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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 21, 2000
-------------------------------------
Date of Report (date of earliest event reported)
PRIMUS KNOWLEDGE SOLUTIONS, INC.
-----------------------------------------
(Exact name of registrant as specified in its charter)
Washington
-------------------------------------
(State or other jurisdiction of incorporation)
0-26273 91-1350484
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(Commission File Number) (IRS Employer Identification No.)
Primus Knowledge Solutions, Inc.
1601 Fifth Avenue, Suite 1900
Seattle, Washington 98101
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(Address including zip code of registrant's principal executive offices)
(206) 292-1000
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(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets
On January 21, 2000, pursuant to an Agreement and Plan of Merger, dated
as of January 8, 2000 (the "Merger Agreement"), by and among Primus Knowledge
Solutions, Inc., a Washington corporation ("Primus," or the "Company"), Austin
Acquisition, Inc., a Georgia Corporation and wholly owned subsidiary of Primus
("Merger Sub") and 2order.com, Inc., a Georgia corporation ("2Order.com"),
Merger Sub was merged with and into 2order.com, with 2order.com being the
surviving corporation (the "Merger").
2order.com develops and markets software that acts as a personal sales
assistant, helping buyers define requirements and configure custom solutions.
2order.com was incorporated in Georgia in 1991 under the name Business Systems
Design, Inc.
As a result of the Merger, Primus issued 1,656,504 shares of Primus
common stock, $.025 par value per share (the "Total Merger Consideration") and
assumed all outstanding options and warrants of 2order.com. Such consideration
was determined in arms-length negotiation between Primus and 2order.com. The
Total Merger Consideration will be allocated between (i) the portion to be
received by the holders of 2order.com's preferred stock and common stock (the
"Net Merger Consideration"), and (ii) the portion issuable to the holders of
2order.com's options and warrants upon the respective exercise or conversion
thereof (the "Option Merger Consideration'). The Net Merger Consideration and
the Option Merger Consideration was paid to the 2order.com shareholders as
follows:
Holders of 2order.com Series A preferred stock, Series B preferred
stock and common stock received 0.1709 of a share of Primus Common Stock in the
Merger for each share of 2order.com Series A preferred stock, Series B preferred
stoc and common stock they held. The holders of 2order.com's Series A, and
Series B preferred stock converted all such stock to 2order.com common stock
prior to the effective time of the merger.
Options outstanding to purchase shares of 2order.com common stock,
whether or not vested or exercisable, were assumed by Primus and constitute an
option to acquire shares of Primus common stock, on substantially the same terms
and conditions as were previously applicable.
Warrants outstanding to purchase capital stock of 2order.com were
assumed by Primus and constitute a warrant to acquire shares of Primus common
stock, on substantially the same terms and conditions as were applicable under
the assumed warrant.
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The Merger will be accounted for as a pooling of interest.
Pursuant to the Merger Agreement, the shareholders of 2order.com have
agreed to indemnify and hold Primus harmless from losses that Primus or its
affiliates may suffer as a result of (1) any inaccuracy or misrepresentation in,
or breach of, any representation or warranty made by 2order.com in the Merger
Agreement or related agreements; and (2) any failure by 2order.com or the
shareholders of 2order.com to perform or comply, in whole or in part, with any
covenant or agreement in the Merger Agreement or related agreements. A total of
10% of the Net Merger Consideration has been deposited with an escrow agent to
secure these indemnification obligations.
The description of the Merger Agreement herein, which is filed as an
exhibit to this Form 8-K, does not purport to be complete and is qualified in
its entirety by the provisions of the Merger Agreement.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired.+
(b) Pro Forma Financial Information.+
(c) Exhibits
2.01 Agreement and Plan of Merger dated as of January 8, 2000 by
and among, Primus Knowledge Solutions, Inc., Austin
Acquisition, Inc. and 2order.com, Inc.
___________________
+ To be filed by amendment within 60 days of the date of this report
on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PRIMUS KNOWLEDGE SOLUTIONS, INC.
/s/ Elizabeth J. Huebner
Date: February 4, 2000 __________________________________
Elizabeth J. Huebner
Executive Vice President and Chief
Financial Officer
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EXHIBIT 2.01
AGREEMENT AND PLAN OF MERGER
among
PRIMUS KNOWLEDGE SOLUTIONS, INC
AUSTIN ACQUISITION, INC.,
and
2ORDER.COM, INC.
Dated as of January 8, 2000
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CONTENTS
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ARTICLE I - THE MERGER............................................................................... 1
1.1 The Merger......................................................................... 1
1.2 The Closing........................................................................ 1
1.3 Effective Date and Time............................................................ 2
1.4 Articles of Incorporation of the Surviving Corporation............................. 2
1.5 Bylaws of the Surviving Corporation................................................ 2
1.6 Directors and Officers............................................................. 2
1.7 Conversion of Shares............................................................... 3
1.7.1 Merger Consideration.................................................... 3
1.7.2 Exchange of Certificates................................................ 6
1.7.3 No Fractional Shares.................................................... 7
1.7.4 No Further Transfers.................................................... 7
1.8 Shareholder Matters................................................................ 7
1.9 Dissenters' Rights................................................................. 8
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................... 8
2.1 Organization....................................................................... 9
2.2 Enforceability..................................................................... 9
2.3 Capitalization..................................................................... 9
2.4 Subsidiaries and Affiliates........................................................ 11
2.5 No Approvals; No Conflicts......................................................... 11
2.6 Financial Statements............................................................... 11
2.7 Absence of Certain Changes or Events............................................... 12
2.8 Taxes.............................................................................. 15
2.9 Property........................................................................... 17
2.10 Contracts.......................................................................... 19
2.10.1 Material Contracts...................................................... 19
2.10.2 Required Consents....................................................... 20
2.11 Customers and Suppliers............................................................ 20
2.12 Orders; Commitments; Warranties and Returns........................................ 21
2.13 Claims and Legal Proceedings....................................................... 21
2.14 Labor and Employment Matters....................................................... 21
2.15 Employee Benefit Plans............................................................. 22
2.15.1 Employee Benefit Plan Listing........................................... 22
2.15.2 Documents Provided...................................................... 22
2.15.3 Compliance.............................................................. 23
2.15.4 Contributions and Premium Payments...................................... 24
2.15.5 Related Employers....................................................... 24
2.15.6 Multiemployer and Title IV Plans........................................ 24
2.15.7 Post-Termination Welfare Benefits....................................... 24
2.15.8 Suits, Claims and Investigations........................................ 25
2.15.9 Payments Resulting From Transactions.................................... 25
2.16 Personnel.......................................................................... 25
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2.17 Intellectual Property................................................................ 26
2.17.1 General................................................................... 26
2.17.2 Company Technology........................................................ 26
2.17.3 Third Party Technology.................................................... 26
2.17.4 Trademarks................................................................ 27
2.17.5 Intellectual Property Rights.............................................. 27
2.17.6 Maintenance of Rights..................................................... 28
2.17.7 Third Party Claims........................................................ 28
2.17.8 Infringement by the Company............................................... 28
2.17.9 Confidentiality........................................................... 29
2.17.10 Domain Names.............................................................. 29
2.17.11 Year 2000................................................................. 29
2.17.12 Indemnification........................................................... 30
2.17.13 Restrictions on Intellectual Property..................................... 30
2.18 Accounts Receivable.................................................................. 30
2.19 Inventory............................................................................ 30
2.20 Corporate Books and Records.......................................................... 30
2.21 Permits.............................................................................. 31
2.22 Compliance With Laws................................................................. 31
2.23 Insurance............................................................................ 31
2.24 Brokers or Finders................................................................... 32
2.25 Absence of Questionable Payments..................................................... 32
2.26 Bank Accounts........................................................................ 32
2.27 Insider Interests.................................................................... 32
2.28 Compliance With Environmental Laws................................................... 33
2.29 Information Supplied by the Company.................................................. 33
2.30 Full Disclosure...................................................................... 34
2.31 Pooling Matters...................................................................... 34
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................................. 34
3.1 Organization......................................................................... 34
3.2 Enforceability....................................................................... 35
3.3 Securities........................................................................... 35
3.4 No Approvals or Notices Required; No Conflicts With Instruments...................... 35
3.5 Capitalization....................................................................... 36
3.6 Full Disclosure...................................................................... 36
3.7 Brokers or Finders................................................................... 37
3.8 Claims and Legal Proceedings......................................................... 37
3.9 Compliance with Laws................................................................. 38
3.10 No Material Adverse Event............................................................ 38
ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND THE PURCHASER.......................... 38
4.1 Accuracy of Representations and Warranties........................................... 38
4.2 Performance of Agreements............................................................ 38
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4.3 Opinion of Company Counsel........................................................... 38
4.4 Compliance Certificate............................................................... 38
4.5 Material Adverse Change.............................................................. 39
4.6 Approvals and Consents............................................................... 39
4.7 Proceedings and Documents; Secretary's Certificate................................... 39
4.8 Nonforeign Affidavit................................................................. 39
4.9 Compliance With Laws................................................................. 39
4.10 Legal Proceedings.................................................................... 39
4.11 Affiliate Letters.................................................................... 40
4.12 Termination of Certain Agreements.................................................... 40
4.13 Employee Agreements.................................................................. 40
4.14 Shareholder Representation Letters................................................... 40
4.15 Pooling of Interests................................................................. 40
4.16 Securities Law Exemption............................................................. 41
4.17 Dissenters' Rights................................................................... 41
4.18 Company Shareholder Approval......................................................... 41
4.19 Termination of Company's 401(k) Plan................................................. 41
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY......................................... 41
5.1 Accuracy of Representations and Warranties........................................... 41
5.2 Performance of Agreements............................................................ 41
5.3 Opinion of Parent Counsel............................................................ 42
5.4 Compliance Certificate............................................................... 42
5.5 Legal Proceedings.................................................................... 42
5.6 Proceedings and Documents; Secretary's Certificate................................... 42
5.7 Material Adverse Change.............................................................. 42
5.8 Approvals and Consents............................................................... 42
5.9 Compliance With Laws................................................................. 43
5.10 Tax Opinion.......................................................................... 43
5.11 Registration Rights Agreement........................................................ 43
ARTICLE VI - COVENANTS................................................................................. 43
6.1 Conduct of Business by the Company Pending the Merger................................ 43
6.2 Access to Information; Confidentiality............................................... 45
6.3 No Alternative Transactions.......................................................... 45
6.4 Notification of Certain Matters...................................................... 46
6.5 Further Action....................................................................... 46
6.6 Nasdaq Listing....................................................................... 47
6.7 Publicity............................................................................ 47
6.8 Form S-8............................................................................. 47
6.9 Registration Rights.................................................................. 47
6.10 Company Shareholders Meeting; Affiliate and Voting Agreements........................ 48
6.11 Consent Solicitation Statement....................................................... 48
6.12 Employee Benefits.................................................................... 48
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ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER........................................................ 49
7.1 Termination.......................................................................... 49
7.2 Effect of Termination................................................................ 50
7.3 Amendment............................................................................ 50
7.4 Waiver............................................................................... 50
7.5 Company Termination Fee.............................................................. 50
7.6 Parent Termination Fee............................................................... 51
ARTICLE VIII - SURVIVAL AND INDEMNIFICATION............................................................ 51
8.1 Survival............................................................................. 51
8.2 Indemnification by Shareholders...................................................... 51
8.3 Indemnification By Parent or the Surviving Corporation............................... 52
8.4 Threshold and Limitations............................................................ 52
8.5 Procedure for Indemnification........................................................ 53
8.6 Remedies; Specific Performance....................................................... 56
8.7 Shareholder Representative........................................................... 56
8.8 No Circular Recovery................................................................. 56
ARTICLE IX - GENERAL................................................................................... 57
9.1 Tax Matters.......................................................................... 57
9.2 Expenses............................................................................. 57
9.3 Notices.............................................................................. 57
9.4 Severability......................................................................... 58
9.5 Entire Agreement..................................................................... 58
9.6 Assignment........................................................................... 59
9.7 Parties in Interest.................................................................. 59
9.8 Governing Law; Jurisdiction; Venue................................................... 59
9.9 Counterparts......................................................................... 59
9.10 Waiver of Jury Trial................................................................. 59
9.11 Knowledge............................................................................ 59
9.12 Third Party Beneficiaries............................................................ 60
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EXHIBITS
1.3 - Form of Articles of Merger
1.7 - Schedule of Conversion Ratios
1.7.1(h) - Form of Escrow Agreement
2 - Schedule of Exceptions
4.3 - Form of Opinion of Company Counsel
4.8 - Form of Real Property Tax Affidavit
4.11 - Form of Affiliate Letter
4.12 - List of Agreements to be Terminated at Closing
4.13 - Form of Shareholder Representation Letter
5.3 - Form of Opinion of Parent Counsel
5.10 - Form of Tax Opinion
6.9 - Form of Company Registration Rights Agreement
6.10 - Form of Affiliate and Voting Agreement
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of January 8, 2000, by and among Primus Knowledge Solutions, Inc., a
Washington corporation ("Parent"), Austin Acquisition, Inc., a Georgia
corporation and wholly owned subsidiary of Parent ("Merger Sub"), and
2order.com, Inc., a Georgia corporation (the "Company").
RECITALS
A. The Company, Parent and Merger Sub believe it advisable and in their
respective best interests to effect a merger of the Company and Merger Sub on
the terms and subject to the conditions set forth in this Agreement (the
"Merger").
B. The Board of Directors of the Company has approved this Agreement
and the Merger as required by applicable law.
C. The Boards of Directors of Parent and Merger Sub, and the sole
shareholder of Merger Sub, have approved this Agreement and the Merger as
required by applicable law.
D. The parties intend that the Merger will qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and as a pooling of interests for accounting purposes.
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as
follows:
ARTICLE I - THE MERGER
1.1 The Merger
Upon the terms and subject to the conditions hereof, (a) at the
Effective Time (as defined in Section 1.3) the separate corporate existence of
Merger Sub shall cease and Merger Sub shall be merged with and into the Company
(the Company as the surviving corporation after the Merger is sometimes referred
to herein as the "Surviving Corporation") and (b) from and after the Effective
Time, the Merger shall have all the effects of a merger under the laws of the
State of Georgia and other applicable law.
1.2 The Closing
The closing of the Merger (the "Closing") shall take place at the
offices of Perkins Coie LLP, 1201 Third Avenue, 48th Floor, Seattle, Washington,
as soon as practicable after the satisfaction or waiver of the conditions set
forth in Articles IV and V below, or such other date, time and location as
Parent and the Company shall agree (the "Closing Date").
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1.3 Effective Date and Time
On the Closing Date and subject to the terms and conditions hereof, the
parties hereto shall cause the appropriate articles of merger and related
documents (collectively, the "Articles of Merger") complying with the applicable
provisions of the Georgia Business Corporation Code ("Georgia Law"),
substantially in the form attached hereto as Exhibit 1.3, and in such form as
required by, and executed in duplicate in accordance with, Georgia Law, shall be
delivered for filing with the Secretary of State of the State of Georgia (the
"Georgia Secretary of State"). The Merger shall become effective on the date
(the "Effective Date") and at the time (the "Effective Time") of filing of the
Articles of Merger with the Georgia Secretary of State, or at such other time as
may be specified in the Articles of Merger as filed. If the Georgia Secretary of
State requires any changes in the Articles of Merger as a condition to filing or
to issuing its certificate to the effect that the Merger is effective, Parent,
Merger Sub and the Company will execute any necessary revisions incorporating
such changes, provided such changes are not inconsistent with and do not result
in any material change in the terms of this Agreement.
1.4 Articles of Incorporation of the Surviving Corporation
At the Effective Time, the Articles of Incorporation of the Surviving
Corporation shall be amended and restated in their entirety to conform to the
substantive portions of the Articles of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time; provided, however, that Article I
thereof shall be amended to read as follows: "The name of this corporation is
2order.com, Inc." Thereafter, the Articles of Incorporation of the Surviving
Corporation may be amended in accordance with their terms and as provided by
law.
1.5 Bylaws of the Surviving Corporation
At the Effective Time, the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall become the Bylaws of the Surviving
Corporation. Thereafter, the Bylaws of the Surviving Corporation may be amended
or repealed in accordance with their terms and the Articles of Incorporation of
the Surviving Corporation and as provided by law.
1.6 Directors and Officers
At the Effective Time, the directors of Merger Sub shall become the
directors of the Surviving Corporation, and the officers of the Company and
Merger Sub shall all become the officers of the Surviving Corporation, and such
directors and officers shall hold office in accordance with and subject to the
Articles of Incorporation and Bylaws of the Surviving Corporation.
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1.7 Conversion of Shares
1.7.1 Merger Consideration
As of the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof:
(a) All shares of any class of capital stock of the Company held
by the Company as treasury shares shall be canceled.
(b) Each issued and outstanding share of capital stock of Merger
Sub shall be converted into one share of common stock of the Surviving
Corporation.
(c) Each issued and outstanding share of capital stock of the
Company shall be converted into that portion of the Net Merger Consideration (as
defined below) to which the holder is entitled pursuant to the provisions of the
charter documents of the Company. The holders, if any, of outstanding shares of
preferred stock of the Company ("Company Preferred Stock") shall be entitled to
receive in such conversion such preferential portion of the Net Merger
Consideration as may be determined in accordance with the provisions of the
charter documents of the Company. The holders of the outstanding shares of
common stock of the Company ("Company Common Stock") shall be entitled to
receive in such conversion such residual portion of the Net Merger Consideration
as may be determined in accordance with the provisions of the charter documents
of the Company. The conversion ratio as determined in accordance with the
provisions of the Company's charter documents for each outstanding series of
Company Preferred Stock shall be referred to herein with reference to the
respective series. The conversion ratio as determined in accordance with the
provisions of the Company's charter documents for the Company Common Stock shall
be referred to herein as the "Common Conversion Ratio." The Company shall
calculate the various applicable conversion ratios applicable to the Company
Preferred Stock and Company Common Stock based on a reasonably expected range of
values for Parent Common Stock and shall attach a summary of such calculations
as Exhibit 1.7.
