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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
by and among
▇▇▇▇.▇▇▇, INC.
▇▇▇▇.▇▇▇, INC.
▇▇▇▇▇.▇▇▇, INC.
and
THE STOCKHOLDERS OF
▇▇▇▇▇.▇▇▇, INC.
dated as of
March 14, 2000
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
Section 1.1 The Merger............................................................1
Section 1.2 Effective Time........................................................2
Section 1.3 Effect of the Merger..................................................2
Section 1.4 Certificate of Incorporation; Bylaws..................................2
Section 1.5 Directors and Officers................................................2
Section 1.6 Additional Actions....................................................3
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
Section 2.1 Conversion of Shares..................................................3
Section 2.2 Exchange of Certificates..............................................6
Section 2.3 No Fractional Securities..............................................6
Section 2.4 Stock Transfer Books..................................................7
Section 2.5 No Further Ownership Rights in Company Stock..........................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY
Section 3.1 Corporate Organization................................................7
Section 3.2 Authorization.........................................................8
Section 3.3 Consents and Approvals; No Violations.................................8
Section 3.4 Capitalization........................................................8
Section 3.5 Financial Statements..................................................9
Section 3.6 Absence of Undisclosed Liabilities....................................9
Section 3.7 Absence of Certain Changes or Events.................................10
Section 3.8 Legal Proceedings, etc...............................................10
Section 3.9 Tax Matters..........................................................11
Section 3.10 Title to Properties and Related Matters..............................12
Section 3.11 Intellectual Property; Proprietary Rights; Employee Restrictions.....13
Section 3.12 Contracts............................................................15
Section 3.13 Employee Matters.....................................................17
Section 3.14 Compliance with Applicable Law.......................................20
Section 3.15 Ability to Conduct the Business......................................21
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Section 3.16 Major Customers.......................................................21
Section 3.17 Consultants, Sales Representatives and Other Agents...................22
Section 3.18 Accounts Receivable...................................................22
Section 3.19 Insurance.............................................................22
Section 3.20 Bank Accounts; Powers of Attorney.....................................22
Section 3.21 Minute Books, etc.....................................................22
Section 3.22 Related Person Indebtedness and Contracts.............................23
Section 3.23 Brokers; Payments.....................................................23
Section 3.24 Disclosure............................................................23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING TO THE STOCKHOLDERS
Section 4.1 Authorization.........................................................23
Section 4.2 Merger Shares.........................................................24
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION CORP.
Section 5.1 Corporate Organization................................................27
Section 5.2 Authorization.........................................................27
Section 5.3 Consents and Approvals; No Violations.................................27
Section 5.4 Capitalization........................................................28
Section 5.5 SEC Reports...........................................................28
Section 5.6 Brokers; Payments.....................................................29
Section 5.7 Validity of Shares....................................................29
Section 5.8 No Liabilities of Acquisition Corp....................................29
Section 5.9 Absence of Undisclosed Liabilities....................................29
Section 5.12 No Parent Material Adverse Effect.....................................30
Section 5.13 Tax Matters...........................................................30
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Transfer of Shares....................................................31
Section 6.2 Reasonable Efforts; Etc...............................................31
Section 6.3 Fees and Expenses.....................................................31
Section 6.4 Nasdaq National Market Listing........................................31
Section 6.5 Tax Covenants.........................................................31
Section 6.6 Legends...............................................................33
Section 6.7 Management Stock Options..............................................33
Section 6.8 Contribution Agreement................................................34
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ARTICLE VII
COVENANTS OF THE COMPANY AND THE STOCKHOLDERS
Section 7.1 Non-Competition.......................................................34
Section 7.2 Conduct of Business by the Company and its Subsidiaries...............35
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND ACQUISITION CORP.
Section 8.1 Representations and Warranties True...................................38
Section 8.2 Performance...........................................................38
Section 8.3 Absence of Litigation.................................................38
Section 8.4 Consents..............................................................39
Section 8.5 Additional Agreements.................................................39
Section 8.6 Delivery of Certificates for Cancellation.............................39
Section 8.7 Certificate of Merger.................................................39
Section 8.8 Opinion of Counsel to the Company.....................................39
Section 8.9 Supporting Documents..................................................40
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND STOCKHOLDERS
Section 9.1 Representations and Warranties True...................................40
Section 9.2 Performance...........................................................40
Section 9.3 Absence of Litigation.................................................40
Section 9.4 Consents..............................................................41
Section 9.5 Additional Agreements.................................................41
Section 9.6 Certificate of Merger.................................................41
Section 9.7 Shares of Parent Common Stock.........................................41
Section 9.8 Opinion of Counsel to Parent and Acquisition Corp.....................41
Section 9.9 Supporting Documents..................................................41
ARTICLE X
TERMINATION
Section 10.1 Termination...........................................................42
Section 10.2 Effect of Termination.................................................42
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
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Section 11.1 Indemnity Obligations..................................................42
Section 11.2 Notification of Claims.................................................44
Section 11.3 Duration...............................................................45
Section 11.4 No Contribution........................................................45
ARTICLE XII
MISCELLANEOUS PROVISION
Section 12.1 Amendment..............................................................45
Section 12.2 Waiver of Compliance...................................................46
Section 12.3 Notices................................................................46
Section 12.4 Assignment.............................................................47
Section 12.5 No Third Party Beneficiaries...........................................47
Section 12.6 Public Announcements...................................................47
Section 12.7 Counterparts...........................................................47
Section 12.8 Headings...............................................................47
Section 12.9 Entire Agreement.......................................................47
Section 12.10 Governing Law..........................................................48
EXHIBITS
Exhibit A Contribution Agreement
Exhibit B Certificate of Merger (Delaware)
Exhibit C Escrow Agreement
Exhibit D Company Disclosure Schedules
Exhibit E Parent Disclosure Schedules
Exhibit F Form of Employment Agreement
Exhibit G Form of Lock-Up Agreement
Exhibit H Form of Registration Rights Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of March 14, 2000 by and among
▇▇▇▇.▇▇▇, Inc., a corporation organized under the laws of the State of Delaware
(the "Parent"), ▇▇▇▇.▇▇▇, Inc., a corporation organized under the laws of the
State of Delaware and a wholly-owned subsidiary of the Parent ("Acquisition
Corp."), ▇▇▇▇▇.▇▇▇, Inc., a corporation organized under the laws of the State of
Delaware (the "Company"), and the stockholders of the Company (the
"Stockholders") identified on the signature pages hereto.
WHEREAS, the respective Boards of Directors of the Parent, Acquisition
Corp. and the Company have approved the merger of Acquisition Corp. with and
into the Company (the "Merger"), pursuant to which the Company will be the
surviving corporation (in such capacity, the "Surviving Corporation") and the
stockholders of the Company immediately prior to such Merger will be entitled to
receive the consideration provided for in this Agreement, all upon the terms and
subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this Agreement,
▇▇▇▇.▇▇▇, certain of the Stockholders and the Company, are entering into a
Contribution Agreement in the form of Exhibit A attached hereto (the
"Contribution Agreement"), pursuant to which ▇▇▇▇.▇▇▇ and such Stockholders will
each make certain contributions to the Surviving Corporation immediately
following the consummation of the Merger in exchange for shares of capital stock
of the Surviving Corporation;
WHEREAS, immediately following the contributions to be made pursuant to
the Contribution Agreement, ▇▇▇▇.▇▇▇ and the Stockholders party thereto will
own, directly or indirectly, all of the issued and outstanding shares of the
Surviving Corporation's common stock, par value $0.01 per share (the "Surviving
Corporation Stock"); and
WHEREAS, it is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements set forth herein, and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. (a) THE MERGER. At the Effective Time (as
defined in Section 1.2), and subject to and upon the terms and conditions of
this Agreement and the Delaware General Corporation Law (the "DGCL"),
Acquisition Corp. shall be merged with and into the Company, the separate
corporate existence of Acquisition Corp. shall cease, and the Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
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(b) CLOSING. Unless this Agreement has been terminated and the
transactions herein contemplated have been abandoned pursuant to Article X and
subject to the satisfaction or waiver of the conditions set forth in Articles
VIII and IX, the consummation of the Merger (the "Closing") will take place as
promptly as practicable (and in any event within two (2) business days) after
satisfaction or waiver of the conditions set forth in Articles VIII and IX, at
the offices of Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another date, time or place is agreed to in writing
by the Company and the Parent. The date of such Closing is referred to herein as
the "Closing Date."
SECTION 1.2 EFFECTIVE TIME. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Articles VIII and IX, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger as contemplated by the DGCL in the form of Exhibit B hereto (the
"Certificate of Merger"), together with any required related certificates, with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with the relevant provisions of, the DGCL (the time
of such filings being the "Effective Time").
SECTION 1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Acquisition Corp. shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Acquisition Corp. shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 1.4 CERTIFICATE OF INCORPORATION; BYLAWS. (a) CERTIFICATE OF
INCORPORATION. Unless otherwise determined by the Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of the Company
shall be amended in the Merger to be the same as the Certificate of
Incorporation of Acquisition Corp., as in effect immediately prior to the
Effective Time, and the name of the Surviving Corporation shall be changed to
▇▇▇▇.▇▇▇, Inc., and as so amended shall be the Certificate of Incorporation of
the Surviving Corporation until thereafter amended in accordance with the DGCL
and such Certificate of Incorporation.
(b) BYLAWS. Unless otherwise determined by the Parent prior to the
Effective Time, the Bylaws of Acquisition Corp., as in effect immediately prior
to the Effective Time, shall, at the Effective Time, be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with the DGCL, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
SECTION 1.5 DIRECTORS AND OFFICERS. The directors of Acquisition Corp.
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Acquisition Corp. immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
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SECTION 1.6 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation considers or is advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in or to any of the rights, properties
or assets of Acquisition Corp. or the Company acquired or to be acquired by
reason of, or as a result of, the Merger, or otherwise to carry out the purposes
of this Agreement, the Surviving Corporation and its proper officers and
directors shall be authorized to execute and deliver, in the name and on behalf
of Acquisition Corp. or the Company, all such deeds, bills of sale, assignments
and assurances and to do, in the name and on behalf of Acquisition Corp. or the
Company, all such other acts and things necessary or desirable to vest, perfect
or confirm any and all right, title or interest in, to or under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out the
purposes of this Agreement.
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
SECTION 2.1 CONVERSION OF SHARES. (a) CONVERSION OF SHARES. Each share
of common stock, par value $.001 per share, of the Company ("Company Common
Stock"), issued and outstanding as of the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, automatically
be converted into the right to receive (I) the Common Closing Payment (as
hereinafter defined), (II) the Common Contingent Payment (as hereinafter
defined) and (III) the Unexercised Options Payment (as hereinafter defined).
Each share of Series A Preferred Stock, par value $.001 per share, of the
Company (the "Company Preferred Stock"), issued and outstanding as of the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, automatically be converted into the right to receive (I)
the Preferred Closing Payment (as hereinafter defined), (II) the Preferred
Contingent Payment (as hereinafter defined) and (III) the Unexercised Options
Payment (as hereinafter defined). The Common Closing Payment and the Preferred
Closing Payment are hereinafter referred to as the "Closing Payments" and the
Common Contingent Payment and the Preferred Contingent Payment are hereinafter
referred to as the "Contingent Payments." The Closing Payments shall be made on
the Closing Date. The Contingent Payments (if any) shall be made within twenty
(20) days after the first anniversary of the Closing Date. The Unexercised
Options Payment shall be made within twenty (20) days after the Unexercised
Options Determination Date (as defined below). Notwithstanding the foregoing,
the Parent Shares (as defined below) issuable to the Stockholder Indemnitors (as
defined below) on the Closing Date and the Contingent Payment Date that are
required to be deposited with the Escrow Agent pursuant to Section 2.1(b) shall
not be paid on the Closing Date or, if applicable, the date of payment of the
Contingent Payment but shall be deposited with the Escrow Agent and disposed of
in accordance with the terms of Section 2.1(b) and the Escrow Agreement. The
Closing Payments and the Contingent Payments are based on there being 3,316,750
Fully Diluted Shares issued and outstanding. In this Agreement, "Fully Diluted
Shares" means the number of outstanding shares of Company Common Stock
immediately prior to the Effective Time, calculated on a fully diluted, fully
converted basis as though all convertible debt and equity securities and options
(whether vested or unvested), warrants and other rights to purchase Company
Common Stock had been converted into or exercised for Company Common Stock.
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(i) The "Common Closing Payment" means 1.24940488 shares of
Class A common stock, par value $0.01 per share, of Parent ("Parent
Common Stock").
(ii) The "Preferred Closing Payment" means (A) 1.01288878 shares
of Parent Common Stock and (B) 1.54552 shares of Class A common stock,
par value $0.01 per share, of the Surviving Corporation ("Surviving
Corporation Class A Common Stock").
(iii) The "Unexercised Options Payment" means the quotient
obtained by dividing (A) the aggregate number of Parent Shares that are
not issued but that would have been issuable upon exercise of Company
Stock Options (as hereinafter defined) that are cancelled, forfeited or
expired unexercised on or before the Unexercised Options Determination
Date by (B) the number of Fully Diluted Shares Outstanding (excluding
such shares described under clause (iii) (A) above). The "Unexercised
Options Determination Date" shall be the earlier of the expiration of the
final vesting period for Company Stock Options that are subject to
vesting and three years after the Effective Time.
(iv) The "Common Contingent Payment" means that number of shares
of Parent Common Stock obtained by multiplying the number of Parent
Shares issued pursuant to the Common Closing Payment (as appropriately
adjusted for subsequent stock splits, stock dividends, stock combinations
and similar events) by the Contingent Payment Multiple.
(v) The "Preferred Contingent Payment" means that number of
shares of Parent Common Stock obtained by multiplying the number of
Parent Shares issued pursuant to the Preferred Closing Payment (as
appropriately adjusted for subsequent stock splits, stock dividends,
stock combinations and similar events) by the Contingent Payment
Multiple.
(vi) The "Contingent Payment Multiple" means the product
obtained by multiplying 0.004 by a fraction, the numerator of which shall
be the excess, if any, of the Target Acquisition Amount over the Actual
Acquisition Amount and the denominator of which shall be $1,000,000.
(vii) The "Target Acquisition Amount" means $50,000,000.
(viii) The "Actual Acquisition Amount" means the fair market value
(determined in the sole discretion of the Board of Directors of Parent)
of the aggregate consideration payable by Parent, ▇▇▇▇.▇▇▇ or their
respective affiliates in Qualified Acquisitions; provided that if such
fair market value is not less than or equal to zero or an integral
multiple of $1,000,000, such fair market value shall be deemed to be an
amount equal to the nearest integral multiple of $1,000,000.
(ix) "Qualified Acquisition" means a transaction consummated
during the period before the first anniversary of the Closing Date
(including the period before the date hereof) in which Parent, ▇▇▇▇.▇▇▇
or any of their respective affiliates acquires, directly or indirectly,
by merger or consolidation or by purchasing any equity interest in a
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portion of the assets of, or by any other means, a majority of the
effective economic and voting interests of a business engaged in
developing, marketing or providing consumer or business internet portals
and related services focused on the Asian market or a portion thereof or
a business that is in furtherance of such a business.
(x) The number of shares of Parent Common Stock issued for each
share of Company Common Stock pursuant to the Common Closing Payment is
herein referred to as the "Common Exchange Ratio." The number of shares
of Parent Common Stock and the number of shares of Surviving Corporation
Class A Common Stock issued for each share of Company Preferred Stock
pursuant to the Preferred Closing Payment is herein referred to as the
"Preferred Exchange Ratio." The aggregate number of shares of Parent
Common Stock and Surviving Corporation Class A Common Stock issued
pursuant to this Section 2.1(a) shall be referred to in this Agreement as
the "Merger Shares"; the aggregate number of shares of Parent Common
Stock issued pursuant to Section 2.1(a) shall be referred to in this
Agreement as the "Parent Shares"; and the aggregate number of shares of
Surviving Corporation Class A Common Stock issued pursuant to Section
2.1(a) shall be referred to in this Agreement as the "Retained Shares."
The number of Parent Shares and Retained Shares to be issued to each of
the Stockholders is set forth on Schedule 2.1(a).
