EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MICRON ELECTRONICS, INC.,
IMAGINE ACQUISITION CORPORATION
AND
INTERLAND, INC.
MARCH 22, 2001
CONFIDENTIAL
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ARTICLE I THE MERGER.....................................................................................1
1.1 The Merger; Effective Time.....................................................................1
1.2 Closing........................................................................................2
1.3 Effect of the Merger...........................................................................2
1.4 Certificate of Incorporation; Bylaws; Parent Name Change; Offices..............................2
1.5 Directors and Officers of Surviving Corporation; Directors of Parent...........................2
1.6 Effect on Capital Stock........................................................................3
1.7 Exchange of Certificates.......................................................................6
1.8 No Further Ownership Rights in Company Common Stock............................................9
1.9 Restricted Stock...............................................................................9
1.10 Tax Consequences..............................................................................10
1.11 Taking of Necessary Action; Further Action....................................................10
1.12 Payments of Excess Cash or Net Proceeds by Parent.............................................10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY.....................................................16
2.1 Organization; Subsidiaries....................................................................16
2.2 Company Capitalization........................................................................17
2.3 Obligations With Respect to Capital Stock.....................................................19
2.4 Authority; Non-Contravention..................................................................20
2.5 SEC Filings; Company Financial Statements.....................................................21
2.6 Absence of Certain Changes or Events..........................................................22
2.7 Taxes.........................................................................................22
2.8 Title to Properties...........................................................................24
2.9 Intellectual Property.........................................................................24
2.10 Compliance with Laws..........................................................................28
2.11 Litigation....................................................................................28
2.12 Employee Benefit Plans........................................................................29
2.13 Environmental Matters.........................................................................33
2.14 Certain Agreements............................................................................33
2.15 Brokers' and Finders' Fees....................................................................35
2.16 Insurance.....................................................................................35
2.17 Disclosure....................................................................................35
2.18 Board Approval................................................................................36
2.19 Fairness Opinion..............................................................................36
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2.20 Takeover Statutes and Rights Agreement Not Applicable.........................................36
2.21 Affiliates....................................................................................36
2.22 Supplier and Customer Relationships...........................................................36
2.23 Product and Service Quality...................................................................36
2.24 Disruptions...................................................................................37
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......................................37
3.1 Organization of Parent, Merger Sub and other Subsidiaries.....................................38
3.2 Parent and Merger Sub Capitalization..........................................................38
3.3 Obligations With Respect to Capital Stock.....................................................40
3.4 Authority; Non-Contravention..................................................................41
3.5 SEC Filings; Parent Financial Statements......................................................42
3.6 Absence of Certain Changes or Events..........................................................43
3.7 Taxes.........................................................................................43
3.8 Title to Properties...........................................................................45
3.9 Intellectual Property.........................................................................45
3.10 Compliance with Laws..........................................................................47
3.11 Litigation....................................................................................48
3.12 Employee Benefit Plans........................................................................48
3.13 Environmental Matters.........................................................................52
3.14 Certain Agreements............................................................................52
3.15 Brokers' and Finders' Fees....................................................................53
3.16 Disclosure....................................................................................54
3.17 Board Approval................................................................................54
3.18 Fairness Opinion..............................................................................54
3.19 Insurance.....................................................................................54
3.20 Supplier and Customer Relationships...........................................................55
3.21 Product and Service Quality...................................................................55
3.22 Disruptions...................................................................................55
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME...........................................................56
4.1 Conduct of Business by Company................................................................56
4.2 Conduct of Business by Parent.................................................................58
ARTICLE V ADDITIONAL AGREEMENTS.........................................................................61
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5.1 Proxy Statement/Prospectus; Registration Statement; Antitrust and Other Filings...............61
5.2 Meeting of Company Shareholders...............................................................62
5.3 Meeting of Parent Shareholders................................................................64
5.4 No Solicitation...............................................................................65
5.5 Confidentiality; Access to Information........................................................67
5.6 Public Disclosure.............................................................................67
5.7 Reasonable Efforts; Notification..............................................................67
5.8 Third Party Consents..........................................................................68
5.9 Stock Options; ESPP; Warrants.................................................................69
5.10 Form S-8......................................................................................70
5.11 Indemnification...............................................................................70
5.12 Parent Shareholder Approval Matters...........................................................71
5.13 Nasdaq Listing................................................................................71
5.14 Letters of Accountants........................................................................71
5.15 Takeover Statutes.............................................................................71
5.16 Certain Employee Benefits.....................................................................71
5.17 Tax Matters...................................................................................72
5.18 Bridge Loan Credit Facility...................................................................72
5.19 Parent Ownership of Company Capital Stock.....................................................73
5.20 Anti-takeover Measures........................................................................73
5.21 Registration Rights...........................................................................73
ARTICLE VI CONDITIONS TO THE MERGER......................................................................73
6.1 Conditions to Obligations of Each Party to Effect the Merger..................................73
6.2 Additional Conditions to Obligations of Company...............................................74
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.............................75
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.............................................................77
7.1 Termination...................................................................................77
7.2 Notice of Termination; Effect of Termination..................................................79
7.3 Fees and Expenses.............................................................................79
7.4 Amendment.....................................................................................81
7.5 Extension; Waiver.............................................................................81
ARTICLE VIII GENERAL PROVISIONS............................................................................81
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8.1 Non-Survival of Representations and Warranties................................................81
8.2 Notices.......................................................................................82
8.3 Interpretation; Certain Defined Terms.........................................................83
8.4 Counterparts..................................................................................84
8.5 Entire Agreement; Third Party Beneficiaries...................................................84
8.6 Severability..................................................................................84
8.7 Other Remedies; Specific Performance..........................................................85
8.8 Governing Law.................................................................................85
8.9 Rules of Construction.........................................................................85
8.10 Assignment....................................................................................85
8.11 Waiver Of Jury Trial..........................................................................85
INDEX OF EXHIBITS
Exhibit A The Voting Agreement
Schedule 1.6(a)(ii) Exchange Ratio Adjustment Schedule
Schedule 1.6(b) NAC Reserve Estimate
Exhibit 5.18A Bridge Loan and Security Agreement
Exhibit 5.18B Form of Promissory Note
Exhibit 5.20A Amended Registration Rights Agreement
Exhibit 5.20B New Registration Rights Agreement
Exhibit 6.2(g)(1) MTI Shareholder Agreement
Exhibit 6.2(g)(2) Shareholder Agreement
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of March 22, 2001, among Micron Electronics, Inc., a Minnesota
corporation ("PARENT"), Imagine Acquisition Corporation, a Delaware corporation
and a wholly owned first-tier subsidiary of Parent ("MERGER SUB"), and
Interland, Inc., a Georgia corporation ("COMPANY").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and Company
have approved this Agreement, and declared advisable the merger of Merger Sub
with and into Company (the "MERGER") upon the terms and subject to the
conditions of this Agreement and in accordance with the General Corporation Law
of the State of Delaware ("DELAWARE LAW") and the applicable provisions of the
Georgia Business Corporation Code ("GEORGIA LAW"). Upon the effectiveness of the
Merger, all the outstanding Common Stock and Common Stock equivalents of Company
will be converted into Common Stock and Common Stock equivalents of Parent, all
in the manner and on the basis determined herein.
B. For United States federal income tax purposes, the Merger is
intended to qualify as a "reorganization" pursuant to the provisions of Section
368 of the Internal Revenue Code of 1986, as amended (the "CODE"). For
accounting purposes, the Merger is intended to be accounted for as a "purchase"
under United States generally accepted accounting principles ("GAAP").
C. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
Xxx Xxxxxxxxxx and certain other affiliates of Company, will enter into, pro
rata with respect to that number of shares of Common Stock of Company as will in
aggregate represent 38% of the outstanding shares of Company Common Stock as of
the date of the Company shareholder meeting to approve the Merger, and Micron
Technology, Inc., a Delaware corporation ("MTI"), the majority stockholder of
Parent, will enter into, with respect to all of its shares of Common Stock of
Company, a Voting Agreement in the form of EXHIBIT A (the "VOTING AGREEMENT").
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1. THE MERGER; EFFECTIVE TIME. A Certificate of Merger containing only
the information required by Section 251(d) of the Delaware Law (the "DELAWARE
CERTIFICATE OF MERGER") will be filed with the Secretary of State of the State
of Delaware as soon as practicable after the Closing (as defined in Section 1.2
below). Articles of Merger containing only the information required by Section
14-2-1105 of the Georgia Law (the "GEORGIA ARTICLES OF MERGER") will be filed
with the Secretary of State of the State of Georgia as soon as practicable after
the Closing (as defined in Section 1.2 below). The effective time of the Merger
("EFFECTIVE
TIME") will occur upon the filing of both the Delaware Certificate of Merger
with the Delaware Secretary of State and the Georgia Articles of Merger with the
Georgia Secretary of State, or upon such other date as the parties hereto may
mutually agree. Subject to the terms and conditions of this Agreement, at the
Effective Time, Merger Sub will be merged with and into Company in a statutory
merger pursuant to this Agreement and in accordance with applicable provisions
of Delaware Law and Georgia Law, the separate corporate existence of Merger Sub
shall cease, and Company shall continue as the surviving corporation of the
Merger (the "SURVIVING CORPORATION").
1.2 CLOSING. The closing of the Merger (the "CLOSING") shall take place
at the offices of Fenwick & West LLP, Two Palo Alto Square, Palo Alto,
California, at a time and date to be specified by the parties, which shall be no
later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "CLOSING DATE").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law and Georgia Law. Without limiting the generality of the foregoing,
at the Effective Time, the Surviving Corporation shall possess all the property,
rights, privileges, powers and franchises of Company and Merger Sub, and shall
be subject to all debts, liabilities and duties of Company and Merger Sub.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS; PARENT NAME CHANGE; OFFICES.
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation.
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
(c) At the Effective Time, the Articles of Incorporation of Parent
shall be amended to change the name of Parent to "Interland, Inc."
(d) For a period of at least eighteen months after the Effective
Time, the executive offices of the Parent shall be based in Atlanta, Georgia.
1.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION; DIRECTORS OF
PARENT. The initial directors of the Surviving Corporation shall be the
directors of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly elected or appointed and qualified. The initial
officers of the Surviving Corporation shall be the officers of Company
immediately prior to the Effective Time, until their respective successors are
duly appointed. Parent shall submit for shareholder approval at the Parent
Shareholder Meeting:
(a) a proposal to increase the size of Parent's Board of Directors
from five to eight and to amend Parent's Bylaws (the "PARENT BYLAW AMENDMENT")
to (i) provide that all
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directors shall hold office for a period of not less than two years after the
Effective Time, (ii) permit the removal of directors only for cause during such
two year period, and (iii) effective after the expiration of such initial two
year term, change the term of all directors to an indefinite term and permit
removal with or without cause, and (iv) authorize the Board of Directors to
decrease the size of the Board of Directors; and
(b) a proposal (the "PARENT APPOINTMENT CONFIRMATION") to elect
three individuals to fill the newly created director positions, two of whom
shall be selected by Company and one of whom shall be selected jointly by Parent
and Company (collectively, such three nominees are the "NEW DIRECTORS").
One of the New Directors designated by Company shall agree in
writing as of Closing to resign in the event that the Company Parties to the
Shareholder Agreement (as defined below) collectively sell or transfer (other
than to family members or trusts for the benefit thereof) in excess of 20% of
the aggregate amount of Parent stock they beneficially own immediately after the
Effective Time or in the event that after the Effective Time Parent issues in
one or more acquisitions in excess of an aggregate of 20% of the aggregate
amount of shares of Parent Common Stock outstanding immediately following the
Effective Time.
1.6 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, Company or the holders of any of the following
securities:
(a) CONVERSION OF COMPANY COMMON STOCK; EXCHANGE RATIO;
ADJUSTMENT.
(i) Subject to Section 1.6(a)(ii) and Section 1.6(f), each
share of common stock, no par value per share, of Company ("COMPANY COMMON
STOCK") issued and outstanding immediately prior to the Effective Time, other
than any shares of Company Common Stock to be canceled pursuant to Section
1.6(c), will be canceled and extinguished and automatically converted into the
right to receive 0.861 (the "EXCHANGE RATIO") shares of common stock, par value
$0.01 per share, of Parent ("PARENT COMMON STOCK") upon surrender of the
certificate representing such share of Company Common Stock in the manner
provided in Section 1.7.
(ii) In the event that Parent's cash and Cash Equivalents (as
defined below) at Closing (after deducting the amount of the NAC Reserve (as
defined below)) ("NET AVAILABLE CASH") are collectively less than an amount
equal to (x) two hundred million dollars ($200,000,000.00) LESS (y) the
Aggregate Bridge Loan Amount (as defined in Section 5.18) ("NET AVAILABLE CASH
MINIMUM"), then the Exchange Ratio shall be adjusted as provided in SCHEDULE
1.6(a)(II).
(iii) No fraction of a share of Parent Common Stock will be
issued by virtue of the Merger, but in lieu thereof, a cash payment shall be
made pursuant to Section 1.7(e).
(iv) Unless otherwise stated all references in this Agreement
to Company Common Stock shall be deemed to include the associated preferred
share purchase
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rights ("RIGHTS") issued pursuant to the Preferred Share Rights Agreement dated
as of July 12, 2000 (the "RIGHTS AGREEMENT") between the Company and SunTrust
Bank as Rights Agent.
(v) As used herein, the term "CASH EQUIVALENTS" shall mean
all investments by Parent in cash legal tender of the United States and in any
one or more of the following: (A) marketable obligations issued or guaranteed by
the United States of America or by any agency of the United States of America,
and maturing not later than 90 days from the date of acquisition thereof, (B)
commercial paper that has the highest credit rating by Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., and that matures not later than
90 days from the date of acquisition thereof and (C) time deposits maturing not
later than 90 days from the date of creation thereof with, including negotiable
certificates of deposit and banker's acceptances issued by or drawn on, a United
States commercial bank or trust company or a bank or trust company chartered or
organized under the laws of Canada, which has capital and surplus of at least
$500,000,000, including without limitation, any such deposits in Eurodollars
issued by a foreign branch of any such bank or trust company; provided, however,
that any of the foregoing that were acquired after the date of this Agreement by
means of indebtedness shall, to the extent of any such indebtedness, be deemed
for purposes of this Section 1.6 not to be cash or Cash Equivalents.
(b) As used herein, the "NAC RESERVE" shall be equal to a reserve,
determined as provided in this Section 1.6(b) in accordance with GAAP, equal to
the aggregate of all Non-Hosting GAAP Liabilities (as defined in Section 1.12)
as of the Closing Date, net of related estimated tax refunds associated with the
PC Business or the SpecTek business or the sale or discontinuance thereof, an
estimate of which NAC Reserve is set out on SCHEDULE 1.6(b). By May 15, 2001,
Parent shall prepare (and provide to Company and a disinterested "Big 5"
accounting firm of Company's choosing ("COMPANY AUDITOR"), an initial
comprehensive, detailed analysis and calculation of the NAC Reserve and of each
Non-Hosting GAAP Liability included therein, as applicable under various
potential alternative courses of action ("EXPENSE PLAN"). Thereafter, Parent's
auditors, PricewaterhouseCoopers LLP ("PWC"), as a part of its review of
Parent's balance sheet for the most recent month ending at least 25 days prior
to the Closing Date ("BASE BALANCE SHEET"), and the Expense Plan, shall review
the reserves for Non-Hosting GAAP Liabilities included in the Base Balance Sheet
(the "AUDITOR APPROVED NAC RESERVES"). In the event the Parent believes that the
Auditor Approved NAC Reserves, are, or will as of the Closing Date be,
incomplete or inadequate to cover all Non-Hosting GAAP Liabilities as of the
Closing Date, then Parent may increase the Auditor Approved NAC Reserves (such
updated reserves, the "UPDATED NAC RESERVES"). The Auditor Approved NAC
Reserves, or if applicable in lieu thereof the Updated NAC Reserves, are herein
referred to as the "PARENT ESTIMATED NAC RESERVES". Company, and the Company
Auditor, acting at Company's expense but with Parent's cooperation, will work
cooperatively and concurrently with Parent and PWC throughout the process of the
review of the Expense Plan and the Base Balance Sheet so as to be in a position
to assess the adequacy of the Parent Estimated NAC Reserves within ten (10) days
after the Parent Estimated NAC Reserves are available. In the event that Company
reasonably determines, based on advice of the Company Auditor, that the Parent
Estimated NAC Reserves are in aggregate at least $5,000,000 different than the
aggregate of all Non-Hosting GAAP Liabilities as of the Closing Date, then
Company may, within ten (10) days after Parent advises Company in writing of the
Parent Estimated NAC Reserves and the method of calculation thereof ("PARENT
NOTICE"), object, by written notice delivered to Parent ("OBJECTION
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NOTICE"), to the adequacy of the Parent Estimated NAC Reserves and provide
Company's own estimate of an aggregate reserve amount sufficient to satisfy the
aggregate of all Non-Hosting GAAP Liabilities as of the Closing Date ("COMPANY
ESTIMATED NAC RESERVES"). Both the Parent Notice and the Objection Notice shall
be sufficiently detailed to permit an independent auditor to evaluate and
confirm the accuracy of the included estimate of NAC Reserves. After issuance
and receipt of an Objection Notice, Parent and Company senior management shall
for a period of ten (10) days discuss in good faith and attempt to reach
resolution on whether the Parent Estimated NAC Reserves or the Company Estimated
NAC Reserves more accurately reflects the aggregate of all Non-Hosting GAAP
Liabilities as of the Closing Date, and in that context either party may retain
its original reserves estimate or modify its estimate of reserves in writing (in
either case, the "MODIFIED ESTIMATES"). If the parties are unable to reach
agreement, the dispute shall be submitted to binding arbitration in Boise,
Idaho, under the Expedited Commercial Arbitration Rules of the American
Arbitration Association (or other mutually agreed procedures that can be
resolved within the timeframes herein mentioned). A third, independent, mutually
agreeable disinterested "Big 5" accounting firm (or a partner thereof if the
firm cannot so serve) shall be selected as arbitrator and the parties shall
deliver to such party each party's Modified Estimates along with all written
arguments or documentation supporting the adoption of such party's Modified
Estimates. The arbitrator's sole determination shall be as to the proper amount
of the NAC Reserve in accordance with this Agreement. Within 45 days of the
appointment of such arbitrator, under the rules of the American Arbitration
Association and the law of the State of Delaware (exclusive of that body of law
dealing with choice of law), the arbitrator shall adopt one of the Modified
Estimates as his or her final binding decision and award (the "AWARD"). The
parties will reasonably cooperate to enable the arbitrator to reach resolution
within that time frame. Any judgment upon the Award rendered by the arbitrator
within such 45 day period will be binding on the parties hereto and may be
entered in any court having jurisdiction over the subject matter thereof. In the
event an arbitration award is not issued within such 45 day period, Parent may
in its sole discretion elect, by written notice to Company, to unilaterally
advance from November 30, 2001 to September 30, 2001 the termination date
provided for in Section 7.1(b) ("TERMINATION DATE ADJUSTMENT"). Company and its
representatives shall have reasonable access to the information, documents and
work papers of both Parent and PWC related to the determination and confirmation
of the NAC Reserve, as well as the right to ask questions and receive answers of
personnel of such entities involved with such determination and confirmation in
a timely manner, and Parent shall have the same rights as Company to understand
the basis for the Company Estimated NAC Reserves. The arbitrator shall be
compensated for his or her services by the parties jointly at a rate to be
determined by the parties or by the American Arbitration Association. Each party
will bear its own costs and attorneys fees of any dispute under this Section.
The arbitrator's decision under this Section shall include findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached and shall deliver such documents to each party to this
Agreement along with a signed copy of the arbitrator's Award. Nothing in this
Section 1.6 shall be deemed to prevent either party from obtaining injunctive or
declaratory relief.
(c) CANCELLATION OF COMPANY-OWNED AND PARENT-OWNED STOCK. Each
share of Company Common Stock held by Company or owned by Merger Sub, Parent or
any direct or indirect wholly owned subsidiary of Company or of Parent
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
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(d) STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLAN; WARRANTS. At the
Effective Time, all options to purchase Company Common Stock then outstanding
under Company's Stock Incentive Plan (the "COMPANY STOCK OPTION PLAN") shall be
assumed by Parent in accordance with Section 5.9 of this Agreement. Rights
outstanding under Company's Employee Stock Purchase Plan (the "COMPANY ESPP")
shall be treated as set forth in Section 5.9 of this Agreement. At the Effective
Time, all warrants to purchase Company capital stock then outstanding shall be
assumed by Parent in accordance with Section 5.9 of this Agreement.
(e) CAPITAL STOCK OF MERGER SUB. Each share of common stock, par
value $0.01 per share, of Merger Sub (the "MERGER SUB COMMON STOCK"), issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock, $0.01 par
value per share, of the Surviving Corporation. Following the Effective Time,
each certificate evidencing ownership of shares of Merger Sub common stock shall
evidence ownership of such shares of capital stock of the Surviving Corporation.
(f) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock), reorganization,
recapitalization, reclassification or other like change with respect to Parent
Common Stock or Company Common Stock occurring on or after the date hereof and
prior to the Effective Time.
1.7. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Parent shall select an institution reasonably
acceptable to Company to act as the exchange agent (the "EXCHANGE AGENT") in the
Merger.
(b) EXCHANGE FUND. Promptly after the Effective Time, Parent shall
make available to the Exchange Agent for exchange in accordance with this
Article I, the shares of Parent Common Stock (such shares of Parent Common
Stock, together with cash in lieu of fractional shares and any dividends or
distributions with respect thereto, are hereinafter referred to as the "EXCHANGE
FUND") issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Common Stock.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, Parent
shall instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates ("CERTIFICATES") that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into shares of Parent Common Stock pursuant to Section
1.6, (i) a letter of transmittal in customary form (that shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall contain such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of
Certificates for cancellation to the Exchange Agent together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates
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representing the number of whole shares of Parent Common Stock into which their
shares of Company Common Stock were converted at the Effective Time, payment in
lieu of fractional shares that such holders have the right to receive pursuant
to Section 1.7(e) and any dividends or distributions payable pursuant to Section
1.7(d), and the Certificates so surrendered shall forthwith be canceled. Until
so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, to evidence only the ownership of
the number of full shares of Parent Common Stock into which such shares of
Company Common Stock shall have been so converted and the right to receive an
amount in cash in lieu of the issuance of any fractional shares in accordance
with Section 1.7(e) and any dividends or distributions payable pursuant to
Section 1.7(d). No interest will be paid or accrued on any cash in lieu of
fractional shares of Parent Common Stock or on any unpaid dividends or
distributions payable to holders of Certificates. In the event of a transfer of
ownership of shares of Company Common Stock that is not registered in the
transfer records of Company, a certificate representing the proper number of
shares of Parent Common Stock may be issued to a transferee if the Certificate
representing such shares of Company Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the holders of certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of Parent Common Stock to which
such holder is entitled pursuant to Section 1.7(e) and the amount of dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Parent
Common Stock.
(e) FRACTIONAL SHARES. (i) As promptly as practicable following
the Effective Time, the Exchange Agent shall determine the excess of (A) the
number of full shares of Parent Common Stock delivered to the Exchange Agent
pursuant to Section 1.7(b), over (B) the aggregate number of full shares of
Parent Common Stock to be distributed to holders of Company Common Stock
pursuant to Section 1.7(c) (such excess, the "EXCESS SHARES"). Following the
Effective Time, the Exchange Agent, as agent for the holders of Company Common
Stock, shall sell the Excess Shares at then prevailing prices on the Nasdaq
Stock Market in the manner set forth in paragraph (ii) of this Section 1.7(e).
(ii) The sale of the excess shares by the Exchange Agent
shall be executed on the Nasdaq Stock Market and shall be executed in round lots
to the extent practicable. The Exchange Agent shall use all commercially
reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's reasonable judgment, is
practicable consistent with obtaining the best execution of such sales in
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light of prevailing market conditions. Until the net proceeds of such sales have
been distributed to the holders of Company Common Stock, the Exchange Agent will
hold such proceeds in trust for the holders of Company Common Stock. The
Exchange Agent will determine the portion of such net proceeds to which each
holder of Company Common Stock shall be entitled, if any, by multiplying the
amount of the aggregate net proceeds by a fraction the numerator of which is the
amount of the fractional share interest to which such holder of Company Common
Stock is entitled (after taking into account all shares of Parent Common Stock
to be issued to such holder) and the denominator of which is the aggregate
amount of fractional share interests to which all holders of Company Common
Stock are entitled. As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Company Common Stock with respect to
fractional share interests, the Exchange Agent shall promptly pay such amounts
to such holders of Company Common Stock in accordance with the terms of Section
1.7(c).