(d) Each outstanding option to purchase shares of Company Common
Stock, whether or not vested or exercisable ("Company Option") shall be
converted into an option to purchase that portion of the Option Merger
Consideration (as defined below) to which the holder is entitled pursuant to the
provisions of the documents creating and representing such options and shall be
assumed by Parent. Such Company Options shall after the Merger constitute an
option to acquire, on the same vesting terms and on substantially the same other
terms and conditions as were previously applicable, that number of whole shares
of Parent Common Stock determined pursuant to the foregoing sentence at a price
per share (rounded to the nearest $0.01) equal to the aggregate exercise price
of the Company Option divided by the Common Conversion Ratio. Parent shall
assume the obligations of the Company under the Company's existing stock option
plan and shall comply with the terms of such plan as they apply to the Company
Options assumed as set forth above. Parent will treat
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such Company Options consistent with the Company's treatment thereof for federal
income tax purposes.
(e) Each warrant to purchase capital stock of the Company (the
"Company Warrants") that is issued and outstanding as of the Effective Time
shall be converted into a warrant to purchase that portion of the Option Merger
Consideration to which the holder is entitled pursuant to the provisions of the
documents creating and representing such warrants and shall be assumed by
Parent. Such Company Warrants shall after the Merger constitute a warrant to
acquire, on substantially the same terms and conditions as were applicable under
such assumed Company Warrant, that number of whole shares of Parent Common Stock
determined pursuant to the foregoing sentence at a price per share (rounded to
the nearest ($0.01) equal to the exercise price of the Company Warrant divided
by the applicable conversion ratio determined in accordance with the provisions
of the documents creating and representing such warrants.
(f) The total number of shares of common stock of Parent ("Parent
Common Stock") issued or issuable pursuant to the Merger shall equal $90 million
divided by the Closing Average (as defined below) (the "Total Merger
Consideration"). The Total Merger Consideration shall be allocated between that
portion receivable in the Merger by the holders of Company Preferred Stock and
Company Common Stock (the "Net Merger Consideration") and that portion issuable
to the holders of the Company Options and Company Warrants upon the respective
exercise or conversion thereof (the "Option Merger Consideration"). Solely for
purposes of calculating such allocation, the Company Options and Warrants shall
be deemed to constitute outstanding shares of the respective Company Common
Stock or Company Preferred Stock into which they are exercisable or convertible.
(g) The term "Closing Average" shall mean the average of the last
reported sale prices of Parent Common Stock as reported on the Nasdaq National
Market for the ten trading days ending with and including the third the trading
day prior to the Closing Date (taking into consideration all adjustments for
stock splits, stock dividends or the like during such period).
(h) Notwithstanding the foregoing:
(i) As collateral security for the indemnification obligations
of the shareholders of the Company pursuant to Article VIII, the shareholders of
the Company, by approving the Merger at a special meeting of shareholders or by
written consent, shall be deemed to have pledged, transferred and assigned to
Parent, and Parent shall withhold from the Net Merger Consideration otherwise
issuable under this Agreement, a number of shares of Parent Common Stock equal
to 10% of the total number of shares of Parent Common Stock otherwise issuable
as Net Merger Consideration pursuant to this Section 1.7.1 (the "Holdback
Shares") and shall deliver the Holdback Shares to Chase Mellon Shareholder
Services LLC, as escrow agent (the "Escrow Agent") to be held in escrow pursuant
to an escrow agreement substantially in the form of Exhibit 1.7.1(h). Such
pledge and holdback is for the benefit of
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Parent for purposes of facilitating satisfaction of any indemnification claims
that may be made by Parent under Article VIII below, and each shareholder shall
be deemed to have granted a security interest in such shareholder's pro rata
share of the Holdback Shares, and the certificates and instruments, if any,
representing or evidencing such Holdback Shares. In lieu of any fractional
shares of Parent Common Stock, each shareholder's pro rata share of the Holdback
Shares shall be rounded up to the nearest whole number. Such Holdback Shares
shall be free of any other escrow or pledge obligation. Such pledge includes all
securities hereafter delivered to such shareholder with respect to or in
substitution for such shareholder's Holdback Shares, all certificates and
instruments representing or evidencing such securities, and all nontaxable
noncash dividends and other property at any time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shareholder's Holdback Shares. In the event such shareholder receives any such
property, such shareholder shall hold such property in trust for Parent and
shall immediately deliver such property to Parent to be held as Holdback Shares.
Notwithstanding anything herein to the contrary, the shareholders of the Company
shall be entitled to promptly receive any distribution on the Holdback Shares
which constitutes a "dividend" within the meaning of Section 316 of the Code.
(ii) Each certificate, if any, evidencing a shareholder's pro
rata share of the Holdback Shares issued in his, her or its name in the Merger
shall be delivered to Parent directly by Parent's transfer agent, such
certificate bearing no restrictive or cautionary legend other than those
imprinted by the transfer agent at Parent's request or as set forth herein. Each
shareholder shall, at the Closing, deliver to Parent, for each such certificate,
a stock power duly signed in blank by him, her or it for purposes of allowing
Parent to exercise its rights under this Section 1.7.1(h) and Article VIII.
(iii) The shareholders of the Company shall be treated as the
owners of the Holdback Shares for income tax purposes and shall be the holders
of record thereof and entitled to exercise any voting powers incident to such
Holdback Shares until such time, if any, as such Holdback Shares, or any portion
thereof, are forfeited to Parent to satisfy any indemnification obligations
pursuant to Article VIII. In addition, upon the release of any Holdback Shares
pursuant to the terms hereof, the shareholder that is the record owner thereof
shall be entitled to any cash or other proceeds from such Holdback Shares
(including any dividends or other property paid with respect to such Holdback
Shares not previously distributed to such shareholder).
(iv) The Holdback Shares shall be available to satisfy any
indemnification obligations of the shareholders pursuant to Article VIII hereof.
Promptly following the end of the Survival Period (as defined in Section 8.1),
Parent shall return or cause to be returned to the former shareholders of the
Company the Holdback Shares, less (A) any Holdback Shares previously forfeited
to Parent to satisfy any indemnification obligations pursuant to Article VIII
and (B) an additional number of Holdback Shares reasonably sufficient to satisfy
any pending Claims for indemnification made by any Indemnified Party (as such
terms are defined in Article VIII). Any remaining Holdback Shares shall be
released promptly
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following final resolution of, and full payment in connection with, any
indemnification obligations referred to above.
(v) Any Holdback Shares forfeited to Parent in order to satisfy
indemnification claims under Article VIII shall be deemed to reduce the Net
Merger Consideration otherwise due to the shareholders under this Section 1.7.1,
and no shareholder shall have any right to such forfeited Holdback Shares by
virtue of the Merger.
(vi) Stop transfer instructions will be given to Parent's
transfer agent with respect to those certificates evidencing the Holdback Shares
and certificates evidencing the Holdback Shares will contain a legend stating in
substance:
These shares have been pledged as collateral
pursuant to that certain Agreement and Plan of
Merger dated January 8, 2000 by and among Parent,
Austin Acquisition, Inc. and 2order.com, Inc. Prior
to the expiration of the pledge as set forth in such
agreement, these shares may not be offered, sold,
exchanged, transferred or otherwise disposed of.
Parent will terminate such stop transfer instruction and authorize its transfer
agent to remove such restrictive legend and release with respect to any
certificates representing Holdback Shares that are returned by Parent pursuant
to Section 1.7.1(h)(iv).
1.7.2 Exchange of Certificates
As soon as practicable after the Effective Date, Parent shall make
available, and each shareholder of the Company immediately prior to the
Effective Time will be entitled to receive, upon surrender to Parent of one or
more certificates representing Company Common Stock or Company Preferred Stock
for cancellation, certificates representing the number of shares of Parent
Common Stock that such shareholder is entitled to receive pursuant to Section
1.7.1 hereof; provided, however, that the certificates representing the Holdback
Shares shall be delivered to Parent in accordance with this Agreement. The
shares of Parent Common Stock that each such shareholder shall be entitled to
receive pursuant to the Merger shall be deemed to have been issued at the
Effective Time. No interest shall accrue on the Merger Consideration. If the
Merger Consideration (or any portion thereof) is to be delivered to any person
other than the person in whose name the certificate or certificates representing
shares of Company Common Stock or Company Preferred Stock surrendered in
exchange therefor is registered, it shall be a condition to such exchange that
the person requesting such exchange shall pay to Parent any transfer or other
taxes required by reason of the payment of the Merger Consideration to a person
other than the registered holder of the certificate or certificates so
surrendered, or shall establish to the satisfaction of Parent that such tax has
been paid or is not applicable. Notwithstanding the foregoing, neither Parent
nor any other party hereto shall be liable to a holder of shares of Company
Common Stock or Company Preferred Stock for any Merger Consideration delivered
to a public official pursuant to applicable abandoned property, escheat and
similar laws. In the event that any certificates representing shares of Company
Common Stock shall have been lost, stolen or destroyed, upon the making of an
affidavit of
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that fact by the shareholder claiming such certificate to be lost, stolen or
destroyed, Parent shall issue in exchange for such lost, stolen or destroyed
certificate the shares of Parent Common Stock that such shareholder is entitled
to receive pursuant to Section 1.7.1; provided, however, that Parent may in its
discretion and as a condition precedent to the issuance thereof, require such
shareholder to provide Parent with an indemnity agreement against any claim that
may be made against Parent with respect to the certificate alleged to have been
lost, stolen or destroyed.
1.7.3 No Fractional Shares
(a) No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued in the Merger, and no dividend,
stock split or other distribution with respect to Parent Common Stock shall
relate to any such fractional interest, and any such fractional interests shall
not entitle the owner thereof to vote or to any rights of a security holder. In
lieu thereof, Parent shall pay to the holder of shares of Company Common Stock
or Company Preferred Stock who would otherwise be entitled to a fraction of a
share of Parent Common Stock, as soon as practicable after the Effective Date
(and in the same timely manner required for delivery of certificates of Parent
Common Stock provided in Section 1.7.2), an amount in cash equal to such
fraction multiplied by the Closing Average (as defined above).
(b) Subject to the provisions of clause (ii) below, the number
of shares of Parent Common Stock issuable upon exercise of any Company Option or
Company Warrant shall not include any fractional shares. Instead, (i) promptly
following the Closing Date, Parent shall pay to the holder of such Company
Option or Company Warrant, cash equal to such fraction multiplied by the Closing
Average, or (ii) in the case of any Company Option to which Section 421 of the
Code applies by reason of its qualification under Section 422 of the Code, the
exercise price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such Option shall be determined in order to
comply with Section 424 of the Code.
1.7.4 No Further Transfers
After the Effective Time, there shall be no transfers of any shares of
Company Common Stock or Company Preferred Stock on the stock transfer books of
the Surviving Corporation. If, after the Effective Time, certificates formerly
representing shares of Company Common Stock or Company Preferred Stock are
presented to the Surviving Corporation, they shall be forwarded to Parent and
shall be canceled and exchanged in accordance with this Section 1.7.
1.8 Shareholder Matters
The approval by a shareholder of the Company of this Agreement and the
transactions contemplated hereby (whether by written consent or by vote) shall
constitute the agreement by such shareholder who so approves: (a) to enter into
and be bound by the Shareholder Representation Letter (as defined in Section
4.15 below and in the form attached hereto as
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Exhibit 4.15); (b) to appoint the Shareholder Representative (as defined in
Section 8.6 below) to act on such shareholder's behalf as set forth herein; and
(c) to waive any and all rights of appraisal or dissent that may be available to
such shareholder under Georgia Law with respect to the Merger.
1.9 Dissenters' Rights
Holders of shares of Company Common Stock or Company Preferred Stock
who have complied with all the requirements for perfecting appraisal rights for
such shares as required under Georgia Law ("Dissenting Shareholders") shall not
be entitled to any portion of the Total Merger Consideration under this
Agreement with respect to such shares notwithstanding the foregoing provisions
of this Article I, and in lieu thereof shall be entitled to receive from the
Surviving Corporation whatever is determined to be due to them under Georgia Law
with respect to such shares (the "Dissenting Shares"); provided, however, that
Dissenting Shares outstanding at the Effective Time and held by a Dissenting
Shareholder who shall after the Effective Time withdraw such Dissenting
Shareholder's demand for appraisal or lose such Dissenting Shareholder's right
of appraisal as provided by Georgia Law shall be deemed to be converted as of
the Effective Time into the right to receive the consideration that would
otherwise have been payable in respect thereof under, and on the terms and
conditions set forth in, this Agreement if no dissent had been made. Promptly
after execution and delivery of this Agreement, the Company shall take such
actions as are necessary to comply with the requirements of Section 14-2-1302 of
Georgia Law and shall use reasonable best efforts to ensure that the deadline
under Section 14-2-1302 of Georgia Law for demands for appraisal in respect of
the Merger shall have expired prior to the Effective Time. Prior to the
Effective Time, the Company will not settle any demand with respect to any
Dissenting Shares without the consent of Parent. The Company shall give notice
to Parent promptly after it is notified that any shareholder of the Company has
elected or attempted to exercise appraisal rights. Nothing in this Agreement is
intended or shall be construed as an agreement or admission that any statutory
appraisal rights are or may be available with respect to the transactions
contemplated hereby.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as is otherwise specifically set forth with appropriate
cross-references in the Schedule of Exceptions attached hereto as Exhibit 2 (the
"Schedule of Exceptions"), and in order to induce Parent and Merger Sub to enter
into and perform this Agreement and the other agreements and certificates that
are required to be executed pursuant to this Agreement (collectively, the
"Operative Documents"), the Company represents and warrants to Parent and Merger
Sub as of the date of this Agreement and as of the Closing as follows in this
Article II.
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2.1 Organization
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia. The Company has all
requisite corporate power and authority to own, operate and lease its properties
and assets, to carry on its business as now conducted and as currently proposed
to be conducted, and to enter into and perform its obligations under this
Agreement and the other Operative Documents to which the Company is a party, and
to consummate the transactions contemplated hereby and thereby. The Company is
duly qualified and licensed as a foreign corporation to do business and is in
good standing in each jurisdiction in which the character of the Company's
properties occupied, owned or held under lease or the nature of the business
conducted by the Company makes such qualification or licensing necessary, except
where the failure to be so qualified or in good standing has not had and could
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. For purposes of this Agreement, the term "Company
Material Adverse Effect" shall mean any material adverse effect on the business,
operations, assets, liabilities (absolute, accrued, contingent or otherwise),
condition (financial or other) or prospects, identified in materials provided to
Parent by the Company, of the Company and its subsidiaries taken as a whole;
provided, however, that a Company Material Adverse Effect shall not include any
change in general economic conditions or changes that affect the Company's
industry generally.
2.2 Enforceability
The Company has full corporate power and authority to execute, deliver
and perform its obligations under this Agreement and each of the other Operative
Documents to which it is a party and each of the certificates, instruments and
documents executed or delivered by it pursuant to the terms of this Agreement.
All corporate action on the part of the Company and its officers, directors and
shareholders necessary for the authorization, execution, delivery and
performance of this Agreement and the other Operative Documents to which the
Company is a party, the consummation of the Merger, and the performance of all
the Company's obligations under this Agreement and the other Operative Documents
to which the Company is a party has been taken or will be taken as of or prior
to the Effective Time. This Agreement has been, and each of the other Operative
Documents to which the Company is a party at the Closing will have been, duly
executed and delivered by the Company, and this Agreement is, and each of the
other Operative Documents to which the Company is a party will be at the
Closing, a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
2.3 Capitalization
(a) The authorized capital stock of the Company consists of 20,000,000
shares of Company Common Stock and 10,000,000 shares of Company Preferred Stock
designated as 2,720,455 shares of Series A Preferred Stock ("Series A Stock")
and 2,873,564 shares of Series B Preferred Stock ("Series B Stock").
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(b) The issued and outstanding capital stock of the Company consists
solely of 3,383,500 shares of Company Common Stock, 2,720,455 shares of Series A
Stock and 2,643,679 shares of Series B Stock. The issued and outstanding shares,
respectively, of Company Common Stock and of each series of Company Preferred
Stock are held of record and, to the knowledge of the Company, beneficially by
the shareholders of the Company as set forth in Section 2.3(b) of the Schedule
of Exceptions. Such issued and outstanding shares are duly authorized and
validly issued, fully paid and nonassessable, and were issued in compliance with
all applicable federal and state securities laws. To the knowledge of the
Company, no Person (as defined in Section 2.5) other than the shareholders of
the Company holds any interest in any of the outstanding shares. True and
correct copies of the stock records of the Company, showing all issuances and
transfers of shares of capital stock of the Company since inception, have been
provided to Parent or its counsel.
(c) Other than (i) Company Options to purchase up to 873,500 shares of
Company Common Stock that have been granted under the Company's 1996 Stock
Option Plan (the "Company Option Plan"), (ii) Company Warrants to purchase up to
69,741 shares of Company Common Stock, and the Option Dilution Warrants
described in Section 2.3(c) of the Schedule of Exceptions, there are no
outstanding rights of first refusal or offer, preemptive rights, options,
warrants, conversion rights or other agreements, either directly or indirectly,
for the purchase or acquisition from the Company or any shareholder of any
shares of Company Common Stock, Company Preferred Stock or any securities
convertible into or exchangeable for shares of Company Common Stock or Company
Preferred Stock. Set forth in Section 2.3(c) of the Schedule of Exceptions is a
schedule accurately reflecting the shares of Company Common Stock issuable upon
exercise or conversion of the outstanding Company Options and Company Warrants,
the grant or issue dates, vesting schedules and exercise or conversion prices
thereof and, in each case, the identities of the holders. All Company Options
and Company Warrants have been granted with exercise prices equal to the fair
market value per share of Company Common Stock or Company Preferred Stock (as
applicable) on the date of grant, as determined by the Company's Board of
Directors. The Company has delivered to Parent true and correct copies of the
Company Option Plan, the form of stock option agreements relating to the Company
Options granted thereunder and all Company Warrant certificates.
