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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 24, 2000
FREEMARKETS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 000-27913 04-3265483
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
22nd FLOOR, FREEMARKETS CENTER
210 SIXTH AVENUE, PITTSBURGH, PA 15222
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (412) 434-0500
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Item 2. Acquisition or Disposition of Assets.
On March 24, 2000, FreeMarkets, Inc. ("FreeMarkets") acquired
iMark.com, Inc., a Delaware corporation ("iMark.com"), by means of a merger (the
"Merger") of a wholly owned subsidiary of FreeMarkets, EMark Acquisition
Corporation, a Delaware corporation ("Emark Acquisition"), with and into
iMark.com. The Merger was accomplished pursuant to the Agreement and Plan of
Merger, dated as of March 14, 2000, among FreeMarkets, Emark Acquisition and
iMark.com (the "Merger Agreement"). As a result of the Merger, each outstanding
share of iMark.com Common Stock was converted into 0.1575523105 of a share of
FreeMarkets Common Stock. The terms of the Merger Agreement were the result of
arm's-length negotiations among the parties.
As a result of the Merger, a total of approximately 1.574 million
shares of FreeMarkets Common Stock (the "FreeMarkets Shares") will be issued to
former iMark.com stockholders. The issuance of the FreeMarkets Shares to
iMark.com stockolders is intended to be exempt from registration pursuant to
Regulation D under the Securities Act of 1933, as amended. FreeMarkets will also
grant to former holders of options to purchase iMark.com Common Stock a total of
approximately 0.176 million stock options to purchase FreeMarkets Common Stock.
iMark.com is a business-to-business Internet marketplace for the
exchange of used equipment. iMark.com brings together buyers and sellers in a
fair and neutral marketplace, and offers services associated with buying and
selling equipment, including Leasing Services, Transportation & Rigging
Services, and Investment Recovery Services.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) It is impracticable at the time of filing this Current Report on Form 8-K to
provide the financial statements of the acquired business required to be filed
by Item 7(a) of Form 8-K. In accordance with paragraph (a)(4) of Form 8-K, the
financial statements of the acquired business shall be filed as an amendment to
this Current Report on Form 8-K as soon as practicable and not later than June
7, 2000.
(b) It is impracticable at the time of filing this Current Report on Form 8-K to
provide the pro forma financial information relative to the acquired business
required to be filed by Item 7(b) of Form 8-K. In accordance with paragraph
(b)(2) of Item 7 of Form 8-K, the pro forma financial information relative to
the acquired business shall be filed as an amendment to this Current Report on
Form 8-K as soon as practicable and not later than June 7, 2000.
(c) Exhibits.
Exhibit No. Description
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2.1 Agreement and Plan of Merger, dated as of March 14, 2000
by and among FreeMarkets, Inc., EMark Acquisition
Corporation and iMark.com, Inc.
99.1 Press Release dated March 15, 2000
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FreeMarkets, Inc.
Date: April 5, 2000 By: /s/ Joan S. Hooper
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Joan S. Hooper
Vice President and Chief
Financial Officer
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EXHIBIT INDEX
Exhibit No. Exhibit
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2.1 Agreement and Plan of Merger dated as of March 14,
2000, by and among FreeMarkets, Inc., EMark
Acquisition Corporation and iMark.com, Inc.
99.1 Press Release dated March 15, 2000
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of March 14, 2000
by and among
FREEMARKETS, INC.
EMARK ACQUISITION CORPORATION
AND
IMARK.COM, INC.