(b) ESCROW SHARES. On the Closing Date and on the date of payment
of the Common Contingent Payment, Parent shall deliver to American Stock
Transfer and Trust Company (the "Escrow Agent") as collateral for the
indemnification obligations of the Stockholder Indemnitors (as defined below)
hereunder 15% of the Parent Shares issuable pursuant to the Merger to each of
the Stockholder Indemnitors (the "Escrow Shares"), in accordance with the Escrow
Agreement. Release of the Escrow Shares will be permitted only in accordance
with the terms and conditions of the Escrow Agreement. In this Agreement, the
"Escrow Agreement" shall mean the escrow agreement, to be executed by Parent,
each of the Stockholder Indemnitors and the Escrow Agent in substantially the
form of Exhibit C attached hereto. In this Agreement, the "Stockholder
Indemnitors" shall mean ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇. The Stockholder Indemnitors and Parent shall issue joint written
instructions to the Escrow Agent (i) to distribute the Escrow Shares, upon final
resolution of all claims by the Parent Indemnitees (as defined in Section 11.1)
for indemnification under Article XI, to the Parent Indemnitees or the
Stockholder Indemnitors or both in accordance with such resolution or (ii) if no
claims for indemnification by the Parent Indemnitees shall be made on or before
the first anniversary of the Merger, to distribute the Escrow Shares to the
Stockholder Indemnitors in accordance with their respective entitlements.
(c) TREASURY SHARES. Each share of Company Common Stock held in
the Company's treasury as of the Effective Time, if any, shall, by virtue of the
Merger, be canceled without payment of any consideration therefor.
(d) ACQUISITION CORP. SHARES. Each share of common stock, par
value $0.01 per share, of Acquisition Corp. (the "Acquisition Corp. Common
Stock") issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into one validly issued, fully paid and nonassessable shares of
Class B Common Stock, par value $.01 per share, of the Surviving
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Corporation ("Surviving Corporation Class B Common Stock"). Each certificate
evidencing ownership of shares of Acquisition Corp. Common Stock shall evidence
ownership of such shares of Surviving Corporation Class B Common Stock.
(e) STOCK OPTIONS. At the Effective Time, all options and warrants
to purchase Company Common Stock then outstanding shall be assumed by the
Surviving Corporation in accordance with Section 6.7(a) hereof and shall
thereafter represent the right to purchase Parent Shares as provided in Section
6.7(a).
SECTION 2.2 EXCHANGE OF CERTIFICATES. (a) At the Closing, certificates
(the "Certificates"), which immediately prior to the Effective Time represented
the issued and outstanding shares of Company Common Stock and Company Preferred
Stock that were converted into the right to receive Merger Shares pursuant to
Section 2.1(a) shall be surrendered for cancellation and termination in the
Merger. At the Effective Time, each Certificate shall be canceled in exchange
for certificates representing, in the aggregate, the number of whole shares of
Parent Common Stock and the number of Retained Shares into which the Company
Common Stock and Company Preferred Stock evidenced by the Certificates so
surrendered has been converted pursuant to Section 2.1(a) of this Agreement.
Such certificates, other than certificates representing Escrow Shares, which
certificates shall be delivered to the Escrow Agent on the Closing Date pursuant
to Section 2.1(b), shall be delivered to the Stockholders on the Closing Date.
Until surrendered, each outstanding Certificate which prior to the Effective
Time represented shares of Company Common Stock or Company Preferred Stock shall
be deemed for all corporate purposes to evidence ownership of the number of
whole shares of Parent Common Stock and the number of Retained Shares into which
the shares of Company Common Stock and Company Preferred Stock have been
converted but shall have no other rights. From and after the Effective Time, the
holders of shares of Company Common Stock and Company Preferred Stock shall
cease to have any rights in respect of such shares and their rights shall be
solely in respect of the number of shares of Parent Common Stock and Surviving
Corporation Class A Common Stock into which such shares of Company Common Stock
and Company Preferred Stock have been converted.
(b) In the event any Certificate has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, Parent shall issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common Stock
issuable in exchange therefor and the Surviving Corporation shall issue the
shares of Surviving Corporation Class A Common Stock issuable in exchange
therefor pursuant to the provisions of Section 2.1(a) of this Agreement. The
Board of Directors of Parent may in its discretion and as a condition precedent
to the issuance thereof require the owner of such lost, stolen or destroyed
Certificate to provide to Parent an indemnity agreement against any claim that
may be made against Parent or the Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
SECTION 2.3 NO FRACTIONAL SECURITIES. No fractional shares of Parent
Common Stock or Surviving Corporation Class A Common Stock shall be issuable by
the Parent or the Surviving Corporation upon the conversion of shares of Company
Common Stock and Company Preferred Stock in the Merger pursuant to Section
2.1(a) hereof. In lieu of any such fractional shares, each holder of Company
Common Stock and Company Preferred Stock who would
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otherwise have been entitled to receive a fraction of a share of Parent Common
Stock or Surviving Corporation Class A Common Stock shall be entitled to receive
instead an amount in cash equal to such fraction multiplied by the average of
the last quoted sale prices for one share of Parent Common Stock on The Nasdaq
National Market (or, if Parent Common Stock is not then quoted on The Nasdaq
National Market but is traded on a national securities exchange, then such
securities exchange) for the fifteen (15) trading days ending with the trading
day immediately prior to the Effective Time.
SECTION 2.4 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of Company Common Stock or Company Preferred Stock on
the records of the Company.
SECTION 2.5 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. The Merger
Shares delivered upon the surrender for exchange of shares of Company Common
Stock and Company Preferred Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares, and there shall be no further registration of transfers on the records
of the Surviving Corporation of shares of Company Common Stock and Company
Preferred Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, certificates for shares of Company Common Stock or
Company Preferred Stock are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY
The Company and each of the Stockholder Indemnitors, jointly and
severally, represents and warrants to the Parent as set forth below as of the
date of this Agreement and as of the Closing Date, subject to the exceptions set
forth in the disclosure schedules supplied by the Company dated as of the date
hereof and attached hereto as Exhibit D (the "Company Disclosure Schedules"),
the section numbers and letters of which correspond to the section and
subsection numbers and letters of this Agreement.
SECTION 3.1 CORPORATE ORGANIZATION. Each of the Company and its
Subsidiaries (as defined in Section 3.4) is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own,
operate and lease the properties and assets it now owns, operates and leases and
to carry on its business as presently conducted. Each of the Company and its
Subsidiaries is duly qualified to transact business as a foreign corporation and
is in good standing in the jurisdictions set forth in Schedule 3.1, which are
the only jurisdictions where such qualification is required by reason of the
nature of the properties and assets currently owned, operated or leased by it or
the business currently conducted by it except for those jurisdictions where the
failure to be so qualified would not have a Company Material Adverse Effect (as
defined in Section 3.7). The Company has previously delivered to the Parent
complete and correct copies of the Certificates of Incorporation and Bylaws, as
amended to date, of each of the Company and its Subsidiaries. Schedule 3.1 sets
forth a list of each Subsidiary of the Company.
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SECTION 3.2 AUTHORIZATION. The Company has full corporate power and
authority to enter into this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery of, and the consummation of the
transactions contemplated by, this Agreement have been duly approved by the
Board of Directors and the stockholders of the Company, and no other corporate
action on the part of the Company is necessary to approve and authorize the
execution and delivery of, or the consummation of the transactions contemplated
by, this Agreement. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding agreement of the Company,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance or other laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
including judicial discretion in the enforcement of equitable remedies,
regardless of whether such enforceability is considered in a proceeding in law
or in equity, and requirements of good faith, fair dealing and reasonableness.
SECTION 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and
delivery of, and the consummation of the transactions contemplated by, this
Agreement, the Contribution Agreement and the Escrow Agreement (collectively,
the "Transaction Agreements"), and the ownership and operation of the Company
and its subsidiaries by Parent, will not: (i) violate or conflict with any
provision of the Certificates of Incorporation or Bylaws of the Company or any
of its Subsidiaries, (ii) (A) breach, violate or constitute an event of default
(or an event which with the lapse of time or the giving of notice or both would
constitute an event of default) under, give rise to any right of termination,
cancellation, modification or acceleration under, or, except as set forth on
Schedule 3.3, require any consent or the giving of any notice under, any
material note, bond, indenture, mortgage, security agreement, lease, license,
franchise, permit, agreement or other instrument or obligation to which the
Company or any of its Subsidiaries is a party, or by which the Company or any of
its Subsidiaries or any of their respective properties or assets may be bound,
or (B) result in the creation of any lien, claim or encumbrance or other right
of any third party of any kind whatsoever upon the properties or assets of the
Company or any of its Subsidiaries pursuant to the terms of any such instrument
or obligation, (iii) violate or conflict in any material respect with any law,
statute, ordinance, code, rule, regulation, judgment, order, writ, injunction,
decree or other instrument of any federal, state, local or foreign court or
governmental or regulatory body, agency or authority applicable to the Company
or any of its Subsidiaries or by which any of their respective properties or
assets may be bound or (iv) except as disclosed on Schedule 3.3, require, on the
part of the Company or any of its Subsidiaries, any filing or registration with,
or permit, license, exemption, consent, authorization or approval of, or the
giving of any notice to, any governmental or regulatory body, agency or
authority.
SECTION 3.4 CAPITALIZATION. (a) The authorized capital stock of the
Company consists of 8,975,000 shares of Company Common Stock of which 2,050,000
shares are issued and outstanding, and 1,025,000 shares of Company Preferred
Stock, all of which are issued and outstanding. All of the issued and
outstanding shares of Common Stock were duly authorized and validly issued and
are fully paid and nonassessable, and were not issued in violation of any
preemptive or other rights, any provision of any contract, agreement or
arrangement of any kind or federal, state or foreign securities laws. Except as
disclosed in Schedule 3.4(a) hereto, the Company has never repurchased or
redeemed any shares of its capital stock, and there are no amounts owed or which
may be owed to any person by the Company as a result of any
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repurchase or redemption of shares of its capital stock. Except as disclosed in
Schedule 3.4(a) hereto, there are no agreements, arrangements or understandings
to which the Company is a party or by which it is bound to redeem or repurchase
any shares of its capital stock. Except as disclosed in Schedule 3.4(a) hereto,
there are not, and on the Closing Date there will not be, outstanding (i) any
options, warrants or other rights to purchase from the Company any capital stock
of the Company, (ii) any securities convertible into or exchangeable for shares
of such stock or (iii) any agreements, arrangements or understandings to which
the Company is a party or by which it is bound pursuant to which the Company is
or may be required to issue additional shares of its capital stock or options,
warrants or other securities of the Company. Except as set forth in Schedule
3.4(a), there are no voting trusts, shareholder agreements, proxies or other
agreements, arrangements or understandings relating to the voting, purchase or
sale of capital stock (i) between or among the Company and any of its
stockholders and (ii) between or among any of the Company's stockholders
(collectively, "Company Shareholder Arrangements"). All of the Company
Shareholder Arrangements will be terminated upon the Effective Time.
(b) The capitalization and ownership of capital stock of each
Subsidiary of the Company is as set forth in Schedule 3.4(b). Except as set
forth in Schedule 3.4(b), the Company does not own, directly or indirectly, any
equity securities, or options, warrants or other rights to acquire equity
securities, or securities convertible into or exchangeable for equity
securities, of any other corporation or any limited liability company, or any
partnership interest in any general or limited partnership or unincorporated
joint venture (a "Subsidiary"). There are not, and on the Closing Date there
will not be, outstanding any (i) options, warrants or other rights with respect
to the capital stock of any of the Company's Subsidiaries, (ii) any securities
convertible into or exchangeable for shares of such stock or (iii) any
agreements, arrangements or understandings to which any Subsidiary is a party or
by which it is bound pursuant to which any Subsidiary is or may be required to
issue additional shares of its capital stock or options, warrants or other
securities of any Subsidiary.
SECTION 3.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.5(a) are
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of December 31, 1999 and the unaudited statement of income for the fiscal year
ended December 31, 1999 (hereinafter collectively referred to as the "Financial
Statements"). Except as set forth on Schedule 3.5(a), the Financial Statements
(i) have been prepared from the books and records of the Company, (ii) have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied during the periods covered thereby and
(iii) present fairly in all material respects the financial condition and
results of operations and cash flows of the Company as at the dates, and for the
periods, stated therein.
SECTION 3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except (i) as set forth
on Schedule 3.6, (ii) as set forth or reserved against in the balance sheet of
the Company dated as of December 31, 1999 included in the Financial Statements
(the "Reference Balance Sheet") and (iii) for obligations and liabilities
incurred since December 31, 1999 in the ordinary course of business, which do
not individually or in the aggregate exceed $25,000, the Company and its
Subsidiaries do not have any material liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise.
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SECTION 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 3.7, since December 31, 1999, the Company and its Subsidiaries have
carried on their business in all material respects in the ordinary course and
consistent with past practice. Except as set forth on Schedule 3.7 hereto, since
December 31, 1999, neither the Company nor any of its Subsidiaries has: (i)
incurred any material obligation or liability (whether absolute, accrued,
contingent or otherwise) except in the ordinary course of business and
consistent with past practice, (ii) experienced any Company Material Adverse
Effect (as defined below), (iii) made any change in accounting principle or
practice or in its method of applying any such principle or practice, (iv)
suffered any material damage, destruction or loss, whether or not covered by
insurance, affecting its properties, assets or business, (v) mortgaged, pledged
or subjected to any lien, charge or other encumbrance, or granted to third
parties any rights in, any of its assets, tangible or intangible other than
liens on equipment leased or purchased on credit having a value not exceeding
$10,000 per asset or $50,000 in the aggregate and materialsmen and other similar
liens arising by operation of law and discharged in the ordinary course of
business, provided that the Company is not in breach in any material respect on
its obligations with respect to the obligations secured by such liens, (vi) sold
or transferred any of its assets having a value in excess of $10,000 per
individual asset or $50,000 in the aggregate for all assets sold or transferred,
except in the ordinary course of business and consistent with past practice, or
canceled or compromised any debts or waived any claims or rights except in the
ordinary course of business and consistent with past practice, (vii) issued any
additional shares of capital stock or any rights, options or warrants to
purchase, or securities convertible into or exchangeable for, shares of its
capital stock, (viii) declared or paid any dividends on or made any
distributions (however characterized) in respect of shares of its capital stock,
(ix) repurchased or redeemed any shares of its capital stock, (x) granted any
general or specific increase in the compensation payable or to become payable to
any of its employees or any bonus or service award or other like benefit, or
instituted, increased, augmented or improved any Benefit Plan (as that term is
hereinafter defined) or (xi) entered into any agreement to do any of the
foregoing. The term "Company Material Adverse Effect" means, for purposes of
this Agreement, any change, event or effect that is, or that is reasonably
likely to be, materially adverse to the business, prospects, operations, assets,
liabilities (contingent or otherwise), financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole.
SECTION 3.8 LEGAL PROCEEDINGS, ETC. Except as set forth in Schedule 3.8,
there are no suits, actions, claims, proceedings (including, without limitation,
arbitral or administrative proceedings) or investigations pending or, to the
knowledge of the Company (which, for purposes of this Agreement, shall mean the
actual knowledge of the Stockholder Indemnitors after reasonable inquiry and the
Company), threatened against the Company or any of its Subsidiaries or any of
their respective properties, assets or business or, to the knowledge of the
Company, pending or threatened against any of the Stockholders, officers,
directors, employees, agents or consultants of the Company or any of its
Subsidiaries in connection with the business of the Company or any of its
Subsidiaries. There are no such suits, actions, claims, proceedings or
investigations pending against the Company or any of its Subsidiaries, or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries challenging the validity or propriety of the transactions
contemplated by the Transaction Agreements. There is no judgment, order,
injunction, decree or award (whether issued by a court, an arbitrator or an
administrative agency) to which the Company or any of its Subsidiaries is a
party, or involving
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the Company's or any of its Subsidiaries' properties, assets or business, which
is unsatisfied or which requires continuing compliance therewith by the Company
or any of its Subsidiaries.