(d) Except as described in Section 2.3(d) of the Schedule of
Exceptions, the Company is not a party or subject to any agreement or
understanding and, to the knowledge of the Company, there is no agreement or
understanding between any Persons that affects or relates to the voting or
giving of written consents with respect to any securities of the Company or the
voting by any director of the Company. No shareholder of the Company or any
affiliate thereof is indebted to the Company, and the Company is not indebted to
any shareholder of the Company or any affiliate thereof. Except as described in
Section 2.3(d) of the Schedule of Exceptions, the Company is not under any
contractual or other obligation to register any of its presently outstanding
securities or any of its securities that may hereafter be issued. All agreements
providing for rights of refusal and co-sale rights and other rights relating to
transfer of stock granted by the Company with respect to the Company Common
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Stock, Company Preferred Stock, Company Options or Company Warrants are
described in Section 2.3(d) of the Schedule of Exceptions.
2.4 Subsidiaries and Affiliates
The Company does not own or control, and has not in the past owned or
controlled, directly or indirectly, any corporation, partnership, limited
liability company or other business entity. The Company does not own, directly
or indirectly, any ownership, equity, or voting interest in, any corporation,
partnership, joint venture or other entity, and has no agreement or commitment
to purchase any such interest.
2.5 No Approvals; No Conflicts
The execution, delivery and performance by the Company of this
Agreement and the other Operative Documents to which the Company is a party and
the consummation of the transactions contemplated hereby and thereby, the
effectiveness of the Merger will not, except as set forth in Section 2.5 of the
Schedule of Exceptions, (a) constitute a violation (with or without the giving
of notice or lapse of time, or both) of any statute, regulation, rule or other
provision of law or any judgment, decree, order or other requirement of any
court or other governmental authority applicable to the Company, (b) require any
consent, approval or authorization of, or declaration, filing or registration
with, any person, corporation, partnership, joint venture, association,
organization, other entity or governmental or regulatory authority (a "Person"),
except for (i) compliance with applicable securities laws and (ii) the filing of
all documents necessary to consummate the Merger with the Georgia Secretary of
State, (c) constitute a breach of or conflict with or result in a default (with
or without the giving of notice or lapse of time, or both) under, or
acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any Material Contract, (d) result in
the creation of any Encumbrance (as defined in Section 2.9(d)) upon any material
assets of the Company or, to the knowledge of the Company, upon any outstanding
shares or other securities of the Company, (e) conflict with or result in a
breach of or constitute a default under any provision of the Articles of
Incorporation or Bylaws of the Company, or (f) invalidate or adversely affect
any permit, license or authorization currently material to the conduct of the
business of the Company.
2.6 Financial Statements
The Company has delivered to Parent (a) audited balance sheets,
statements of income and expense for the fiscal years ended December 31, 1997
and 1998 (the "Year End Financials"), and (b) unaudited balance sheets, and
unaudited statements of income and expense, statements of cash flow and
statements of shareholders' equity of the Company as of and for the eleven-month
period ended November 30, 1999 (the "Interim Financials"). The Year End
Financials and the Interim Financials are collectively referred to as (the
"Financial Statements"). The balance sheet of the Company as of November 30,
1999 is herein referred to as the "Company Balance Sheet." The Financial
Statements have been prepared in conformity with generally accepted accounting
principles in the United States ("GAAP") on a
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basis consistent with prior accounting periods (except that the Interim
Financials do not contain all footnotes and other presentation items that may be
required by GAAP). The Financial Statements were prepared from the books and
records of the Company and fairly present the financial position, results of
operations and changes in financial position of the Company as of the dates and
for the periods indicated, subject, in the case of Interim Financials, to normal
year-end adjustments, which will not be material or significant. The Company has
no liabilities or obligations of any nature (absolute, contingent or otherwise)
that are not fully reflected or reserved against in the Company Balance Sheet
and that would be required under GAAP to be reflected or reserved in a balance
sheet prepared in accordance with GAAP, except liabilities or obligations
incurred since the date of the Company Balance Sheet in the ordinary course of
business and consistent with past practice that are not in excess of $40,000 in
the aggregate or $20,000 individually. The Company maintains standard systems of
accounting established and administered in accordance with GAAP. The Company is
not a guarantor, indemnitor, surety or other obligor of any indebtedness of any
other Person. Section 2.6 of the Schedule of Exceptions sets forth all
promissory notes, loans, lines of credits or similar obligations pursuant to
which the Company is an obligor, together with all the amounts owed by the
Company under such obligations, and all liabilities under equipment leases of
the Company as of November 30, 1999. Section 2.6 of the Schedule of Exceptions
sets forth all indebtedness and other obligations of the shareholders relating
to the Company, together with all the amounts owed by such shareholders in
respect thereof, as of the Closing. The Company's practices with respect to
recognizing software licensing revenue and capitalizing software development
costs, as reflected in the Financial Statements, are reasonable, in accordance
with industry standards and consistent with the advice of the Company's
independent accountants.
2.7 Absence of Certain Changes or Events
Except as set forth in Section 2.7 of the Schedule of Exceptions, since
the date of the Company Balance Sheet, no event has occurred and no state of
facts has developed or is continuing that has had or could reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, and neither the Company nor any of its officers or directors in their
representative capacities, nor, to the Company's knowledge, any shareholder on
behalf of the Company have:
(a) received written notice, or to the Company's knowledge any
other kind of notice, that there has been, will be or may be a loss of, or
contract cancellation by, any current customer, supplier or licensor of the
Company, which loss or cancellation would result in lost annual revenues to the
Company of at least $50,000;
(b) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment other than in the ordinary course of
business and consistent with past practice;
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(c) forgiven or canceled any indebtedness for borrowed money or
waived any claims or rights of material value (including, without limitation,
any indebtedness owing to the Company by any shareholder, officer, director,
employee or affiliate of the Company);
(d) granted, other than in the ordinary course of business and
consistent with past practice, any increase in the compensation of directors,
officers, employees or consultants;
(e) borrowed or agreed to borrow any funds, assumed or become
subject to, whether directly or by way of guarantee or otherwise, any
liabilities or obligations (absolute, accrued or contingent), or incurred any
liabilities or obligations (absolute, accrued or contingent) except liabilities
and obligations incurred in the ordinary course of business and consistent with
past practice not to exceed $50,000 in the aggregate or $25,000 individually, or
increased, or experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves;
(f) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued or contingent) other than the payment, discharge
or satisfaction in the ordinary course of business and consistent with past
practice of claims, liabilities and obligations reflected or reserved against in
the Company Balance Sheet or incurred in the ordinary course of business and
consistent with past practice since the date of the Company Balance Sheet, or
prepaid any obligation having a fixed maturity of more than 90 days from the
date such obligation was issued or incurred;
(g) permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, institutional control, restriction
or charge, except (i) conditional sales or similar security interests granted in
connection with the purchase of equipment or supplies in the ordinary course of
business, (ii) Encumbrances for current taxes not yet due and payable, (iii)
landlord's liens for rental payments not yet due and payable, and (iv)
mechanics', materialmen's, carriers' and other similar statutory liens securing
indebtedness that is in the aggregate less than $25,000, was incurred in the
ordinary course of business and is not yet due and payable;
(h) written down the value of any inventory or written off as
uncollectible any notes or accounts receivable, except for write-downs and
write-offs that are in the aggregate less than $25,000, incurred in the ordinary
course of business and consistent with past practice;
(i) sold, transferred or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible) with an
aggregate net book value in excess of $25,000, except the sale of inventory in
the ordinary course of business and consistent with past practice;
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(j) disposed of or permitted to lapse any rights to the use of
any trademark, trade name, patent or copyright, or disposed of or disclosed to
any Person other than representatives of Parent any trade secret, formula,
process or know-how not theretofore a matter of public knowledge without
obtaining an appropriate confidentiality agreement from such person;
(k) made any single capital expenditure or commitment in excess
of $10,000 for additions to property, plant, equipment or intangible capital
assets or made aggregate capital expenditures in excess of $20,000 for additions
to property, plant, equipment or intangible capital assets;
(l) made any change in any method of accounting or accounting
practice or internal control procedure, except for any such change after the
date hereof required by reason of a concurrent change in GAAP and consented to
by Parent (which consent shall not be unreasonably withheld);
(m) issued any capital stock, other securities or options or
other rights to acquire capital stock or other securities, or declared, paid or
set aside for payment any dividend or other distribution in respect of its
capital stock, or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of the Company, or
otherwise permitted the withdrawal by any of the holders of capital stock of the
Company of any cash or other assets (real, personal or mixed, tangible or
intangible), in compensation, indebtedness or otherwise, other than payments of
compensation or the issuance of options in the ordinary course of business and
consistent with past practice;
(n) except for transactions that are not material in the
aggregate, loaned or advanced any amount to, or sold, transferred or leased any
properties or assets (real, personal or mixed, tangible or intangible) to, or
entered into any agreement or arrangement with, any of the Company's officers,
directors or employees or any affiliate of the Company's officers directors or
employees, except directors' fees and compensation paid to officers and
employees at rates consistent with past practice, and except stock purchase
agreements and stock option agreements with such individuals;
(o) entered into or agreed to enter into, or otherwise suffered
to be outstanding, any power of attorney of the Company or any obligations or
liabilities (absolute, accrued or contingent) of the Company, as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise, in respect of
the obligation of any other Person;
(p) received notice of, or otherwise obtained knowledge of: (i)
any claim, action, suit, arbitration, proceeding or investigation involving,
pending against or threatened against the Company or any employee of the Company
in his or her capacity as a representative of the Company before or by any court
or governmental or nongovernmental department, commission, board, bureau, agency
or instrumentality, or by any other Person; (ii) any valid basis for any
material claim, action, suit, arbitration, proceeding, investigation or the
application of any fine or penalty adverse to the Company before or by any
Person; or
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(iii) any outstanding or unsatisfied judgments, orders, decrees or stipulations
to which the Company or any officer, director or employee of the Company is a
party that relate directly to the transactions contemplated herein or that have
had or could reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect;
(q) entered into or agreed to any sale, assignment, transfer or
license of any IP Rights or Technology (as defined in Section 2.17 below) or
other intangible assets of the Company to a third party, except for non
exclusive licenses granted to customers in the ordinary course of business (true
and complete copies of which have been provided to Parent), or any amendment or
change to any existing license or other agreement relating to any IP Rights or
Technology;
(r) except in the ordinary course of business, consistent with
past practice, and in amounts and on terms consistent with past practice
incurred, assumed or guaranteed any indebtedness for borrowed money or granted
any security interest in any assets; or
(s) agreed, whether in writing or otherwise, to take any action
described in this Section 2.7.
2.8 Taxes
(a) (i) All Tax Returns (as defined below) required to be filed by or
on behalf of the Company have been timely filed and all such Tax Returns were
(at the time they were filed) and are true, correct and complete in all
respects; (ii) except as set forth in Section 2.8(a) of the Schedule of
Exceptions, all Taxes (as defined below) of the Company due and payable for
periods ending on or prior to the Closing Date (whether or not reflected on any
Tax Return) have been fully and timely paid; (iii) no waivers of statutes of
limitation have been given or requested with respect to the Company in
connection with any Tax Returns covering the Company with respect to any Taxes
payable by it; (iv) no taxing authority in a jurisdiction where the Company does
not file Tax Returns has made a claim, assertion or threat to the Company that
the Company is or may be subject to taxation by such jurisdiction; (v) the
Company has duly and timely withheld from employee salaries, wages and other
compensation and paid over to the appropriate governmental authority all amounts
required to be so withheld and paid over for all periods under all applicable
laws; (vi) there are no liens with respect to Taxes on any of the Company's
property or assets other than liens for current Taxes not yet payable; (vii)
there are no Tax rulings, requests for rulings, or closing agreements relating
to the Company that could affect the liability for Taxes or the amount of
taxable income of the Company for any period (or portion of a period) after the
date hereof; and (viii) any adjustment of Taxes of the Company made by the IRS
(as defined below) in any examination that is required to be reported to the
appropriate state, local or foreign taxing authorities has been reported, and
any additional Taxes due with respect thereto have been paid.
(b) Neither the Company nor any other Person on behalf of the Company
(i) has filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in
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Section 341(f)(4) of the Code) owned by the Company; (ii) has executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law; or (iii) has agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code or any similar provision of state, local
or foreign law by reason of a change in accounting method initiated by the
Company or has notice that a governmental authority has proposed any such
adjustment or change in accounting method.
(c) There is no outstanding dispute or claim concerning any Tax
liability of the Company either (i) claimed or raised by any authority in
writing or (ii) as to which the Company has knowledge based on contact or
correspondence with any agent of such authority, nor to the knowledge of the
Company is any such claim or dispute pending. Section 2.8(c) of the Schedule of
Exceptions contains a complete and accurate list of all Tax Returns filed with
respect to the Company for taxable periods ended on or after the Company's
inception or the inception of any predecessor that have been audited, and
indicates those Tax Returns that currently are the subject of audit. The Company
has delivered to Parent correct and complete copies of all Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by the Company since the Company's inception.
(d) The Company has not made any payments, is not obligated to make any
payments and is not a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Section
280G of the Code (or any similar provision of state, local or foreign law).
(e) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(f) The Company is not a party to any Tax allocation or sharing agreement.
The Company (i) has not been a member of a Tax Group (as defined below) filing a
consolidated income Tax Return under Section 1501 of the Code (or any similar
provision of state, local or foreign law) and (ii) does not have any liability
for Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a transferee or successor
by contract or otherwise.
(g) The unpaid Taxes of the Company (i) did not, as of November 30, 1999,
exceed the reserve for Tax liability set forth on the face (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) of the Company Balance Sheet and (ii) do not materially
exceed that reserve as adjusted for the passage of time and operations in the
ordinary course of business through the Closing Date.
(h) Except as set forth in Section 2.8(h) of the Schedule of Exceptions,
there has been no ownership change, as defined in Section 382(g) of the Code (or
any comparable provision of state, local or foreign law), with respect to the
Company during or after any taxable period in which the Company incurred a net
operating loss.
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(i) All Company Options that the Company has treated as incentive stock
options under Section 421 of the Code meet the requirements of Section 422 of
the Code.
As used in this Agreement, the following terms shall have the following
meanings:
"Taxes" means all foreign, federal, state, county or local taxes, charges,
fees, levies, imposts, duties and other assessments, including, but not limited
to, any income, alternative minimum or add-on, estimated, gross income, gross
receipts, sales, use, transfer, transactions, intangibles, ad valorem, value-
added, franchise, registration, title, license, capital, paid-up capital,
profits, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, real property, recording, personal property, federal highway use,
commercial rent, environmental (including, but not limited to, taxes under
Section 59A of the Code) or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalties or additions to tax; and "Tax" means any
---
of the foregoing Taxes.
"Tax Group" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Company is now
or was formerly a member.
"Tax Returns" means any return, declaration, report, claim or refund,
information return, statement or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
2.9 Property
(a) Section 2.9(a) of the Schedule of Exceptions contains a complete and
accurate list of all real property owned, leased or currently being used by the
Company (the "Real Property"). The Company has delivered to Parent true and
complete copies of all written leases, subleases, rental agreements, contracts
of sale, tenancies or licenses relating to the Real Property and written
summaries of the terms of any oral leases, subleases, rental agreements,
contracts of sale, tenancies or licenses to which the Real Property is subject.
(b) Section 2.9(b) of the Schedule of Exceptions contains a complete and
accurate list of each item of personal property having a current value in excess
of $10,000 that is owned, leased, rented or used by the Company (the "Personal
Property"); provided, however, that such list need not describe the Technology
or the IP Rights (as defined in Sections 2.17.2 and 2.17.5, respectively) listed
in Section 2.17 of the Schedule of Exceptions. The Company has delivered to
Parent true and complete copies of all leases, subleases, rental agreements,
contracts of sale, tenancies or licenses to which the Personal Property is
subject.
(c) The Real Property and the Personal Property include all the properties
and assets (whether real, personal or mixed, tangible or intangible) (other
than, in the case of the Personal Property, property rights with an individual
current value of less than $10,000 and the Technology and IP Rights) reflected
in the Company Balance Sheet (except for such properties
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or assets sold since the date of the Company Balance Sheet in the ordinary
course of business and consistent with past practice) and all the properties and
assets purchased by the Company since the date of the Company Balance Sheet
(other than, in the case of the Personal Property, property rights with an
individual value of less than $10,000 and the Technology and IP Rights). The
Real Property and the Personal Property include all material property used in
the business of the Company, other than the Technology and IP Rights. The
Company's offices and other structures and its Personal Property are in good
operating condition and repair, normal wear and tear excepted, are adequate for
the uses to which they are being put, and, to the Company's knowledge, comply in
all material respects with applicable safety and other laws and regulations.
(d) The Company's title to or leasehold interest in each parcel of the
Real Property is free and clear of all liens, mortgages, pledges, deeds of
trust, security interests, charges, encumbrances and other adverse claims or
interests of any kind (each, an "Encumbrance"), except for Encumbrances related
to Taxes not yet due and payable, landlords' liens for rental payments not yet
due and payable and Encumbrances created by the lessors thereof (each a
"Permitted Encumbrance"). Each lease of any portion of the Real Property is
valid, binding and enforceable in accordance with its terms against the parties
thereto and, to the Company's knowledge, against any other Person with an
interest in such Real Property, the Company has performed in all material
respects all obligations imposed on it thereunder, and neither the Company nor,
to the Company's knowledge, any other party thereto is in material default
thereunder, nor is there any event that with notice or lapse of time, or both,
would constitute a material default thereunder by the Company or, to the
Company's knowledge, by any other party. Except as set forth in Section 2.9(d)
of the Schedule of Exceptions, the Company has not granted any lease, sublease,
tenancy or license of, or entered into any rental agreement or contract of sale
with respect to, any portion of the Real Property.
(e) The Personal Property is free and clear of all Encumbrances (except
as reflected in the Financial Statements, except for Encumbrances created by the
lessors thereof and except for Encumbrances related to Taxes not yet due and
payable by the Company), and, other than leased Personal Property that is so
noted on the list supplied pursuant to Section 2.9(b), the Company owns such
Personal Property. Each lease, license, rental agreement, contract of sale or
other agreement to which the Personal Property is subject is valid, binding and
enforceable in accordance with its terms against the parties thereto, the
Company has performed in all material respects all obligations imposed on it
thereunder, and neither the Company nor, to the Company's knowledge, any other
party thereto is in material default thereunder, nor is there any event that
with notice or lapse of time, or both, would constitute a material default by
the Company or, to the Company's knowledge, any other party thereunder. The
Company has not granted any lease, sublease, tenancy or license of any portion
of the Personal Property, except in the ordinary course of business.
