for approval of this Agreement, (ii) a tender offer (to which Rule
14e-2(a) applies) for any of the outstanding shares of capital stock of Target
is commenced prior to the Target Special Meeting, and within the time required
by Rule 14e-2(a) under the Exchange Act the board of directors of Target fails
to recommend against acceptance of such tender offer, or takes no position with
respect to such tender offer, or states
39
its inability to take a position with respect to such tender offer, (iii) Target
or its board of directors takes any position (including making no recommendation
or stating an inability to make a recommendation) with respect to any
Acquisition Proposal other than a recommendation to reject such Acquisition
Proposal, (iv) the board of directors of Target resolves (which resolution shall
not modify, limit or impair Target's obligations under this Agreement) to
accept, accepts or recommends to the Target Stockholders a Superior Proposal, or
(v) the board of directors of Target resolves to take any of the foregoing
actions.
8.3 TERMINATION BY TARGET. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
approval by the Target Stockholders, by action of the board of directors of
Target, if:
(a) Buyer or Merger Sub shall have failed to comply in any
material respect with any of the covenants or agreements contained in any
Section of this Agreement to be complied with or performed by Buyer or Merger
Sub at or prior to such date of termination; provided, however, that if such
failure or failures are capable of being cured prior to the Effective Time, such
failure or failures shall not have been cured within thirty (30) days of
delivery to Buyer of written notice of such failure or failures; or
(b) there exists a breach or breaches of any representation or
warranty of Buyer or Merger Sub contained in this Agreement such that the
Closing condition set forth in Section 7.1(a) would not be satisfied; provided,
however, that if such breach or breaches are capable of being cured prior to the
Effective Time, such breach or breaches shall not be cured within thirty (30)
days of delivery to Buyer of written notice of such breach or breaches.
(c) In accordance with Section 6.2(b), the board of directors of
Target accepts or recommends to the Target Stockholders a Superior Proposal or
resolves to do so, provided that Target has given written notice of such
Superior Proposal as required under Section 6.2(b) and Buyer has not made a
proposal which is reasonably equivalent from the perspective of the Target
Stockholders within seventy-two (72) hours of such written notice.
8.4 PROCEDURE FOR TERMINATION. In order to terminate this Agreement
pursuant to this Article VIII, a Party shall provide written notice thereof to
the other Parties.
8.5 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to
this Article VIII, no Party (or any of its directors or officers) shall have any
liability or further obligation under this Agreement to any other Party, except
as provided in this Section 8.5 and except that nothing herein shall relieve any
Party from liability for breach of this Agreement.
(b) If this Agreement is terminated by Buyer (i) pursuant to
Section 8.2(c), or (ii) pursuant to Section 8.2(a) as a result of a breach by
Target of a covenant contained in Section 6.2 or by Target pursuant to Section
8.3(c), then within two business days of delivery by Buyer of the Buyer Expense
Notice (as defined below) Target shall pay Buyer a termination fee equal to
$400,000 plus all of the expenses incurred by Buyer in connection with this
Agreement and the transactions contemplated hereby (collectively, the "BUYER
TRANSACTION EXPENSES") as set forth in a written notice to the Target (the
"BUYER EXPENSE NOTICE"). If this Agreement is
40
terminated by Buyer pursuant to Section 8.2(a) as a result of a failure to
satisfy the closing condition set forth in Section 7.2(j), and the failure is in
an amount of $150,000 or more, then within two business days of delivery by
Buyer of the Buyer Expense Notice Target shall pay Buyer the Buyer Transaction
Expenses as set forth in a written notice to the Target. If this Agreement is
terminated by Buyer or Target pursuant to Section 8.1(d) as a result of a Target
Negative Vote, then within two business days of delivery by Buyer of the Buyer
Expense Notice Target shall pay Buyer its Buyer Transaction Expenses as set
forth in a Buyer Expense Notice which shall not exceed $500,000; provided that
if, within 6 months of the date of termination of this Agreement pursuant to
Section 8.1(d) as a result of a Target Negative Vote, any Person acquires a
majority of the voting stock of the Target, then Target shall pay to Buyer a
termination fee equal to $400,000 less any termination fee previously paid upon
closing of such transaction.
(c) Any fee payable under this Section 8.5 will be payable by
wire transfer of immediately available funds to an account specified by the
receiving party.
ARTICLE IX
MISCELLANEOUS
9.1 NONSURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. None of
the representations, warranties or covenants in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.1 shall not limit any covenant or agreement of the Parties
which by its terms contemplates performance after the Effective Time.
