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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UNISPHERE NETWORKS, INC.,
PITCHER ACQUISITION CORP.,
AND
BROADSOFT, INC.
Dated as of October 20, 2000
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER...........................................................1
1.1 The Merger..............................................................1
1.2 The Closing.............................................................1
1.3 Actions at the Closing..................................................1
1.4 Additional Action.......................................................2
1.5 Conversion of Shares....................................................2
1.6 Dissenting Shares.......................................................5
1.7 Exchange of Shares......................................................5
1.8 Fractional Shares.......................................................7
1.9 Options and Warrants....................................................7
1.10 Escrow.................................................................9
1.11 Certificate of Incorporation and By-laws...............................9
1.12 No Further Rights.....................................................10
1.13 Closing of Transfer Books.............................................10
1.14 Tax Consequences......................................................10
1.15 Accounting Treatment..................................................10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................10
2.1 Organization, Qualification and Corporate Power........................10
2.2 Capitalization.........................................................11
2.3 Authorization of Transaction...........................................12
2.4 Noncontravention.......................................................12
2.5 Subsidiaries...........................................................13
2.6 Financial Statements...................................................13
2.7 Absence of Certain Changes.............................................13
2.8 Undisclosed Liabilities................................................13
2.9 Tax Matters............................................................14
2.10 Assets................................................................15
2.11 Owned Real Property...................................................15
2.12 Real Property Leases..................................................15
2.13 Intellectual Property.................................................16
2.14 Contracts.............................................................18
2.15 Powers of Attorney....................................................20
2.16 Insurance.............................................................20
2.17 Litigation............................................................20
2.18 Warranties............................................................20
2.19 Employees.............................................................20
2.20 Employee Benefits.....................................................21
2.21 Environmental Matters.................................................23
2.22 Legal Compliance......................................................25
2.23 Customers and Suppliers...............................................25
2.24 Permits...............................................................25
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2.25 Certain Business Relationships With Affiliates........................25
2.26 Brokers' Fees.........................................................25
2.27 Books and Records.....................................................26
2.28 Disclosure............................................................26
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
THE TRANSITORY SUBSIDIARY.....................................................26
3.1 Organization, Qualification and Corporate Power........................26
3.2 Capitalization.........................................................26
3.3 Authorization of Transaction...........................................27
3.4 Noncontravention.......................................................27
3.5 Reports and Financial Statements.......................................27
3.6 Absence of Material Adverse Change.....................................28
3.7 Litigation.............................................................28
3.8 Interim Operations of the Transitory Subsidiary........................29
3.9 Brokers' Fees..........................................................29
3.10 Disclosure............................................................29
3.11 Other Transactions....................................................29
ARTICLE IV COVENANTS..........................................................29
4.1 Closing Efforts........................................................29
4.2 Governmental and Third-Party Notices and Consents......................29
4.3 Special Meeting, Prospectus/Proxy Statement and Registration Statement.30
4.4 Operation of Business..................................................31
4.5 Access to Information..................................................34
4.6 Notice of Breaches.....................................................35
4.7 Exclusivity............................................................35
4.8 Expenses...............................................................35
4.9 Agreements from Certain Affiliates of the Company......................36
4.10 Listing of Merger Shares..............................................36
4.11 Loan..................................................................36
4.12 Directors and Officers Insurance......................................36
4.13 Employee Benefit and Related Matters..................................37
4.14 Certain Tax Matters...................................................37
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER................................38
5.1 Conditions to Each Party's Obligations.................................38
5.2 Conditions to Obligations of the Buyer and the Transitory Subsidiary...39
5.3 Conditions to Obligations of the Company...............................41
ARTICLE VI INDEMNIFICATION....................................................42
6.1 Indemnification by the Company Stockholders............................42
6.2 Indemnification by the Buyer...........................................43
6.3 Indemnification Claims.................................................43
6.4 Survival of Representations and Warranties.............................46
6.5 Limitations............................................................47
ARTICLE VII TERMINATION.......................................................48
7.1 Termination of Agreement...............................................48
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7.2 Effect of Termination..................................................49
ARTICLE VIII DEFINITIONS......................................................49
ARTICLE IX MISCELLANEOUS......................................................52
9.1 Press Releases and Announcements.......................................52
9.2 No Third Party Beneficiaries...........................................52
9.3 Entire Agreement.......................................................52
9.4 Succession and Assignment..............................................52
9.5 Counterparts and Facsimile Signature...................................54
9.6 Headings...............................................................54
9.7 Notices................................................................54
9.8 Governing Law..........................................................55
9.9 Amendments and Waivers.................................................55
9.10 Severability..........................................................55
9.11 Submission to Jurisdiction............................................55
9.12 Construction..........................................................56
Exhibit A - Escrow Agreement
Exhibit B - Stockholder Voting Agreement
Exhibit C - Affiliate Agreement
Exhibit D - Loan and Security Agreement
Exhibit E - Opinion of Counsel to the Company
Exhibit F - Noncompetition and Nonsolicitation Agreement
Exhibit G-1 - Lock-Up Agreement (Employee)
Exhibit G-2 - Lock-Up Agreement (Non-Employee)
Exhibit H - Opinion of Counsel to the Buyer and the Transitory Subsidiary
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of October 20, 2000 by and among Unisphere
Networks, Inc., a Delaware corporation (the "Buyer"), Pitcher Acquisition Corp.,
a Delaware corporation and a wholly-owned subsidiary of the Buyer (the
"Transitory Subsidiary"), and BroadSoft, Inc., a Delaware corporation (the
"Company"). The Buyer, the Transitory Subsidiary and the Company are referred to
collectively herein as the "Parties."
This Agreement contemplates a merger of the Transitory Subsidiary into the
Company. In such merger, the stockholders of the Company will receive common
stock of the Buyer in exchange for their capital stock of the Company. It is
intended that the merger would qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. The
parties further intend for the merger to be accounted for, for financial
accounting purposes, as a purchase transaction.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which the Company and
the Transitory Subsidiary file a certificate of merger or other appropriate
documents prepared and executed in accordance with Section 251(c) of the
Delaware General Corporation Law (the "Certificate of Merger") with the
Secretary of State of the State of Delaware. The Merger shall have the effects
set forth in Section 259 of the Delaware General Corporation Law.
1.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hale and Dorr LLP
in Reston, Virginia, commencing at 9:00 a.m. local time on such mutually
agreeable date as soon as practicable (and in any event not later than three
business days) after the satisfaction or waiver of all conditions (excluding the
delivery of any documents to be delivered at the Closing by any of the Parties)
set forth in Article V hereof (the "Closing Date").
1.3 ACTIONS AT THE CLOSING. At the Closing:
(a) the Company shall deliver to the Buyer and the Transitory
Subsidiary the various certificates, instruments and documents referred to in
Section 5.2;
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(b) the Buyer and the Transitory Subsidiary shall deliver to the
Company the various certificates, instruments and documents referred to in
Section 5.3;
(c) the Company and the Transitory Subsidiary shall file with the
Secretary of State of the State of Delaware the Certificate of Merger;
(d) the Buyer shall deliver certificates for the Initial Shares (as
defined below) to a bank trust company or other entity reasonably satisfactory
to the Company appointed by the Buyer to act as the exchange agent (the
"Exchange Agent") in accordance with Section 1.7; and
(e) the Buyer, Michael Tessler and Robert Goodman (the
"Indemnification Representatives") and an independent escrow agent mutually
agreeable to the parties (the "Escrow Agent") shall execute and deliver the
Escrow Agreement attached hereto as EXHIBIT A (the "Escrow Agreement") and the
Buyer shall deliver to the Escrow Agent a certificate for the Escrow Shares (as
defined below) being placed in escrow on the Closing Date pursuant to Section
1.10.
1.4 ADDITIONAL ACTION. The Surviving Corporation may, at any time after
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:
(a) Each share of common stock, $.01 par value per share, of the
Company ("Common Shares") issued and outstanding immediately prior to the
Effective Time (other than Common Shares owned beneficially by the Buyer or the
Transitory Subsidiary, Dissenting Shares (as defined below) and Common Shares
held in the Company's treasury) shall be converted into and represent the right
to receive (subject to the provisions of Section 1.10) (i) such number of shares
of common stock, $.01 par value per share, of the Buyer ("Buyer Common Stock")
as is equal to the Common Conversion Ratio (as defined below) plus (ii) any
Additional Shares pursuant to Section 1.5(d) below.
(b) The "Common Conversion Ratio" shall be the result obtained by
dividing (i) 4,960,000 by (ii) the sum of (A) number of outstanding Common
Shares immediately prior to the Effective Time (the "Actual Closing Shares")
(after giving effect to the exercise of all Warrants (as defined below)
outstanding immediately prior to the Effective Time and the conversion of all
shares of Series B Convertible Preferred Stock, $.01 par value per share (the
"Series B Preferred Shares") into Common Shares (as contemplated by Section
5.2(m)), and (B) the number of Common Shares issuable upon the exercise of all
Options (as defined below) outstanding immediately prior to the Effective Time,
other than any Options issued as contemplated by Section 4.4(a) (such sum being
referred to as the "Fully-Diluted Closing Shares").
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(c) Of the shares of Buyer Common Stock into which the Common Shares
were converted pursuant to this Section 1.5, 496,000 shares of Buyer Common
Stock (the "Escrow Shares") shall be deposited into escrow pursuant to Section
1.10 and shall be held and disposed of in accordance with the terms of the
Escrow Agreement. Stockholders of record of the Company immediately prior to the
Effective Time ("Company Stockholders") shall be entitled to receive initially
in the aggregate the number of shares of Buyer Common Stock into which their
Common Shares were converted pursuant to this Section 1.5 (and cash in lieu of
any fractional share of Buyer Common Stock, provided that such cash shall be
paid following the end of the Measurement Period, as contemplated in Section 1.8
below), less the number of Escrow Shares (the "Initial Shares"). The Initial
Shares shall be allocated among the Company Stockholders pro rata in accordance
with the number of Common Shares held by each, with any fractions being rounded
down to the nearest whole number. The Initial Shares and the Escrow Shares are
referred to as the "Total Closing Shares."
(d) Promptly following the expiration of the Measurement Period (as
defined below) (but in any event within 15 days thereafter), the Buyer shall
issue, without deduction, reduction or setoff, that number of additional shares
of Buyer Common Stock (the "Additional Shares"), if any, equal to the Total
Merger Shares (as defined below) less the Total Closing Shares. Of such
Additional Shares, that number of shares equal to the product of (i) the Total
Merger Consideration (as defined below) less 4,960,000 shares, multiplied by
(ii) 10%, shall be considered Escrow Shares and deposited into escrow pursuant
to Section 1.10. The Company Stockholders shall be entitled to receive initially
the number of Additional Shares not deposited into escrow pursuant to the
preceding sentence, which shall be allocated among the Company Stockholders pro
rata in accordance with the number of Initial Shares received by each in respect
of its Common Shares, with any fractions being rounded down to the nearest
whole number and cash being paid in lieu of any fractional share following the
end of the Measurement Period as contemplated by Section 1.8 below. The Initial
Shares, the Additional Shares and the Escrow Shares are referred to as the
"Merger Shares."
(e) The number of "Total Merger Shares" shall equal the product of
(A) the Total Merger Consideration multiplied by (B) a fraction, the numerator
of which is the number of Actual Closing Shares and the denominator of which is
the number of Fully-Diluted Closing Shares. The "Total Merger Consideration"
shall be calculated as follows:
(i) if the Buyer Average Stock Price is less than or equal to
Threshold A, then the Total Merger Consideration shall be 6,710,000 shares of
Buyer Common Stock;
(ii) if the Buyer Average Stock Price is greater than
Threshold A and less than Threshold B, then the Total Merger Consideration shall
be the number of shares of Buyer Common Stock equal to the quotient of (x)
Threshold B multiplied by 5,460,000, (y) divided by the Buyer Average Stock
Price;
(iii) if the Buyer Average Stock Price is equal to or greater
than Threshold B and less than or equal to Threshold C, then the Total Merger
Consideration shall be 5,460,000 shares of Buyer Common Stock;
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(iv) if the Buyer Average Stock Price is greater than
Threshold C and less than Threshold D, then the Total Merger Consideration shall
be the number of shares of Buyer Common Stock equal to the quotient of (x)
Threshold C multiplied by 5,460,000, (y) divided by the Buyer Average Stock
Price; and
(v) if the Buyer Average Stock Price is equal to or greater
than Threshold D, then the Total Merger Consideration shall be 4,960,000 shares
of Buyer Common Stock; where
(vi) "Threshold A" shall mean the quotient of (A) Threshold B
multiplied by 5,460,000, (B) divided by 6,710,000. "Threshold B" shall mean a
fraction, the numerator of which is $10,000,000,000 plus the amount of the Gross
IPO Proceeds (as defined below), and the denominator of which is the number of
Post-IPO Shares. "Threshold "C" shall mean a fraction, the numerator of which is
$14,000,000,000 plus the amount of the Gross IPO Proceeds, and the denominator
of which is the number of Post-IPO Shares. "Threshold D" shall mean the quotient
of (A) Threshold C multiplied by 5,460,000, (B) divided by 4,960,000. "Gross IPO
Proceeds" shall mean the price per share to the public, as set forth on the
cover of the final prospectus for the IPO (as defined below), multiplied by the
number of shares sold to the public in the IPO, after giving effect to the
exercise by the underwriters of their over-allotment option, if applicable.
"Post-IPO Shares" means the number of shares of Buyer Common Stock outstanding
immediately after the closing of the IPO, plus the number of shares of Buyer
Common Stock issuable upon the exercise of options and warrants to purchase
Buyer Common Stock then outstanding, plus the number of shares issued upon the
exercise of the underwriters' over-allotment option, if applicable. "IPO" shall
mean the first public underwritten offering of equity securities made by the
Buyer pursuant to an effective registration statement on Form S-1 under the
Securities Act (as defined below). The "Buyer Average Stock Price" shall be
equal to the average of the last reported sale price per share for the Buyer
Common Stock on the Nasdaq National Market for the 20 consecutive trading days
(the "Measurement Period") beginning with the first complete trading day
following the later to occur of (x) the public announcement of Buyer's quarterly
financial results for the Buyer's first fiscal quarter ending after the IPO and
(y) the 30th day following the Closing Date.
(f) Each Company Share (as defined below) held in the Company's
treasury immediately prior to the Effective Time shall be cancelled and retired
without payment of any consideration therefor.
(g) Each share of common stock, $.01 par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and thereafter evidence one share of common stock,
$.01 par value per share, of the Surviving Corporation.
(h) In the event of any change in Buyer Common Stock between the date
of this Agreement and the later of the date 10 days following the Measurement
Period or the date all Additional Shares are issued pursuant to Section 1.5(d)
by reason of stock split, stock dividend, subdivision, reclassification,
recapitalization, combination, exchange of shares or the
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like, the number and class of shares of Buyer Common Stock to be issued and
delivered in the Merger as provided in this Agreement shall be appropriately
adjusted.
1.6 DISSENTING SHARES.
(a) For purposes of this Agreement, "Dissenting Shares" means Company
Shares held as of the Effective Time by a Company Stockholder who has not voted
such Company Shares in favor of the adoption of this Agreement and the Merger
and with respect to which appraisal shall have been duly demanded and perfected
in accordance with Section 262 of the Delaware General Corporation Law and not
effectively withdrawn or forfeited prior to the Effective Time. Dissenting
Shares shall not be converted into or represent the right to receive Merger
Shares, unless such Company Stockholder shall have forfeited his, her or its
right to appraisal under the Delaware General Corporation Law or properly
withdrawn, his, her or its demand for appraisal. If such Company Stockholder has
so forfeited or withdrawn his, her or its right to appraisal of Dissenting
Shares, then (i) as of the occurrence of such event, such holder's Dissenting
Shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the Merger Shares issuable in respect of such
Company Shares pursuant to Section 1.5, and (ii) promptly following the
occurrence of such event, the Buyer shall deliver to the Exchange Agent a
certificate representing 90% of the Merger Shares to which such holder is
entitled pursuant to Section 1.5 (which shares shall be considered Initial
Shares for all purposes of this Agreement) and shall deliver to the Escrow Agent
a certificate representing the remaining 10% of the Merger Shares to which such
holder is entitled pursuant to Section 1.5 (which shares shall be considered
Escrow Shares for all purposes of this Agreement).
