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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AKAMAI TECHNOLOGIES, INC.,
ALOHA MERGER CORPORATION,
AND
NETWORK24 COMMUNICATIONS, INC.
DATED AS OF JANUARY 14, 2000
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TABLE OF CONTENTS
Page
----
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER 1
1.1 Merger.............................................................1
1.2 Time and Place of Closing..........................................2
1.3 Effective Time.....................................................2
ARTICLE 2 TERMS OF MERGER 2
2.1 Articles of Incorporation..........................................2
2.2 Bylaws.............................................................2
2.3 Directors and Officers.............................................3
ARTICLE 3 MANNER OF CONVERTING SHARES 3
3.1 Conversion of Shares...............................................3
3.2 Anti-Dilution Provisions...........................................4
3.3 Shares Held by Company or Parent...................................4
3.4 Dissenting Stockholders............................................4
3.5 Fractional Shares..................................................5
3.6 Conversion of Stock Options and Warrants; Restricted Stock.........5
ARTICLE 4 EXCHANGE OF SHARES 6
4.1 Exchange Procedures................................................6
4.2 Rights of Former Company Stockholders..............................8
4.3 Escrow Agreement...................................................8
4.4 Restricted Stock; Legending of Certificates........................9
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF Company 9
5.1 Organization, Standing, and Power..................................9
5.2 Authority of Company; No Breach By Agreement......................10
5.3 Capital Stock.....................................................11
5.4 Company Subsidiaries..............................................11
5.5 Financial Statements..............................................11
5.6 Absence of Undisclosed Liabilities................................12
5.7 Absence of Certain Changes or Events..............................12
5.8 Tax Matters.......................................................12
5.9 Assets............................................................13
5.10 Intellectual Property.............................................14
5.11 Environmental Matters.............................................16
5.12 Compliance with Laws..............................................16
5.13 Labor Matters.....................................................17
5.14 Employee Benefit Plans............................................17
5.15 Material Contracts................................................19
5.16 Legal Proceedings.................................................20
5.17 Reports...........................................................20
5.18 Statements True and Correct.......................................21
5.19 Tax and Regulatory Matters........................................21
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5.20 State Takeover Laws...............................................21
5.21 Charter Provisions................................................21
5.22 Investment Intention..............................................21
5.23 Board Recommendation..............................................22
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PARENT 22
6.1 Organization, Standing, and Power.................................22
6.2 Authority; No Breach By Agreement.................................22
6.3 Capital Stock.....................................................23
6.4 SEC Filings; Financial Statements.................................23
6.5 Absence of Certain Changes or Events..............................24
6.6 Tax Matters.......................................................24
6.7 Compliance with Laws..............................................25
6.8 Legal Proceedings.................................................25
6.9 Reports...........................................................25
6.10 Statements True and Correct.......................................26
6.11 Authority of Sub..................................................26
6.12 Accounting, Tax and Regulatory Matters............................26
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION 27
7.1 Affirmative Covenants of Company..................................27
7.2 Negative Covenants of Company.....................................27
7.3 Adverse Changes in Condition......................................29
ARTICLE 8 ADDITIONAL AGREEMENTS 29
8.1 Stockholder Approval..............................................29
8.2 Exchange Listing..................................................29
8.3 Regulatory Filings; Required Consents.............................29
8.4 Filings with State Offices........................................30
8.5 Agreement as to Efforts to Consummate.............................30
8.6 Investigation and Confidentiality.................................31
8.7 Press Releases....................................................31
8.8 Certain Actions...................................................31
8.9 Accounting and Tax Treatment......................................32
8.10 State Takeover Laws...............................................32
8.11 Charter Provisions................................................32
8.12 Employee Benefits and Contracts...................................32
8.13 Indemnification...................................................33
8.14 Registration Rights...............................................34
8.15 Treatment of HP Warrants..........................................34
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE 34
9.1 Conditions to Obligations of Each Party...........................34
9.2 Conditions to Obligations of Parent...............................36
9.3 Conditions to Obligations of Company..............................37
ARTICLE 10 TERMINATION 38
10.1 Termination.......................................................38
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10.2 Effect of Termination..........................................39
ARTICLE 11 MISCELLANEOUS 39
11.1 Definitions....................................................39
11.2 Expenses.......................................................48
11.3 Brokers and Finders............................................48
11.4 Entire Agreement...............................................48
11.5 Amendments.....................................................48
11.6 Waivers........................................................49
11.7 Assignment.....................................................49
11.8 Notices........................................................49
11.9 Governing Law..................................................50
11.10 Counterparts...................................................50
11.11 Captions; Articles and Sections................................50
11.12 Interpretations................................................51
11.13 Enforcement of Agreement.......................................51
11.14 Severability...................................................52
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<PAGE> 5
LIST OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
1. Form of Stockholders' Voting Agreement
2. Agreement of Merger
3. Form of Stockholder Representation Agreement
4. Form of Escrow Agreement
5. Declaration of Registration Rights
6. Matters as to Which Rosenblum Parish & Isaacs, A Law
Corporation Will Opine
7. Form of Agreement with Certain Employees
8. Form of Agreement with Daniel J. Fraisl
9. Form of Claims Letter
10. Matters as to Which Alston & Bird LLP Will Opine
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<PAGE> 6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of January 14, 2000, by and among AKAMAI TECHNOLOGIES, INC.
("PARENT"), a Delaware corporation; ALOHA MERGER CORPORATION ("SUB"), a
California corporation; and NETWORK24 COMMUNICATIONS, INC. ("COMPANY"), a
California corporation.
PREAMBLE
The respective Boards of Directors of Company, Sub and Parent are of
the opinion that the transactions described herein are in the best interests of
the parties to this Agreement and their respective stockholders. This Agreement
provides for the acquisition of Company by Parent pursuant to the merger of
Company with and into Sub. At the effective time of such merger, the outstanding
shares of the capital stock of Company shall be converted into the right to
receive shares of the common stock of Parent (except as provided herein). As a
result, stockholders of Company shall become stockholders of Parent and Sub
shall continue to conduct it's business and operations of Company as a
wholly owned subsidiary of Parent. The transactions described in this Agreement
are subject to the approval of the stockholders of Company and the satisfaction
of certain other conditions described in this Agreement. It is the intention of
the parties to this Agreement that the Merger for federal income tax purposes
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code and that this Agreement shall constitute a "plan of
reorganization" for the purposes of the Internal Revenue Code.
Concurrently with the execution and delivery of this Agreement and as
a condition and inducement to Parent's willingness to enter into this Agreement,
each of the directors of Company and each of the holders of 5% or more of the
outstanding shares of Company Capital Stock has executed and delivered to Parent
an agreement in substantially the form of Exhibit 1 (the "VOTING AGREEMENTS"),
pursuant to which they have agreed, among other things, to vote the shares of
Company Capital Stock over which such Persons have voting power to approve and
adopt this Agreement.
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER
Subject to the terms and conditions of this Agreement, the Agreement
of Merger attached hereto as Exhibit 2 (the "PLAN OF MERGER") and the applicable
provisions of the California
<PAGE> 7
Corporations Code, at the Effective Time, Company shall be merged with and into
Sub (the "MERGER"). Sub shall be the Surviving Corporation resulting from the
Merger, shall remain a wholly owned Subsidiary of Parent and shall continue to
be governed by the Laws of the State of California. The Merger shall be
consummated pursuant to the terms of this Agreement and the Plan of Merger,
which has been approved and adopted by the respective Boards of Directors of
Company, Sub and Parent and by Parent, as the sole stockholder of Sub.
1.2 TIME AND PLACE OF CLOSING
The closing of the transactions contemplated hereby (the "Closing")
will take place at 9:00 A.M. on the date that the Effective Time occurs (or the
immediately preceding day if the Effective Time is earlier than 9:00 A.M.), or
at such other time as the Parties, acting through their authorized officers, may
mutually agree. The Closing shall be held at such location as may be mutually
agreed upon by the Parties.
1.3 EFFECTIVE TIME
The Merger and other transactions contemplated by this Agreement and
the Plan of Merger shall become effective on the date and at the time the Plan
of Merger, together with the required officers' certificates, with the Secretary
of State of the State of California, in accordance with the relevant provisions
of the California Corporations Code, shall become effective with the Secretary
of State of the State of California (the "EFFECTIVE TIME"). Subject to the terms
and conditions hereof, unless otherwise mutually agreed upon in writing by the
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on the first business day following
the last to occur of (i) the effective date (including expiration of any
applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, and (ii)
the date on which the stockholders of Company approve this Agreement to the
extent such approval is required by applicable Law; or such later date within 30
days thereof as may be specified by Parent.
ARTICLE 2
TERMS OF MERGER
2.1 ARTICLES OF INCORPORATION
The Articles of Incorporation of Sub in effect immediately prior to
the Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until duly amended or repealed; provided, that the Articles of
Incorporation of the Surviving Corporation shall be amended to provide that the
name of the Surviving Corporation shall be "Network24 Communications, Inc."
2.2 BYLAWS
The Bylaws of Sub in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation until duly amended or repealed.