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) of this Section 1.7(e), Parent may decide, at its option, exercised prior
to the Effective Time, in lieu of the issuance and sale of Excess Shares and the
making of the payments contemplated in such paragraphs, that Parent shall pay to
the Exchange Agent an amount sufficient for the Exchange Agent to pay each
holder of Company Common Stock the amount such holder would have received
pursuant to Section 1.7(e)(ii) assuming that the sales of Parent Common Stock
were made at a price equal to the average of the closing prices of the Parent
Common Stock on the Nasdaq Stock Market for the ten consecutive trading days
immediately following the Effective Time and, in such case, all references
herein to the cash proceeds of the sale of the Excess Shares and similar
references shall be deemed to mean and refer to the payments calculated as set
forth in this paragraph (iii). In such event, Excess Shares shall not be issued
or otherwise transferred to the Exchange Agent pursuant to Sections 1.7(c) or
(e).
(f) REQUIRED WITHHOLDING. Each of the Exchange Agent, Parent and
the Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable Legal Requirement
(as defined in Section 2.2(c)). To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the person to whom such amounts would otherwise have been
paid.
(g) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock represented by such Certificates were converted pursuant to Section
1.6, cash for fractional shares, if any, as may be required pursuant to Section
1.7(e) and any dividends or distributions payable pursuant to Section 1.7(d);
PROVIDED, HOWEVER, that Parent may, in its discretion and as a condition
precedent to the issuance of such certificates representing shares of Parent
Common Stock, cash and other distributions, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent, the Surviving
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Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
(h) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor
any party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(i) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
that remains undistributed to the holders of Company Common Stock for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Company Common Stock who have not theretofore complied with the
provisions of this Section 1.7 shall thereafter look only to Parent for the
shares of Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock to which they are entitled pursuant to Section 1.7(e) and any
dividends or other distributions with respect to Parent Common Stock to which
they are entitled pursuant to Section 1.7(d), in each case, without any interest
thereon.
1.8 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.7(d) and (e)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Common Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Common Stock
that were outstanding immediately prior to the Effective Time. If after the
Effective Time Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.9 RESTRICTED STOCK. If any shares of Company Common Stock that are
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition providing that
such shares ("COMPANY RESTRICTED STOCK") may be forfeited or repurchased by the
Company upon any termination of the shareholders' employment, directorship or
other relationship with the Company (and/or any affiliate of the Company) under
the terms of any restricted stock purchase agreement or other agreement with the
Company that does not by its terms provide that such repurchase option, risk of
forfeiture or other condition lapses upon consummation of the Merger, then the
shares of Parent Common Stock issued upon the conversion of such shares of
Company Common Stock in the Merger will continue to be unvested and subject to
the same repurchase options, risks of forfeiture or other conditions following
the Effective Time, and the certificates representing such shares of Parent
Common Stock may accordingly be marked with appropriate legends noting such
repurchase options, risks of forfeiture or other conditions. Company shall take
all actions that may be necessary to ensure that, from and after the Effective
Time, Parent is entitled to exercise any such repurchase option or other right
set forth in any such restricted stock purchase agreement or other agreement. A
listing of the holders of Company Restricted Stock, together with the number of
shares and the vesting schedule of Company Restricted Stock held by each
together with a list of any unvested shares subject to accelerated vesting by
virtue of the Merger or termination following the Merger, is set forth in Part
1.9 of the Company Disclosure Letter. Nothing in this Section 1.9 shall be
deemed to amend or modify any of the terms of any such restricted stock purchase
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agreement or other agreement, or to prevent any accelerated vesting by virtue of
the Merger or termination following the Merger otherwise provided for in any
such restricted stock purchase agreement or other agreement.
1.10 TAX CONSEQUENCES. It is intended by the parties hereto that the
Merger shall constitute a "reorganization" within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub will take all such lawful and necessary action. Parent shall
cause Merger Sub to perform all of its obligations relating to this Agreement
and the transactions contemplated hereby.
1.12 PAYMENTS OF EXCESS CASH OR NET PROCEEDS BY PARENT.
For purposes of this Section 1.12, the following terms shall have the
following meanings:
"AUDITED CLOSING BALANCE SHEET" means the audited consolidated balance
sheet of Parent as of the Effective Time, prepared on a basis reasonably
consistent with Parent's most recent audited quarterly consolidated balance
sheet contained in the Parent SEC Reports, which has been reviewed and approved
by Parent's auditors.
"AUDITED CLOSING BALANCE SHEET NON-HOSTING GAAP LIABILITIES" shall mean an
amount equal to all Non-Hosting GAAP Liabilities shown on the Audited Closing
Balance Sheet (whether included in reserves for discontinued operations or other
items on the face of the Closing Balance Sheet).
"DISPOSITION" shall mean a sale, transfer or other disposition,
liquidation or winding up, in one or a series of transactions of all or
substantially all of Parent's PC Business or all or substantially all of the
assets used in the PC Business.
"ESCROW" shall mean that certain escrow established pursuant to Section
1.12(a) pursuant to which any Excess Cash or Net Proceeds will be retained until
the Escrow Release Date to ensure Parent's ability to make any Escrow Payments.
"ESCROW LIABILITIES" shall mean any Audited Closing Balance Sheet
Non-Hosting GAAP Liabilities or any Post-Closing Non-Hosting GAAP Liabilities.
"ESCROW PAYMENT" shall mean any payment from Escrow to pay for any Escrow
Liabilities.
"ESCROW RELEASE DATE" shall mean the date that is six months after the
Closing Date.
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"EXCESS CASH" shall mean an amount equal to the sum of (A) the amount of
Parent's cash and Cash Equivalents reflected on the Audited Closing Balance
Sheet, LESS (i) the amount of any Audited Closing Balance Sheet Non-Hosting GAAP
Liabilities (other than those which have reduced Net Proceeds), LESS (ii) two
hundred million dollars ($200,000,000.00); and (B) the amount of any decrease in
the reserves for Audited Closing Balance Sheet Non-Hosting GAAP Liabilities (but
not including any decreases in the amount of the reserves solely resulting from
payments for the Escrow Liabilities that are the subject of such reserves)
reflected in Parent audited financial statements for periods after the Closing
Date, which financial statements have been audited by PWC; in any event, Excess
Cash will not include any Net Proceeds distributed hereunder, unless Parent
elects to include such amount in Excess Cash and exclude the same from Net
Proceeds.
"GAAP LIABILITIES" shall mean expenses, claims or liabilities (including
probable material loss contingencies), if and to the extent that GAAP would
require same to be included in items on the face of a balance sheet prepared in
accordance with GAAP, based on the level of materiality and probability required
for such a liability to be so included.
"NET PROCEEDS" with respect to any Disposition, means (i) cash (freely
convertible into U.S. dollars) indefeasibly paid to Parent or any Subsidiary of
Parent from such Disposition, and (ii) stock, promissory notes, other securities
or other non cash consideration (including pursuant to any contingent value
right or earn out provision) indefeasibly paid to Parent or any Subsidiary from
such Disposition upon the final liquidation or conversion of such securities
into cash (net of any taxes or other costs with respect to such conversion),
after (a) provision for all taxes, fees, levies, assessments or other charges by
any Governmental Authority in connection with the Disposition and any taxes
relating to the income measured by or resulting from such Disposition, (b)
payment of all brokerage commissions, finders fees and other out-of-pocket fees
and expenses associated with such Disposition, (c) payment of any indebtedness
required to be incurred by Parent or any Subsidiary in connection with such
Disposition, (d) deduction of appropriate amounts to be provided by Parent as a
reserve or credit against the purchase price, in accordance with GAAP, relating
to any indemnity liabilities assumed by Parent in connection with the
Disposition (which reserve will expire when such indemnity liability expires per
its terms); and (e) deduction of any portion of the aggregate amount of the
Audited Closing Balance Sheet Non-Hosting GAAP Liabilities that is not assumed
by the acquiring entity or an affiliate thereof in any Disposition (other than
those which have already reduced Excess Cash). In the event that consideration
to be received by Parent in connection with such Disposition is subject to
escrow, forfeiture or otherwise affected by some contingency, Parent shall not
be deemed to have received such escrowed, defeasible or contingent portion of
such consideration until such escrow, forfeiture risk or contingency shall have
expired or lapsed. If any Net Proceeds are other than cash, then the value of
such assets shall be their fair market value as determined by the Board of
Directors in good faith, EXCEPT THAT the value of any securities received shall
be valued as follows:
(x) The method of valuation of securities not subject to
restrictions on free marketability shall be as follows:
(i) unless otherwise specified in a definitive
agreement for the acquisition of the PC Business, if the securities are then
traded on a national securities exchange
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or the Nasdaq National Market (or a similar national quotation system), then the
value shall be deemed to be the average of the closing prices of the securities
on such exchange or system over the thirty (30) calendar day period ending three
(3) trading days prior to the distribution; and
(ii) if (i) above does not apply but the securities are
actively traded over-the-counter, then, unless otherwise specified in a
definitive agreement for the acquisition of the PC Business, the value shall be
deemed to be the average of the closing bid prices over the thirty (30) day
period ending three (3) days prior to the Payment; and
(iii) if there is no active public market as described
in clauses (i) or (ii) above, then the value shall be the fair market value
thereof, as determined in good faith by the Board of Directors of Parent.
(y) The method of valuation of securities subject to
restrictions on free marketability shall be to make an appropriate discount from
the market value determined as above in subparagraphs (a)(i), (ii) or (iii) of
this subsection to reflect the approximate fair market value thereof, as
determined in good faith by the Board of Directors of Parent.
"NON-HOSTING GAAP LIABILITIES" shall mean GAAP Liabilities of Parent that
are related to (or, in the case of items allocated to the Parent's current web
hosting business as conducted by the Parent's HostPro division ("HOSTPRO
BUSINESS") and to business units other than the HostPro Business, allocable (and
then only to the extent allocable) to) any of the following: (i) the ongoing
operations of the PC Business or the SpecTek business; (ii) the sale, transfer
or other disposition of the PC Business or the SpecTek business (including any
indemnity obligations associated with any agreement relating to any sale of the
PC Business or the SpecTek business, and including any net amounts due MTI in
connection with the sale and termination of the SpecTek business); (iii) any
wind down and cessation of operations of the PC Business or the SpecTek business
(including any GAAP Liabilities included in any reserve for discontinued
operations relating to the PC Business or SpecTek); or (iv) any other GAAP
Liabilities of Parent to the extent not related to or allocable to the HostPro
Business.
"PARENT CLOSING DATE SHAREHOLDERS" shall mean those beneficial holders of
shares of Parent Common Stock immediately prior to the Effective Time reflected
on the Transfer Agent List.
"PARENT TRANSFER AGENT" means Xxxxx Fargo Bank, N.A.
"PAYMENT" shall mean any of: (i) a payment of Excess Cash made following
the Escrow Release Date to the Payment Agent for the benefit of the Parent
Closing Date Shareholders (to be paid by the Payment Agent to such Parent
Closing Date Shareholders in accordance with their Pro Rata Share) pursuant to
Section 1.12(b) below; or (ii) in the event Net Proceeds are realized, a payment
of Net Proceeds made following the Escrow Release Date to the Payment Agent for
the benefit of the Parent Closing Date Shareholders (to be paid by the Payment
Agent to such Parent Closing Date Shareholders in accordance with their Pro Rata
Share) made to Parent Closing Date Shareholders pursuant to Section 1.12(c)
below.
"PAYMENT AGENT" means Xxxxx Fargo Bank, N.A.
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"PC BUSINESS" shall mean Parent's business of developing, manufacturing,
marketing, selling, distributing, installing, servicing, supporting,
maintaining, repairing or otherwise commercially exploiting all or any aspect of
any or all of its personal computer products or of any intangible assets or
Intellectual Property Rights related to such personal computer products or the
business of selling same.
"POST-CLOSING NON-HOSTING GAAP LIABILITIES" shall mean any Non-Hosting
GAAP Liabilities arising after the Closing Date.
"PRO RATA SHARE" shall mean with respect to each Parent Closing Date
Shareholder, the quotient obtained by dividing (i) the number of shares of
Parent Common Stock held by a Parent Closing Date Shareholder immediately prior
to the Effective Time, as reflected on the Transfer Agent List, by (ii) the
total number of shares of Parent Common Stock outstanding immediately prior to
the Effective Time, as reflected on the Transfer Agent List.
"SPECTEK" shall mean Parent's business of developing, manufacturing,
marketing, selling, distributing, installing, servicing, supporting,
maintaining, repairing or otherwise commercially exploiting all or any aspect of
any or all of its memory products or of any intangible assets or Intellectual
Property Rights related to such memory products or the business of selling same.
"TRANSFER AGENT LIST" means the list of Parent Closing Date Shareholders
as certified by the Parent Transfer Agent.
(a) ESCROW.
(i) Within forty-five (45) days after the Effective Time
(the "INITIAL PAYMENT DATE"), Parent shall prepare the Closing Balance Sheet and
determine the amount of Excess Cash.
Parent shall provide to MTI, and any independent
auditors retained by MTI, reasonable access during Parent's business hours to
those books and records in the possession of Parent and any personnel which
relate to the preparation of the Net Distributable Amount and to the workpapers
of Parent and its independent auditors for the purposes of resolving any
disputes concerning the Net Distributable Amount.
(ii) Any Excess Cash available, and any Net Proceeds
realized, prior to the Escrow Release Date (together with interest thereon, the
"ESCROW FUNDS") shall be deposited by Parent in a segregated, interest bearing
account in the Company's name ("ESCROW ACCOUNT"). Prior to the Escrow Release
Date, Parent shall use Escrow Funds to satisfy any Escrow Liabilities arising
prior to the Escrow Release Date. On the Escrow Release Date, an amount equal to
the Escrow Funds, less the amount of any Escrow Liabilities remaining
outstanding on that date ("NET DISTRIBUTABLE AMOUNT"), which amount shall be
approved by a committee of directors of Parent who were not directors or
officers of Parent immediately prior to the Effective Time (the "SPECIAL
COMMITTEE"), shall be distributed as a Payment to the Payment Agent for the
benefit of the Parent Closing
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Date Shareholders. Prior to such Payment, Parent shall provide MTI (or such
other persons as MTI designates to represent the interests of the Parent
Closing Date Shareholders) (the "SHAREHOLDER REPRESENTATIVE") the calculation
of the proposed Payment as calculated under the preceding sentence. Parent
shall provide to MTI, and any independent auditors retained by MTI,
reasonable access during Parent's business hours to those books and records
in the possession of Parent and any personnel which relate to the preparation
of the Net Distributable Amount and to the workpapers of Parent and its
independent auditors for the purposes of resolving any disputes concerning
the Net Distributable Amount. Absent objection within ten (10) business days
to such Payment, such Payment shall be made in the Distributable Amount and
such Payment shall conclusively be deemed to have been made, and such Net
Distributable Amount shall conclusively be deemed to have been calculated, in
accordance with this Agreement. If the Shareholder Representative objects to
the calculation of the Net Distributable Amount, the Shareholder
Representative shall provide to the Parent a notice of such objection that
sets forth in reasonable detail the specific errors or omissions in the
calculation of the Net Distributable Amount ("OBJECTION NOTICE"); provided,
however, that the amount of the Audited Closing Balance Sheet Non-Hosting
GAAP Liabilities may not be a subject of such Objection Notice, as such
number will already have been subject to audit in connection with the audit
by PWC of the Closing Balance Sheet; provided, further that the proper
calculation of any Post-Closing Non-Hosting GAAP Liabilities arising prior to
the Escrow Release Date may be a proper subject of an Objection Notice.
Following receipt of any Objection Notice, the Shareholder Representative and
the Special Committee shall discuss in good faith the applicable objections
set forth therein for a period of sixty (60) days thereafter and shall,
during such period, attempt to resolve the matter or matters in dispute by
mutual written agreement. If the Shareholder Representative and the Special
Committee reach such an agreement, such agreement shall be confirmed in
writing and thereafter the Net Distributable Amount, as adjusted based on
such agreement, shall be distributed to the Payment Agent for the benefit of
the Parent Closing Date Shareholders, which payment shall thereafter be
conclusively deemed to have been distributed in accordance with this
Agreement. If the Shareholder Representative and the Special Committee are
unable to reach a mutual agreement as stated above during the sixty (60) day
period referred to therein, then PWC (or if PWC declines to so serve, another
"Big 5" auditing firm) (the "ACCOUNTING EXPERT"), acting as an expert and not
as an arbitrator, shall resolve those matters still in dispute with respect
to the calculation of the Net Distributable Amount. The Accounting Expert's
resolution of the matters in dispute, including any adjustments to the Net
Distributable Amount made by the Accounting Expert, shall be final and
binding on Parent, the Shareholder Representative and the Parent Closing Date
Shareholders and the Net Distributable Amount (as adjusted by such Accounting
Expert) shall be distributed to the Payment Agent for the benefit of the
Parent Closing Date Shareholders. The Accounting Expert shall make a
determination as soon as practicable and in any event within sixty (60) days
(or such other time as the Shareholder Representatives and the Special
Committee shall agree in writing) after its engagement. Notwithstanding
anything set forth in this section, the scope of any dispute to be resolved
by the Accounting Expert, acting pursuant hereto shall be limited to
correcting errors in the calculation of the Net Distributable Amount,
including confirming the proper computation of Excess Cash or Net Proceeds,
including that all reserves for Escrow Liabilities have been properly
reduced, confirming that all Audited Closing Balance Sheet Non-Hosting GAAP
Liabilities have been properly reduced, confirming that all Audited Closing
Balance Sheet Non-Hosting GAAP Liabilities have been paid, discharged or
satisfied in full (or deducted in determining the Net Distributable Amount),
and confirming that all Post-Closing Non-Hosting GAAP Liabilities arising
prior the Escrow Release Date have been paid, discharged
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or satisfied as of that date and, except for the foregoing matters, the
Accounting Expert shall not and is not to make any further determination.
Parent, the Special Committee and the Shareholder Representative shall fully
cooperate with each other and with the Accounting Expert to resolve any
dispute. Notwithstanding any other provision of this Agreement, including
without limitation any provision stating that remedies shall be cumulative
and not exclusive, this section provides the sole and exclusive method for
resolving any and all disputes of each and every nature whatever that may
arise with respect to the calculation of the Net Distributable Amount or the
related Payment. As between the parties, Parent (acting for Parent, the
Shareholder Representative, and Parent Closing Date Shareholders) and Company
(acting for the Company, and all Company shareholders) hereby irrevocably
waive, relinquish and surrender on their own behalf and on behalf of their
respective affiliates and representatives all rights to, and agree that they
will not attempt, and shall cause their affiliates and representatives not to
attempt, to, resolve any such dispute or disputes in any manner other than as
set forth in this section, including without limitation through litigation.
All fees and expenses of Company and Parent relating to the matters described
in this section, including the calculation of the Net Distributable Amount,
shall be borne by Parent (and shall not constitute an Escrow Liability for
purposes of calculating the Net Distributable Amount), and all fees and
expenses of any former Company shareholder, Parent Closing Date Shareholder,
or the Shareholder Representative relating to the matters described in this
section shall be borne by the party incurring such fees. Notwithstanding the
foregoing, in the event any dispute is submitted to the Accounting Expert for
resolution as provided in this section hereof, the fees and expenses of the
Accounting Expert shall be borne by Parent and shall not constitute an Escrow
Liability for purposes of calculating the Net Distributable Amount.
(b) DISTRIBUTIONS OF EXCESS CASH. Within forty-five (45) days from the
end of each of Parent's fiscal quarters ending subsequent to the Escrow Release
Date until the third anniversary of Closing (at which time this Section 1.12(b)
shall expire), Parent shall make a Payment of Excess Cash to the Payment Agent
for the benefit of the Parent Closing Date Shareholders, in an aggregate amount
equal to any Excess Cash remaining after payment of all Escrow Liabilities
arising prior to the Escrow Release Date; provided that such Payment will be
made pursuant to Section 302A.551 of the Minnesota Business Corporation Act
("MINN. BUS. CORP. ACT") with a record date as of immediately prior to the
Effective Time and no such Payment shall be made if and to the extent that it
would violate Section 551 of the Minn. Bus. Corp. Act; PROVIDED, that any such
Payment that is otherwise available to be made shall first be reduced by an
amount by which any previous Escrow Funds to be distributed would have been
reduced but were not so reduced because the Escrow Funds were not large enough
to cover all of such reduction (i.e., the amount by which Escrow Liabilities
exceeded Escrow Funds otherwise available for distribution). Parent may in its
sole discretion, elect not to make any Payment of Excess Cash until the
aggregate amount of Excess Cash would result in a Payment of Excess Cash of at
least ten million dollars ($10,000,000.00), but once such threshold is exceeded
all Excess Cash including such threshold amount shall be distributed.
(c) DISTRIBUTIONS OF NET PROCEEDS. Parent shall, as promptly as
practical after the later of the Escrow Release Date and the receipt of Net
Proceeds but in no event after the third anniversary of Closing, at which time
this Section 1.12(c) shall expire, make a Payment of such Net Proceeds to the
Payment Agent for the benefit of the Parent Closing Date Shareholders,
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in an amount equal to (i) the aggregate Net Proceeds received by Parent through
the date of such Payment, LESS (ii) the aggregate amount of all Payments of ----
Net Proceeds made to date; provided that such Payment will be made pursuant to
Section 302A.551 of the Minn. Bus. Corp. Act with a record date as of
immediately prior to the Effective Time and no such Payment shall be made if and
to the extent that it would violate Section 551 of the Minn. Bus. Corp. Act.
Parent may in its sole discretion, elect not to make any Payment of Net Proceeds
until the aggregate amount of Net Proceeds received by it would result in a
Payment of Net Proceeds in an aggregate amount equal to at least ten million
dollars ($10,000,000.00), but once such threshold is exceeded all Excess Cash
including such threshold amount shall be distributed.
(d) INTENDED THIRD PARTY BENEFICIARIES; UNATTACHED TO STOCK; FORFEITURE.
Parent Closing Date Shareholders shall be deemed to be intended third party
beneficiaries of this Section 1.12. For the avoidance of doubt, Payments made
hereunder shall be made to the Parent Closing Date Shareholders notwithstanding
any transfer of Parent shares held thereby subsequent to the Effective Time. In
the event that at the time of any payment under this Section 1.12, the Parent
Closing Date Shareholder cannot be located at such holder's last known address
in the Transfer Agent's records, or at any other address obtained after 30 days
commercially reasonable efforts by Parent, or if a Parent Closing Date
Shareholder's identity cannot be determined despite the Transfer Agent's
reasonable search, the Parent Closing Date Shareholders may look only to Parent
to recover any Payment to be made under this Section 1.12 and shall only be
general creditors of Parent, and shall have no right to recover interest. None
of Parent, Company or the Payment Agent shall be liable to any person in respect
of any portion of a Payment delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If a Parent Closing Date
Shareholder cannot be located prior to one year after the Effective Time (or
immediately prior to such earlier date on which such portion of a Payment would
otherwise escheat to or become the property of any Governmental Entity), any
such portion of a Payment shall, to the extent permitted by applicable law,
become the property of Parent, free and clear of all claims or interest of any
person previously entitled thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
As of the date of this Agreement and as of the Closing Date, except as
disclosed in (i) Company's Registration Statement on Form S-1 filed on March 15,
2000 and declared effective on July 24, 2000 and any Company SEC Reports (as
defined below) filed subsequent to such Registration Statement on Form S-1, and
(ii) the disclosure letter delivered by Company to Parent dated as of the date
hereof and certified by a duly authorized officer of Company (the "COMPANY
DISCLOSURE LETTER") (each Part of which qualifies the correspondingly numbered
representation, warranty or covenant to the extent specified therein and such
other representations, warranties or covenants to the extent a matter in such
Part is disclosed in such a way as to make its relevance to such other
representation, warranty or covenant readily apparent), Company represents and
warrants to Parent and Merger Sub as follows:
2.1 ORGANIZATION; SUBSIDIARIES.
(a) Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and
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has all requisite corporate power and authority, and all requisite
qualifications to do business as a foreign corporation, to conduct its business
in the manner in which its business is currently being conducted, except where
the failure to be so organized, existing or in good standing or to have such
power, authority or qualifications would not, individually or in the aggregate,
have a Material Adverse Effect (as defined in Section 8.3) on Company.
(b) Other than as set forth in Part 2.1 of the Company Disclosure
Letter, neither Company nor any of its subsidiaries owns any capital stock of,
or any equity interest of any nature in, any corporation, partnership, joint
venture arrangement or other business entity, other than the entities identified
in Part 2.1 of the Company Disclosure Letter, except for passive investments in
equity interests of public companies as part of the cash management program of
Company. Neither Company nor any of its subsidiaries has agreed or is obligated
to make, or is bound by any written, oral or other agreement, contract,
subcontract, lease, binding understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature, as in effect as of the date
hereof or as may hereinafter be in effect under which it may become obligated to
make any future investment in or capital contribution to any other entity.