(b) The Company shall give the Buyer (i) prompt notice of any written
demands for appraisal of any Company Shares, withdrawals of such demands, and
any other instruments that relate to such demands received by the Company and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the Delaware General Corporation Law; provided that,
prior to the Closing, the Company shall have the opportunity to participate in
all such negotiations and proceedings. The Company shall not, except with the
prior written consent of the Buyer, make any payment with respect to any demands
for appraisal of Company Shares or offer to settle or settle any such demands,
unless required to do so by a court of competent jurisdiction. Prior to the
Closing, the Buyer shall consult with the Company prior to entering into any
agreement to settle any such demands.
1.7 EXCHANGE OF SHARES.
(a) Prior to the Effective Time, the Buyer shall appoint the Exchange
Agent to effect the exchange for the Initial Shares and the Additional Shares of
certificates that, immediately prior to the Effective Time, represented Common
Shares converted into Merger Shares pursuant to Section 1.5 (including any
Common Shares referred to in the last sentence of Section 1.6(a))
("Certificates"). On the Closing Date, the Buyer shall deliver to the Exchange
Agent, in trust for the benefit of holders of Certificates, stock certificates
(issued in the name of the Company Stockholders) representing the Initial
Shares, as described in Section 1.5. As soon as practicable after the Effective
Time, the Buyer shall cause the Exchange Agent to send a
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notice and a transmittal form to each holder of a Certificate advising such
holder of the effectiveness of the Merger and the procedure for surrendering to
the Exchange Agent such Certificate in exchange for the Initial Shares issuable
pursuant to Section 1.5. Each holder of a Certificate, upon proper surrender
thereof to the Exchange Agent in accordance with the instructions in such
notice, shall be entitled to receive in exchange therefor (subject to any taxes
required to be withheld) the Initial Shares issuable pursuant to Section 1.5.
Following determination of the Total Merger Consideration, the Buyer shall
deliver to the Exchange Agent stock certificates representing the Additional
Shares and each holder of a Certificate, upon proper surrender thereto, shall be
entitled to receive the Additional Shares issuable pursuant to Section 1.5.
Until properly surrendered, each such Certificate shall be deemed for all
purposes to evidence only the right to receive a certificate for the Initial
Shares or Additional Shares, if any, issuable pursuant to Section 1.5 (and cash
in lieu of any fractional share of Buyer Common Stock, provided that such cash
shall be paid following the end of the Measurement Period, as contemplated in
Section 1.8 below). Holders of Certificates shall not be entitled to receive
certificates for the Initial Shares or Additional Shares, if any, to which they
would otherwise be entitled until such Certificates are properly surrendered.
(b) If any Initial Shares or Additional Shares, if any, are to be
issued in the name of a person other than the person in whose name the
Certificate surrendered in exchange therefor is registered, it shall be a
condition to the issuance of such Initial Shares or Additional Shares, if any,
that (i) the Certificate so surrendered shall be transferable, and shall be
properly assigned, endorsed or accompanied by appropriate stock powers, (ii)
such transfer shall otherwise be proper and (iii) the person requesting such
transfer shall pay to the Exchange Agent any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of the Exchange Agent
that such taxes have been paid or are not required to be paid. Notwithstanding
the foregoing, neither the Exchange Agent nor any Party shall be liable to a
holder of Common Shares for any Initial Shares or Additional Shares, if any,
issuable to such holder pursuant to Section 1.5 that are delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, the Buyer shall issue in
exchange for such lost, stolen or destroyed Certificate the Initial Shares
issuable in exchange therefor pursuant to Section 1.5. The Board of Directors of
the Buyer may, in its reasonable discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to give the Buyer an appropriate affidavit and/or a bond in such sum
as it may direct as indemnity against any claim that may be made against the
Buyer with respect to the Certificate alleged to have been lost, stolen or
destroyed.
(d) No dividends or other distributions that are payable to the
holders of record of Buyer Common Stock as of a date on or after the Closing
Date shall be paid to former Company Stockholders entitled by reason of the
Merger to receive Initial Shares or Additional Shares, if any, until such
holders surrender their Certificates for certificates representing the Merger
Shares. Upon such surrender, the Buyer shall pay or deliver to the persons in
whose
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name the certificates representing such Initial Shares or Additional Shares, if
any, are issued any dividends or other distributions that are payable to the
holders of record of Buyer Common Stock as of a date on or after the Closing
Date and which were paid or delivered between the Effective Time and the time of
such surrender; provided that no such person shall be entitled to receive any
interest on such dividends or other distributions.
(e) Certificates representing the Merger Shares may be legended to
reflect the lock-up agreements contemplated by Section 5.2(j).
1.8 FRACTIONAL SHARES. No certificates or scrip representing fractional
Initial Shares shall be issued to former Company Stockholders upon the surrender
for exchange of Certificates, and such former Company Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
Initial Shares or Additional Shares, if any, that would have otherwise been
issued to such former Company Stockholders. In lieu of such fractional shares,
promptly following the Measurement Period (but in any event within 10 days
thereafter), any holder of Company Shares who would otherwise be entitled to a
fraction of a share of Buyer Common Stock (after aggregating all fractional
shares of Buyer Common Stock issuable to such holder) shall (provided that such
holder shall have surrendered its Certificate(s)), be paid in cash the dollar
amount (rounded to the nearest whole cent), without interest, determined by
multiplying such fraction by the Buyer Average Stock Price.
1.9 OPTIONS AND WARRANTS.
(a) As of the Effective Time, all options to purchase Common Shares
issued by the Company pursuant to its stock option plans or otherwise
("Options"), whether vested or unvested, and the Company's stock option plan(s)
under which Options have been granted shall be assumed by the Buyer. Immediately
after the Effective Time, each Option outstanding immediately prior to the
Effective Time shall be deemed to constitute an option to acquire Buyer Common
Stock on the same terms and conditions as were applicable under such Option at
the Effective Time, subject to the adjustments contemplated by this Section
1.9(a). For all assumed Options, other than any Options issued as contemplated
by Section 4.4(a) (referred to as the "Permitted Options"), each Option shall
become an option to acquire a number of shares of Buyer Common Stock equal to
the number of Common Shares subject to the unexercised portion of such Option
multiplied by the Common Conversion Ratio (with any fraction resulting from such
multiplication to be rounded down to the nearest whole number). The exercise
price per share of each such assumed Option, other than Permitted Options, shall
be equal to the exercise price of such Option immediately prior to the Effective
Time, divided by the Common Conversion Ratio (with any fraction resulting from
such division to be rounded up to the nearest whole cent). The number of shares
purchasable under, and the exercise price of, each assumed Permitted Option
shall not be adjusted in connection with the Merger and shall remain the same
after the Effective Time. Following the Measurement Period, with respect to any
Options assumed by Buyer pursuant to this Section 1.9(a) and still unexercised,
other than Permitted Options, the holder of such assumed Option shall receive
additional options, on the same terms and conditions and at the same exercise
price per share in effect immediately prior to such
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issuance, to purchase a number of shares of Buyer Common Stock equal to the
difference between (i) the number of shares of Buyer Common Stock subject to
such assumed Option immediately prior thereto multiplied by a fraction, (A) the
numerator of which is the Total Merger Consideration and (B) the denominator of
which is 4,960,000 (with any fraction resulting from such multiplication to be
rounded down to the nearest whole number), and (ii) the number of shares of
Buyer Common Stock subject to such assumed Option immediately prior thereto. The
exercise price in effect immediately prior to such adjustment shall not be
adjusted. The term, exercisability, vesting schedule, status as an "incentive
stock option" under Section 422 of the Internal Revenue Code of 1986 (as
amended, the "Code"), if applicable, and all of the other terms of the Options
shall otherwise remain unchanged. In the event the Buyer receives a request to
exercise any Option assumed by it following the Effective Time and prior to the
expiration of the Measurement Period, Buyer shall notify the optionholder of the
consequence of such exercise with respect to potential additional options
contemplated by this Section 1.9(a).
(b) As soon as practicable after the Effective Time, the Buyer or the
Surviving Corporation shall deliver to the holders of Options appropriate
notices setting forth the number of shares of Buyer Common Stock subject to such
assumed Option, the exercise price per share, and such holders' rights pursuant
to such Options, as amended by this Section 1.9, and the agreements evidencing
such Options shall continue in effect on the same terms and conditions (subject
to the amendments provided for in this Section 1.9 and such notice). The Buyer
or the Surviving Corporation shall deliver to the holders of Options an
appropriate notice after the expiration of the Measurement Period, describing
any additional options issued pursuant to this Section 1.9.
(c) The Buyer shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Buyer Common Stock for delivery
upon exercise of the Options assumed in accordance with this Section 1.9. Within
10 days after the Effective Time, the Buyer shall file a Registration Statement
on Form S-8 (or any successor form) under the Securities Act of 1933 (as
amended, the "Securities Act") with respect to all shares of Buyer Common Stock
subject to such Options that may be registered on a Form S-8, and within 10 days
after the expiration of the Measurement Period, Buyer shall amend such
Registration Statement on Form S-8, if necessary, to take into account any
additional options issued with respect to the Options pursuant to this Section
1.9. Buyer shall use its best efforts to maintain the effectiveness of such
Registration Statement for so long as such Options remain outstanding.
(d) The Company shall cause the termination, as of the Effective
Time, of the Second Amended and Restated Replacement Warrant to Purchase Stock,
dated November 4, 1999, by the Company in favor of Silicon Valley Bank and the
Warrant Agreement by and between the Company and Comdisco, Inc. dated as of June
5, 2000 (the "Warrants") to the extent that either Warrant remains unexercised
as of the Effective Time.
(e) The Company shall obtain, prior to the Closing, the consent from
each holder of an Option or a Warrant to the amendment (in the case of Options)
or termination (in the case of Warrants) of such Option or Warrant pursuant to
this Section 1.9 (unless such consent is not required under the terms of the
applicable agreement, instrument or plan).
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(f) Section 2.2 of the Disclosure Schedule sets forth (i) all Common
Shares, Series A Preferred Shares (as defined below) and Series B Preferred
Shares (collectively, the "Company Shares") outstanding immediately prior to the
Effective Time that are unvested or are subject to a repurchase option, risk of
forfeiture or other conditions under any applicable restricted stock purchase
agreement or other agreement with the Company (the "Restricted Shares") and (ii)
all elections made under Section 83(b) of the Code with respect thereto. Any
shares of Buyer Common Stock (including Additional Shares) issued in exchange
for the Restricted Shares will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition (provided, however,
that the vesting schedule of such shares shall accelerate in accordance with the
terms of the applicable restricted stock purchase or other agreement upon the
Effective Time, and further provided that the repurchase price in effect
immediately prior to the Effective Time, if any, shall be appropriately adjusted
by dividing it by the Common Conversion Ratio, and further provided that after
expiration of the Measurement Period, such repurchase price shall not be further
adjusted to reflect the issuance of any Additional Shares), and the certificates
representing such shares of Buyer Common Stock shall accordingly be marked with
appropriate legends.
1.10 ESCROW.
(a) On the Closing Date and following the determination of the Total
Merger Consideration (if applicable), the Buyer shall deliver to the Escrow
Agent a certificate (issued in the name of the Escrow Agent or its nominee)
representing the Escrow Shares, as described in Section 1.5, for the purpose of
securing the indemnification obligations of the Indemnifying Stockholders (as
defined in Section 6.1) set forth in this Agreement. The Escrow Shares shall be
held by the Escrow Agent under the Escrow Agreement pursuant to the terms
thereof. The Escrow Shares shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of any party, and shall be held and disbursed solely for the
purposes and in accordance with the terms of the Escrow Agreement.
(b) The adoption of this Agreement and the approval of the Merger by
the Company Stockholders shall constitute approval of the Escrow Agreement and
of all of the arrangements relating thereto, including without limitation the
placement of the Escrow Shares in escrow and the appointment of the
Indemnification Representatives.
1.11 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The Certificate of Incorporation of the Surviving Corporation
immediately following the Effective Time shall be the same as the Certificate of
Incorporation of the Transitory Subsidiary immediately prior to the Effective
Time, except that (1) the name of the corporation set forth therein shall be
changed to the name of the Company and (2) the identity of the incorporator
shall be deleted.
(b) The By-laws of the Surviving Corporation immediately following
the Effective Time shall be the same as the By-laws of the Transitory Subsidiary
immediately prior to the Effective Time, except that the name of the corporation
set forth therein shall be changed to the name of the Company.
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1.12 NO FURTHER RIGHTS. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or by
law.
1.13 CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Buyer, the Surviving Corporation or the Exchange Agent, they shall be
cancelled and exchanged for Initial Shares and, if applicable, Additional Shares
in accordance with Section 1.5, subject to Section 1.10 and to applicable law in
the case of Dissenting Shares.
1.14 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.15 ACCOUNTING TREATMENT. For accounting purposes, the Merger is intended
to be accounted for as a purchase.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule provided by the Company to the Buyer on the date hereof and
accepted in writing by the Buyer (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify only the corresponding
paragraph in this Article II; provided, however, that the Company may insert
appropriate cross-references in a paragraph of the Disclosure Schedule to
another paragraph of the Disclosure Schedule, and such other paragraph in this
Article II shall be deemed to be so qualified as well. For purposes of this
Article II, the phrase "to the knowledge of the Company" or any phrase of
similar import shall be deemed to refer to the actual knowledge of those
employees and directors identified in the introduction to the Disclosure
Schedule.
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. The Company is duly qualified
to conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, except where the failure
to be so qualified or in good standing, individually or in the aggregate, has
not had and would not be reasonably likely to have a Company Material Adverse
Effect (as defined below). The Company has all requisite corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. The Company has furnished to the Buyer
complete and accurate copies of its Certificate of Incorporation and By-laws.
The
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Company is not in default under or in violation of any provision of its
Certificate of Incorporation or By-laws. For purposes of this Agreement,
"Company Material Adverse Effect" means a material adverse effect on the assets,
business, condition (financial or otherwise), operations or results of
operations of the Company.
2.2 CAPITALIZATION. The authorized capital stock of the Company consists
of (a) 50,000,000 Common Shares, of which, as of the date of this Agreement,
30,345,826 shares were issued and outstanding and 30,000 shares were held in the
treasury of the Company and (b) 13,015,004 shares of preferred stock, of which
(i) 9,000,000 shares have been designated as Series A Preferred Stock, $.01 par
value per share (the "Series A Preferred Shares"), of which, as of the date of
this Agreement, 9,000,000 shares were issued and outstanding and (ii) 4,015,004
shares have been designated as Series B Shares, of which, as of the date of this
Agreement, 3,850,000 shares were issued and outstanding, 66,000 shares were
reserved for issuance upon exercise of outstanding Warrants and 99,000 were
reserved for possible issuance upon exercise of Warrants that may be required to
be issued upon the occurrence of certain events described in Section 2.2 of the
Disclosure Schedule. Section 2.2 of the Disclosure Schedule sets forth a
complete and accurate list, as of the date of this Agreement, of (i) all
stockholders of the Company, indicating the number and class or series of
Company Shares held by each stockholder and (for Company Shares other than
Common Shares) the number of Common Shares (if any) into which such Company
Shares are convertible, (ii) all outstanding Options and Warrants, indicating
(A) the holder thereof, (B) the number and class or series of Company Shares
subject to each Option and Warrant and (for Company Shares other than Common
Shares) the number of Common Shares (if any) into which such Company Shares are
convertible, (C) the exercise price, date of grant, vesting schedule and
expiration date for each Option or Warrant, and (D) any terms regarding the
acceleration of vesting, and (iii) all stock option plans and other stock or
equity-related plans of the Company. All of the issued and outstanding Company
Shares are, and all Company Shares that may be issued upon exercise of Options
or Warrants will be (upon issuance in accordance with their terms), duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights. As of the date of this Agreement, other than the Options and Warrants
listed in Section 2.2 of the Disclosure Schedule and, with respect to redemption
rights, other than pursuant to the Company Charter, there are no outstanding or
authorized options, warrants, rights, agreements or commitments to which the
Company is a party or which are binding upon the Company providing for the
issuance or redemption of any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
the Company. Except as set forth in Section 2.2 of the Disclosure Schedule, and
except for the Company's Second Amended and Restated Stockholders' Agreement,
dated May 23, 2000 (the "Stockholders Agreement"), and the Company's Amended and
Restated Registration Rights Agreement, dated April 25, 2000 (the "Registration
Rights Agreement"), there are no agreements to which the Company is a party or
by which it is bound with respect to the voting (including without limitation
voting trusts or proxies), registration under the Securities Act, or sale or
transfer (including without limitation agreements relating to pre-emptive
rights, rights of first refusal, co-sale rights or "drag-along" rights) of any
securities of the Company. To the knowledge of the Company, there are no
agreements among other parties, to which the Company is not a party and by which
it is not bound, with respect to the voting (including without limitation voting
trusts or proxies) or sale or
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<PAGE> 16
transfer (including without limitation agreements relating to rights of first
refusal, co-sale rights or "drag-along" rights) of any securities of the
Company. All of the issued and outstanding Company Shares were issued in
compliance with applicable federal and state securities laws.