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2.3 DIRECTORS AND OFFICERS
The directors of Sub in office immediately prior to the Effective
Time, together with such additional persons as may thereafter be elected, shall
serve as the directors of the Surviving Corporation from and after the Effective
Time in accordance with the Bylaws of the Surviving Corporation. The officers of
Company in office immediately prior to the Effective Time, together with such
additional persons as may thereafter be elected, shall serve as the officers of
the Surviving Corporation from and after the Effective Time in accordance with
the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES
Subject to the provisions of this ARTICLE 3, at the Effective Time,
by virtue of the Merger and without any action on the part of Parent, Company,
Sub or the stockholders of any of the foregoing, the shares of the constituent
corporations shall be converted as follows:
(a) Each share of capital stock of Parent issued and
outstanding immediately prior to the Effective Time shall remain
issued and outstanding from and after the Effective Time.
(b) Each share of Sub Common Stock issued and
outstanding immediately prior to the Effective Time shall remain
issued and outstanding from and after the Effective Time. Each stock
certificate of Sub evidencing ownership of any shares of Sub Common
Stock shall continue to evidence ownership of such shares of common
stock of the Surviving Corporation.
(c) Each share of Company Common Stock (excluding
shares held by Company or any Parent Entity and shares held by
stockholders who perfect, and not withdrawn or otherwise forfeited at
or prior to the Effective Time, their statutory dissenters' rights as
provided in Section 3.4) issued and outstanding immediately prior to
the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for (i) the right to receive 0.033752 of
a share of Parent Common Stock (the "Common Firm Exchange Ratio") and
(ii) (subject to the provisions of Section 4.3) the contingent right
to receive 0.003750 of a share of Parent Common Stock (the "Escrow
Exchange Ratio"). The sum of the Firm Exchange Ratio and the Escrow
Exchange Ratio (0.037502 of a share of Parent Common Stock) is
referred to herein as the "Common Exchange Ratio".
(d) Each share of Company Series A Stock (excluding
shares held by Company or any Parent Entity and shares held by
stockholders who perfect, and not withdrawn or otherwise forfeited at
or prior to the Effective Time, their statutory dissenters' rights as
provided in Section 3.4) issued and outstanding immediately prior to
the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for (i) the right to receive a number of
shares of Parent Common Stock equal
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to the number of shares of Company Common Stock into which such share
of Company Series A Stock was convertible immediately prior to the
Effective Time, pursuant to Company's articles of incorporation as in
effect immediately prior to the Effective Time, multiplied by
0.024376 (the "Preferred Firm Exchange Ratio"), (ii) (subject to the
provisions of Section 4.3) the contingent right to receive a number
of shares of Parent Common Stock equal to the number of shares of
Company Common Stock into which such share of Company Series A Stock
was convertible immediately prior to the Effective Time, pursuant to
Company's articles of incorporation as in effect immediately prior to
the Effective Time, multiplied by the Escrow Exchange Ratio, and
(iii) the right to receive a cash payment from Parent in the amount
of $2.156345 (the "Preferred Cash Payment"). For purposes of this
Agreement, the "Firm Shares" shall mean the aggregate number of
shares of Parent Common Stock issuable pursuant to Sections 3.1(c)(i)
and 3.1(d)(i) and "Escrow Shares" shall mean the aggregate number of
shares of Parent Common Stock issuable pursuant to Sections
3.1(c)(ii) and 3.1(d)(ii).
3.2 ANTI-DILUTION PROVISIONS
In the event Parent changes the number of shares of Parent Common
Stock issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, or similar recapitalization with respect to such stock
and the record date therefor (in the case of a stock dividend) or the effective
date thereof (in the case of a stock split or similar recapitalization for which
a record date is not established) shall be prior to the Effective Time, the
Common Firm Exchange Ratio, the Preferred Firm Exchange Ratio and the Escrow
Exchange Ratio shall be proportionately adjusted.
3.3 SHARES HELD BY COMPANY OR PARENT
Each of the shares of Company Capital Stock held by Company or by any
Parent Entity shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.4 DISSENTING STOCKHOLDERS
Any holder of shares of Company Capital Stock who perfects, and has
not withdrawn or otherwise forfeited at or prior to the Effective Time, such
holder's dissenters' rights in accordance with and as contemplated by the
California Corporations Code (a "DISSENTING STOCKHOLDER") shall be entitled to
receive the value of such shares in cash as determined pursuant to such
provision of Law; provided, that no such payment shall be made to any Dissenting
Stockholder unless and until such Dissenting Stockholder has complied with the
applicable provisions of the California Corporations Code and surrendered to
Company the certificate or certificates representing the shares of Company
Capital Stock for which payment is being made. In the event that after the
Effective Time a Dissenting Stockholder of Company fails to perfect, or
effectively withdraws or loses, his right to appraisal and of payment for his
shares of Company Capital Stock, Parent shall issue and deliver the
consideration to which such holder of shares of Company Capital Stock is
entitled under this ARTICLE 3 (without interest) upon surrender by such holder
of the certificate or certificates representing shares of Company Capital Stock
held by such holder.
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3.5 FRACTIONAL SHARES
Notwithstanding any other provision of this Agreement, each holder of
shares of Company Capital Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a Firm Share (after taking
into account all certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
Firm Share multiplied by the last sale price of Parent Common Stock on the
Nasdaq National Market (as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source selected by Parent) on the last
trading day preceding the Effective Time. No such holder will be entitled to
dividends, voting rights, or any other rights as a stockholder in respect of any
fractional shares.
3.6 CONVERSION OF STOCK OPTIONS AND WARRANTS; RESTRICTED STOCK.
(a) At the Effective Time, each option, warrant or
other Equity Right to purchase shares of Company Capital Stock ("Company Equity
Rights") granted by Company under the Company Stock Plan or otherwise, which are
outstanding at the Effective Time, whether or not exercisable, shall be
converted into and become rights with respect to Parent Common Stock, and Parent
shall assume each Company Equity Right, in accordance with the terms of the
Company Stock Plan and stock option agreement or other agreement or instrument
by which it is evidenced, except that from and after the Effective Time, (i)
Parent and its Compensation Committee shall be substituted for Company and the
Committee of Company's Board of Directors (including, if applicable, the entire
Board of Directors of Company) administering the Company Stock Plan, (ii) each
Company Equity Right assumed by Parent may be exercised solely for shares of
Parent Common Stock (or cash, if so provided under the terms of such Company
Equity Right), (iii) the maximum number of shares of Parent Common Stock subject
to such Company Equity Right shall be equal to the number of shares (rounded
down to the nearest whole share) of Company Common Stock subject to such Company
Equity Right immediately prior to the Effective Time multiplied by the Common
Exchange Ratio, and (iv) the per share exercise price under each such Company
Equity Right shall be adjusted by dividing the per share exercise price under
each such Company Equity Right by the Common Exchange Ratio and rounding up to
the nearest cent. Notwithstanding the provisions of clause (iii) of the
preceding sentence, Parent shall not be obligated to issue any fraction of a
share of Parent Common Stock upon exercise of Company Equity Rights and any
fraction of a share of Parent Common Stock that otherwise would be subject to a
converted Company Equity Right shall represent the right to receive a cash
payment upon exercise of such converted Company Equity Right equal to the
product of such fraction and the difference between the market value of one
share of Parent Common Stock at the time of exercise of such Option and the per
share exercise price of such Option. The market value of one share of Parent
Common Stock at the time of exercise of an Option shall be the last sale price
of such common stock on the Nasdaq National Market (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source
selected by Parent) on the last trading day preceding the date of exercise. In
addition, notwithstanding the provisions of clauses (iii) and (iv) of the first
sentence of this Section 3.6, each Company Equity Right which is an "incentive
stock option" shall be adjusted as required by Section 424 of the Internal
Revenue Code, and the regulations promulgated thereunder, so as not to
constitute a modification, extension or renewal of the option, within the
meaning of Section 424(h) of the Internal Revenue Code.
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(b) As soon as practicable after the Effective Time,
Parent shall deliver to the participants in each Company Stock Plan an
appropriate notice setting forth such participant's rights pursuant thereto and
the grants subject to such Company Stock Plan shall continue in effect on the
same terms and conditions (subject to the adjustments required by Section 3.6(a)
after giving effect to the Merger), and Parent shall comply with the terms of
each Company Stock Plan to ensure, to the extent required by, and subject to the
provisions of, such Company Stock Plan, that Company Equity Rights which
qualified as incentive stock options prior to the Effective Time continue to
qualify as incentive stock options after the Effective Time. At or prior to the
Effective Time, Parent shall take all corporate action necessary to reserve for
issuance sufficient shares of Parent Common Stock for delivery upon exercise of
Company Equity Rights assumed by it in accordance with this Section 3.6. As soon
as practicable after the Effective Time, Parent shall file one or more
registration statements on Form S-8 (or any successor or other appropriate
forms), with respect to the shares of Parent Common Stock subject to such
Company Equity Rights granted under the Company Stock Plan and shall use its
reasonable efforts to maintain the effectiveness of such registration statement
(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding.