Neither Company, nor any of its subsidiaries, has, at any time, been a general
partner of any general partnership, limited partnership or other entity. Part
2.1 of the Company Disclosure Letter indicates the jurisdiction of organization
of each entity listed therein and Company's direct or indirect equity interest
therein.
(c) Company has delivered or made available to Parent a true and
correct copy of the Articles of Incorporation and Bylaws of Company and similar
governing instruments of each of its subsidiaries, each as amended to date
(collectively, the "COMPANY CHARTER DOCUMENTS"), and each such instrument is in
full force and effect. Neither Company nor any of its subsidiaries is in
violation of any of the provisions of the Company Charter Documents. Company has
delivered or made available to Parent all proposed or considered amendments to
the Company Charter Documents.
2.2 COMPANY CAPITALIZATION.
(a) The authorized capital stock of Company consists solely of
200,000,000 shares of Company Common Stock, of which there were 47,348,585
shares issued and outstanding as of the close of business on March 15, 2001;
25,000,000 shares of preferred stock, no par value, of which 15,000,000 are
designated as Series A Preferred Stock, none of which were shares issued and
outstanding as of the close of business on March 15, 2001; and 2,100,000 are
designated as Series A-1 Preferred Stock none of which were issued and
outstanding as of the close of business on March 15, 2001. All outstanding
shares of Company capital stock are duly authorized, validly issued, fully paid
and nonassessable and are not subject to preemptive rights created by statute,
the Articles of Incorporation or Bylaws of Company or any agreement or document
to which Company or any of its shareholders is a party or by which Company or
any of its shareholders is bound. As of the date of this Agreement, there are no
shares of Company Common Stock held in treasury by the Company. From and after
the Effective Time, the shares of Parent Common Stock issued in exchange for any
shares of Company Restricted Stock will, without any further act of Parent, the
Company or any other person, become subject to the restrictions, conditions and
other provisions of such Company Restricted Stock, and Parent will
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automatically succeed to and become entitled to exercise the Company's rights
and remedies under such Company Restricted Stock.
(b) As of the close of business on March 9, 2001, (i) 6,730,233
shares of Company Common Stock are subject to issuance pursuant to outstanding
options to purchase Company Common Stock under the Company Stock Option Plan
("COMPANY OPTIONS") for a weighted average aggregate exercise price of $4.28,
(ii) 540,000 shares of Company Common Stock are reserved for future issuance
under the Company ESPP, and (iii) 5,537,216 shares of Company Common Stock are
subject to issuance pursuant to outstanding warrants to purchase Company Common
Stock ("COMPANY WARRANTS") for a weighted average exercise price of $14.0076.
Part 2.2(b)(1) of the Company Disclosure Letter sets forth the following
information with respect to each Company Option outstanding as of the date of
this Agreement: (i) the name of the optionee; (ii) the number of shares of
Company Common Stock subject to such Company Option; (iii) the exercise price of
such Company Option; (iv) the date on which such Company Option was granted or
assumed; (v) the date on which such Company Option expires; (vi) whether the
exercisability of such option will be accelerated in any way by the transactions
contemplated by this Agreement, and indicates the extent of any such
acceleration; and (vii) whether such Company Option remains exercisable at any
time after the 90th day after termination of service. Company has made available
to Parent an accurate and complete copy of the Company Stock Option Plan and the
form of all stock option agreements evidencing Company Options. There are no
options outstanding to purchase shares of Company Common Stock other than
pursuant to the Company Stock Option Plan. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. Except as set forth on
Part 2.2(b) of the Company Disclosure Letter, there are no commitments or
agreements of any character to which the Company is bound obligating the Company
to accelerate the vesting of any Company Option as a result of the merger.
Except as set forth on Part 2.2(b) of the Company Disclosure Letter, no Company
Option has had its vesting, exercise or exercise price provisions amended or
modified since December 31, 2000 and no Company Option has been issued in
replacement of another Company Option. Part 2.2(b)(2) of the Company Disclosure
Letter sets forth the following information with respect to each Company Warrant
outstanding as of the date of this Agreement: (i) the name of the warrantholder;
(ii) the number of shares of Company Common Stock subject to such Company
Warrant; (iii) the exercise price of such Company Warrant; (iv) the date on
which such Company Warrant was granted or assumed; (v) the date on which such
Company Warrant expires and (vi) whether the exercisability of such warrant will
be accelerated in any way by the transactions contemplated by this Agreement,
and indicates the extent of any such acceleration. Company has made available to
Parent an accurate and complete copy of each warrant purchase agreement
evidencing Company Warrants. There are no warrants outstanding to purchase
shares of Company Common Stock, and there are no commitments to issue additional
warrants, other than the warrants listed in Part 2.2(b)(2) of the Company
Disclosure Letter. The minimum and (and assuming all exercisability criteria are
satisfied) maximum number of shares of Company Common Stock issuable to Service
Company LLC (Roadrunner) under warrants granted or issued pursuant to the Web
Hosting Reseller Agreement between Company and Roadrunner dated January 28,
2000, are disclosed in Part 2.2(b)(2) of the Company Disclosure Letter, and
Roadrunner has no other rights to obtain additional warrants or exercise
warrants for additional shares of Company capital stock. All shares of Company
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Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable.
(c) Except as set forth on Part 2.2(c) of the Company Disclosure
Letter, all outstanding shares of Company capital stock, all outstanding Company
Options, and all outstanding shares of capital stock of each subsidiary of
Company have been issued and granted in compliance with (i) all applicable
federal and state securities laws and other applicable material Legal
Requirements and (ii) all material requirements set forth in applicable
agreements or instruments. For the purposes of this Agreement, "LEGAL
REQUIREMENTS" means any federal, state, local, municipal, foreign or other law,
statute, constitution, principle of common law, resolution, ordinance, code,
edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined in Section 2.4).
2.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Part 2.3 of the Company Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of Company
equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Company owns
all of the securities of its subsidiaries identified on Part 2.1 of the Company
Disclosure Letter, free and clear of all claims and Encumbrances, and there are
no other equity securities, partnership interests or similar ownership interests
of any class of equity security of any subsidiary of Company, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. For purposes of this Agreement, "ENCUMBRANCES" means
any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, claim, infringement, interference, option, right of first refusal,
preemptive right, community property interest or restriction of any nature
(including any restriction on the voting of any security, any restriction on the
transfer of any security or other asset, any restriction on the receipt of any
income derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset). Except as set forth in Part 2.2 or Part 2.3 of the
Company Disclosure Letter, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which Company or any of its subsidiaries is a party or by which it is bound
obligating Company or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock, partnership interests or similar ownership interests of Company
or any of its subsidiaries or obligating Company or any of its subsidiaries to
grant, extend, accelerate the vesting of or enter into any such subscription,
option, warrant, equity security, call, right, commitment or agreement. Except
as contemplated by this Agreement or as set forth on Part 2.3 of the Company
Disclosure Letter, there are no registration rights with respect to any equity
security of any class of Company or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
subsidiaries. Shareholders of Company will not be entitled to dissenters' or
appraisal rights under applicable state law in connection with the Merger.
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2.4 AUTHORITY; NON-CONTRAVENTION.
(a) Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by Company's
shareholders (the "COMPANY SHAREHOLDER APPROVALS") and the filing of the
Delaware Certificate of Merger pursuant to Delaware Law and the filing of the
Georgia Articles of Merger pursuant to Georgia Law. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock is
sufficient for Company's shareholders to approve and adopt this Agreement and
approve the Merger, and no other approval of any holder of any securities of
Company is required in connection with the consummation of the Merger. This
Agreement has been duly executed and delivered by Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub, constitutes the
valid and binding obligation of Company, enforceable against Company in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws affecting the rights of creditors generally and general
principles of equity.
(b) The execution and delivery of this Agreement by Company does
not, and the performance of this Agreement by Company will not, (i) conflict
with or violate the Company Charter Documents, (ii) subject to obtaining the
Company Shareholder Approvals and compliance with the requirements set forth in
Section 2.4(c), conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Company or any of its subsidiaries or by which
Company or any of its subsidiaries or any of their respective properties is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or impair Company's rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an Encumbrance on
any of the properties or assets of Company or any of its subsidiaries pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise, concession, or other instrument or obligation to which
Company or any of its subsidiaries is a party or by which Company or any of its
subsidiaries or its or any of their respective assets are bound or affected,
except, in the case of clauses (ii) and (iii), for such conflicts, violations,
breaches, defaults, impairments, or rights that, individually or in the
aggregate, would not have a Material Adverse Effect on Company. Part 2.4(b) of
the Company Disclosure Letter lists all consents, waivers and approvals under
any of Company's or any of its subsidiaries' agreements, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby, which, individually or in the aggregate, if not obtained,
would result in a material loss of benefits to Company, Parent or the Surviving
Corporation as a result of the Merger.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("GOVERNMENTAL ENTITY") or other person, is required to be obtained or
made by Company in connection with the execution and delivery of this Agreement
or the consummation of the Merger, except for (i) the filing of the Delaware
Certificate of Merger with the Secretary of State of the State of Delaware and
the Georgia Articles of Merger
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with the Secretary of State of the State of Georgia and other appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, (ii) the filing of the Registration Statement (as
defined in Section 2.17) with the Securities and Exchange Commission ("SEC") in
accordance with the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") and the effectiveness of the Registration Statement, and a Schedule 13D
with regard to the Company Voting Agreement and the Parent Voting Agreement in
accordance with the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and the Exchange Act (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state securities (or related) laws and the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and the securities or antitrust laws of any foreign country, and (iv)
such other consents, authorizations, filings, approvals and registrations that
if not obtained or made would not be material to the Company, Parent or the
Surviving Corporation or have a material adverse effect on the ability of the
parties hereto to consummate the Merger.
2.5 SEC FILINGS; COMPANY FINANCIAL STATEMENTS.
(a) Company has filed all forms, reports and documents required to
be filed by Company with the SEC since the effective date of the registration
statement of Company's initial public offering and has made available to Parent
such forms, reports and documents in the form filed with the SEC. All such
required forms, reports and documents (including those that Company may file
subsequent to the date hereof) are referred to herein as the "COMPANY SEC
REPORTS." As of their respective dates, the Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act, or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except to the extent
corrected prior to the date of this Agreement by a subsequently filed Company
SEC Report. None of Company's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports (the
"COMPANY FINANCIALS"), including each Company SEC Report filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
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, 8-K or any successor form under the Exchange Act) and (iii) fairly
presented the consolidated financial position of Company and its subsidiaries as
at the respective dates thereof and the consolidated results of Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of Company
contained in Company SEC Reports as of December 31, 2000 is hereinafter referred
to as the "COMPANY BALANCE SHEET." Except as disclosed in the Company
Financials, since the date of the Company
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Balance Sheet, neither Company nor any of its subsidiaries has any liabilities
required under GAAP to be set forth on a balance sheet (absolute, accrued,
contingent or otherwise) that are, individually or in the aggregate, material to
the business, results of operations or financial condition of Company and its
subsidiaries taken as a whole, except for liabilities incurred since the date of
the Company Balance Sheet in the ordinary course of business consistent with
past practices and liabilities incurred in connection with this Agreement.
(c) Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments that previously had been filed by Company with the SEC
pursuant to the Securities Act or the Exchange Act.
2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Part
2.6 of the Company Disclosure Letter, since the date of the Company Balance
Sheet there has not been: (i) any Material Adverse Effect with respect to
Company, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
Company's or any of its subsidiaries' capital stock, or any purchase, redemption
or other acquisition by Company of any of Company's capital stock or any other
securities of Company or its subsidiaries or any options, warrants, calls or
rights to acquire any such shares or other securities except for repurchases
that are not, individually or in the aggregate, material in amount from
employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any split, combination
or reclassification of any of Company's or any of its subsidiaries' capital
stock, (iv) any granting by Company or any of its subsidiaries of any material
increase in compensation or fringe benefits to any of their officers or
employees, or any payment by Company or any of its subsidiaries of any bonus to
any of their officers or employees, or any granting by Company or any of its
subsidiaries of any material increase in severance or termination pay, other
than in the ordinary course, consistent with past practice, or any entry by
Company or any of its subsidiaries into, or material modification or amendment
of, any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Company of the nature contemplated hereby, (v) any
material change by Company in its accounting methods, principles or practices,
except as required by concurrent changes in GAAP, (vi) any material revaluation
by Company of any of its material assets, including writing off notes or
accounts receivable other than in the ordinary course of business, or (vii) any
material change in the pricing of the fees Company charges for the Company
Services (as defined in Section 2.9(k) below).
2.7 TAXES.
(a) Except as set forth on Part 2.7(a) of the Company
Disclosure Letter, Company and each of its subsidiaries have timely filed, or
applied for the extension of the applicable filing deadline, all material
federal, state, local and foreign returns, estimates, information statements and
reports ("RETURNS") relating to Taxes required to be filed by or on behalf of
Company and each of its subsidiaries with any Tax authority, such Returns are
true, correct and complete in all material respects, and Company and each of its
subsidiaries have paid all Taxes shown to be due on such Returns.
-22-
(b) Company and each of its subsidiaries have withheld all
federal and state income taxes, Taxes pursuant to the Federal Insurance
Contribution Act ("FICA"), Taxes pursuant to the Federal Unemployment Tax Act
("FUTA") and other Taxes required to be withheld, except such Taxes that are not
material to Company.
(c) Other than as set forth in Part 2.7(c) of the Company
Disclosure Letter, neither Company nor any of its subsidiaries has been
delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against Company or any of its
subsidiaries, nor has Company or any of its subsidiaries executed any unexpired
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(d) Except as set forth on Part 2.7(d) of the Company
Disclosure Letter, no audit or other examination of any Return of Company or any
of its subsidiaries by any Tax authority is presently in progress, nor has
Company or any of its subsidiaries been notified of any request for such an
audit or other examination that is reasonably likely to result in any adjustment
that is material to Company.
(e) No adjustment relating to any Returns filed by Company
or any of its subsidiaries has been proposed in writing formally or informally
by any Tax authority to Company or any of its subsidiaries or any representative
thereof that is reasonably likely to be material to Company.
(f) Neither Company nor any of its subsidiaries has any
liability for unpaid Taxes that has not been accrued for or reserved on the
Company Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, that is material to Company, other than any liability
for unpaid Taxes that may have accrued since the date of the Company Balance
Sheet in connection with the operation of the business of Company and its
subsidiaries in the ordinary course.
(g) There is no agreement, plan or arrangement to which
Company or any of its subsidiaries is a party, including this Agreement and the
agreements entered into in connection with this Agreement, covering any employee
or former employee of Company or any of its subsidiaries that, individually or
collectively, would be reasonably likely to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code.
(h) Neither Company nor any of its subsidiaries has filed
any consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by Company.
(i) Neither Company nor any of its subsidiaries is party to
or has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement.
(j) Except as may be required as a result of the Merger,
Company and its subsidiaries have not been and will not be required to include
any adjustment in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 of the Code or any
-23-
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Closing.
(k) None of Company's or its subsidiaries' assets are tax
exempt use property within the meaning of Section 168(h) of the Code.
(l) Company has not been distributed in a transaction
qualifying under Section 355 of the Code within the last two years, nor has
Company distributed any corporation in a transaction qualifying under Section
355 of the Code within the last two years.
(m) Company is not aware of any fact, circumstance, plan or
intention on the part of Company that would be reasonably likely to prevent the
Merger from qualifying as a "reorganization" pursuant to the provisions of
Section 368 of the Code.
For the purposes of this Agreement, "TAX" or "TAXES" refers to (i) any and
all federal, state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities relating to taxes, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts, (ii) any
liability for payment of any amounts of the type described in clause (i) as a
result of being a member of an affiliated consolidated, combined or unitary
group, and (iii) any liability for amounts of the type described in clauses (i)
and (ii) as a result of any express or implied obligation to indemnify another
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
2.8 TITLE TO PROPERTIES.
(a) Company owns no real property interests. Part 2.8(a) of the
Company Disclosure Letter list all real property leases to which Company is a
party and each amendment thereto that is in effect as of the date of this
Agreement that provide for annual payments in excess of $250,000. All such
current leases are in full force and effect, are valid and effective in all
material respects in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event of default (or event
that with notice or lapse of time, or both, would constitute a default) that
would give rise to a material claim against Company or a termination of such
leases.
(b) Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Encumbrances except as set forth in Part 2.8(b)
of the Company Disclosure Letter, except as reflected in the Company Financials
and except for liens for Taxes not yet due and payable and such Encumbrances
that are not material in character, amount or extent.
2.9 INTELLECTUAL PROPERTY. For the purposes of this Agreement, the
following terms have the following definitions:
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"INTELLECTUAL PROPERTY" shall mean any or all of the following and
all rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, URLs, rights to domain
names, logos, common law trademarks and service marks, trademark and service
xxxx registrations and applications therefor throughout the world; (vi) all
databases and data collections and all rights therein throughout the world;
(vii) all moral and economic rights of authors and inventors, however
denominated, throughout the world, and (viii) any similar or equivalent rights
to any of the foregoing anywhere in the world.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Company or one of its
subsidiaries.
"COMPANY LICENSED INTELLECTUAL PROPERTY" shall mean any Intellectual
Property that is licensed to Company on a non-exclusive basis and that is used
in the conduct of its business as currently conducted.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the
Registered Intellectual Property owned by, or filed in the name of, Company or
one of its subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY" means all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; (iv) registered domain names; and (v) any other
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued, filed with, or recorded by any
Governmental Entity.
(a) No material Company Intellectual Property, or, except as set
forth in Part 2.9(a) of the Company Disclosure Letter, no material product or
service of Company is subject to any proceeding or outstanding decree, order,
judgment, agreement, or stipulation that restricts in any manner the use,
transfer, or licensing thereof by Company, or which may affect the validity, use
or enforceability of such Company Intellectual Property.
(b) Each material item of Company Registered Intellectual Property
is valid and subsisting, all necessary registration, maintenance and renewal
fees currently due in connection with such Registered Intellectual Property have
been made and all necessary documents, recordations and certificates in
connection with such Registered Intellectual Property have been filed with the
relevant patent, copyright, trademark, domain name or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property, except, in each case, as
would not materially adversely affect such item of Company Registered
Intellectual Property. Except as set forth in Part 2.9(b)
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of the Company Disclosure Letter, Company has applied for patent and copyright
protection with respect to each material software program of the Company, such
registrations, applications or issued patents are listed by number in Part
2.9(b) of the Company Disclosure Letter, and copies of such registrations,
applications and issued patents have been provided to Parent's counsel. Company
has not disclosed the source code of any material software program of the
Company to any person except (i) employees of the Company bound under written
invention assignment and non-disclosure agreements and (ii) such other persons
bound under written non-disclosure agreements, the form(s) of which have been
delivered to Parent's counsel. Except as set forth in Part 2.9(b) of the Company
Disclosure Letter, Company retains ownership of all Intellectual Property rights
in and to all material software programs (including without limitation any
derivative works thereof), products and services of the Company, and no third
party has any rights (anywhere in the world) in or to any trade name, URL,
domain name, logo, common law trademark or service xxxx, trademark or service
xxxx registration or application therefore used by the Company anywhere in the
world.
(c) Company or one of its subsidiaries owns and has good and
exclusive title to, or has license (sufficient for the conduct of its business
as currently conducted) to, each material item of Company Intellectual Property
and Company Licensed Intellectual Property free and clear of any Encumbrance
(excluding licenses and related restrictions).
(d) Neither Company nor any of its subsidiaries have transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Company Intellectual Property, to any third
party.
(e) Part 2.9(e) of the Company Disclosure Letter lists all
material contracts, licenses, agreements to which Company is a party (other than
service agreements with customers of the Company that are in the standard form
thereof as same has been in effect from time to time, a copy of the current form
of which has been provided to Parent): (i) with respect to Company Intellectual
Property licensed or transferred to any third party (other than agreements
entered into in the ordinary course consistent with past practice); (ii) that
are material service agreements with customers and that are not in the standard
form thereof provided to Parent (including without limitation any service
agreement providing for "99.999%" service levels); (iii) all contracts, licenses
and agreements to which Company is a party pursuant to which a third party has
licensed or transferred any material Intellectual Property to Company; and (iv)
that require Company to insure co-located hardware; (except for any contract,
license and agreement that, if terminated, would not have a Material Adverse
Effect on Company). There are no material contracts, licenses and agreements to
which Company is a party with respect to the software, hardware, network and
technology infrastructure used in Company's business as currently conducted
that, if terminated, would have a Material Adverse Effect on Company.
(f) Except as set forth on Part 2.9(f) of the Company Disclosure
Letter, to Company's knowledge, the operation of the business of Company as such
business currently is conducted, including Company's design, development,
marketing and sale of the products or services of Company (including with
respect to products currently under development) has not and does not infringe
or misappropriate the Intellectual Property of any third party or, to its
knowledge, constitute unfair competition or trade practices under the laws of
any jurisdiction, which, individually or in the aggregate, would result in a
material liability.
-26-
(g) Company has not received notice from any third party that the
operation of the business of Company or any act, product or service of Company,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction, which allegation, if true, would have a Material Adverse Effect on
Company.
(h) Except as set forth in Part 2.9(h) of the Company Disclosure
Letter, to the knowledge of Company, no person has or is infringing or
misappropriating any material Company Intellectual Property, which infringement
or misappropriation, individually or in the aggregate, would have a Material
Adverse Effect on Company.
(i) Company and its subsidiaries have taken reasonable steps to
protect Company's and its subsidiaries' rights in Company's and such
subsidiaries' confidential information and trade secrets, except where the
failure to do so would not have a Material Adverse Effect on Company. All
employees, contractors and consultants of Company and any other third parties
who have been involved in the development of Company's software, products or
services have executed invention assignment and confidentiality agreements in
the form delivered to Parent's counsel, and all employees and consultants of
Company and other third parties who have access to confidential information or
trade secrets related to the Company's business, including without limitation
source code of any software program of the Company, have executed appropriate
nondisclosure agreements in the form delivered to Parent's counsel.
(j) None of the Company Intellectual Property or product or
service of Company contains any defect in connection with processing data
containing dates in leap years or in the year 2000 or any preceding or following
years, which defects, individually or in the aggregate, would have a Material
Adverse Effect on Company.
(k) All material contracts, licenses and agreements relating to:
the products or service offerings or capabilities of Company and its
subsidiaries, including material products or service offerings or capabilities
currently under development (collectively the "COMPANY SERVICES"); to material
Company Intellectual Property; or to material Company Licensed Intellectual
Property (collectively, the "KEY AGREEMENTS"), are in full force and effect. The
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination, or
suspension of such contracts, licenses and agreements. Company and each of its
subsidiaries are in material compliance with, and have not materially breached
any term of any of the Key Agreements, licenses and agreements and, to the
knowledge of Company and its subsidiaries, all other parties to the Key
Agreements are in compliance in all material respects with, and have not
materially breached any term of, the Key Agreements.
(l) Following the Closing Date, the Surviving Corporation will be
permitted to exercise all of Company's rights under the Key Agreements to the
same extent Company would have been able to had the transactions contemplated by
this Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments that Company would
otherwise be required to pay.
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2.10 COMPLIANCE WITH LAWS.
(a) Neither Company nor any of its subsidiaries is in conflict
with, or in default or in violation of (i) any law, rule, regulation, order,
judgment or decree applicable to Company or any of its subsidiaries or by which
Company or any of its subsidiaries or any of their respective properties is
bound or affected, or (ii) any note, bond, mortgage, indenture, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Company or any of its subsidiaries is a party or by which Company or any of its
subsidiaries or its or any of their respective properties is bound or affected,
except for conflicts, violations and defaults that, individually or in the
aggregate, would not have a Material Adverse Effect on Company. Except as set
forth in Part 2.10(a) of the Company Disclosure Letter, no investigation or
review by any Governmental Entity is pending or, to the Company's knowledge, has
been threatened in a writing delivered to Company against Company or any of its
subsidiaries, nor, to the Company's knowledge, has any Governmental Entity
indicated an intention to conduct an investigation of Company or any of its
subsidiaries. To the Company's knowledge, there is no agreement, judgment,
injunction, order or decree binding upon Company or any of its subsidiaries that
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any material business practice of Company or any of its
subsidiaries, or any acquisition of material property by Company or any of its
subsidiaries.
(b) Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities that
are material to or required for the operation of the business of Company as
currently conducted (collectively, the "COMPANY PERMITS"), and are in compliance
with the terms of the Company Permits, except where the failure to hold such
Company Permits, or be in such compliance, would not, individually or in the
aggregate, have a Material Adverse Effect on Company.