2.3 AUTHORIZATION OF TRANSACTION. The Company has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and,
subject to the adoption of this Agreement and the approval of the Merger by a
majority of the votes represented by the outstanding Common Shares (including
the Series B Preferred Shares, voting on an as-converted basis, voting together
with the Common Shares as a single class) and a majority of the Company's Series
A Preferred Shares and Series B Preferred Shares, voting as a single class (with
each Series A Preferred Share having one vote and each Series B Preferred Share
having that number of votes as is equal to the number of Common Shares into
which it is then convertible) (collectively, the "Requisite Stockholder
Approval"), the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Company. Without limiting the generality of the foregoing,
the Board of Directors of the Company, at a meeting duly called and held, by the
unanimous vote of all directors (i) determined that the Merger is fair and in
the best interests of the Company and its stockholders, (ii) adopted this
Agreement in accordance with the provisions of the Delaware General Corporation
Law, and (iii) directed that this Agreement and the Merger be submitted to the
stockholders of the Company for their adoption and approval and resolved to
recommend that the stockholders of Company vote in favor of the adoption of this
Agreement and the approval of the Merger. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
2.4 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "Hart-Scott-Rodino Act"), if any, obtaining the Requisite
Stockholder Approval and filing of the Certificate of Merger as required by the
Delaware General Corporation Law, except as set forth on Section 2.4 of the
Disclosure Schedule, neither the execution and delivery by the Company of this
Agreement, nor the consummation by the Company of the transactions contemplated
hereby, will (a) conflict with or violate any provision of the Certificate of
Incorporation or By-laws of the Company, (b) require on the part of the Company
any filing with, or any permit, authorization, consent or approval of, any
court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (a "Governmental Entity"), (c)
conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party the right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which the Company is a party or by which the Company is bound or to which any of
their assets is subject, (d) result in the imposition of any Security Interest
(as defined below) upon any assets of the Company or (e) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its properties or assets subject, in the cases of Section 2.4(c) and
(e), to any conflicts, breaches, defaults, accelerations, terminations,
modifications, cancellations, consents, notices, waivers or violations which,
individually or in the
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aggregate, has not had and would not be reasonably likely to have a Company
Material Adverse Effect. For purposes of this Agreement: "Security Interest"
means any mortgage, pledge, security interest, encumbrance, charge or other lien
(whether arising by contract or by operation of law), other than (i) mechanic's,
materialmen's, landlord's and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, (iii) liens on goods in transit incurred pursuant to documentary
letters of credit, in each case arising in the Ordinary Course of Business (as
defined below) of the Company and not material to the Company and (iv) liens for
current Taxes not yet due and payable; and "Ordinary Course of Business" means
the ordinary course of the Company's business, consistent with past custom and
practice (including with respect to frequency and amount).
2.5 SUBSIDIARIES. The Company does not control directly or indirectly or
have any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business association.
2.6 FINANCIAL STATEMENTS. The Company has provided to the Buyer (a) the
audited consolidated balance sheets and statements of operations and cash flows
of the Company as of and for the period from inception through December 31, 1999
and the year ended December 31, 1999 and the audited statement of changes in
stockholders' equity for the year ended December 31, 1999; and (b) the unaudited
consolidated balance sheet and statements of operations, changes in
stockholders' equity and cash flows as of and for the eight months ended as of
August 31, 2000 (the "Most Recent Balance Sheet Date"). Such financial
statements (collectively, the "Financial Statements") have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods covered thereby, fairly
present the financial condition, results of operations and cash flows of the
Company as of the respective dates thereof and for the periods referred to
therein and are consistent with the books and records of the Company; provided,
however, that the Financial Statements referred to in clause (b) above are
subject to normal recurring year-end adjustments (which will not be material)
and do not include footnotes.
2.7 ABSENCE OF CERTAIN CHANGES. Since the Most Recent Balance Sheet Date,
(a) there has occurred no event or development which has had, or would
reasonably be expected to have in the future, a Company Material Adverse Effect,
and (b) except as set forth on Section 2.7 of the Disclosure Schedule, neither
the Company nor any Subsidiary has taken any of the actions set forth in
paragraphs (a) through (n) of Section 4.4.
2.8 UNDISCLOSED LIABILITIES. Except as set forth on Section 2.8 of the
Disclosure Schedule, the Company has no liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated and whether
due or to become due) of the type required to be reflected in a balance sheet
prepared in accordance with GAAP, except for (a) liabilities shown on the
balance sheet referred to in clause (b) of Section 2.6 (the "Most Recent Balance
Sheet"), and (b) liabilities which have arisen since the Most Recent Balance
Sheet Date in the Ordinary Course of Business and which are similar in nature
and amount to the liabilities which arose during the comparable period of time
in the immediately preceding fiscal period.
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2.9 TAX MATTERS.
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or other
similar assessments or liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, unemployment insurance,
social security, business license, business organization, environmental, workers
compensation, payroll, profits, license, lease, service, service use, severance,
stamp, occupation, windfall profits, customs, duties, franchise and other taxes
imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied to a taxing authority in
connection with Taxes.
(b) The Company has filed on a timely basis all Tax Returns that it
was required to file, and all such Tax Returns were complete and accurate in all
material respects, and the Company has paid on a timely basis all Taxes whether
or not shown on such Tax Returns to be due and payable. The Company is not nor
has ever been a member of a group of corporations with which it has filed (or
been required to file) consolidated, combined or unitary Tax Returns. The unpaid
Taxes of the Company for tax periods through the Most Recent Balance Sheet Date
do not exceed the accruals and reserves for Taxes (excluding accruals and
reserves for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the Most Recent Balance Sheet. The Company
does not have any actual or potential liability for any Tax obligation of any
taxpayer (including without limitation any affiliated group of corporations or
other entities that included the Company during a prior period) other than the
Company. All Taxes that the Company is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity.
(c) The Company has delivered to the Buyer complete and accurate
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since its inception.
None of the federal income Tax Returns of the Company have been audited by the
Internal Revenue Service. The Company has delivered or made available to the
Buyer complete and accurate copies of all other Tax Returns of the Company
together with all related examination reports and statements of deficiency for
all periods from and after the Company's inception. No examination or audit of
any Tax Return of the Company by any Governmental Entity is currently in
progress or, to the knowledge of the Company, threatened or contemplated. The
Company has not been informed by any jurisdiction that the jurisdiction believes
that the Company was required to file any Tax Return that was not filed. The
Company has not waived any statute of limitations with respect to Taxes or
agreed to an extension of time with respect to a Tax assessment or deficiency.
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(d) The Company: (i) is not a "consenting corporation" within the
meaning of Section 341(f) of the Code, and none of the assets of the Company are
subject to an election under Section 341(f) of the Code; (ii) 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; (iii) except as set forth in Section 2.9(d) of the
Disclosure Schedule, has not made any payments, is not obligated to make any
payments, or is not a party to any agreement that could obligate it to make any
payments that may be treated as an "excess parachute payment" under Section 280G
of the Code; (iv) does not have any actual or potential liability for any Taxes
of any person (other than the Company and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of federal, state, local,
or foreign law), or as a transferee or successor, by contract, or otherwise; or
(v) is not or has not been required to make a basis reduction pursuant to
Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section
1.337(d)-2(b).
(e) The Company has not undergone a change in its method of
accounting resulting in an adjustment to its taxable income pursuant to Section
481 of the Code.
(f) Except as set forth in Section 2.9(f) of the Disclosure Schedule,
no state or federal "net operating loss" of the Company determined as of the
Closing Date is subject to limitation on its use pursuant to Section 382 of the
Code or comparable provisions of state law as a result of any "ownership change"
within the meaning of Section 382(g) of the Code or comparable provisions of any
state law occurring prior to the Closing Date.
2.10 ASSETS. The Company owns or leases all tangible assets necessary for
the conduct of its businesses as presently conducted and as presently proposed
to be conducted. Such tangible assets, taken in the aggregate, are in good
operating condition and repair (subject to normal wear and tear) and are
suitable for the purposes for which they presently are used. Except as set forth
in Section 2.10 of the Disclosure Schedule, no asset of the Company (tangible or
intangible) is subject to any Security Interest.
2.11 OWNED REAL PROPERTY. The Company does not own any real property.
2.12 REAL PROPERTY LEASES. Section 2.12 of the Disclosure Schedule lists,
as of the date of this Agreement, all real property leased or subleased to or by
the Company and lists the term of such lease, any extension and expansion
options, and the rent payable thereunder. The Company has delivered to the Buyer
complete and accurate copies of the leases and subleases (as amended to date)
listed in Section 2.12 of the Disclosure Schedule. With respect to each lease
and sublease listed in Section 2.12 of the Disclosure Schedule, except as set
forth in Section 2.12 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, in full force and
effect and is enforceable by the Company in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency, the relief of
debtors and rules of law governing injunctive relief and other equitable
remedies;
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(b) subject to the giving of notices and receipt of consents set
forth on Section 2.4 of the Disclosure Schedule, the lease or sublease will
continue to be legal, valid, binding, enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect immediately prior to the Closing, unless the lease or sublease would, by
its express terms, expire prior to the Closing;
(c) the Company is not, nor to the knowledge of the Company, is any
other party, in breach or violation of, or default under, any such lease or
sublease, and no event has occurred, is pending or, to the knowledge of the
Company, is threatened, which, after the giving of notice, with lapse of time,
or otherwise, would constitute a breach or default by the Company or, to the
knowledge of the Company, any other party under such lease or sublease; and
(d) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold.
2.13 INTELLECTUAL PROPERTY.
(a) Except as set forth in Section 2.13(a) of the Disclosure
Schedule, the Company owns or has the right to use all Intellectual Property (as
defined below) necessary (i) to use, manufacture, market and distribute the
products manufactured, marketed, sold or licensed, and to provide the services
provided, by the Company to other parties (together, the "Customer
Deliverables") or (ii) to operate the Company's internal systems that are
material to the business or operations of the Company, including, without
limitation, computer hardware systems, software applications and embedded
systems (the "Internal Systems"; the Intellectual Property owned by or licensed
to the Company and incorporated in or underlying the Customer Deliverables or
the Internal Systems is referred to herein as the "Company Intellectual
Property"). Each item of Company Intellectual Property will be owned or
available for use by the Surviving Corporation immediately following the Closing
on substantially identical terms and conditions as it was immediately prior to
the Closing. The Company has taken the measures to protect the proprietary
nature of each item of Company Intellectual Property as are specified in Section
2.13 of the Disclosure Schedule. To the knowledge of the Company, other than
with respect to commercially available, off-the-shelf software embedded in or
otherwise part of the Internal Systems, (a) no other person or entity has any
rights to any of the Company Intellectual Property owned by the Company (except
pursuant to agreements or licenses specified in Section 2.13(c) of the
Disclosure Schedule), and (b) no other person or entity is infringing, violating
or misappropriating any of the Company Intellectual Property. For purposes of
this Agreement, "Intellectual Property" means all (i) patents and patent
applications, (ii) copyrights and registrations thereof, (iii) mask works and
registrations and applications for registration thereof, (iv) computer software,
data and documentation, (v) trade secrets and confidential business information,
whether patentable or unpatentable and whether or not reduced to practice,
know-how, manufacturing and production processes and techniques, research and
development information, copyrightable works, financial, marketing and business
data, pricing and cost information, business and marketing plans and customer
and supplier lists and information, (vi) trademarks, service marks, trade names,
domain names and applications and registrations therefor and (vii) other
proprietary rights relating to any of the foregoing. Section 2.13(a) of the
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Disclosure Schedule lists each patent, patent application, copyright
registration or application therefor, mask work registration or application
therefor, and trademark, service mark and domain name registration or
application therefor of the Company or any Subsidiary, and the measures taken by
the Company to protect the proprietary nature of each item of Company
Intellectual Property.
(b) Except as set forth in Section 2.13(b) of the Disclosure
Schedule, none of the Customer Deliverables, or the marketing, distribution,
provision or use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity.
None of the Internal Systems, or the use thereof, infringes or violates, or
constitutes a misappropriation of, any Intellectual Property rights of any
person or entity. Section 2.13(b) of the Disclosure Schedule lists any
complaint, claim or notice, or written threat thereof, received by the Company
alleging any such infringement, violation or misappropriation; and the Company
has provided to the Buyer complete and accurate copies of all written
documentation in the possession of the Company relating to any such complaint,
claim, notice or threat. The Company has provided to the Buyer complete and
accurate copies of all written documentation in the Company's possession
relating to claims or disputes known to the Company concerning any Company
Intellectual Property.
(c) Section 2.13(c) of the Disclosure Schedule identifies each
license or other agreement (or type of license or other agreement) (written or
oral) pursuant to which the Company has licensed, distributed or otherwise
granted any rights to any third party with respect to, any Company Intellectual
Property.
(d) Section 2.13(d) of the Disclosure Schedule identifies each item
of Company Intellectual Property that is owned by a party other than the
Company, and the license or agreement pursuant to which the Company uses it
(excluding off-the-shelf software programs licensed by the Company pursuant to
"shrink wrap" licenses).
(e) The Company has not disclosed the source code for any of the
software owned by the Company (the "Software") or other confidential information
constituting, embodied in or pertaining to the Software to any person or entity,
and has not entered into any escrow arrangement with respect to the Software,
each except pursuant to the agreements listed in Section 2.13(e) of the
Disclosure Schedule, and the Company has taken reasonable measure to prevent
disclosure of such source code.
(f) All of the copyrightable materials (including Software)
incorporated in or bundled with the Customer Deliverables have been created by
employees of the Company within the scope of their employment by the Company or
by independent contractors of the Company who have executed agreements expressly
assigning all right, title and interest in such copyrightable materials to the
Company. No portion of such copyrightable materials was jointly developed with
any third party.
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(g) To the knowledge of the Company, the Customer Deliverables and
the Internal Systems are free from significant defects or programming errors and
conform in all material respects to the written documentation and specifications
therefor.
(h) All of the Customer Deliverables currently being marketed,
distributed or licensed by the Company or which were marketed, distributed or
licensed by the Company since its inception, and all Internal Systems, are Year
2000 Compliant. The Company is not aware of any failure to be Year 2000
Compliant of any third-party system that is material to the business or
operations of the Company, including without limitation any system belonging to
any of the Company's suppliers, service providers or customers.
(i) For purposes of this Agreement, "Year 2000 Compliant" means that
the applicable system or item:
(i) will accurately receive, record, store, provide, recognize
and process all date and time data from, during, into and between the twentieth
and twenty-first centuries, the years 1999 and 2000 and all leap years;
(ii) will accurately perform all date-dependent calculations and
operations (including, without limitation, mathematical operations, sorting,
comparing and reporting) from, during, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000 and all leap years; and
(iii) will not malfunction, cease to function or provide invalid
or incorrect results as a result of (x) the change of years from 1999 to 2000,
(y) date data, including date data which represents or references different
centuries, different dates during 1999 and 2000, or more than one century or (z)
the occurrence of any particular date;
in each case without human intervention, other than original data entry.
2.14 CONTRACTS.
(a) Section 2.14 of the Disclosure Schedule lists the following
agreements (written or oral) to which the Company is a party as of the date of
this Agreement:
(i) any agreement (or group of related agreements) for the lease
of personal property from or to third parties providing for lease payments in
excess of $10,000 per annum or having a remaining term longer than 12 months;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or receipt of services (A)
which calls for performance over a period of more than one year, (B) which
involves more than the sum of $10,000, or (C) in which the Company or any
Subsidiary has granted manufacturing rights, "most favored nation" pricing
provisions or exclusive marketing or distribution rights relating to any
products or territory or has agreed to purchase a minimum quantity of goods or
services or has agreed to purchase goods or services exclusively from a certain
party;
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(iii) any agreement establishing a partnership or joint venture,
or any business arrangement for the distribution or development of products;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed or guaranteed (or may create, incur, assume or
guarantee) indebtedness (including capitalized lease obligations) involving more
than $10,000 or under which it has imposed (or may impose) a Security Interest
on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition,
excluding the Company's standard form of Nondisclosure and Noncompete Agreement
entered into with each employee and consultant of the Company and provided to
the Buyer pursuant to Section 2.19 hereof;
(vi) any employment or consulting agreement, excluding the
Company's standard form of Nondisclosure and Noncompete Agreement entered into
with each employee and consultant of the Company and provided to the Buyer
pursuant to Section 2.19 hereof;
(vii) any agreement involving any officer, director or
stockholder of the Company or any affiliate (an "Affiliate"), as defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), thereof;
(viii) any agreement under which the consequences of a default or
termination would reasonably be expected to have a Company Material Adverse
Effect;
(ix) any agreement which contains any provisions requiring the
Company to indemnify any other party thereto (excluding indemnities contained in
agreements for the purchase, sale or license of products entered into in the
Ordinary Course of Business); and
(x) any other agreement (or group of related agreements) either
involving more than $10,000 or not entered into in the Ordinary Course of
Business.