(c) All contractual restrictions or limitations on
transfer with respect to Company Common Stock awarded under the Company Stock
Plan or any other plan, program, Contract or arrangement of Company, to the
extent that such restrictions or limitations shall not have already lapsed
(whether as a result of the Merger or otherwise), and except as otherwise
expressly provided in such plan, program, Contract or arrangement, shall remain
in full force and effect with respect to shares of Parent Common Stock into
which such restricted stock is converted pursuant to Section 3.1.
(d) Each of Company and Parent agrees to take all
necessary steps to effectuate the provisions of this Section 3.6, including
using its reasonable efforts to obtain from each holder of a Company Equity
Right any Consent or Contract that may be deemed necessary or advisable in order
to effect the transactions contemplated by this Section 3.6, including an
agreement not to exercise after the Effective Time Company Equity Rights granted
under the Company Stock Plan until Parent has filed a registration statement on
Form S-8 in accordance with this Section. Anything in this Agreement to the
contrary notwithstanding, Parent shall have the right, in its sole discretion,
not to deliver the consideration provided in this Section 3.6 to a former holder
of a Company Equity Right who has not delivered such Consent or Contract.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES
(a) Promptly after the Effective Time, Parent shall
make available to Parent's transfer agent or another exchange agent selected by
Parent (the "Exchange Agent") for exchange in accordance with this Section 4.1
the Firm Shares and cash in an amount sufficient to permit payment of cash in
lieu of fractional shares pursuant to Section 3.5. Promptly after the Effective
Time, Parent and Company shall cause the Exchange Agent to mail to each holder
of
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<PAGE> 12
record of a certificate or certificates which represented shares of Company
Capital Stock immediately prior to the Effective Time (the "Certificates")
appropriate transmittal materials and instructions (which shall specify that
delivery shall be effected, and risk of loss and title to such Certificates
shall pass, only upon proper delivery of such Certificates to the Exchange
Agent), which shall include or be accompanied by the Stockholder Representation
Agreement. The Certificate or Certificates so delivered shall be duly endorsed
as the Exchange Agent may require. In the event of a transfer of ownership of
shares of Company Capital Stock represented by Certificates that are not
registered in the transfer records of Company, the consideration provided in
Section 3.1 may be issued to a transferee if the Certificates representing such
shares are delivered to the Exchange Agent, accompanied by all documents
required to evidence such transfer and by evidence satisfactory to the Exchange
Agent that any applicable stock transfer taxes have been paid. If any
Certificate shall have been lost, stolen, mislaid or destroyed, upon receipt of
(i) an affidavit of that fact from the holder claiming such Certificate to be
lost, mislaid, stolen or destroyed, (ii) such bond, security or indemnity as
Parent and the Exchange Agent may reasonably require and (iii) any other
documents necessary to evidence and effect the bona fide exchange thereof, the
Exchange Agent shall issue to such holder the consideration into which the
shares represented by such lost, stolen, mislaid or destroyed Certificate shall
have been converted. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate.
(b) After the Effective Time, each holder of shares
of Company Capital Stock (other than shares to be canceled pursuant to Section
3.3 or as to which statutory dissenters' rights have been perfected as provided
in Section 3.4) issued and outstanding at the Effective Time shall deliver to
the Exchange Agent the Certificate or Certificates representing such shares and
the Shareholder Representation Agreement in the form attached hereto as Exhibit
3 (or such other form as shall be reasonably satisfactory to Parent) and shall
promptly upon surrender thereof receive in exchange therefor the consideration
provided in Section 3.1, together with all undelivered dividends or
distributions in respect of such shares (without interest thereon) pursuant to
Section 4.2. To the extent required by Section 3.5, each holder of shares of
Company Capital Stock issued and outstanding at the Effective Time also shall
receive, upon surrender of the Certificate or Certificates, cash in lieu of any
fractional share of Parent Common Stock to which such holder may be otherwise
entitled (without interest). Parent shall not be obligated to deliver the
consideration to which any former holder of Company Capital Stock is entitled as
a result of the Merger until such holder surrenders such holder's Certificate or
Certificates (or substitute documentation as provided in this Section 4.1) for
exchange as provided in this Section 4.1 and delivers the Stockholder
Representation Agreement, which Company acknowledges and agrees is a condition
to effecting the issuance of Parent Common Stock as a private placement pursuant
to Section 4(2) of the Securities Act and that Parent will be relying upon the
representations made by each stockholder of Company in the applicable
Stockholder Representation Agreement in connection with the issuance of Parent
Common Stock to such stockholder.
(c) Each of Parent, the Surviving Corporation and the
Exchange Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Capital Stock such amounts, if any, as it is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code or
any provision of state, local or foreign Tax Law. To the extent that any
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<PAGE> 13
amounts are so withheld by Parent, the Surviving Corporation or the Exchange
Agent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Capital Stock in respect of which such deduction and withholding was
made by Parent, the Surviving Corporation or the Exchange Agent, as the case may
be.
(d) Any other provision of this Agreement
notwithstanding, neither Parent, the Surviving Corporation nor the Exchange
Agent shall be liable to a holder of Company Capital Stock for any amounts paid
or property delivered in good faith to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
4.2 RIGHTS OF FORMER COMPANY STOCKHOLDERS
(a) At the Effective Time, the stock transfer books
of Company shall be closed as to holders of Company Capital Stock immediately
prior to the Effective Time and no transfer of Company Capital Stock by any such
holder shall thereafter be made or recognized. Until surrendered for exchange in
accordance with the provisions of Section 4.1, each Certificate theretofore
representing shares of Company Capital Stock (other than shares to be canceled
pursuant to Sections 3.3 and 3.4) shall from and after the Effective Time
represent for all purposes only the right to receive the consideration provided
in Sections 3.1 and 3.5 in exchange therefor.
(b) Whenever a dividend or other distribution is
declared by Parent on the Parent Common Stock, the record date for which is at
or after the Effective Time, the declaration shall include dividends or other
distributions on all shares of Parent Common Stock issuable pursuant to this
Agreement, but no dividend or other distribution payable to the holders of
record of Parent Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any Certificate until such holder surrenders
such Certificate for exchange as provided in Section 4.1. However, upon
surrender of such Certificate, both the Parent Common Stock certificate
(together with all such undelivered dividends or other distributions without
interest) and any undelivered dividends and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to each share
represented by such Certificate.
4.3 ESCROW AGREEMENT
In connection with the Closing, Parent, the Escrow Agent and the
Stockholders' Representative shall have executed and delivered to the other an
escrow agreement (the "ESCROW AGREEMENT"), which shall be in substantially the
form of Exhibit 4 (with such reasonable and customary modifications as the
Escrow Agent may require). The Escrow Shares to be issued pursuant to Sections
3.1(c)(ii) and 3.1(d)(ii) shall be issued to, and registered in the name of, the
Escrow Agent as nominee for the holders of Certificates cancelled pursuant to
Section 4.1 and shall held by the Escrow Agent pursuant to the terms of the
Escrow Agreement and distributed in accordance with terms thereof. The
representations, warranties and agreements of Company contained in this
Agreement and in any certificate delivered pursuant to this Agreement shall
survive the Closing in accordance with the terms of the Escrow Agreement
notwithstanding any investigation conducted with respect thereto or any
knowledge acquired as to the accuracy or inaccuracy of any such representation
or warranty.
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4.4 RESTRICTED STOCK; LEGENDING OF CERTIFICATES
The shares of Parent Common Stock to be issued in connection with
this Agreement will be issued in a transaction exempt from registration under
the Securities Act by reason of Section 4(2) thereof or Regulation D promulgated
thereunder, and Parent is relying on the representations of Company and the
stockholders of the Company with respect to such exemption. Stop transfer
instructions with respect to the shares of Parent Common Stock received by each
stockholder of Company pursuant to the Merger will be given to Parent's transfer
agent and there will be placed on the certificates for such shares, or shares
issued in substitution thereof, a legend stating in substance:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of applicable states or unless an
exemption from such registration is available."
The foregoing legend will also be placed on any certificate representing
securities issued subsequent to the original issuance of the Parent Common Stock
pursuant to the Merger as a result of any transfer of such shares or any stock
dividend, stock split, or other recapitalization as long as the Parent Common
Stock issued pursuant to the Merger has not been transferred in such manner to
justify the removal of the legend therefrom.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF COMPANY
-----------------------------------------
Company hereby represents and warrants to Parent as follows, except
as disclosed in the Company Disclosure Memorandum:
5.1 ORGANIZATION, STANDING, AND POWER
Company is a corporation duly organized, validly existing, and in
good standing under the Laws of the State of California, and has the corporate
power and authority to carry on its business as now conducted and to own, lease
and operate its material Assets. Company is duly qualified or licensed to
transact business as a foreign corporation in good standing in the States of the
United States and foreign jurisdictions where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or licensed,
except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect. The minute book and other organizational
documents for Company have been made available to Parent for its review and are
true and complete in all material respects as in effect as of the date of this
Agreement and accurately reflect in all material respects all amendments thereto
and all proceedings of the Board of Directors and stockholders thereof.