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EXHIBITS
EXHIBIT A - FORM OF STOCKHOLDER AGREEMENT
EXHIBIT B - CERTIFICATE OF MERGER
EXHIBIT C - TRANSMITTAL LETTER
EXHIBIT D - STOCKHOLDERS' REPRESENTATIVE AGREEMENT
EXHIBIT E - INDEMNITY ESCROW AGREEMENT
EXHIBIT F - OPINION OF VENTURE LAW GROUP
EXHIBIT G-1 - COMPANY STOCKHOLDER LETTER AGREEMENT (ACCREDITED)
EXHIBIT G-2 - COMPANY STOCKHOLDER LETTER AGREEMENT (NON-ACCREDITED)
EXHIBIT H - FORM OF NONCOMPETITION AGREEMENT
EXHIBIT I - FORM OF EMPLOYEE LOCK-UP AGREEMENT
EXHIBIT J-1 - FORM OF RELEASE (BOSKO DURICKOVIC)
J-2 - FORM OF RELEASE (ANDRES CARVALLO)
J-3 - FORM OF RELEASE (DOUGLAS HIBBERD)
EXHIBIT K - OPINION OF MORGAN, LEWIS & BOCKIUS LLP
EXHIBIT L - SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
Schedules
Company Disclosure Schedule
Parent Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of March 14,
2000, is by and among FREEMARKETS, INC., a Delaware corporation ("Parent"),
EMARK ACQUISITION CORPORATION, a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and IMARK.COM, INC. a Delaware corporation (the
"Company"). All capitalized terms used in this Agreement shall have the
definitions referenced in Article X hereof.
WHEREAS, the Board of Directors of Parent, the Board of Directors and
the sole stockholder of Sub and the Board of Directors of the Company have
approved the acquisition of the Company by Parent by means of a merger of Sub
with and into the Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, for federal income tax purposes, it is intended that the
acquisition of the Company by Parent pursuant hereto shall qualify as a
reorganization under the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code");
WHEREAS, concurrently with the execution of this Agreement, certain
stockholders of the Company (the "Stockholder Parties") who collectively own
approximately 88% of the combined voting power of all classes of the Company's
issued and outstanding capital stock are each entering into a Stockholder
Agreement in substantially the form attached hereto as Exhibit A (collectively,
the "Stockholder Agreements");
NOW, THEREFORE, in consideration of the promises and the
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, Parent, Sub and the Company agree as
follows:
ARTICLE I - THE MERGER
Section 1.01 The Merger. Subject to the terms and conditions of this
Agreement and the Certificate of Merger in substantially the form attached
hereto as Exhibit B, at the Effective Time (as defined in Section 1.02), Sub
shall be merged with and into the Company and the separate corporate existence
of Sub shall thereupon cease (the "Merger"). As a result of the Merger, the
outstanding shares of capital stock of Sub and the Company shall be converted or
canceled in the manner provided in Article II of this Agreement, the separate
corporate existence of Sub shall cease and the Company shall be the surviving
corporation following the Merger. After the Effective Time, the Merger shall
have the effects specified in the Delaware General Corporation Law (the "DGCL").
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Section 1.02 Closing; Effective Time. Subject to Article VII hereof,
the closing of the Merger (the "Closing") shall take place (i) at the offices of
Morgan, Lewis & Bockius LLP, 32nd Floor, One Oxford Centre, Pittsburgh,
Pennsylvania at 10:00 a.m., prevailing time, on March __, 2000, or at such other
place and time and/or on such other date as Parent and the Company may agree.
The date upon which the Closing occurs is herein referred to as the "Closing
Date." Simultaneously with, or as soon as practicable following, the Closing,
the Company as the surviving corporation shall file the Certificate of Merger
with the Secretary of State of the State of Delaware. The Merger shall become
effective at the later of such time as such document is so filed or at such time
as is set forth in the Certificate of Merger, if different, which time is
hereinafter referred to as the "Effective Time."
Section 1.03 Effects of the Merger.
(a) The Surviving Corporation. At the Effective Time, (i) the
separate existence of Sub shall cease and Sub shall be merged with and into the
Company (Sub and the Company are sometimes referred to below as the "Constituent
Corporations" and the Company is sometimes referred to below as the "Surviving
Corporation"), (ii) the Certificate of Incorporation of the Company in effect
immediately prior to the Effective Time shall be amended and restated in the
form of Annex A attached to the Certificate of Merger, and, as so amended and
restated, such Certificate of Incorporation shall be the Certificate of
Incorporation of the Surviving Corporation until amended thereafter in
accordance with applicable law, and (iii) the Bylaws of the Company as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until amended thereafter in accordance with applicable law.