(f) The Company's offices, manufacturing and production facilities and
other structures and the Company's Personal Property are adequate for the uses
to which they are being put and there are no applicable adverse zoning, building
or land use codes or rules,
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ordinances, regulations or other restrictions relating to zoning or land use
that currently or, to the knowledge of the Company may prospectively prevent, or
cause the imposition of material fines or penalties as the result of, the use of
all or any portion of the Real Property for the conduct of the business as
presently conducted. The Company has received all necessary approvals with
regard to occupancy and maintenance of the Real Property.
2.10 Contracts
2.10.1 Material Contracts
Section 2.10.1 of the Schedule of Exceptions contains a complete and
accurate list (other than the IP Rights listed in Section 2.17 of the Schedule
of Exceptions) of all contracts, agreements and understandings, oral or written,
to which the Company is currently a party or by which the Company is currently
bound that (x) provide for potential payments by or to the Company in excess of
$10,000, (y) are otherwise material to the Company's business or (z) the loss of
which could reasonably be expected to cause a Company Material Adverse Effect
(collectively, "Material Contracts"), including, without limitation, acquisition
agreements, strategic alliance agreements, stock purchase agreements,
shareholders agreements, security agreements, license agreements, software
development agreements, distribution agreements, joint venture agreements,
reseller agreements, credit agreements, and instruments relating to the
borrowing of money. Except as disclosed in Section 2.10.1 of the Schedule of
Exceptions, all such agreements are valid, binding and enforceable in accordance
with their terms against the Company and, to the Company's knowledge, each other
party thereto, and are in full force and effect, the Company has performed in
all material respects all obligations imposed on it thereunder, and neither the
Company nor, to the Company's knowledge, any other party thereto is in material
default thereunder, nor to the Company's knowledge is there any event that with
notice or lapse of time, or both, would constitute a material default by the
Company or, to the Company's knowledge, any other party thereunder. True and
complete copies of each such Material Contract (or written summaries of the
terms of any such oral contract) have been delivered to Parent by the Company.
Except as set forth in Section 2.10.1 of the Schedule of Exceptions, the Company
has none of the following:
(a) contracts with directors, officers, shareholders, employees,
agents, consultants, advisors, salespeople, sales representatives, distributors
or dealers that cannot be canceled by the Company within 30 days' notice without
liability, penalty or premium, any agreement or arrangement providing for the
payment of any bonus or commission based on sales or earnings, or any
compensation agreement or arrangement with former employees of the Company;
(b) employment agreements, whether express or implied, or any
other agreements for services that contain severance or termination pay
liabilities or obligations;
(c) noncompetition agreements or other arrangements that would
prevent the Company from carrying on its business anywhere in the world;
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(d) notices that any party to a contract listed in Section
2.10.1 of the Schedule of Exceptions intends to cancel, terminate or refuse to
renew such contract (if such contract is renewable);
(e) material disputes with any of its suppliers, customers,
distributors, OEM resellers, licensors or licensees;
(f) product distribution agreements, development agreements or
license agreements as licensor or licensee (except for standard nonexclusive
software licenses granted to end-user customers in the ordinary course of
business, the form of which has been provided to Parent, or standard licenses
purchased by the Company for off-the-shelf software);
(g) joint venture contracts or arrangements or any other
agreements that involve a sharing of profits with other persons; and
(h) instruments evidencing indebtedness for borrowed money by
way of a direct loan, sale of debt securities, purchase money obligation,
conditional sale or guarantee, or otherwise, except for trade indebtedness
incurred in the ordinary course of business, and except as disclosed in the
Financial Statements
2.10.2 Required Consents
The execution and delivery of this Agreement and the performance of the
obligations of the Company hereunder will not constitute a default under any
Material Contract and do not require the consent of any other party to any
Material Contract, except for those consents listed in Section 2.10.2 of the
Schedule of Exceptions, all of which will be obtained at or prior to the
Closing.
2.11 Customers and Suppliers
Section 2.11 of the Schedule of Exceptions sets forth: (a) a complete and
accurate list (in all material respects) of the customers of the Company
accounting for 2% or more of the Company's revenues during the fiscal year last
ended and the eleven-month period ended November 30, 1999, showing the
approximate total revenues from each such customer during the fiscal year last
ended and the eleven-month period ended November 30, 1999, and (b) a complete
and accurate list (in all material respects) of the suppliers of the Company
from whom the Company has purchased 5% or more of the goods or services
purchased by the Company in the fiscal year last ended and the eleven-month
period ended November 30, 1999. The Company has not received any notice from its
customers or suppliers that would cause it, in its reasonable judgment, to
expect any material modification to its relationship with any customers or
suppliers named in Section 2.11 of the Schedule of Exceptions.
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2.12 Orders; Commitments; Warranties and Returns
Section 2.12 of the Schedule of Exceptions sets forth the Company's
warranties currently made with respect to its business, products and services,
and current policies with respect to returns of products. Except as set forth in
Section 2.12 of the Schedule of Exceptions, the Company has experienced no
actual or, to its knowledge, threatened claims against it for warranty costs
exceeding $50,000 in the aggregate. As used above, the term "warranty cost"
shall mean costs and expenses associated with correcting, returning or replacing
defective or allegedly defective products or services, whether such costs and
expenses arise out of claims sounding in warranty, contract, tort or otherwise.
2.13 Claims and Legal Proceedings
There are no claims, actions, suits, arbitrations, investigations or
proceedings pending or, to the Company's knowledge, threatened against or
involving the Company before or by any court or governmental or nongovernmental
department, commission, board, bureau, agency or instrumentality, or by any
other Person. To the Company's knowledge, there is no valid basis for any claim,
action, suit, arbitration, proceeding or investigation before or by any Person,
except as has not had and could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect. There are no material
outstanding or unsatisfied judgments, orders, decrees or stipulations to which
the Company is a party. Section 2.13 of the Schedule of Exceptions sets forth a
description of any material disputes that have been settled or resolved by
litigation or arbitration since the Company's inception.
2.14 Labor and Employment Matters
There are no material labor disputes, employee grievances or disciplinary
actions pending or, to the Company's knowledge, threatened against or involving
the Company or any of its present or former employees in connection with their
employment at the Company. The Company has complied in all material respects
with all provisions of law relating to employment and employment practices,
terms and conditions of employment, wages and hours. The Company is not engaged
in any unfair labor practice and has no material liability for any arrears of
wages or Taxes or penalties for failure to comply with any such provisions of
law. There is no labor strike, dispute, slowdown or stoppage pending or, to the
Company's knowledge, threatened against or affecting the Company, and the
Company has not experienced any work stoppage or other labor difficulty since
its inception. No collective bargaining agreement is binding on the Company. The
Company has no knowledge of any organizational efforts presently being made or
threatened by or on behalf of any labor union with respect to employees of the
Company. Each employee, officer and consultant of the Company has executed a
nondisclosure and invention assignment agreement in the form provided to Parent.
To the Company's knowledge, no employee, officer or consultant of the Company is
in violation of any such agreement or any employment agreement, noncompetition
agreement, patent disclosure agreement, invention assignment agreement,
proprietary information agreement or other contract or agreement relating to the
relationship of such employee with the Company or any other party. All employees
of the Company are employed
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on an "at will" basis, and are, to the Company's knowledge, eligible to work and
are lawfully employed in the United States.
2.15 Employee Benefit Plans
2.15.1 Employee Benefit Plan Listing
Section 2.15.1 of the Schedule of Exceptions accurately lists all of the
Company's retirement, pension, profit sharing, deferred compensation, savings,
bonus, incentive, cafeteria, flexible benefits, medical, dental, vision,
hospitalization, life insurance, group insurance, medical expense reimbursement,
dependent care assistance, tuition reimbursement, disability, accident, sick
pay, holiday, vacation, severance, stock purchase, stock option, stock
appreciation rights, fringe benefit and other employee benefit plans, funds,
policies, programs, contracts, arrangements and payroll practices (including,
but not limited to, all "employee benefit plans," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and
all employment, consulting and personal service contracts and agreements,
whether formal or informal, whether written or unwritten, (a) sponsored,
maintained or contributed to by the Company, (b) covering or benefiting any
current or former officer, employee, agent, director or independent contractor
of the Company (or any dependent or beneficiary of any such individual), or (c)
with respect to which the Company has (or could have) any obligation or
liability (such plans, funds, policies, programs, contracts, arrangements and
payroll practices are hereinafter referred to collectively as "Employee Benefit
Plans" and each individually as an "Employee Benefit Plan"). The Company does
not have any agreement, arrangement, commitment or obligation, whether formal or
informal, whether written or unwritten, to create (or contribute to) any
additional employee benefit plan, fund, policy, program, contract, arrangement
or payroll practice, or to modify or amend any existing Employee Benefit Plan.
There has been no amendment, interpretation or other announcement by the Company
(written or oral) relating to, or change in participation or coverage under, any
Employee Benefit Plan that, either alone or together with other such items or
events, could increase the expense of maintaining the Employee Benefit Plans
above the level of expense incurred with respect thereto for the most recent
fiscal year included in the Financial Statements. Also set forth in such Section
2.15.1 of the Schedule of Exceptions is the annual amount expected to be paid by
the Company pursuant to each Employee Benefit Plan for the fiscal year last
ended. The Company does not have any agreement, arrangement or commitment,
whether formal or informal to create any additional Employee Benefit Plan.
Except as set forth in Section 2.15.1 of the Schedule of Exceptions, the terms
of each Employee Benefit Plan permit the Company to amend or terminate such
Employee Benefit Plan at any time and for any reason without penalty.
2.15.2 Documents Provided
The Company has delivered to Parent true, correct and complete copies (or,
in the case of unwritten Employee Benefit Plans, descriptions) of all Employee
Benefit Plans (and all amendments thereto), along with, to the extent applicable
to the particular Employee Benefit Plan, the following information: (a) copies
of the last three annual reports (Form 5500 series)
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filed with respect to such Employee Benefit Plan; (b) copies of the summary plan
descriptions, summaries of material modifications and all material employee
manuals or communications filed or distributed with respect to such Employee
Benefit Plan during the last three years; (c) copies of all contracts (and any
amendments thereto) relating to such Employee Benefit Plan, including, but not
limited to, service provider agreements, administrative service agreements,
insurance contracts, annuity contracts, investment management agreements and
record-keeping agreements; (d) copies of all documents relating to any loans to
the Employee Benefit Plan, including, but not limited to, any and all notes,
security agreements and guarantees; (e) the most recent determination, opinion,
notification or advisory letter issued by the IRS with respect to such Employee
Benefit Plan and (f) notice of any material adverse change occurring with
respect to the Employee Benefit Plan since the date of the most recently
completed and filed annual report.
2.15.3 Compliance
With respect to each Employee Benefit Plan, (a) such Employee Benefit Plan
is, and at all times since its inception has been, maintained, administered and
operated in all material respects in accordance with its terms and in compliance
in all material respects with all applicable laws, statutes, orders, rules and
regulations, and all requirements prescribed thereby, including, but not limited
to, ERISA and the Code; (b) all amendments and actions required to bring such
Employee Benefit Plan into conformity with the applicable provisions of ERISA,
the Code and other applicable laws and regulations have been made or taken
within the time prescribed by law, except to the extent that such amendments or
actions are not required by law to be made or taken until after the Closing Date
and are disclosed in Section 2.15.3 of the Schedule of Exceptions; (c) the
Company, and, to the Company's knowledge, each fiduciary of such Employee
Benefit Plan and, to the Company's knowledge, all other Persons have, at all
times, properly performed all obligations, whether arising by operation of law
or by contract, required to be performed by each of them in connection with such
Employee Benefit Plan; (d) all returns, reports and other disclosures relating
to such Employee Benefit Plan required to be filed with any governmental entity
or agency or furnished to any participant or beneficiary have been properly
completed or prepared and timely filed or furnished in accordance with
applicable law; (e) neither the Company nor, to the Company's knowledge, any
other fiduciary of such Employee Benefit Plan has engaged in any transaction or
acted or failed to act in a manner that violates the fiduciary requirements of
ERISA or any other applicable law; and (f) no event has occurred or, to the
Company's knowledge, is threatened or about to occur that constitutes or could
constitute a nonexempt prohibited transaction under Section 406 or 407 of ERISA
or under Section 4975 of the Code. Each Employee Benefit Plan that constitutes a
"group health plan," as defined in Section 607(1) or 733(a)(1) of ERISA or
Section 4980B(g)(2) of the Code, has been maintained, administered and operated
at all times since its inception in compliance with (and the Company has never
violated any of) the requirements of Parts 6 and 7 of Subtitle B of Title I of
ERISA, Section 4980B(f) of the Code, any regulations under such ERISA and Code
sections and any other applicable federal, state, local or foreign law regarding
the provision or continuation of health insurance coverage or other welfare
benefits (within the meaning of Section 3(1) of ERISA). Each Employee Benefit
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Plan that is intended to be qualified under Section 401(a) of the Code is, and
at all times since its inception has been, so qualified, and its related trust
or annuity contract is, and at all times since its inception has been, exempt
from taxation under Section 501(a) of the Code, and each such Employee Benefit
Plan (and its related trust(s) and/or annuity contract(s)) is the subject of an
unrevoked favorable determination letter from the IRS to that effect. To the
Company's knowledge, nothing has occurred since the most recent favorable
determination letter issued with respect to each such Employee Benefit Plan, and
no circumstances exist, or are reasonably expected by the Company to occur, that
could cause the Company (or such Employee Benefit Plan) to lose its ability to
rely on such determination letter or could cause the IRS to revoke such
determination letter. To the Company's knowledge, no event or omission has
occurred, or is reasonably expected by the Company to occur (including, but not
limited to, any of the transactions contemplated in or by this Agreement), with
respect to any Employee Benefit Plan that has or could subject, directly or
indirectly, the Company or any other Person to a tax under Chapter 43 of
Subtitle D of the Code or a penalty under Part 5 of Subtitle B of Title I of
ERISA.
2.15.4 Contributions and Premium Payments
All contributions, premiums and other payments due or required to be made
to each Employee Benefit Plan under the terms of such Employee Benefit Plan,
ERISA, the Code or other applicable law have been timely paid, or, if not yet
due, have been properly recorded on the books of the Company.
2.15.5 Related Employers
The Company is not, and has never been, a member of (a) a controlled group
of corporations, within the meaning of Section 414(b) of the Code, (b) a group
of trades or businesses under common control, within the meaning of Section
414(c) of the Code, (c) an affiliated service group, within the meaning of
Section 414(m) of the Code, or (d) any other group of Persons treated as a
single employer under Section 414(o) of the Code.
2.15.6 Multiemployer and Title IV Plans
The Company does not maintain or contribute to, and has never maintained or
contributed to (or been obligated to contribute to), any multiemployer plan as
defined in Section 3(37) or Section 4001(a)(3) of ERISA or 414(f) of the Code,
any multiple employer plan within the meaning of Section 4063 or 4064 of ERISA
or Section 413(c) of the Code or any employee benefit plan, fund, program,
contract or arrangement that is subject to Section 412 of the Code, Section 302
of ERISA or Title IV of ERISA.
2.15.7 Post-Termination Welfare Benefits
Neither the Company nor any Employee Benefit Plan provides or has any
obligation to provide (or contribute toward the cost of) health, severance or
any other welfare benefits (within the meaning of Section 3(1) of ERISA) with
respect to any current or former officer,
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employee, agent, director or independent contractor of the Company or any other
entity beyond such individual's retirement or other termination of service,
other than continuation coverage mandated by Sections 601 through 608 of ERISA
or Section 4980B(f) of the Code.
2.15.8 Suits, Claims and Investigations
There are no actions, suits or claims (other than routine claims for
benefits) pending or, to the Company's knowledge, threatened with respect to (or
against the assets of) any Employee Benefit Plan, nor, to the Company's
knowledge, is there a basis for any such action, suit or claim. No Employee
Benefit Plan is currently under investigation, audit or review, directly or
indirectly, by the IRS, the Department of Labor (the "DOL") or any other
governmental entity or agency, and, to the Company's knowledge, no such action
is contemplated or under consideration by the IRS, the DOL or any other
governmental entity or agency.
2.15.9 Payments Resulting From Transactions
Except as set forth in Section 2.15.9 of the Schedule of Exceptions,
neither the execution and delivery of this Agreement or any of the other
Operative Documents nor the consummation of the transactions contemplated in (or
by) this Agreement or any of the other Operative Documents will (a) entitle any
current or former officer, employee, agent, director or independent contractor
of the Company to severance pay, unemployment compensation or any other payment
from the Company or any other Person, or otherwise increase the amount of
compensation due to any such individual, or (b) result in any benefit or right
becoming established or increased, or accelerate the time of payment or vesting
of any benefit, under any Employee Benefit Plan, whether or not some other
subsequent action or event would be required to trigger any of the items
specified in (a) or (b) above.
2.16 Personnel
Section 2.16 of the Schedule of Exceptions lists (a) the names and current
compensation amounts of all directors and officers of the Company; (b) the wage
rates for nonsalaried and nonofficer salaried employees of the Company by
classification, and all union contracts (if any); (c) all group insurance
programs in effect for employees of the Company; (d) the names and current
compensation packages of all independent contractors and consultants of the
Company; and (e) the family relationships, if any, among such personnel. The
Company is not in default with respect to any of its obligations referred to in
clause (b) above and has no, and will not incur any, material obligation or
liability for severance or back pay owed through or by virtue of the Merger.