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5.2 AUTHORITY OF COMPANY; NO BREACH BY AGREEMENT
(a) Company has the corporate power and authority
necessary to execute, deliver, and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery,
and performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Company,
subject to the approval of this Agreement and the Plan of Merger by the holders
of a majority of the votes entitled to be cast by the holders of the outstanding
shares of Company Capital Stock, voting as a single class, by the holders of a
majority of the votes entitled to be cast by the holders of the outstanding
shares of Company Common Stock, voting as a separate class, and by the holders
of a majority of the votes entitled to be cast by the holders of the outstanding
shares of Company Series A Stock, voting as a separate class, which are the only
stockholder votes required for approval of this Agreement and consummation of
the Merger by Company. Subject to such requisite stockholder approval, this
Agreement represents a legal, valid, and binding obligation of Company,
enforceable against Company in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this
Agreement by Company, nor the consummation by Company of the transactions
contemplated hereby, nor compliance by Company with any of the provisions
hereof, will (i) subject to receipt of requisite stockholder approvals, conflict
with or result in a breach of any provision of Company's Articles of
Incorporation or Bylaws or the certificate or articles of incorporation or
bylaws of any Company Subsidiary or any resolution adopted by the board of
directors or the stockholders of Company, or (ii) constitute or result in a
Default under, or require any Consent pursuant to, or result in the creation of
any Lien on any Asset of Company under, any Contract or Permit of Company, where
such Default or Lien, or any failure to obtain such Consent, is reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect, or, (iii) subject to receipt of the requisite Consents referred to in
Section 9.1(b), constitute or result in a Default under, or require any Consent
pursuant to, any Law or Order applicable to Company or any of its material
Assets.
(c) Other than (i) the approval of this Agreement and
the Plan of Merger by the requisite votes of the holders of Company Capital
Stock, (ii) the filing of the Plan of Merger, together with the required
officers' certificates, with the Secretary of State of the State of California,
in accordance with the relevant provisions of the California Corporations Code,
and (iii) such filings, authorizations or approvals as may be set forth in
Section 5.2(c) of the Company Disclosure Memorandum, no notice to, filing with,
or Consent of, any Person is necessary for the consummation by Company of the
Merger and the other transactions contemplated in this Agreement.
(d) Prior to execution of this Agreement, (i) the
Amended and Restated Shareholders Agreement, dated as of August 16, 1999, among
Company and the holders of
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Company Capital Stock named therein (the "Company Shareholders Agreement"), has
been amended to provide that the provisions of Section 4.2 of the Shareholders
Agreement shall not apply to the Merger or any of the other transactions
contemplated by this Agreement and that the Shareholders Agreement shall be
terminated automatically effective as of the Effective Time, (ii) the
Registration Rights Agreement, dated as of August 16, 1999, among Company and
the holders of Company Capital Stock named therein (the "Company Registration
Rights Agreement" ), has been amended to provide that the Company Registration
Rights Agreement shall be terminated automatically effective as of the Effective
Time, and (iii) the Series A Preferred Stock Purchase Agreement, dated as of
August 16, 1999, among Company and the holders of Company Capital Stock named
therein (the "Purchase Agreement" ), has been amended to provide that the
Purchase Agreement shall be terminated automatically effective as of the
Effective Time.
5.3 CAPITAL STOCK
(a) The authorized capital stock of Company consists
of (i) 100,000,000 shares of Company Common Stock, of which 12,191,574 shares
are issued and outstanding as of the date of this Agreement, and (ii) 20,000,000
shares of Company Preferred Stock, of which 5,793,925 shares of Company Series A
Stock are issued and outstanding. All of the issued and outstanding shares of
Company Capital Stock are duly and validly issued and outstanding and are fully
paid and nonassessable under the California Corporations Code. None of the
outstanding shares of Company Capital Stock has been issued in violation of any
preemptive rights of the current or past stockholders of Company.
(b) Except as set forth in Section 5.3(a) or as
disclosed in Section 5.3 of the Company Disclosure Memorandum, there are no
shares of capital stock or other equity securities of Company outstanding and no
outstanding Equity Rights relating to the capital stock or equity securities of
Company.
(c) The duration, vesting schedule, exercisability
and other terms of each Company Equity Right assumed by Parent pursuant to
Section 3.6 immediately after the Effective Time shall be the same as the
corresponding terms in effect immediately prior to the Effective Time and the
vesting of stock options under the Company Stock Plan shall not be accelerated
as a result of the Merger. Since the date of issuance of the Company Series A
Stock, there have been no events which, under the terms of the Company Series A
Stock, have caused or will cause any reduction in the conversion price or
increase in the conversion ratio of the Company Series A Stock.
5.4 COMPANY SUBSIDIARIES
Company has no Subsidiaries.
5.5 FINANCIAL STATEMENTS
Each of the Company Financial Statements was prepared on a consistent
basis throughout the periods involved, and fairly presented in all material
respects the financial position of Company as at the respective dates and the
results of operations and cash flows for the periods indicated. Copies of all
Company Financial Statements are attached to Section 5.5 of the
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Company Disclosure Memorandum, which also sets forth all changes in accounting
methods (for financial accounting purposes) at any time made, agreed to,
requested or required with respect to Company.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES
Company has no Liabilities that are reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect, except
Liabilities which are accrued or reserved against in the balance sheets of
Company as of December 31, 1998 and September 30, 1999, included in the Company
Financial Statements delivered prior to the date of this Agreement. Company has
not incurred or paid any Liability since December 31, 1998, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement. Company is not
directly or indirectly liable, by guarantee, indemnity, or otherwise, upon or
with respect to, or obligated, by discount or repurchase agreement or in any
other way, to provide funds in respect to, or obligated to guarantee or assume
any Liability of any Person for any amount in excess of $25,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Since November 30, 1999, (i) there have been no events, changes, or
occurrences (whether or not covered by insurance) which have had, or are
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect, and (ii) Company has not taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if taken
after the date of this Agreement, would represent or result in a material breach
or violation of any of the covenants and agreements of Company provided in
ARTICLE 7.
5.8 TAX MATTERS
(a) All Tax Returns required to be filed by or on
behalf of Company have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1998, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Company
Material Adverse Effect, and all Tax Returns filed are complete and accurate in
all material respects to the Knowledge of Company. All Taxes shown on filed Tax
Returns have been paid. As of the date of this Agreement,there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes that is
reasonably likely to result in a determination that would have, individually or
in the aggregate, a Company Material Adverse Effect, except as reserved against
in the Company Financial Statements delivered prior to the date of this
Agreement. Company's federal income Tax Returns have never been audited by the
IRS or any other Tax authority. There are no Liens with respect to Taxes upon
any of the Assets of Company, except for any such Liens which are not reasonably
likely to have a Company Material Adverse Effect.
(b) None of the Company Entities has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due (excluding such statutes that
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<PAGE> 18
relate to years currently under examination by the Internal Revenue Service or
other applicable taxing authorities) that is currently in effect.
(c) The provision for any Taxes due or to become due
for any of the Company Entities for the period or periods through and including
the date of the respective Company Financial Statements that has been made and
is reflected on such Company Financial Statements is sufficient to cover all
such Taxes.
(d) Deferred Taxes of Company have been provided for
in accordance with GAAP.
(e) Company is not a party to any Tax allocation or
sharing agreement and Company has never been a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was Company) or has any Liability for Taxes of any Person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign Law) as a transferee or successor or by Contract or otherwise.
(f) Company is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
(g) Company has not made any payments, is not
obligated to make any payments, and is not a party to any Contract that could
obligate it to make any payments that would be disallowed as a deduction under
Section 280G or 162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as
defined in Internal Revenue Code Section 382(g), of the Company Entities that
occurred during or after any Taxable Period in which the Company Entities
incurred a net operating loss that carries over to any Taxable Period ending
after December 31, 1998.
(i) Company does not have and has not had in any
foreign country a permanent establishment, as defined in any applicable Tax
treaty or convention between the United States and such foreign country.
5.9 ASSETS
(a) Except as reserved against in the Company
Financial Statements delivered prior to the date of this Agreement, Company has
good and marketable title, free and clear of all Liens, to all of its Assets,
except for any such Liens or other defects of title which are not reasonably
likely to have a Company Material Adverse Effect. All tangible properties used
in the business of Company are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
Company's past practices.
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(b) All items of inventory of the Company Entities
reflected on the most recent balance sheet included in the Company Financial
Statements delivered prior to the date of this Agreement and prior to the
Effective Time consisted and will consist, as applicable, of items of a quality
and quantity usable and saleable in the ordinary course of business and conform
to generally accepted standards in the industry in which the Company Entities
are a part.
(c) The accounts receivable of Company as set forth
on the most recent balance sheet included in the Company Financial Statements
delivered prior to the date of this Agreement or arising since the date thereof
are valid and genuine; have arisen solely out of bona fide sales and deliveries
of goods, performance of services and other business transactions in the
ordinary course of business consistent with past practice; are not subject to
valid defenses, set-offs or counterclaims; and are collectible within 90 days
after billing at the full recorded amount thereof less, in the case of accounts
receivable appearing on the most recent balance sheet included in the Company
Financial Statements delivered prior to the date of this Agreement, the recorded
allowance for collection losses on such balance sheet.