(b) The Company has delivered to the Buyer a complete and accurate
copy of each agreement listed in Section 2.13 or Section 2.14 of the Disclosure
Schedule. With respect to each agreement so listed: (i) the agreement is legal,
valid, binding, in full force and effect and enforceable by the Company in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency, the relief of debtors and rules of law governing
injunctive relief and other equitable remedies; (ii) subject to the giving of
notices and receipt of consents set forth in Section 2.4 of the Disclosure
Schedule, the agreement will continue to be legal, valid, binding and
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the Closing
(unless the agreement would, by its express terms, expire prior to the Closing)
and the consummation of the transactions contemplated hereby will not cause a
default under or result in the acceleration of the obligations under the
agreement; and (iii) the Company is not, nor, to the knowledge of the
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<PAGE> 24
Company, is any other party, in breach or violation of, or default under, any
such agreement, and no event has occurred, is pending or, to the knowledge of
the Company, is threatened, which, after the giving of notice, with lapse of
time, or otherwise, would constitute a breach or default by the Company or, to
the knowledge of the Company, any other party under such contract, subject to
any conflicts, breaches, violations or defaults which, individually or in the
aggregate, has not had and would not be reasonably likely to have a Company
Material Adverse Effect.
2.15 POWERS OF ATTORNEY. Except as set forth in Section 2.15 of the
Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of the Company.
2.16 INSURANCE. Section 2.16 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, directors' and officers', environmental,
product liability and automobile insurance policies and bond and surety
arrangements) to which the Company is a party. Such insurance policies are of
the type and in amounts customarily carried by organizations conducting
businesses or owning assets similar to those of the Company. There is no
material claim pending under any such policy as to which coverage has been
questioned, denied or disputed by the underwriter of such policy. All premiums
due and payable under all such policies have been paid, the Company has no
liability for retroactive premiums or similar payments, and the Company is
otherwise in compliance in all material respects with the terms of such
policies. The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any such policy. Each such policy
will continue to be enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing.
2.17 LITIGATION. Except as set forth in Section 2.17 of the Disclosure
Schedule, there is no action, suit, proceeding, claim, arbitration, mediation or
investigation before any Governmental Entity or before any arbitrator (a "Legal
Proceeding") which is pending or, to the Company's knowledge, has been
threatened against the Company which (a) seeks either damages in excess of
$25,000 or equitable relief or (b) in any manner challenges or seeks to prevent,
enjoin, alter or delay the transactions contemplated by this Agreement.
2.18 WARRANTIES. No product or service manufactured, sold, leased, licensed
or delivered by the Company is subject to any guaranty, warranty, right of
return, right of credit or other indemnity other than (i) the applicable
standard terms and conditions of sale or lease of the Company, which are set
forth in Section 2.18 of the Disclosure Schedule and (ii) manufacturers'
warranties for which the Company does not have any liability. Section 2.18 of
the Disclosure Schedule sets forth the aggregate expenses incurred by the
Company in fulfilling its obligations under the guaranty, warranty, right of
return and indemnity provisions during each of the fiscal years and the interim
period covered by the Financial Statements; and the Company does not know of any
reason why such expenses should significantly increase as a percentage of sales
in the future.
2.19 EMPLOYEES.
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(a) Section 2.19 of the Disclosure Schedule contains a list of all
employees of the Company, along with the position and the authority to work in
the United States (whether by U.S. citizenship or otherwise) of each such
person. The Company has previously provided to the Buyer the annual rate of
compensation of each current employee of the Company, which information is true
and complete as of the date hereof. The Company has not extended loans to any of
its employees which remain, as of the date hereof, unpaid. Each employee of the
Company has entered into a Nondisclosure and Noncompete Agreement with the
Company on the Company's standard form, a copy of which standard form has
previously been delivered to the Buyer. To the knowledge of the Company, no key
employee or group of employees has any plans to terminate employment with the
Company.
(b) The Company is not a party to or bound by any collective
bargaining agreement, nor has any of them experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Company has no knowledge of any organizational effort made or threatened, either
currently or within the past two years, by or on behalf of any labor union with
respect to employees of the Company.
2.20 EMPLOYEE BENEFITS.
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Employee Benefit Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
without limitation insurance coverage, severance benefits, disability benefits,
deferred compensation, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other forms of incentive compensation or post-retirement
compensation.
(ii) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(iii) "ERISA Affiliate" means any entity which is, or at any
applicable time was, a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
the Company or a Subsidiary.
(b) Section 2.20(b) of the Disclosure Schedule contains a complete
and accurate list of all Employee Benefit Plans maintained, or contributed to,
by the Company or any ERISA Affiliate. Complete and accurate copies of (i) all
Employee Benefit Plans which have been reduced to writing, (ii) written
summaries of all unwritten Employee Benefit Plans, (iii) all related trust
agreements, insurance contracts and summary plan descriptions, and (iv) all
annual
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<PAGE> 26
reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans) all
plan financial statements for each Employee Benefit Plan, if such reports and
statements have been required, have been delivered to the Buyer. Each Employee
Benefit Plan has been administered in all material respects in accordance with
its terms and each of the Company and the ERISA Affiliates has in all material
respects met its obligations with respect to such Employee Benefit Plan and has
made all required contributions thereto. The Company, each ERISA Affiliate and
each Employee Benefit Plan are in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the regulations
thereunder (including without limitation Section 4980 B of the Code, Subtitle K,
Chapter 100 of the Code and Sections 601 through 608 and Section 701 et seq. of
ERISA). All filings and reports as to each Employee Benefit Plan required to
have been submitted to the Internal Revenue Service or to the United States
Department of Labor have been duly submitted.
(c) There are no Legal Proceedings (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders) against or involving any
Employee Benefit Plan or asserting any rights or claims to benefits under any
Employee Benefit Plan that could give rise to any material liability.
(d) All the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost. Each Employee Benefit Plan which
is required to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has
been tested for compliance with, and satisfies the requirements of, Section
401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to
the Closing Date.
(e) Neither the Company nor any ERISA Affiliate has ever maintained
an Employee Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA.
(f) At no time has the Company or any ERISA Affiliate been obligated
to contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
(g) There are no unfunded obligations under any Employee Benefit Plan
providing benefits after termination of employment to any employee of the
Company (or to any beneficiary of any such employee), including but not limited
to retiree health coverage and deferred compensation, but excluding continuation
of health coverage required to be continued under Section 4980B of the Code or
other applicable law and insurance conversion privileges under state law. The
assets of each Employee Benefit Plan which is funded are reported at their fair
market value on the books and records of such Employee Benefit Plan.
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<PAGE> 27
(h) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the Company, or any ERISA
Affiliate that would subject the Company or any ERISA Affiliate to (i) any
material fine, penalty, tax or liability of any kind imposed under ERISA or the
Code or (ii) any contractual indemnification or contribution obligation
protecting any fiduciary, insurer or service provider with respect to any
Employee Benefit Plan.
(i) No Employee Benefit Plan is funded by, associated with or related
to a "voluntary employee's beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
(j) Each Employee Benefit Plan (other than the Company's 1999 Stock
Incentive Plan) is amendable and terminable unilaterally by the Company at any
time without liability to the Company as a result thereof and no Employee
Benefit Plan, plan documentation or agreement, summary plan description or other
written communication distributed generally to employees by its terms prohibits
the Company from amending or terminating any such Employee Benefit Plan.
(k) Section 2.20(k) of the Disclosure Schedule discloses each: (i)
agreement with any stockholder, director, executive officer or other key
employee of the Company (A) the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
the Company of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee or (C)
providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee; (ii) agreement,
plan or arrangement under which any person may receive payments from the Company
that may be subject to the tax imposed by Section 4999 of the Code or included
in the determination of such person's "parachute payment" under Section 280G of
the Code; and (iii) agreement or plan binding the Company, including without
limitation any stock option plan, stock appreciation right plan, restricted
stock plan, stock purchase plan, severance benefit plan or Employee Benefit
Plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
(l) Section 2.20(l) of the Disclosure Schedule sets forth the policy
of the Company and any Subsidiary with respect to accrued vacation, accrued sick
time, compensatory time and earned time-off and the amount of such liabilities
as of September 30, 2000.
2.21 ENVIRONMENTAL MATTERS.
(a) The Company has complied with all applicable Environmental Laws
(as defined below), except for violations of Environmental Laws that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect. There is no pending or, to
the knowledge of the Company, threatened civil or
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criminal litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request by any Governmental
Entity, relating to any Environmental Law involving the Company or any
Subsidiary. For purposes of this Agreement, "Environmental Law" means any
federal, state or local law, statute, rule or regulation or the common law
relating to the environment or occupational health and safety, including without
limitation any statute, regulation, administrative decision or order pertaining
to (i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous materials or substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release or threatened release into the environment of
industrial, toxic or hazardous materials or substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wild life, marine life and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels, containers,
abandoned or discarded barrels, and other closed receptacles; (vii) health and
safety of employees and other persons; and (viii) manufacturing, processing,
using, distributing, treating, storing, disposing, transporting or handling of
materials regulated under any law as pollutants, contaminants, toxic or
hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms "release" and "environment" shall have
the meaning set forth in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA").
(b) There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment by the Company or, to the
knowledge of the Company, by any other party, at any parcel of real property or
any facility formerly or currently owned, operated or controlled by the Company.
With respect to any such releases of Materials of Environmental Concern by the
Company, the Company has given all required notices to Governmental Entities
(copies of which have been provided to the Buyer). The Company is not aware of
any releases of Materials of Environmental Concern at parcels of real property
or facilities other than those owned, operated or controlled by the Company that
could reasonably be expected to have an impact on the real property or
facilities owned, operated or controlled by the Company. For purposes of this
Agreement, "Materials of Environmental Concern" means any chemicals, pollutants
or contaminants, hazardous substances (as such term is defined under CERCLA),
solid wastes and hazardous wastes (as such terms are defined under the Resource
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products or any other material subject to regulation under any Environmental
Law.
(c) Set forth in Section 2.21(c) of the Disclosure Schedule is a list
of all documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations and audits relating to premises currently
or previously owned or operated by the Company (whether conducted by or on
behalf of the Company or a third party, and whether done at the initiative of
the Company or directed by a Governmental Entity or other third party) which the
Company has possession of or access to as of the date hereof. A complete and
accurate copy of each such document has been provided to the Buyer.
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(d) The Company is not aware of any material environmental liability
of any solid or hazardous waste transporter or treatment, storage or disposal
facility that has been used by the Company.
2.22 LEGAL COMPLIANCE. Except with respect to tax matters that are treated
in Section 2.9, employee benefits matters that are treated in Section 2.20 and
environmental matters that are treated in Section 2.21, the Company, and the
conduct and operations of its business, are in compliance with each applicable
law (including rules and regulations thereunder) of any federal, state, local or
foreign government, or any Governmental Entity, except for any violations or
defaults that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect.
2.23 CUSTOMERS AND SUPPLIERS. No customer accounted for any revenues of the
Company during the last full fiscal year or the interim period through the Most
Recent Balance Sheet Date. Section 2.23 of the Disclosure Schedule sets forth
each supplier that is the sole supplier of any significant product to the
Company. No such supplier has indicated within the past year that it will stop,
or decrease the rate of, supplying products to the Company. No purchase order or
commitment of the Company is in excess of normal requirements, nor are prices
provided therein in excess of current market prices for the products or services
to be provided thereunder.
2.24 PERMITS. Section 2.24 of the Disclosure Schedule sets forth a list of
all permits, licenses, registrations, certificates, orders or approvals from any
Governmental Entity (including without limitation those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property) ("Permits") issued to or held by the Company as of the date
hereof. Such listed Permits are the only Permits that are required for the
Company to conduct its business as presently conducted or as proposed to be
conducted, except for those the absence of which, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect. Each such Permit is in full force and effect and, to
the knowledge of the Company, no suspension or cancellation of such Permit is
threatened and there is no basis for believing that such Permit will not be
renewable upon expiration. Each such Permit will continue in full force and
effect immediately following the Closing.
2.25 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES. No Affiliate of the
Company (a) owns any property or right, tangible or intangible, which is used in
the business of the Company, (b) has any claim or cause of action against the
Company, or (c) owes any money to, or is owed any money by, the Company. Section
2.25 of the Disclosure Schedule describes any transactions or relationships
between the Company and any Affiliate thereof which have occurred or existed
since the Company's inception, other than investments made with respect to the
Company Shares.
2.26 BROKERS' FEES. Other than fees payable to Robertson Stephens Inc. and
W.R. Hambrecht & Co., the Company does not have any liability or obligation to
pay any fees or
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commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
2.27 BOOKS AND RECORDS. The minute books and other similar records of the
Company contain complete and accurate records of all actions taken at any
meetings of the Company's stockholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting. The books and records of the Company accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of the Company and have been maintained in accordance with good
business and bookkeeping practices.
2.28 DISCLOSURE. No representation or warranty by the Company contained in
this Agreement, and no statement contained in the Disclosure Schedule, contains
or will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was or will be made, in order to make the statements herein or therein not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants to
the Company as follows:
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Each of the Buyer and
the Transitory Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation. The Buyer is
duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing would not have a Buyer
Material Adverse Effect (as defined below). The Buyer has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Buyer has furnished
or made available to the Company complete and accurate copies of its Certificate
of Incorporation and By-laws. For purposes of this Agreement, "Buyer Material
Adverse Effect" means a material adverse effect on the assets, business,
condition (financial or otherwise), operations or results of operations of the
Buyer and its subsidiaries, taken as a whole.
3.2 CAPITALIZATION. The authorized capital stock of the Buyer consists
solely of 105,824,172 shares of Buyer Common Stock, of which 90,284,760 shares
were issued and outstanding as of September 30, 2000; provided that the Board of
Directors of the Buyer has approved an amendment to the Buyer's certificate of
incorporation increasing the number of authorized shares of Buyer Common Stock
to 295,000,000 and creating a class of 5,000,000 shares of authorized "blank
check" preferred stock, which amendment the Buyer expects will be submitted for
approval by its stockholders, approved and filed prior to completion of the IPO.
All of the issued and outstanding shares of Buyer Common Stock are duly
authorized, validly
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issued, fully paid, nonassessable and free of all preemptive rights. All of the
Merger Shares will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights. As of September 30, 2000, the Buyer has reserved a total of 14,139,381
shares of Buyer Common Stock for issuance pursuant to the exercise of
outstanding options, warrants or other securities convertible into or
exchangeable for shares of Buyer Common Stock and an additional 1,400,031 shares
of Buyer Common Stock are reserved for future grants of stock options or
restricted stock awards. There are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Buyer.
3.3 AUTHORIZATION OF TRANSACTION. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and (in the case of the Buyer) the Escrow Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery by the Buyer
and the Transitory Subsidiary of this Agreement and (in the case of the Buyer)
the Escrow Agreement and the consummation by the Buyer and the Transitory
Subsidiary of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer and Transitory Subsidiary, respectively. This Agreement has been duly and
validly executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its terms.
3.4 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the Hart-Scott-Rodino Act, if any, and the filing of the
Certificate of Merger as required by the Delaware General Corporation Law,
neither the execution and delivery by the Buyer or the Transitory Subsidiary of
this Agreement or (in the case of the Buyer) the Escrow Agreement, nor the
consummation by the Buyer or the Transitory Subsidiary of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any provision
of the charter or By-laws of the Buyer or the Transitory Subsidiary, (b) require
on the part of the Buyer or the Transitory Subsidiary any filing with, or
permit, authorization, consent or approval of, any Governmental Entity, (c)
conflict with, result in breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party any right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which the Buyer or the Transitory Subsidiary is a party or by which either is
bound or to which any of their assets are subject, except for (i) any conflict,
breach, default, acceleration, termination, modification or cancellation which
would not adversely affect the consummation of the transactions contemplated
hereby or (ii) any notice, consent or waiver the absence of which would not
adversely affect the consummation of the transactions contemplated hereby, or
(d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Buyer or the Transitory Subsidiary or any of their properties
or assets.