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2.17 Intellectual Property
2.17.1 General
The Company owns or is licensed and has all rights in and to the following
as required to conduct its business as now conducted and as proposed to be
conducted: (a) all products, tools, computer programs, specifications, source
code, object code, graphics, devices, techniques, algorithms, methods,
processes, procedures, packaging, trade dress, formulae, drawings, designs,
improvements, discoveries, concepts, user interfaces, software, "look and feel,"
development and other tools, content, inventions (whether or not patentable or
copyrightable and whether or not reduced to practice), designs, logos, know-how,
concepts and other technology that are now, or during the two years prior to the
date of this Agreement have been, or currently are proposed to be, developed,
produced, used, marketed or sold by the Company (collectively, the "Technology-
Related Assets"); and (b) all intellectual property and other proprietary rights
in the Technology-Related Assets, including, without limitation, all trade
names, trademarks, domain names, service marks, logos, brand names and other
identifiers, trade secrets, copyrights and domestic and foreign letters patent,
and the registrations, applications, renewals, extensions and continuations (in
whole or in part) thereof, all goodwill associated therewith and all rights and
causes of action for infringement, misappropriation, misuse, dilution or unfair
trade practices associated therewith.
2.17.2 Company Technology
Section 2.17.2 of the Schedule of Exceptions sets forth a list of all
products and tools developed, produced, used, marketed or sold by the Company
during the two years prior to the date of this Agreement, together with all
prior versions, predecessors or precursors to such products or tools
(collectively, the "Products"). Except for the Third Party Technologies (as
defined in Section 2.17.3), the Company owns all right, title and interest in
and to the following (collectively, the "Technology"), free and clear of all
Encumbrances, other than Permitted Encumbrances: (a) the Products, together with
any and all codes, techniques, software tools, formats, designs, user
interfaces, content and "look and feel" related thereto; (b) any and all
updates, enhancements, corrections, modifications, improvements and new releases
related to the items set forth in clause (a) above; (c) any and all technology
and work in progress related to the items set forth in clauses (a) and (b)
above; and (d) all inventions, discoveries, processes, designs, trade secrets,
know-how and other confidential or proprietary information related to the items
set forth in clauses (a), (b), and (c) above. The Technology, excluding the
Third Party Technologies (as defined below), is sometimes referred to herein as
the "Company Technology."
2.17.3 Third Party Technology
Section 2.17.3 of the Schedule of Exceptions sets forth a list of all
Technology used in the Company's business for which the Company does not own all
right, title and interest (collectively, the "Third Party Technologies"), and
all license agreements or other contracts pursuant to which the Company has the
right to use (in the manner used by the Company, or
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intended or necessary for use with the Company Technology) the Third Party
Technologies (the "Third Party Licenses"), indicating, with respect to each of
the Third Party Technologies listed therein, the owner thereof and the Third
Party License applicable thereto. The Company has the lawful right to use (free
of any material restriction not expressly set forth in the Third Party Licenses)
(a) all Third Party Technology that is incorporated in or used in the
development or production of the Company Technology and (b) all other Third
Party Technology necessary for the conduct of the Company's business as now
conducted and as proposed to be conducted in any written materials furnished by
the Company to Parent. All Third Party Licenses are valid, binding and in full
force and effect, the Company and, to the Company's knowledge, each other party
thereto have performed in all material respects their obligations thereunder,
and neither the Company nor, to the Company's knowledge, any other party thereto
is in material default thereunder, nor to the Company's knowledge has there
occurred any event or circumstance that with notice or lapse of time or both
would constitute a material default or event of material default on the part of
the Company or, to the Company's knowledge, any other party thereto or give to
any other party thereto the right to terminate or modify any Third Party
License. The Company has not received written notice, or to the Company's
knowledge any other kind of notice, that any party to any Third Party License
intends to cancel, terminate or refuse to renew (if renewable) such Third Party
License or to exercise or decline to exercise any option or right thereunder.
2.17.4 Trademarks
Section 2.17.4 of the Schedule of Exceptions sets forth a list of all
trademarks, trade names, brand names, service marks, logos or other identifiers
for the Products or otherwise used by the Company in its business (the "Marks").
The Company has full legal and beneficial ownership, free and clear of any
Encumbrances, other than Permitted Encumbrances, of all rights conferred by use
of the Marks in connection with the Products or otherwise in the Company's
business and, as to those Marks that have been registered in the United States
Patent and Trademark Office, by federal registration of the Marks.
2.17.5 Intellectual Property Rights
Section 2.17.5 of the Schedule of Exceptions sets forth all patents, patent
applications, copyright registrations (and applications therefor) and trademark
registrations (and applications therefor) (collectively, the "IP Registrations")
associated with the Company Technology and the Marks. The Company owns all
right, title and interest, free and clear of any Encumbrances, in and to the IP
Registrations, together with any other rights in or to any copyrights
(registered or unregistered), rights in the Marks (registered or unregistered),
trade secret rights and other intellectual property rights (including, without
limitation, rights of enforcement) contained or embodied in the Company
Technology and the Marks (collectively, the "IP Rights").
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2.17.6 Maintenance of Rights
The Company has not conducted its business, and has not used or enforced
(or, to its knowledge, failed to use or enforce) the IP Rights, in a manner that
would result in the abandonment, cancellation or unenforceability of any item of
the IP Rights or the IP Registrations, and the Company has not taken (or, to its
knowledge, failed to take) any action that would result in the forfeiture or
relinquishment of any IP Rights or IP Registrations, in each case where such
abandonment, cancellation, unenforceability, forfeiture or relinquishment has
had or could reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. Except as set forth in Section 2.17.6 of the
Schedule of Exceptions, the Company has not granted to any third party any
rights or permissions to use any of the Technology or the IP Rights. To the best
of the Company's knowledge, except pursuant to reasonably prudent safeguards,
(a) no third party has received any confidential information relating to the
Technology or the IP Rights and (b) the Company is not under any contractual or
other obligation to disclose to any third party any Company Technology.
2.17.7 Third Party Claims
(a) The Company has not received any notice or claim (whether written,
oral or otherwise) challenging the Company's ownership or rights in the Company
Technology or the IP Rights or claiming that any other person or entity has any
legal or beneficial ownership with respect thereto; (b) all the IP Rights are
legally valid and enforceable without any material qualification, limitation or
restriction on their use, and the Company has not received any notice or claim
(whether written, oral or otherwise) challenging the validity or enforceability
of any of the IP Rights; and (c) to the Company's knowledge, no other person or
entity is infringing or misappropriating any part of the IP Rights or otherwise
making any unauthorized use of the Company Technology.
2.17.8 Infringement by the Company
(a) The use of any of the Technology in the Company's business does not
infringe, violate or interfere with or constitute an appropriation of any right,
title or interest (including, without limitation, any patent, copyright,
trademark or trade secret right) held by any other person or entity, and there
have been no claims made with respect thereto; (b) the use of any of the Marks
and other IP Rights in the Company's business does not infringe, violate or
interfere with or constitute an appropriation of any right, title or interest
(including, without limitation, any patent, copyright, trademark or trade secret
right) held by any other person or entity, and there have been no claims made
with respect thereto; and (c) the Company has not received any notice or claim
(whether written, oral or otherwise) regarding any infringement,
misappropriation, misuse, abuse or other interference with any third party
intellectual property or proprietary rights (including, without limitation,
infringement of any patent, copyright, trademark or trade secret right of any
third party) by the Company, the Technology or the Marks or other IP Rights, or
claiming that any other entity has any claim of infringement with respect
thereto.
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2.17.9 Confidentiality
(a) The Company has not disclosed any source code regarding the Technology
to any person or entity other than those persons or entities set forth on
Section 2.17.9 of the Schedule of Exceptions, all of whom have entered into a
written nondisclosure agreement with the Company; (b) the Company has at all
times maintained and diligently enforced commercially reasonable procedures to
protect all confidential information relating to the Technology; (c) neither the
Company nor any escrow agent is under any contractual or other obligation to
disclose the source code or any other proprietary information included in or
relating to the Technology; and (d) the Company has not deposited any source
code relating to the Technology into any source code escrows or similar
arrangements. If, as disclosed in Section 2.17.9 of the Schedule of Exceptions,
the Company has deposited any source code to the Technology into source code
escrows or similar arrangements, no event has occurred that has or could
reasonably form the basis for a release of such source code from such escrows or
arrangements.
2.17.10 Domain Names
Section 2.17.10 of the Schedule of Exceptions sets forth a list of all
Internet domain names used by the Company in its business (collectively, the
"Domain Names"). The Company has, and upon the Closing the Surviving Corporation
will have, a valid registration and all material rights (free of any material
restriction) in and to the Domain Names, including, without limitation, all
rights necessary to continue to conduct the Company's business as it is
currently conducted.
2.17.11 Year 2000
The Company Technology, and to the Company's knowledge the Third Party
Technology that is incorporated in or used in the development or production of
the Company Technology (the "Incorporated Third Party Technology") is Year 2000
Compliant. The Company's business, financial condition and results of operations
will not be materially adversely affected by Year 2000 Compliance related
issues. The term "Year 2000 Compliant" as used herein means that (i) each item
of Company Technology, and, to the Company's knowledge, the Incorporated Third
Party Technology, on dates on and after January 1, 2000 (the "Millenium Dates"),
will calculate any information dependent on or relating to dates on or after
January 1, 2000 in the same manner, and with the same functionality, data
integrity and performance, as such Company Technology, and to the Company's
knowledge, Incorporated Third Party Technology records, stores, processes,
calculates and presents calendar dates on or before any Millenium Date, and (ii)
the Millenium Dates will not adversely affect the operation of such Company
Technology, and to the Company's knowledge, such Incorporated Third Party
Technology, with respect to date-dependent data or computations, output, or
other routines or functions.
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2.17.12 Indemnification
Except pursuant to standard end user licenses, (true and correct copies of
which have been provided to Parent), the Company has not entered into any
agreement or offered to indemnify any Person against any charge of infringement
by the Technology or IP Rights, or any other intellectual property or right. The
Company has not entered into any agreement granting any Person the right to
bring any infringement action with respect to, or otherwise to enforce, any of
the Technology or IP Rights.
2.17.13 Restrictions on Intellectual Property
To the knowledge of the Company, none of the Company's officers or
employees, has entered into any agreement regarding know-how, trade secrets,
assignment of rights in inventions, or prohibition or restriction of competition
or solicitation of customers, or any other similar restrictive agreement or
covenant, whether written or oral, with any Person other than the Company.
2.18 Accounts Receivable
All accounts receivable of the Company reflected in the Company Balance
Sheet or existing at the time of Closing ("Accounts") represent amounts due for
services performed or sales actually made in the ordinary course of business and
properly reflect the amounts due. The bad debt reserves and allowances reflected
in the Company Balance Sheet are adequate. All Accounts existing and remaining
unpaid at the time of Closing are expected to be collectible by the Surviving
Corporation or Parent in the ordinary course of business consistent with past
practice in 90 days or less.
2.19 Inventory
All items in the inventory reflected in the Company Balance Sheet or as
currently owned by the Company for use in the operation of the business (a) have
been valued in accordance with GAAP and (b) are of a quality and quantity usable
and salable in the ordinary course of business. All items of inventory of
finished products meet the Company's current specifications and consist of items
of a quality and quantity that are salable in the ordinary course of the
business as currently conducted by the Company, and all inventories of raw
materials, intermediates, work in process, supplies, parts and packaging and
labeling materials consist of items of a quality and quantity that are usable in
the ordinary course of the business as heretofore and currently conducted by the
Company and appropriate for their intended use, including, where applicable,
processing into inventories of finished products.
2.20 Corporate Books and Records
The Company has furnished to Parent or its representatives for their
examination true and complete copies of (a) the Articles of Incorporation and
Bylaws of the Company as currently in effect, including all amendments thereto,
(b) the minute books of the Company,
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(c) the stock issuance and transfer books of the Company and (d) the stock
option and warrant records. Such minutes reflect all meetings of and actions by
the Company's shareholders, Board of Directors and any committees thereof since
the Company's inception, and such minutes accurately reflect in all material
respects the events of and actions taken at such meetings. Such stock transfer
books accurately reflect all issuances and transfers of shares of capital stock
of the Company, and the stock option and warrant records accurately reflect all
grants of options and warrants, since the Company's inception.
2.21 Permits
The Company has received all required governmental approvals,
authorizations, consents, licenses, orders, registrations and permits of all
agencies, whether federal, state, local or foreign (the "Permits"), the failure
to obtain of which has had or could reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect. Section 2.21 of the
Schedule of Exceptions contains a list of all Permits with expiration dates, if
any. The Company is in compliance in all material respects with the terms of all
Permits, and all Permits are valid and in full force and effect, and no
proceeding is pending or, to the knowledge of the Company, threatened, the
object of which is to revoke, limit or otherwise affect any Permit, all except
as has not had or could not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect. The Company has not received
any notifications of any asserted failure to obtain any Permit or any past and
unremedied failure to obtain any Permit.
2.22 Compliance With Laws
The Company is and has at all times been in compliance with all federal,
state, local and foreign laws, rules, regulations, ordinances, decrees, orders
and similar mandates applicable to the Company and its business, assets and
employees, except as has not had and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, including,
without limitation, all such laws, rules, ordinances, decrees, orders or
mandates relating to antitrust, consumer protection and privacy, intellectual
property, unfair trade, false advertising, currency exchange, environmental
protection, equal opportunity, health, occupational safety, pension, securities
and trading-with-the-enemy matters. The Company has not received any
notification of any asserted present or past unremedied failure by the Company
to comply with any of such laws, rules, ordinances, decrees, orders or mandates.
2.23 Insurance
The Company maintains commercially reasonable levels of (a) insurance on
its property (including leased premises) that insures against loss or damage by
fire or other casualty and (b) insurance against liabilities, claims and risks
of a nature and in such amounts as are normal and customary in the Company's
industry for companies of similar size and financial condition. All insurance
policies of the Company are in full force and effect, all premiums with respect
thereto covering all periods up to and including the date this representation is
made have been
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paid, and no notice of cancellation or termination has been received with
respect to any such policy or binder. Such policies or binders are sufficient
for compliance with all requirements of law currently applicable to the Company
and of all agreements to which the Company is a party (except as has not had and
could not reasonably be expected to have a Company Material Adverse Effect),
will remain in full force and effect through the respective expiration dates of
such policies or binders without the payment of additional premiums, and will
not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. The Company has not been refused
any insurance with respect to its assets or operations, nor has any insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance limited its coverage.
2.24 Brokers or Finders
The Company has not incurred, and will not incur, directly or indirectly,
as a result of any action taken by or on behalf of the Company, any liability
for brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Merger, this Agreement or any transaction contemplated
hereby.
2.25 Absence of Questionable Payments
Neither the Company nor, to the Company's knowledge, any director, officer,
agent, employee or other Person acting on behalf of the Company has used any
Company funds for improper or unlawful contributions, payments, gifts or
entertainment, or made any improper or unlawful expenditures relating to
political activity to domestic or foreign government officials or others. The
Company has reasonable financial controls to prevent such improper or unlawful
contributions, payments, gifts, entertainment or expenditures. Neither the
Company nor, to the Company's knowledge, any current director, officer, agent,
employee or other Person acting on behalf of the Company has accepted or
received any improper or unlawful contributions, payments, gifts or
expenditures. The Company has at all times complied, and is in compliance, in
all respects with the Foreign Corrupt Practices Act and all foreign laws and
regulations relating to prevention of corrupt practices and similar matters. The
Company has not received any written notice, or to the Company's knowledge any
other kind of notice, that any transaction was improper or unlawful within the
meaning of this Section 2.25.
2.26 Bank Accounts
Section 2.26 of the Schedule of Exceptions sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company maintains safe deposit boxes or
accounts of any nature and the names of all Persons authorized to draw thereon,
make withdrawals therefrom or have access thereto.
2.27 Insider Interests
No shareholder, officer or director of the Company has any direct interest
(other than as a shareholder of the Company) (a) in any Real Property, Personal
Property, Technology or
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IP Rights used in or directly pertaining to the business of the Company,
including, without limitation, inventions, patents, trademarks or trade names,
or (b) in any agreement, contract, arrangement or obligation relating to the
Company, its present or prospective business or its operations. There are no
agreements, understandings or proposed transactions between the Company and any
of its officers, directors, shareholders or affiliates or to the Company's
knowledge any affiliate thereof. The Company and its officers, directors, and to
the Company's knowledge, its employees, contractors, consultants or other
representatives have no direct interest, in any entity, including, without
limitation, any corporation, partnership, joint venture, proprietorship, firm,
licensee, business or association (whether as an employee, officer, director,
shareholder, agent, independent contractor, security holder, creditor,
consultant or otherwise) that presently (i) provides any services, produces
and/or sells any products or product lines, or engages in any activity that is
the same, similar to or competitive with any activity or business in which the
Company is now engaged or proposes to engage; (ii) is a material supplier,
customer or creditor; or (iii) has any direct or indirect interest in any asset
or property, real or personal, tangible or intangible, of the Company or any
property, real or personal, tangible or intangible, that is necessary or
desirable for the present or currently anticipated future conduct of the
Company's business.
2.28 Compliance With Environmental Laws
Neither the Company nor, to the Company's knowledge, any other Person
(including, without limitation, any previous owner, lessee or sublessee) has
treated, stored or disposed of any material amounts of petroleum products,
hazardous waste, hazardous substances, pollutants or contaminants on the Real
Property, or any real property previously owned, leased, subleased or used by
the Company in the operation of its business, in violation of any applicable
foreign, federal, state or local statutes, regulations or ordinances, or common
law, in each case as in existence at or prior to the Closing. To the Company's
knowledge, there have been no releases of any material amounts of petroleum,
petroleum products, hazardous waste, hazardous substances, pollutants or
contaminants on, at or from any assets or properties, including, without
limitation, the Real Property, owned, leased, subleased or used by the Company
in the operation of its business during the time such assets or properties were
owned, leased, subleased or used by the Company (or, to the Company's knowledge,
prior to such time), including, without limitation, any releases of any material
amounts of petroleum, petroleum products, hazardous waste, hazardous substances,
pollutants or contaminants in violation of any law.
2.29 Information Supplied by the Company
None of the information supplied or to be supplied by the Company to its
shareholders in connection with any written consent by or meeting of such
shareholders, at the date on which such information was supplied prior to the
time the Company's shareholders were requested to approve the Merger, contained
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not materially
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misleading; provided, however, that the Company makes no representations or
warranties regarding information furnished by or related to Parent or Merger
Sub.