(d) All Assets which are material to Company's
business, held under leases or subleases by Company, are held under valid
Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
(e) The Company Entities currently maintain insurance
similar in amounts, scope, and coverage to that maintained by similar
organizations. None of the Company Entities has received notice from any
insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There are
presently no claims for amounts exceeding in any individual case $5,000 pending
under such policies of insurance and no notices of claims in excess of such
amounts have been given by Company under such policies.
(f) The Assets of Company include all Assets required
to operate the business of Company as presently conducted.
5.10 INTELLECTUAL PROPERTY
(a) Section 5.10(a) of the Company Disclosure
Memorandum sets forth separately all patents and patent applications (domestic
and foreign), trademark registrations and trademark applications (domestic and
foreign) and all copyright registrations (x) of which Company is the owner,
identifying the subject matter and any related registration, (y) that Company
uses pursuant to license or other authorization of any Person, listing the
subject matter, any ancillary registration and the source of authorization and
(z) that Company owns jointly with any other Person. Company has made available
to Parent correct and complete copies of all such patents, franchises,
registrations, applications, licenses, agreements and authorizations (as amended
to date) and all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. Section 5.10(a) of the Company
Disclosure Memorandum also
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identifies all owned or licensed software that is integral to the delivery by
Company of the products and services it offers.
(b) Company owns or has the right to use pursuant to
license, sublicense, agreement or permission all Intellectual Property that is
used or proposed to be used in the business of Company as currently conducted or
as proposed to be conducted by Company ("Company Intellectual Property"). Except
for license fees paid in respect of "shrink-wrap" software, Company pays no
royalty to any Person with respect to any Company Intellectual Property. Each
item of Company Intellectual Property owned or used by Company immediately prior
to the Effective Time will be owned or available for use on identical terms and
conditions immediately subsequent to the Effective Time.
(c) Section 5.10(c) of the Company Disclosure
Memorandum also identifies each trade name or unregistered trademark used by
Company in connection with its business.
(d) Company has not infringed upon or misappropriated
any Intellectual Property of any Person, and Company has not received any
unresolved charge, complaint, claim, demand or notice alleging any such
infringement from any Person or misappropriation (including any claim that
Company must obtain an independent license from any Person or refrain from using
any Intellectual Property rights of any Person). To the Knowledge of Company, no
other Person has infringed upon or misappropriated any Intellectual Property
rights of Company.
(e) The software owned or purported to be owned by
Company was either (i) developed by employees of Company within the scope of
their employment, (ii) developed by independent contractors or consultants who
have assigned their rights to Company pursuant to written agreements, or (iii)
otherwise acquired by Company from another Person.
(f) All employees and independent contractors and
consultants of Company have executed and delivered to Company, agreements
regarding the protection of Company's proprietary information and the assignment
to Company of any Company Intellectual Property arising from services performed
for Company by such persons.
(g) Company has obtained or entered into appropriate
written agreements with its employees and with third parties in connection with
the disclosure to or use or appropriation by, employees and third parties, of
trade secret or proprietary information owned by Company and not otherwise
protected by a patent, a patent application, copyright, trademark, or other
registration or legal scheme ("Confidential Information"). Company has not
furnished the source code of any of its software products to any Person,
deposited any such source code in escrow or otherwise provided access to such
source code to any Person.
(h) No officer, director or employee of Company is
party to any Contract with any Person other than Company which requires such
officer, director or employee to assign any interest in any Intellectual
Property to any Person other than Company or to keep confidential any trade
secrets, proprietary data, customer information, or other business information
of any Person other than Company. No officer, director or employee of Company is
party to any Contract which restricts or prohibits such officer, director or
employee from engaging in activities competitive with any Person, including
Company.
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(i) Company has taken reasonable steps with the
intent of ensuring that its products (including existing products and technology
and products and technology currently under development) are, when used in
accordance with associated documentation on a specified platform or platforms,
capable of accurately processing, providing, and receiving date data from, into,
and between the twentieth and twenty-first centuries, including the years 1999
and 2000, and, making leap year calculations, provided that all other
non-Company products (e.g., hardware, software and firmware) used in or in
combination with such products, properly exchange data with Company's products.
5.11 ENVIRONMENTAL MATTERS
(a) To the Knowledge of Company, Company and its
Operating Properties are, and have been, in compliance with all Environmental
Laws, except for violations which are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
(b) To the Knowledge of Company,there is no
Litigation pending or threatened before any court, governmental agency, or
authority or other forum in which Company or any of its Operating Properties (or
Company in respect of such Operating Property) has been or, with respect to
threatened Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release, discharge, spillage, or disposal into the environment of any
Hazardous Material, whether or not occurring at, on, under, adjacent to, or
affecting (or potentially affecting) a site owned, leased, or operated by
Company or any of its Operating Properties, except for such Litigation pending
or threatened that is not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect, nor is there any reasonable basis
for any Litigation of a type described in this sentence, except such as is not
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
(c) During the period of (i) Company's ownership or
operation of any of their respective current properties, or (ii) Company's
holding of a security interest in a Operating Property, to the Knowledge of
Company, there have been no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties, except such as are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect. Prior to
the period of (i) Company's ownership or operation of any of their respective
current properties, or (ii) Company's holding of a security interest in a
Operating Property, to the Knowledge of Company,there were no releases,
discharges, spillages, or disposals of Hazardous Material in, on, under, or
affecting any such property or Operating Property, except such as are not
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
5.12 COMPLIANCE WITH LAWS
Company has in effect all Permits necessary for it to own, lease, or
operate its material Assets and to carry on its business as now conducted,
except for those Permits the absence of which are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect, and there
has occurred no Default under any such Permit, other than Defaults
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which are not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect. Company:
(a) is not in Default under any of the provisions of
its Articles of Incorporation or Bylaws (or other governing
instruments);
(b) is not in Default under any Laws, Orders, or
Permits applicable to its business or employees conducting its
business, except for Defaults which are not reasonably likely to
have, individually or in the aggregate, a Company Material Adverse
Effect; or
(c) since January 1, 1995, has not received any
notification or communication from any agency or department of
federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that Company is not in compliance
with any of the Laws or Orders which such governmental authority or
Regulatory Authority enforces, where such noncompliance is reasonably
likely to have, individually or in the aggregate, a Company Material
Adverse Effect, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect, or (iii) requiring
Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment, or memorandum
of understanding, or to adopt any Board resolution or similar
undertaking.
Copies of all material reports, correspondence, notices and other
documents relating to any inspection, audit, monitoring or other form of review
or enforcement action by a Regulatory Authority have been made available to
Parent.
5.13 LABOR MATTERS
Company is not the subject of any Litigation asserting that it has
committed an unfair labor practice (within the meaning of the National Labor
Relations Act or comparable state law) or seeking to compel it to bargain with
any labor organization as to wages or conditions of employment, nor is Company
party to any collective bargaining agreement, nor is there any strike or other
labor dispute involving Company, pending or threatened, or to the Knowledge of
Company, is there any activity involving Company's employees seeking to certify
a collective bargaining unit or engaging in any other organization activity.
Section 5.13 of the Company Disclosure Memorandum sets forth an accurate and
complete list of all current directors, officers and employees of Company,
showing each such person's name, positions, and annual rate of remuneration, and
bonus arrangements and fringe benefits, not otherwise required to be identified
in Section 5.14(a) of the Company Disclosure Memorandum, for the current fiscal
year.
5.14 EMPLOYEE BENEFIT PLANS.
(a) Company has disclosed in Section 5.14(a) of the
Company Disclosure Memorandum, and has delivered or made available to Parent
prior to the execution of this Agreement copies in each case of, all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan, all other
written employee programs, arrangements, or agreements, all medical, vision,
dental, or
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other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by Company or ERISA Affiliate thereof
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "Company Benefit
Plans"). Any of the Company Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "Company ERISA Plan." No Company ERISA Plan is also a "defined benefit
plan" (as defined in Section 414(j) of the Internal Revenue Code). No Company
Pension Plan is or has been a multiemployer plan within the meaning of Section
3(37) of ERISA.
(b) All Company Benefit Plans are in compliance with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect. Each
Company ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and Company is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. To the
Knowledge of Company, Company has not engaged in a transaction with respect to
any Company Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject Company to a Tax imposed by either
Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in amounts
which are reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect.
(c) There is no "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
Company, or any single-employer plan of any entity which is considered one
employer with Company under Section 4001 of ERISA or Section 414 of the Internal
Revenue Code or Section 302 of ERISA (whether or not waived) (an "ERISA
Affiliate"). Company has not provided, and is not required to provide, security
to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29)
of the Internal Revenue Code.
(d) Company has no Liability for retiree health and
life benefits under any of the Company Benefit Plans and there are no
restrictions on the rights of Company to amend or terminate any such retiree
health or benefit Plan without incurring any Liability thereunder, which
Liability is reasonably likely to have a Company Material Adverse Effect.