3.5 REPORTS AND FINANCIAL STATEMENTS. The Buyer has previously furnished
or made available to the Company complete and accurate copies, as amended or
supplemented, of its Registration Statement on Form S-1 (the "IPO Registration
Statement"), as filed with the Securities and Exchange Commission (the "SEC"),
and all written comments provided by the staff of the SEC to the Buyer with
respect to the IPO Registration Statement and all responses to
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such comments filed by the Buyer with the SEC (other than responses that the
Buyer determines should be kept confidential for bona fide business purposes,
provided that the Buyer shall in any event provide all responses that relate to
the Company or the transactions contemplated by this Agreement). The IPO
Registration Statement complied in all material respects with the requirements
of the Securities Act of 1933, as amended (the "Securities Act") and the rules
and regulations thereunder when filed and, upon effectiveness thereof in
accordance with the Securities Act, the Buyer currently intends to offer shares
of Buyer Common Stock to the public pursuant thereto. As of the date of this
Agreement, Credit Suisse First Boston Corporation has advised the Buyer that it
supports the Buyer's current intention to go forward with the IPO. As of the
date of this Agreement, subject to the last three sentences of this Section 3.5,
the IPO Registration Statement does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements and
unaudited interim financial statements of the Buyer included in the IPO
Registration Statement, subject to the last three sentences of this Section 3.5,
(i) complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto when filed, (ii) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, (iii) fairly present the consolidated
financial condition, results of operations and cash flows of the Buyer as of the
respective dates thereof and for the periods referred to therein, and (iv) are
consistent with the books and records of the Buyer. The Company acknowledges
that the IPO Registration Statement has not been declared effective and is the
subject of ongoing review by the staff of the SEC, and that additional
modifications to the IPO Registration Statement and the financial statements
included therein may be necessary in response to comments issued by the SEC
staff. Among other things, the SEC staff has issued comments regarding potential
compensation expenses attributable to "cheap stock" issued by the Buyer,
regarding the period over which certain intangible assets of the Buyer should be
amortized and regarding potential variable accounting with respect to certain
stock options issued by the Buyer. The Company agrees that any modification to
the IPO Registration Statement made by the Buyer after the date of this
Agreement in response to comments from the SEC staff, including any
modifications to existing disclosure or financial data or any addition of new
disclosure, shall not give rise to a breach of the representations and
warranties made in this Section 3.5.
3.6 ABSENCE OF MATERIAL ADVERSE CHANGE. Since June 30, 2000, there has
occurred no event or development which has had, or would reasonably be expected
to have in the future, a Buyer Material Adverse Effect.
3.7 LITIGATION. Except as disclosed in the IPO Registration Statement, as
of the date of this Agreement, there is no Legal Proceeding which is pending or,
to the Buyer's knowledge, threatened against the Buyer or any subsidiary of the
Buyer which, if determined adversely to the Buyer or such subsidiary, could
have, individually or in the aggregate, a Buyer Material Adverse Effect or which
in any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
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3.8 INTERIM OPERATIONS OF THE TRANSITORY SUBSIDIARY. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.
3.9 BROKERS' FEES. Other than fees payable to Credit Suisse First Boston
Corporation, neither the Buyer nor the Transitory Subsidiary has any liability
or obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
3.10 DISCLOSURE. No representation or warranty by the Buyer contained in
this Agreement contains or will contain any untrue statement of a material fact
or omit or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
3.11 OTHER TRANSACTIONS. On the date hereof, the Buyer is not in active and
substantive discussions with any third party involving (i) an Acquisition (as
defined below) of the Buyer (ii) the Buyer's acquisition of any other business
or entity, or (iii) issuances by the Buyer of any of its securities, other than
(x) the IPO, (y) in connection with the exercise or conversion of currently
outstanding warrants, options and other convertible securities, and (z) the
issuance of further employee stock options and the issuance of the Buyer's
Common Stock pursuant thereto. An "Acquisition" is an acquisition, purchase,
merger, other business combination or other single transaction or series of
related transactions the result of which is a sale of all or substantially all
of the assets of the Buyer or a merger or acquisition of the Buyer with, into or
by any other corporation or corporations, in which the shareholders of the
corporation immediately prior to such transaction do not own a majority of the
outstanding shares of the surviving entity or entities.
ARTICLE IV
COVENANTS
4.1 CLOSING EFFORTS. Each of the Parties shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including without limitation using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the Merger are satisfied.
4.2 GOVERNMENTAL AND THIRD-PARTY NOTICES AND CONSENTS.
(a) Each Party shall use its Reasonable Best Efforts to obtain, at
its expense, all waivers, permits, consents, approvals or other authorizations
from Governmental Entities, and to effect all registrations, filings and notices
with or to Governmental Entities, as may be required for such Party to
consummate the transactions contemplated by this Agreement and to otherwise
comply with all applicable laws and regulations in connection with the
consummation
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of the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, each of the Parties shall file any Notification and
Report Forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, shall use its Reasonable
Best Efforts to obtain an early termination of the applicable waiting period,
and shall make any further filings or information submissions pursuant thereto
that may be necessary, proper or advisable; provided, however, that,
notwithstanding anything to the contrary in this Agreement, the Buyer shall not
be obligated to sell or dispose of or hold separately (through a trust or
otherwise) any assets or businesses of the Buyer or its Affiliates.
(b) The Company shall use its Reasonable Best Efforts to obtain, at
its expense, all such waivers, consents or approvals from third parties, and to
give all such notices to third parties, as are required to be listed in Section
2.4 of the Disclosure Schedule.
4.3 SPECIAL MEETING, PROSPECTUS/PROXY STATEMENT AND REGISTRATION
STATEMENT.
(a) The Company shall use its Reasonable Best Efforts to obtain, as
promptly as practicable, the Requisite Stockholder Approval, either at a special
meeting of stockholders or pursuant to a written stockholder consent, all in
accordance with the applicable requirements of the Delaware General Corporation
Law. In connection with such special meeting of stockholders or written
stockholder consent, the Buyer shall prepare, with the assistance and
cooperation of the Company, a Registration Statement on Form S-4 (the
"Registration Statement"). In connection with the preparation of the
Registration Statement, the Company shall use its Reasonable Best Efforts to
provide to the Buyer no later than November 10, 2000 (i) financial statements of
the Company as of and for the nine months ended September 30, 2000, which
financial statements shall be audited by Arthur Andersen LLP, auditors of the
Company ("Arthur Andersen"), (ii) comparative unaudited income statements of the
Company for the quarter-to-date periods ended September 30, 1999 and 2000 and an
unaudited income statement and cash flow statement of the Company for the
year-to-date period ended September 30, 1999, (iii) audited financial statements
of the Company as of and for the year ended December 31, 1998 and 1999, (iv) a
reviewed (SAS 71 level) income statement of the Company for the twelve months
ended September 30, 2000, and (v) such other information as is required to be
provided with respect to the Company in the Registration Statement
(collectively, the information identified in clauses (i) through (v) being
referred to as the "Required Information"). The Registration Statement shall
include a prospectus/proxy statement to be used for the purpose of offering the
Merger Shares to stockholders of the Company and soliciting proxies or written
consents from stockholders of the Company for the purpose of obtaining the
Requisite Stockholder Approval (such prospectus/proxy statement, together with
any accompanying letter to stockholders, notice of meeting and form of proxy or
written consent, shall be referred to herein as the "Prospectus/Proxy
Statement"). The summary of the Merger in the Prospectus/Proxy Statement shall
include a summary of the terms relating to the indemnification obligations of
the Company Stockholders, the escrow arrangements and the authority of the
Indemnification Representatives, and a statement that the adoption of this
Agreement by the stockholders of the Company shall constitute approval of such
terms. Each of the Buyer and the Company shall use Reasonable Best Efforts in
order to prepare the Registration Statement and
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the Prospectus/Proxy Statement as expeditiously as possible after the date
hereof, with a view towards having such documents prepared by the later of the
tenth business day after the date that the Company provides the Required
Information and the tenth business day after the date that the Buyer's IPO is
consummated, provided that each of the Buyer and the Company acknowledge that
the Registration Statement shall not be filed prior to the effectiveness of the
IPO Registration Statement. The Buyer shall file the Registration Statement with
the SEC and shall, with the assistance of the Company, promptly respond to any
SEC comments on the Registration Statement and shall otherwise use its
Reasonable Best Efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable. Promptly following such
time as the Registration Statement is declared effective, the Company shall
distribute the Prospectus/Proxy Statement to its stockholders and, pursuant
thereto, shall use its Reasonable Best Efforts to obtain the Requisite
Stockholder Approval. If the Requisite Stockholder Approval is obtained by means
of a written consent, the Company shall send, pursuant to Sections 228 and
262(d) of the Delaware General Corporation Law, a written notice to all
stockholders of the Company that did not execute such written consent informing
them that this Agreement and the Merger were adopted and approved by the
stockholders of the Company and that appraisal rights are available for their
Common Shares pursuant to Section 262 of the Delaware General Corporation Law
(which notice shall include a copy of such Section 262), and shall promptly
inform the Buyer of the date on which such notice was sent.
(b) The Company, acting through its Board of Directors, shall include
in the Prospectus/Proxy Statement the unanimous recommendation of its Board of
Directors that the stockholders of the Company vote in favor of the adoption of
this Agreement and the approval of the Merger.
(c) The Company shall ensure that the Prospectus/Proxy Statement does
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading (provided that the
Company shall not be responsible for the accuracy or completeness of any
information relating to the Buyer or furnished by the Buyer in writing for
inclusion in the Prospectus/Proxy Statement).
(d) The Buyer shall ensure that the Registration Statement does not
contain an 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 not
misleading (provided that the Buyer shall not be responsible for the accuracy or
completeness of any information relating to the Company or furnished by the
Company in writing for inclusion in the Registration Statement).
(e) Contemporaneously with the execution of this Agreement, the
Company Stockholders listed on Section 4.3(e) of the Disclosure Schedule hereto
shall each enter into a Stockholder Voting Agreement substantially in the form
attached hereto as EXHIBIT B.
4.4 OPERATION OF BUSINESS. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Company shall conduct its operations in the Ordinary Course of Business and in
compliance with all applicable laws and
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regulations and, to the extent consistent therewith, use its Reasonable Best
Efforts to preserve intact its current business organization, keep its physical
assets in good working condition, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it to the end that its goodwill and
ongoing business shall not be impaired in any material respect. Without limiting
the generality of the foregoing, prior to the Effective Time, the Company shall
not, without the written consent of the Buyer:
(a) except for (i) the Options described on Section 4.4(a) of the
Disclosure Schedule (which Options shall contain the Buyer's standard option
terms and conditions and shall expressly provide that the Merger shall not
accelerate the vesting schedule thereof), (ii) the Options that may be granted
pursuant to offer letters which offers have not been accepted, declined or
terminated as of the date hereof and which are set forth on Section 2.7 of the
Disclosure Schedule and (iii) redemption of the Series A Preferred Shares as
contemplated by Section 5.2(s) hereof, issue or sell, or redeem or repurchase,
any stock or other securities of the Company or any rights, warrants or options
to acquire any such stock or other securities (except pursuant to the conversion
or exercise of convertible securities or Options or Warrants outstanding on the
date hereof and except for repurchases of Restricted Shares with an aggregate
purchase price not exceeding $25,000 from employees of the Company upon
termination of their employment), or amend any of the terms of (including
without limitation the vesting of) any such convertible securities or Options or
Warrants;
(b) except for redemption of the Series A Preferred Shares as
contemplated by Section 5.2(s) hereof, split, combine or reclassify any shares
of its capital stock; declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of its capital stock;
(c) create, incur or assume any indebtedness (including obligations
in respect of capital leases); assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person or entity; or make any loans, advances or
capital contributions to, or investments in, any other person or entity, except
(i) as contemplated by this Agreement, (ii) for advances to the Company's
employees for the purposes of business travel of up to $5,000 in each instance
and $25,000 in the aggregate, and (iii) for incurrences of indebtedness after
January 31, 2001 under the Company's loan arrangement with Comdisco, Inc.;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 2.20(k) or increase in any manner the compensation or fringe benefits
of, or materially modify the employment terms of, its directors, officers or
employees, generally or individually, or pay any bonus or other benefit to its
directors, officers or employees (except for (i) existing payment obligations as
provided to Buyer pursuant to Section 2.19, (ii) amendments to the Company's
1999 Stock Incentive Plan or the adoption of a new stock option plan solely to
permit the Option grants contemplated by Section 4.4(a), (iii) compensation
increases for employees of the Company (other than any person identified in the
fifth paragraph of the preamble to the Disclosure
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Schedule) on his or her anniversary date, not to exceed 7% of such employee's
base salary, and (iv) an amendment required pursuant to Section 4.13(a) of this
Agreement;
(e) acquire, sell, lease, license or dispose of any assets or
property (including without limitation any real property, shares or other equity
interests in or securities of any Subsidiary or any corporation, partnership,
association or other business organization or division thereof), other than
purchases and sales of assets in the Ordinary Course of Business or a Permitted
Contract (as defined below);
(f) mortgage or pledge any of its property or assets or subject any
such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any obligation
or liability other than in the Ordinary Course of Business;
(h) amend the Company's Restated Certificate of Incorporation (the
"Company Charter"), by-laws or other organizational documents (except for
amendments to the Company Charter solely to permit the grants of Options
contemplated by Section 4.4(a) hereof and redemption of the Series A Preferred
Shares as contemplated by Section 5.2(s) hereof);
(i) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally applicable change
in GAAP;
(j) amend, terminate, take or omit to take any action that would
constitute a violation of or default under, or waive any rights under, any
contract or agreement that is listed on Schedule 2.13 or Schedule 2.14 hereto or
enter into any contract or agreement, other than a Permitted Contract, that
would be required to be listed on either such schedule if it existed on the date
of this Agreement;
(k) make or commit to make any capital expenditure in excess of the
amounts set forth in the Company's budget for the fiscal year 2000, which has
been provided to Buyer, or in excess of the amounts set forth in the budget for
fiscal year 2001, approved by the Company's Board of Directors and the Buyer
after the date hereof; provided, however, that if the Company and the Buyer are
unable to agree upon a capital budget for 2001, then the capital budget for the
first quarter of 2001 shall be deemed for this purpose to equal the amount of
capital expenditures made by the Company in the last quarter of 2000 increased
by 15%, with the budget being increased by 15% each quarter thereafter;
(l) institute or settle any Legal Proceeding;
(m) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in any of the conditions to the Merger set forth in Article V not being
satisfied; or
(n) agree in writing or otherwise to take any of the foregoing
actions.
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A "Permitted Contract" shall mean (i) outbound software licenses, substantially
in accordance with the Company's standard form (which form shall be finalized
and approved by Buyer following the date hereof, such approval not to be
unreasonably withheld), which licenses shall not provide any exclusive license
rights and which shall have reasonable, arms-length pricing with discounts not
in excess of those that are customary in the industry, (ii) inbound licenses of
technology rights from third parties which, in the aggregate (but excluding any
license fees payable under commercially available, off the shelf software under
"shrink wrap" licenses), would not bind the Company to pay license fees in
excess of $100,000, (iii) non-disclosure agreements with third parties, which
contain restrictions on disclosure by the third party that are substantially
similar to those contained in the Company's standard form as in effect on the
date of this Agreement, (iv) evaluation agreements on the Company's standard
form as in effect on the date of this Agreement and (v) contracts with parties
listed in, and regarding the subject matter specified in, Section 4.4(e) of the
Disclosure Schedule. In connection with the form of outbound software license
contemplated by (i) above, the Buyer and the Company agree that they will use
their Reasonable Best Efforts in order to review and agree promptly after the
date of this Agreement on a mutually agreeable form of license agreement for use
by the Company.
4.5 ACCESS TO INFORMATION.
(a) The Company shall permit representatives of the Buyer to have
full access (at all reasonable times, and in a manner so as not to interfere
with the normal business operations of the Company) to all premises, properties,
financial and accounting records, contracts, other records and documents, and
personnel, of or pertaining to the Company.
(b) Within 15 days after the end of each month ending prior to the
Closing, beginning with October 2000, the Company shall furnish to the Buyer an
unaudited income statement for such month and a balance sheet as of the end of
such month, prepared on a basis consistent with the Financial Statements. Such
financial statements shall present fairly the financial condition and results of
operations of the Company as of the dates thereof and for the periods covered
thereby, and shall be consistent with the books and records of the Company.