(b) Rights and Obligations of Surviving Corporation. At and
after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises of a public as well as of a private
nature, and be subject to all the restrictions, disabilities and duties of each
of the Constituent Corporations; and all and singular rights, privileges, powers
and franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, as well as for stock subscriptions and all other things in
action or belonging to each of the Constituent Corporations, shall be vested in
the Surviving Corporation, and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the Constituent
Corporations, and the title to any real estate vested by deed or otherwise, in
either of the Constituent Corporations, shall not revert or be in any way
impaired; but all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thereafter attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if such debts and liabilities had been incurred by it.
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(c) Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title and interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either Constituent Corporation, all such deeds, bills
of sale, assignments and assurances and to do, in the name and on behalf of
either Constituent Corporation, all such other acts and things as may be
necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title and interest in, to and under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
(d) Directors and Officers. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
until their resignation or removal or until their respective successors have
been elected and qualified. The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until their
resignation or removal or until their respective successors have been elected
and qualified.
ARTICLE II - CONVERSION OF SECURITIES
Section 2.01 Merger Consideration.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of any holder of capital stock of the Company, each share
of Common Stock, $.0001 par value per share, of the Company (collectively,
"Company Common Shares") (other than (i) those Company Common Shares held by any
stockholder of the Company ("Company Stockholder") who properly exercises any
appraisal rights available under applicable law ("Dissenting Shares"), and (ii)
Company Common Shares held in treasury ("Treasury Shares")), issued and
outstanding immediately prior to the Effective Time, shall be canceled and
retired and cease to exist, and shall thereafter represent the right to receive
that fraction (the "Exchange Ratio") of a share of the Common Stock, par value
$.01 per share, of Parent ("Parent Common Stock"), calculated as the quotient
obtained by dividing (A) 1,750,000, by (B) the sum of (I) the number of Company
Common Shares issued and outstanding immediately prior to the Effective Time
(including Dissenting Shares and Company Common Shares acquired upon conversion
of all Company Preferred Shares converted and Other Purchase Rights (as defined
in Section 3.02(c)) exercised prior to the Closing in accordance with Section
6.02(f), but excluding Treasury Shares) as set forth in the Capitalization
Certificate delivered by the Company pursuant to Section 6.02(g), and (II) the
number of Company Stock Options outstanding immediately prior to the Effective
Time. Such fraction of a share of Parent Common Stock is also referred to herein
as the "Per Share Merger Consideration."
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(b) Notwithstanding anything to the contrary contained herein,
no shares of Parent Common Stock shall be delivered in the Merger to any Company
Stockholder who has not voted in favor of, or consented to, the adoption of this
Agreement until the surrender by such Company Stockholder of a Certificate (as
defined in Section 2.02) with respect to the Company Common Shares owned by such
Company Stockholder together with a Transmittal Letter (as defined in Section
2.02) with respect thereto and the abandonment by such Company Stockholder of
any and all appraisal rights to which such Company Stockholder may be entitled
under applicable laws.
(c) At and as of the Effective Time, the Treasury Shares shall
not represent the right to receive the Per Share Merger Consideration. At and as
of the Effective Time, all such Treasury Shares shall be canceled and retired
and shall cease to exist, and no cash, securities or other property shall be
payable in respect thereof.
Section 2.02 Exchange of Certificates.