(e) Company is not a party to any oral or written (i)
Contract with any stockholders, director, executive officer or other key
employee of Company (A) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving
Company of the nature of any of the transactions contemplated by this Agreement,
(B) providing any term of employment or compensation guarantee or (C) providing
severance benefits or other benefits after the termination of employment of such
director, executive officer or key employee; (ii) Contract under which any
Person may receive payments from Company that may be subject to the tax imposed
by Section 4999 of the Internal Revenue Code or included in the determination of
such Person's "parachute payment" under Section 280G
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of the Internal Revenue Code; and (iii) Contract binding Company, including any
stock option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan or severance benefit plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(f) The actuarial present values of all accrued
deferred compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of Company and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the most recent Company Financial Statements
delivered prior to execution of this Agreement to the extent required by and in
accordance with GAAP.
(g) Each Company Benefit Plan is amendable and
terminable unilaterally by Company at any time without Liability to Company as a
result thereof and no Company Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits Company from amending or terminating any such
Company Benefit Plan.
5.15 MATERIAL CONTRACTS
(a) Section 5.15(a) of the Company Disclosure
Memorandum identifies each of the following Contracts to which Company, or any
of its Assets, businesses, or operations, is a party, or is bound or affected
by, or receives benefits under: (i) any employment, severance, termination,
consulting, or retirement Contract providing for aggregate payments to any
Person in any calendar year in excess of $50,000, (ii) any Contract for the
borrowing of money (other than Contracts evidencing trade payables arising in
the ordinary course of business), any currency exchange, commodities or other
hedging arrangement, or any leasing transaction of the type required to be
capitalized in accordance with GAAP, or for the guarantee, support,
indemnification, assumption or endorsement of, or any similar commitment with
respect to, the Liabilities of any other Person, (iii) any Contract which
prohibits or restricts Company from engaging in any business activities in any
geographic area, line of business or otherwise in competition with any other
Person other than Company, (iv) any Contract with any Person with whom Company
does not deal at arm's length within the meaning of the Internal Revenue Code,
(v) any Contract involving Intellectual Property (other than Contracts entered
into in the ordinary course with customers and "shrink-wrap" software licenses),
(vi) any Contract relating to the provision of data processing, network
communication, or other technical services to or by Company (other than
Contracts entered into in the ordinary course with customers), (vii) any
Contract relating to the purchase or sale of any goods or services (other than
Contracts entered into in the ordinary course of business and involving payments
under any individual Contract not in excess of $100,000), and (ix) any other
Contract that expires or may be renewed at the option of any Person other than
Company so as to expire more than one year after the date of this Agreement
(together with all Contracts referred to in Sections 5.9 and 5.14(a), the
"Company Contracts").
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(b) With respect to each Company Contract: (i) the
Contract is in full force and effect; (ii) Company is not in Default thereunder,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect; (iii) Company has not
repudiated or waived any material provision of any such Contract; and (iv) no
other party to any such Contract is, to the Knowledge of Company, in Default in
any respect, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect, or has
repudiated or waived any material provision thereunder. All of the indebtedness
of Company for money borrowed is prepayable at any time by Company without
penalty or premium.
(c) No customer which individually accounted for more
than 5% of Company's consolidated gross revenues during the 12-month period
preceding the date of this Agreement, and no supplier of Company has canceled or
otherwise terminated, or made any written threat to Company to cancel or
otherwise terminate, its relationship with Company, or has decreased materially
its services or supplies to Company in the case of any such supplier, or its
usage of the services or products of Company in the case of such customer, and
to the Knowledge of Company, no such supplier or customer intends to cancel or
otherwise terminate its relationship with Company or to decrease materially its
services or supplies to Company or its usage of the services or products of
Company, as the case may be.
5.16 LEGAL PROCEEDINGS
There is no Litigation instituted or pending, or, to the Knowledge of
Company, threatened (or unasserted but considered probable of assertion and
which if asserted would have at least a reasonable probability of an unfavorable
outcome) against Company, or against any director, employee or employee benefit
plan of Company, or against any Asset, interest, or right of any of them, that
is reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect, nor are there any Orders of any Regulatory Authorities,
other governmental authorities, or arbitrators outstanding against Company, that
are reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect. Company is not involved in or, to the Knowledge of
Company, reasonably anticipates any dispute with any of its current or former
employees, agents, brokers, distributors, vendors, customers, business
consultants, representatives or independent contractors (or any current or
former employees of any of the foregoing Persons). Section 5.16 of the Company
Disclosure Memorandum contains a summary of all Litigation as of the date of
this Agreement to which Company is a party and which names Company as a
defendant or cross-defendant or for which Company has any potential Liability.
5.17 REPORTS
Since the date of organization, Company has timely filed all reports
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities (except, in
the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not, in all material
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respects, 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
made therein, in light of the circumstances under which they were made, not
misleading.
5.18 STATEMENTS TRUE AND CORRECT
No statement, certificate, instrument, or other writing furnished or
to be furnished by Company to Parent pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. All copies of Contracts delivered to
Parent and its Representatives by or on behalf of Company that are unsigned by
one or more parties thereto (i) have been signed by all parties thereto in the
form supplied to Parent and (ii) are true and correct copies of such Contracts
and include all amendments, supplements and modifications thereto or waivers
currently in effect thereunder. All documents that Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
5.19 TAX AND REGULATORY MATTERS
Neither Company nor any Affiliate thereof has taken or agreed to take
any action or has any Knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) or result in the imposition of a condition or restriction of the
type referred to in the last sentence of such Section 9.1(b).
5.20 STATE TAKEOVER LAWS
Company has taken all necessary action to exempt the transactions
contemplated by this Agreement from, or if necessary to challenge the validity
or applicability of, any applicable "moratorium," "fair price," "business
combination," "control share," or other anti-takeover Laws (collectively,
"Takeover Laws").
5.21 CHARTER PROVISIONS
Company has taken all action so that the entering into of this
Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement do not and will not result in the grant of any
rights to any Person under the Articles of Incorporation, Bylaws or other
governing instruments of Company or restrict or impair the ability of Parent or
any of its Subsidiaries to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of Company that may be directly or
indirectly acquired or controlled by them.
5.22 INVESTMENT INTENTION
To the Knowledge of Company, each holder of Company Capital Stock is
acquiring the shares of Parent Common Stock to be issued pursuant to this
Agreement for investment only, for
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such stockholder's own account and not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof.
5.23 BOARD RECOMMENDATION
The Board of Directors of Company, at a meeting duly called and held,
has by unanimous vote of those directors present (who constituted all but one of
the directors then in office) (i) determined that this Agreement, the Plan of
Merger and the transactions contemplated hereby and thereby, including the
Merger, and the Voting Agreements and the transactions contemplated thereby,
taken together, are fair to and in the best interests of the holders of Company
Capital Stock and (ii) resolved to recommend that the holders of the shares of
Company Capital Stock approve this Agreement and the Plan of Merger.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
----------------------------------------
Parent hereby represents and warrants to Company as follows, except
as disclosed in the Parent Disclosure Memorandum:
6.1 ORGANIZATION, STANDING, AND POWER
Parent is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Delaware, and has the corporate power
and authority to carry on its business as now conducted and to own, lease and
operate its material Assets. Parent is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its Assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Parent has the corporate power and authority
necessary to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Parent. This
Agreement represents a legal, valid, and binding obligation of Parent,
enforceable against Parent in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this
Agreement by Parent, nor the consummation by Parent of the transactions
contemplated hereby, nor compliance by Parent with any of the provisions hereof,
will (i) conflict with or result in a breach of any provision of
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Parent's Certificate of Incorporation or Bylaws, or (ii) constitute or result in
a Default under, or require any Consent pursuant to, or result in the creation
of any Lien on any Asset of any Parent Entity under, any Contract or Permit of
any Parent Entity, where such Default or Lien, or any failure to obtain such
Consent, is reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect, or, (iii) subject to receipt of the requisite
Consents referred to in Section 9.1(b), constitute or result in a Default under,
or require any Consent pursuant to, any Law or Order applicable to any Parent
Entity or any of their respective material Assets.
(c) Other than such Consents, filings, or
notifications which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect, no notice
to, filing with, or Consent of, any public body or authority is necessary for
the consummation by Parent of the Merger and the other transactions contemplated
in this Agreement.
6.3 CAPITAL STOCK
The authorized capital stock of Parent consists of (i) 300,000,000
shares of Parent Common Stock, of which 92,756,594 shares are issued and
outstanding as of the date of this Agreement, and (ii) 5,000,000 shares of
Parent Preferred Stock, none of which are issued and outstanding. All of the
issued and outstanding shares of Parent Capital Stock are, and all of the shares
of Parent Common Stock to be issued in exchange for shares of Company Capital
Stock upon consummation of the Merger, when issued in accordance with the terms
of this Agreement, will be, duly and validly issued and outstanding and fully
paid and nonassessable under the DGCL. None of the outstanding shares of Parent
Capital Stock has been, and none of the shares of Parent Common Stock to be
issued in exchange for shares of Company Capital Stock upon consummation of the
Merger will be, issued in violation of any preemptive rights of the current or
past stockholders of Parent.
6.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has timely filed and made available to
Company all SEC Documents required to be filed by Parent (the "Parent SEC
Reports"). The Parent SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Laws and
other applicable Laws and (ii) did not, at the time they were filed (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such Parent SEC Reports or
necessary in order to make the statements in such Parent SEC Reports, in light
of the circumstances under which they were made, not misleading.