SECTION 3.9 TAX MATTERS. (a) Except as set forth in Schedule 3.9, all
Tax returns, reports and other filings in respect of Taxes (as that term is
hereinafter defined) required to be filed in respect of the Company and each of
its Subsidiaries have been or will be duly and timely filed, have been or will
be prepared in compliance with all applicable laws, rules and regulations, and
are true, correct and complete, and all Taxes of the Company and each of its
Subsidiaries, whether or not shown as due on such returns, reports or other
filings, have been or will be fully paid when due. The Company and each of its
Subsidiaries has established adequate reserves on their respective books of
account for all Taxes and for any liability for deferred income Taxes.
(b) Except as set forth in Schedule 3.9, there are no actions or
proceedings currently pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against the Company or such Subsidiary by any
governmental authority for the assessment or collection of Taxes, no claim for
the assessment or collection of Taxes has been asserted against the Company or
any of its Subsidiaries, and there are no matters under discussion between the
Company or any of its Subsidiaries with any governmental authority regarding
claims for the assessment or collection of Taxes. Any unpaid Taxes that have
been claimed or imposed as a result of any examinations of any Tax return,
report or other filing of the Company or any of its Subsidiaries by any
governmental authority are being contested in good faith and are fully described
in Schedule 3.9. Except as set forth in Schedule 3.9, there are no agreements or
applications by the Company or any of its Subsidiaries for an extension of time
for the assessment or payment of any Taxes and no waivers of the statute of
limitations in respect of Taxes. There are no Tax liens on any of the assets of
the Company or any of its Subsidiaries, except for liens for Taxes not yet due.
Neither the Company nor any of its Subsidiaries has received any claim from any
taxing authority in a jurisdiction in which the Company or such Subsidiary does
not file Tax returns that it is or may be subject to taxation by that
jurisdiction. Neither the Company nor any of its Subsidiaries has a permanent
establishment in, or is engaged in a trade or business in, any jurisdiction
other than its jurisdiction of organization.
(c) Except as set forth in Schedule 3.9, there is no agreement,
plan or arrangement covering any employee or independent contractor or former
employee or independent contractor of the Company or any of its Subsidiaries
that, considered individually or considered collectively with any other such
agreement, plan or arrangement, will, or could reasonably be expected to, give
rise directly or indirectly to the payment of any amount that would not be
deductible pursuant to ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Internal Revenue Code
of 1986, as amended (the "Code"), or that would be subject to an excise tax
under Section 4999 of the Code.
(d) Except as set forth in Schedule 3.9, neither the Company nor
any of its Subsidiaries has ever been a party to or bound by any Tax indemnity
agreement, Tax sharing agreement, Tax allocation agreement or similar agreement
or arrangement and neither the Company nor any of its Subsidiaries has any
liability for any Taxes of any other person under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or non-United States law).
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(e) Except as set forth in Schedule 3.9, the Company and each of
its Subsidiaries has withheld or deducted all Taxes or other amounts from
payments to employees or other persons required to be deducted or withheld, and
has timely paid over such Taxes or other amounts to the appropriate governmental
authorities to the extent due and payable.
(f) Neither the Company nor any of its Subsidiaries is a
"consenting corporation" within the meaning of Section 341(f)(1) of the Code, or
comparable provisions of any state statutes, and none of the assets of the
Company or any of its Subsidiaries is subject to an election under Section
341(f) of the Code or comparable provisions of any state statutes.
(g) Neither the Company nor any of its Subsidiaries is, or has
been, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(h) Except as set forth in Schedule 3.9, there are no accounting
method changes or proposed or threatened accounting method changes with respect
to the Company or any of its Subsidiaries, or any other item, that could give
rise to an adjustment under Section 481 of the Code (or similar provision of
non-United States, state or local law) for periods after the Closing Date, and
neither the Company nor any of its Subsidiaries will be required to make any
such Section 481 adjustment (or similar adjustment under non-United States,
state or local law) as a result of the transactions contemplated by this
Agreement.
(i) Except as set forth in Schedule 3.9, no power of attorney has
been granted by the Company or any of its Subsidiaries and is currently in force
with respect to any matter relating to Taxes, and no Tax ruling relating to the
Company or any of its Subsidiaries has been requested from any governmental
authority.
(j) For purposes of this Agreement, the terms "Tax" and "Taxes"
shall mean and include any and all taxes (including, without limitation, any and
all income, franchise, sales, use, excise, withholding, employment, payroll,
social security or property taxes) and similar assessments, customs, duties,
charges and fees (including interest, penalties and additions to such taxes,
assessments, customs, duties, charges and fees, penalties for failure to file or
late filing of any return, report or other filing, and any interest in respect
of such penalties and additions) imposed or assessed by any federal, state,
local or non-United States taxing jurisdiction.
SECTION 3.10 TITLE TO PROPERTIES AND RELATED MATTERS. (a) Except as set
forth on Schedule 3.10(a), the Company and its Subsidiaries have good and valid
title to all personal property, tangible or (excluding any Intellectual Property
Rights, as defined in Section 3.11) intangible, which the Company or its
Subsidiaries purports to own, including the properties reflected on the
Reference Balance Sheet or acquired after the date thereof, free and clear of
any claims, liens, pledges, security interests or encumbrances of any kind
whatsoever (other than (i) purchase money security interests and common law
vendor's liens, in each case for goods purchased on open account in the ordinary
course of business and having a fair market value of less than $10,000 in each
individual case, (ii) liens for Taxes not yet due and payable and (iii) such
imperfections of title and encumbrances, if any, that are not material in
character, amount or extent and that do not materially detract from the value,
or materially interfere with the use, of the property subject thereto or
affected thereby or that affect property having a fair market value of less than
$10,000 in each individual case). Collectively, such property, the property
leased by
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the Company as disclosed on Schedule 3.10(c) and the Intellectual Property
Rights disclosed on Schedule 3.11 constitute all property, tangible or
intangible, used by the Company and its Subsidiaries necessary to conduct the
business of the Company and its Subsidiaries as presently conducted.
(b) The Company does not own any real property or any interest in
real property, except as set forth in Schedule 3.10(d).
(c) Schedule 3.10(c) sets forth a list, which is correct and
complete in all material respects, of all equipment, machinery, instruments,
vehicles, furniture, fixtures and other items of personal property currently
owned or leased by the Company or any of its Subsidiaries with a book value as
of December 31, 1999, in each case of $10,000 or more. Except as set forth in
Schedule 3.10(c), all such personal property that is material to the business of
the Company and its Subsidiaries is in suitable operating condition (ordinary
and reasonable wear and tear excepted) and is physically located in or about one
of the Company's or any of its Subsidiaries' places of business and is owned by
the Company or any of its Subsidiaries or is leased by the Company or any of its
Subsidiaries under one of the leases set forth in Schedule 3.10(d). Except as
disclosed in Schedule 3.10(c), none of such personal property is subject to any
agreement or commitment for its use by any person other than the Company and its
Subsidiaries. The maintenance and operation of such personal property has been
in conformance in all material respects with all applicable laws and
regulations. Except as set forth on Schedule 3.10(c), there are no assets leased
by the Company or any of its Subsidiaries that are owned, directly or
indirectly, by any Related Person (as that term is hereinafter defined in
Section 3.22).
(d) Schedule 3.10(d) sets forth a complete and correct list of all
real property and personal property leases reflecting an obligation of the
Company or any of its Subsidiaries in excess of $10,000 for any one lease or
$50,000 in the aggregate for all of such leases to which the Company or any of
its Subsidiaries is a party. The Company has previously delivered to the Parent
complete and correct copies of each lease (and any amendments or supplements
thereto) listed in Schedule 3.10(d). Except as set forth in Schedule 3.10(d),
(i) each such lease is valid and binding and in full force and effect, (ii)
neither the Company, any of its Subsidiaries nor (to the knowledge of the
Company) any other party is in default under any such lease, and no event has
occurred which constitutes, or with the lapse of time or the giving of notice or
both would constitute, a default by the Company or (to the knowledge of the
Company) a default by any other party under such lease, and (iii) there is no
requirement under any such lease that the Company or any of its Subsidiaries
either obtain the lessor's consent to, or notify the lessor of, the consummation
of the transactions contemplated by this Agreement.
SECTION 3.11 INTELLECTUAL PROPERTY; PROPRIETARY RIGHTS; EMPLOYEE
RESTRICTIONS. (a) Set forth on Schedule 3.11 is a list of all copyright
registrations and applications for copyright registrations, trademark
registrations and applications for trademark registrations, patents and patent
applications, trademarks, service marks, trade names and Internet domain names
that are used by the Company or any of its Subsidiaries in their business as
presently conducted. The items listed on Schedule 3.11, together with all other
intellectual property rights owned by the Company or any of its Subsidiaries and
used in connection with their business and (i) all licenses, assignments and
releases of intellectual property rights of others in material works embodied in
the Company's and its Subsidiaries' products, (ii) any and all intellectual
property
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rights, licenses, data and databases, computer programs and other computer
software user interfaces, know-how, trade secrets, customer lists, proprietary
technology, processes and formulas, source code, object code, algorithms,
architecture, structure, display screens, layouts, development tools,
instructions, templates and marketing materials created by or on behalf of the
Company or any of its Subsidiaries and (iii) inventions, trade dress, logos and
designs created by or on behalf of the Company or any of its Subsidiaries are
referred to as "Intellectual Property Rights." Except as set forth on Schedule
3.11 or as the failure to have been validly assigned would not have a Company
Material Adverse Effect, all Intellectual Property Rights purported to be owned
by the Company or any of its Subsidiaries which were developed, worked on or
otherwise held by any stockholder, employee, officer, consultant or other person
or entity are owned free and clear by the Company or such Subsidiary by
operation of law or have been validly assigned to the Company or such
Subsidiary. Except for the items listed in Exhibit A to Schedule 3.12(a), true
and correct copies of all such licenses, assignments and releases of
Intellectual Property Rights have been provided to Parent prior to the date
hereof, all of which are, to the knowledge of the Company, valid and binding and
in full force and effect. Except as set forth on Schedule 3.11 or as the failure
to have been validly assigned would not have a Company Material Adverse Effect,
all services provided to the Company or any of its Subsidiaries by non-employees
in respect of the creation, modification or improvement of any Intellectual
Property Rights of the Company or its Subsidiaries (including, without
limitation, software, hardware, copyrightable works and the like) have been
performed pursuant to agreements with the Company or its Subsidiaries that
assign to the Company or its Subsidiaries ownership of such Intellectual
Property Rights, each of which is valid and binding and in full force and
effect. To the Company's knowledge, the Intellectual Property Rights (along with
other commercially available intellectual property rights) are sufficient to
carry on the business of the Company and its Subsidiaries as presently
conducted. Except as set forth on Schedule 3.11, the Company and its
Subsidiaries have license to use or exclusive ownership of all Intellectual
Property Rights material to their business as presently conducted identified in
Schedule 3.11 as owned or licensed by the Company or any of its Subsidiaries or
has obtained any licenses, releases or assignments reasonably necessary to use
all third parties' Intellectual Property Rights material to the Company's and
its Subsidiaries' business as presently conducted in works embodied in the
Company's or any of its Subsidiaries' products. Except as set forth on Schedule
3.11, the present business activities or products of the Company and its
Subsidiaries do not infringe any Intellectual Property Rights of others. Except
as set forth in Schedule 3.11, neither the Company nor any of its Subsidiaries
has received any written notice or other written claim from any person asserting
that any of their present activities infringe or may infringe any Intellectual
Property Rights of such person.
(b) Except as set forth on Schedule 3.11, the Company and its
Subsidiaries have the right to use all trade secrets, data, customer lists, log
files, hardware designs, programming processes, software and other information
required for or incident to their products or their business (including, without
limitation, the operation of their Web sites) as presently conducted and have no
reason to believe that any of such information that is provided to the Company
or any of its Subsidiaries by third parties and is material to its operations
will not continue to be provided to the Company or such Subsidiary on the same
terms and conditions as currently exist. The Company and its Subsidiaries have
taken reasonable measures to protect and preserve the security and
confidentiality of their trade secrets and other confidential information. To
the knowledge of the Company, all trade secrets and other confidential
information of the Company
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and its Subsidiaries are not part of the public domain or knowledge, nor have
they been misappropriated by any person having an obligation to maintain such
trade secrets or other confidential information in confidence for the Company or
any of its Subsidiaries. To the knowledge of the Company, no employee or
consultant of the Company or any of its Subsidiaries has used any trade secrets
or other confidential information of any other person in the course of his work
for the Company or its Subsidiaries. Except as set forth in Schedule 3.11, each
of the Company and its Subsidiaries is the exclusive owner of all right, title
and interest in its Intellectual Property Rights as purported to be owned by the
Company and its Subsidiaries and, to the knowledge of the Company, such
Intellectual Property Rights are valid and in full force and effect. No
university, government agency (whether federal, state or non-United States) or
other organization that sponsored research and development conducted by the
Company or any of its Subsidiaries has any claim of right to or ownership of or
other encumbrance upon the Intellectual Property Rights of the Company or any of
its Subsidiaries. Except as set forth in Schedule 3.11, the Company is not aware
of any present infringement by others of the Company's or any of its
Subsidiaries' copyrights or other Intellectual Property Rights in any of its
products, technology or services, or any violation in any material respect of
the confidentiality of any of its proprietary information. To the Company's
knowledge, neither the Company nor its Subsidiaries is making unlawful use of
any confidential information or trade secrets of any past or present employees
of the Company or any of its Subsidiaries.
(c) Except as set forth in Schedule 3.11, neither the Company nor
any of its Subsidiaries nor, to the knowledge of the Company, any of the
Stockholders or employees, has any agreements or arrangements with current or
former employers of employees (which agreements or arrangements relate to (i)
confidential information or trade secrets of such employers, or (ii) the
assignment of rights by such stockholders or employees to any inventions,
know-how or intellectual property of any kind) that would interfere with such
stockholder's or employees' ability to develop or assign to the Company or any
of its Subsidiaries any Intellectual Property Rights developed by such
stockholder or employee for the Company or its Subsidiaries. The Company and the
Stockholder Indemnitors have previously delivered to Parent true and correct
copies of each such agreement listed on Schedule 3.11. To the knowledge of the
Company, no such stockholders or employees are bound by any consulting agreement
relating to confidential information or trade secrets of another entity that are
being violated by such persons. The activities of the Company's and its
Subsidiaries' employees on behalf thereof do not violate any agreements or
arrangements known to the Company or any of its Stockholders which any such
employees or consultants have with former employers or any other entity to whom
such employees or consultants may have rendered consulting services.
SECTION 3.12 CONTRACTS. (a) Except as set forth in Schedule 3.12(a) (or
in Schedule 3.4(a), Schedule 3.10(d), Schedule 3.11 or Schedule 3.13(a)),
neither the Company nor any of its Subsidiaries is a party to, or subject to:
(i) any contract, arrangement or understanding, or series
of related contracts, arrangements or understandings, that involves
annual expenditures or receipts by the Company or any of its Subsidiaries
of more than $10,000;
(ii) any note, indenture, credit facility, mortgage,
security agreement or other contract, arrangement or understanding
relating to or evidencing indebtedness for
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money borrowed or a security interest or mortgage in the assets of the
Company or any of its Subsidiaries;
(iii) any guaranty issued by the Company or any of its
Subsidiaries;
(iv) any contract, arrangement or understanding relating to
the acquisition, issuance or transfer of any securities;
(v) any contract, arrangement or understanding relating to
the acquisition, transfer, distribution, use, development, sharing or
license of any technology or Intellectual Property Rights;
(vi) any contract, arrangement or understanding granting to
any person the right to use any property or property right of the Company
or any of its Subsidiaries other than licenses granted in the ordinary
course of business with a term of less than one year;
(vii) any contract, arrangement or understanding restricting
the Company's or any Subsidiary's right to (A) engage in any business
activity or compete with any business, or (B) develop or distribute any
technology;
(viii) any contract, arrangement or understanding relating to
the employment of, or the performance of services of, any employee,
consultant or independent contractor and pursuant to which the Company or
any of its Subsidiaries is required to pay more than $10,000 per year;
(ix) any contract, arrangement or understanding with a
Related Person (as that term is hereinafter defined); or
(x) any outstanding offer, commitment or obligation to
enter into any contract or arrangement of the nature described in
subsections (i) through (ix) of this subsection 3.12(a).