2.11 LITIGATION. Except as set forth on Part 2.11 of the Company
Disclosure Letter, there are no claims, suits, actions or proceedings pending
or, to the knowledge of Company, threatened against, relating to or affecting
Company or any of its subsidiaries, before any Governmental Entity or any
arbitrator that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which could reasonably be expected, either
singularly or in the aggregate with all such claims, actions or proceedings, to
have a Material Adverse Effect on Company or on the Surviving Corporation
following the Merger or have a material adverse effect on the ability of the
parties hereto to consummate the Merger. No Governmental Entity has at any time
challenged or questioned in a writing delivered to Company the legal right of
Company to conduct its business as currently conducted. As of the date hereof,
to the knowledge of Company, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that will, or that would reasonably be
expected to, cause or provide a bona fide basis for a director or executive
officer of the Company to seek indemnification from the Company under the
Company Charter Documents or any indemnification agreement between Company and
such person.
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2.12 EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 2.12(a)(i) below (which definition shall apply
only to this Section 2.12), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under
common control with Company within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "COMPANY EMPLOYEE PLAN" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "EMPLOYEE BENEFIT PLAN," within the meaning
of Section 3(3) of ERISA that is or has been maintained, contributed to, or
required to be contributed to, by Company or any Affiliate for the benefit of
any Employee;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current, former, or retired
employee, officer, or director of Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation or
similar agreement or contract between Company or any Affiliate, and any Employee
or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each Company
Employee Plan that has been adopted or maintained by Company, whether informally
or formally, for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "PENSION PLAN" (as
defined below) that is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
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(xiii)"PENSION PLAN" shall mean each Company Employee Plan
that is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) SCHEDULE. Part 2.12 of the Company Disclosure Letter contains
an accurate and complete list of each Company Employee Plan and each Employee
Agreement. Company does not have any plan or commitment to establish any new
Company Employee Plan, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Employee Agreement.
(c) DOCUMENTS. Company has made available to Parent: (i) correct
and complete copies of all documents embodying each Company Employee Plan and
each Employee Agreement including all amendments thereto; (ii) the most recent
annual actuarial valuations, if any, prepared for each Company Employee Plan;
(iii) the most recent annual report (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the Code
in connection with each Company Employee Plan or related trust; (iv) if the
Company Employee Plan is funded, the most recent annual and periodic accounting
of Company Employee Plan assets; (v) the most recent summary plan description
together with the summary of material modifications thereto, if any, required
under ERISA with respect to each Company Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and rulings relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the DOL with respect to any Company Employee Plan; (vii) all
material written agreements relating to each Company Employee Plan; (viii) all
communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events that
would result in any material liability to Company; (ix) all COBRA forms and
related notices; and (x) all registration statements and prospectuses prepared
in connection with each Company Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except, in each case, as would not,
individually or in the aggregate, result in a material liability to the Company,
(i) Company has performed in all material respects all obligations required to
be performed by it under, is not in default or violation of, and has no
knowledge of any default or violation by any other party to, each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination letter from the IRS with respect to each such Plan as to its
qualified status under the Code or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a determination letter and make any amendments necessary to obtain a favorable
determination and, to the knowledge of the Company, no event has occurred giving
rise to a material likelihood that such Plan would not be treated as qualified
by the IRS, and that such Plan satisfied the requirements of the Tax Reform Act
of 1986 and the GUST amendments; (iii), to the knowledge of the Company, no
"prohibited
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transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any Company Employee Plan; (iv) there are no actions, suits or
claims pending, or, to the knowledge of Company, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; (v) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to Parent,
Company or any of its Affiliates (other than ordinary administration expenses
typically incurred in a termination event); (vi) there are no audits, inquiries
or proceedings pending or, to the knowledge of Company, threatened by the IRS or
DOL with respect to any Company Employee Plan; (vii) neither Company nor any
Affiliate is subject to any penalty or tax with respect to any Company Employee
Plan under Section 402(i) of ERISA or Sections 4975 through 4980 of the Code;
and (viii) all contributions due from the Company or any Affiliate with respect
to any of the Company Employee Plans have been made as required under ERISA or
have been accrued on the Company Balance Sheet, and no further contributions
will be due or will have accrued thereunder as of the Closing Date.
(e) PENSION PLANS. Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan that is subject to Title IV of ERISA or Section 412 of the Code,
that would result in material liability to Company.
(f) MULTIEMPLOYER PLANS. At no time has Company contributed to or
been requested to contribute to any Multiemployer Plan, that would result in
material liability to Company.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth on Part
2.12(g) of the Company Disclosure Letter, no Company Employee Plan provides, or
has any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any person for any reason, except as may be
required by COBRA or other applicable statute, and Company has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) COBRA; FMLA. Neither Company nor any Affiliate has, prior to
the Effective Time, and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
(i) EFFECT OF TRANSACTION. Except as expressly contemplated by
this Agreement or as set forth on Part 2.12(i) of the Company Disclosure Letter,
the execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee. Except as set forth on Part 2.12(i) of
the Company Disclosure Letter, no payment or
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benefit that will or may be made by Company or its Affiliates with respect to
any Employee as a result of the transactions contemplated by this Agreement will
be characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code or will be treated as a nondeductible expense within the
meaning of Section 162 of the Code.
(j) EMPLOYMENT MATTERS. Except, in each case, as would not,
individually or in the aggregate, result in a material liability for the
Company, Company and each of its subsidiaries: (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) has
made commercially reasonable efforts to properly classified independent
contractors for purposes of federal and applicable state tax laws, laws
applicable to employee benefits and other applicable laws; (iv) is not liable
for any arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing; and (v) is not liable for any material payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending, or, to Company's knowledge, threatened or reasonably anticipated claims
or actions against Company under any worker's compensation policy or long-term
disability policy. Except as set forth on Part 2.12(j) of the Company Disclosure
Letter, to Company's knowledge, no Employee of Company has violated any
employment contract, nondisclosure agreement or noncompetition agreement by
which such Employee is bound due to such Employee being employed by Company and
disclosing to Company or using trade secrets or proprietary information of any
other person or entity, and Company has made commercially reasonable efforts to
correctly classify employees as exempt employees and non-exempt employees under
the Fair Labor Standards Act.
(k) LABOR. No work stoppage or labor strike against Company is
pending, threatened or reasonably anticipated. Company does not know of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of Company, threatened or reasonably anticipated claims relating to
any labor, safety or discrimination matters involving any Employee, including
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to Company. Neither Company nor any of its subsidiaries has
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act. Company is not presently, nor has it been in the past, a party
to, or bound by, any collective bargaining agreement or union contract with
respect to Employees and no collective bargaining agreement is being negotiated
by Company.
(l) SURRENDER FEES. No Company Employee Plan will be subject to
any surrender fees or service fees upon termination other than the normal and
reasonable administrative fees associated with the termination of benefit plans.
Company will have no liability to any employee or to any organization or any
other entity as a result of the termination of any employee leasing arrangement.
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2.13 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Except as would not have a Material
Adverse Effect on Company, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies (a "HAZARDOUS MATERIAL") are present, as a result of the
actions of Company or any of its subsidiaries or any affiliate of Company, or,
to Company's knowledge, as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof that Company or any of its
subsidiaries has at any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Except as would not have a
Material Adverse Effect on Company (in any individual case or in the aggregate)
(i) neither Company nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the Closing
Date, and (ii) neither Company nor any of its subsidiaries has disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) PERMITS. Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents
("ENVIRONMENTAL PERMITS") material to and necessary for the conduct of Company's
and its subsidiaries' Hazardous Material Activities and other businesses of
Company and its subsidiaries as such activities and businesses are currently
being conducted.
(d) ENVIRONMENTAL LIABILITIES. No material action, proceeding,
revocation, amendment procedure, writ or injunction is pending, and to Company's
knowledge, no material action, proceeding, revocation proceeding, amendment
procedure, writ or injunction has been threatened by any Governmental Entity
against Company or any of its subsidiaries in a writing delivered to Company
concerning any Environmental Permit of Company, Hazardous Material or any
Hazardous Materials Activity of Company or any of its subsidiaries. Company is
not aware of any fact or circumstance that reasonably could be expected to
involve Company or any of its subsidiaries in any environmental litigation or
impose upon Company any environmental liability, with such exceptions as would
not have a Material Adverse Effect on Company.
2.14 CERTAIN AGREEMENTS. Except as set forth in Part 2.14 of the Company
Disclosure Letter or the Company SEC Reports, neither Company nor any of its
subsidiaries is a party to or is bound by:
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(a) any employment or consulting agreement or commitment with any
employee or member of Company's Board of Directors, that, individually or in the
aggregate, is material to Company, other than those that are terminable by
Company or any of its subsidiaries on no more than thirty days notice without
liability or financial obligation, except to the extent general principles of
wrongful termination law may limit Company's or any of its subsidiaries' ability
to terminate employees at will;
(b) any agreement or plan, including any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(c) any material agreement of indemnification, any material
guaranty or any instrument evidencing indebtedness for borrowed money by way of
direct loan, sale of debt securities, purchase money obligation, conditioned
sale, or otherwise;
(d) any agreement, obligation or commitment containing covenants
purporting to limit or which effectively limit the Company's or any of its
subsidiaries' freedom to compete in any line of business or in any geographic
area or which would so limit Company or Surviving Corporation or any of its
subsidiaries after the Effective Time or granting any exclusive distribution or
other exclusive rights;
(e) any agreement or commitment currently in force relating to the
disposition or acquisition by Company or any of its subsidiaries after the date
of this Agreement of a material amount of assets not in the ordinary course of
business, or pursuant to which Company has any material ownership or
participation interest in any corporation, partnership, joint venture, strategic
alliance or other business enterprise other than Company's subsidiaries;
(f) any agreement or commitment with any affiliate of the Company
that is material to the Company; and
(g) any agreement or commitment currently in force providing for
capital expenditures by Company or its subsidiaries in excess of $250,000.00.
The agreements required to be disclosed in the Company Disclosure Letter
pursuant to clauses (a) through (g) above or pursuant to Section 2.9 or that are
or would be required to be filed with any Company SEC Report ("COMPANY
CONTRACTS") are valid and in full force and effect, except to the extent that
such invalidity would not have a Material Adverse Effect on Company. Except as
disclosed in the Company Disclosure Letter pursuant to clauses (a) through (g)
above or pursuant to Section 2.9 and except as disclosed in any Company SEC
Report, neither Company nor any of its subsidiaries, nor to Company's knowledge,
any other party thereto, is in breach, violation or default under, and neither
Company nor any of its subsidiaries has received written notice that it has
breached, violated or defaulted, any of the terms or conditions of any Company
Contract in such a manner as would have a Material Adverse Effect on Company.
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2.15 BROKERS' AND FINDERS' FEES. Except for fees payable to Bear Xxxxxxx
& Co. Inc. pursuant to engagement letters that have been provided to Parent,
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.16 INSURANCE. Company and each of its subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting business or owning assets similar to those of the Company and its
subsidiaries. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies have been paid and the Company and its subsidiaries are otherwise
in compliance in all material respects with the terms of such policies and
bonds. To the knowledge of Company, there has been no threatened termination of,
or material premium increase with respect to, any of such policies.
2.17 DISCLOSURE. The information supplied by Company for inclusion in the
joint proxy statement and prospectus and Form S-4 (or any similar successor form
thereto) Registration Statement to be filed by Parent with the SEC in connection
with the issuance of Parent Common Stock in the Merger (the "REGISTRATION
STATEMENT") shall not at the time the Registration Statement is filed with the
SEC and at the time it becomes effective under the Securities Act 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 circumstances under which they are made, not misleading. The
information supplied by Company for inclusion or incorporation by reference in
the proxy statement and prospectus to be filed with the SEC as part of the
Registration Statement (the "PROXY STATEMENT/PROSPECTUS") shall not, on the date
the Proxy Statement/Prospectus is mailed to Company's shareholders or to
Parent's shareholders, at the time of the meeting of Company's shareholders (the
"COMPANY SHAREHOLDERS' MEETING") to consider the Company Shareholder Approvals,
at the time of the meeting of the meeting of Parent's shareholders (the "PARENT
SHAREHOLDERS' MEETING") to consider the Parent Shareholder Approval Matters (as
that term is defined in Section 5.12 hereof) (with Parent Shareholders' approval
of the Parent Shareholder Approval Matters being herein referred to as the
"PARENT SHAREHOLDER APPROVALS"), 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 circumstances under which
they are made, not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Company Shareholders' Meeting or Parent
Shareholders' Meeting that has become false or misleading. The Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act, the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time any event relating to
Company or any of its affiliates, officers or directors should be discovered by
Company that is required to be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement/Prospectus, Company shall
promptly inform Parent. Notwithstanding the foregoing, Company makes no
representation or warranty with respect to any information supplied by Parent,
Merger Sub, any of Parent's subsidiaries or any affiliate of the foregoing that
is contained in any of the foregoing documents.
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2.18 BOARD APPROVAL. The Board of Directors of Company has, as of the
date of this Agreement, (i) determined that the Merger is fair to, and in the
best interests of Company and its shareholders, and has approved this Agreement
and (ii) declared the advisability of the Merger and recommends that the
shareholders of Company approve and adopt this Agreement and approve the Merger.
2.19 FAIRNESS OPINION. Company's Board of Directors has received a
written opinion from Bear Xxxxxxx & Co. Inc., dated as of the date hereof, to
the effect that, as of the date hereof, the Exchange Ratio is fair to Company's
shareholders from a financial point of view, and has delivered to Parent a copy
of such opinion.
2.20 TAKEOVER STATUTES AND RIGHTS AGREEMENT NOT APPLICABLE. No Georgia,
or to the Company's knowledge, other state's, anti-takeover, control share
acquisition, fair price, moratorium or other similar statute or regulation
(each, a "TAKEOVER STATUTE") applies or purports to apply to this Agreement, the
Merger or the other transactions contemplated hereby. The Rights are not
currently exercisable and will not become exercisable as a result of the Company
entering into this Agreement, the announcement of the execution and delivery of
this Agreement and the terms of the Merger, or the consummation of the Merger.
2.21 AFFILIATES. Part 2.21 of the Company Disclosure Letter is a complete
list of those persons who may be deemed to be, in Company's reasonable judgment,
affiliates of Company within the meaning of Rule 145 promulgated under the
Securities Act. Except as set forth in the Company SEC Reports, since the
effective date of the Company's initial public offering, no material event or
material increase in compensation or benefits has occurred as of the date of
this Agreement that would be required to be reported by the Company pursuant to
Item 404 of Regulation S-K promulgated by the SEC in the Company's Form 10-K or
Schedule 14A relating to its Annual Meeting of Shareholders.
2.22 SUPPLIER AND CUSTOMER RELATIONSHIPS. To the Company's knowledge, it
has good commercial working relationships with its material customers and
suppliers. Except as disclosed in Part 2.22 of the Company Disclosure Letter, no
customer accounting for more than 5% of the Company's revenues in any month
during the last twelve calendar months ending December 31, 2000 ("MATERIAL
CUSTOMER") has canceled or otherwise terminated its relationship with Company,
decreased or limited materially the amount of product or services ordered from
Company or threatened in writing (or to Company's knowledge orally) to take any
such action.
2.23 PRODUCT AND SERVICE QUALITY. To the Company's knowledge, all
services provided by Company or any Subsidiary to customers on or prior to the
Closing Date conform to applicable contractual commitments, implied warranties
not disclaimed, express warranties, product specifications and quality standards
published by Company or a Subsidiary in all material respects and include
limitations of Company's liability that are tied to the value of the contract.
Neither Company nor any Subsidiary has any material liability (and Company is
not aware of any basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against Company or
any Subsidiary giving rise to any liability) for replacement or repair thereof,
or for the taking of any remedial action with respect thereto or other damages
in connection therewith. Company has not received any written complaint from a
Customer that alleges that Company is in material breach of the customer
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contract or the agreed upon service level commitments, except for those that
Company reasonably believes can be addressed without resulting in a material
liability. All material unresolved written complaints received since December
31, 2000 from customers regarding the Company Services, in which the matter
complained about is of a recurring nature relative to more than one customer,
are set out in Part 2.23 of the Company Disclosure Letter in detail reasonably
sufficient to understand the nature of the complaint and the material actions
required to achieve resolution thereof. Company has no material liability for
breach of any service level commitments in excess of reserves therefore in the
Company Balance Sheet. Company has received written contract indemnities, or has
obtained other contractual allowances that were appropriate under the
circumstances, from each of its suppliers and vendors against liabilities that
Company may incur as a result of material defects or deficiencies in such
suppliers' or vendors' products or services or Intellectual Property
infringement relating thereto. The Company's data privacy policy is as set forth
on its web site and in Part 2.23 of the Company Disclosure Letter.
2.24 DISRUPTIONS. Except to the extent disclosed on Part 2.24 to the
Company Disclosure Letter, since December 31, 2000 there has not occurred any
material disruptions to network operations, or any material delays in planned
facility or network build out or construction activities, or any material
performance failures by the Company, or other material service disruptions, that
have resulted in material customer complaints or material breaches of customer
installation commitments, in each case with respect to the Company, which
individually or in the aggregate, have a Material Adverse Effect on the Company.
Except as set forth in Part 2.24 of the Company Disclosure Letter, the Company
has in place a formal disaster recovery plan reasonably calculated to ensure
prompt recovery from material disruptions to Company's network operations
without incurring liabilities to customers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date of this Agreement and as of the Closing Date, except (A) as
disclosed in (i) Parent's Annual Report on Form 10-K for the year ending August
31, 2000 and any Parent SEC Reports (as defined below) filed subsequent to such
Form 10-K, and (ii) the disclosure letter delivered by Parent to Company dated
as of the date hereof and certified by a duly authorized officer of Parent (the
"PARENT DISCLOSURE LETTER") (each Part of which qualifies the correspondingly
numbered representation, warranty or covenant to the extent specified therein
and such other representations, warranties or covenants to the extent a matter
in such Part is disclosed in such a way as to make its relevance to such other
representation, warranty or covenant readily apparent), and (B) with respect to
(x) the Disposition and (y) any sale of Intellectual Property or rights related
thereto, real property of Parent and of SpecTek or related assets to Parent's
parent entity or other transactions described in or contemplated by the
agreement between Parent, and MTI and MEI California, Inc. relating thereto
("MTI SALE AGREEMENT"), a copy of which has been provided to Company), any
Payment, any reduction in force or termination of supplier relationships
incident to any of the foregoing, the merger of Parent's HostPro subsidiary with
another wholly-owned Parent subsidiary and related
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assumption by Parent of HostPro Options (as defined in Section 6.3(h)), or any
potential acquisition that both Parent and Company approve of in advance in
writing (each, a "MUTUALLY AGREED ACQUISITION"), or any changes in Parent's or
any Subsidiary's financial condition, results of operation, expenses, assets or
liabilities directly resulting from any thereof ("CONTEMPLATED PARENT CHANGES"),
in each case where the same would reasonably constitute an exception to any of
the following representations and warranties, Parent and Merger Sub represent
and warrant as follows:
3.1 ORGANIZATION OF PARENT, MERGER SUB AND OTHER SUBSIDIARIES.
(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority, and all
requisite qualifications to do business as a foreign corporation, to conduct its
business in the manner in which its business is currently being conducted,
except where the failure to be so organized, existing or in good standing or to
have such power, authority or qualifications would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
(b) Other than as set forth in Part 3.1 of the Parent Disclosure
Letter, neither Parent nor any of its subsidiaries owns any capital stock of, or
any equity interest of any nature in, any corporation, partnership, joint
venture arrangement or other business entity, other than the entities identified
in Part 3.1 of the Parent Disclosure Letter, except for passive investments in
equity interests of public companies as part of the cash management program of
Parent. Neither Parent nor any of its subsidiaries has agreed or is obligated to
make, or is bound by any written, oral or other agreement, contract,
subcontract, lease, binding understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature, as in effect as of the date
hereof or as may hereinafter be in effect under which it may become obligated to
make any future investment in or capital contribution to any other entity.
Neither Parent, nor any of its subsidiaries, has, at any time, been a general
partner of any general partnership, limited partnership or other entity. Part
3.1 of the Parent Disclosure Letter indicates the jurisdiction of organization
of each entity listed therein and Company's direct or indirect equity interest
therein.
(c) Parent has delivered or made available to Company a true and
correct copy of the Articles of Incorporation and Bylaws of Parent and
Certificate of Incorporation and Bylaws of Merger Sub, each as amended to date
(collectively, the "PARENT CHARTER DOCUMENTS"), and each such instrument is in
full force and effect. Neither Parent nor Merger Sub is in violation of any of
the provisions of the Parent Charter Documents. Parent has delivered or made
available to Company all proposed or considered amendments to the Parent Charter
Documents.
3.2 PARENT AND MERGER SUB CAPITALIZATION.
(a) The authorized capital stock of Parent consists solely of
150,000,000 shares of Parent Common Stock, of which there were 96,856,165 shares
issued and outstanding as of the close of business on the date hereof. All
outstanding shares of Parent Common Stock are duly authorized, validly issued,
fully paid and nonassessable and are not subject to preemptive rights
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created by statute, the Articles of Incorporation or Bylaws of Parent or any
agreement or document to which Parent is a party or by which it is bound.
(b) As of the close of business on March 21, 2001, (i) 8,931,943 shares
of Parent Common Stock are subject to issuance pursuant to outstanding options
to purchase Parent Common Stock for a weighted average aggregate exercise price
of $10.10; (ii) 7,047,100 shares of HostPro, Inc. common stock, $0.01 par value
per share ("HOSTPRO COMMON STOCK") are subject to issuance pursuant to
outstanding options to purchase HostPro Common Stock for a weighted average
aggregate exercise price of $1.51 under HostPro's 2000 Equity Incentive Plans I
& II, which shall be adopted by Parent such that these options to purchase
shares of HostPro Common Stock shall be converted into options to purchase
Parent Common Stock as described in Section 6.3(h); and (iii) 1,456,600 shares
of Parent Common Stock are reserved for future issuance under the Parent ESPP.
Parent's 1995 Equity Incentive Plan and HostPro's 2000 Equity Incentive Plans I
& II are together referred to as the "PARENT STOCK OPTION PLANS." Options to
purchase Parent Common Stock or HostPro Common Stock pursuant to the Parent
Stock Option Plans are referred to as the "PARENT OPTIONS." Part 3.2(b)(1) of
the Parent Disclosure Letter sets forth the following information with respect
to each Parent Option outstanding as of the date of this Agreement: (i) the name
of the optionee; (ii) the number of shares of Parent Common Stock subject to
such Parent Option; (iii) the exercise price of such Parent Option; (iv) the
date on which such Parent Option was granted or assumed; (v) the date on which
such Parent Option expires; (vi) whether the exercisability of such option will
be accelerated in any way by the transactions contemplated by this Agreement,
and indicates the extent of any such acceleration; and (vii) whether such Parent
Option remains exercisable at any time after the 90th day after termination of
service. Parent has made available to Company an accurate and complete copy of
the Parent Stock Option Plans and the form of all stock option agreements
evidencing Parent Options. There are no options outstanding to purchase shares
of Parent Common Stock other than pursuant to the Parent Stock Option Plans. All
shares of Parent Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
Except as set forth on Part 3.2(b) of the Parent Disclosure Letter, there are no
commitments or agreements of any character to which Parent is bound obligating
Parent to accelerate the vesting of any Parent Option as a result of the merger.
All shares of Parent Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Part 3.2(b) of the Parent Disclosure
Letter, no Parent Option has had its vesting, exercise or exercise price
provisions amended or modified since December 31, 2000, and no Parent Option has
been issued in replacement of another Parent Option.
(c) The authorized capital stock of Merger Sub consists of 1,000 shares
of common stock, $0.01 par value, all of which, as of the date hereof, are
issued and outstanding and are held by Parent. All of the outstanding shares of
Merger Sub's common stock have been duly authorized and validly issued, and are
fully paid and nonassessable. Merger Sub was formed for the purpose of
consummating the Merger and has no material assets or liabilities except as
necessary for such purpose.
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(d) Except as set forth on Part 3.2(d) of the Parent Disclosure Letter,
all outstanding shares of Parent Common Stock, all outstanding Parent Options,
and all outstanding shares of capital stock of each subsidiary of Parent have
been issued and granted in compliance with (i) all applicable federal and state
securities laws and other applicable material Legal Requirements and (ii) all
material requirements set forth in applicable agreements or instruments.
(e) The Parent Common Stock to be issued in the Merger, when issued in
accordance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable. There are no statutory or contractual preemptive rights
or rights of first refusal with respect to the issuance of the Parent Common
Stock upon consummation of the Merger.
(f) Each Subsidiary of Parent is duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, has all
powers and governmental licenses, authorizations, consents and approvals
required to carry out its business as now conducted, except for those the
absence of which would not, individually or in the aggregate, have a Material
Adverse Effect on Parent or the Houdini Business.