2.30 Full Disclosure
The information furnished by the Company to Parent or its representatives
in connection with this Agreement (including, but not limited to, the Financial
Statements and all information in the Schedule of Exceptions and the other
Exhibits hereto) or the other Operative Documents, taken as a whole, does not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements so made or information so delivered,
in light of the circumstances under which they were made or delivered not
misleading.
2.31 Pooling Matters
To its knowledge, the Company has not taken, directly or indirectly, and
the Company has no knowledge that any other Person has taken, any actions
involving any recapitalization or repurchase or redemption of any securities of
the Company, or any grant or acceleration of any options to acquire securities
of the Company, or any purchase or sale of securities of Parent, and to the
Company's knowledge there have occurred no other events with respect to or
involving the Company or its shareholders which, taken individually or together,
would affect the ability of Parent to account for the Merger as a "pooling of
interests" transaction in accordance with GAAP, and the Company is not aware of
any facts which otherwise could prevent such accounting treatment. Section 2.31
of the Schedule of Exceptions contains a complete list of those persons who may
be deemed to be, in the Company's reasonable judgment, affiliates of the Company
within the meaning of Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
In order to induce the Company to enter into and perform this Agreement and
the other Operative Documents, Parent and Merger Sub jointly and severally
represent and warrant to the Company as follows in this Article III:
3.1 Organization
Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington. Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Georgia. Each of Parent and Merger Sub has all requisite corporate
power and authority to own, operate and lease its respective properties and
assets, to carry on its respective business as now conducted and as proposed to
be conducted, to enter into and perform its obligations under this Agreement and
the other applicable Operative Documents to which Parent or Merger Sub is a
party, and to consummate the transactions contemplated hereby and thereby. Each
of Parent and Merger Sub is duly
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qualified and licensed as a foreign corporation to do business and is in good
standing in each jurisdiction in which the character of properties occupied,
owned or held under lease by Parent or Merger Sub, as applicable, or the nature
of the business conducted by Parent or Merger Sub, as applicable, makes such
qualification or licensing necessary, except where the failure to be so
qualified or in good standing has not had and could not reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the
business, operations, assets, liabilities (absolute, accrued, contingent or
otherwise), condition (financial or other) or prospects of Parent and its
subsidiaries taken as a whole (a "Parent Material Adverse Effect"); provided,
however, that Parent Material Adverse Effect shall not include any change in
general economic conditions, the trading price of Parent Common Stock or changes
that affect Parent's industry generally. Parent holds all the issued and
outstanding shares of capital stock of Merger Sub of record and beneficially.
3.2 Enforceability
Parent and Merger Sub each have full corporate power and authority to
execute, deliver and perform their obligations under this Agreement and each of
the other Operative Documents to which they are a party and each of the
certificates, instruments and documents executed or delivered by them pursuant
to the terms of this Agreement. All corporate action on the part of Parent and
Merger Sub and their respective officers, directors and shareholders necessary
for the authorization, execution, delivery and performance of this Agreement and
the other applicable Operative Documents to which Parent or Merger Sub is a
party, the consummation of the Merger and the performance of all their
respective obligations under this Agreement and the other applicable Operative
Documents to which Parent or Merger Sub is a party has been taken or will be
taken prior to the Effective Time. This Agreement has been, and each of the
other Operative Documents to which Parent or Merger Sub is a party will have
been at the Closing, duly executed and delivered by Parent or Merger Sub, as the
case may be, and this Agreement is, and each of the other Operative Documents to
which Parent or Merger Sub is a party will be at the Closing, a legal, valid and
binding obligation of Parent or Merger Sub, as the case may be, enforceable
against Parent or Merger Sub, as the case may be, in accordance with its terms.
3.3 Securities
The Parent Common Stock to be issued pursuant to this Agreement has been,
or will be prior to the Effective Time, duly authorized for issuance, and such
Parent Common Stock, when issued and delivered to the Company's shareholders
pursuant to this Agreement, shall be validly issued, fully paid and
nonassessable and free and clear of all Encumbrances created by or through
Parent except as contemplated herein.
3.4 No Approvals or Notices Required; No Conflicts With Instruments
The execution, delivery and performance of this Agreement and the other
Operative Documents by Merger Sub and Parent, as applicable, and the
consummation by them of the transactions contemplated hereby and thereby will
not (a) constitute a violation (with or
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without the giving of notice or lapse of time, or both) of any statute,
regulation, rule or other provision of law or any judgment, decree, order or
other requirement of any court or other governmental authority applicable to
Parent or Merger Sub; (b) require any consent, approval or authorization of any
Person, except (i) compliance with applicable securities laws and (ii) the
filing of all documents necessary to consummate the Merger with the Georgia
Secretary of State; (c) constitute a breach of or conflict with or result in a
default (with or without the giving of notice or lapse of time, or both) under,
or acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any agreement, lease, note or other
restriction, encumbrance, obligation or liability to which Parent or Merger Sub
is a party or by which it is bound or to which any assets of Parent or Merger
Sub are subject; (d) conflict with or result in a breach of or constitute a
default under any provision of the Articles of Incorporation or Bylaws of Parent
or Merger Sub.
3.5 Capitalization
The authorized capital stock of Parent consists of 50,000,000 shares of
Parent Common Stock, of which 14,318,999 shares were issued and outstanding as
of November 10, 1999, and 15,000,000 shares of preferred stock, none of which
are issued or outstanding. As of September 30, 1999, other than (i) options to
purchase up to 3,498,556 shares of Parent Common Stock that have been granted
under Parent's stock option plans, (ii) warrants to purchase up to 11,666 shares
of Parent Common Stock, and (iii) rights granted to employees of Parent or its
subsidiaries under Parent's Employee Stock Purchase Plan, there are no
outstanding rights of first refusal or offer, preemptive rights, options,
warrants, conversion rights or other agreements, either directly or indirectly,
for the purchase or acquisition from the Parent of any shares of Parent Common
Stock or any securities convertible into or exchangeable for shares of Parent
Common Stock.
3.6 Full Disclosure
The information furnished by Parent or Merger Sub in connection with this
Agreement or the other Operative Documents, including information furnished for
inclusion in the Company's Consent Solicitation, together with the documents
previously filed by Parent with the Securities and Exchange Commission ("SEC"),
taken as a whole, as of date hereof, does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements so made, in light of the circumstances in which they were made, not
misleading. Parent's Registration Statement on Form S-1, as declared effective
by the SEC, and Parent's Quarterly Reports on Form 10-Q for the quarters ended
June 30, 1999 and September 30, 1999, and all other reports or registration
statements filed by it under the Securities Act, or under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), in the form filed with the SEC, (collectively, the "Parent SEC
Reports")as of the date filed, (a) complied in all material respects as to form
with the applicable requirements under the Securities Act or the Exchange Act,
as the case may be, and (b) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the
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circumstances under which they were made, not misleading. The financial
statements of Parent included in such reports comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except as may be indicated in the notes to such financial
statements and, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC, and except that unaudited financial statements may not contain
footnotes and are subject to year-end audit adjustments) and fairly present the
financial position of Parent as and at the date thereof and the results of its
operations and cash flows for the period then ended. Since September 30, 1999,
neither Parent nor any of its subsidiaries has incurred any liabilities or
obligations of any nature (whether absolute, accrued, fixed, contingent,
liquidated or unliquidated, known or unknown) except liabilities, obligations
and contingencies (a) which are reflected in the consolidated balance sheet of
Parent at September 30, 1999, or (b) which (i) were incurred in the ordinary
course of business since September 30, 1999 and consistent with past practices,
(ii) are disclosed in the Parent SEC Reports filed since September 30, 1999,
(copies of which have been provided or will be provided to the Company within
one business day of the date such report is filed) or (iii) would not
individually or in the aggregate have a Parent Material Adverse Effect. Since
September 30, 1999, except as described in any Parent SEC Reports, (copies of
which have been provided or will be provided to the Company within one business
day of the date such report is filed), there has been no change in any of the
significant accounting policies, practices or procedures of Parent except
changes resulting from changes in accounting pronouncements of the Financial
Accounting Standards Board or changes in applicable laws. Parent has timely
filed all SEC Reports required to be filed by Parent.
3.7 Brokers or Finders
Parent has not incurred, and will not incur, directly or indirectly, as a
result of any action taken by or on behalf of Parent, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Merger, this Agreement or any transaction contemplated
hereby that would result in a claim against the Company or its shareholders.
3.8 Claims and Legal Proceedings
There is no claim, action, suit, arbitration, criminal or civil
investigation or proceeding pending or, to Parent's knowledge, threatened
against or involving Parent before or by any court or governmental or
nongovernmental department, commission, board, bureau, agency or
instrumentality, or any other Person, that questions the validity of this
Agreement or any action taken or to be taken by Parent pursuant to this
Agreement or in connection with the transactions contemplated hereby.
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3.9 Compliance with Laws
Parent has complied with, is not in violation of, and has not received any
written notices of violation with respect to, any foreign, federal, state or
local statute, law or regulation, except where the failure to comply will not
have a Parent Material Adverse Effect.
3.10 No Material Adverse Event
Since September 30, 1999, no event has occurred and no state of facts has
developed or is continuing that has had or could reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect, except for
such events or facts that have been disclosed in filings made with the SEC.
ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS OF
PARENT AND THE PURCHASER
The obligations of Parent and Merger Sub to perform and observe the
covenants, agreements and conditions hereof to be performed and observed by them
at or before the Closing shall be subject to the satisfaction of the following
conditions, which may be expressly waived only in writing signed by Parent:
4.1 Accuracy of Representations and Warranties
The representations and warranties of the Company contained herein
(including the Schedule of Exceptions and other Exhibits) and in the other
Operative Documents shall have been true and correct in all material respects
when made and, except to the extent that such representations and warranties
speak as of an earlier date, shall be true and correct in all material respects
as of the Closing Date, as though made on that date.
4.2 Performance of Agreements
The Company shall have performed in all material respects all obligations
and agreements and complied in all material respects with all covenants
contained in this Agreement or any other Operative Document to be performed and
complied with by it at or prior to the Closing.
4.3 Opinion of Company Counsel
Parent shall have received the opinion letter of Red Hot Law Group of
Ashley LLC, counsel for the Company, dated the Closing Date, substantially in
the form of Exhibit 4.3.
4.4 Compliance Certificate
Parent shall have received a certificate of the President of the Company,
dated the Closing Date, in form and substance reasonably satisfactory to Parent,
certifying that the
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conditions to the obligations of Parent and Merger Sub in Sections 4.1, 4.2,
4.5, 4.6, 4.13, 4.14, 4.18, and 4.19 have been fulfilled.
4.5 Material Adverse Change
Since the date of this Agreement and through the Closing, no event shall
have occurred and no state of facts shall have developed or be continuing that
has had or could reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
4.6 Approvals and Consents
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby,
or for the continued operation of the Company, shall have been obtained, and all
waiting periods specified by law shall have passed. All other consents,
approvals and notices referred to in this Agreement or in the Schedule of
Exceptions, and required to be obtained by the Company, including without
limitation any consents required under any of the Material Contracts in
connection with the Merger, shall have been obtained or delivered and shall be
satisfactory to Parent.
4.7 Proceedings and Documents; Secretary's Certificate
Parent shall have received a certificate of the Secretary of the Company,
in form and substance satisfactory to Parent, as to the authenticity and
effectiveness of the actions of the Board of Directors and shareholders of the
Company authorizing the Merger and the transactions contemplated by this
Agreement and the other Operative Documents. Copies of the Company's Articles of
Incorporation, certified by the Georgia Secretary of State, and Bylaws,
certified by the Secretary of the Company, shall be attached to such
certificate.
4.8 Nonforeign Affidavit
Parent shall have received from the Company, pursuant to Section 1445 of
the Code, a Foreign Investment in Real Property Tax Act Affidavit substantially
in the form of Exhibit 4.8.
4.9 Compliance With Laws
All laws and regulations to which Parent or the Company is subject shall
legally permit the consummation of the transactions contemplated by this
Agreement and the other Operative Documents.
4.10 Legal Proceedings
No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any other Operative Document, and no litigation, investigation or administrative
proceeding shall be pending or threatened that
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would enjoin, restrain, condition or prevent consummation of this Agreement or
any other Operative Document.
4.11 Affiliate Letters
Parent shall have received Affiliate Letters substantially in the form of
Exhibit 4.11 from each of those Persons who were, on the date on which the
requisite number of consents or votes has been obtained to approve the Merger,
"affiliates" of the Company within the meaning of Rule 144 of the rules and
regulations promulgated under the Securities Act, as amended, and who have not
previously signed Affiliate and Voting Agreements as contemplated by Section
6.10, and the Affiliate and Voting Agreements contemplated by Section 6.10 and
executed as of the date of this Agreement by the shareholders of the Company who
are affiliates shall be in full force and effect.
4.12 Termination of Certain Agreements
Any and all rights of refusal, co-sale rights and registration rights for
the benefit of the holders of Company Common Stock, Company Preferred Stock,
Company Options, Company Warrants or other stock purchase rights, and the Option
Dilution Warrants described in Section 2.3(c) of the Schedules of Exceptions,
all as set forth in Exhibit 4.12, shall have been terminated effective at or
prior to Closing.
4.13 Employee Agreements
All employees of the Company shall have entered into valid and enforceable
confidentiality, invention assignment, noncompetition and nonsolicitation
agreements with the Company in substantially the form previously provided to
Parent.
4.14 Shareholder Representation Letters
Shareholders of the Company owning 90% or more of the Company's capital
stock shall have executed a Shareholder Representation Letter in substantially
the form attached hereto as Exhibit 4.14, addressing, among other issues, (i)
securities law representations, (ii) share ownership, (iii) appointment of the
Shareholder Representative (as defined in Section 8.6 below), (iv) waiver of
rights relating to Company Common Stock and/or Company Preferred Stock, (v)
waiver of dissenters' rights and (vi) agreement to be bound by the
indemnification, pledge and holdback provisions of Section 1.7.1 and Article
VIII of this Agreement, and a Shareholder Representative shall have been
appointed and notice of such appointment provided to Parent as provided in the
Shareholder Representation Letters.
4.15 Pooling of Interests
Parent shall have received from its independent auditors an opinion in form
and substance satisfactory to Parent that the Merger will qualify for "pooling
of interests" treatment under applicable accounting standards.
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4.16 Securities Law Exemption
The issuance of the Parent Common Stock in the Merger shall be exempt from
the registration and qualification requirements of federal and applicable state
securities laws.
4.17 Dissenters' Rights
Holders of no more than 5% of the Company Common Stock shall have delivered
to the Company before the Effective Time timely written notice of such holder's
intent to exercise their dissenters' rights with respect to the Merger in
accordance with Georgia Law, unless such holder shall have withdrawn or
otherwise lost his or her right to such payment.
4.18 Company Shareholder Approval
The shareholders of the Company shall have approved the Merger in
accordance with Georgia Law.
4.19 Termination of Company's 401(k) Plan
The Company's 401(k) Plan shall have been terminated, frozen or otherwise
amended as directed by Parent.
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE COMPANY
The obligations of the Company to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by it at or before
the Closing shall be subject to the satisfaction of the following conditions,
which may be expressly waived only in writing signed by the Company.
5.1 Accuracy of Representations and Warranties
The representations and warranties of Parent and Merger Sub contained
herein and in the other Operative Documents shall have been true and correct in
all material respects when made and, except to the extent that such
representations and warranties speak as of an earlier date, shall be true and
correct in all material respects as of the Closing Date, as though made on that
date.
5.2 Performance of Agreements
Parent and Merger Sub shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants contained in this Agreement or any other Operative Document to be
performed and complied with by them at or prior to the Closing.
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5.3 Opinion of Parent Counsel
The Company shall have received the opinion letter of Perkins Coie LLP,
counsel for Parent, dated the Closing Date, substantially in the form of Exhibit
5.3.
5.4 Compliance Certificate
The Company shall have received a certificate of an officer of Parent,
dated the Closing Date, substantially in form and substance reasonably
satisfactory to the Company, certifying that the conditions to the obligations
of the Company in Sections 5.1, 5.2, 5.7 and 5.8 have been fulfilled.
5.5 Legal Proceedings
No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any other Operative Document, and no litigation, investigation or administrative
proceeding shall be pending or threatened which would enjoin, restrain,
condition or prevent consummation of this Agreement or any other Operative
Document.
5.6 Proceedings and Documents; Secretary's Certificate
The Company shall have received a certificate of the Secretary of Parent,
in form and substance reasonably satisfactory to the Company, as to the
authenticity and effectiveness of the actions of the Board of Directors of
Parent authorizing the Merger and the transactions contemplated by this
Agreement and the other Operative Documents.
5.7 Material Adverse Change
Since the date of this Agreement and through the Closing, no event shall
have occurred and no state of facts shall have developed or be continuing that
has had or could reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, except for such changes occurring
as a direct result of the execution or announcement of this Agreement. Changes
in the trading prices of Parent Common Stock shall not be deemed to have a
Parent Material Adverse Effect under this Agreement.
5.8 Approvals and Consents
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby
shall have been obtained, and all waiting periods specified by law shall have
passed. All other consents, approvals and notices referred to in this Agreement
shall have been obtained or delivered.
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5.9 Compliance With Laws
All laws and regulations to which Parent or the Company is subject shall
legally permit the consummation of transactions contemplated by this Agreement
and under the other Operative Documents.
5.10 Tax Opinion
The Company shall have received a written opinion from Long Aldridge &
Norman LLP substantially in the form of Exhibit 5.10, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code. The Company agrees to make such representations as are reasonably
requested by Long Aldridge & Norman LLP for purposes of rendering such opinion.
5.11 Registration Rights Agreement
Holders of at least a majority of the Registrable Securities under Parent's
Registration Rights Agreement shall have consented to the granting of
registration rights to the Company's shareholders with respect to the shares of
Parent Common Stock constituting the Net Merger Consideration as contemplated in
Section 6.9 below and upon obtaining such consent Parent shall have executed and
delivered the Company Registration Rights Agreement (as defined in Section 6.9
below).
ARTICLE VI - COVENANTS
The parties covenant and agree as follows in this Article VI.