(b) The Company has previously made available for inspection and
copying to the Parent copies that are complete and correct in all material
respects (or, in the case of oral contracts, a materially complete and correct
description) of each contract (and any amendments or supplements thereto) listed
on Schedule 3.12(a). Except as set forth in Schedule 3.12(b), (i) each contract
listed in Schedule 3.12(a) is in full force and effect; (ii) neither the Company
or any of its Subsidiaries nor, to the Company's knowledge, any other party is
in default under any material contract, and no event has occurred that
constitutes, or with the lapse of time or the giving of notice or both would
constitute, a default by the Company or any of its Subsidiaries or (to the
knowledge of the Company) a default by any other party under such contract;
(iii) the Company has not received written notice of any material disputes or
disagreements between the Company or any of its Subsidiaries and any other party
with respect to any material contract; and (iv) except where the failure to
obtain consent or give notice would not have a Company Material Adverse Effect
and would not have a material adverse effect on the transactions contemplated
under the Transaction Agreements, each other party to each contract has
consented or been given notice (or prior to the Closing shall have consented or
been given notice), where such consent or the giving of such notice is
necessary, sufficient that such contract shall remain
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in full force and effect following the consummation of the transactions
contemplated by the Transaction Agreements without modification in the rights or
obligations of the Company or its Subsidiaries thereunder.
(c) Except as set forth and described in Schedule 3.12(c), neither
the Company nor any of its Subsidiaries has issued any warranty or any agreement
or commitment to indemnify any person.
SECTION 3.13 EMPLOYEE MATTERS. (a) Schedule 3.13(a) attached hereto sets
forth the name, current annual compensation rate (including bonus and
commissions), title, current base salary rate, accrued bonus, accrued sick
leave, accrued severance pay and accrued vacation benefits of each present
employee of the Company and its Subsidiaries; organizational charts of the
Company and its Subsidiaries; collective bargaining, union or other employee
association agreements; employment, managerial, advisory, consulting and
severance agreements; employee confidentiality or other agreements protecting
proprietary processes, formulae or information; any employee handbook(s); any
reports or plans prepared or adopted pursuant to the Equal Employment
Opportunity Act of 1972, as amended; and each employee benefit or compensation
plan, agreement or arrangement covering present or former employees of the
Company or any of its Subsidiaries, including "employee benefit plans" within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974 ("ERISA"), stock purchase, stock option, fringe benefit, change in control,
bonus and deferred compensation plans, agreements or funding arrangements
(collectively, the "Benefit Plans"), whether sponsored, maintained or
contributed to by (i) the Company or (ii) any other organization which is a
member of a controlled group of organizations (within the meaning of Sections
414(b), (c), (m) or (o) of the Code) of which the Company is a member (the
"Controlled Group").
(b) For each Benefit Plan, each of the following is true:
(i) if such Benefit Plan is an employee pension benefit
plan (as such term is defined in ERISA Section 3(2)) intended to qualify
under the Code, since 1993 the Plan has received at least one favorable
determination letter as to its qualification under the Code (or such a
letter has been or will be applied for prior to expiration of the
applicable remedial amendment period), and nothing has occurred, whether
by action or failure to act, which would cause the loss of such
qualification or which would result in material costs to the Company or
its Subsidiaries under the Internal Revenue Service's Employee Plans
Compliance Resolution System;
(ii) the financial statements of the Company and the
Subsidiaries reflect all employee liabilities arising under such Benefit
Plan in a manner satisfying the applicable requirements of Statement of
Financial Accounting Standards ("SFAS") Nos. 87, 88, 106, 112, 123 and
132;
(iii) there are no actions, suits or claims (other than
routine claims for benefits in the ordinary course) pending, or to the
Company's knowledge, threatened, and to the Company's knowledge, there
are no facts which could give rise to any such actions, suits or claims
(other than routine claims for benefits in the ordinary course);
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(iv) to the Company's knowledge, none of the Stockholder
Indemnitors, the Company, the Subsidiaries, the members of the Controlled
Group and any other party has, with respect to any such Benefit Plan,
engaged in a non-exempt prohibited transaction, as such term is defined
in Code Section 4975 or ERISA Section 406;
(v) to the Company's knowledge, no event has occurred and
no condition exists that would subject the Company or any Subsidiary to
any Tax under Chapter 43 of the Code or to a fine under ERISA Section
502(c);
(vi) to the Company's knowledge, the requirements of ERISA
and all other applicable laws have been complied with in all material
respects;
(vii) all contributions and insurance premiums required as of
the Closing Date have been paid;
(viii) there are no leased employees (as such term is defined
in Code Section 414(n)) who must be taken into account for the
requirements of Code Section 414(n)(3);
(ix) the recordkeeping systems for such Benefit Plan were
updated to properly account for the "Year 2000" transition;
(x) to the Company's knowledge, the execution and delivery
of this Agreement by the Company and the consummation of the transactions
contemplated under the Transaction Agreements, either alone or together
with any subsequent events, will not result in any obligation or
liability (with respect to accrued benefits or otherwise) to any such
Benefit Plan, to any employee or former employee of the Company or any of
its Subsidiaries; and
(xi) the Company has delivered to the Parent current,
accurate and complete copies of such Benefit Plan (including the plan
document, trust agreement and other funding or insurance instruments
relating thereto) and, to the extent applicable, copies of the most
recent: (A) determination letter and any outstanding request for a
determination letter; (B) Form 5500 and, if applicable, attached Schedule
B (including any related actuarial valuation report) with respect to the
last three plan years; (C) any "top hat" plan notice to the U.S.
Department of Labor; (D) certified financial statements; (E) collective
bargaining agreements or other such contracts; (F) Form S-8 (including
any amendments and any prospectus related thereto); (G) Form 5310 and any
related filings with the Pension Benefit Guaranty Corporation; (H) the
general notification to employees of their "COBRA" rights under Code
Section 4980B and ERISA Sections 601-609 and the form of letter(s)
distributed upon the occurrence of a COBRA qualifying event for each
Benefit Plan that is a "group health plan" as defined in Code Section
5000(b)(1) and ERISA Section 607(1); and (I) the form of certificate for
"HIPAA" creditable coverage distributed in accordance with Code Section
9801 and ERISA Section 701, including, if applicable, the notice of
"HIPAA" rights issued to individuals for certification events occurring
between October 1, 1996 and May 31, 1997.
(c) Neither the Company nor, to the Company's knowledge, any other
member of the Controlled Group sponsors or maintains (or has ever sponsored or
maintained) an
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"employee pension benefit plan" (within the meaning of Section 3(2) of ERISA)
that is subject to Title IV of ERISA or to the minimum funding requirements of
Section 412 of the Code or Part 3 of Title I of ERISA.
(d) Neither the Company nor, to the Company's knowledge, any other
member of the Controlled Group contributes or is obligated to contribute (or has
ever been obligated to contribute) to a "multiemployer plan" (within the meaning
of Section 4001(a)(3) of ERISA).
(e) No Benefit Plan is intended to be an employee stock ownership
plan (within the meaning of Section 4975(e)(7) of the Code) or a tax credit
employee stock ownership plan (within the meaning of Section 409(a) of the
Code).
(f) For each Benefit Plan which is an employee welfare benefit
plan (within the meaning of ERISA Section 3(1)) (a "Welfare Plan"), the
following is true:
(i) each such Welfare Plan intended to meet the
requirements for tax-favored treatment under Subchapter B of Chapter 1 of
the Code meets such requirements;
(ii) there is no voluntary employees' beneficiary
association within the meaning of Code Sections 501(c)(9) and 505 (a
"VEBA") maintained with respect to any such Welfare Plan;
(iii) no such Welfare Plan is a "multiple employer welfare
arrangement" within the meaning of ERISA Section 3(40);
(iv) each such Welfare Plan which is a "group health plan"
(as such term is defined in Code Section 5000(b)(1) and ERISA Section
607(1)) complies and has complied with the applicable requirements of
Code Sections 4980B and 9801-9806, ERISA Sections 601-734 and the
applicable provisions of the Social Security Act and state law;
(v) each such Welfare Plan (including any such plan
covering former employees of the Company or any Subsidiary) may be
amended or terminated by the Company, any Subsidiary or the Parent on or
at any time after the Closing Date; and
(vi) Schedule 3.12(f) discloses the amount of unfunded
liabilities for retiree medical and life insurance benefits (and any
other post-retirement benefits other than pensions) arising under such
Welfare Plan, determined as of the most recent valuation date, and no
amendment of such Welfare Plan since such date has materially increased
such liabilities.
(g) With respect to the Company and each Subsidiary, except as set
forth in Schedule 3.12(g), each of the following is true:
(i) each of the Company and the Subsidiaries is in
compliance in all material respects with all applicable laws and
collective bargaining agreements respecting employment and employment
practices, terms and conditions of employment and wages and hours and
occupational safety and health, and, to the Company's knowledge, is not
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engaged in any unfair labor practice within the meaning of Section 8 of
the National Labor Relations Act, and there is no action, suit or legal,
administrative, arbitration, grievance or other proceeding pending or, to
the Company's knowledge, threatened, or, to the Company's knowledge, any
investigation pending or threatened against the Company or any Subsidiary
relating to any thereof, and, to the Company's knowledge, no basis exists
for any such action, suit or legal, administrative, arbitration,
grievance or other proceeding or governmental investigation;
(ii) there is no labor strike, dispute, slowdown or stoppage
actually pending or, to the Company's knowledge, threatened against the
Company or any Subsidiary;
(iii) none of the employees of the Company or any Subsidiary
is a member of or represented by any labor union and, to the Company's
knowledge, there are no attempts of whatever kind and nature being made
to organize any of such employees;
(iv) without limiting the generality of paragraph (iii)
above, no certification or decertification is pending or was filed within
the past twelve months respecting the employees of the Company or any
Subsidiary and, to the Company's knowledge, no certification or
decertification petition is being or was circulated among the employees
of the Company or any Subsidiary within the past twelve months;
(v) no agreement (including any collective bargaining
agreement), arbitration or court decision, decree or order or
governmental order which is binding on the Company or any Subsidiary in
any way limits or restricts the Company or any Subsidiary from relocating
or closing any of its operations, other than decrees, governmental
orders, laws, rules and regulations of general applicability to which the
Company or any of its Subsidiaries are subject;
(vi) neither the Company nor any Subsidiary has experienced
any organized work stoppage in the last five years; and
(vii) there are no charges, administrative proceedings or
formal complaints of discrimination (including but not limited to
discrimination based upon sex, age, marital status, race, national
origin, sexual preference, handicap or veteran status) pending or, to the
Company's knowledge, threatened, or to the Company's knowledge, any
investigation pending or threatened before the Equal Employment
Opportunity Commission or any federal, state or local agency or court.
There have been no audits of the equal employment opportunity practices
of the Company or any Subsidiary and, to the Company's knowledge, no
basis for any such claim exists.
SECTION 3.14 COMPLIANCE WITH APPLICABLE LAW. To the Company's knowledge,
neither the Company nor any of its Subsidiaries is in violation in any material
respect of any applicable safety, health, environmental or other law, statute,
ordinance, code, rule, regulation, judgment, order, injunction, writ or decree
of any federal, state, local or non-United States court or governmental or
regulatory body, agency or authority having, asserting or claiming jurisdiction
over it or over any part of its business, operations, properties or assets,
except for any violation that would not have a Company Material Adverse Effect.
Neither the Company nor
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any of its Subsidiaries has received any written notice alleging any such
violation, nor to the knowledge of the Company, is there any inquiry,
investigation or proceedings relating thereto.
SECTION 3.15 ABILITY TO CONDUCT THE BUSINESS. (a) There is no agreement,
arrangement or understanding, nor any judgment, order, writ, injunction or
decree of any court or governmental or regulatory body, agency or authority
applicable to the Company or any of its Subsidiaries or to which the Company or
any of its Subsidiaries is a party or by which it (or any of its properties or
assets) is bound, that will prevent the use by the Company, after the Closing
Date, of the properties and assets owned, leased or used by, the business
conducted by or the services rendered by the Company and its Subsidiaries on the
date hereof, in each case on substantially the same basis as the same are used,
owned, conducted or rendered on the date hereof. Each of the Company and its
Subsidiaries has in force, and is in compliance in all material respects with
all governmental permits, licenses, exemptions, consents, authorizations and
approvals used in or required for the conduct of its business as presently
conducted, all of which, except as set forth in Schedule 3.15 or as the failure
to so remain in force would not have a Company Material Adverse Effect, shall
continue in full force and effect, without requirement of any filing or the
giving of any notice and without modification thereof, following the
consummation of the transactions contemplated under the Transaction Agreements.
Neither the Company nor any of its Subsidiaries has received any written notice
of, and to the knowledge of the Company, there are no inquiries, proceedings or
investigations relating to or which could result in, the revocation or
modification of any such permit, license, exemption, consent, authorization or
approval.
(b) There is no agreement (noncompete or otherwise), commitment,
judgment, injunction, order or decree to which the Company or any of its
Subsidiaries is a party or otherwise binding upon the Company or any of its
Subsidiaries (other than decrees, governmental orders, laws, rules and
regulations of general applicability to which the Company or any of its
Subsidiaries are subject) which has the effect of prohibiting or impairing any
line of business or business practice, including, without limitation, the
licensing of any product of the Company or any of its Subsidiaries, any
acquisition of property (tangible or intangible) by the Company or any of its
Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to and
is not currently bound by any agreement under which the Company or such
Subsidiary is restricted from selling, licensing or otherwise distributing any
of its technology or products to or providing services to customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market which has or would reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.16 MAJOR CUSTOMERS. Schedule 3.16 sets forth a complete and
correct list of the 5 largest customers of the Company and its Subsidiaries, in
terms of revenue recognized in respect of such customers during the seven months
ended January 31, 2000, showing the amount of revenue recognized for each such
customer during such period. Except as set forth and described in Schedule 3.16,
neither the Company nor any of its Subsidiaries has received any notice or other
communication (written or oral) from any of the customers listed in Schedule
3.16 hereto terminating or reducing in any material respect, or setting forth an
intention to terminate or reduce in the future, or otherwise reflecting a
material adverse change in, the business relationship between such customer and
the Company or its Subsidiaries.
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SECTION 3.17 CONSULTANTS, SALES REPRESENTATIVES AND OTHER AGENTS.
Schedule 3.17 hereto sets forth a complete and correct list of the names and
addresses of each consultant, sales representative or other agent (other than
any such person performing solely clerical functions) currently engaged by the
Company and its Subsidiaries who is not an employee thereof, the commission
rates or other compensation applicable with respect to each such person and the
amount of commissions or other compensation earned by each such person for the
twelve (12) months ended December 31, 1999. Complete and correct copies of all
current agreements between the Company or any of its Subsidiaries and any such
person have previously been delivered or made available by the Company to the
Parent.
SECTION 3.18 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
reflected on the Reference Balance Sheet (i) arose from bona fide transactions
in the ordinary course of business and consistent with past practice, (ii)
except as set forth on Schedule 3.18, are owned by the Company and its
Subsidiaries free and clear of any security interest, lien, encumbrance or
claims and (iii) are accurately and fairly reflected on the Reference Balance
Sheet in accordance with GAAP consistently applied. The reserves for bad debts
reflected on the Reference Balance Sheet (including any determination to
establish no reserves) were calculated or such determination was made in
accordance with GAAP consistent with past practice and are adequate.
SECTION 3.19 INSURANCE. Schedule 3.19 hereto is a true and complete list
of all insurance policies carried by the Company and its Subsidiaries with
respect to their business, together with, in respect of each such policy, the
name of the insurer, the number of the policy, the annual policy premium payable
therefor, the limits of coverage, the deductible amount (if any), the expiration
date thereof and each pending claim thereunder. Complete and correct copies of
each certificate of insurance have previously been delivered or made available
by the Company to Parent. All such policies are in full force and effect. All
premiums due thereon have been paid.
SECTION 3.20 BANK ACCOUNTS; POWERS OF ATTORNEY. Schedule 3.20 sets forth
a complete and correct list showing:
(i) all bank accounts of the Company and its Subsidiaries,
together with, with respect to each such account, the account number, the
names of all signatories thereof, the authorized powers of each such
signatory and the approximate balance thereof on the date of this
Agreement; and
(ii) the names of all persons holding powers of attorney from
the Company and its Subsidiaries and a summary statement or a copy of the
terms thereof.