9.2 AMENDMENT AND MODIFICATION. This Agreement may only be amended by a
written agreement signed by all the Parties whether before or after approval by
the Target Stockholders, by mutual written consent of the parties duly
authorized by the boards of directors of Target and Merger Sub.
9.3 FURTHER ASSURANCES. Each Party shall execute and cause to be
delivered to each other Party such instruments and other documents, and shall
take such other actions, as any such other Party may reasonably request (whether
before, at or after the Closing) for the purpose of carrying out or evidencing
any of the transactions contemplated by this Agreement.
9.4 CONFIDENTIALITY. The Parties acknowledge that Buyer and Target have
entered into the Confidentiality Agreement, and that that agreement will survive
the termination of this Agreement and the completion of the Merger.
9.5 WAIVER.
(a) No failure on the part of any Party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver or such power, right, privilege or remedy. No single
or partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
41
(b) No Party shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
9.6 NOTICES. All notices and other communications given under this
Agreement and the agreements, the forms of which are exhibits to this Agreement,
shall be in writing and be delivered personally by overnight courier or similar
means or sent by facsimile with confirmation of transmission, to the Parties at
the addresses specified below or to such other address for a Party as shall be
specified by like notice. Any such notice shall be effective upon receipt if
personally delivered or on the next business day following transmittal if sent
by confirmed facsimile. Notices shall be delivered as follows:
if to Target: 0000 Xxxx Xxxxxxxx Xxxx
Xxxxx 000
Xxxx Xxxx, XX 00000
Phone: (000) 000-0000
Attn: Chief Executive Officer
Fax: (000) 000-0000
with a copy (not constituting notice) to: Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
if to Buyer or Merger Sub, to: 0000 Xxxxx 00xx Xxxxxx
X.X. Xxx 00000
Xxxxx, XX 00000
Attn: Chief Executive Officer
Fax: (000) 000-0000
with a copy (not constituting notice) to: Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
9.7 ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement nor
any right, interest or obligation set forth in this Agreement may be assigned or
delegated by any Party without the prior written consent of the other Parties.
This Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns. This Agreement is not
intended to confer any rights or remedies upon any Person other than the
Parties.
9.8 GOVERNING LAW. This Agreement will be governed by the Laws of the
State of
42
Delaware without reference to its principles of conflicts of laws.
9.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.10 SEVERABILITY. If any one or more of the provisions in this
Agreement is finally determined to be invalid, illegal or unenforceable in any
respect, it shall be adjusted rather than voided, if possible, to effect the
original intent of the Parties as reflected in this Agreement, as closely as
possible. In any event, the validity, legality and enforceability of the
remaining provisions of this Agreement shall be unaffected.
9.11 ENTIRE AGREEMENT. This Agreement (including the agreements, the
forms of which are exhibits to this Agreement) and the Confidentiality Agreement
embody the entire agreement and understanding of the Parties with respect to
their subject matter. There are no representations, warranties or covenants
other than those expressly set forth or referred to herein and therein.
9.12 RULES OF CONSTRUCTION. Each Party has been represented by counsel
in the preparation and negotiation of this Agreement, and therefore waives any
rule of construction that would construe ambiguities against a Party drafting
this Agreement or any portion of this Agreement.
9.13 JURISDICTION AND SERVICE OF PROCESS. Any Action seeking to enforce
any provision of, or based on any right arising out of, this Agreement shall be
brought against any of the Parties (and shall only be brought) in the courts of
the State of California, County of San Francisco, or, if it or he has or can
acquire jurisdiction there, in the United States District Court for the Northern
District of California, and each Party consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such Action and waives
any objection to venue laid therein. Process in any Action referred to in the
preceding sentence may be served on any Party anywhere in the world.
9.14 WAIVER OF JURY TRIAL. THE PARTIES HEREBY IRREVOCABLY WAIVE THE
RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO THIS
AGREEMENT OR THE ENFORCEMENT OF ANY PROVISION OF THIS AGREEMENT.
43
IN WITNESS WHEREOF, the Parties have signed this Agreement as of the
date that appears in the first paragraph of this Agreement.
INFOUSA INC.
By /s/ Xxxxx Xxxxx
----------------------
Xxxxx Xxxxx, CEO
KAPALUA ACQUISITION CORP.
By /s/ Xxxxx Xxxxx
----------------------
Xxxxx Xxxxx, President
CLICKACTION INC.
By /s/ Xxxxxx Xxxxx
----------------------
Xxxxxx Xxxxx, CEO
44
EXHIBIT LIST
A-1 Form of Officer and Director Voting Agreement
A-2 Form of Tail Wind Voting Agreement
B Form of Settlement Agreement
C Form of Escrow Agreement
X Xxxxxx Opinion