(b) Each of the Parent Financial Statements
(including, in each case, any related notes) contained in the Parent SEC
Reports, including any Parent SEC Reports filed after the date of this Agreement
until the Effective Time, complied as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto, was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited interim statements, as permitted by Form
10-Q of the SEC), and fairly presented in all material respects the consolidated
financial position of Parent and its Subsidiaries as at the respective dates and
the
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consolidated results of operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount or effect.
6.5 ABSENCE OF CERTAIN CHANGES OR EVENTS
Since September 30, 1999, except as disclosed in the Parent SEC
Reports filed prior to the date of this Agreement, there have been no events,
changes or occurrences (whether or not covered by insurance) which have had, or
are reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect.
6.6 TAX MATTERS.
(a) All Tax Returns required to be filed by or on
behalf of any of the Parent Entities have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1998, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, except to the
extent that all such failures to file, taken together, are not reasonably likely
to have a Parent Material Adverse Effect, and all Tax Returns filed are complete
and accurate in all material respects to the Knowledge of Parent. All Taxes
shown on filed Tax Returns have been paid. As of the date of this
Agreement,there is no audit examination, deficiency, or refund Litigation with
respect to any Taxes that is reasonably likely to result in a determination that
would have, individually or in the aggregate, a Parent Material Adverse Effect,
except as reserved against in the Parent Financial Statements delivered prior to
the date of this Agreement. All Taxes and other Liabilities due with respect to
completed and settled examinations or concluded Litigation have been paid.
(b) None of the Parent Entities has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due (excluding such statutes that relate to years
currently under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) The provision for any Taxes due or to become due
for any of the Parent Entities for the period or periods through and including
the date of the respective Parent Financial Statements that has been made and is
reflected on such Parent Financial Statements is sufficient to cover all such
Taxes.
(d) Deferred Taxes of the Parent Entities have been
provided for in accordance with GAAP.
(e) None of the Parent Entities is a party to any Tax
allocation or sharing agreement and none of the Parent Entities has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Parent) has any Liability for
Taxes of any Person (other than Parent and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
Law) as a transferee or successor or by Contract or otherwise.
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6.7 COMPLIANCE WITH LAWS
Each Parent Entity has in effect all Permits necessary for it to own,
lease or operate its material Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Parent Material Adverse
Effect, and there has occurred no Default under any such Permit, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect. None of the Parent Entities:
(a) is in Default under its Certificate of
Incorporation or Bylaws (or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits
applicable to its business or employees conducting its business,
except for Defaults which are not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect;
or
(c) since January 1, 1995, has received any
notification or communication from any agency or department of
federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any Parent Entity is not in
compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance
is reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect, (ii) threatening to revoke any
Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect,
or (iii) requiring any Parent Entity to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment or memorandum of understanding, or to adopt any Board
resolution or similar undertaking, which restricts materially the
conduct of its business.
6.8 LEGAL PROCEEDINGS
There is no Litigation instituted or pending, or, to the Knowledge of
Parent, threatened (or unasserted but considered probable of assertion and which
if asserted would have at least a reasonable probability of an unfavorable
outcome) against any Parent Entity, or against any director, employee or
employee benefit plan of any Parent Entity, or against any Asset, interest, or
right of any of them, that is reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any Parent Entity, that are reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect.
6.9 REPORTS
Since the date of organization, each Parent Entity has filed all
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with Regulatory Authorities
(except, in the case of state securities authorities, failures to file which are
not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not, in all material
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respects, 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 made therein, in light of the circumstances under
which they were made, not misleading.
6.10 STATEMENTS TRUE AND CORRECT
No statement, certificate, instrument or other writing furnished or
to be furnished by any Parent Entity or any Affiliate thereof to Company
pursuant to this Agreement contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that any Parent Entity or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
6.11 AUTHORITY OF SUB
Sub is a corporation duly organized, validly existing and in good
standing under the Laws of the State of California as a wholly owned Subsidiary
of Parent. The authorized capital stock of Sub shall consist of 1,000 shares of
Sub Common Stock, all of which is validly issued and outstanding, fully paid and
nonassessable and is owned by Parent free and clear of any Lien. Sub has the
corporate power and authority necessary to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Merger, have
been duly and validly authorized by all necessary corporate action in respect
thereof on the part of Sub. This Agreement represents a legal, valid, and
binding obligation of Sub, enforceable against Sub in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
Parent, as the sole stockholder of Sub, has voted prior to the Effective Time
the shares of Sub Common Stock in favor of adoption approval of this Agreement,
as and to the extent required by applicable Law.
6.12 ACCOUNTING, TAX AND REGULATORY MATTERS
No Parent Entity or any Affiliate thereof has taken or agreed to take
any action or has any Knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) or result in the imposition of a condition or restriction of the
type referred to in the last sentence of such Section 9.1(b).
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ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 AFFIRMATIVE COVENANTS OF COMPANY
From the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, unless the prior written consent of
Parent shall have been obtained, and except as otherwise expressly contemplated
herein, Company shall and shall cause each of its Subsidiaries to (a) operate
its business only in the usual, regular, and ordinary course, (b) preserve
intact its business organization and Assets and maintain its rights and
franchises, and (c) take no action which would (i) materially adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentences of Section 9.1(b) or 9.1(c), or (ii)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF COMPANY
From the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, unless the prior written consent of
Parent shall have been obtained, and except as otherwise expressly contemplated
herein, Company covenants and agrees that it will not do or agree or commit to
do any of the following:
(a) amend the Articles of Incorporation, Bylaws or
other governing instruments of Company, or
(b) except for short-term borrowings with a maturity
of one year or less in the ordinary course of business consistent
with past practices, incur any indebtedness for borrowed money,
assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other Person, or impose, or
suffer the imposition, on any Asset of Company of any Lien or permit
any such Lien to exist (other than in connection with Liens in effect
as of the date hereof that are disclosed in the Company Disclosure
Memorandum); or
(c) repurchase, redeem, or otherwise acquire or
exchange (other than exchanges in the ordinary course under employee
benefit plans), directly or indirectly, any shares, or any securities
convertible into any shares, of the capital stock of Company, or
declare or pay any dividend or make any other distribution in respect
of Company Capital Stock; or
(d) except for this Agreement, or pursuant to the
exercise of Company Equity Rights outstanding as of the date hereof
and pursuant to the terms thereof in existence on the date hereof, or
as disclosed in Section 7.2(d) of the Company Disclosure Memorandum,
issue, sell, pledge, encumber, authorize the issuance of, enter into
any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any
additional shares of Company Capital Stock or any other Equity Right;
or
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(e) adjust, split, combine or reclassify any capital
stock of Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Company
Capital Stock, or sell, lease, mortgage or otherwise dispose of or
otherwise encumber any Asset having a book value in excess of $10,000
other than in the ordinary course of business for reasonable and
adequate consideration, or transfer or license to any Person other
than Company or otherwise extend, amend or modify in any material
respect any rights to material Intellectual Property other than in
the ordinary course of business (including changing any domain names
or failing to renew existing domain name registrations on a timely
basis), or enter into grants to future Intellectual Property rights,
other than as may be required by applicable Law; or
(f) purchase any securities or make any material
investment, either by purchase of stock or securities, contributions
to capital, Asset transfers, or purchase of any Assets, in any Person
other than a wholly owned Company Subsidiary, or otherwise acquire
direct or indirect control over any Person; or
(g) grant any increase in compensation or benefits to
the employees or officers of Company, except in accordance with past
practice disclosed in Section 7.2(g) of the Company Disclosure
Memorandum or as required by Law; pay any severance or termination
pay or any bonus other than pursuant to written policies or written
Contracts in effect on the date of this Agreement and disclosed in
Section 7.2(g) of the Company Disclosure Memorandum; enter into or
amend any severance agreements with officers of Company; grant any
increase in fees or other increases in compensation or other benefits
to directors of Company except in accordance with past practice
disclosed in Section 7.2(g) of the Company Disclosure Memorandum; or
waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of any Company Equity Rights or restricted
stock, or reprice Company Equity Rights granted under any Company
Stock Plan or authorize cash payments in exchange for any Company
Equity Rights; or
(h) enter into or amend any employment Contract
between Company and any Person (except for any such amendment as is
required by Law) that Company does not have the unconditional right
to terminate without Liability (other than Liability for services
already rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan or terminate
or withdraw from, or make any material change in or to, any existing
employee benefit plans of Company other than any such change that is
required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan, or
make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past
practice; or
(j) make any significant change in any Tax or
accounting methods or systems of internal accounting controls, except
as may be appropriate to conform to changes in Tax Laws or GAAP as
concurred to by Parent's independent auditors; or
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(k) commence any Litigation other than in accordance
with past practice, or settle any Litigation involving any Liability
of Company for money damages or restrictions upon the operations of
Company; or
(l) except in the ordinary course of business, enter
into, modify, amend or terminate any material Contract or waive,
release, compromise or assign any material rights or claims.