3.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Part 3.3 of the Parent Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of Parent
equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except for
securities Parent owns, free and clear of all claims and Encumbrances, directly
or indirectly through one or more subsidiaries, and except for shares of capital
stock or other similar ownership interests of certain subsidiaries of Parent
that are owned by certain nominee equity holders as required by the applicable
law of the jurisdiction of organization of such subsidiaries, as of the date of
this Agreement, Parent owns all equity securities, partnership interests or
similar ownership interests of any class of equity security of each subsidiary
of Parent, including all securities thereof that are exchangeable or convertible
into or exercisable for such equity securities, partnership interests or similar
ownership interests. Except as set forth in Part 3.2 or Part 3.3 of the Parent
Disclosure Letter, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which Parent or any of its subsidiaries is a party or by which it is bound
obligating Parent or any of its subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or
cause the repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of Parent or any of its
subsidiaries or obligating Parent or any of its subsidiaries to grant, extend,
accelerate the vesting of or enter into any such subscription, option, warrant,
equity security, call, right, commitment or agreement. Except as contemplated by
this Agreement or as set forth on Part 3.3 of the Parent Disclosure Letter and
except as contemplated by Section 5.20, there are no registration rights with
respect to any equity security of any class of Parent or with respect to any
equity security, partnership interest or similar ownership interest of any class
of any of its subsidiaries.
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3.4 AUTHORITY; NON-CONTRAVENTION.
(a) Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the Merger have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub, subject only to obtaining
the Parent Shareholder Approvals and the filing of the Delaware Certificate of
Merger pursuant to Delaware Law and the Georgia Articles of Merger pursuant to
Georgia Law. The affirmative vote of the holders of a majority of the shares of
the Parent Common Stock present, either in person or by proxy, and entitled to
vote at the Parent Shareholders' Meeting, but in any case not less than 25.01%
of the outstanding Parent Common Stock, is sufficient for Parent's shareholders
(i) to approve the issuance of shares of Parent Common Stock pursuant to the
Merger, and (ii) to amend Parent's Articles of Incorporation to increase the
authorized number of shares of Parent Common Stock to 200 million shares (or
such larger number as Parent deems appropriate in light of anticipated future
issuances), and no other approval of any holder of any securities of Company is
required in connection with the consummation of the Merger. This Agreement has
been duly executed and delivered by each of Parent and Merger Sub and, assuming
the due authorization, execution and delivery by Company, constitute the valid
and binding obligations of Parent and Merger Sub, respectively, enforceable
against Parent and Merger Sub in accordance with their terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting the
rights of creditors generally and general principles of equity.
(b) The execution and delivery of this Agreement by each of Parent
and Merger Sub does not, and the performance of this Agreement by Parent and
Merger Sub will not, (i) subject to obtaining the Parent Shareholder Approvals,
conflict with or violate the Parent Charter Documents, (ii) subject to obtaining
the Parent Shareholder Approvals and compliance with the requirements set forth
in Section 3.4(c), conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or Merger Sub or any other subsidiary of
Parent or by which any of their respective properties is bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair
Parent's rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of; or result in the creation of an Encumbrance on any of the
properties or assets of Parent or Merger Sub or any other subsidiary of Parent
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise, concession or other instrument or obligation to
which Parent or Merger Sub or any other subsidiary of Parent is a party or by
which Parent or Merger Sub or any other subsidiary of Parent or any of their
respective assets are bound or affected, except, in the case of clauses (ii) and
(iii), for such conflicts, violations, breaches, defaults, impairments, or
rights that, individually or in the aggregate, would not have a Material Adverse
Effect on Parent or on the HostPro Business. Part 3.4(b) of the Parent
Disclosure Letter list all consents, waivers and approvals under any of Parent's
or any of its subsidiaries' material agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby, which, individually or in the aggregate, if not obtained,
would result in a material loss of benefits to Parent or the Surviving
Corporation as a result of the Merger.
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(c) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or other person
is required to be obtained or made by Parent or Merger Sub in connection with
the execution and delivery of this Agreement or the consummation of the Merger,
except for (i) the filing of the Delaware Certificate of Merger with the
Secretary of State of the State of Delaware and the Georgia Articles of Merger
with the Secretary of State of the State of Georgia and other appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, (ii) the filing of the Registration Statement with the
SEC and the effectiveness of the Registration Statement, and a Schedule 13D with
regard to the Company Voting Agreement and the Parent Voting Agreement in
accordance with the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and the Exchange Act (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state securities (or related) laws and the HSR Act and the
securities or antitrust laws of any foreign country, and (iv) such other
consents, authorizations, filings, approvals and registrations that if not
obtained or made would not be material to Parent or the Surviving Corporation or
have a material adverse effect on the ability of the parties hereto to
consummate the Merger.
3.5 SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required to
be filed by Parent with the SEC since August 28, 1997. All such required forms,
reports and documents (including those that Parent may file subsequent to the
date hereof) are referred to herein as the "PARENT SEC REPORTS." As of their
respective dates, the Parent SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such Parent
SEC Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent corrected prior to the date of this
Agreement by a subsequently filed Parent SEC Report. None of Parent's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Parent SEC Reports (the
"PARENT FINANCIALS"), including any Parent SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
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 1O-Q, 8-K or any successor form under the Exchange Act, and except that
discontinued operations are reported as discontinued operations required under
GAAP) and (iii) fairly presented the consolidated financial position of Parent
and its subsidiaries as of the respective dates thereof and the consolidated
results of Parent's operations and cash flows for the periods indicated, except
that the unaudited interim financial statements may not contain footnotes and
were or are subject to normal and recurring year-end adjustments, and except
that discontinued operations are reported as discontinued operations required
under GAAP. The balance sheet of Parent contained in Parent SEC Reports
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as of November 30, 2000 is hereinafter referred to as the "PARENT BALANCE
SHEET." Except as disclosed in the Parent Financials, since the date of the
Parent Balance Sheet neither Parent nor any of its subsidiaries has any
liabilities required under GAAP to be set forth on a balance sheet (absolute,
accrued, contingent or otherwise) that are, individually or in the aggregate,
material to the business, results of operations or financial condition of Parent
and its subsidiaries taken as a whole, except for liabilities incurred since the
date of the Parent Balance Sheet in the ordinary course of business consistent
with past practices and liabilities incurred in connection with this Agreement.
(c) Parent has heretofore furnished to Company a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments that previously had been filed by Parent with the SEC pursuant
to the Securities Act or the Exchange Act.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Part
3.6 of the Parent Disclosure Letter, since the date of the Parent Balance Sheet,
and except for the Contemplated Parent Changes and except as contemplated by
Section 1.12 hereof, there has not been (i) any Material Adverse Effect with
respect to Parent, (ii) any declaration, setting aside or payment of any
dividend on, or other distribution (whether in cash, stock or property) in
respect of, any of Parent's or any of its subsidiaries' capital stock, or any
purchase, redemption or other acquisition by Parent of any of Parent's capital
stock or any other securities of Parent or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases that are not, individually or in the aggregate, material in
amount from employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any split, combination
or reclassification of any of Parent's or any of its subsidiaries' capital
stock, (iv) any granting by Company or any of its subsidiaries of any material
increase in compensation or fringe benefits to any of their officers or
employees, or any payment by Company or any of its subsidiaries of any bonus to
any of their officers or employees, or any granting by Company or any of its
subsidiaries of any material increase in severance or termination pay, other
than in the ordinary course, consistent with past practice, or any entry by
Company or any of its subsidiaries into, or material modification or amendment
of, any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Company of the nature contemplated hereby, (v) any
material change by Parent in its accounting methods, principles or practices,
except as required by concurrent changes in GAAP, (vi) any material revaluation
by Parent of any of its material assets, including writing off notes or accounts
receivable other than in the ordinary course of business or (vii) any material
change in the pricing of the fees Parent charges for the HostPro Services (as
defined in Section 3.9(j)).
3.7 TAXES.
(a) Parent and each of its subsidiaries have timely filed, or
applied for the extension of the applicable filing deadline, all material
Returns relating to Taxes required to be filed by or on behalf of Parent and
each of its subsidiaries with any Tax authority, such Returns are true, correct
and complete in all material respects, and Parent and each of its subsidiaries
have paid all Taxes shown to be due on such Returns.
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(b) Parent and each of its subsidiaries have withheld all federal
and state income taxes, Taxes pursuant to FICA, Taxes pursuant to FUTA and other
Taxes required to be withheld, except such Taxes that are not material to
Parent.
(c) Neither Parent nor any of its subsidiaries has been delinquent
in the payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against Parent or any of its subsidiaries, nor
has Parent or any of its subsidiaries executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) Except as set forth in Part 3.7(c) of the Parent Disclosure
Letter, no audit or other examination of any Return of Parent or any of its
subsidiaries by any Tax authority is presently in progress, nor has Parent or
any of its subsidiaries been notified of any request for such an audit or other
examination that is reasonably likely to result in any adjustment that is
material to Parent.
(e) No adjustment relating to any Returns filed by Parent or any
of its subsidiaries has been proposed in writing formally or informally by any
Tax authority to Company or any of its subsidiaries or any representative
thereof that is reasonably likely to be material to Parent.
(f) Neither Parent nor any of its subsidiaries has any liability
for unpaid Taxes that has not been accrued for or reserved on the Parent Balance
Sheet in accordance with GAAP, whether asserted or unasserted, contingent or
otherwise, that is material to Parent, other than any liability for unpaid Taxes
that may have accrued since the date of the Parent Balance Sheet in connection
with the operation of the business of Parent and its subsidiaries in the
ordinary course.
(g) There is no agreement, plan or arrangement to which Parent or
any of its subsidiaries is a party, including this Agreement and the agreements
entered into in connection with this Agreement, covering any employee or former
employee of Parent or any of its subsidiaries that, individually or
collectively, would be reasonably likely to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code.
(h) Neither Parent nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by Parent.
(i) Neither Parent nor any of its subsidiaries is party to or has
any obligation under any tax-sharing, tax indemnity or tax allocation agreement
or arrangement, other than with Parent's parent entity.
(j) Except as may be required as a result of the Merger, Parent
and its subsidiaries have not been and will not be required to include any
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
Section 481 of the Code or any comparable
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provision under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Closing.
(k) None of Parent's or its subsidiaries' assets are tax exempt
use property within the meaning of Section 168(h) of the Code.
(l) Parent has not been distributed in a transaction qualifying
under Section 355 of the Code within the last two years, nor has Parent
distributed any corporation in a transaction qualifying under Section 355 of the
Code within the last two years.
(m) Parent is not aware of any fact, circumstance, plan or
intention on the part of Parent that would be reasonably likely to prevent the
Merger from qualifying as a "reorganization" pursuant to the provisions of
Section 368 of the Code.
3.8 TITLE TO PROPERTIES.
(a) Parent has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in
connection with the HostPro Business, free and clear of any Encumbrances, except
as reflected in the Parent Financials and except for liens for Taxes not yet due
and payable and such Encumbrances that are not material in character, amount or
extent.
(b) Parent has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Encumbrances, except as reflected in the Parent
Financials and except for liens for Taxes not yet due and payable and such
Encumbrances that are not material in character, amount or extent.
3.9 INTELLECTUAL PROPERTY. For the purposes of this Agreement, the
following terms have the following definitions:
"PARENT INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Parent or one of its subsidiaries
relating to or used in the HostPro Business.
"PARENT LICENSED INTELLECTUAL PROPERTY" shall mean any Intellectual
Property that is licensed to Parent on a non-exclusive basis and that is used in
the conduct of the HostPro Business as currently conducted.
"PARENT REGISTERED INTELLECTUAL PROPERTY" means all of the
Registered Intellectual Property owned by, or filed in the name of, Parent or
one of its subsidiaries relating to or used in the HostPro Business.
(a) No material Parent Intellectual Property or product or service
of Parent is subject to any proceeding or outstanding decree, order, judgment,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by Parent, or which may affect the validity, use or
enforceability of such Parent Intellectual Property.
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(b) Each material item of Parent Registered Intellectual Property
is valid and subsisting, all necessary registration, maintenance and renewal
fees currently due in connection with such Registered Intellectual Property have
been made and all necessary documents, recordations and certificates in
connection with such Registered Intellectual Property have been filed with the
relevant patent, copyright, trademark, domain name or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property except, in each case, as would
not materially adversely affect such item of Parent Registered Intellectual
Property. Parent has applied for patent and copyright protection with respect to
each material software program of the HostPro Business, such registrations,
applications or issued patents are listed by number in Part 3.9(b) of the Parent
Disclosure Letter, and copies of such registrations, applications and issued
patents have been provided to Company's counsel. Parent has not disclosed the
source code of any material software program of the HostPro Business to any
person except (i) employees of the Parent or its subsidiaries bound under
written invention assignment and non-disclosure agreements and (ii) such other
persons bound under written non-disclosure agreements, the form(s) of which have
been delivered to Company's counsel. Parent retains ownership of all Parent
Intellectual Property rights in and to all material software programs (including
without limitation any derivative works thereof), products and services of the
HostPro Business, and no third party has any rights (anywhere in the world) in
or to any trade name, URL, domain name, logo, common law trademark or service
xxxx, trademark or service xxxx registration or application therefore used by
the HostPro Business anywhere in the world.
(c) Parent or one of its subsidiaries owns and has good and
exclusive title to, or has license (sufficient for the conduct of its business
as currently conducted and as proposed to be conducted) to, each material item
of Parent Intellectual Property and Parent Licensed Intellectual Property free
and clear of any Encumbrance (excluding licenses and related restrictions).
(d) Neither Parent nor any of its subsidiaries have transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Parent Intellectual Property, to any third
party.
(e) To Parent's knowledge, the operation of the HostPro Business
as such business currently is conducted, including Parent's design, development,
marketing and sale of products or services in connection with the HostPro
Business or any other business of Parent or its subsidiaries (including with
respect to products currently under development) has not, does not and will not
infringe or misappropriate the Intellectual Property of any third party or, to
its knowledge, constitute unfair competition or trade practices under the laws
of any jurisdiction, which, individually or in the aggregate, would result in a
material liability.
(f) Parent has not received notice from any third party that the
operation of the business of Parent or any act, product or service of Parent,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction, which allegation, if true, would have a Material Adverse Effect on
Parent or the HostPro Business.
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(g) To the knowledge of Parent, no person has or is infringing or
misappropriating any material Parent Intellectual Property, which infringement
or misappropriation, individually or in the aggregate, would have a Material
Adverse Effect on Parent or the HostPro Business.
(h) Parent and its subsidiaries have taken reasonable steps to
protect Parent's and its subsidiaries' rights in Parent's and such subsidiaries'
confidential information and trade secrets, except where the failure to do so
would not have a Material Adverse Effect on Parent or the HostPro Business. All
employees, contractors and consultants of Parent and any other third parties who
have been involved in the development of software, products or services offered
in connection with the HostPro Business have executed invention assignment and
confidentiality agreements in the form delivered to Company's counsel, and all
employees and consultants of Parent and other third parties who have access to
confidential information or trade secrets related to the HostPro Business have
executed appropriate nondisclosure agreements in the form delivered to Company's
counsel.
(i) None of the Parent Intellectual Property or product or service
of Parent contains any significant defect in connection with processing data
containing dates in leap years or in the year 2000 or any preceding or following
years, which defects, individually or in the aggregate, would have a Material
Adverse Effect on Parent or the HostPro Business.
(j) All material contracts, licenses and agreements relating to:
the products or service offerings or capabilities of the HostPro Business,
including material products or service offerings or capabilities currently under
development (collectively the "HOSTPRO SERVICES"); to material Parent
Intellectual Property; or to material Parent Licensed Intellectual Property
(collectively, the "KEY HOSTPRO AGREEMENTS"), are in full force and effect. The
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination, or
suspension of such contracts, licenses and agreements. Parent and each of its
subsidiaries are in material compliance with, and have not materially breached
any term of any of the Key HostPro Agreements, licenses and agreements and, to
the knowledge of Company and its subsidiaries, all other parties to the Key
HostPro Agreements are in compliance in all material respects with, and have not
materially breached any term of, the Key HostPro Agreements.
3.10 COMPLIANCE WITH LAWS.
(a) Neither Parent nor any of its subsidiaries is in conflict
with, or in default or in violation of (i) any law, rule, regulation, order,
judgment or decree applicable to Parent or any of its subsidiaries or by which
Parent or any of its subsidiaries or any of their respective properties is bound
or affected, or (ii) any note, bond, mortgage, indenture, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
any of its subsidiaries is a party or by which Parent or any of its subsidiaries
or its or any of their respective properties is bound or affected, except for
conflicts, violations and defaults that, individually or in the aggregate, would
not have a Material Adverse Effect on Parent or the HostPro Business. Except as
set forth in Part 3.10(a) of the Parent Disclosure Letter, no investigation or
review by any Governmental Entity is pending or, to Parent's knowledge, has been
threatened in a writing delivered to Parent against Parent or any of its
subsidiaries, nor, to
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Parent's knowledge, has any Governmental Entity indicated an intention to
conduct an investigation of Parent or any of its subsidiaries. To Parent's
knowledge, there is no agreement, judgment, injunction, order or decree binding
upon Parent or any of its subsidiaries that has or could reasonably be expected
to have the effect of prohibiting or materially impairing any material business
practice of Parent or any of its subsidiaries, or any acquisition of material
property by Parent or any of its subsidiaries.
(b) Parent and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities that
are material to or required for the operation of the business of Parent as
currently conducted (collectively, the "PARENT PERMITS"), and are in compliance
with the terms of the Parent Permits, except where the failure to hold such
Parent Permits, or be in such compliance, would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or the HostPro Business.
3.11 LITIGATION. Except as set forth on Part 3.11 of the Parent
Disclosure Letter, there are no claims, suits, actions or proceedings pending
or, to the knowledge of Parent, threatened against, relating to or affecting
Parent or any of its subsidiaries, before any Governmental Entity or any
arbitrator that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which could reasonably be expected, either
singularly or in the aggregate with all such claims, actions or proceedings, to
have a Material Adverse Effect on Parent or the HostPro Business or have a
material adverse effect on the ability of the parties hereto to consummate the
Merger. No Governmental Entity has at any time challenged or questioned in a
writing delivered to Parent the legal right of Parent to conduct its business as
currently conducted. As of the date hereof, to the knowledge of Parent, no event
has occurred, and no claim, dispute or other condition or circumstance exists,
that will, or that would reasonably be expected to, cause or provide a bona fide
basis for a director or executive officer of Parent to seek indemnification from
Parent under the Parent Charter Documents or any indemnification agreement
between Parent and such person.
3.12 EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 3.12(a)(i) below (which definition shall apply
only to this Section 3.12), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under
common control with Parent within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the regulations issued thereunder;
(vi) "PARENT EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation or
similar agreement or contract between Parent or any Affiliate, and any Parent
Employee or consultant;
(ii) "PARENT EMPLOYEE PLAN" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise,
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funded or unfunded, including without limitation, each "EMPLOYEE BENEFIT PLAN,"
within the meaning of Section 3(3) of ERISA that is or has been maintained,
contributed to, or required to be contributed to, by Parent or any Affiliate for
the benefit of any Employee;
(iii) "PARENT EMPLOYEES" shall mean any current, former or
retired employee, officer or director of Parent or any Affiliate;
(iv) "INTERNATIONAL PARENT EMPLOYEE PLAN" shall mean each
Parent Employee Plan that has been adopted or maintained by Parent, whether
informally or formally, for the benefit of Employees outside the United States;
(v) "MULTIEMPLOYER PLAN" shall mean any "PENSION PLAN" (as
defined below) that is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(vi) "PENSION PLAN" shall mean each Parent Employee Plan that
is an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) SCHEDULE. Part 3.12 of the Parent Disclosure Letter contains
an accurate and complete list of each Parent Employee Plan and each Parent
Employee Agreement. Parent does not have any plan or commitment to establish any
new Parent Employee Plan, to modify any Parent Employee Plan or Parent Employee
Agreement (except to the extent required by law or to conform any such Parent
Employee Plan or Parent Employee Agreement to the requirements of any applicable
law, in each case as previously disclosed to Company in writing, or as required
by this Agreement), or to enter into any Parent Employee Agreement.
(c) DOCUMENTS. Parent has made available to Company: (i) correct
and complete copies of all documents embodying each Parent Employee Plan and
each Parent Employee Agreement including all amendments thereto; (ii) the most
recent annual actuarial valuations, if any, prepared for each Parent Employee
Plan; (iii) the most recent annual report (Form Series 5500 and all schedules
and financial statements attached thereto), if any, required under ERISA or the
Code in connection with each Parent Employee Plan or related trust; (iv) if the
Parent Employee Plan is funded, the most recent annual and periodic accounting
of Parent Employee Plan assets; (v) the most recent summary plan description
together with the summary of material modifications thereto, if any, required
under ERISA with respect to each Parent Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and rulings relating
to Parent Employee Plans and copies of all applications and correspondence to or
from the IRS or the DOL with respect to any Parent Employee Plan; (vii) all
material written agreements and contracts relating to each Parent Employee Plan;
(viii) all material communications material to any Parent Employee or Parent
Employees relating to any Parent Employee Plan and any proposed Parent Employee
Plans, in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events that would result in any material liability to Parent;
(ix) all COBRA forms and related notices; and (x) all registration statements
and prospectuses prepared in connection with each Parent Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except, in each case, as would not,
individually or in the aggregate, result in a material liability to Parent, (i)
Parent has performed in
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all material respects all obligations required to be performed by it under, is
not in default or violation of, and has no knowledge of any default or violation
by any other party to, each Parent Employee Plan, and each Parent Employee Plan
has been established and maintained in material respects in accordance with its
terms and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) each Parent
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code has either received a
favorable determination letter from the IRS with respect to each such Plan as to
its qualified status under the Code or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a determination letter and make any amendments necessary to obtain a favorable
determination and, to the knowledge of Parent, no event has occurred giving rise
to a material likelihood that such Plan would not be treated as qualified by the
IRS, and that such Plan satisfied the requirements of the Tax Reform Act of 1986
and the Gust Amendments; (iii) the knowledge of Parent, no "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any Parent Employee Plan; (iv) there are no actions, suits or
claims pending, or, to the knowledge of Parent, threatened or reasonably
anticipated (other than routine claims for benefits) against any Parent Employee
Plan or against the assets of any Parent Employee Plan; (v) each Parent Employee
Plan can be amended, terminated or otherwise discontinued after the Effective
Time in accordance with its terms, without liability to Parent or any of its
Affiliates (other than ordinary administration expenses typically incurred in a
termination event); (vi) there are no audits, inquiries or proceedings pending
or, to the knowledge of Parent, threatened by the IRS or DOL with respect to any
Parent Employee Plan; (vii) neither Parent nor any Affiliate is subject to any
penalty or tax with respect to any Parent Employee Plan under Section 402(i) of
ERISA or Sections 4975 through 4980 of the Code; and (viii) all contributions
due from the Company or any Affiliate with respect to any of the Company
Employee Plans have been made as required under ERISA or have been accrued on
the Company Balance Sheet.
(e) PENSION PLANS. Parent does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan that is subject to Title IV of ERISA or Section 412 of the Code,
that would result in material liability to Parent.
(f) MULTIEMPLOYER PLANS. At no time has Parent contributed to or
been requested to contribute to any Multiemployer Plan, that would result in
material liability to Parent.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth on Part
3.12(g) of the Parent Disclosure Letter, no Parent Employee Plan provides, or
has any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any person for any reason, except as may be
required by COBRA or other applicable statute, and Parent has never represented,
promised or contracted (whether in oral or written form) to any Parent Employee
(either individually or to Parent Employees as a group) or any other person that
such Parent Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
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(h) COBRA; FMLA. Neither Parent nor any Affiliate has, prior to
the Effective Time, and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
(i) EFFECT OF TRANSACTION. Except as expressly contemplated by
this Agreement or as set forth on Part 3.12(i) of the Parent Disclosure Letter,
the execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Parent Employee
Plan, trust or loan that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any Parent Employee. Except as set forth on Part 3.12(i) of the Parent
Disclosure Letter, no payment or benefit that will or may be made by Parent or
its Affiliates with respect to any Employee as a result of the transactions
contemplated by this Agreement will be characterized as an "excess parachute
payment," within the meaning of Section 280G(b)(1) of the Code or will be
treated as a nondeductible expense within the meaning of Section 162 of the
Code.