SECTION 3.21 MINUTE BOOKS, ETC. The minute books, stock certificate book
and stock ledger of the Company and its Subsidiaries are complete and correct in
all material respects. The minute books of the Company and its Subsidiaries
contain materially accurate and complete records of all meetings or written
consents to action of the Board of Directors and stockholders of the Company and
its Subsidiaries and accurately reflect in all material respects all corporate
actions of the Company and its Subsidiaries which are required by law to be
passed upon by the Board of Directors or stockholders of the Company and its
Subsidiaries.
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SECTION 3.22 RELATED PERSON INDEBTEDNESS AND CONTRACTS. Schedule 3.22
sets forth a complete and correct list of (and complete and correct copies have
been provided to the Parent of) all contracts, commitments, arrangements and
understandings not described elsewhere in this Agreement between the Company or
any of its Subsidiaries and any of the following (collectively, "Related
Persons"): (i) the Stockholders; (ii) the spouses and children of any of the
Stockholders (collectively, "near relatives"); (iii) any trust for the benefit
of any of the Stockholders or any of their respective near relatives; or (iv)
any corporation, partnership, joint venture or other entity or enterprise owned
or controlled by any of the Stockholders or by any of their respective near
relatives. All amounts contributed by the Stockholders to the Company or any of
its Subsidiaries have been treated as contributions to Company equity and have
not been treated as, nor do they constitute, indebtedness of the Company or any
of its Subsidiaries to the Stockholders.
SECTION 3.23 BROKERS; PAYMENTS. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by the Transaction Agreements based upon arrangements made by or on
behalf of the Company or the Stockholders. The Company has suspended or
terminated, and has the legal right to terminate or suspend, all negotiations
and discussions of business combination transactions with parties other than the
Parent. No valid claim exists against the Company or, based on any action by the
Company, against the Parent for payment of any "topping," "break-up" or
"bust-up" fee or any similar compensation or payment arrangement as a result of
the transactions contemplated hereby.
SECTION 3.24 DISCLOSURE. No representation or warranty by the Company or
the Stockholder Indemnitors contained in this Agreement and no statement
contained in any of the Disclosure Schedules delivered or to be delivered
pursuant to this Agreement by the Company or the Stockholder Indemnitors
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING TO THE STOCKHOLDERS
SECTION 4.1 AUTHORIZATION. Each of the Stockholders severally and not
jointly represents and warrants to the Parent and Acquisition Corp. as set forth
below as of the date of this Agreement and as of the Closing Date, subject to
the exceptions set forth in the Disclosure Schedule:
(i) Each of the Stockholders is the sole and exclusive
record and beneficial owner of the shares of the Company's capital stock
set forth opposite its name in Schedule 3.4 hereto, free and clear of any
claims, liens, pledges, options, rights of first refusal or other
encumbrances or restrictions of any nature whatsoever (other than
restrictions on transfer imposed under applicable securities laws), and,
except as set forth on Schedule 3.4 hereto, there are no agreements,
arrangements or understandings to which such Stockholder is a party
(other than the Transaction Agreements) involving the
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purchase, sale or other acquisition or disposition of the shares of
Company Common Stock or Company Preferred Stock owned by such Stockholder
or any interest therein;
(ii) such Stockholder shall at the Effective Time, deliver
or cause to be delivered to the Parent certificates representing all
shares of Company Common Stock and Company Preferred Stock owned by such
Seller, each such certificate to be duly endorsed for transfer and free
and clear of any claims, liens, pledges, options, rights of first refusal
or other encumbrances or restrictions of any nature whatsoever (other
than restrictions imposed under applicable securities laws);
(iii) Each Stockholder has all necessary legal capacity,
right, power and authority to execute and deliver, and to consummate the
transactions contemplated by, each of the Transaction Agreements, and
each of the Transaction Agreements constitutes a valid and binding
obligation of such Stockholder enforceable in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, including judicial discretion in the enforcement of
equitable remedies, regardless of whether such enforceability is
considered in a proceeding in law or in equity; and
(iv) the execution and delivery of each of the Transaction
Agreements by such Stockholder and the consummation of the transactions
contemplated under each Transaction Agreement will not (A) except as
disclosed on Schedule 4.1, breach, violate or constitute an event of
default (or an event which with the lapse of time or the giving of notice
or both would constitute an event of default) under, give rise to any
right of termination, cancellation, modification or acceleration under or
require any consent or the giving of any notice under, any note, bond,
indenture, mortgage, security agreement, lease, license, franchise,
permit, agreement or other instrument or obligation to which such
Stockholder is a party, or by which such Stockholder or the shares of
Company Common Stock or Company Preferred Stock held by such Stockholder
may be bound, or result in the creation of any material lien, claim or
encumbrance or other right of any third party of any kind whatsoever upon
the properties or assets of such Stockholder pursuant to the terms of any
such instrument or obligation, or (B) violate or conflict with any law,
statute, ordinance, code, rule, regulation, judgment, order, writ,
injunction, decree or other instrument of any court or governmental or
regulatory body, agency or authority applicable to such Stockholder or by
which such the shares of Company Common Stock or Company Preferred Stock
held by such Stockholder may be bound.
SECTION 4.2 MERGER SHARES. Each Stockholder, severally and not jointly,
acknowledges, represents and warrants to the Parent as follows:
(i) Such Stockholder understands that the Merger Shares to
be issued to such Stockholder pursuant to this Agreement will not have
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law by reason of specific
exemptions under the provisions thereof which depend in part upon the
other representations and warranties made by the Stockholder in this
Agreement. Such Stockholder understands that the Parent is relying, in
part, upon the Stockholder's
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representation and warranties contained in this Section 4.2 for the
purpose of determining whether this transaction meets the requirements
for such exemptions.
(ii) Such Stockholder is an "accredited investor" (as
defined in rule 501(a) under the Securities Act) and has such knowledge,
skill and experience in business, financial and investment matters so
that the Stockholder is capable of evaluating the merits and risks of an
investment in the Merger Shares pursuant to the transactions contemplated
by this Agreement or to the extent that the Stockholder has deemed it
appropriate to do so, the Stockholder has relied upon appropriate
professional advice regarding the tax, legal and financial merits and
consequences of an investment in Merger Shares pursuant to the
transactions contemplated by this Agreement.
(iii) Such Stockholder has made, either alone or together
with the Stockholder's advisors, such independent investigation of the
Parent, its management and related matters as the Stockholder deems to
be, or such advisors have advised to be, necessary or advisable in
connection with an investment in the Merger Shares through the
transactions contemplated by this Agreement; and the Stockholder and
advisors have received all information and data that the Stockholder and
such advisors believe to be necessary in order to reach an informed
decision as to the advisability of an investment in the Merger Shares
pursuant to the transactions contemplated by this Agreement.
(iv) Such Stockholder has reviewed the Stockholder's
financial condition and commitments, alone and together with the
Stockholder's advisors, and, based on such review, the Stockholder is
satisfied that (A) the Stockholder has adequate means of providing for
the Stockholder's financial needs and possible contingencies and has
assets or sources of income which, taken together, are more than
sufficient so that he or she could bear the risk of loss of his or her
entire investment in the Merger Shares, (B) the Stockholder has no
present or contemplated future need to dispose of all or any portion of
the Merger Shares to satisfy any existing or contemplated undertaking,
need or indebtedness, and (C) the Stockholder is capable of bearing the
economic risk of an investment in the Merger Shares for the indefinite
future. Such Stockholder shall furnish any additional information about
the Stockholder reasonably requested by the Parent to assure the
compliance of this transaction with applicable federal and state
securities laws.
(v) Such Stockholder understands that the Merger Shares to
be received by the Stockholder in the transactions contemplated under
this Agreement will be "restricted securities" under applicable federal
securities laws and that the Securities Act and the rules of the
Securities and Exchange Commission (the "SEC") promulgated thereunder
provide in substance that the Stockholder may dispose of such shares only
pursuant to an effective registration statement under the Securities Act
or an exemption from registration if available. Such Stockholder further
understands that Parent has no obligation or intention to register the
sale of any of the Merger Shares to be received by the Stockholder in the
transactions contemplated under this Agreement, or take any other action
so as to permit sales, pursuant to the Securities Act. Such Stockholder
further understands that applicable state securities laws may impose
additional constraints upon the sale of securities. As a consequence, the
Stockholder understands that the Stockholder may have to bear the
economic risk of an investment in the Merger Shares to
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be received by the Stockholder pursuant to the transactions contemplated
under this Agreement for an indefinite period of time.
(vi) Such Stockholder is acquiring the Merger Shares
pursuant to the transactions contemplated under this Agreement for
investment only and not with a view to or intention of or in connection
with any resale or distribution of such shares or any interest therein.
(vii) The certificate(s) evidencing the Merger Shares to be
issued pursuant to the transactions contemplated under this Agreement
shall bear the following legend:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended, or
any state securities laws and may not be sold or transferred in
the absence of such registration or an exemption therefrom under
the Securities Act of 1933, as amended, and applicable state
securities laws."
(viii) The certificate(s) evidencing the Merger Shares to be
issued pursuant to the transactions contemplated under this Agreement to
the Stockholder Indemnitors shall bear the following legends:
"The shares represented by this certificate are subject
to certain restrictions on transfer and other dispositions
pursuant to a lock-up agreement dated as of March 14, 2000. A copy
of such lock-up agreement is maintained at the offices of the
Corporation by the Secretary of the Corporation."
(ix) Each Stockholder agrees that, if requested by the
managing underwriter in connection with an initial public offering of
shares of capital stock of the Surviving Corporation or any successor to
the Surviving Corporation, it will not sell, transfer or otherwise
dispose of any of the Retained Shares (or securities into which the
Retained Shares shall have been converted or exchanged) for up to 180
days after the date of the final prospectus in connection with such
offering as provided in the form of customary underwriters' lock-up
letter required by such underwriter.
(x) Tax Matters. Each Stockholder has had an opportunity to
review with its own tax advisors the tax consequences to such Stockholder
of the Merger and the other transactions contemplated by each of the
Transaction Agreements. Each Stockholder understands that it must rely
solely on its advisors and not on any statements or representations by
Parent, the Company or any of their agents. Each Stockholder understands
that it (and not Parent or the Company) shall be responsible for its own
tax liability, if any, that may arise from the Merger and the other
transactions contemplated by the Transaction Agreements.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION CORP.
Parent and Acquisition Corp., jointly and severally, represent and
warrant to the Company and the Stockholders as set forth below as of the date
hereof and as of the Closing Date, subject to the exceptions set forth in the
disclosure schedules supplied by Parent dated as of the date hereof and attached
hereto as Exhibit E (the "Parent Disclosure Schedules"), the section numbers and
letters of which correspond to the section and subsection numbers and letters of
this Agreement.
SECTION 5.1 CORPORATE ORGANIZATION. Each of the Parent and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, operate and lease the properties
and assets it now owns, operates and leases and to carry on its business as
presently conducted. Each of the Parent and its Subsidiaries is duly qualified
to transact business as a foreign corporation and is in good standing in the
jurisdictions where such qualification is required by reason of the nature of
the properties and assets currently owned, operated or leased by it or the
business currently conducted by it except for such jurisdictions where the
failure to be so qualified would not have a Parent Material Adverse Effect. The
term "Parent Material Adverse Effect" means for purposes of this Agreement, any
change, event or effect that is, or that is reasonably likely to be, materially
adverse to the business, prospects, operation, assets, liabilities (contingent
or otherwise), financial condition or results of operations of the Parent and
its Subsidiaries, taken as a whole.
SECTION 5.2 AUTHORIZATION. The Parent has full corporate power and
authority to execute and deliver and to consummate the transactions contemplated
by the Transaction Agreements. The execution and delivery of and the
consummation of the transactions contemplated by the Transaction Agreements have
been duly approved by the Board of Directors of the Parent and no other
corporate proceedings on the part of the Parent are necessary to approve and
authorize the execution and delivery of or the consummation of the transactions
contemplated by the Transaction Agreements. Each of the Transaction Agreements
has been duly executed and delivered by the Parent and constitutes a valid and
binding agreement of the Parent, enforceable in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
including judicial discretion in the enforcement of equitable remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or in law, and requirements of good faith, fair dealing and
reasonableness.
SECTION 5.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Subject to compliance
with applicable federal, state and non-United States securities laws, the
execution and delivery of, and the consummation of the transactions contemplated
by, the Transaction Agreements will not: (i) violate or conflict with any
provisions of the Certificate of Incorporation or Bylaws of the Parent or any of
its Subsidiaries; (ii) except for any of the following that would not have a
Parent Material Adverse Effect or a material adverse effect on the transactions
contemplated by the
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Transaction Agreements, (A) breach, violate or constitute an event of default
(or an event which with the lapse of time or the giving of notice or both would
constitute an event of default) under, give rise to any right of termination,
cancellation, modification or acceleration under, or, except as set forth on
Schedule 5.3, require any consent or the giving of any notice under, any
material note, bond, indenture, mortgage, security agreement, lease, license,
franchise, permit, agreement or other instrument or obligation to which the
Parent or any of its Subsidiaries is a party, or by which the Parent or any of
its Subsidiaries or any of their respective properties or assets may be bound,
or (B) result in the creation of any lien, claim or encumbrance of any kind
whatsoever upon the properties or assets of the Parent or any of its
Subsidiaries pursuant to the terms of any such instrument or obligation, other
than any breach, violation, default, termination, cancellation, modification or
acceleration which would not have a Parent Material Adverse Effect; (iii)
violate or conflict in any material respect with any law, statute, ordinance,
code, rule, regulation, judgment, order, writ, injunction or decree or other
instrument of any federal, state, local or foreign court or governmental or
regulatory body, agency or authority applicable to the Parent or any of its
Subsidiaries or by which any of their respective properties or assets may be
bound, except for such violations or conflicts which would not have a Parent
Material Adverse Effect; or (iv) except as disclosed on Schedule 5.3, require,
on the part of the Parent, any filing or registration with, or permit, license,
exemption, consent, authorization or approval of, or the giving of any notice
to, any governmental or regulatory body, agency or authority other than any
filing, registration, permit, license, exemption, consent, authorization,
approval or notice which if not obtained or made would not have a Parent
Material Adverse Effect.
SECTION 5.4 CAPITALIZATION. The authorized capital stock of the Parent
consists of 120,000,000 shares of Parent Common Stock, of which approximately
52,046,367 shares are issued and outstanding as of February 29, 2000, 10,000,000
shares of Class B Common Stock, par value $.01 per share, of which 10,000,000
shares are issued and outstanding as of the date hereof, and 60,000,000 shares
of Preferred Stock, of which none are issued and outstanding as of the date
hereof. All of the issued and outstanding shares of Parent Common Stock are duly
authorized, validly issued, fully paid and nonassessable, and were not issued in
violation of any applicable preemptive rights. Except as disclosed in Schedule
5.4 and for (x) options to purchase Parent Common Stock which were granted
pursuant to the stock option plans referenced in the Parent's SEC Filings (as
defined below) and, (y) the Parent's Subordinated Convertible Debentures due
2005, and except as contemplated by the Transaction Agreements, as of the date
hereof, there are no outstanding (i) options, warrants or other rights to
purchase from the Parent any capital stock of the Parent, (ii) securities
convertible into or exchangeable for shares of such stock, and (iii) except as
disclosed in or contemplated by the SEC Filings or as contemplated by this
Agreement, there are no agreements, arrangements or commitments to which the
Parent is a party or by which it is bound pursuant to which Parent is or may
become obligated to issue additional shares of its capital stock or options,
warrants or other securities of the Parent.
SECTION 5.5 SEC REPORTS. Complete and correct copies of all reports and
other filings filed by Parent with the SEC pursuant to the Securities Act and
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Acts"), since and including the filing date of the Registration
Statement with respect to the Parent's initial public offering (such reports and
other filings collectively referred to herein as the "SEC Filings") are
available on the SEC's ▇▇▇▇▇ Web site. Attached hereto as Schedule 5.5 is a copy
of the SEC's ▇▇▇▇▇ Web site page listing all such reports and filings filed by
Parent. The Company has made all filings with
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the SEC that it was required to make in accordance with the Acts (including but
not limited to all Form 8-K's that were required to be filed) through the date
hereof. As of their respective dates, the SEC Filings did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.6 BROKERS; PAYMENTS. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
SECTION 5.7 VALIDITY OF SHARES. Assuming the accuracy of the
representations contained in Section 4.2 and in the Contribution Agreement, the
shares of Parent Common Stock to be issued pursuant to this Agreement will, when
issued in accordance with this Agreement be duly authorized, validly issued,
fully paid and nonassessable, will not be subject to any preemptive or other
statutory right of stockholders, will be issued in compliance with applicable
U.S. federal and state securities laws and will be free of any liens or
encumbrances.