7.3 ADVERSE CHANGES IN CONDITION
Each Party agrees to give written notice promptly to the other Party
upon becoming aware of the occurrence or impending occurrence of any event or
circumstance relating to it or any of its Subsidiaries which (i) is reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect or a Parent Material Adverse Effect, as applicable, or (ii) would cause
or constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 STOCKHOLDER APPROVAL
Company shall solicit written consents in lieu of a Stockholders'
Meeting as soon as reasonably practicable for the purpose of obtaining approval
of this Agreement and such other related matters as it deems appropriate. In
connection with such solicitation, (i) the Board of Directors of Company shall
recommend to its stockholders the approval of the matters submitted for
approval, (ii) the Board of Directors and officers of Company shall use their
reasonable best efforts to obtain such stockholders' approval, and (iii) Company
shall use its reasonable best efforts to deliver or cause to be delivered to
Parent, concurrently with or as soon as practicable after the execution of this
Agreement (and in each case prior to the Effective Time), from each holder of
Company Capital Stock an executed Stockholder Representation Agreement. Parent
and Company shall make all necessary filings with respect to the Merger under
the Securities Laws.
8.2 EXCHANGE LISTING
Parent shall use its reasonable efforts to list, prior to the
Effective Time, on the Nasdaq National Market the shares of Parent Common Stock
to be issued to the holders of Company Capital Stock pursuant to the Merger, and
Parent shall give all notices and make all filings with the Nasdaq National
Market required in connection with the transactions contemplated herein.
8.3 REGULATORY FILINGS; REQUIRED CONSENTS
The Parties hereto shall cooperate with each other and use their
reasonable efforts to promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all Consents of all Regulatory
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Authorities and other Persons which are necessary or advisable to consummate the
transactions contemplated by this Agreement (including the Merger). Each Party
shall have the right to review in advance, and to the extent practicable each
will consult the other on, in each case subject to applicable Laws relating to
the exchange of information, all the information relating to the other Party
which appears in any filing made with, or written materials submitted to, any
Regulatory Authority or other Person in connection with the transactions
contemplated by this Agreement and will promptly notify each other of any
communication with any Regulatory Authority or other Person and provide the
other Party with an opportunity to participate in any meetings with a Regulatory
Authority or other Person relating thereto; provided, that nothing contained
herein shall be deemed to provide either Party with a right to review any
information provided to any Regulatory Authority on a confidential basis in
connection with the transactions contemplated hereby. In exercising the
foregoing right, each of the Parties hereto shall act reasonably and as promptly
as practicable. The Parties agree that they will consult with each other with
respect to the obtaining of all Consents of all Regulatory Authorities and other
Persons necessary or advisable to consummate the transactions contemplated by
this Agreement and each Party will keep the other apprised of the status of
matters relating to contemplation of the transactions contemplated herein. To
the extent permitted by Law, the Parties shall deliver to each other copies of
all filings, correspondence and orders to and from all Regulatory Authorities in
connection with the transactions contemplated hereby. Each Party also shall
promptly advise the other upon receiving any communication from any Regulatory
Authority whose Consent is required for consummation of the transactions
contemplated by this Agreement which causes such Party to believe that there is
a reasonable likelihood that any requisite Consent will not be obtained or that
the receipt of any such Consent will be materially delayed.
` 8.4 FILINGS WITH STATE OFFICES
Upon the terms and subject to the conditions of this Agreement,
Company and Sub shall file with the Secretary of State of the State of
California in connection with the Closing the Plan of Merger, together with the
required officers' certificates, in accordance with the relevant provisions of
the California Corporations Code.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE
Subject to the terms and conditions of this Agreement, each Party
agrees to use, and to cause its Subsidiaries 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 to consummate and
make effective, as soon as reasonably practicable after the date of this
Agreement, the transactions contemplated by this Agreement, including using its
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in ARTICLE 9; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement.
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8.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time and subject to
applicable Laws relating to the exchange of information, each Party shall keep
the other Party advised of all material developments relevant to its business
and to consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of its business and properties and of its
financial and legal conditions as the other Party reasonably requests, provided
that such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with normal
operations. No investigation by a Party shall affect the representations and
warranties of the other Party.
(b) In addition to the Parties' respective
obligations under the Confidentiality Agreement, which is hereby reaffirmed and
adopted, and incorporated by reference herein, each Party shall, and shall cause
its advisers and agents to, maintain the confidentiality of all confidential
information furnished to it by the other Party concerning its and its
Subsidiaries' businesses, operations, and financial positions and shall not use
such information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Company shall use its reasonable efforts to
exercise its rights, and shall not waive any rights, under confidentiality
agreements entered into with Persons who were considering an Acquisition
Proposal with respect to Company to preserve the confidentiality of the
information relating to Company provided to such Persons and their Affiliates
and Representatives.
(d) Each Party agrees to give the other Party notice
as soon as practicable after any determination by it of any fact or occurrence
relating to the other Party which it has discovered through the course of its
investigation and which represents, or is reasonably likely to represent, either
a material breach of any representation, warranty, covenant or agreement of the
other Party or which has had or is reasonably likely to have a Company Material
Adverse Effect or a Parent Material Adverse Effect, as applicable.
8.7 PRESS RELEASES
Prior to the Effective Time, Company and Parent shall consult with
each other as to the form and substance of any press release or other public
disclosure materially related to this Agreement or any other transaction
contemplated hereby; provided, that nothing in this Section 8.7 shall be deemed
to prohibit any Party from making any disclosure which its counsel deems
necessary or advisable in order to satisfy such Party's disclosure obligations
imposed by Law.
8.8 CERTAIN ACTIONS
Except with respect to this Agreement and the transactions
contemplated hereby, neither Company nor any Affiliate thereof nor any
Representatives thereof shall directly or indirectly solicit any Acquisition
Proposal by any Person. Neither Company nor any Affiliate or
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Representative thereof shall furnish any non-public information that it is not
legally obligated to furnish, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal, but Company may communicate
information about such an Acquisition Proposal to its stockholders if and to the
extent that it is required to do so in order to comply with its legal
obligations as advised by outside counsel. Company shall promptly advise Parent
following the receipt of any Acquisition Proposal and the details thereof, and
advise Parent of any developments with respect to such Acquisition Proposal
promptly upon the occurrence thereof. Company shall (i) immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any Persons conducted heretofore with respect to any of the foregoing, and (ii)
direct and use its reasonable efforts to cause all of its Affiliates and
Representatives not to engage in any of the foregoing.
8.9 TAX TREATMENT
Each of the Parties undertakes and agrees to use its reasonable
efforts to cause the Merger, and to take no action which would cause the Merger
not, to qualify for treatment as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 STATE TAKEOVER LAWS
Company shall take all necessary steps to exempt the transactions
contemplated by this Agreement from, or if necessary to challenge the validity
or applicability of, any applicable Takeover Law.
8.11 CHARTER PROVISIONS
Company shall take all necessary action to ensure that the entering
into of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby do not and will not result in the grant of any
rights to any Person under the Articles of Incorporation, Bylaws or other
governing instruments of Company or restrict or impair the ability of Parent or
any of its Subsidiaries to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of Company that may be directly or
indirectly acquired or controlled by them.
8.12 EMPLOYEE BENEFITS AND CONTRACTS
Following the Effective Time, Parent shall provide generally to
officers and employees of Company employee benefits under employee benefit and
welfare plans (other than stock option or other plans involving the potential
issuance of Parent Common Stock), on terms and conditions which when taken as a
whole are substantially similar to those currently provided by the Parent
Entities to their similarly situated officers and employees. For purposes of
participation, vesting and (except in the case of Parent retirement plans)
benefit accrual under Parent's employee benefit plans, the service of the
employees of the Company Entities prior to the Effective Time shall be treated
as service with a Parent Entity participating in such employee benefit plans.
Parent also shall cause the Surviving Corporation and its Subsidiaries to honor
in accordance with their terms all employment, severance, consulting and other
compensation Contracts disclosed in Section 8.12 of the Company Disclosure
Memorandum to Parent between Company and any current or former director,
officer, or employee thereof, and all provisions for
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vested benefits or other vested amounts earned or accrued through the Effective
Time under the Company Benefit Plans (other than Company Equity Rights).
8.13 INDEMNIFICATION.
(a) Parent shall not cause or allow the Surviving
Corporation to modify, and shall cause the Surviving Corporation to honor, any
rights to indemnification or exculpation from Liabilities arising out of actions
or omissions arising out of any Person's service or services as a director or
officer of Company or, at Company's request, of another corporation,
partnership, joint venture, trust or other enterprise occurring at or prior to
the Effective Time (including the transactions contemplated by this Agreement)
now existing in favor of such Persons as provided in Company's articles of
incorporation or bylaws, as in effect on the date of this Agreement.
(b) Any Person wishing to claim indemnification under
paragraph (a) of this Section 8.13 (each, an "Indemnified Party"), upon learning
of any such Liability or Litigation, shall promptly notify the Surviving
Corporation thereof. In the event of any such Litigation (whether arising before
or after the Effective Time), except as otherwise provided in any
indemnification Contract between Company and the Indemnified Party, (i) the
Surviving Corporation shall have the right to assume the defense thereof and the
Surviving Corporation shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except that if
the Surviving Corporation elects not to assume such defense or counsel for the
Indemnified Parties advises that there are substantive issues which raise
conflicts of interest between the Surviving Corpora