(c) Buyer agrees to keep the Company advised of all material
developments regarding the IPO Registration Statement and the IPO. Buyer shall
promptly provide to the Company further amendments of the IPO Registration
Statement as they are filed, as well as any comments received by the Company
from the SEC staff regarding the IPO Registration Statement and any responses
filed by the Company with the SEC with respect to such comments (other than
responses that the Buyer determines should be kept confidential for bona fide
business purposes, provided that the Buyer shall in any event provide all
responses that relate to the Company or the transactions contemplated by this
Agreement). Buyer will use Reasonable Best Efforts to provide the Company with
reasonable access from time to time to the Buyer's lead underwriter involved in
the IPO.
(d) In addition to the information provided by the Company under
Section 4.5(c) above, in the event that the IPO is not consummated by December
31, 2000, the Buyer
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shall permit representatives of the Company to have access to Buyer's internal
revenue forecasts and financial projections and information regarding Buyer's
backlog and supply chain.
4.6 NOTICE OF BREACHES.
(a) From the date of this Agreement until the Effective Time, the
Company shall promptly deliver to the Buyer supplemental information concerning
events or circumstances occurring subsequent to the date hereof which would
render any representation, warranty or statement in this Agreement or the
Disclosure Schedule inaccurate at any time after the date of this Agreement
until the Closing Date. No such supplemental information shall be deemed to cure
any misrepresentation or breach of warranty or constitute an amendment of any
representation, warranty or statement in this Agreement or the Disclosure
Schedule.
(b) From the date of this Agreement until the Effective Time, the
Buyer shall promptly deliver to the Company supplemental information concerning
events or circumstances occurring subsequent to the date hereof which would
render any representation or warranty in this Agreement inaccurate at any time
after the date of this Agreement until the Closing Date. No such supplemental
information shall be deemed to cure any misrepresentation or breach of warranty
or constitute an amendment of any representation or warranty in this Agreement
4.7 EXCLUSIVITY. The Company shall not, and the Company shall require each
of its officers, directors, employees, representatives and agents not to,
directly or indirectly, except as otherwise expressly contemplated in Section
4.4(a) of this Agreement, (i) initiate, solicit, encourage or otherwise
facilitate any inquiry, proposal, offer or discussion with any party (other than
the Buyer) concerning any merger, reorganization, consolidation,
recapitalization, business combination, liquidation, dissolution, share
exchange, sale of stock, sale of material assets or similar business transaction
involving the Company or any division of the Company, (ii) furnish any
non-public information concerning the business, properties or assets of the
Company or any division of the Company to any party (other than the Buyer) or
(iii) engage in discussions or negotiations with any party (other than the
Buyer) concerning any such transaction. The Company shall immediately notify any
party with which discussions or negotiations of the nature described above were
pending that the Company is terminating such discussions or negotiations. If the
Company receives any inquiry, proposal or offer of the nature described above,
the Company shall, within one business day after such receipt, notify the Buyer
of such inquiry, proposal or offer, including the identity of the other party
and the terms of such inquiry, proposal or offer.
4.8 EXPENSES. Except as set forth in Article VI and the Escrow Agreement,
each of the Parties shall bear its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby; provided, however, that if the Merger is consummated, the
Company shall not incur more than an aggregate of $3.0 million in investment
banking, broker's, finder's, legal and accounting fees and expenses in
connection with the Merger, and all other fees and expenses of the Company in
connection with the transactions contemplated hereby shall be borne by the
Company Stockholders.
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4.9 AGREEMENTS FROM CERTAIN AFFILIATES OF THE COMPANY. Upon the execution
of this Agreement, the Company shall provide to the Buyer a list of those
persons who are, in the Company's reasonable judgment, Affiliates of the
Company. The Company shall provide to the Buyer such information and documents
as the Buyer shall reasonably request for purposes of reviewing such list and
shall notify the Buyer in writing regarding any change in the identity of its
Affiliates prior to the Closing Date. In order to help ensure that the issuance
of and any resale of the Merger Shares will comply with the Securities Act, the
Company shall use its Reasonable Best Efforts to deliver or cause to be
delivered to the Buyer, as soon as practicable and in any case prior to the
mailing of the Prospectus/Proxy Statement (or, in the case of any person who
becomes an Affiliate after such date, as soon as practicable after such person
becomes an Affiliate), an Affiliate Agreement, in the form attached hereto as
EXHIBIT C (an "Affiliate Agreement"), executed by each of its Affiliates. The
Buyer shall be entitled to place appropriate legends on the certificates
evidencing any Merger Shares to be issued to Affiliates of the Company, and to
issue appropriate stop transfer instructions to the transfer agent for the Buyer
Common Stock, setting forth restrictions on transfer consistent with the terms
of the Affiliate Agreement.
4.10 LISTING OF MERGER SHARES. On or prior to the date that the
Registration Statement is declared effective by the SEC, Buyer shall submit a
properly completed application for listing of the Merger Shares on the Nasdaq
National Market ("Nasdaq"), and shall pay any fee required in connection
therewith. Thereafter, Buyer shall use its Reasonable Best Efforts to cause the
listing of the Merger Shares on Nasdaq, including responding promptly to any
reasonable requests or inquiries from Nasdaq with respect to such application.
4.11 LOAN. The Company and the Buyer shall enter into a Loan and Security
Agreement in the form attached hereto as EXHIBIT D. Promptly after the date
hereof, the parties shall provide such agreement and any related agreements to
Comdisco, Inc. and Silicon Valley Bank for their review and approval, and the
parties shall execute such agreement and any related agreements promptly
following such approval. The Buyer acknowledges that such lenders will require
subordination of such loan to the Company's presently outstanding loans and
agrees to execute subordination agreements with those lenders that include
subordination provisions substantially similar to those contained in the
Subordination Agreement between Comdisco, Inc. and Silicon Valley Bank dated as
of June 5, 2000.
4.12 DIRECTORS AND OFFICERS INSURANCE.
(a) Provided that the Company obtains a directors' and officers'
runoff liability insurance polic(ies) with insurance carrier(s) reasonably
acceptable to Buyer and with a premium(s) not in excess of $75,000, with
aggregate coverage limits of at least $25 million and which provide coverage for
claims for a period of six years from and after the Effective Time
(collectively, the "Runoff Policy"), then for a period of six years from and
after the Effective Time, Buyer will fulfill and honor in all respects the
obligations of the Company pursuant to any indemnification provision under the
Company Charter or the Company's bylaws as each is in effect on the date hereof
(the persons to be indemnified pursuant to the provisions referred to in this
Section 4.12(a) shall be referred to as, collectively, the "Company Indemnified
Parties").
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The provisions with respect to indemnification and exculpation from liability
set forth in the Company Charter and the Company's bylaws on the date of this
Agreement shall not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would adversely affect the
rights thereunder of any Company Indemnified Party, except as may be required to
conform with changes in applicable law and any changes which do not affect the
application of such provisions to acts or omissions of such individuals prior to
the Effective Time, and except to the extent the Buyer expressly assumes the
provisions relating to indemnification.
(b) For six years after the Effective Time, Buyer shall use its
Reasonable Best Efforts to take any such actions, other than the payment of
additional premiums, as may be necessary in order to maintain in full force and
effect the Runoff Policy.
(c) This Section 4.12 shall survive the consummation of the Merger
and the Effective Time, is intended to benefit and may be enforced by the
Company, Buyer, the Surviving Corporation and the Company Indemnified Parties,
and shall be binding on all successors and assigns of Buyer and the Surviving
Corporation.
4.13 EMPLOYEE BENEFIT AND RELATED MATTERS.
(a) Any Company-sponsored Employee Benefit Plans in effect at the
Effective Time will continue to be sponsored and maintained without material
change (except as required by law) by the Buyer and the Surviving Corporation
until such time as those Company plans are merged into Parent's benefit plans or
the participants in the Company Employee Benefit Plans who are employees or
immediate family members of employees immediately prior to the Effective Time
("Covered Employees") otherwise become covered under the Parent's benefit plans
or other benefit plans; provided, however, that, prior to the Effective Time,
the Company shall amend its Trust Star 401(k) plan to provide that such plan
does not cover employees of affiliated companies.
(b) If Covered Employees are included in any Employee Benefit Plan of
Buyer or its Subsidiaries, Buyer agrees that the Covered Employees shall receive
credit under such plan (other than any such plan providing for sabbaticals) for
service prior to the Effective Time with the Company to the same extent such
serve was counted under similar Company Employee Benefit Plans for purposes of
eligibility, vesting, eligibility for retirement (but not for benefit accrual)
and, with respect to vacation, disability and severance, the determination of
benefit levels. If Covered Employees are included in any medical, dental or
health plan other than the plan or plans they participated in immediately prior
to the Effective Time, Buyer agrees that any such plans shall not include
pre-existing condition exclusions, except to the extent such exclusions were
applicable under the similar Company Employee Benefit Plan immediately prior to
the Effective Time.
4.14 CERTAIN TAX MATTERS.
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(a) Each of Buyer and the Company will use its Reasonable Best
Efforts to cause the Merger to constitute a reorganization within the meaning of
Section 368(a) of the Code, and to timely satisfy, or cause to be timely
satisfied, all applicable tax reporting and filing requirements contained in the
Code and the Treasury Regulations with respect to the Merger, including the
reporting requirements contained in Treasury Regulation 1.367(a)-3(c)(6).
(b) In connection with the filing of the Registration Statement, the
Company and Buyer shall execute and deliver to Hale and Dorr LLP and to Cooley
Godward LLP, tax representation letters in customary form, dated as of the date
of such filing. Following delivery of such tax representation letters, each of
Buyer and the Company will use Reasonable Best Efforts to cause Hale and Dorr
LLP and Cooley Godward LLP, respectively, to deliver a tax opinion satisfying
the requirements of Item 601 of Regulation S-K under the Securities Act and to
obtain the consent of Hale and Dorr LLP and Cooley Godward LLP to the filing of
such tax opinions as exhibits to the Registration Statement. In rendering such
opinions, and in rendering the opinions referenced in Sections 5.2(l) and 5.3(g)
hereof, each of such counsel shall be entitled to rely on the tax representation
letters described in this Section 4.14.
(c) Prior to the Effective Time, the Company shall submit to a
stockholder vote the right of any "disqualified individual" (as defined in
Section 280G(c) of the Code) to receive any and all payments that could be
deemed "parachute payments" under Section 280G(b) of the Code, in a manner that
satisfies the stockholder approval requirements for the small business exemption
of Code Section 280G(b)(5). In addition, prior to the Effective Time, the
Company shall provide adequate disclosure to the stockholders of the Company of
all material facts concerning each such payment that, but for such vote, could
be deemed a "parachute payment" to a "disqualified individual" under Code
Section 280G, in a manner that satisfied Code Section 280G(b)(5)(B).
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) this Agreement and the Merger shall have received the Requisite
Stockholder Approval;
(b) all applicable waiting periods (and any extensions thereof) under
the Hart-Scott-Rodino Act, if applicable, shall have expired or otherwise been
terminated;
(c) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and there shall not be in
effect any stop order suspending the effectiveness of the Registration Statement
or any proceedings seeking such a stop order;
(d) the IPO shall have closed; and
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(e) the Merger Shares shall have been approved for listing on the
Nasdaq National Market, subject to notice of issuance.
5.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE TRANSITORY SUBSIDIARY.
The obligation of each of the Buyer and the Transitory Subsidiary to consummate
the Merger is subject to the satisfaction (or waiver by the Buyer) of the
following additional conditions:
(a) the number of Dissenting Shares shall not exceed 2.5% of the
number of outstanding Common Shares as of the Effective Time (calculated after
giving effect to the conversion into Common Shares of all outstanding and Series
B Preferred Shares);
(b) the Company shall have obtained (and shall have provided copies
thereof to the Buyer) all of the consents identified on Schedule 5.2(b)
(collectively, the "Required Closing Consents"); provided, that to the extent
that the Buyer waives the receipt of any Required Closing Consent and proceeds
to consummate the Merger, Buyer and any other Indemnified Party (as defined in
Article VI) shall not be permitted to make any claim for indemnification under
Article VI hereof with respect to the failure to receive such Required Closing
Consent or any Damages arising therefrom;
(c) the representations and warranties of the Company set forth in
this Agreement shall be true and correct, as of the date of this Agreement and
as of the Effective Time as though made as of the Effective Time, except to the
extent such representations and warranties are specifically made as of a
particular date or as of the date of this Agreement (in which case such
representations and warranties shall be true and correct as of such date) and
except for any failure to be true and correct which has not resulted in, and
would not be reasonably likely to result in, a Company Material Adverse Change
(as defined below);
(d) the Company shall have performed or complied with in all material
respects its agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Effective Time;
(e) no Legal Proceeding shall be pending or threatened in writing
(other than those specifically identified in Section 2.17 of the Disclosure
Schedule) wherein an unfavorable judgment, order, decree, stipulation or
injunction would reasonably be likely to (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation or (iii)
have a Company Material Adverse Effect, and no such judgment, order, decree,
stipulation or injunction shall be in effect;
(f) the Company shall have delivered to the Buyer and the Transitory
Subsidiary a certificate (the "Company Certificate") to the effect that each of
the conditions specified in clause (a) of Section 5.1 and clauses (a) through
(e) (insofar as clause (e) relates to Legal Proceedings involving the Company or
a Subsidiary) of this Section 5.2 is satisfied in all respects;
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(g) the Buyer shall have received from counsel to the Company an
opinion with respect to the matters set forth in EXHIBIT E attached hereto,
addressed to the Buyer and dated as of the Closing Date;
(h) the Buyer shall have received copies of the resignations,
effective as of the Effective Time, of each director and officer of the Company
(other than any such resignations which the Buyer designates, by written notice
to the Company, as unnecessary);
(i) Michael Tessler and Scott Hoffpauir and at least six other of the
employees of the Company identified in Section 5.2(i) of the Disclosure Schedule
(the "Key Employees") shall have (i) accepted an offer of employment from Buyer
(which offer may be contingent upon the Closing), (ii) executed an offer letter
in a form reasonably satisfactory to Buyer and consistent with Buyer's past
practice, (iii) taken no action to rescind acceptance of such offer of
employment, (iv) agreed that the occurrence of the Merger, in and of itself,
shall not constitute "Good Reason" with respect to acceleration of such
employee's Options upon termination of employment; and (v) executed a
Noncompetition and Nonsolicitation Agreement in the form attached hereto as
EXHIBIT F;
(j) the parties identified in Section 5.2(j) of the Disclosure
Schedule shall have executed lock-up agreements prior to the effectiveness of
the IPO Registration Statement, substantially in the forms attached hereto as
EXHIBIT G-1 or G-2 (with the form on Exhibit G-1 being executed by employees and
the form on Exhibit G-2 being executed by non-employees);
(k) no circumstance with respect to, change in or effect on the
Company (a "Company Material Adverse Change") shall have occurred since the date
hereof that is reasonably likely to be or have a Company Material Adverse
Effect, other than a circumstance, change or effect resulting, alone or in
combination, from (a) failure of the Company to meet any revenue or earnings
projections, (b) the delay or cancellation of orders by the Company's customers
or the disruption or loss of any relationship set forth in Section 5.2(k) of the
Disclosure Schedule, (c) conditions generally effecting the United States
economy or the software industry, (d) actions required to be taken or prohibited
from being taken by this Agreement, (e) change in accounting principles or
requirements or applicable laws or regulations, or (f) failure by Buyer to take
action required by this Agreement;
(l) the Buyer shall have received an opinion from Hale and Dorr LLP,
in a form reasonably satisfactory to the Buyer, dated the Closing Date, to the
effect that the Merger will constitute a reorganization for federal income tax
purposes within the meaning of Section 368(a) of the Code; provided that if Hale
and Dorr LLP does not render such opinion, this condition shall nonetheless be
deemed satisfied if Cooley Godward LLP renders such opinion to the Buyer;
provided, further, that this condition shall be deemed satisfied, at the
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Company's election, if the Company is not responsible for failure of the Merger
to constitute such a reorganization;
(m) all outstanding Series B Preferred Shares shall have been
converted into Common Shares;
(n) all Warrants shall have been exercised or terminated;
(o) the Buyer shall have received such other certificates and
instruments (including without limitation certificates of good standing of the
Company in their jurisdiction of organization and the various foreign
jurisdictions in which they are qualified, certified charter documents,
certificates as to the incumbency of officers and the adoption of authorizing
resolutions) as it shall reasonably request in connection with the Closing;
(p) any "parachute payments" will have been approved by the
percentage of holders of the outstanding Company Shares as required by law as
described in Section 4.14(c);
(q) the Company shall have delivered to the Buyer a properly executed
statement satisfying the requirements of Treasury Regulation Sections 1.897-2(h)
and 1.1445-2(c)(3) in a form reasonably acceptable to the Buyer; and
(r) the Company shall have delivered to the Buyer all Tax good
standing and other clearance certificates or similar documents which are
required by any Tax authority in any jurisdiction in which the Company is
required to file Tax Returns to relieve the Buyer from any obligations to
withhold any portion of any consideration payable by reason of this Agreement or
the transactions contemplated hereby or thereby;
(s) the Company shall have caused to be redeemed, for the
consideration specified in the Company Charter, all outstanding Series A
Preferred Shares not later than the last day of the calendar month preceding the
month in which the Merger is consummated; and
(t) the Company shall have provided to the Buyer a balance sheet as
of the end of the calendar month preceding the month in which the Merger is
consummated, prepared in accordance with GAAP, and showing total assets of less
than $10.0 million.