(a) As soon as practicable after the Effective Time, upon
surrender to Parent of a certificate or certificates representing all of such
Company Stockholder's outstanding Company Common Shares which Company Common
Shares may be represented by certificates formerly representing Company
Preferred Shares which have been converted into Company Common Shares
(collectively, "Certificates"), together with (i) a duly executed transmittal
letter in the form attached as Exhibit C hereto (the "Transmittal Letter"), (ii)
an executed signature page to the Stockholders' Representative Agreement in the
form attached as Exhibit D hereto (the "Representative Agreement"), and (iii) if
such Company Stockholder is an employee or officer of the Company on the date
hereof, an executed Lock-Up Agreement (as defined in Section 6.02(q), each
Company Stockholder shall, subject to (A) Section 8.01(b), (B) the vesting terms
and repurchase option set forth in any restricted stock agreement to which such
Company Stockholder is a party (collectively, "Restricted Stock Agreements"),
and (C) the terms of any Pledge and Security Agreement with the Company to which
any Company Stockholder is a party, be entitled to receive, in exchange
therefor, a certificate representing that number of whole shares of Parent
Common Stock which such Company Stockholder has the right to receive in respect
of the Certificate surrendered pursuant to the provisions of this Article II,
and each Certificate so surrendered shall forthwith be canceled. Any reference
to Company Common Shares in the Restricted Stock Agreements (collectively,
"Company Restricted Stock") shall, at and after the Effective Time, be deemed to
constitute a reference to shares of Parent Common Stock subject to repurchase by
Parent in accordance with the repurchase option described therein. As soon as
practicable after the Effective Time, and subject to and in accordance with the
provisions of Section 8.01(b) hereof, Parent shall cause to be delivered (A) to
Chase Manhattan Trust Company, N.A. as indemnity escrow agent (the "Indemnity
Escrow Agent"), a certificate or certificates representing the Escrow Shares (as
defined in Section 8.01(b) hereof) to be issued to such Company Stockholder; (B)
to the Secretary of Parent a certificate or certificates representing (I) the
number of whole shares of Parent Common Stock that are subject to repurchase by
Parent or the Company immediately following the Effective Time in accordance
with the terms of the Restricted Stock Agreements ("Unvested Shares") and (II)
the number of
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whole shares of Parent Common Stock subject to any Pledge and Security Agreement
("Pledged Shares"), less in each case such number of Unvested Shares or Pledged
Shares which are also Escrow Shares; and (C) to such Company Stockholder a
certificate representing those shares of Parent Common Stock issuable to such
Company Stockholder which are not Escrow Shares, Unvested Shares or Pledged
Shares. The Escrow Shares shall be held in escrow by the Indemnity Escrow Agent
and shall be available to compensate Parent for certain damages as provided in
Article VIII and the Indemnity Escrow Agreement referred to in Section 8.01(b).
To the extent not used for such purposes, the Escrow Shares shall be released,
all as provided in the Indemnity Escrow Agreement. The Unvested Shares shall be
held in escrow by the Secretary of Parent and released in accordance with the
applicable Restricted Stock Agreement.
(b) If any certificate for shares of Parent Common Stock is to
be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the Certificate(s) so surrendered shall be properly endorsed for transfer (or
accompanied by an appropriate instrument of transfer) and shall otherwise be in
proper form for transfer, and that the person requesting such exchange shall pay
any transfer or other taxes required by reason of the issuance of certificates
for such shares of Parent Common Stock in a name other than that of the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of Parent that any such taxes have been paid or are not applicable.
(c) Notwithstanding any other provision of this Article II, no
fractional shares of Parent Common Stock will be issued and any holder of
Company Common Shares entitled hereunder to receive a fractional share of Parent
Common Stock but for this Section 2.02(c) will be entitled hereunder to receive
no such fractional share but a cash payment in lieu thereof in an amount equal
to such fraction multiplied by $198.75.
(d) None of Parent, Sub or the Company shall be liable to any
person in respect of any cash or other property delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any payment
pursuant to this Article II would otherwise escheat to or become the property of
any Governmental Entity), the shares of Parent Common Stock issuable, or cash
payment determined in accordance with Section 2.02(c), in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of Parent free and clear of all claims or interests of any person
previously entitled thereto.