6.1 Conduct of Business by the Company Pending the Merger
Unless Parent shall otherwise agree in writing, the business of the Company
shall be conducted in and only in, and the Company shall not take any action
except in, the ordinary course of business and in a manner consistent with past
practice and in accordance with applicable law. The Company shall use
commercially reasonable efforts to preserve intact the business organization of
the Company, to keep available the services of the current officers, employees
and consultants of the Company and to preserve the current relationships of the
Company with, and the goodwill of, customers, suppliers and other Persons with
which the Company has significant business relations. By way of amplification
and not limitation, except as otherwise contemplated by this Agreement, the
Company shall not, between the date of this Agreement and the Effective Time,
directly or indirectly do, or propose to do, any of the following without the
prior written consent of Parent, which consent shall not be unreasonably
withheld or delayed:
(a) amend or otherwise change its Articles of Incorporation or Bylaws;
(b) except for the issuance of shares of Company Common Stock or
Company Preferred Stock upon the exercise or conversion of currently outstanding
options,
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warrants or convertible notes, issue, sell, contract to issue or sell, pledge,
dispose of, grant, encumber or authorize the issuance, sale, pledge,
disposition, grant or Encumbrance of (i) any shares of capital stock of any
class of the Company, (ii) any options, warrants, convertible securities or
other rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom interest)
of the Company, or (iii) any assets of the Company;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock or other securities, property or otherwise,
with respect to any of its capital stock;
(d) reclassify, combine, split, subdivide, redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or other
securities;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or division thereof or any material amount of
assets; (ii) incur any indebtedness for borrowed money or issue any debt
securities (except for the issuance of promissory notes to existing shareholders
of the Company up to the principal amount of $1.5 million) or assume, guarantee
or endorse, or otherwise as an accommodation become responsible for, the
obligations of any Person, or make any loans or advances, except in the ordinary
course of business and consistent with past practice; (iii) enter into any
contract or agreement other than in the ordinary course of business, consistent
with past practice; (iv) authorize any single capital expenditure which is in
excess of $25,000 or capital expenditures which are, in the aggregate, in excess
of $100,000 for the Company taken as a whole; (v) enter into any agreement in
which the obligation of the Company exceeds $25,000 or which shall not terminate
or be subject to termination for convenience within 30 days following execution;
(vi) license any Technology or IP Rights, except nonexclusive licenses to end
users of the Company's products granted in the ordinary course of the Company's
business, consistent with past practice; or (vii) enter into or amend any
contract, agreement, commitment or arrangement with respect to any matter set
forth in this subsection (e);
(f) enter into or amend any employment, consulting or agency
agreement, or increase the compensation payable or to become payable to its
officers, employees, agents or consultants, or grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or other employee of the Company, or establish, adopt,
enter into or amend any Employee Benefit Plan, collective bargaining, bonus,
profit-sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance, benefit
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee;
(g) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting methods, policies or procedures (including, without limitation,
procedures with respect to the payment of accounts payable and collection of
accounts receivable);
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(h) take any action that would prevent Parent from being able to
account for the Merger as a pooling of interests whether or not permitted by the
provisions of this Article VI;
(i) make any material Tax election or settle or compromise any Tax
liability;
(j) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice;
(k) take any action that would or is reasonably likely to result in
any of the representations or warranties of the Company set forth in this
Agreement being untrue in any material respect, or in any covenant of the
Company set forth in this Agreement being breached, or in any of the conditions
to the Merger specified in Article IV not being satisfied;
(l) take any action of the type covered in Section 2.7 above; or
(m) agree to do any of the foregoing.
6.2 Access to Information; Confidentiality
From the date hereof to the Effective Time, the Company shall, and shall
cause the officers, directors, employees and agents of the Company to, afford
the officers, employees and agents of Parent access at all reasonable times to
the officers, employees, agents, properties, offices, plants and other
facilities, books and records of the Company and shall furnish Parent with all
financial, operating and other data and information as Parent, through its
officers, employees or agents, may reasonably request. From the date hereof
until the Effective Time, the Company shall provide Parent with monthly and
other financial statements of the Company as they become available internally at
the Company, all of which financial statements shall fairly present the
financial position and results of operations of the Company as of the dates and
for the periods therein specified. No investigation or due diligence efforts of
any party hereto (or such party's representatives) pursuant to this Section 6.2
or otherwise in connection with the transactions contemplated by this Agreement
shall affect, or limit in any way such party's ability to rely on, any
representation or warranty of the other parties in this Agreement or any
condition to the obligations of the parties hereto. The parties shall continue
to comply with and to perform their respective obligations under the Mutual
Nondisclosure Agreement between Parent and the Company entered into as of
December 7, 1999.
6.3 No Alternative Transactions
The Company shall immediately cease and cause to be terminated any existing
discussions or negotiations with any parties (other than Parent) conducted
heretofore with respect to any Alternative Transaction (as defined below).
Unless this Agreement shall have been terminated in accordance with its terms,
the Company shall not, except to the extent
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required in the opinion of counsel to the Company in the exercise of fiduciary
duties of the Board of Directors of the Company, directly or indirectly, through
any officer, director, agent or otherwise, solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to any Alternative
Transaction, or participate in any negotiations regarding any Alternative
Transaction, or furnish to any other Person any information with respect to, or
otherwise cooperate or negotiate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other Person with regard
to any Alternative Transaction. The Company shall notify Parent promptly if any
such proposal or offer, or any inquiry or contact with any Person with respect
thereto, is made and shall, in any such notice to Parent, indicate in reasonable
detail the identity of the Person making such proposal, offer, inquiry or
contact and the terms and conditions of such proposal, offer, inquiry or
contact. The Company agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill (e.g., agreement not to invest
in or seek change of control of the Company) agreement to which the Company is a
party. The term "Alternative Transaction" shall mean either (a) a transaction
pursuant to which any Person other than Parent or an affiliate of Parent (a
"Third Party") acquires or would acquire more than 25% of the capital stock of
the Company either from the Company or its shareholders, (b) a merger or other
business combination involving the Company pursuant to which any Third Party
acquires or would acquire more than 25% of the equity ownership of the Company
or the entity surviving such merger or other business combination, or (c) any
other transaction pursuant to which any Third Party acquires control of the
assets or business of the Company.
6.4 Notification of Certain Matters
Each party shall give prompt notice to the other parties if (a) such party
obtains knowledge that any representation or warranty by such party in this
Agreement was inaccurate when made or will be inaccurate as of the Closing; (b)
there occurs or fails to occur any event or state of facts that would be
reasonably likely to cause any representation or warranty made by such party
contained in this Agreement to be untrue or inaccurate as of the Closing Date;
(c) such party fails to comply with, perform or satisfy any covenant, condition
or agreement to be complied with, performed or satisfied by such party
hereunder; or (d) there occurs or fails to occur any event or state of facts
that would render any condition to the obligations of the other party to this
Agreement reasonably incapable of being satisfied on or prior to the reasonably
anticipated Closing Date or, if none, February 29, 2000; provided, however, that
the delivery of any notice pursuant to this Section 6.4 shall not limit or
otherwise negatively affect the remedies available to the parties hereunder.
6.5 Further Action
Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use commercially reasonable efforts to take, or cause to be taken,
all appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby, including, without limitation,
using commercially reasonable efforts to obtain all waivers, licenses,
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permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company as are
necessary for the consummation of the transactions contemplated hereby and to
fulfill the conditions to the Merger. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or the other Operative Documents, each party to this Agreement
shall use commercially reasonable efforts to promptly take all such action.
After the Closing, each party hereto, at the request of and without any further
cost or expense to the other parties, will take any further actions reasonably
necessary or desirable to carry out the purposes of this Agreement or any other
Operative Document, to vest in the Surviving Corporation full title to all
properties, assets and rights of the Company and to effect the issuance of the
Parent Common Stock to the shareholders of the Company pursuant to the terms and
conditions hereof.
6.6 Nasdaq Listing
Parent agrees to authorize for listing on the Nasdaq National Market the
shares of Parent Common Stock constituting the Net Merger Consideration, and the
shares of Parent Common Stock required to be reserved for issuance upon exercise
of Company Options and Company Warrants assumed in connection with the Merger,
by filing with the Nasdaq National Market a Notification of Listing of
Additional Shares (or such other form as may be required by the Nasdaq National
Market) as soon as reasonably practicable after the Closing or otherwise in
accordance with the rules and regulations of the Nasdaq National Market.
6.7 Publicity
No party hereto shall issue any press release or otherwise make any
statements to any third party with respect to this Agreement or the transactions
contemplated hereby other than the issuance by Parent of a press release
announcing this Agreement and the transactions contemplated hereby or as
required by law. Prior to such issuance, Parent will consult with the Company
regarding the content of the press release and obtain the Company's reasonable
approval to such press release.
6.8 Form S-8
Parent agrees to file a registration statement on Form S-8 for the shares
of Parent Common Stock issuable with respect to the Company Options as soon as
is reasonably practicable after the Effective Time and in any event on or before
April 25, 2000 and shall maintain the effectiveness of such registration
statement thereafter for so long as any the Company Options remain outstanding.
6.9 Registration Rights
Subject to obtaining the consent referred to in Section 5.9 above, at
Closing, Parent and the Company's shareholders shall enter into a registration
rights agreement (the "Company Registration Rights Agreement") substantially in
the form attached hereto as Exhibit 6.9.
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Pursuant to such agreement, Parent shall, by April 15, 2000, file a registration
statement on Form S-1 covering the resale of the shares of Parent Common Stock
issued in the Merger (including Holdback Shares still in Escrow). In addition,
from and after the Closing, the shareholders of the Company as of the Closing
will be granted piggyback registration rights pursuant to the Company
Registration Rights Agreement.
6.10 Company Shareholders Meeting; Affiliate and Voting Agreements
The Company will take all action necessary in accordance with applicable
law and its Articles of Incorporation and Bylaws to provide notice of and
solicit the consent or convene a meeting of its shareholders (the "Company
Shareholders Meeting") within the shortest time permitted by law after the date
hereof to consider and vote upon the Merger. The Board of Directors of the
Company, in connection with its approval of this Agreement, has resolved to
recommend and declare advisable such approval, and the Company shall as promptly
as possible take all lawful action to solicit, and use all reasonable efforts to
obtain, such approval. Pursuant to the terms of the Affiliate and Voting
Agreements in the form attached hereto as Exhibit 6.10 (the "Affiliate and
Voting Agreement") and dated the date of this Agreement, Affiliates who are
shareholders of the Company each have agreed to vote all shares of Company
Common Stock owned by them or over which they have voting control, or to execute
or cause to be executed consents, to grant their approval of the Merger and this
Agreement.
6.11 Consent Solicitation Statement
The Company and Parent will, as promptly as practicable, prepare and
distribute to the Company's shareholders a Consent Solicitation that will
constitute a consent in connection with the vote of the Company's shareholders
with respect to the Merger and an information statement for purposes of
providing disclosure to such shareholders concerning Parent and its securities
(the "Consent Solicitation"). The Company and Parent will use all reasonable
efforts to cause the Consent Solicitation to be distributed to the shareholders
of the Company at the earliest practicable date. If at any time prior to the
Effective Time any event relating to or affecting the Company or Parent shall
occur as a result of which it is necessary, in the opinion of counsel for the
Company or of counsel for Parent, to supplement or amend the Consent
Solicitation in order to make such document not misleading in light of the
circumstances existing at the time approval of the shareholders of the Company
is sought, the Company and Parent will forthwith prepare and distribute an
amendment or supplement so that such document, as so supplemented or amended,
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.12 Employee Benefits
(a) Parent shall cause employees of Company to be eligible to participate
in Parent's 401(k) Plan (the "Parent 401(k) Plan"). Parent covenants that the
service of individuals employed by the Company immediately prior to the Closing
Date (the "Transferred
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Employees") shall be credited as service under the Parent 401(k) Plan for
eligibility and vesting purposes to the extent such Transferred Employees
participate in any 401(k) plan maintained by the Company as of the Closing Date.
(b) Any group health insurance plan of Parent (the "Successor Plan")
provided to Transferred Employees shall meet the following requirements: (i)
service with the Company prior to the Closing Date shall be credited against all
eligibility and waiting period requirements under the Successor Plan for those
Transferred Employees (and their eligible dependents) who were eligible for
group health insurance plan coverage from the Company as of the Closing Date;
and (ii) the deductibles in effect under the Successor Plan for the plan year in
which the Closing Date occurs shall be reduced for each Transferred Employee by
any amounts applied toward such Transferred Employee's deductibles under the
Company's group health insurance plan for the plan year in which the Closing
Date occurs, provided such Transferred Employee submits evidence in form
satisfactory to Parent that reasonably demonstrates the deductible amount so
applied under the Company's group health insurance plan.
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 Termination
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this Agreement
by the shareholders of the Company):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Merger has not been
consummated by February 29, 2000; provided, however, that the right to terminate
this Agreement under this subsection (b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date;
(c) by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the Merger illegal or if any judgment,
injunction, order or decree enjoining Parent, Merger Sub or the Company from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable; provided, however, that the party
seeking to terminate this Agreement pursuant to this subsection (c) shall have
used all reasonable efforts to remove such judgment, injunction, order or
decree;
(d) by the Company, in the event of a material breach by Parent or
Merger Sub of any representation or warranty, which breach constitutes a Parent
Material Adverse Effect, or any agreement contained herein that has not been
cured or is not curable within 15 days after notice of such material breach or
if any condition to the obligations of the Company pursuant to Article V becomes
incapable of being satisfied on or before February 29, 2000; or
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(e) by Parent, in the event of a material breach by the Company of
any representation or warranty, which breach constitutes a Company Material
Adverse Effect, or any agreement contained herein that has not been cured or is
not curable within 15 days after notice of such material breach or if any
condition of the obligations of Parent pursuant to Article IV becomes incapable
of being satisfied on or before February 29, 2000.
7.2 Effect of Termination
In the event of the termination of this Agreement pursuant to Section 7.1
hereof, there shall be no further obligation on the part of any party hereto,
except that nothing herein shall relieve any party from liability for any
willful breach hereof.
7.3 Amendment
This Agreement may be amended only in writing signed by each of the parties
hereto and after approval of this Agreement by the shareholders of the Company,
by the Shareholder Representative.
7.4 Waiver
At any time prior to the Effective Time, any party hereto may (a) extend
the time for the performance of any obligation or other act of any other party
hereto, (b) waive any inaccuracy in the representations and warranties contained
herein or in any document delivered pursuant hereto, or (c) waive compliance
with any agreement or condition contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the party
or parties to be bound thereby.
7.5 Company Termination Fee
The Company shall pay to Parent a cash fee (the "Fee") in the event that
(a) this Agreement is terminated by Parent pursuant to Section 7.1(e) above or
Parent becomes entitled to terminate this Agreement under Section 7.1(e) above
by virtue of a material breach by the Company of a representation, warranty or
agreement of the Company contained herein, and (b) the Company enters into an
agreement relating to, or consummates, an Alternative Transaction (as defined in
Section 6.3 above) either prior to the date such termination occurs or right to
terminate arises, or within one year thereafter. The Fee shall be an amount
equal to five percent (5%) of the product of the Total Merger Consideration
times the higher of (i) the Closing Average or (ii) the last reported sales
price of Parent's Common Stock on the Nasdaq National Market on the date that
this Agreement is terminated or becomes terminable by Parent. The Fee shall be
payable no later than the earliest of (x) five days after Parent notifies the
Company of termination of this Agreement, (y) the date on which the Company
enters into a definitive agreement relating to an Alternative Transaction or (z)
the date of closing thereof. Notwithstanding the foregoing, the Fee shall not be
payable if Parent is in material breach of this Agreement at the time this
Agreement is terminated.
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7.6 Parent Termination Fee
Parent shall pay to the Company a cash fee (the "Parent Fee") in the event
that this Agreement is terminated by the Company pursuant to Section 7.1(d). The
Parent Fee shall be an amount equal to five percent (5%) of the product of the
Total Merger Consideration times the higher of (i) the Closing Average or (ii)
the last reported sales price of Parent's Common Stock on the Nasdaq National
Market on the date this Agreement is terminated by the Company. The Parent Fee
shall be payable no later than five days after the Company notifies Parent of
termination of this Agreement.
ARTICLE VIII - SURVIVAL AND INDEMNIFICATION
8.1 Survival
All representations and warranties contained in this Agreement or in the
other Operative Documents or in any certificate delivered pursuant hereto or
thereto shall survive the Closing until the first anniversary of the Effective
Time (the "Survival Period"); provided, however, that the representations and
warranties of the Company set forth in Section 2.6 above shall survive until the
earlier of (a) the first anniversary of the Effective Time and (b) the date on
which Parent completes and publicly releases audited financial statements of
combined operations of the Company and Parent, and shall not be deemed waived or
otherwise affected by any investigation made or any knowledge acquired with
respect thereto. The covenants and agreements contained in this Agreement or in
the other Operative Documents shall survive the Closing and shall continue until
all obligations with respect thereto shall have been performed or satisfied or
shall have been terminated in accordance with their terms.
8.2 Indemnification by Shareholders
Subject to the limitations set forth in this Article VIII, from and after
the Closing, the shareholders of the Company (the "Shareholders") jointly and
severally shall indemnify and hold Parent, its officers, directors and
affiliates (as "affiliate" is defined in Rule 12b-2 of the Exchange Act) (the
"Indemnified Parties") harmless from and against, and shall reimburse the
Indemnified Parties for, any and all losses, damages, debts, liabilities,
obligations, judgments, orders, awards, writs, injunctions, decrees, fines,
penalties, Taxes, costs or expenses (including, but not limited to, any
reasonable legal or accounting fees or expenses) ("Losses") arising out of (a)
any inaccuracy or misrepresentation in, or breach of, any representation or
warranty made by the Company in this Agreement, together with the Schedule of
Exceptions as delivered upon execution of this Agreement, or in any other
Operative Document; (b) any liability for Taxes resulting from the transactions
contemplated by this Agreement, including, without limitation, transfer, sales,
use, excise, conveyance and similar taxes, excluding any Taxes resulting from a
reassessment of Real Property or Personal Property occurring as a result of the
Merger; or (c) any failure by the Company or such Shareholder to perform or
comply, in whole or in part, with any covenant or agreement in this Agreement or
in any other Operative Document.