SECTION 5.8 NO LIABILITIES OF ACQUISITION CORP. Parent and Acquisition
Corp. represent and warrant jointly and severally that as of immediately prior
to the Effective Time, Acquisition Corp. shall have, and shall have had, no
liabilities except as it may have acquired in the Merger with the Company.
SECTION 5.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except (i) as set forth
on Schedule 5.9, (ii) as set forth in the SEC Filings, including the financial
statements dated as of September 30, 1999 field within the Parent's Quarterly
Report on Form 10-Q for the quarter then ended, and (iii) for obligations and
liabilities incurred since September 30, 1999 in the ordinary course of
business, the Parent and its Subsidiaries do not have any material liabilities
or obligations of any nature, whether accrued, absolute, contingent or
otherwise.
SECTION 5.10 LEGAL PROCEEDINGS, ETC. Except as set forth in Schedule
5.10, there are no suits, actions, claims, proceedings (including, without
limitation, arbitral or administrative proceedings) or investigations pending
or, to the knowledge of the Parent (which, for purposes of this Agreement, shall
mean the actual knowledge of the Parent after reasonable inquiry), threatened
against the Parent or any of its Subsidiaries or any of its properties, assets
or business or, to the knowledge of the Parent, pending or threatened against
any of the stockholders, officers, directors, employees, agents or consultants
of the Parent or any of its Subsidiaries in connection with the business of the
Parent or any of its Subsidiaries. There are no such suits, actions, claims,
proceedings or investigations pending against the Parent or any of its
Subsidiaries, or, to the knowledge of the Parent, threatened against the Parent
or any of its Subsidiaries challenging the validity or propriety of the
transactions contemplated by the Transaction Agreements. There is no judgment,
order, injunction, decree or award (whether issued by a court, an arbitrator or
an administrative agency) to which the Parent or any of its Subsidiaries is a
party, or involving the Parent's or any of its Subsidiaries properties, assets
or business, which is unsatisfied or which requires continuing compliance
therewith by the Parent or any of its Subsidiaries.
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SECTION 5.11 COMPLIANCE WITH APPLICABLE LAW. To the knowledge of Parent,
neither the Parent nor any of its Subsidiaries is in violation in any material
respect of any applicable safety, health, environmental or other law, statute,
ordinance, code, rule, regulation, judgment, order, injunction, writ or decree
of any federal, state, local, United States or non-United States court or
governmental or regulatory body, agency or authority having, asserting or
claiming jurisdiction over it or over any part of its business, operations,
properties or assets, except for any violation that would not have a Parent
Material Adverse Effect. Neither the Parent nor any of its Subsidiaries has
received any written notice alleging any such violation, nor to the knowledge of
Parent, is there any inquiry, investigation or proceedings relating thereto.
SECTION 5.12 NO PARENT MATERIAL ADVERSE EFFECT. Since September 30, 1999,
there has not occurred any Parent Material Adverse Effect.
SECTION 5.13 TAX MATTERS.
(a) Except as set forth in Schedule 5.13, all Tax returns, reports
and other filings in respect of Taxes (as that term is hereinafter defined)
required to be filed in respect of the Parent and each of its Subsidiaries have
been or will be duly and timely filed, have been or will be prepared in
compliance with all applicable laws, rules and regulations, and are true,
correct and complete, and all Taxes of the Parent and each of its Subsidiaries,
whether or not shown as due on such returns, reports or other filings, have been
or will be fully paid when due. The Parent each of its Subsidiaries has
established adequate reserves on their respective books of account for all Taxes
and for any liability for deferred income Taxes.
(b) Except as set forth in Schedule 5.13, there are no actions or
proceedings currently pending or, to the knowledge of the Parent, threatened
against the Parent or any of its Subsidiaries by any governmental authority for
the assessment or collection of Taxes, no claim for the assessment or collection
of Taxes has been asserted against the Parent or any of its Subsidiaries, and
there are no matters under discussion between the Parent or any of its
Subsidiaries with any governmental authority regarding claims for the assessment
or collection of Taxes. Any unpaid Taxes that have been claimed or imposed as a
result of any examinations of any Tax return, report or other filing of the
Parent or any of its Subsidiaries by any governmental authority are being
contested in good faith and are fully described in Schedule 5.13. Except as set
forth in Schedule 5.13, there are no agreements or applications by the Parent or
any of its Subsidiaries for an extension of time for the assessment or payment
of any Taxes and no waivers of the statute of limitations in respect of Taxes.
There are no Tax liens on any of the assets of the Parent or any of its
Subsidiaries, except for liens for Taxes not yet due. Neither the Parent nor any
of its Subsidiaries has received any claim from any taxing authority in a
jurisdiction in which the Parent or any of its Subsidiaries does not file Tax
returns that it is or may be subject to taxation by that jurisdiction.
SECTION 5.14 DISCLOSURE. No representation or warranty by the Parent or
any of its Subsidiaries contained in this Agreement and no statement contained
in any of the Disclosure Schedules delivered or to be delivered pursuant to this
Agreement by the Parent or any of its Subsidiaries contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 TRANSFER OF SHARES. Each Stockholder agrees that such
Stockholder (i) shall not dispose of or in any way encumber its shares of
Company Common Stock or Company Preferred Stock prior to the consummation of the
transactions contemplated under the Transaction Agreements, (ii) shall use its
commercially reasonable efforts to cause, and take no action inconsistent with,
the approval and consummation of said transactions and (iii) at the Closing,
deliver or cause to be delivered to Parent certificates representing all shares
of Company Common Stock or Company Preferred Stock owned by it, duly endorsed
for transfer and free and clear of any claims, liens, pledges, options, rights
of first refusal or other encumbrances or restrictions of any nature whatsoever
(other than restrictions imposed under applicable securities laws).
SECTION 6.2 REASONABLE EFFORTS; ETC. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Transaction
Agreements, including obtaining any consents, authorizations, exemptions and
approvals from, and making all filings with, any governmental or regulatory
authority, agency or body which are necessary in connection with the
transactions contemplated by the Transaction Agreements.
SECTION 6.3 FEES AND EXPENSES. The Parent and the Company shall bear and
pay all of their own fees, costs and expenses relating to the transactions
contemplated by the Transaction Agreements, including, without limitation, the
fees and expenses of their respective counsel, accountants, brokers and
financial advisors.
SECTION 6.4 NASDAQ NATIONAL MARKET LISTING. As soon as reasonably
practicable and in any event at or prior to the time required by applicable
NASDAQ rules applicable to the Company, Parent shall cause the shares of Parent
Common Stock issuable in the Merger, including the Contingent Payment Shares, to
be authorized for listing on The Nasdaq National Market and will maintain such
listing at all times thereafter for so long as the Parent Common Stock is listed
on the NASDAQ National Market.
SECTION 6.5 TAX COVENANTS. (a) The parties hereto intend that, for
United States federal income tax purposes, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization." Accordingly, both before
and after the Closing, each of the parties agrees that all of its books and
records shall be maintained, and all United States federal, state and local
income tax returns and schedules thereto shall be filed in a manner, consistent
with the Merger's qualification as a reorganization. Each party shall provide to
each other party such cooperation, information, reports, returns or schedules as
may be reasonably required to assist such other party in accounting for and
reporting the Merger as such. Each of Parent, Acquisition Corp., the Company and
the Stockholders agrees that it and its affiliates shall not take, cause or
permit any action (or fail to take, cause or permit any action) if such action
(or the failure of such action to
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occur) would cause the Merger not to be treated as a reorganization within the
meaning of Code Section 368(a)(1); provided, however, that, notwithstanding the
foregoing, each party shall be expressly permitted to take, cause or permit any
action (or fail to take, cause or permit any action) if such action (or the
failure of such action to occur) is contemplated by this Agreement or any other
Transaction Agreements or any document related to the transactions contemplated
by this Agreement or any other Transaction Agreements.
(b) The Company shall timely prepare and file or cause to be
prepared and filed all Tax returns, reports or other filings of the Company and
its Subsidiaries for all periods ending on or before the Closing Date and timely
pay when due all Taxes relating to such Tax returns. Prior to the filing of any
Tax return, report or other filing of the Company or its Subsidiaries described
in the preceding sentence that was not filed before the Closing Date, the
Company shall provide Parent with a substantially final draft of such return,
report or other filing at least fifteen (15) days prior to the due date for such
Tax return, report or other filing and Parent shall have the right to review
such Tax return prior to the filing of such Tax return. Parent shall notify the
Company, of any objections that Parent may have to any items set forth in any
such draft Tax return, report or other filing, and Parent and the Company shall
agree to consult and resolve in good faith any such objection and mutually
consent to the filing of such Tax return, report or other filing. Such Tax
returns, reports and other filings shall be prepared or completed in a manner
consistent with prior practice of the Company with respect to Tax returns,
reports and other filings concerning the income, properties or operations of the
Company (including elections and accounting methods and conventions), except as
otherwise required by law or regulation or otherwise agreed to by Parent prior
to the filing thereof. Notwithstanding the foregoing, it is agreed that the
Company need not file any Tax return or pay any Taxes earlier than the date on
which the same are due.
(c) On and after the Closing Date, Parent shall have the exclusive
right to represent the interests of the Company in any and all Tax audits or
administrative or court proceedings relating to Tax returns, reports or other
filings.
(d) Each Stockholder agrees to promptly notify Parent in writing
upon receipt by such Stockholder or any affiliate of such Stockholder of notice
of any pending or threatened Tax audits or assessments relating to the income,
properties or operations of the Company or any of its Subsidiaries.
(e) After the Closing Date, the Parent, the Surviving Corporation
and each Stockholder agree to provide each other with such cooperation and
information relating to the Company as any other party may reasonably request in
(i) filing any Tax return, report or other filing, amended Tax return, report or
other filing or claim for Tax refund, (ii) determining any Tax liability or
right to refund of Taxes, (iii) conducting or defending any audit or other
proceeding in respect of Taxes, or (iv) effectuating the terms of the
Transaction Agreements. The parties shall retain all Tax returns, schedules and
work papers, and all material records and other documents relating thereto,
until the expiration of the statute of limitation (and, to the extent notified
by any party, any extensions thereof) of the taxable years to which such Tax
returns and other documents relate and, unless such Tax returns and other
documents are offered and delivered to Parent, the Surviving Corporation or the
Stockholders, as the case may be, until the final determination of any Tax in
respect of such years. Any information obtained under this
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Section 6.5(e) shall be kept confidential, except as may be otherwise necessary
in connection with filing any Tax return, amended return, or claim for refund,
determining any Tax liability or right to refund of Taxes, or in conducting or
defending any audit or other proceeding in respect of Taxes. Notwithstanding the
foregoing, no party nor any of their respective affiliates shall be unreasonably
required to prepare any document, or determine any information, not then in its
possession in response to a request under this Section 6.5(e).
(f) The Stockholders shall be liable for, and shall pay when due,
any transfer, gains, documentary, sales, use, registration, stamp, value-added
or other similar Taxes payable by reason of the transactions contemplated under
the Transaction Agreements, and shall file all necessary returns, reports or
other filings with respect to all such Taxes.
(g) Any and all existing Tax sharing, allocation, compensation or
like agreements or arrangements, whether or not written, that include the
Company or any of its Subsidiaries, including without limitation any arrangement
by which the Company or such Subsidiary makes compensating payments to any other
member of any affiliated, consolidated, combined, unitary or other similar Tax
group for the use of certain tax attributes, shall be terminated as of the day
before the Closing Date (pursuant to a writing executed on or before the Closing
Date by all parties concerned) and shall have no further force or effect. All
liabilities of the Company (for Taxes or otherwise pursuant to such agreements
or arrangements) shall be canceled on or prior to the Closing Date.
SECTION 6.6 LEGENDS. The Parent shall re-issue a certificate without the
legends described in Section 4.2 to the holder of such certificate, if the
shares represented by such certificate are being transferred pursuant to an
effective registration statement under the Securities Act or if the shares
represented by such certificate may be publicly sold pursuant to Rule 144(k)
under the Securities Act. Subject to compliance with the applicable lock-up
restrictions, the Parent shall take all actions reasonably necessary to
facilitate sales by the Stockholders of the Merger Shares and the Contingent
Payment Shares pursuant to Rule 144.
SECTION 6.7 MANAGEMENT STOCK OPTIONS.
(a) Stock Options. At the Effective Time, each outstanding option
or warrant to purchase shares of Company Common Stock (each, a "Company Stock
Option"), whether or not vested, shall be assumed by Parent. Each Company Stock
Option so assumed by Parent under this Agreement will continue to have, and be
subject to, the same terms and conditions of such options immediately prior to
the Effective Time (including, without limitation, any repurchase rights or
vesting provisions and provisions regarding the acceleration of vesting on
certain transactions, other than the transactions contemplated by this
Agreement), except that (i) each Company Stock Option will be exercisable (or
will become exercisable in accordance with its terms) for that number of whole
Parent Shares equal to the product of the number of shares of Company Common
Stock that were issuable upon exercise of such Company Stock Option immediately
prior to the Effective Time multiplied by the Options Exchange Ratio (as defined
below), rounded down to the nearest whole number of Parent Shares and (ii) the
per share exercise price for the Parent Shares issuable upon exercise of such
assumed Company Stock Option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Company Stock Option was exercisable immediately
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prior to the Effective Time by the Options Exchange Ratio, rounded up to the
nearest whole cent. As used herein, the Options Exchange Ratio shall mean (i) in
the case of Company Stock Options having an exercise price immediately before
the Merger equal to $1.00 per share, 1.18193301; (ii) in the case of Company
Stock Options having an exercise price immediately before the Merger equal to
$1.50 per share, 1.15160377; and (iii) in the case of Company Stock Options
having an exercise price equal to $2.50 per share, 1.09101881.
(b) Surviving Corporation Stock Option Plan. The Parent agrees to cause
the Surviving Corporation to grant, as of the Closing Date, to the Stockholder
Indemnitors options to purchase 4,444,442 shares in the aggregate of the
Surviving Corporation Class A common stock, par value $.01 per share,
("Options"). Options shall be allocated among employees of the Surviving
Corporation as set forth on Schedule 6.7(b). The Options shall contain terms and
conditions substantially the same as those contained in the Parent's 1999
Employee Stock Option Plan (except that the Options shall not contain incentive
stock option provisions) and shall provide for (i) initial vesting of 25% on the
first anniversary of the date of grant and the balance vesting quarterly over
the 36 months following such first anniversary subject to continued employment
at the Surviving Corporation or a subsidiary thereof and (iii) a ten (10) year
term, subject to early expiration upon the occurrence of certain events. The
shares issuable upon exercise of Options granted on the Closing Date shall
constitute 10% of the outstanding common stock of the Surviving Corporation on a
fully diluted basis immediately after giving effect to the Merger and the
transactions contemplated to be completed immediately after the Merger under the
Contribution Agreement.
SECTION 6.8 CONTRIBUTION AGREEMENT. The Parent and each of the
Stockholders agrees to comply with their respective obligations under the
Contribution Agreement immediately following the consummation of the Merger,
including, without limitation, ▇▇▇▇.▇▇▇'s obligations to contribute the ▇▇▇▇.▇▇▇
Contributions (as defined in the Contribution Agreement) and the Stockholders
obligations to contribute to the Stockholder Contributions (as defined in the
Contribution Agreement).
SECTION 6.9 TERMINATION OF STOCKHOLDER ARRANGEMENTS. The Company and
each of the Stockholders agrees that the June 1999 Stockholders Agreement
disclosed in the Disclosure Schedules and the Registration Rights Agreement
dated June 9, 1999 shall terminate upon the Effective Time.