5.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to consummate the Merger is subject to the satisfaction of the following
additional conditions:
(a) the Buyer shall have effected all of the registrations, filings
and notices referred to in Section 4.2 which are required on the part of the
Buyer, except for any which if not obtained or effected would not have a Buyer
Material Adverse Effect or a material adverse effect on the ability of the
Parties to consummate the transactions contemplated by this Agreement;
(b) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in the first sentence of Section 3.1 and Section
3.3 and any representations and warranties of the Buyer and the Transitory
Subsidiary set forth in this Agreement that are
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qualified as to materiality shall be true and correct, and the representations
and warranties of the Buyer and the Transitory Subsidiary set forth in this
Agreement that are not so qualified (other than those set forth in Section 3.1
and Section 3.3) shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Effective Time as though
made as of the Effective Time, except to the extent such representations and
warranties are specifically made as of a particular date or as of the date of
this Agreement (in which case such representations and warranties shall be true
and correct as of such date);
(c) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with in all material respects its agreements and covenants
required to be performed or complied with under this Agreement as of or prior to
the Effective Time;
(d) no Legal Proceeding shall be pending or threatened wherein an
unfavorable judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) have a Buyer Material Adverse Effect, and no
such judgment, order, decree, stipulation or injunction shall be in effect;
(e) the Buyer shall have delivered to the Company a certificate (the
"Buyer Certificate") to the effect that each of the conditions specified in
clause (c) of Section 5.1 and in clauses (a) through (d) (insofar as clause (d)
relates to Legal Proceedings involving the Buyer) of this Section 5.3 is
satisfied in all respects;
(f) the Company shall have received from counsel to the Buyer and the
Transitory Subsidiary an opinion with respect to the matters set forth in
EXHIBIT H attached hereto, addressed to the Company and dated as of the Closing
Date;
(g) the Company shall have received an opinion from Cooley Godward
LLP, in a form reasonably satisfactory to the Company, dated the Closing Date,
to the effect that the Merger will constitute a reorganization for federal
income tax purposes within the meaning of Section 368(a) of the Code; provided
that if Cooley Godward LLP does not render such opinion, this condition shall
nonetheless be deemed satisfied if Hale and Dorr LLP renders such opinion to the
Company; and
(h) the Company shall have received such other certificates and
instruments (including without limitation certificates of good standing of the
Buyer and the Transitory Subsidiary in their jurisdiction of organization,
certified charter documents, certificates as to the incumbency of officers and
the adoption of authorizing resolutions) as it shall reasonably request in
connection with the Closing.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY THE COMPANY STOCKHOLDERS. The Company Stockholders
receiving the Merger Shares pursuant to Section 1.5 (the "Indemnifying
Stockholders"),
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severally but not jointly, shall indemnify the Buyer in respect of, and hold it
harmless against, any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown,
or due or to become due or otherwise), monetary damages, fines, fees, penalties,
interest obligations, deficiencies, losses and expenses (including without
limitation amounts paid in settlement, interest, court costs, costs of
investigators, reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts, and other reasonable expenses of litigation)
("Damages") incurred or suffered by the Surviving Corporation or the Buyer or
any Affiliate thereof resulting from, relating to or constituting:
(a) any inaccuracy in or breach of any representation or warranty or
failure to perform any covenant or agreement of the Company contained in this
Agreement or the Company Certificate; or
(b) any claim by a stockholder or former stockholder of the Company,
or any other person or entity, seeking to assert, or based upon: (i) ownership
or rights to ownership of any shares of stock of the Company; (ii) any rights of
a stockholder (other than the right to receive the Merger Shares pursuant to
this Agreement or appraisal rights under the applicable provisions of the
Delaware General Corporation Law), including any option, preemptive rights or
rights to notice or to vote; (iii) any rights under the Certificate of
Incorporation or By-laws of the Company; or (iv) any claim that his, her or its
shares were wrongfully repurchased by the Company.
6.2 INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify the
Indemnifying Stockholders in respect of, and hold them harmless against, any and
all Damages incurred or suffered by the Indemnifying Stockholders resulting
from, relating to or constituting any inaccuracy in or breach of any
representation or warranty or failure to perform any covenant or agreement of
the Buyer or the Transitory Subsidiary contained in this Agreement or the Buyer
Certificate.
6.3 INDEMNIFICATION CLAIMS.
(a) A party entitled, or seeking to assert rights, to indemnification
under this Article VI (an "Indemnified Party") shall give written notification
to the party from whom indemnification is sought (an "Indemnifying Party") of
the commencement of any suit or proceeding relating to a third party claim for
which indemnification pursuant to this Article VI may be sought. Such
notification shall be given within 20 days after receipt by the Indemnified
Party of notice of such suit or proceeding, and shall describe in reasonable
detail (to the extent known by the Indemnified Party) the facts constituting the
basis for such suit or proceeding and the amount of the claimed damages;
provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party of any
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such suit or
proceeding with counsel reasonably satisfactory to the Indemnified Party;
provided that (i) the Indemnifying Party may only assume control of such defense
if (A) it acknowledges
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in writing to the Indemnified Party that any damages, fines, costs or other
liabilities that may be assessed against the Indemnified Party in connection
with such suit or proceeding constitute Damages for which the Indemnified Party
shall be indemnified pursuant to this Article VI and (B) the ad damnum is less
than or equal to the amount of Damages for which the Indemnifying Party is
liable under this Article VI and (ii) the Indemnifying Party may not assume
control of the defense of a suit or proceeding involving criminal liability or
in which equitable relief is sought against the Indemnified Party. If the
Indemnifying Party does not so assume control of such defense, the Indemnified
Party shall control such defense. The party not controlling such defense (the
"Non-controlling Party") may participate therein at its own expense; provided
that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes that the Indemnifying Party and the
Indemnified Party have conflicting interests or different defenses available
with respect to such suit or proceeding, the reasonable fees and expenses of
counsel to the Indemnified Party shall be considered "Damages" for purposes of
this Agreement. The party controlling such defense (the "Controlling Party")
shall keep the Non-controlling Party advised of the status of such suit or
proceeding and the defense thereof and shall consider in good faith
recommendations made by the Non-controlling Party with respect thereto. The
Non-controlling Party shall furnish the Controlling Party with such information
as it may have with respect to such suit or proceeding (including copies of any
summons, complaint or other pleading which may have been served on such party
and any written claim, demand, invoice, billing or other document evidencing or
asserting the same) and shall otherwise cooperate with and assist the
Controlling Party in the defense of such suit or proceeding. The Indemnifying
Party shall not agree to any settlement of, or the entry of any judgment arising
from, any such suit or proceeding without the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld or delayed; provided
that the consent of the Indemnified Party shall not be required if the
Indemnifying Party agrees in writing to pay any amounts payable pursuant to such
settlement or judgment and such settlement or judgment includes a complete
release of the Indemnified Party from further liability and has no other adverse
effect on the Indemnified Party. The Indemnified Party shall not agree to any
settlement of, or the entry of any judgment arising from, any such suit or
proceeding without the prior written consent of the Indemnifying Party, which
shall not be unreasonably withheld or delayed.
(b) In order to seek indemnification under this Article VI, an
Indemnified Party shall give written notification (a "Claim Notice") to the
Indemnifying Party which contains (i) a description and the amount (the "Claimed
Amount") of any Damages incurred or reasonably expected to be incurred by the
Indemnified Party, (ii) a statement that the Indemnified Party is entitled to
indemnification under this Article VI for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment (in the manner
provided in paragraph (c) below) in the amount of such Damages. If the
Indemnified Party is seeking to enforce such claim pursuant to the Escrow
Agreement, the Indemnifying Party shall deliver a copy of the Claim Notice to
the Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice, the Indemnifying
Party shall deliver to the Indemnified Party a written response (the "Response")
in which the Indemnifying Party shall: (i) agree that the Indemnified Party is
entitled to receive all of the Claimed Amount (in which case the Response shall
be accompanied by a payment by the
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Indemnifying Party to the Indemnified Party of the Claimed Amount, by check or
by wire transfer; provided that if the Indemnified Party is seeking to enforce
such claim pursuant to the Escrow Agreement, the Indemnifying Party and the
Indemnified Party shall deliver to the Escrow Agent, within three days following
the delivery of the Response, a written notice executed by both parties
instructing the Escrow Agent to distribute to the Buyer such number of Escrow
Shares as have an aggregate Value (as defined below) equal to the Claimed
Amount), (ii) agree that the Indemnified Party is entitled to receive part, but
not all, of the Claimed Amount (the "Agreed Amount") (in which case the Response
shall be accompanied by a payment by the Indemnifying Party to the Indemnified
Party of the Agreed Amount, by check or by wire transfer; provided that if the
Indemnified Party is seeking to enforce such claim pursuant to the Escrow
Agreement, the Indemnifying Party and the Indemnified Party shall deliver to the
Escrow Agent, within three days following the delivery of the Response, a
written notice executed by both parties instructing the Escrow Agent to
distribute to the Buyer such number of Escrow Shares as have an aggregate Value
equal to the Agreed Amount) or (iii) dispute that the Indemnified Party is
entitled to receive any of the Claimed Amount. If the Indemnifying Party in the
Response disputes its liability for all or part of the Claimed Amount, the
Indemnifying Party and the Indemnified Party shall follow the procedures set
forth in Section 6.3(d) for the resolution of such dispute (a "Dispute"). For
purposes of this Article VI, the "Value" of any Escrow Shares delivered in
satisfaction of an indemnity claim shall be the average of the last reported
sale prices per share of the Buyer Common Stock on the Nasdaq National Market
over the ten consecutive trading days ending on the third day immediately
preceding the date of distribution of such Escrow Shares (subject to equitable
adjustment in the event of any stock split, stock dividend, reverse stock split
or similar event affecting the Buyer Common Stock since the beginning of such
ten-day period), multiplied by the number of such Escrow Shares.
(d) During the 60-day period following the delivery of a Response
that reflects a Dispute, the Indemnifying Party and the Indemnified Party shall
use reasonable efforts to resolve the Dispute. If the Dispute is not resolved
within such 60-day period, the Indemnifying Party and the Indemnified Party
shall discuss in good faith the submission of the Dispute to a mutually
acceptable alternative dispute resolution procedure (which may be non-binding or
binding upon the parties, as they agree in advance) (the "ADR Procedure"). In
the event the Indemnifying Party and the Indemnified Party agree upon an ADR
Procedure, such parties shall, in consultation with the chosen dispute
resolution service (the "ADR Service"), promptly agree upon a format and
timetable for the ADR Procedure, agree upon the rules applicable to the ADR
Procedure, and promptly undertake the ADR Procedure. The provisions of this
Section 6.3(d) shall not obligate the Indemnifying Party and the Indemnified
Party to pursue an ADR Procedure or prevent either such party from pursuing the
Dispute in a court of competent jurisdiction; provided that, if the Indemnifying
Party and the Indemnified Party agree to pursue an ADR Procedure, neither the
Indemnifying Party nor the Indemnified Party may commence litigation or seek
other remedies with respect to the Dispute (other than injunctive relief
reasonably necessary to protect such party's interest in the Dispute) prior to
the completion of such ADR Procedure. Any ADR Procedure undertaken by the
Indemnifying Party and the Indemnified Party shall be considered a compromise
negotiation for purposes of federal and state rules of evidence, and all
statements, offers, opinions and disclosures (whether written or oral) made in
the course of the ADR Procedure by or on behalf of the Indemnifying Party, the
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Indemnified Party or the ADR Service shall be treated as confidential and, where
appropriate, as privileged work product. Such statements, offers, opinions and
disclosures shall not be discoverable or admissible for any purposes in any
litigation or other proceeding relating to the Dispute (provided that this
sentence shall not be construed to exclude from discovery or admission any
matter that is otherwise discoverable or admissible). The fees and expenses of
any ADR Service used by the Indemnifying Party and the Indemnified Party shall
be shared equally by the Indemnifying Party and the Indemnified Party. If the
Indemnified Party is seeking to enforce the claim that is the subject of the
Dispute pursuant to the Escrow Agreement, the Indemnifying Party and the
Indemnified Party shall deliver to the Escrow Agent, promptly following the
resolution of the Dispute (whether by mutual agreement, pursuant to an ADR
Procedure, as a result of a judicial decision or otherwise), a written notice
executed by both parties instructing the Escrow Agent as to what (if any)
portion of the Escrow Shares shall be distributed to the Buyer and/or the
Indemnifying Stockholders (which notice shall be consistent with the terms of
the resolution of the Dispute).
(e) Notwithstanding the other provisions of this Section 6.3, if a
third party asserts (other than by means of a lawsuit) that an Indemnified Party
is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to this Article VI, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
such Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article VI, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the provisions of this Article VI,
for any such Damages for which it is entitled to indemnification pursuant to
this Article VI (subject to the right of the Indemnifying Party to dispute the
Indemnified Party's entitlement to indemnification, or the amount for which it
is entitled to indemnification, under the terms of this Article VI).
(f) For purposes of this Section 6.3 and the last two sentences of
Section 6.4, (i) if the Indemnifying Stockholders comprise the Indemnifying
Party, any references to the Indemnifying Party (except provisions relating to
an obligation to make or a right to receive any payments provided for in Section
6.3 or Section 6.4) shall be deemed to refer to the Indemnification
Representatives, and (ii) if the Indemnifying Stockholders comprise the
Indemnified Party, any references to the Indemnified Party (except provisions
relating to an obligation to make or a right to receive any payments provided
for in Section 6.3 or Section 6.4) shall be deemed to refer to the
Indemnification Representatives. The Indemnification Representatives shall have
full power and authority on behalf of each Indemnifying Stockholder to take any
and all actions on behalf of, execute any and all instruments on behalf of, and
execute or waive any and all rights of, the Indemnifying Stockholders under this
Article VI. The Indemnification Representatives shall have no liability to any
Indemnifying Stockholder for any action taken or omitted on behalf of the
Indemnifying Stockholders pursuant to this Article VI.
6.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement, the Company Certificate and the Buyer
Certificate shall (a) survive
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the Closing and any investigation at any time made by or on behalf of an
Indemnified Party and (b) shall expire on the date one year following the
Closing Date, except that the representations and warranties set forth in
Section 2.2 (and any portion of the Company Certificate relating thereto) shall
survive the Closing without limitation. If an Indemnified Party delivers to an
Indemnifying Party, before expiration of a representation or warranty, either a
Claim Notice based upon a breach of such representation or warranty, or a notice
that, as a result of a legal proceeding instituted by or written claim made by a
third party, the Indemnified Party reasonably expects to incur Damages as a
result of a breach of such representation or warranty (an "Expected Claim
Notice"), then such representation or warranty shall survive until, but only for
purposes of, the resolution of the matter covered by such notice. If the legal
proceeding or written claim with respect to which an Expected Claim Notice has
been given is definitively withdrawn or resolved in favor of the Indemnified
Party, the Indemnified Party shall promptly so notify the Indemnifying Party;
and if the Indemnified Party has delivered a copy of the Expected Claim Notice
to the Escrow Agent and Escrow Shares have been retained in escrow after the
Termination Date (as defined in the Escrow Agreement) with respect to such
Expected Claim Notice, the Indemnifying Party and the Indemnified Party shall
promptly deliver to the Escrow Agent a written notice executed by both parties
instructing the Escrow Agent to distribute such retained Escrow Shares to the
Indemnifying Stockholders in accordance with the terms of the Escrow Agreement.