(j) EMPLOYMENT MATTERS. Except, in each case, as would not,
individually or in the aggregate, result in a material liability to Parent,
Parent and each of its subsidiaries: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Parent Employees; (iii) has made
commercially reasonable efforts to properly classify independent contractors for
purposes of federal and applicable state tax laws, laws applicable to employee
benefits and other applicable laws; (iv) is not liable for any arrears of wages
or any taxes or any penalty for failure to comply with any of the foregoing; and
(v) is not liable for any material payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Parent Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, or, to
Parent's knowledge, threatened or reasonably anticipated claims or actions
against Parent under any worker's compensation policy or long-term disability
policy. To Parent's knowledge, no Parent Employee has violated any employment
contract, nondisclosure agreement or noncompetition agreement by which such
Parent Employee is bound due to such Parent Employee being employed by Parent
and disclosing to parent or using trade secrets or proprietary information of
any other person or entity, and Parent has made commercially reasonable efforts
to correctly classify employees as exempt employees and non-exempt employees
under the Fair Labor Standards Act.
(k) LABOR. No work stoppage or labor strike against Parent is
pending, threatened or reasonably anticipated. Parent does not know of any
activities or proceedings of any labor union to organize any Parent Employees.
There are no actions, suits, claims, labor disputes or grievances pending, or,
to the knowledge of Parent, threatened relating to any labor, safety or
discrimination matters involving any Parent Employee, including charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually
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or in the aggregate, result in any material liability to Parent. Neither Parent
nor any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. Parent is not presently, nor has it
been in the past, a party to, or bound by, any collective bargaining agreement
or union contract with respect to Parent Employees and no collective bargaining
agreement is being negotiated by Parent.
3.13 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Except as would not have a Material
Adverse Effect on Parent, no underground storage tanks and no amount of any
Hazardous Materials are present, as a result of the actions of Parent or any of
its subsidiaries or any affiliate of Parent, or, to Parent's knowledge, as a
result of any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof that Parent or any of its subsidiaries has at any time owned,
operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Except as would not have a
Material Adverse Effect on Parent (in any individual case or in the aggregate)
(i) neither Parent nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the Closing
Date, and (ii) neither Parent nor any of its subsidiaries has disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) PERMITS. Parent and its subsidiaries currently hold all
Environmental Permits material to and necessary for the conduct of Parent's and
its subsidiaries' Hazardous Material Activities and other businesses of Parent
and its subsidiaries as such activities and businesses are currently being
conducted.
(d) ENVIRONMENTAL LIABILITIES. No material action, proceeding,
revocation proceeding, amendment procedure, writ or injunction is pending, and
to Parent's knowledge, no material action, proceeding, revocation proceeding,
amendment procedure, writ or injunction has been threatened by any Governmental
Entity against Parent or any of its subsidiaries in a writing delivered to
Parent concerning any Environmental Permit of Parent, Hazardous Material or any
Hazardous Materials Activity of Parent or any of its subsidiaries. Parent is not
aware of any fact or circumstance that reasonably could be expected to involve
Parent or any subsidiaries in any environmental litigation or impose upon Parent
any material environmental liability, with such exceptions as would not have a
Material Adverse Effect on Parent.
3.14 CERTAIN AGREEMENTS. Except as set forth in Part 3.14 of the Parent
Disclosure Letter or in the Parent SEC Reports, neither Parent nor any of its
subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement or commitment with any
employee of the HostPro Business or member of Parent's Board of Directors, that,
individually or in the aggregate, is material to the HostPro Business, other
than those that are terminable by
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Parent or any of its subsidiaries on no more than thirty days notice without
liability or financial obligation, except to the extent general principles of
wrongful termination law may limit Parent's or any of its subsidiaries' ability
to terminate employees at will;
(b) any agreement or plan, including any stock option plan, stock
appreciation right plan or stock purchase plan, for employees of the HostPro
Business, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement;
(c) any material agreement of indemnification for any employees of
the HostPro Business, any material guaranty or any instrument evidencing
indebtedness for borrowed money by way of direct loan, sale of debt securities,
purchase money obligation, conditioned sale, or otherwise that is material to
the HostPro Business;
(d) any agreement, obligation or commitment containing covenants
purporting to limit or which effectively limit the Parent's or any of its
subsidiaries' freedom to compete in the HostPro Business or in any geographic
area or granting any exclusive distribution or other exclusive rights with
respect thereto; or
(e) any agreement or commitment currently in force relating to the
disposition or acquisition by Parent or any of its subsidiaries after the date
of this Agreement of a material amount of assets not in the ordinary course of
business (other than in connection with the Contemplated Parent Changes (and in
that connection, a copy of the MTI Sales Agreement has been provided to
Company), or pursuant to which Parent has any material ownership or
participation interest in any corporation, partnership, joint venture, strategic
alliance or other business enterprise other than Parent's subsidiaries; or
(f) any agreement or commitment with any affiliate of the Parent
that is material to the HostPro Business; or
(g) any agreement or commitment related to the HostPro Business
currently in force providing for capital expenditures by Parent or its
subsidiaries in excess of $250,000.00.
The agreements required to be disclosed in the Parent Disclosure Letter
pursuant to clauses (a) through (g) above or pursuant to Section 3.9 or required
to be filed with any Parent SEC Report ("PARENT CONTRACTS") are valid and in
full force and effect, except to the extent that such invalidity would not have
a Material Adverse Effect on Parent. Except as disclosed pursuant to clauses (a)
through (g) above or pursuant to Section 2.9 or as disclosed in the Parent SEC
Reports, neither Parent nor any of its subsidiaries, nor to Parent's knowledge,
any other party thereto, is in breach, violation or default under, and neither
Parent nor any of its subsidiaries has received written notice that it has
breached, violated or defaulted, any of the terms or conditions of any Parent
Contract in such a manner as would have a Material Adverse Effect on Parent.
3.15 BROKERS' AND FINDERS' FEES. Except for fees payable to CIBC World
Markets Corp., Parent has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage
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or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
3.16 DISCLOSURE. The information supplied by Parent for inclusion in the
Registration Statement shall not at the time the Registration Statement is filed
with the SEC and at the time it becomes effective under the Securities Act
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 circumstances under which they are made, not
misleading. The information supplied by Parent for inclusion in the Proxy
Statement/Prospectus shall not, on the date the Proxy Statement/Prospectus is
mailed to Company's shareholders or to Parent's shareholders, at the time of the
Company Shareholders' Meeting, at the time of the Parent Shareholders' Meeting
or as of the Effective Time, 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 circumstances under which
they are made, not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Company Shareholders' Meeting or the Parent
Shareholders' Meeting that has become false or misleading. The Registration
Statement and Proxy Statement/Prospectus will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder. If at any time prior to the Effective Time, any event relating to
Parent or any of its affiliates, officers or directors should be discovered by
Parent that is required to be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement/Prospectus, Parent shall
promptly inform Company. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any information supplied by Company
or any of its affiliates that is contained in any of the foregoing documents.
3.17 BOARD APPROVAL. The Board of Directors of Parent has, as of the date
of this Agreement, (i) determined that the Merger is fair to, and in the best
interests of Parent and its shareholders, and has approved this Agreement and
(ii) recommends that the shareholders of Parent approve each of the Parent
Shareholder Approval Matters.
3.18 FAIRNESS OPINION. Parent's Board of Directors has received a written
opinion from CIBC World Markets Corp., dated as of the date hereof, to the
effect that, as of the date hereof, the Exchange Ratio is fair to Parent from a
financial point of view, and has delivered to Company a copy of such opinion.
3.19 INSURANCE. Parent and each of its subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting business or owning assets similar to those of the Parent and
subsidiary. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies have been paid and Parent and its subsidiaries are otherwise in
compliance in all material respects with the terms of such policies and bonds.
To the knowledge of Parent, there has been no threatened termination of, or
material premium increase with respect to, any of such policies.
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3.20 SUPPLIER AND CUSTOMER RELATIONSHIPS. To Parent's knowledge, it has
good commercial working relationships with the HostPro Business' material
customers and suppliers. Except as disclosed in Part 3.20 of the Parent
Disclosure Letter, no customer accounting for more than 5% of the HostPro
Business' revenues in any month during the last twelve calendar months ending
December 31, 2000 ("MATERIAL CUSTOMER") has canceled or otherwise terminated its
relationship with Parent or any of its subsidiaries, decreased or limited
materially the amount of product or services ordered from Parent or its
subsidiaries or threatened in writing (or to Parent's knowledge orally) to take
any such action.
3.21 PRODUCT AND SERVICE QUALITY. To Parent's knowledge, all services
provided by the HostPro Business to customers on or prior to the Closing Date
conform to applicable contractual commitments, implied warranties not
disclaimed, express warranties, product specifications and quality standards
published by Parent or its subsidiaries in all material respects ad include
limitations of the Parent's liability that are tied to the value of contract.
Neither Parent nor any of its subsidiaries has any material liability (and
Parent is not aware of any basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
Parent or any of its subsidiaries giving rise to any liability) for the taking
of any remedial action with respect to such services or other damages in
connection therewith. Parent has not received any written complaint from a
customer that alleges that Parent is in material breach of the customer contract
or the agreed upon service level commitments, except for those that Parent
reasonably believes can be addressed without resulting in a material liability.
All material unresolved written complaints received since December 31, 2000 from
customers regarding the HostPro Services, in which the matter complained about
is of a recurring nature relative to more than one customer, are set out in Part
3.21 of the Parent Disclosure Letter in detail reasonably sufficient to
understand the nature of the complaint and the material actions required to
achieve resolution thereof. Parent has no material liability for breach of any
service level commitments in excess of reserves therefore in the Parent Balance
Sheet. Parent has received or is in the process of receiving, written contract
indemnities, or has obtained or is in the process of obtaining, other
contractual allowances that were appropriate under the circumstances, from each
of its suppliers has received or is in the process of receiving written contract
indemnities from each of the suppliers and vendors of the HostPro Business
against liabilities that Parent may incur as a result of material defects or
deficiencies in such suppliers' or vendors' products or services or Parent
Intellectual Property infringement relating thereto. The HostPro Business' data
privacy policy is as set forth on its web site and in Part 3.21 of the Parent
Disclosure Letter.
3.22 DISRUPTIONS. Except to the extent disclosed on Part 3.22 to the
Parent Disclosure Letter, since December 31, 2000 there has not occurred any
material disruptions to network operations, or any material delays in planned
facility or network build out or construction activities, or any material
performance failures by the HostPro Business, or other material service
disruptions, that have resulted in material customer complaints or material
breaches of customer installation commitments, in each case with respect to the
HostPro Business, which individually or in the aggregate, have a Material
Adverse Effect on the Parent or the HostPro Business. The HostPro Business has
in place a formal disaster recovery plan reasonably calculated to ensure prompt
recovery from material disruptions to the HostPro Business' network operations
without incurring liabilities to its customers.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS BY COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted and in compliance in all
material respects with all applicable laws and regulations, pay its debts and
Taxes when due subject to good faith disputes over such debts or Taxes, pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and employees and (iii) preserve its relationships with customers,
suppliers, licensors, licensees, and others with which it has business dealings.
In addition, during that period Company will promptly notify Parent of any
material event involving its business or operations consistent with the
agreements contained herein.
In addition, except as permitted by the terms of this Agreement, and
except as contemplated by this Agreement or provided in Part 4.1 of the Company
Disclosure Letter, without the prior written consent of Parent, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time,
Company shall not do any of the following and shall not permit its subsidiaries
to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or restricted stock, or re-price (by
amendment or substitution) options granted under any employee, consultant,
director or other stock plans or authorize cash payments in exchange for any
options granted under any of such plans other than options vesting in connection
with an employee terminated in an isolated instance;
(b) Grant any severance or termination pay to any officer or
employee except (i) pursuant to written agreements in effect, or policies
existing, on the date hereof and as previously disclosed in writing to Parent,
(ii) in an amount not to exceed three months base pay of the terminated person
or pursuant to terms and provisions that are substantially similar to such plans
adopted by Parent or (iii) as consented to by Parent, whose consent shall not be
unreasonably withheld or delayed, or adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to any Company
Intellectual Property, other than non-exclusive licenses granted in the ordinary
course of business and consistent with past practice or, if granted on terms
different from past practice or outside the ordinary course, are granted on
terms and in a manner that are generally favorable to the Company;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock of Company or split, combine or reclassify any capital
stock of Company or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any capital stock of Company;
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(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber
any shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the issuance
delivery and/or sale of (i) shares of Company Common Stock pursuant to the
exercise of Company Options, (ii) shares of Company Common Stock issuable to
participants in the Company ESPP, (iii) shares of Company Common Stock issuable
to participants in the Company's 401(k) Plan, (iv) shares of Company Common
Stock issuable to holders of Company Warrants, in the case of (i), (ii), (iii),
(iv) and (v) consistent with the terms thereof, and (v) subject to Section
4.1(a), pursuant to grants of Company Options to newly hired employees, upon
promotions of existing employees, or as part of Company's annual option grant
program, in each case, in the ordinary course of business, consistent with past
practice, and not to exceed in the aggregate pursuant to this clause (v),
1,000,000 shares of Company Common Stock issued pursuant to the Company Stock
Option Plan (with individual grants or awards included within that 1,000,000
figure not to exceed 250,000 shares of Company Common Stock issued to any one
person without prior approval of Parent's Chairman of the Board).
(g) Cause, permit or propose any amendments to its Articles of
Incorporation Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof; or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to the
business of Company or enter into any material joint ventures, strategic
relationships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets that are material, individually or in the aggregate, to the
business of Company;
(j) Incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Company, enter into any "keep well" or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing other than (i) in the ordinary course of business,
consistent with past practice, (ii) pursuant to existing credit facilities, in
the ordinary course of business or (iii) pursuant to equipment financing;
(k) Except as required to comply with any Legal Requirement, adopt
or amend any employee benefit plan or employee stock purchase or employee stock
option plan, or enter into any employment contract (other than offer letters and
letter agreements entered into in
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the ordinary course of business consistent with past practice providing for
compensation and other benefits generally commensurate with similarly situated
employees) or collective bargaining agreement, pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
or fringe benefits (including rights to severance or indemnification) of its
directors (other than directors fees to non-employee directors), officers,
employees or consultants other than in the ordinary course of business,
consistent with past practice and Section 4.1(a) hereof, or change in any
material respect any management policies or procedures;
(1) Make any material capital expenditures other than capital
expenditures contained in the capital budget of Company approved by Company
prior to the date of this Agreement; PROVIDED, HOWEVER, that Company may
continue to enter into capital leases consistent with past practices;
(m) Modify, amend or terminate any Company Contract to which
Company or any subsidiary thereof is a party or waive, release or assign any
material rights or claims thereunder, in each case, in a manner that could
reasonably be expected to materially adversely affect the Company;
(n) Enter into any licensing or other agreement with regard to the
acquisition, distribution or licensing of any material Intellectual Property
other than licenses, distribution agreements, advertising agreements, or other
similar agreements that are granted or entered into in the ordinary course of
business consistent with past practice, or, if granted or entered into on terms
different from past practice or outside the ordinary course, are granted or
entered into on terms and in a manner that are generally favorable to the
Company;
(o) Materially revalue any of its assets or, except as required by
GAAP, make any change in accounting methods, principles or practices;
(p) Materially change the pricing of the fees Company charges for
the Company Services; or
(q) Agree in writing or otherwise to take any of the actions
described in Section 4.1 (a) through (p) above.
4.2 CONDUCT OF BUSINESS BY PARENT. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Parent and each of its
subsidiaries shall, except to the extent that Company shall otherwise consent in
writing and except for the Contemplated Parent Changes, carry on its business in
the usual, regular and ordinary course, in substantially the same manner as
heretofore conducted and in compliance in all material respects with all
applicable laws and regulations, collect its receivables in the ordinary course
consistent with past practice, pay its payables, debts and Taxes when due
subject to good faith disputes over such debts or Taxes and subject to taking
such actions as are necessary to manage down the costs of implementing the
Contemplated Parent Changes, pay or perform other material obligations when due,
and use its commercially reasonable efforts consistent with past practices and
policies to (i) preserve intact its present business organization relating to
the HostPro Business, (ii) keep available the services
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of its present officers and employees relating to the HostPro Business and (iii)
preserve its relationships with customers, suppliers, licensors, licensees, and
others with which it has business dealings in each case relating to the HostPro
Business. In addition, during that period Parent will promptly notify Company of
any material event (other than the Contemplated Parent Changes) involving its
business or operations consistent with the agreements contained herein. Nothing
in this Agreement shall preclude or restrict Parent from reincorporating in
Delaware prior to or at the Effective Time, provided that Parent's Certificate
of Incorporation and Bylaws shall be the same as Parent's current Articles of
Incorporation and Bylaws except for such changes as are expressly contemplated
by this Agreement, such changes as are necessary given differences between
Minnesota and Delaware law and such other changes as Company approves, such
approval not to unreasonably be withheld.
In addition, except as permitted by the terms of this Agreement, and
except as contemplated by this Agreement or provided in Part 4.2 of the Parent
Disclosure Letter, without the prior written consent of Company, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time,
Parent shall not do any of the following and shall not permit its subsidiaries
to do any of the following (except to effect or implement the Contemplated
Parent Changes):
(a) With respect to the HostPro Business or employees thereof,
waive any stock repurchase rights, accelerate, amend or change the period of
exercisability of options or restricted stock, or re-price (by amendment or
substitution) options granted under any employee, consultant, director or other
stock plans or authorize cash payments in exchange for any options granted under
any of such plans;
(b) With respect to the HostPro Business or employees thereof, (x)
grant any severance or termination pay to any officer or employee except (i)
pursuant to written agreements in effect, or policies existing, on the date
hereof and as previously disclosed in writing to Parent, (ii) in an amount not
to exceed two months base pay of the terminated person or (iii) as consented to
by Company, whose consent shall not be unreasonably withheld or delayed, or (y)
adopt any new severance plan;
(c) With respect to the HostPro Business or Intellectual Property
used in connection therewith, transfer or license to any person or entity or
otherwise extend, amend or modify in any material respect any rights to any
Company Intellectual Property, other than non-exclusive licenses in the ordinary
course of business and consistent with past practice;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock of Parent or split, combine or reclassify any capital stock
of Parent or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock of Parent;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Parent or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
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(f) Issue, deliver, sell, authorize, pledge or otherwise encumber
any shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the issuance
delivery and/or sale of (i) shares of Parent Common Stock pursuant to the
exercise of Parent Options, (ii) shares of Parent Common Stock issuable to
participants in the Parent ESPP, (iii) shares of Parent Common Stock issuable to
participants in the Parent's 401(k) Plan, and (iv) shares of Parent Common Stock
issuable to holders of Parent Warrants, in the case of (i), (ii), (iii) and (iv)
(and clauses (v) - (vii) below) consistent with the terms thereof, (v) pursuant
to grants of Parent Options to newly hired employees, upon promotions of
existing employees, or as part of Parent's annual option grant program, in each
case, in the ordinary course of business, consistent with past practice, and not
to exceed in the aggregate pursuant to this clause (v), 1,500,000 shares of
Parent Common Stock issued pursuant to the Parent Stock Option Plans; (vi)
options granted in lieu of the HostPro Options (or Parent's assumption of
HostPro Options) in connection with the merger described in Section 6.2(e); and
(vii) any other actions required to implement the Contemplated Parent Actions.
(g) Cause, permit or propose any amendments to its Articles of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof (other than any Mutually Agreed
Acquisition), or otherwise acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the business of Parent or enter
into any material joint ventures, strategic relationships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets that are material, individually or in the aggregate, to the
HostPro Business;
(j) Incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Parent, enter into any "keep well" or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing other than (i) in the ordinary course of business,
consistent with past practice or (ii) pursuant to existing credit facilities, in
the ordinary course of business;
(k) Except as required to comply with any Legal Requirement or as
contemplated by this Agreement, with respect to any employees of the HostPro
Business, adopt or amend any employee benefit plan or employee stock purchase or
employee stock option plan, or enter into any employment contract (other than
offer letters and letter agreements entered into in the ordinary course of
business consistent with past practice providing for compensation and other
benefits generally commensurate with similarly situated employees) or collective
bargaining agreement, pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance
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or indemnification) of its directors, officers, employees or consultants other
than in the ordinary course of business, consistent with past practice, or
change in any material respect any management policies or procedures;
(1) Make any material capital expenditures other than capital
expenditures contained in the capital budget of Parent approved by Parent prior
to the date of this Agreement; PROVIDED, HOWEVER, that Parent may continue to
enter into capital leases consistent with past practices;
(m) Modify, amend or terminate any Parent contract to which Parent
or any subsidiary thereof is a party or waive, release or assign any material
rights or claims thereunder, in each case, in a manner that could reasonably be
expected to materially adversely affect the HostPro Business and except for
severance arrangements for Parent employees associated with the PC Business;
(n) Enter into any licensing or other agreement with regard to the
acquisition, distribution or licensing of any material Intellectual Property
used in the HostPro Business, other than licenses, distribution agreements,
advertising agreements, or other similar agreements entered into in the ordinary
course of business consistent with past practice;
(o) Enter into any licensing or other agreement with regard to the
acquisition, distribution or licensing of any material Intellectual Property
other than licenses, distribution or other similar agreements entered into in
the ordinary course of business consistent with past practice;
(p) Materially change the pricing of the fees Parent charges for
the services offered in connection with the HostPro Business;
(q) Except as required by GAAP (and except as GAAP permits with
respect to accounting for discontinued operations), make any change in
accounting methods, principles or practices; or
(r) Agree in writing or otherwise to take any of the actions
described in Section 4.2 (a) through (q) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT; ANTITRUST
AND OTHER FILINGS.
(a) As promptly as practicable after the execution of this
Agreement, Company and Parent will prepare and file with the SEC, the Proxy
Statement/Prospectus and Parent will prepare and file with the SEC the
Registration Statement in which the Proxy Statement/Prospectus will be included
as a prospectus. Each of Company and Parent will respond to any comments of the
SEC, will use its respective commercially reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing and each of Company and Parent will cause the
Proxy
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Statement/Prospectus to be mailed to its respective shareholders at the earliest
practicable time after the Registration Statement is declared effective by the
SEC. Promptly after the date of this Agreement, each of the Company and Parent
will prepare and file (i) with the United States Federal Trade Commission and
the Antitrust Division of the United States Department of Justice Notification
and Report Forms relating to the transactions contemplated herein as required by
the HSR Act, as well as comparable pre-merger notification forms required by the
merger notification or control laws and regulations of any applicable
jurisdiction, as agreed to by the parties (the "ANTITRUST FILINGS") and (ii) any
other filings required to be filed by it under the Exchange Act, the Securities
Act or any other federal, state or foreign laws relating to the Merger and the
transactions contemplated by this Agreement (the "OTHER FILINGS"). The Company
and Parent each shall promptly supply the other with any information that may be
required in order to effectuate any filings pursuant to this Section 5.1.
(b) Each of the Company and Parent will notify the other promptly
upon the receipt of any comments from the SEC or its staff or any other
government officials in connection with any filing made pursuant hereto and of
any request by the SEC or its staff or any other government officials for
amendments or supplements to the Registration Statement, the Proxy
Statement/Prospectus or any Antitrust Filings or Other Filings or for additional
information and will supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and the SEC, or its
staff or any other government officials, on the other hand, with respect to the
Registration Statement, the Proxy Statement/Prospectus, the Merger or any
Antitrust Filing or Other Filing. Each of the Company and Parent will cause all
documents that it is responsible for filing with the SEC or other regulatory
authorities under this Section 5.1 to comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs that is required to be set forth in an
amendment or supplement to the Proxy Statement/Prospectus, the Registration
Statement or any Antitrust Filing or Other Filing, the Company or Parent, as the
case may be, will promptly inform the other of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials, and/or
mailing to shareholders of the Company and/or Parent, such amendment or
supplement.
5.2 MEETING OF COMPANY SHAREHOLDERS.
(a) Promptly after the date hereof, Company will take all action
necessary in accordance with the Georgia Law and its Articles of Incorporation
and Bylaws to convene the Company Shareholders' Meeting to be held as promptly
as practicable, and in any event (to the extent permissible under applicable
law) within 45 days after the declaration of effectiveness of the Registration
Statement, for the purpose of voting upon approval and adoption of this
Agreement and approval of the Merger. Subject to Section 5.2(c), Company will
use its commercially reasonable efforts to solicit from its shareholders proxies
in favor of the adoption and approval of this Agreement and the approval of the
Merger and will take all other action necessary to secure the vote or consent of
its shareholders required by the rules of the Nasdaq Stock Market or Georgia Law
to obtain such approvals. Notwithstanding anything to the contrary contained in
this Agreement, Company may adjourn or postpone the Company Shareholders'
Meeting to the extent necessary to ensure that any necessary supplement or
amendment to the Proxy Statement/Prospectus is provided to Company's
shareholders in advance of a vote on the Merger and this Agreement or, if as of
the time for which Company
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Shareholders' Meeting is originally scheduled (as set forth in the Proxy
Statement/Prospectus) there are insufficient shares of Company Common Stock
represented (either in person or by proxy) to constitute a quorum necessary
to conduct the business of the Company Shareholders' Meeting (provided that
no such adjournments shall collectively be for more than a total of 30 days,
provided that such amendment or supplement is duly circulated prior to
expiration of such 30 day period). Company shall ensure that the Company
Shareholders' Meeting is called, noticed, convened, held and conducted, and
that all proxies solicited by the Company in connection with the Company
Shareholders' Meeting are solicited, in compliance with the Georgia Law, its
Articles of Incorporation and Bylaws, the rules of the Nasdaq Stock Market
and all other applicable legal requirements. Company's obligation to call,
give notice of, convene and hold the Company Shareholders' Meeting in
accordance with this Section 5.2(a) shall not be limited to or otherwise
affected by the commencement, disclosure, announcement or submission to
Company of any Acquisition Proposal or Superior Offer, or by any withdrawal,
amendment or modification of the recommendation of the Board of Directors of
Company with respect to this Agreement or the Merger.