ARTICLE VII
COVENANTS OF THE COMPANY AND THE STOCKHOLDERS
SECTION 7.1 NON-COMPETITION. Each of the Stockholder Indemnitors hereby
severally and not jointly agrees that for a period of three (3) years after the
date hereof, he or she will not, directly or indirectly, compete with the
business of the Surviving Corporation or (other than in his capacity as an
employee of the Surviving Corporation) ▇▇▇▇.▇▇▇ or the Parent. Each Stockholder
Indemnitor acknowledges that money damages may not be a sufficient remedy for
any breach of this provision and agrees that ▇▇▇▇.▇▇▇, Parent and the Surviving
Corporation will be entitled to seek specific performance and injunctive or
other equitable relief for any such breach.
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For purposes of this Article VII, the term "not compete" shall mean that:
(a) No Stockholder Indemnitor shall, on such Stockholder
Indemnitor's behalf or on behalf of any other party other than the Parent or the
Surviving Corporation, solicit or seek the business of any customer or account
of the Parent or the Surviving Corporation wherein said solicitation involves a
product or service substantially similar to or competitive with any product or
service offered or under development by the Parent or the Surviving Corporation
as of the date hereof or during the term of such Stockholder Indemnitor's
employment with the Parent or the Surviving Corporation.
(b) No Stockholder Indemnitor shall directly or indirectly own,
operate, consult to or be employed by any firm in a business substantially
similar to or competitive with the present business of the the Parent or the
Surviving Corporation or such business activity in which the Parent or the
Surviving Corporation may engage during the term of employment; provided that
such Stockholder Indemnitor shall not be prohibited from owning less than 5% of
a publicly traded mutual fund or similar publicly traded investment for
investment purposes.
(c) No Stockholder Indemnitor shall directly or indirectly solicit
the Surviving Corporation's customers, vendors, subcontractors, or prospects
with services or products of the nature of those being sold by the Surviving
Corporation. Each Stockholder Indemnitor further agrees that, for a period of
three (3) years from after the date hereof, he will not in any capacity (other
than as an employee of and on behalf of the Surviving Corporation), either
separately, jointly or in association with others, directly or indirectly,
solicit or contact in connection with, or in furtherance of, a competitive
activity any of the Surviving Corporation's employees, consultants, agents,
suppliers, customers or prospects that were such with respect to the Surviving
Corporation at any time during the one (1) year immediately preceding the date
hereof or that become such with respect to the Surviving Corporation at any time
during the one (1) year immediately following the date hereof. Such Stockholder
Indemnitor's obligations under this Section 7.1 shall survive the termination or
cessation of his or her employment with the Surviving Corporation and shall not
be limited by Article XI hereof.
SECTION 7.2 CONDUCT OF BUSINESS BY THE COMPANY AND ITS SUBSIDIARIES.
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
Closing Date, the Company and its Subsidiaries shall, except to the extent that
Parent shall otherwise consent in writing, carry on their business, in the
usual, regular and ordinary course consistent with past practices, in
substantially the same manner as heretofore conducted and in compliance with all
applicable laws and regulations (except where noncompliance would not have a
Company Material Adverse Effect), pay their 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 their commercially reasonable efforts consistent
with past practices and policies to (i) preserve substantially intact their
present business organization, (ii) keep available the services of their present
officers and employees and (iii) preserve their relationships with customers,
suppliers, distributors, licensors, licensees, and others with which they have
significant business dealings. In addition, except as permitted by the terms of
this Agreement, without the prior written consent of the Parent, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this
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Agreement pursuant to its terms and the Closing Date, the Company and its
Subsidiaries shall not 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 reprice 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) Grant any severance or termination pay to any officer or
employee except pursuant to applicable law, written agreements outstanding, or
policies existing, on the date hereof and as previously or concurrently
disclosed in writing or made available to the Parent, or adopt any new severance
plan, or amend or modify or alter in any manner any severance plan, agreement or
arrangement existing on the date hereof;
(c) Transfer or license to any person or otherwise extend, amend
or modify any material Intellectual Property Rights of the Company or its
Subsidiaries, or enter into grants to transfer or license to any person future
patent rights, other than in the ordinary course of business consistent with
past practices, provided that in no event shall the Company or any of its
Subsidiaries license on an exclusive basis or sell any Intellectual Property
Rights of the Company or its Subsidiaries;
(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 or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of the Company or any of 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,
or agree to any of the foregoing with respect to, any shares of capital stock or
any securities convertible into or exchangeable for shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into or exchangeable for shares of capital
stock, or enter into other agreements or commitments of any character obligating
it to issue any such shares or convertible or exchangeable securities;
(g) Amend the Company's or any of its Subsidiaries' certificates
of incorporation, bylaws or other constituting documents;
(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 which are material, individually or in the aggregate, to the
business of the Company or any of its Subsidiaries or enter into any joint
ventures, strategic partnerships or alliances or other arrangements that provide
for exclusivity of
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territory or otherwise restrict the Company's or any of its Subsidiaries'
ability to compete or to offer or sell any products or services;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets, except sales of inventory in the ordinary course of
business consistent with past practice and, except for the sale, lease or
disposition (other than through licensing) of property or assets which are not
material, individually or in the aggregate, to the business of Company or any of
its Subsidiaries;
(j) Incur any indebtedness for borrowed money in excess of $25,000
in the aggregate 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 the Company or any of its Subsidiaries, 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;
(k) Adopt or amend any employee benefit plan, policy or
arrangement or any employee stock purchase or employee stock option plan, or
enter into any employment contract or collective bargaining agreement (other
than offer letters and letter agreements entered into in the ordinary course of
business consistent with past practice with employees who are terminable "at
will"), 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, officers, employees or
consultants, except in the ordinary course of business consistent with past
practices;
(l) (i) Pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) other than the payment, discharge, settlement or satisfaction, in the
ordinary course of business consistent with past practices or in accordance with
their terms, or liabilities recognized or disclosed in the most recent
consolidated financial statements (or the notes thereto) of the Company or
incurred since the date of such financial statements, or (ii) waive the benefits
of, agree to modify in any manner, terminate, release any person from or
knowingly fail to enforce any confidentiality or similar agreement to which the
Company or any of its Subsidiaries is a party or of which the Company or any of
its Subsidiaries is a beneficiary;
(m) Except in the ordinary course of business consistent with past
practices, modify, amend or terminate any material contract or material
agreement to which the Company or any of its Subsidiaries is a party or waive,
delay the exercise of, release or assign any material rights or claims
thereunder;
(n) Except as required by GAAP, revalue any of their assets or
make any change in accounting methods, principles or practices;
(o) Incur or enter into any agreement, contract or commitment
requiring the Company or any of its Subsidiaries to pay in excess of $100,000 in
any 12 month period;
(p) Settle any litigation;
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(q) Make or rescind any Tax elections that, individually or in the
aggregate, could be reasonably likely to adversely affect in any material
respect the Tax liability or Tax attributes of the Company or any of its
Subsidiaries, settle or compromise any material income tax liability or, except
as required by applicable law, materially change any method of accounting for
Tax purposes or prepare or file any Tax return in a manner inconsistent with
past practice;
(r) Form, establish or acquire any Subsidiary;
(s) Agree in writing or otherwise agree, commit or resolve to take
any of the actions described in Section 7.2 (a) through (r) above.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND ACQUISITION
CORP.
The obligation of the Parent and Acquisition Corp. to consummate the
transactions contemplated hereby shall be subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions (any of which may
be waived in writing by the Parent and Acquisition Corp. in their sole
discretion):
SECTION 8.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company and the Stockholders which are contained in the
Transaction Agreements, or contained in any Schedule, certificate or instrument
delivered or to be delivered pursuant to the Transaction Agreements, shall be
made again on and as of the Closing Date and shall be true and correct in all
material respects on and as of the Closing Date, and at the Closing the Company
and the Stockholders shall have delivered to the Parent and Acquisition Corp. a
certificate signed on its behalf by its President or Chief Financial Officer to
that effect with respect to all such representations and warranties.
SECTION 8.2 PERFORMANCE. The Company and the Stockholders shall have
performed and complied in all material respects with all of the obligations
under the Transaction Agreements that are required to be performed or complied
with by them on or prior to the Closing Date, and at the Closing the Company
shall have delivered to the Parent and Acquisition Corp. a certificate (duly
executed on behalf of the Company by the President or the Chief Financial
Officer of the Company) to that effect with respect to all such obligations
required to have been performed or complied with by the Company on or before the
Closing Date, and the Stockholders shall have executed and delivered to the
Parent and Acquisition Corp. a certificate to that effect with respect to all
such obligations required to have been performed or complied with by the
Stockholders on or before the Closing Date.
SECTION 8.3 ABSENCE OF LITIGATION. No statute, rule or regulation shall
have been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory body,
agency or authority shall have been instituted by any person (or instituted or
threatened by any governmental or regulatory body,
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agency or authority), and no investigation by any governmental or regulatory
body, agency or authority shall have been commenced with respect to the
transactions contemplated hereby or with respect to the Company which would be
reasonably likely to have an adverse effect on the transactions contemplated
under the Transaction Agreements or have a Company Material Adverse Effect.
SECTION 8.4 CONSENTS. All material approvals, consents, waivers and
authorizations required by Parent to be obtained by the Company or any
Stockholder in connection with the Merger and the other transactions
contemplated by the Transaction Agreements (including those identified on
Schedule 3.3) shall have been obtained and shall be in full force and effect.
SECTION 8.5 ADDITIONAL AGREEMENTS. Parent shall have received duly
executed and delivered the following agreements:
(i) Employment Agreements, in the form mutually agreed by
the Parent and each of such employees and substantially in the form of
Exhibit F attached hereto, executed by each of the Stockholder
Indemnitors (the "Key Employees");
(ii) Lock-up Agreements, in the form mutually agreed by the
Parent and each of the Stockholder Indemnitors and substantially in the
form of Exhibit G attached hereto, duly executed by each of the
Stockholder Indemnitors;
(iii) a Registration Rights Agreement, substantially in the
form of Exhibit H, providing for the registration of Parent Shares held
by non-management Stockholders for resale under certain circumstances
provided therein;
(iv) the Escrow Agreement, duly executed by each of the
Stockholder Indemnitors and
(v) The Contribution Agreement, duly executed by ▇▇▇▇.▇▇▇,
Inc. and the Stockholders of ▇▇▇▇.▇▇▇, Inc.
SECTION 8.6 DELIVERY OF CERTIFICATES FOR CANCELLATION. The Certificates
representing all of the issued and outstanding shares of Company Common Stock
and the Company Preferred Stock as of the Closing Date, duly endorsed in blank,
shall have been surrendered for cancellation.
SECTION 8.7 CERTIFICATE OF MERGER. The Company shall have executed and
delivered to the Parent counterparts of the Certificate of Merger to be filed
with the Secretary of State of the State of Delaware in connection with the
Merger and the Certificate of Merger shall have been duly filed and become
effective.
SECTION 8.8 OPINION OF COUNSEL TO THE COMPANY. The Company shall have
delivered to Parent an opinion of counsel to the Company in form and substance
reasonably satisfactory to Parent.
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SECTION 8.9 SUPPORTING DOCUMENTS. The Company shall have delivered to
the Parent a certificate of the Secretary of the Company, dated the Closing
Date, certifying on behalf of the Company (i) that attached thereto is a true
and complete copy of the Bylaws of such Company as in effect on the date of such
certification; (ii) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors and Stockholders of such Company
authorizing the execution, delivery and performance of the Transaction
Agreements and the consummation of the Merger; and (iii) to the incumbency and
specimen signature of each officer of the Company executing on behalf of such
company the Transaction Agreements and the other agreements related thereto.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND STOCKHOLDERS
The obligation of the Company and the Stockholders to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or prior to the Closing Date of each of the following
conditions (any of which may be waived in writing by the Company and the
Stockholders in their sole discretion):
SECTION 9.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of each of the Parent and Acquisition Corp. contained in the
Transaction Agreements, or contained in any Schedule, certificate or other
instrument or document delivered or to be delivered pursuant to the Transaction
Agreements, shall be made again on and as of the Closing Date and shall be true
and correct in all material respects on and as of the Closing Date, and at the
Closing each of Parent and Acquisition Corp. shall have delivered to the
Stockholders a certificate signed on its behalf by its President or Chief
Financial Officer, to that effect with respect to all such representations and
warranties.
SECTION 9.2 PERFORMANCE. Each of the Parent and Acquisition Corp. shall
have performed and complied in all material respects with all of the obligations
under the Transaction Agreements which are required to be performed or complied
with by them on or prior to the Closing Date, and at the Closing each of the
Parent and Acquisition Corp. shall have delivered to the Company and the
Stockholders a certificate, signed on its behalf by its President or its Chief
Financial Officer, to that effect with respect to all such obligations required
to have been performed or complied with by such entity on or before the Closing
Date.
SECTION 9.3 ABSENCE OF LITIGATION. No statute, rule or regulation shall
have been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory body,
agency or authority shall have been instituted by any person (or instituted or
threatened by any governmental or regulatory body, agency or authority) and no
investigation by any governmental or regulatory body, agency or authority shall
have been commenced with respect to the transactions contemplated hereby or with
respect to the Parent or Acquisition Corp. which would have a material adverse
effect on the transactions contemplated under the Transaction Agreements or have
a Parent Material Adverse Effect.
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SECTION 9.4 CONSENTS. All material approvals, consents, waivers and
authorizations required to be obtained by Parent or Acquisition Corp. in
connection with the Merger and the other transactions contemplated by the
Transaction Agreements (including those identified on Schedule 5.3) shall have
been obtained and shall be in full force and effect.
SECTION 9.5 ADDITIONAL AGREEMENTS. The Parent shall have executed and
delivered (and shall have agreed to cause the Surviving Corporation to execute
and deliver immediately following the Effective Time, as applicable)
counterparts of the following agreements:
(i) the Employment Agreements referred to in Section 8.5 (i)
hereof;
(ii) the Registration Rights Agreement referred to in Section
8.5 (ii) hereof;
(ii) the Lock-up Agreement referred to in Section 8.5(iii)
hereof;
(iii) the Escrow Agreement and
(iv) the Contribution Agreement
SECTION 9.6 CERTIFICATE OF MERGER. The Parent and Acquisition Corp.
shall have executed and delivered to the Company counterparts of the Certificate
of Merger to be filed with the Secretary of State of the State of Delaware in
connection with the Merger and the Certificate of Merger shall have been duly
filed and become effective.
SECTION 9.7 SHARES OF PARENT COMMON STOCK. At the Closing, the Parent
shall deliver to the Stockholders the Merger Shares pursuant to Section 2.1(a)
hereof, other than the Escrow Shares, which the Parent shall deliver to the
Escrow Agent pursuant to Section 2.1(b) hereof, as provided in Section 2.2
hereof.
SECTION 9.8 OPINION OF COUNSEL TO PARENT AND ACQUISITION CORP. Parent
shall have delivered to the Stockholders an opinion of counsel to the Parent and
Acquisition Corp. in form and substance reasonably satisfactory to the
Stockholders.
SECTION 9.9 SUPPORTING DOCUMENTS. (a) The Parent shall have delivered to
the Company a certificate of the Secretary of the Parent, dated the Closing
Date, certifying on behalf of the Parent (i) that attached thereto is a true and
complete copy of the Bylaws of Parent as in effect on the date of such
certification; (ii) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors of such Parent authorizing the
execution, delivery and performance of the Transaction Agreements and the
consummation of the Merger; and (iii) to the incumbency and specimen signature
of each officer of the Parent executing on behalf of such Parent the Transaction
Agreements.
(b) Acquisition Corp. shall have delivered to the Company a
certificate of the Secretary of Acquisition Corp., dated the Closing Date,
certifying on behalf of Acquisition Corp. (i) that attached thereto is a true
and complete copy of the Bylaws of Acquisition Corp. as in effect on the date of
such certification; (ii) that attached thereto is a true and complete copy of
all resolutions adopted by the Board of Directors and stockholders of
Acquisition Corp. authorizing the execution, delivery and performance of this
Agreement and the consummation of the Merger;
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and (iii) to the incumbency and specimen signature of each officer of
Acquisition Corp. executing on behalf of such Acquisition Corp. this Agreement
and the other agreements related hereto.