6.5 LIMITATIONS.
(a) Notwithstanding anything to the contrary herein, except with
respect to Damages relating to willful misrepresentation, fraud or breach of the
representation and warranties in Section 2.2 (or the portion of the Company
Certificate relating thereto), (i) the aggregate liability of the Indemnifying
Stockholders, on the one hand, and the Buyer, on the other hand, for Damages
under this Article VI shall not exceed 10% of the Total Merger Consideration,
(ii) the Indemnifying Stockholders and the Buyer shall be liable under this
Article VI only if the aggregate Damages for which they or it would otherwise be
liable exceeds $1,000,000, but if the Damages do exceed that amount, then the
Indemnifying Stockholders or the Buyer, as the case may be, shall be liable for
all Damages, and (iii) each Indemnifying Stockholder shall only be liable for
his, her or its pro rata share (based on the number of Merger Shares received by
such Indemnifying Stockholder as a percentage of the total number of Merger
Shares issued); provided that the limitation set forth in clauses (i) and (ii)
above shall not apply to a claim pursuant to Section 6.1(a) relating to a breach
of the covenants set forth in Section 4.8. For purposes solely of this Article
VI, all representations and warranties of the Company in Article II (other than
Section 2.28) and all representations and warranties of the Buyer and the
Transitory Subsidiary in Article III (other than Section 3.10) shall be
construed as if the term "material" and any reference to "Company Material
Adverse Effect" and "Buyer Material Adverse Effect" (and variations thereof)
were omitted from such representations and warranties.
(b) Except for Damages relating to willful misrepresentation, fraud
and breach of the representation and warranties set forth in Section 2.2 or the
covenants set forth in Section 4.8, the Escrow Agreement shall be the exclusive
means for the Buyer to collect any Damages for which it is entitled to
indemnification under this Article VI.
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(c) Except with respect to claims based on willful misrepresentation
and fraud, after the Closing, the rights of the Indemnified Parties under this
Article VI and the Escrow Agreement shall be the exclusive remedy of the
Indemnified Parties with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement.
(d) No Indemnifying Stockholder shall have any right of contribution
against the Company or the Surviving Corporation with respect to any breach by
the Company of any of its representations, warranties, covenants or agreements.
ARTICLE VII
TERMINATION
7.1 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
prior to the Effective Time (whether before or after Requisite Stockholder
Approval), as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written notice
to the Company in the event the Company is in breach of any representation,
warranty or covenant contained in this Agreement, and such breach, individually
or in combination with any other such breach, (i) would cause the conditions set
forth in clauses (c) or (d) of Section 5.2 not to be satisfied and (ii) is not
cured within 20 days following delivery by the Buyer to the Company of written
notice of such breach;
(c) the Company may terminate this Agreement by giving written notice
to the Buyer in the event the Buyer or the Transitory Subsidiary is in breach of
any representation, warranty or covenant contained in this Agreement, and such
breach, individually or in combination with any other such breach, (i) would
cause the conditions set forth in clauses (b) or (c) of Section 5.3 not to be
satisfied and (ii) is not cured within 20 days following delivery by the Company
to the Buyer of written notice of such breach;
(d) any Party may terminate this Agreement by giving written notice
to the other Parties at any time after the Company Stockholders have voted on
whether to approve this Agreement and the Merger in the event this Agreement and
the Merger failed to receive the Requisite Stockholder Approval;
(e) the Buyer may terminate this Agreement by giving written notice
to the Company if the Closing shall not have occurred on or before February 28,
2001 (the "Termination Date") by reason of the failure of any condition
precedent under Section 5.1 or 5.2 hereof (unless the failure results primarily
from a breach by the Buyer or the Transitory Subsidiary of any representation,
warranty or covenant contained in this Agreement); provided that such date shall
be extended until April 29, 2001 in the event that the Registration Statement
has been filed but has not been declared effective by the Termination Date;
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(f) the Company may terminate this Agreement by giving written notice
to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before Termination Date by reason of the failure of any condition
precedent under Section 5.1 or 5.3 hereof (unless the failure results primarily
from a breach by the Company of any representation, warranty or covenant
contained in this Agreement); provided that such date shall be extended until
April 29, 2001 in the event that the Registration Statement has been filed but
has not been declared effective by the Termination Date; or
(g) the Company may terminate this Agreement by giving written notice
to the Buyer and the Transitory Subsidiary if the IPO Registration Statement has
not been declared effective by January 31, 2001.
7.2 EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 7.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to any other Party (except for any liability of any
Party for breaches of this Agreement), provided that the terms of the Mutual
Non-Disclosure Agreement dated September 20, 2000 between the Buyer and the
Company (the "NDA"), the letter agreement with respect to nonsolicitation of
employees dated October 3, 2000 between the Buyer and the Company (the "Letter
Agreement"), and the provisions of Article 9 hereof shall survive any such
termination without limitation.
ARTICLE VIII
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ -------
<S> <C>
Acquisition 3.11
Actual Closing Shares 1.5(b)
Additional Shares 1.5(d)
ADR Procedure 6.3(d)
ADR Service 6.3(d)
Affiliate 2.14(a)(vii)
Affiliate Agreement 4.9
Agreed Amount 6.3(c)
Arthur Andersen 4.3(a)
Buyer Introduction
Buyer Average Stock Price 1.5(e)(vi)
Buyer Certificate 5.3(e)
Buyer Common Stock 1.5(a)
Buyer Material Adverse Effect 3.1
CERCLA 2.21(a)
Certificates 1.7(a)
</TABLE>
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<TABLE>
<S> <C>
Certificate of Merger 1.1
Claim Notice 6.3(b)
Claimed Amount 6.3(b)
Closing 1.2
Closing Date 1.2
Code 1.9(a)
Common Conversion Ratio 1.5(b)
Common Shares 1.5(a)
Company Introduction
Company Certificate 5.2(f)
Company Charter 4.4(h)
Company Indemnified Parties 4.12(a)
Company Intellectual Property 2.13(a)
Company Material Adverse Change 5.2(k)
Company Material Adverse Effect 2.1
Company Shares 1.9(f)
Company Stockholders 1.5(c)
Controlling Party 6.3(a)
Covered Employee 4.13(a)
Customer Deliverables 2.13(a)
Damages 6.1
Disclosure Schedule Article II
Dispute 6.3(c)
Dissenting Shares 1.6(a)
Effective Time 1.1
Employee Benefit Plan 2.20(a)(i)
Environmental Law 2.21(a)
ERISA 2.20(a)(ii)
ERISA Affiliate 2.20(a)(iii)
Escrow Agreement 1.3(e)
Escrow Agent 1.3(e)
Escrow Shares 1.5(c)
Expected Claim Notice 6.4
Exchange Act 2.14(a)(vii)
Exchange Agent 1.3(d)
Financial Statements 2.6
Fully-Diluted Closing Shares 1.5(b)
GAAP 2.6
Governmental Entity 2.4
Gross IPO Proceeds 1.5(e)(vi)
Hart-Scott-Rodino Act 2.4
Indemnification Representatives 1.3(e)
Indemnified Party 6.3(a)
Indemnifying Party 6.3(a)
Indemnifying Stockholders 6.1
</TABLE>
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<TABLE>
<S> <C>
Initial Shares 1.5(c)
Intellectual Property 2.13(a)
Internal Systems 2.13(a)
IPO 1.5(e)(vi)
IPO Registration Statement 3.5
Key Employees 5.2(i)
Legal Proceeding 2.17
Letter Agreement 7.2
Materials of Environmental Concern 2.21(b)
Measurement Period 1.5(e)(vi)
Merger 1.1
Merger Shares 1.5(d)
Most Recent Balance Sheet 2.8
Most Recent Balance Sheet Date 2.6
Nasdaq 4.10
NDA 7.2
Non-controlling Party 6.3(a)
Options 1.9(a)
Ordinary Course of Business 2.4
Parties Introduction
Permits 2.24
Permitted Contract 4.4
Permitted Options 1.9(a)
Post-IPO Shares 1.5(e)(vi)
Prospectus/Proxy Statement 4.3(a)
Reasonable Best Efforts 4.1
Registration Rights Agreement 2.2
Registration Statement 4.3(a)
Response 6.3(c)
Required Closing Consents 5.2(b)
Required Information 4.3(a)
Requisite Stockholder Approval 2.3
Restricted Shares 1.9(f)
Runoff Policy 4.12(a)
SEC 3.5
Securities Act 1.9(c)
Security Interest 2.4
Series A Preferred Shares 2.2
Series B Preferred Shares 1.5(b)
Software 2.13(e)
Stockholders Agreement 2.2
Surviving Corporation 1.1
Taxes 2.9(a)(i)
Tax Returns 2.9(a)(ii)
</TABLE>
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<TABLE>
<S> <C>
Termination Date 7.1(e)
Threshold A 1.5(e)(vi)
Threshold B 1.5(e)(vi)
Threshold C 1.5(e)(vi)
Threshold D 1.5(e)(vi)
Total Closing Shares 1.5(c)
Total Merger Consideration 1.5(e)
Total Merger Shares 1.5(f)
Transitory Subsidiary Introduction
Value 6.3(c)
Warrants 1.9(d)
Year 2000 Compliant 2.13(i)
</TABLE>
ARTICLE IX
MISCELLANEOUS
9.1 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule (in which case the disclosing
Party shall use reasonable efforts to advise the other Parties and provide them
with a copy of the proposed disclosure prior to making the disclosure).
9.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that (a) the provisions in
Article I concerning issuance of the Merger Shares and Article VI concerning
indemnification are intended for the benefit of the Company Stockholders and (b)
the provisions in Section 4.12 are intended for the benefit of the Company
Indemnified Parties.
9.3 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof; provided that the
NDA and the Letter Agreement shall remain in effect in accordance with their
terms.
9.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer. In the
event of an Acquisition of Buyer, the following additional provisions shall
apply:
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(a) In the event of an Acquisition prior to the Closing of the
Merger, this Agreement, unless previously terminated, shall continue to be
binding upon the Parties, except that (i) the conditions set forth in Sections
5.1(c), 5.1(d), 5.1(e), 5.2(j) and 5.2(n) shall be deemed to have been satisfied
and (ii) appropriate provision shall be made so that each Company Stockholder
and each holder of Options shall thereafter become entitled in the Merger to the
same consideration it would have received had the Merger closed immediately
prior to the Acquisition. For purposes of determining the number of shares of
Buyer Common Stock each Company Stockholder and each holder of Options would
have been entitled to in this event, (A) the Measurement Period shall be deemed
to have elapsed immediately upon the Acquisition, (B) the Buyer Average Stock
Price shall thereafter mean the value of the consideration received or to be
received in the Acquisition by the holders of Buyer Common Stock with respect to
each share of Buyer Common Stock outstanding immediately prior to the closing of
the Acquisition, determined in accordance with paragraph (d) below, (C)
Threshold B shall thereafter mean a fraction, the numerator of which is $10
billion and the denominator of which is the sum of the number of shares of Buyer
Common Stock outstanding immediately prior to the closing of the Acquisition
plus the number of shares of Buyer Common Stock issuable upon the exercise of
options and warrants to purchase Buyer Common Stock then outstanding, and (D)
Threshold C shall thereafter mean a fraction the numerator of which is $14
billion and the denominator of which is the same as that described in clause (C)
above.
(b) In the event of an Acquisition after the Closing of the Merger
but prior to the end of the Measurement Period, (i) the Measurement Period shall
be deemed to have elapsed immediately upon the Acquisition, (ii) the Buyer
Average Stock Price shall thereafter mean the value of the consideration
received or to be received in the Acquisition by the holders of Buyer Common
Stock with respect to each share of Buyer Common Stock outstanding immediately
prior to closing of the Acquisition, (iii) Threshold B shall thereafter mean a
fraction, the numerator of which is $10 billion and the denominator of which is
the sum of the number of shares of Buyer Common Stock outstanding immediately
prior to the closing of the Acquisition plus the number of shares of Buyer
Common Stock issuable upon the exercise of options and warrants to purchase
Buyer Common Stock then outstanding, (excluding any Initial Shares issued to
Company Stockholders, any shares underlying Options and warrants of the Company
that were assumed in connection with the Merger and any shares underlying
Options issued pursuant to Section 4.4(a)), and (iv) Threshold C shall
thereafter mean a fraction the numerator of which is $14 billion and the
denominator of which is the same as that described in clause (iii) above.
(c) If any portion of the consideration received or to be received by
the Holders of Buyer Common Stock in the Acquisition takes a form other than
cash or other consideration with a readily determinable value, the value of such
consideration shall be determined in good faith by the board of directors of the
Buyer, provided that if any portion of such consideration consists of equity
securities of a class that is traded on a national securities exchange or quoted
on the Nasdaq Stock Market, then the value of each share of such security shall
be the average of the last reported sale price per share for the 20 consecutive
trading days immediately prior to the announcement of the Acquisition, unless
the method for valuing such consideration is specified in the definitive
agreement regarding the Acquisition, in which event
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such methodology shall be used. The Indemnification Representatives shall have
the authority, on behalf of the Company Stockholders and the holders of Options,
to approve any interpretation, modification or waiver of this Section 9.4 and,
if requested by the acquiror in the Acquisition, to confirm that the terms of
this Section 9.4 have been complied with or waived. Any determination by the
Indemnification Representatives shall be final and binding on each Company
Stockholder and holder of Options.
9.5 COUNTERPARTS AND FACSIMILE SIGNATURE. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
9.6 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
<TABLE>
<S> <C>
IF TO THE COMPANY: COPY TO:
BroadSoft, Inc. Cooley Godward LLP
200 Perry Parkway, Suite 1 One Freedom Square
Gaithersburg, MD 20877 11951 Freedom Drive
Tel: (301) 977-9440 Reston, VA 20190
Fax: (301) 977-8846 Tel.: (703) 456-8000
Attn: Mr. Michael Tessler Fax: (703) 456-8100
Chief Executive Officer Attn: Adam Salassi , Esq.
IF TO THE BUYER OR COPIES TO:
THE TRANSITORY SUBSIDIARY:
Unisphere Networks, Inc.
Unisphere Networks, Inc. 1 Executive Drive
1 Executive Drive Chelmsford, MA 01824
Chelmsford, MA 01824 Tel.: (978) 848-0300
Tel.: (978) 848-0300 Fax: (978) 441-0678
Fax: (978) 848-0599 Attn: Suzanne Zabitchuck, Esq.
Attn: Mr. James Dolce
Chief Executive Officer Hale and Dorr LLP
60 State Street
Boston, MA 02109
</TABLE>
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Tel.: (617) 526-6000
Fax: (617) 526-5000
Attn: Mark Borden, Esq.
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, or ordinary mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.
9.9 AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time; provided, however,
that any amendment effected subsequent to the Requisite Stockholder Approval
shall be subject to any restrictions contained in the Delaware General
Corporation Law. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the Parties. No waiver
of any right or remedy hereunder shall be valid unless the same shall be in
writing and signed by the Party giving such waiver. No waiver by any Party with
respect to any default, misrepresentation or breach of warranty or covenant
hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
9.10 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
9.11 SUBMISSION TO JURISDICTION. Each of the Parties (a) submits to the
jurisdiction of any state or federal court sitting in Delaware in any action or
proceeding arising out of or relating to this Agreement, (b) agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, and (c) agrees not to bring any action or proceeding arising out
of or relating to this Agreement in any other court. Each of the Parties waives
any defense of
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inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety or other security that might be required of any other
Party with respect thereto. Any Party may make service on another Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 9.7.
Nothing in this Section 9.11, however, shall affect the right of any Party to
serve legal process in any other manner permitted by law.
9.12 CONSTRUCTION.
(a) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
UNISPHERE NETWORKS, INC.
By: /s/ James A. Dolce, Jr.
-----------------------------------
Title: President and Chief Executive
Officer
-----------------------------------
PITCHER ACQUISITION CORP.
By: /s/ James A. Dolce, Jr.
-----------------------------------
Title: President
-----------------------------------
BROADSOFT, INC.
By: /s/ Michael Tessler
-----------------------------------
Title: President and CEO
-----------------------------------
The undersigned, being the duly elected Secretary of the Transitory
Subsidiary, hereby certifies that this Agreement has been adopted by a majority
of the votes represented by the outstanding shares of capital stock of the
Transitory Subsidiary entitled to vote on this Agreement.
/s/ Suzanne M. Zabitchuck
----------------------------------------
Secretary
The undersigned, being the duly elected Secretary of the Company, hereby
certifies that this Agreement has been adopted by the requisite number of votes
of the Company's capital stock required to adopt this Agreement.
----------------------------------------
Secretary