(b) Subject to Section 5.2(c): (i) the Board of Directors of
Company shall recommend that Company's shareholders vote in favor of and adopt
and approve this Agreement and approve the Merger at the Company Shareholders'
Meeting; (ii) the Proxy Statement/Prospectus shall include a statement to the
effect that the Board of Directors of Company has unanimously recommended that
Company's shareholders vote in favor of and adopt and approve this Agreement and
the Merger at the Company Shareholders' Meeting; and (iii) neither the Board of
Directors of Company nor any committee thereof shall withdraw, amend or modify,
or propose or resolve to withdraw, amend or modify in a manner adverse to
Parent, the unanimous recommendation of the Board of Directors of Company that
Company's shareholders vote in favor of and adopt and approve this Agreement and
the Merger. For purposes of this Agreement, said recommendation of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous, provided that for all purposes
of this Agreement, an action by the Board of Directors of Company or a committee
thereof shall be unanimous if each member of the Board of Directors or such
committee has approved such action other than (i) any such member who has
appropriately abstained from voting on such matter because of an actual or
potential conflict of interest and (ii) any such member who is unable to vote in
connection with such action as a result of death or disability.
(c) Nothing in this Agreement shall prevent the Board of Directors
of the Company from withholding, withdrawing, amending or modifying its
unanimous recommendation in favor of the Merger if (i) a Superior Offer (as
defined below) is made to the Company and is not withdrawn, (ii) the Company
shall have provided written notice to Parent (a "NOTICE OF SUPERIOR OFFER")
advising Parent that the Company has received a Superior Offer, specifying all
of the material terms and conditions of such Superior Offer and identifying the
person or entity making such Superior Offer, (iii) Parent shall not have, within
five business days of Parent's receipt of the Notice of Superior Offer, made an
offer that the Company's Board of Directors by a majority vote determines in its
good faith judgment (based on the written advice of a financial advisor of
national standing) to be at least as favorable to Company's shareholders as such
Superior Offer (it being agreed that the Board of Directors of Company shall
convene a meeting to consider any such offer by Parent promptly following the
receipt thereof), (iv) the
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Board of Directors of Company concludes in good faith, after consultation with
its outside counsel, that, in light of such Superior Offer, the withholding,
withdrawal, amendment or modification of such recommendation is required in
order for the Board of Directors of Company to comply with its fiduciary
obligations to Company's shareholders under applicable law and (v) Company shall
not have violated any of the restrictions set forth in Section 5.4 or this
Section 5.2. Company shall provide Parent with at least three business days
prior notice (or such lesser prior notice as provided to the members of the
Company's Board of Directors but in no event less than twenty-four hours) of any
meeting of the Company's Board of Directors at which Company's Board of
Directors is reasonably expected to consider any Acquisition Proposal (as
defined in Section 5.4) to determine whether such Acquisition Proposal is a
Superior Offer. Nothing contained in this Section 5.2(c) shall limit the
Company's obligation to hold and convene the Company Shareholders' Meeting
(regardless of whether the unanimous recommendation of the Board of Directors of
Company shall have been withdrawn, amended or modified). For purposes of this
Agreement, "SUPERIOR OFFER" shall mean an unsolicited, bona fide written offer
made by a third party to consummate any of the following transactions: (i) a
merger or consolidation involving Company pursuant to which the shareholders of
Company immediately preceding such transaction hold less than 50% of the equity
interest in the surviving or resulting entity of such transaction or (ii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or a two step transaction involving a tender offer followed with
reasonable promptness by a merger involving the Company), directly or
indirectly, of ownership of 100% of the then outstanding shares of capital stock
of the Company, on terms that the Board of Directors of the Company determines,
in its reasonable judgment (based on the written advice of a financial advisor
of national standing) to be more favorable to the Company shareholders than the
terms of the Merger; PROVIDED, HOWEVER, that any such offer shall not be deemed
to be a "Superior Offer" if any financing required to consummate the transaction
contemplated by such offer is not committed and is not likely in the reasonable
judgment of the Company's Board of Directors (based on the advice of its
financial advisor) to be obtained by such third party on a timely basis.
(d) Nothing contained in this Agreement shall prohibit the
Company or its Board of Directors from taking and disclosing to its shareholders
a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act.
5.3 MEETING OF PARENT SHAREHOLDERS.
(a) Promptly after the date hereof, Parent will take all action
necessary in accordance with the Minnesota law and its Articles of Incorporation
and Bylaws to convene the Parent Shareholders' Meeting to be held as promptly as
practicable, and in any event (to the extent permissible under applicable law)
within 45 days after the declaration of effectiveness of the Registration
Statement, for the purpose of voting upon the Parent Shareholder Approval
Matters and such other matters relating to the Contemplated Parent Changes that
Parent determines, in consultation with counsel, require Parent shareholder
approval under Minnesota law. Parent will use its commercially reasonable
efforts to solicit from its shareholders proxies in favor of the approval of the
Parent Shareholder Approval Matters and will take all other action necessary to
secure the vote or consent of its shareholders required by the rules of the
Nasdaq Stock Market or Minnesota law to obtain such approvals. Notwithstanding
anything to the contrary contained in this Agreement, Parent may adjourn or
postpone the Parent Shareholders'
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Meeting to the extent necessary to ensure that any necessary supplement or
amendment to the Proxy Statement/Prospectus is provided to Parent's shareholders
in advance of a vote on the Parent Shareholder Approval Matters or, if as of the
time for which Parent Shareholders' Meeting is originally scheduled (as set
forth in the Proxy Statement/Prospectus) there are insufficient shares of Parent
Common Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the Parent Shareholders' Meeting (provided
that no such adjournments shall collectively be for more than a total of 30
days, provided that such amendment or supplement is duly circulated prior to
expiration of such 30 day period). Parent shall ensure that the Parent
Shareholders' Meeting is called, noticed, convened, held and conducted, and that
all proxies solicited by Parent in connection with the Parent Shareholders'
Meeting are solicited, in compliance with the Minnesota law, its Articles of
Incorporation and Bylaws, the rules of the Nasdaq Stock Market and all other
applicable legal requirements.
(b) (i) The Board of Directors of Parent shall unanimously
recommend that Parent's shareholders approve the Parent Shareholder Approval
Matters at the Parent Shareholders' Meeting; (ii) the Proxy Statement/Prospectus
shall include a statement to the effect that the Board of Directors of Parent
has unanimously recommended that Parent's shareholders approve the Parent
Shareholder Approval Matters; and (iii) neither the Board of Directors of Parent
nor any committee thereof shall withdraw, amend or modify, or propose or resolve
to withdraw, amend or modify in a manner adverse to Company, the unanimous
recommendation of the Board of Directors of Parent that Parent's shareholders
approve the Parent Shareholder Approval Matters. For purposes of this Agreement,
said recommendation of the Board of Directors of Parent shall be deemed to have
been modified in a manner adverse to Company if said recommendation shall no
longer be unanimous, provided, that for all purposes of this Agreement, an
action by the Board of Directors of Parent or a committee thereof shall be
unanimous if each member of the Board of Directors of Parent or such committee
has approved such action other than (i) any such member who has appropriately
abstained from voting on such matter because of an actual or potential conflict
of interest and (ii) any such member who is unable to vote in connection with
such action as a result of death or disability.
(c) Nothing contained in this Agreement shall prohibit
Parent or its Board of Directors from taking and disclosing to its shareholders
a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act.
5.4 NO SOLICITATION.
(a) From and after the date of this Agreement until the Effective
Time or termination of this Agreement pursuant to Article VII, Company and its
subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly, (i) solicit or initiate the making, submission or announcement of
any Acquisition Proposal (as hereinafter defined), (ii) participate in any
discussions or negotiations regarding, or furnish to any person any non-public
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to, any Acquisition Proposal, (iii) engage in discussions with any
person with respect to any Acquisition Proposal, except as to the existence of
these provisions, (iv)
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approve, endorse or recommend any Acquisition Proposal or (v) enter into any
letter of intent or similar document or any contract, agreement or commitment
contemplating or otherwise relating to any Acquisition Proposal; PROVIDED,
HOWEVER, that notwithstanding the foregoing, prior to the approval of this
Agreement and the Merger at the Company Shareholders' Meeting, this Section
5.4(a) shall not prohibit Company from furnishing nonpublic information
regarding Company and its subsidiaries to, or entering into discussions or
negotiations with, any person or group who has submitted (and not withdrawn) to
Company an unsolicited, written, bona fide Acquisition Proposal that the Board
of Directors of Company reasonably concludes (based on the written advice of a
financial advisor of national standing) may constitute a Superior Offer if (1)
neither Company nor any representative of Company and its subsidiaries shall
have violated any of the restrictions set forth in this Section 5.4, (2) the
Board of Directors of Company concludes in good faith, after consultation with
its outside legal counsel, that such action is required in order for the Board
of Directors of Company to comply with its fiduciary obligations to Company's
shareholders under applicable law, (3) prior to furnishing any such nonpublic
information to, or entering into any such discussions with, such person or
group, Company gives Parent written notice of the identity of such person or
group and all of the material terms and conditions of such Acquisition Proposal
and of Company's intention to furnish nonpublic information to, or enter into
discussions with, such person or group, and Company receives from such person or
group an executed confidentiality agreement containing terms at least as
restrictive with regard to Company's confidential information as the
Confidentiality Agreement, (4) Company gives Parent at least three business days
advance notice of its intent to furnish such nonpublic information or enter into
such discussions, and (5) contemporaneously with furnishing any such nonpublic
information to such person or group, Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). Company and its subsidiaries
will immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer, director or employee of Company or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of Company or any
of its subsidiaries shall be deemed to be a breach of this Section 5.4 by
Company.
For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean any
offer or proposal by a third party relating to: (A) any acquisition or purchase
from the Company by any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a 20%
interest in the total outstanding voting securities of the Company or any of its
subsidiaries or any tender offer or exchange offer that if consummated would
result in any person or "group" (as defined under Section 13(d) of the Exchange
Act and the rules and regulations thereunder) beneficially owning 20% or more of
the total outstanding voting securities of the Company or any of its
subsidiaries or any merger, consolidation, business combination or similar
transaction involving the Company pursuant to which the shareholders of the
Company immediately preceding such transaction hold less than 80% of the equity
interests in the surviving or resulting entity of such transaction; (B) any
sale, lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition, or
disposition of more than 50% of the assets of the Company; or (C) any
liquidation or dissolution of the Company.
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(b) In addition to the obligations of Company set forth in
paragraph (a) of this Section 5.4, Company as promptly as practicable shall
advise Parent orally and in writing of any request for non-public information
that Company reasonably believes would lead to an Acquisition Proposal or of any
Acquisition Proposal, or any inquiry with respect to or which Company reasonably
should believe would lead to any Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identity of
the person or group making any such request, Acquisition Proposal or inquiry.
Company will keep Parent informed as promptly as practicable in all material
respects of the status and details (including material amendments or proposed
amendments) of any such request, Acquisition Proposal or inquiry.
5.5 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) CONFIDENTIALITY AGREEMENT. The parties acknowledge that
Company and Parent have previously executed a mutual confidential disclosure
agreement, dated as of December 15, 2000 (the "CONFIDENTIALITY AGREEMENT"),
which Confidentiality Agreement will continue in full force and effect in
accordance with its terms.
(b) ACCESS TO INFORMATION. Company will afford Parent and its
accountants, counsel and other representatives reasonable access during normal
business hours to the properties, books, records and personnel of Company during
the period prior to the Effective Time to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations and personnel of Company, as Parent may reasonably
request. Parent will afford Company and its accountants, counsel and other
representatives reasonable access during normal business hours to the
properties, books, records and personnel of Parent during the period prior to
the Effective Time to obtain all information concerning the business, including
the status of product development efforts, properties, results of operations and
personnel of Parent, as Company may reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section 5.5 will affect
or be deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
5.6 PUBLIC DISCLOSURE. Parent and Company will consult with each other,
and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger, this Agreement
or an Acquisition Proposal or any other transactions expected to be announced in
connection therewith and will not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law or
any listing agreement with a national securities exchange. The parties have
agreed to the text of the joint press release announcing the signing of this
Agreement and Parent has disclosed to Company Parent's operating results for its
second quarter and proposed form of press release with respect thereto.
5.7 REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all
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things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using reasonable efforts to accomplish
the following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining
of all necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations from Governmental Entities and the making of all necessary
registrations, declarations and filings (including registrations, declarations
and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to avoid any suit, claim, action, investigation or
proceeding by any Governmental Entity, (iii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iv) the defending of any
suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution or delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. Notwithstanding anything in
this Agreement to the contrary, neither Parent nor any of its affiliates shall
be required by this Agreement to make proposals, execute or carry out agreements
or submit to orders providing for the sale or other disposition or holding
separate (through the establishment of a trust or otherwise) of any assets or
categories of assets of Parent, any of its affiliates or Company or the holding
separate of the shares of Company Common Stock (or shares of stock of the
Surviving Corporation) or imposing or seeking to impose any limitation on the
ability of Parent or any of its subsidiaries or affiliates to conduct their
business or own such assets or to acquire, hold or exercise full rights of
ownership of the shares of Company Common Stock (or shares of stock of the
Surviving Corporation).
(b) Each of Company and Parent will give prompt notice to the
other of (i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the Merger, (ii)
any notice or other communication from any Governmental Entity in connection
with the Merger, (iii) any litigation relating to, involving or otherwise
affecting Company, Parent or their respective subsidiaries that relates to the
consummation of the Merger. Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of Company to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.3 would not be satisfied, PROVIDED, HOWEVER, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. Parent shall give prompt notice to Company of any
representation or warranty made by it or Merger Sub contained in this Agreement
becoming untrue or inaccurate, or any failure of Parent or Merger Sub to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Section 6.2 would not be satisfied, PROVIDED,
HOWEVER, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.8 THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any material consents,
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waivers and approvals under any of its or its subsidiaries' respective
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
5.9 STOCK OPTIONS; ESPP; WARRANTS.
(a) At the Effective Time, each outstanding Company Option,
whether or not then exercisable, will be assumed by Parent. Each Company Option
so assumed by Parent under this Agreement will continue to have, and be subject
to, the same terms and conditions set forth in the Company Stock Option Plan
immediately prior to the Effective Time (including, without limitation, any
repurchase rights or vesting provisions), except that (i) each Company Stock
Option will be exercisable (or will become exercisable in accordance with its
terms) for that number of whole shares of Parent Common Stock equal to the
product of the number of shares of Company Common Stock that were issuable upon
exercise of such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole number of
shares of Parent Common Stock; and (ii) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such assumed Company
Option will be equal to the quotient determined by dividing the exercise price
per share of Company Common Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded up to the
nearest whole cent.
(b) It is intended that Company Options assumed by Parent shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent Company Options qualified as incentive
stock options immediately prior to the Effective Time and the provisions of this
Section 5.9 shall be applied consistent with such intent.
(c) Company shall take all actions necessary pursuant to the terms
of the Company ESPP in order to shorten the participation period(s) under such
plan that includes the Effective Time (the "CURRENT OFFERINGS") such that a new
purchase date for each such participation period shall occur prior to the
Effective Time and shares shall be purchased by Company ESPP participants prior
to the Effective Time. The Current Offerings shall expire immediately following
such new purchase date, and the Company ESPP shall terminate immediately prior
to the Effective Time. Subsequent to such new purchase date, Company shall take
no action, pursuant to the terms of the Company ESPP, to commence any new
offering period.
(d) At the Effective Time, each outstanding Company Warrant,
whether or not then exercisable, will be assumed by Parent. Each Company Warrant
so assumed by Parent under this Agreement will continue to have, and be subject
to, the same terms and conditions set forth in the Company Warrant immediately
prior to the Effective Time (including, without limitation, any vesting
provisions), except that (i) each Company Warrant will be exercisable (or will
become exercisable in accordance with its terms) for that number of whole shares
of Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Warrant
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock; and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Warrant will be equal to the quotient
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determined by dividing the exercise price per share of Company Common Stock at
which such Company Warrant was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded up to the nearest whole cent.
5.10 FORM S-8. Parent agrees to file a registration statement on Form S-8
for the shares of Parent Common Stock issuable with respect to assumed Company
Options as soon as is reasonably practicable, after the Effective Time and shall
maintain the effectiveness of such registration statement thereafter for so long
as any of such options or other rights remain outstanding. This provision
creates no third party beneficiary rights.
5.11 INDEMNIFICATION.
(a) Parent shall cause the Surviving Corporation to, and the
Surviving Corporation shall, indemnify and hold harmless, to the fullest extent
permitted under applicable law, the individuals who on or prior to the Effective
Time were officers or directors of Company (collectively, the "INDEMNIFIED
PARTIES") with respect to all acts or omissions by them in their capacities as
such or taken at the request of Company or any of its subsidiaries at any time
on or prior to the Effective Time. In the event the Surviving Corporation or
Parent or any of their successors or assigns (i) consolidates with or merges
into any other Person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any Person, then and in each such case,
proper provisions shall be made so that the successors and assigns of the
Surviving Corporation or Parent shall assume the obligations of the Surviving
Corporation or the Parent, as the case may be, as set forth in this Section
5.11. From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification agreements between Company and the Indemnified
Parties and any indemnification provisions under Company's Articles of
Incorporation or Bylaws as in effect on the date hereof. The Articles of
Incorporation and Bylaws of the Surviving Corporation will contain provisions
with respect to exculpation and indemnification that are at least as favorable
as those contained in the Articles of Incorporation and Bylaws of Company as in
effect on the date of this Agreement (subject to variations required by
applicable law), which provisions will not be amended, repealed or otherwise
modified for a period of five 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 or officers of Company, unless such
modification is required by law.
(b) For a period of five years after the Effective Time, Parent
will procure directors' and officers' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering those persons who are
currently covered by Company's directors' and officers' liability insurance
policy on terms with respect to coverage and in amounts no less favorable than
those applicable to the current directors and officers of Company; PROVIDED,
HOWEVER, that in no event will Parent or the Surviving Corporation be required
to expend in excess of 200% of the annual premium currently paid by the Company
for such coverage (or such coverage as is available for 200% of such annual
premium) (or in the case of a lump sum payment for tail coverage for such entire
five year period, in excess of $1,500,000).
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(c) This Section 5.11 shall survive the consummation of the
Merger, is intended to benefit Company, the Surviving Corporation and each
Indemnified Party, shall be binding on all successors and assigns of the
Surviving Corporation and Parent, and shall be enforceable by the Indemnified
Parties. The obligations of Parent under this Section 5.11 shall not be
terminated or modified in such a manner as to adversely affect any Indemnified
Party to whom this Section 5.11 applies without the consent of the affected
Indemnified Party (it being expressly agreed that the Indemnified Parties to
whom this Section 5.11 applies shall be third party beneficiaries of this
Section 5.11).
5.12 PARENT SHAREHOLDER APPROVAL MATTERS. Parent will submit to its
shareholders for consideration at the Parent Shareholders' Meeting a proposal to
(i) approve the issuance of stock pursuant to the Merger (incorporating approval
to amend the Parent's Articles of Incorporation to increase to 200 million the
number of shares of Parent's Common Stock authorized) (and in connection
therewith approve both the Parent Bylaw Amendment and the Parent Appointment
Confirmation) (ii) amend Parent's Articles of Incorporation to change the name
of the Parent to Interland, Inc. as of immediately prior to the Effective Time
(collectively, "PARENT SHAREHOLDER APPROVAL MATTERS"). Parent shall take the
actions required by Section 1.5. In addition, Parent may, notwithstanding any
other provision of this Agreement, increase the number of shares issuable
pursuant to options granted under the HostPro's 2000 Equity Incentive Plan to 10
million shares, as adjusted, and implement such amendment.
5.13 NASDAQ LISTING. Parent agrees to seek authorization for listing on
the Nasdaq Stock Market the shares of Parent Common Stock issuable, and those
required to be reserved for issuance, in connection with the Merger, effective
upon official notice of issuance.
5.14 LETTERS OF ACCOUNTANTS. Company and Parent shall use their
respective reasonable efforts to cause to be delivered to Parent letters of
Company's and Parent's independent accountants, respectively, dated no more than
two business days before the date on which the Registration Statement becomes
effective (and satisfactory in form and substance to Parent), that is customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Registration
Statement.
5.15 TAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Parent and Company and their respective Boards of Directors
shall grant such approvals and take such lawful actions as are necessary to
ensure that such transactions may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise act to eliminate or
minimize the effects of such statute and any regulations promulgated thereunder
on such transactions.
5.16 CERTAIN EMPLOYEE BENEFITS.
(a) As soon as practicable after the execution of this Agreement
but prior to the Closing Date, Company and Parent shall confer and work together
in good faith to agree upon mutually acceptable employee benefit and
compensation arrangements, with the objective of Parent providing each Company
employee with compensation and benefits that are not less favorable in the
aggregate than those provided by Company or any of its affiliates immediately
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prior to the Closing Date. Company shall terminate any Company Employee Plans
immediately prior to the Effective Time if requested by Parent. In addition,
Company agrees that it and its subsidiaries shall terminate any and all
severance, separation, retention and salary continuation plans, programs or
arrangements (other than contractual agreements disclosed on the Company
Disclosure Letter) either prior to signing hereof or prior to Closing. Each
Company employee shall receive credit for prior service to Company for purposes
of determining eligibility for benefits under Parent's employee benefits plans.
(b) Within 7 days after the execution of this Agreement, (ii) the
Company will issue a guarantee of the obligations of Xxx Xxxxxxxxxx to Bear
Xxxxxxx Co., Inc. to repay a $3,400,000 loan, and (ii) simultaneously with such
guarantee, the Company will enter into an agreement with Xx. Xxxxxxxxxx pursuant
to which he will agree to promptly repay to the Company (and after the Effective
Time, Parent) any amounts that Company or Parent may pay pursuant to such
guarantee, which obligation will be secured by a lien in all the shares of the
Company owned by Xx. Xxxxxxxxxx that is junior only to the lien of Bear Xxxxxxx,
and he will agree that the Company (and after the Effective Time, Parent) will
be entitled to offset any such amounts he may owe to the Company (and after the
Effective Time, to the Parent or the Company) against any amounts (whether
salary, severance pay, or otherwise) payable at any time by the Company (and
after the Effective Time, by Parent or Company) to him.
5.17 TAX MATTERS. Each of Parent, Merger Sub and Company agrees that it
will not take any action, or fail to take any action, which action or failure to
act would be reasonably likely to cause the Merger to fail to qualify as a
"reorganization" pursuant to the provisions of Section 368 of the Code.
5.18 BRIDGE LOAN CREDIT FACILITY. Parent and Company shall on the date
hereof enter into a Bridge Loan and Security Agreement in the form attached
hereto as EXHIBIT 5.18A ("LOAN AGREEMENT"), providing for advances to be made
thereunder on the terms and subject to the conditions therein specified. Among
other provisions, the Loan Agreement provides for advances thereunder, if
Closing is delayed beyond June 30, 2001 provided that Company is not primarily
responsible for such delay and Parent has not notified Company of such fact
prior to such date ("NOTICED COMPANY DELAY") and provided Company is not in
material default under this Agreement which default is by its nature not curable
or which default is curable but is not cured within 10 days after the giving of
written notice thereof ("MATERIAL DEFAULT"), in the maximum aggregate amount of
$10,000,000 or, if Closing is delayed beyond August 31, 2001 provided that there
is no Noticed Company Delay (noticed prior to August 31) and provided that
Company is not in Material Default under this Agreement, in the maximum
aggregate amount of $20,000,000 (the "BRIDGE LOAN"), with the obligation to
repay each advance thereunder being evidenced by an interest bearing promissory
note in the form of EXHIBIT 5.18B (calling for a term of six months from the
date of termination of this Agreement, provided that if the Agreement is
terminated by Company pursuant to Section 7.1 (a), (b), (c), (d), (e) or (i) the
note shall be due and payable immediately) and with the Bridge Loan being
secured as provided in the Loan Agreement. The aggregate amount of all amounts
due under the Loan Agreement is herein referred to as the "AGGREGATE BRIDGE LOAN
AMOUNT". The Loan Agreement shall be conformed to the extent it is inconsistent
with this Section 5.18. Notwithstanding any other provisions of this Agreement,
if the dispute resolution process set out in Section 1.6 delays the Effective
Time beyond the initially scheduled date therefore (as set forth in the
Registration Statement) for the
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respective meetings of Parent shareholders and Company shareholders contemplated
by Sections 5.2 and 5.3 hereof, then Parent will have no obligation to advance
more than an aggregate of $5,000,000 under the Loan Agreement.