ARTICLE X
TERMINATION
SECTION 10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by the mutual written consent of the Company and the Parent;
(b) by either the Company or the Parent
(i) if any court or governmental or regulatory agency,
authority or body shall have enacted, promulgated or issued any statute,
rule, regulation, ruling, writ or injunction, or taken any other action,
restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and all appeals and means of appeal therefrom have
been exhausted; or
(ii) if the Closing Date shall not have occurred on or before
7 days after signing; provided, however, that the right to terminate this
Agreement pursuant to this Section 10.1(b)(ii) shall not be available to
any party whose (or whose affiliate(s)') breach of any representation or
warranty or failure to perform or comply with any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date; or
(c) by the Company, if any of the conditions specified in Article
IX have not been met or waived prior to such time as such condition can no
longer be satisfied; or
(d) by the Parent, if any of the conditions specified in Article
VIII have not been met or waived prior to such time as such condition can no
longer be satisfied.
SECTION 10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement, the Transaction Agreements shall forthwith become void and there
shall be no liability on the part of any of the parties hereto or (in the case
of the Company, the Parent and Acquisition Corp.) their respective officers or
directors, except for Sections 6.3 and 12.6, which shall remain in full force
and effect, and except that nothing herein shall relieve any party from
liability for a breach of this Agreement prior to the termination hereof.
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
SECTION 11.1 INDEMNITY OBLIGATIONS. (a) Subject to Section 11.3 hereof,
each of the Stockholder Indemnitors hereby jointly and severally agrees to
indemnify and hold the Parent,
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the Surviving Corporation and their respective affiliates and successors
(collectively, "Parent Indemnitees") harmless from, and to reimburse the Parent
Indemnitees for, any Losses (as that term is hereinafter defined) arising out
of, based upon or resulting from (i) any inaccuracy in or breach of any
representation or warranty of the Company or the Stockholder Indemnitors set
forth in Article III of this Agreement or any Schedule or certificate delivered
by the Company or the Stockholder Indemnitors pursuant hereto; (ii) any breach
or nonfulfillment of, or any failure to perform, any of the covenants,
agreements or undertakings of the Company (which covenants, agreements or
undertakings were to be performed or complied with on or prior to the Closing)
which are contained in this Agreement; and (iii) any claims to the extent
arising out of the conduct of the business of the Company or any of its
Subsidiaries prior to the Closing that are not reserved as a liability on the
Reference Balance Sheet or incurred in the ordinary course of business
consistent with past practice or disclosed on the Company Disclosure Schedule or
involving personal injury, death, physical damage to the tangible or real
property of the Company or any of its Subsidiaries or any other person which
otherwise would have been covered by fire, property, casualty or liability
insurance if the Company or such Subsidiary had such insurance in place for all
periods prior to the Closing. For purposes of this Agreement, the term "Losses"
shall mean any and all losses, damages, deficiencies, liabilities, obligations,
actions, claims, suits, proceedings, demands, assessments, judgments,
recoveries, fees, costs and expenses (including, without limitation, all
out-of-pocket expenses, reasonable investigation expenses and reasonable fees
and disbursements of accountants and counsel) of any nature whatsoever, net of
insurance proceeds actually realized by the party incurring such Loss.
Notwithstanding the foregoing and subject to the last sentence of this Section
11.1(a), (i) none of the Stockholder Indemnitors shall be liable for or be
obligated to indemnify any party for one or more breaches of representations or
warranties of the Stockholder Indemnitors under Article III of this Agreement
(other than under Sections 3.4 and 3.9) or agreements of the Company hereunder
or for indemnification under Section 11.1(a) (other than to the extent arising
out of Sections 3.2, 3.3, 3.4, 3.9 or Section 11.1(a)(iii)) unless the aggregate
amount of all Losses arising out of such a breach or breaches exceeds $50,000
and (ii) each of the Stockholder Indemnitors shall not be liable for any Losses
arising out of breaches of representations and warranties under Article III of
this Agreement (other than under Sections 3.2, 3.3, 3.4 and 3.9, or for
indemnification under Section 11.1(a) (other than to the extent arising out of
Sections 3.2, 3.3, 3.4, 3.9 or Section 11.1(a)(iii)) in excess of the amount of
Escrow Shares attributable to such Stockholder Indemnitor on deposit with the
Escrow Agent. The foregoing limitations on liability of the Stockholder
Indemnitors shall not apply in the event of breaches of representations or
warranties arising out of fraud or willful misrepresentation on the part of the
Stockholder Indemnitors.
(b) Subject to Section 11.3 hereof, each of the Stockholders
hereby severally and not jointly agrees to indemnify and hold the Parent
Indemnitees harmless from, and to reimburse the Parent Indemnitees for, any
Losses arising out of, based upon or resulting from (i) any inaccuracy in or
breach of any representation or warranty of such Stockholder set forth in
Article IV of this Agreement, in any other Transaction Agreement or in any
Schedule or certificate delivered by such Stockholder pursuant hereto or
thereto; and (ii) any breach of nonfulfillment of, or any failure to perform,
any of the covenants, agreements or undertakings of such Stockholder under this
Agreement, under any other Transaction Agreement or any Schedule or certificate
delivered by such Stockholder pursuant hereto or thereto. Notwithstanding the
foregoing, none of the Stockholders shall be liable for or be obligated to
indemnify any party for
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any Losses arising out of breaches of representations or warranties under
Article IV in excess of the total consideration received by such Stockholder
pursuant to this Agreement. For the purpose of recovering Losses for which
Parent Indemnitees are indemnified by the Stockholder Indemnitors under this
Section 11.1(b), Parent may seek satisfaction of any such indemnification
obligations directly from such Stockholder Indemnitor or seek satisfaction of
any such indemnification obligations from amounts on deposit with the Escrow
Agent; provided that Parent may not recover any losses in the aggregate
indemnified by a Stockholder Indemnitor under this Section 11.1(b) out of Escrow
Shares on deposit with the Escrow Agent in excess of such Stockholder
Indemnitor's pro rata share of the amount of Escrow Shares on deposit with the
Escrow Agent at the time of any such claim.
(c) Subject to Section 11.3 hereof, Parent hereby agrees to
indemnify and hold the Stockholders harmless from, and to reimburse the
Stockholders for, any Losses arising out of, based upon or resulting from (i)
any inaccuracy in or breach of any representation or warranty of the Parent or
Acquisition Corp. set forth in Article V of this Agreement or any Schedule or
certificate delivered by the Parent pursuant hereto; or (ii) any breach or
nonfulfillment of, or any failure to perform, any of the covenants, agreements
or undertakings of the Parent or Acquisition Corp. which are contained in this
Agreement or any other Transaction Agreement. Notwithstanding the foregoing, (i)
neither the Parent nor the Surviving Corporation shall be liable for or be
obligated to indemnify any party for one or more breaches of representations,
warranties or agreements of the Parent or Acquisition Corp. hereunder unless the
aggregate amount of all Losses arising out of such a breach or breaches exceeds
$50,000 and (ii) the Parent and the Surviving Corporation collectively shall not
be liable for any Losses arising out of breaches of representations or
warranties under Article V in excess of an amount equal to the fair market value
of the Escrow Shares on deposit with the Escrow Agent. The foregoing limitations
on liability of Parent and the Surviving Corporation shall not apply in the
event of breaches of representations, warranties or agreements arising out of
fraud or willful misrepresentation on the part of Parent and Acquisition Corp.
SECTION 11.2 NOTIFICATION OF CLAIMS. (a) Subject to the provisions of
Section 11.3 below, in the event of the occurrence of an event pursuant to which
any party (the "Indemnified Party") shall seek indemnity pursuant to Section
11.1, the Indemnified Party shall provide the indemnifying party (the
"Indemnifying Party") against whom indemnification is sought with prompt written
notice (a "Claim Notice") of such event and shall otherwise promptly make
available to the Indemnifying Party, all relevant information that is material
to the claim and which is in the possession of the Indemnified Party. The
Indemnified Party's failure to give a timely Claim Notice or to promptly furnish
the Indemnifying Party with any relevant data and documents in connection with
any Third-Party Claim (as that term is hereinafter defined) shall not constitute
a defense (in part or in whole) to any claim for indemnification by such party,
except and only to the extent that such failure shall result in any material
prejudice to the Indemnifying Party.
(b) After the giving of any Claim Notice pursuant hereto, the
amount of indemnification to which the Indemnified Party shall be entitled under
this Article XI shall be determined by (A) written agreement between the
Indemnified Party and the Indemnifying Party or (B) a final judgment or decree
of any court of competent jurisdiction. The judgment or decree
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of a court shall be deemed final when the time for appeal, if any, has expired
and no appeal has been taken or when all appeals taken have been finally
determined.
(c) The Indemnifying Party shall have the right to elect to join
in, and in such event to conduct and control, through counsel of its choosing
reasonably acceptable to the Indemnified Party, the defense, settlement,
adjustment or compromise of any claim of any third party (a "Third Party Claim")
as to which indemnification will be sought by the Indemnified Party from the
Indemnifying Party. The expense of any such defense, settlement, adjustment or
compromise, including such counsel, shall be borne by the Stockholder
Indemnitors with respect to indemnification sought pursuant to Section 11.1(a)
and by the Stockholders against whom indemnification is sought with respect to
indemnification sought pursuant to Section 11.1(b), and by the Parent with
respect to indemnification sought pursuant to Section 11.1(c). Unless the
Indemnifying Party elects to assume such defense, settlement, adjustment or
compromise, the Indemnified Party shall have the right to settle any such Third
Party Claim; provided, however, that the Indemnified Party may not effect the
settlement, adjustment or compromise of any such Third Party Claim without the
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. In connection with any Third Party Claim, the Indemnified
Party, or the Indemnifying Party if it has assumed the defense of such claim
pursuant to the foregoing, shall diligently pursue the defense of such Third
Party Claim.
SECTION 11.3 DURATION. All representations and warranties set forth in
the Transaction Agreements and any Schedules or certificates delivered pursuant
hereto or thereto, and all covenants, agreements and undertakings of the parties
contained in or made pursuant to the Transaction Agreements and any Schedules or
certificates delivered pursuant hereto or thereto, and the rights of the parties
to seek indemnification with respect thereto, shall survive the Closing but all
representations and warranties contained in the Transaction Agreements or any
certificate or Schedule delivered pursuant hereto or thereto shall expire on the
first anniversary of the Closing Date, at which time the indemnification
provided in Article XI arising out of a breach of the representations or
warranties shall terminate except with respect to any claim for indemnification
made prior to the date of expiration of the survival period for such claim which
shall survive until the resolution of such claim. Notwithstanding the foregoing,
obligations arising from the breaches of the representations and warranties set
forth in Section 3.4 or in Article IV and obligations arising from fraud shall
each survive the Closing Date until expiration of the applicable statute of
limitations.
SECTION 11.4 NO CONTRIBUTION. The Stockholders hereby waive, acknowledge
and agree that the Stockholders shall not have and shall not exercise or assert
(or attempt to exercise or assert), any right of contribution or right of
indemnity against the Company or the Surviving Corporation in connection with
any indemnification payments which the Stockholders are required to make under
this Article XI.
ARTICLE XII
MISCELLANEOUS PROVISION
SECTION 12.1 AMENDMENT. This Agreement may be amended solely by written
agreement among the parties hereto prior to the Effective Time.
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SECTION 12.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant or agreement contained herein may be waived only by a written notice
from the party or parties entitled to the benefits thereof. No failure by any
party hereto to exercise, and no delay in exercising, any right hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or future exercise of that right by that
party.
SECTION 12.3 NOTICES. All notices and other communications hereunder
shall be deemed given if given in writing and delivered personally, by
registered or certified mail, return receipt requested, postage prepaid, or by
overnight courier to the party to receive the same at its respective address set
forth below (or at such other address as may from time to time be designated by
such party to the others in accordance with this Section 12.3):
(a) if to the Company or the Stockholders, to:
▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇
with copies to:
Nordlicht & Hand
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
(b) if to the Parent or Acquisition Corp., to:
▇▇▇▇.▇▇▇, Inc.
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy at the same address to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
and with a copy to:
Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
All such notices and communications hereunder shall be deemed given
when received, as evidenced by the signed acknowledgment of receipt of the
person to whom such notice or
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communication shall have been personally delivered, the acknowledgment of
receipt returned to the sender by the applicable postal authorities or the
confirmation of delivery rendered by the applicable overnight courier service.
SECTION 12.4 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors (or, in the case of the Stockholders that are natural
persons, their respective heirs, administrators, executors and personal
representatives) and permitted assigns. Neither this Agreement nor any rights,
duties or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other parties hereto, except that the Parent
shall have the right to assign its rights hereunder to any affiliate thereof.
SECTION 12.5 NO THIRD PARTY BENEFICIARIES. Neither this Agreement or any
provision hereof nor any Schedule, certificate or other instrument delivered
pursuant hereto, nor any agreement to be entered into pursuant hereto or any
provision hereof, is intended to create any right, claim or remedy in favor of
any person or entity, other than the parties hereto and their respective
successors (or, in the case of the Stockholders [that are natural persons],
their respective heirs, administrators, executors and personal representatives)
and permitted assigns and any other parties indemnified under Article XI.
SECTION 12.6 PUBLIC ANNOUNCEMENTS. Promptly after the Closing Date, the
Parent and the Company shall issue a press release in such form as they shall
mutually agree. Other than as provided in the immediately preceding sentence,
none of the parties hereto shall, except as mutually agreed by the Parent and
the Stockholders, or except as may be required by law or applicable regulatory
authority (including, without limitation, the rules applicable to Nasdaq
National Market ), issue any reports, releases, announcements or other
statements to the public relating to the transactions contemplated by the
Transaction Agreements.
SECTION 12.7 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 12.8 HEADINGS. The article and section headings contained in this
Agreement are solely for convenience of reference, are not part of the agreement
of the parties and shall not be used in construing this Agreement or in any way
affect the meaning or interpretation of this Agreement.
SECTION 12.9 ENTIRE AGREEMENT. This Agreement, and the Schedules,
certificates and other instruments and documents delivered pursuant hereto,
together with the other Transaction Agreement and the other agreements referred
to herein and to be entered into pursuant hereto, embody the entire agreement of
the parties hereto in respect of, and there are no other agreements or
understandings, written or oral, among the parties relating to, the subject
matter hereof, other than the Confidentiality Agreement entered into among
Parent, the Company and certain of the Stockholders. This Agreement supersedes
all prior agreements and understandings, written or oral, between the parties
with respect to such subject matter, other than the Confidentiality Agreement.
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SECTION 12.10 GOVERNING LAW. The parties hereby agree that this
Agreement, and the respective rights, duties and obligations of the parties
hereunder, shall be governed by and construed in accordance with the DGCL as to
matters within the scope thereof and, as to all other matters, shall be governed
by and construed with the laws of the State of New York, without giving effect
to principles of conflicts of law thereunder. Each of the parties hereby (i)
irrevocably consents and agrees that any legal or equitable action or proceeding
arising under or in connection with this Agreement shall be brought exclusively
in the federal or state courts sitting in New York, New York and any court to
which an appeal may be taken in any such litigation, and (ii) by execution and
delivery of this Agreement, irrevocably submits to and accepts, with respect to
any such action or proceeding, for itself and in respect of its properties and
assets, generally and unconditionally, the jurisdiction of the aforesaid courts,
and irrevocably waives any and all rights such party may now or hereafter have
to object to such jurisdiction. Each Stockholder agrees that service of process
may be made upon it by service upon Nordlicht & Hand ("N&H") at its office at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ in any such action, suit or proceeding
against it with respect to this Agreement or any other agreements relating
hereto, and hereby irrevocably designates and appoints N&H as its authorized
agent upon which process may be served in any such action, suit or proceeding,
it being understood that such appointment and designation shall become effective
without any action on the part of any party. Service of process upon such
authorized agent shall be deemed, in every respect, effective service of process
upon the applicable Stockholder. If N&H ceases to maintain an office in New York
City, then each Stockholder shall appoint another agent for service of process
in the State of New York acceptable to ▇▇▇▇.▇▇▇.
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IN WITNESS WHEREOF, Parent, Acquisition Corp., the Company and the
Stockholders have caused this Agreement to be duly executed and delivered as an
instrument under seal as of the date first above written.
▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
Title: President
THE STOCKHOLDERS:
/s/ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇ Zhang
------------------------------------------
▇▇▇ ▇▇▇▇▇▇ Zhang
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ JTWROS
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ JTWROS
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ a/c/f ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ a/c/f ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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/s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------------
▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇ & Son Incorporated
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ & Son Incorporated
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
50