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8.3 Indemnification By Parent or the Surviving Corporation
Parent shall indemnify and hold the Shareholders (the "Shareholder
Indemnified Parties" and, together with the Parent Indemnified Parties, the
"Indemnified Parties") harmless from and against, and shall reimburse the
Shareholder Indemnified Parties for, any and all Losses arising out of or in
connection with (a) any inaccuracy or misrepresentation in, or breach of, any
representation or warranty made by Parent or Merger Sub in this Agreement or in
any Operative Document or (b) any failure by Parent or Merger Sub to perform or
comply, in whole or in part, with any covenant or agreement in this Agreement in
or any Operative Document.
8.4 Threshold and Limitations
(a) Except for Losses based on fraud, the Indemnified Parties shall be not
be entitled to receive any indemnification payment with respect to any claims
for indemnification under this Article VIII ("Claims") until the aggregate
Losses for which such Indemnified Parties would be otherwise entitled to receive
indemnification exceed $100,000 (the "Threshold") and only to the extent that
such Losses exceed the Threshold.
(b) Except for Losses based on fraud (with respect to which there shall be
no limitation of liability), the aggregate liability of any Shareholder pursuant
to this Article VIII shall be limited to the Holdback Shares.
(c) An indemnifying party shall not be obligated to defend and hold
harmless an Indemnified Party, or otherwise be liable to such party, with
respect to any claims made by the Indemnified Party after the expiration of the
Survival Period or other applicable time limitation described in Section 8.1,
except that indemnity may be sought after the expiration of the Survival Period
or other applicable time limitation if a Claim Notice (as defined in Section
8.4(a)) shall have been delivered to the Shareholder Representative (as defined
in Section 8.6 below) prior to the expiration of such time period.
(d) The indemnification obligations of the Shareholders under this Article
VIII shall be satisfied by forfeiture to Parent of the Holdback Shares, in
accordance with the provisions of this Article VIII. The number of Holdback
Shares to be forfeited to Parent in payment of any Claims shall be determined by
dividing (x) the aggregate dollar amount of such Claims by (y) the Closing
Average. The aggregate value of Claims paid by means of the forfeiture to Parent
of Holdback Shares shall be deemed to reduce the Net Merger Consideration
otherwise payable to the Shareholders of the Company pursuant to Section 1.7 of
this Agreement. Any such claims shall be deemed to reduce the Holdback Shares,
pro rata, with respect to each Shareholder, as determined by reference to the
number of shares of Parent Common Stock that such shareholder is entitled to
receive in the Merger as compared to all other Shareholders.
(e) Payments by an indemnifying party pursuant to this Article VIII shall
be (i) limited to the amount of any Losses after deducting therefrom any Tax
benefit to the Indemnified Party or any affiliate thereof; and (ii) increased to
take account of any Tax cost
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incurred by the Indemnified Party arising from receipt or accrual of indemnity
payments (grossed up for such increase). For purposes of this Section 8.4(e), a
Tax benefit or Tax cost will be considered to be recognized by the Indemnified
Party or any Affiliate in the tax period in which an actual Tax benefit or Tax
cost occurs, and the amount of the Tax benefit or Tax cost shall be determined
by using the actual tax rates applicable to the Indemnified Party and its
affiliates, on a with and without basis after any deductions, credits,
allowances or other tax attributes reportable with respect to a payment
hereunder. At such time as an Indemnified Party makes a request for
indemnification, the Indemnified Party shall provide the indemnifying party with
a detailed schedule of the tax benefits and the incurrence of the indemnified
liability. The schedule shall set forth the amounts and anticipated tax years to
which the tax benefits or costs will be recognized (based on the current
experience and internal financial projections of the Indemnified Party) and,
based on current federal and state tax rates, the resulting estimated tax
benefits or detriments. The present value of the estimated tax benefits and
detriments then shall be determined by discounting each year's estimated benefit
or detriment using a discount rate equal to the current prime lending rate as
published on the date of payment in the Wall Street Journal. The indemnity
payment shall be increased or decreased so that the net after-tax present value
of the payment equals the net after-tax loss to the Indemnified Party. Any
indemnity payments made pursuant to this Article VIII will be treated as an
adjustment to the purchase price for Tax purposes.
8.5 Procedure for Indemnification
(a) An Indemnified Party shall give written notice (the "Claim Notice") of
any Claim for indemnification under this Article VIII to the Escrow Agent, and
the indemnifying parties reasonably promptly after the assertion against an
Indemnified Party of any claim by a third party (a "Third Party Claim") or, if
such Claim is not in respect of a Third Party Claim, reasonably promptly after
the discovery of facts on which the Indemnified Party intends to base a Claim
for indemnification pursuant to Article VIII; provided, however, that the
failure or delay to so notify the Escrow Agent and the indemnifying parties
shall not relieve the indemnifying parties of any obligation or liability that
the indemnifying parties may have to the Indemnified Party except to the extent,
and only to the extent, that the indemnifying parties demonstrate that the
indemnifying parties' ability to defend or resolve such Claim is materially
adversely affected thereby. Any such Claim Notice shall describe the facts and
circumstances on which the asserted Claim for indemnification is based (to the
extent then known by the Indemnified Party) and shall specify how such
Indemnified Party intends to recover such funds pursuant to this Agreement and
the basis for the determination of the amount which the Indemnified Party
intends to recover. Notwithstanding the foregoing, any Claim Notice submitted by
Parent Indemnified Parties or Parent as indemnifying party to the Shareholder
Representative shall be deemed to have been delivered to the Shareholder
Indemnified Parties or the Shareholders as indemnifying parties upon delivering
of such Claim Notice to the Shareholder Representative.
(b) If, within 30 days of the effective date under this Agreement of a
Claim Notice, the indemnifying party contests in writing to the Indemnified
Party and the Escrow Agent that
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Losses identified in such Claim Notice constitute indemnifiable Claims (the
"Contest Notice"), then the Indemnified Party and the indemnifying parties,
acting in good faith, shall attempt to reach agreement with respect to the
contested portions of such Claims. Unless a Claim is contested within such
30-day period (meaning the Representative Notice is effective on or prior to the
30th day after the effective date of the Claim Notice to which such Contest
Notice relates), the Indemnified Party shall, subject to the other terms of this
Article VIII, be paid the amount of the Losses related to such Claim or the
uncontested portion thereof. The indemnifying parties shall not object to any
Claim unless (i) it believes in good faith that the Indemnified Party is not
entitled to be indemnified with respect to the Losses specified therein, or (ii)
they lacks sufficient information to assess the validity or amount of the Claim.
If the indemnifying parties object to a Claim on the basis that they lack
sufficient information, they shall promptly request from the Indemnified Party
any additional information reasonably necessary for it to assess such Claim and
the Indemnified Party shall, to the extent the Indemnified Party reasonably can,
provide additional information reasonably requested. Upon receipt of such
additional information, the indemnifying parties shall review it as soon as
reasonably practicable and notify the Indemnified Party of any withdrawal or
modification of the objection. If the Indemnified Party and the indemnifying
parties are unable to reach agreement with respect to any contested Claims
within 45 days of the delivery of the Contest Notice, the matter shall be
settled by binding arbitration in Seattle, Washington as set forth below. All
claims shall be settled in accordance with the Commercial Arbitration Rules then
in effect of the American Arbitration Association (the "AAA Rules"). The
indemnifying parties and the Indemnified Party shall each designate one
arbitrator within 15 days after the termination of such 45-day period. The
indemnifying parties and the Indemnified Party shall cause such designated
arbitrators mutually to agree upon and designate a third arbitrator; provided,
however, that (i) failing such agreement within 70 days of delivery of the
Representative Notice, the third arbitrator shall be appointed in accordance
with the AAA Rules and (ii) if either the indemnifying parties or the
Indemnified Party fails to timely designate an arbitrator, the dispute shall be
resolved by the one arbitrator timely designated. All of the fees and expenses
of the arbitrators shall be paid in accordance with the determination of the
arbitrators based on the outcome of the dispute, with any portion thereof that
is payable by the Shareholders being paid by Parent and reimbursed from the
Holdback Shares in the same manner as other Claims. The indemnifying parties and
the Indemnified Party shall cause the arbitrators to decide the matter to be
arbitrated pursuant hereto within 30 days after the appointment of the last
arbitrator. The arbitrators' decision shall relate solely to whether the
Indemnified Party is entitled to be indemnified for the contested Claim, or the
contested portion thereof, pursuant to the applicable terms of this Agreement.
The final decision of the majority of the arbitrators shall be furnished to the
indemnifying parties and the Indemnified Party in writing and shall constitute
the conclusive determination of the issue in question binding upon the
indemnifying parties, the Shareholders, and the Indemnified Party, and shall not
be contested by any of them. Such decision may be used in a court of law only
for the purpose of seeking enforcement of the arbitrators' decision.
(c) (i) Subject to the rights of or duties to any insurer or other third
party having potential liability therefor, the indemnifying parties shall have
the right, upon written
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notice given to the Indemnified Party within 30 days after receipt of the notice
from the Indemnified Party of any Third Party Claim, to assume the defense or
handling of such Third Party Claim, at the indemnifying party's sole expense, in
which case the provisions of Section 8.5(c)(ii) shall govern; provided, however,
that, notwithstanding the foregoing, Parent or the Shareholder Representative
may elect to assume the defense and handle any such Third Party Claim if it
determines in good faith that the resolution of such Third Party Claim could
result in a material adverse impact on the business, operations, assets,
liabilities (absolute, accrued, contingent or otherwise), condition (financial
or otherwise) or prospects of Parent or the Shareholders, as applicable, in
which case the provisions of Section 8.5(d)(ii) hereof shall govern.
(ii) The indemnifying parties shall select counsel reasonably
acceptable to the Indemnified Party in connection with conducting the defense or
handling of such Third Party Claim, and the indemnifying parties shall defend or
handle the same in consultation with the Indemnified Party and shall keep the
Indemnified Party timely apprised of the status of such Third Party Claim. The
indemnifying parties shall not, without the prior written consent of the
Indemnified Party, agree to a settlement of any Third Party Claim, unless (A)
the settlement provides an unconditional release and discharge of the
Indemnified Party, and the Indemnified Party is reasonably satisfied with such
discharge and release and (B) the Indemnified Party shall not have reasonably
objected to any such settlement on the ground that the circumstances surrounding
the settlement could result in an adverse impact on the business, operations,
assets, liabilities (absolute, accrued, contingent or otherwise), condition
(financial or otherwise) or prospects of the Indemnified Party. The Indemnified
Party shall cooperate with the indemnifying parties and shall be entitled to
participate in the defense or handling of such Third Party Claim with its own
counsel and at its own expense.
(d) (i) If (A) the indemnifying parties do not give written notice to the
Indemnified Party pursuant to Section 8.5(c)(i) within 30 days after the
effective date of the notice from the Indemnified Party of any Third Party Claim
of the indemnifying party's election to assume the defense or handling of such
Third Party Claim or (B) Parent or the Shareholder Representative elects to
assume the defense or handling of the Third Party Claim pursuant to Section
8.4(c)(ii), the provisions of Section 8.5(d)(ii) shall govern.
(ii) The Indemnified Party may, at the indemnifying party's expense
(which shall be paid from time to time by the indemnifying parties as such
expenses are incurred by the Indemnified Party), select counsel in connection
with conducting the defense or handling of such Third Party Claim and defend or
handle such Third Party Claim in such manner as it may deem appropriate;
provided, however, that the Indemnified Party shall keep the indemnifying
parties timely apprised of the status of such Third Party Claim and shall not
settle such Third Party Claim without the prior written consent of the
indemnifying parties, which consent shall not be unreasonably withheld, unless
the settlement provides an unconditional release and discharge of the
indemnifying parties. If the Indemnified Party defends or handles such Third
Party Claim, the indemnifying parties shall cooperate with the Indemnified Party
and shall be
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entitled to participate in the defense or handling of such Third Party Claim
with its own counsel and at its own expense.
8.6 Remedies; Specific Performance
Except for claims based on fraud, the indemnification provisions of this
Article VIII are the sole and exclusive remedy of any party to this Agreement
for a breach of any representation, warranty or covenant contained herein.
Notwithstanding the preceding sentence, each of the parties acknowledges and
agrees that the other parties hereto would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties hereto shall be entitled to an injunction
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof (including the
indemnification provisions hereof) in any competent court having jurisdiction
over the parties, in addition to any other remedy to which they may be entitled
at law or in equity.
8.7 Shareholder Representative
The term "Shareholder Representative" shall mean the person appointed by
the Shareholders pursuant to the Shareholder Representation Letters referred to
in Section 4.15 above, or any successor thereto of which the Surviving
Corporation and Parent are notified in writing. The Shareholder Representatives
shall have authority to act for and on behalf of all Shareholders with respect
to all matters arising in connection with this Agreement, including, without
limitation, the power and authority, in their sole discretion, to: (a) take any
action contemplated to be taken by the Shareholder Representative under this
Article VIII; (b) negotiate, determine, defend and settle any Third Party Claim
and any dispute which may arise under or in connection with this Agreement; and
(c) make, execute, acknowledge and deliver any releases, assurances, receipts,
requests, instructions, notices, agreements, certificates and any other
instruments, and to generally do any and all things and to take any and all
actions which may be requisite, proper or advisable in connection with this
Agreement.
8.8 No Circular Recovery
No Shareholder will be entitled to make any claim for indemnification
against the Surviving Corporation or any of its Affiliates by reason of the fact
that such Shareholder (or any of his, her or its officers, directors, agents or
other representatives) was a controlling person, director, officer, employee,
agent or other representative of the Company or of any of its Affiliates or was
serving as such for another Person at the request of the Company or any of its
shareholders or Affiliates (whether such claim is for Losses of any kind or
otherwise and whether such claim is pursuant to any statute, charter, by-law,
contractual obligation or otherwise) with respect to any action brought by
Parent or the Surviving Corporation against such Shareholder or the Shareholders
generally (whether such action is pursuant to this Agreement, applicable law, or
otherwise).
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ARTICLE IX - GENERAL
9.1 Tax Matters
Unless otherwise required by law, the parties hereto shall treat the Merger
as a reorganization under Section 368 of the Code and the underlying Treasury
Regulations for all Tax reporting purposes; provided, however, that neither
Parent nor Merger Sub makes any representation or warranty with respect to, and
expressly disclaims any responsibility for, any Tax consequences to the Company
or Shareholders arising out of the structure or terms of this Agreement.
9.2 Expenses
Upon consummation of the transaction contemplated hereby, Parent shall pay
all of the reasonable fees and expenses of Parent, Merger Sub and the Company
incident to the negotiation, preparation and execution of this Agreement and the
other Operative Documents (including legal and accounting fees and expenses);
provided, however, that, should any action be brought hereunder, the attorneys'
fees and expenses of the prevailing party shall be paid by the other party to
such action.
9.3 Notices
Any notice, request or demand desired or required to be given hereunder
shall be in writing given by personal delivery, confirmed facsimile transmission
or overnight courier service, in each case addressed as respectively set forth
below or to such other address as any party shall have previously designated by
such a notice. The effective date of any notice, request or demand shall be the
date of personal delivery, the date on which successful facsimile transmission
is confirmed or the date actually delivered by a reputable overnight courier
service, as the case may be, in each case properly addressed as provided herein
and with all charges prepaid.
To Parent or Merger Sub:
Primus Knowledge Solutions, Inc.
1601 Fifth Avenue
Seattle, WA 98101
Fax: (206) 292-1825
Attention: Michael A. Brochu
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with a copy to:
Perkins Coie LLP
1201 Third Avenue, 48th Floor
Seattle, WA 98101-3099
Fax: (206) 583-8500
Attention: Gregory Gorder
Daniel F. Vaughn
To the Company:
2order.com, Inc.
2970 Clairmont Road, Suite 1010
Atlanta, GA 30329
Fax: (404) 321-0072
Attention: Scott Geller
with a copy to:
Red Hot Law Group of Ashley LLC
817 W. Peachtree Street, Suite 400
Atlanta, GA 30308
Fax: (404) 575-1901
Attention: Evelyn A. Ashley
9.4 Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
9.5 Entire Agreement
This Agreement, the Mutual Nondisclosure Agreement and the other Operative
Documents constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof.
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9.6 Assignment
This Agreement shall not be assigned by operation of law or otherwise;
provided, however, that Merger Sub's rights and obligations may be assigned to
and assumed by Parent or any other corporation wholly owned by Parent.
9.7 Parties in Interest
Except as provided in Section 9.12, this Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their respective
successors heirs, legal representatives and permitted assigns, and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
9.8 Governing Law; Jurisdiction; Venue
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Washington applicable to contracts executed in and to be
performed in that state. The parties irrevocably consent to the nonexclusive
jurisdiction and venue of the state and federal courts located in King County,
Washington and Dekalb County, Georgia in connection with any action relating to
this Agreement.
9.9 Counterparts
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
9.10 Waiver of Jury Trial
Each of Parent, the Company and Merger Sub hereby irrevocably waives all
right to trial by jury in any action, proceeding or counterclaim (whether based
on contract, tort or otherwise) arising out of or relating to this Agreement,
the transactions contemplated hereby or the actions of such parties in the
negotiation, administration, performance and enforcement hereof.
9.11 Knowledge
Whenever the term to the "Knowledge of the Company" or similar phrase, is
used in this Agreement, such phrase shall mean the actual knowledge of the
Company's directors and executive officers and knowledge that could have been
obtained by the Company's executive officers with respect to those matters that
would cause a reasonable person, in a similar position, to investigate the
matter further and that could have been obtained from such investigation without
undue effort.
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9.12 Third Party Beneficiaries
It is the intention of the parties that the Shareholders be considered
third party beneficiaries of the terms and provisions contained in this
Agreement, including but not limited to the rights, obligations and agreements
contained in Article I herein. Further, such Shareholders shall have a vested
right to enforce the provisions of Article I hereof upon compliance with the
terms and provisions contained in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement and Plan of Merger as of the date and year first above written.
PRIMUS KNOWLEDGE SOLUTIONS, INC.
By______________________________________
Its_____________________________________
AUSTIN ACQUISITION, INC.
By______________________________________
Its_____________________________________
2ORDER.COM, INC.
By______________________________________
Its_____________________________________