5.19 PARENT OWNERSHIP OF COMPANY CAPITAL STOCK. Parent hereby
acknowledges and agrees that it does not own any shares of Company Common Stock
or other capital stock of the Company. Parent further agrees that it will not
acquire any shares of Company Common Stock prior to the Effective Time.
5.20 ANTI-TAKEOVER MEASURES. After Closing, Parent's Board of Directors
shall in good faith evaluate the adoption of a shareholder rights plan and other
standard anti-takeover measures.
5.21 REGISTRATION RIGHTS. Concurrently with the execution of this
Agreement, Parent, Company and MTI will enter into the New Registration Rights
Agreement in the form attached as EXHIBIT 5.20A ("NEW REGISTRATION RIGHTS
AGREEMENT"). Company will exercise its best efforts to cause the Founder Parties
and the Existing Holders to enter into the Amended Registration Rights Agreement
in the form attached as EXHIBIT 5.20B ("AMENDED REGISTRATION RIGHTS AGREEMENT")
prior to the Effective Time, and Parent shall enter into, and shall cause MTI to
enter into, the same. The Amended Registration Rights Agreement is similar in
form to the existing Company Registration Rights Agreement between Company and
certain of its existing investors and warrant holders ("EXISTING HOLDERS"), but
has been amended (which amendment would require the consent of such Existing
Holders) to add Xxx Xxxxxxxxxx, Xxxxxxxx Xxxxxxxxx and the Company's other
current officers and directors (collectively "FOUNDER PARTIES"), Parent, and
MTI, as parties, and to amend that agreement to apply to Parent securities held
by such parties after the Merger (regardless of whether Parent would otherwise
be required to assume or be bound by the existing Company Registration Rights
Agreement by virtue of the Merger, which Parent does not concede), and to
clarify that in the event of underwriter cutbacks, Founder Parties will be cut
back first, then other former Company stockholders and warrant holders, and then
MTI.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) COMPANY SHAREHOLDER APPROVAL. This Agreement shall have been
approved and adopted, and the Merger shall have been approved, by the requisite
vote of the shareholders of Company under applicable law and the Company Charter
Documents.
(b) PARENT SHAREHOLDER APPROVAL. The Parent Shareholder Approval
Matters shall have been approved by the requisite vote of the shareholders of
Parent under applicable law and the Parent Charter Documents.
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(c) REGISTRATION STATEMENT EFFECTIVE; PROXY STATEMENT. The SEC
shall have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Proxy Statement/Prospectus, shall have been
initiated or threatened in writing by the SEC.
(d) NO ORDER; HSR ACT. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and has the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger. All waiting
periods, if any, under the HSR Act relating to the transactions contemplated
hereby will have expired or been terminated.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligation of
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement, disregarding
all qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect or any similar standard or qualification, shall be true
and correct at and as of the Closing Date as if made at and as of the Closing
Date (other than representations and warranties that address matters only as of
a certain date, which shall be true and correct as of such date), except where
the failure of such representations or warranties to be true or correct would
not have, individually or in the aggregate, a Material Adverse Effect on Parent
or the HostPro Business. It is understood that, for purposes of determining the
accuracy of such representations and warranties, any update of or modification
to the Parent Disclosure Letter made or purported to have been made after the
execution of this Agreement shall be disregarded. Company shall have received a
certificate with respect to the foregoing signed on behalf of Parent by the
Chief Executive Officer or Chief Financial Officer of Parent.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and Company shall have received a certificate to such
effect signed on behalf of Parent by the Chief Executive Officer or Chief
Financial Officer of Parent.
(c) MATERIAL ADVERSE EFFECT. No Material Adverse Effect with
respect to Parent relating to the HostPro Business shall have occurred since the
date of this Agreement and be continuing.
(d) PARENT BOARD OF DIRECTORS. All actions necessary in order for
the New Directors nominated solely by the Company (and if a third nominee is
mutually agreed and accepts such nomination, such jointly nominated New
Director) to become members of the Parent Board of Directors, and to adopt the
Parent Bylaw Amendment and to effect the Parent Appointment Confirmation, upon
the Effective Time shall have occurred.
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(e) KEY EXECUTIVE. The Employment Agreement between Parent and Xxx
Xxxxxxxxxx executed concurrently herewith but effective as of the Effective Time
("EMPLOYMENT AGREEMENT") shall not have been terminated by Parent and Parent
shall have appointed Xx. Xxxxxxxxxx as Vice Chairman of Parent as of the
Effective Time.
(f) MTI SHAREHOLDER AGREEMENT; SHAREHOLDER AGREEMENT. MTI and
Parent, shall have executed the MTI Shareholder Agreement in the form attached
hereto as EXHIBIT 6.2(g)(1) ("MTI SHAREHOLDER AGREEMENT") and the Shareholder
Agreement in the form attached hereto as EXHIBIT 6.2(g)(2) ("SHAREHOLDER
AGREEMENT") to be entered into with Xxx Xxxxxxxxxx and various affiliates of
Company who collectively own 38% of the Company's outstanding stock as of the
Effective Time ("SHAREHOLDER SIGNITORS").
(g) PC BUSINESS. Prior to the Effective Time, Parent shall have
either entered into a binding agreement to sell the PC Business or announced and
commenced the winding down of the PC Business.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Company contained in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect or any similar standard or qualification, shall be true
and correct at and as of the Closing Date as if made at and as of the Closing
Date (other than representations and warranties that address matters only as of
a certain date, which shall be true and correct as of such date), except where
the failure of such representations or warranties to be true or correct would
not have, individually or in the aggregate, a Material Adverse Effect on
Company. It is understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Company
Disclosure Letter made or purported to have been made after the execution of
this Agreement shall be disregarded. Parent shall have received a certificate
with respect to the foregoing signed on behalf of Company by the Chief Executive
Officer or Chief Financial Officer of Company.
(b) AGREEMENTS AND COVENANTS. Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer or Chief Financial Officer of
Company.
(c) MATERIAL ADVERSE EFFECT. No Material Adverse Effect with
respect to Company shall have occurred since the date of this Agreement and be
continuing.
(d) NO RESTRAINTS. There shall not be instituted or pending any
action or proceeding by any Governmental Entity (i) seeking to restrain,
prohibit or otherwise interfere with the ownership or operation by Parent or any
of its subsidiaries of all or any portion of the business of Company or any of
its subsidiaries or of Parent or any of its subsidiaries or to compel
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Parent or any of its subsidiaries to dispose of or hold separate all or any
portion of the business or assets of Company or any of its subsidiaries or of
Parent or any of its subsidiaries, (ii) seeking to impose or confirm limitations
on the ability of Parent or any of its subsidiaries effectively to exercise full
rights of ownership of the shares of Company Common Stock (or shares of stock of
the Surviving Corporation) including the right to vote any such shares on any
matters properly presented to shareholders or (iii) seeking to require
divestiture by Parent or any of its subsidiaries of any such shares.
(e) CONSENTS. (i) All required approvals or consents of any
Governmental Entity or other person in connection with the Merger and the
consummation of the other transactions contemplated hereby shall have been
obtained (and all relevant statutory, regulatory or other governmental waiting
periods, shall have expired) unless the failure to receive any such approval or
consent would not be reasonably likely, directly or indirectly, to result in a
Material Adverse Effect on Parent and its subsidiaries (including, for the
purposes of this condition, Company and its subsidiaries), taken as a whole, and
(ii) all such approvals and consents that have been obtained shall be on terms
that are not reasonably likely, directly or indirectly, to result in a Material
Adverse Effect on Parent and its subsidiaries (including, for the purposes of
this condition, Company and its subsidiaries), taken as a whole.
(f) KEY EXECUTIVE. Xxx Xxxxxxxxxx shall have accepted employment
with the Surviving Company pursuant to the Employment Agreement as of the
Effective Time and shall have accepted a position as Vice Chairman of Parent.
(g) MTI SHAREHOLDER AGREEMENT; SHAREHOLDER AGREEMENT. The
Shareholder Signitors shall have entered into the MTI Shareholder Agreement and
the Shareholder Agreement.
(h) ASSUMPTION OF HOSTPRO OPTIONS BY MERGER. All options, whether
or not then exercisable, to purchase shares of stock of HostPro, Inc., a wholly
owned subsidiary of Parent ("HOSTPRO") issued under the HostPro Incentive Plan 1
or the HostPro Incentive Plan 2 (the "HOSTPRO OPTIONS") shall have been
converted into options to purchase Parent Common Stock by virtue of the merger
of HostPro with and into a wholly owned subsidiary of Parent and Parent's
assumption of such options. Each HostPro Option so converted and assumed by
Parent by virtue of such merger will continue to have, and be subject to, the
same terms and conditions set forth in the applicable HostPro Incentive Plan
(including, without limitation, any repurchase rights or vesting provisions),
except that (i) each HostPro Option will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Parent Common Stock equal to the product of the number of shares of HostPro
Common Stock that were issuable upon exercise of such HostPro Option immediately
prior to the effective time of such merger multiplied by 0.5715 (the "HOSTPRO
EXCHANGE RATIO"), rounded down to the nearest whole number of shares of Parent
Common Stock and (ii) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such converted and assumed HostPro Option
will be equal to the quotient determined by dividing the exercise price per
share of HostPro Common Stock at which such HostPro Option was exercisable
immediately prior to the effective time of such merger by the HostPro Exchange
Ratio, rounded up to the nearest whole cent and (iii) provisions thereof
prohibiting exercise of HostPro options prior the earlier of 5 years or the
filing of a registration statement on Form S-1 with respect to HostPro capital
stock
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shall be deemed satisfied (by virtue of now having registered Parent securities)
and terminated. Continuous employment with HostPro, Parent's parent entity,
Parent, or its subsidiaries shall be credited to the optionee for purposes of
determining the vesting of all assumed HostPro Options after the effective time
of such merger.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the requisite approvals of the
shareholders of Company or Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by November 30, 2001 for any reason; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement; and
provided, further upon a Termination Date Adjustment by Parent pursuant to
Section 1.6(a)(ii), the foregoing date shall automatically be deemed to be
September 30, 2001.
(c) by either Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
nonappealable;
(d) by either Company or Parent, if the approval of the Merger by
the shareholders of Company shall not have been obtained by reason of the
failure to obtain the required vote at a meeting of Company shareholders duly
convened therefore or at any adjournment thereof permitted hereunder; PROVIDED,
HOWEVER, that the right to terminate this Agreement under this Section 7.1(d)
shall not be available to Company where the failure to obtain the Company
Shareholder Approvals shall have been caused by (i) the action or failure to act
of Company and such action or failure to act constitutes a material breach by
Company of this Agreement or (ii) a breach of the Voting Agreement by any party
thereto other than Parent;
(e) by either Company or Parent, if the Parent Shareholder
Approval Matters shall not have been approved by the requisite vote of Parent
shareholders by reason of the failure to obtain the respective required votes at
a meeting of Parent shareholders duly convened therefore or at any adjournment
thereof permitted hereunder; PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 7.1(e) shall not be available to Parent where the
failure to obtain the Parent Shareholder Approvals shall have been caused by the
action or failure to act of Parent and such action or failure to act constitutes
a material breach by Parent of this Agreement;
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(f) by Parent (at any time prior to the approval of the Merger by
the required vote of the shareholders of Company) if a Triggering Event (as
defined below) shall have occurred;
(g) by Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, PROVIDED that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable by Parent through the exercise of its commercially reasonable efforts,
then Company may not terminate this Agreement under this Section 7.1(g) for 30
days after delivery of written notice from Company to Parent of such breach,
provided Parent continues to exercise commercially reasonable efforts to cure
such breach (it being understood that Company may not terminate this Agreement
pursuant to this paragraph (g) if such breach by Parent is cured during such
30-day period, or if Company shall have materially breached this Agreement); or
(h) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of Company set forth in this Agreement, or if
any representation or warranty of Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, PROVIDED that if such
inaccuracy in Company's representations and warranties or breach by Company is
curable by Company through the exercise of its commercially reasonable efforts,
then Parent may not terminate this Agreement under this Section 7.1(h) for 30
days after delivery of written notice from Parent to Company of such breach,
provided Company continues to exercise commercially reasonable efforts to cure
such breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph (h) if such breach by Company is cured during such
30-day period, or if Parent shall have materially breached this Agreement).
(i) by Company, in the event that Parent's Net Available Cash at
Closing (as calculated and adjusted pursuant to Section 1.6(a) hereof) is less
than an amount equal to (x) $100,000,000 LESS (y) the Aggregate Bridge Loan
Amount (as defined in Section 5.18); PROVIDED that the right to terminate
pursuant to this Section 7.1(i) shall terminate in the event that more than
$10,000,000 is advanced to Company under the Bridge Loan; and provided further
that such right may not be exercised if MTI by means of a capital contribution
tops up the Parent's Net Available Cash at Closing to $100,000,000 less the
Aggregate Bridge Loan Amount.
For the purposes of this Agreement, a "TRIGGERING EVENT" shall be
deemed to have occurred if: (i) the Board of Directors of Company or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent its unanimous recommendation in favor of
the adoption and approval of the Agreement or the approval of the Merger; (ii)
Company shall have failed to include in the Proxy Statement/Prospectus the
unanimous recommendation of the Board of Directors of Company in favor of the
adoption and approval of the Agreement and the approval of the Merger; (iii) the
Board of Directors of Company fails to reaffirm its unanimous recommendation in
favor of the adoption and approval of the Agreement and the approval of the
Merger within 10 business days
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after Parent requests in writing that such recommendation be reaffirmed at any
time following the public announcement of an Acquisition Proposal; (iv) the
Board of Directors of Company or any committee thereof shall have approved or
publicly recommended any Acquisition Proposal; (v) Company shall have entered
into any letter of intent of similar document or any agreement, contract or
commitment accepting any Acquisition Proposal; (vi) Company shall have
materially breached any of the provisions of Sections 5.2 or 5.4; or (vii) a
tender or exchange offer relating to securities of Company shall have been
commenced by a person unaffiliated with Parent, and Company shall not have sent
to its security holders pursuant to Rule 14e-2 promulgated under the Securities
Act, within 10 business days after such tender or exchange offer is first
published sent or given, a statement disclosing that Company recommends
rejection of such tender or exchange offer.
7.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any proper termination
of this Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any willful breach of this Agreement. No termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
7.3 FEES AND EXPENSES.
(a) GENERAL. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; PROVIDED, HOWEVER, that Parent and Company
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred in relation to the printing and filing with the SEC
of the Proxy Statement/Prospectus (including any preliminary materials related
thereto) and the Registration Statement (including financial statements and
exhibits) and any amendments or supplements thereto.
(b) COMPANY PAYMENTS. In the event that this Agreement is
terminated by Parent or Company, as applicable, pursuant to Sections 7.1(d),
7.1(f) or 7.1(h), the Company shall promptly, but in no event later than two
days after the date of such termination, in addition to paying the Aggregate
Bridge Loan Amount pursuant to the Bridge Loan, pay Parent a fee in immediately
available funds in an amount equal to the sum of (x) three million five hundred
thousand dollars ($3,500,000.00) plus (y) the Aggregate Bridge Loan Amount (but
not to exceed an additional $2,100,000.00 dollars, thereby increasing such fee
due under clauses (x) and (y) to a maximum of $5,600,000) (the "TERMINATION
FEE"); PROVIDED, that in the case of a termination under Section 7.1(d) prior to
which no Triggering Event has occurred or under Section 7.1(h) (and for the
avoidance of doubt a termination under Section 7.1(f) shall not be construed to
be a termination under Section 7.1(h), (i) such payment shall be made only if
(A) following the date of this Agreement and prior to the termination of this
Agreement, a person has publicly announced an Acquisition Proposal and (B)
within 12 months following the termination of this Agreement, either a Company
Acquisition (as defined below) is consummated, or the Company
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enters into an agreement providing for a Company Acquisition and such Company
Acquisition is later consummated with the person (or another person controlling,
controlled by, or under common control with, such person) with whom such
agreement was entered into (regardless of when such consummation occurs if the
Company has entered into such an agreement within such 12-month period), and
(ii) such payment shall be made promptly, but in no event later than two days
after the consummation of such Company Acquisition (regardless of when such
consummation occurs if the Company has entered into such an agreement within
such twelve-month period). Company acknowledges that the agreements contained in
this Section 7.3(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not enter into
this Agreement. Accordingly, if the Company fails to pay in a timely manner the
amounts due pursuant to this Section 7.3(b), and, in order to obtain such
payment, Parent makes a claim that results in a judgment against the Company for
the amounts set forth in this Section 7.3(b), Company shall pay to Parent its
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in this Section 7.3(b) at the prime rate of The Chase Manhattan Bank
in effect on the date such payment was required to be made. Payment of the fees
described in this Section 7.3(b) shall not be in lieu of damages incurred in the
event of breach of this Agreement.
For the purposes of this Agreement, "COMPANY ACQUISITION" shall mean
any of the following transactions (other than the transactions contemplated by
this Agreement); (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company pursuant to which the shareholders of the Company immediately preceding
such transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction or the parent thereof, (ii) a
sale or other disposition by the Company of assets representing in excess of 50%
of the aggregate fair market value of the Company's business immediately prior
to such sale, or (iii) the acquisition by any person or group (including by way
of a tender offer or an exchange offer or issuance by Company), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of the Company.
(c) PARENT PAYMENTS. In the event that this Agreement is
terminated by Parent or Company, as applicable, pursuant to Sections 7.1(e) due
to failure of Parent to obtain the requisite approval for the Merger, Parent
shall promptly, but in no event later than two days after the date of such
termination, pay Company a fee in immediately available funds in an amount equal
to three million five hundred thousand dollars ($3,500,000.00); PROVIDED, that
such payment shall be made only if (A) following the date of this Agreement and
prior to the termination of this Agreement, a person has publicly announced a
proposal to make a Parent Acquisition and (B) within 12 months following the
termination of this Agreement, either a Parent Acquisition (as defined below) is
consummated, or the Parent enters into an agreement providing for a Parent
Acquisition and such Parent Acquisition is later consummated with the person (or
another person controlling, controlled by, or under common control with, such
person) with whom such agreement was entered into (regardless of when such
consummation occurs if the Parent has entered into such an agreement within such
12-month period), and (ii) such payment shall be made promptly, but in no event
later than two days after the consummation of such Parent Acquisition
(regardless of when such consummation occurs if the Parent has entered
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into such an agreement within such twelve-month period). Parent acknowledges
that the agreements contained in this Section 7.3(c) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Company would not enter into this Agreement. Accordingly, if the Parent fails to
pay in a timely manner the amount due pursuant to this Section 7.3(c), and, in
order to obtain such payment, Company makes a claim that results in a judgment
against the Parent for the amount set forth in this Section 7.3(c), Parent shall
pay to Company its reasonable costs and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount set forth in this Section 7.3(c) at the prime rate of The
Chase Manhattan Bank in effect on the date such payment was required to be made.
Payment of the fees described in this Section 7.3(c) shall not be in lieu of
damages incurred in the event of breach of this Agreement.
For the purposes of this Agreement, "PARENT ACQUISITION" shall mean
any of the following transactions (other than the transactions contemplated by
this Agreement and other than any of the Contemplated Parent Changes); (i) a
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Parent pursuant to which the
shareholders of the Parent immediately preceding such transaction hold less than
50% of the aggregate equity interests in the surviving or resulting entity of
such transaction or the parent thereof, (ii) a sale or other disposition by the
Parent of assets representing in excess of 50% of the aggregate fair market
value of the Parent's business immediately prior to such sale, or (iii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by Parent), directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership of shares representing in
excess of 50% of the voting power of the then outstanding shares of capital
stock of the Parent.
7.4 AMENDMENT. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Parent and Company.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
terms survive the Effective Time shall survive the Effective Time.
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8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via facsimile (receipt confirmed) to the
parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Micron Electronics, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxx, XX 00000
Attention: President
Facsimile No.: 208-898-3424
with a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile No.: 000-000-0000
(b) if to Company, to:
Interland, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: President
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxx
Facsimile No.: 000-000-0000
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(b) if to the MEI Shareholder Representative, to:
Micron Technology, Inc.
0000 X. Xxxxxxx Xxx
Xxxxx, XX 00000
Attention: President
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxx
Facsimile No.: 000-000-0000
8.3 INTERPRETATION; CERTAIN DEFINED TERMS.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated. The words "INCLUDE,"
"INCLUDES" and "INCLUDING" when used herein shall be deemed in each case to be
followed by the words "WITHOUT LIMITATION." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "THE BUSINESS OF" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity,
except as herein expressly otherwise provided. Reference to the subsidiaries of
an entity shall be deemed to include all direct and indirect subsidiaries of
such entity.
(b) For purposes of this Agreement, the term "KNOWLEDGE" means
with respect to a party hereto, with respect to any matter in question, that any
of the officers or directors of such party has actual knowledge of such matter,
after reasonable inquiry of such matter including consultation with counsel as
to representations dealing with determination relating to laws or legal matters.
For purposes of this definition, the "officers and directors" of Company shall
be those person listed as Company officers and directors in the most recent
applicable Company SEC Reports.
(c) For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect that is or is reasonably likely to
be materially adverse to the business, assets (including intangible assets),
capitalization, financial condition, operations or results of operations of such
entity taken as a whole with its subsidiaries, except to the extent that any
such change, event, violation, inaccuracy, circumstance or effect results from
(i) changes in general economic conditions, (ii) changes affecting the industry
generally in which such entity operates (provided that such changes do not
affect such entity in a disproportionate manner) or (iii) changes in the
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trading prices for such entity's or its parent's capital stock; or (iv) the
announcement of the Merger, or the transactions contemplated by this Agreement;
or, (v) in the case of Parent or its Subsidiaries, the Disposition (including
any sale of PC Business-related Intellectual Property rights, real property or
SpecTek to Parent's parent entity), any sale of the Parent's "SpecTek" business
or related assets, any Payment, or any other Contemplated Parent Changes, or the
announcement of any thereof, or any changes in Parent's or any Subsidiary's
financial condition, results of operation or assets resulting from any thereof,
or any such changes resulting from continued operational losses in connection
with the PC Business or otherwise resulting primarily from the continued
operation of the PC Business or the Parent's SpecTek business, or (vi) in the
case of Parent and its Subsidiaries, any failure of Net Available Cash to equal
or exceed two hundred million dollars ($200,000,000.00) at Closing.
(d) For purposes of this Agreement, amounts, changes, increases,
events, assets, agreements, contracts or licenses exceeding $100,000.00 in value
shall be deemed "MATERIAL;" PROVIDED, HOWEVER, that only claims, obligations or
other liabilities exceeding $250,000.00 in value shall be deemed a "MATERIAL
LIABILITY."
(e) For purposes of this Agreement, the term "PERSON" shall mean
any individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(f) For purposes of this Agreement, "SUBSIDIARY" of a specified
entity will be any corporation, partnership, limited liability company, joint
venture or other legal entity of which the specified entity (either alone or
through or together with any other subsidiary) owns, directly or indirectly, 50%
or more of the stock or other equity or partnership interests the holders of
which are generally entitled to vote for the election of the Board of Directors
or other governing body of such corporation or other legal entity.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement, its
Exhibits and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Company
Disclosure Letter and the Parent Disclosure Letter (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 1.12 and in Section 5.11.
8.6 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or
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unenforceable, the remainder of this Agreement will continue in full force and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
8.7 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written consent of
the other parties hereto. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Any purported assignment in
violation of this Section shall be void.
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, COMPANY AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be executed by their duly authorized respective officers as of the
date first written above.
MICRON ELECTRONICS, INC.
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx, Chairman and Chief
Executive Officer
IMAGINE ACQUISITION CORPORATION
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx, Chairman and Chief
Executive Officer
INTERLAND, INC.
By: /s/ Xxxxxxx Xxxxxxxxxx
----------------------------------------
Xxxxxxx Xxxxxxxxxx, President and Chief
Executive Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]