Section 2.03 Distributions with respect to Unexchanged Company Common
Shares. Notwithstanding any other provisions of this Agreement, no dividends or
other distributions on shares of Parent Common Stock shall be paid with respect
to any Company Common Shares or other securities represented by a Certificate
until such Certificate is surrendered for exchange as provided herein or until
the requirements of Section 2.05 have been satisfied. Subject to the effect of
applicable laws, following surrender of any such Certificate (or satisfaction of
the requirements of Section 2.05) there shall be paid to the holder of
certificates representing shares
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of Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender (or satisfaction of the requirements of Section 2.05),
the amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such shares of Parent Common
Stock and not paid, less the amount of any withholding taxes which may be
required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender thereof (or satisfaction of the requirements of Section 2.05)
and a payment date subsequent to surrender thereof (or satisfaction of the
requirements of Section 2.05) payable with respect to such shares of Parent
Common Stock, less the amount of any withholding taxes which may be required
thereon. No holder of unsurrendered Certificates shall be entitled, until the
surrender of such Certificate (or satisfaction of the requirements of Section
2.05), to vote the shares of Parent Common Stock into which such holder's
Company Common Shares shall have been converted.
Section 2.04 No Further Ownership Rights in Company Shares. The
payment of the Per Share Merger Consideration in respect of each Company Common
Share owned by the Company Stockholders shall be deemed to have been paid in
full satisfaction of all rights pertaining to each such Company Common Share,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the Company Common Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented for transfer to the Surviving Corporation, they
shall be canceled and exchanged for certificates representing shares of Parent
Common Stock in accordance with the procedures set forth in this Article 2.
Section 2.05 Lost Certificates. In the event any Certificate shall have
been lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the disbursement of the Per Share Merger Consideration in respect
of shares represented by such Certificate, require the owner of such lost,
stolen or destroyed Certificate to make an affidavit of that fact containing
such indemnification provisions as Parent may deem appropriate, including,
without limitation, the posting of a standard bond required by Parent's transfer
agent as indemnity against any claim that may be made against it or the
Surviving Corporation with respect to such Certificate.
Section 2.06 Effect on Capital Stock of Sub. Each issued and
outstanding share of Common Stock of Sub shall be converted into and become one
fully paid and nonassessable share of Common Stock, $.01 par value per share, of
the Surviving Corporation.
Section 2.07 Company Stock Options. At the Effective Time, each
outstanding option to purchase Company Common Shares (collectively, "Company
Stock Options") granted under the Company's 1999 Stock Option Plan, as amended
("Company Stock Option Plan"), shall, by virtue of the Merger and without any
further action on the part of the Company or the holder thereof, be assumed by
Parent. From and after the Effective Time, all references to the Company in the
Company Stock Option Plan and the applicable stock option agreements issued
thereunder shall be deemed to refer to Parent, which shall have assumed the
Company Stock Options under the Company Stock Option Plan as of the Effective
Time by virtue of this Agreement and without any further action on the part of
Parent. To the extent that they replace options which
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qualify as "incentive stock options" to the maximum extent permitted by law
under the Company Stock Option Plan, each Company Stock Option assumed by Parent
(each, a "Substitute Stock Option") will be intended to qualify as "incentive
stock options" under the Code (although Parent makes no representation and
warranty whatsoever that such options will so qualify). The Substitute Stock
Options shall be exercisable upon the same terms and conditions (including
vesting provisions) as under the Company Stock Option Plan and the applicable
option agreement issued thereunder, except that (A) each such Substitute Stock
Option shall be exercisable for, and represent the right to acquire, that whole
number of shares of Parent Common Stock (rounded down to the nearest whole
share) equal to the number of Company Common Shares subject to such Company
Stock Option multiplied by the Exchange Ratio, and (B) the option price per
share of Parent Common Stock shall be an amount equal to the option price per
share of Company Common Stock subject to such Company Stock Option in effect
immediately prior to the Effective Time divided by the Exchange Ratio (the
option price per share, as so determined, being rounded up to the nearest full
cent). As soon as practicable after the Effective Time and in no event later
than 30 days after the Effective Time, Parent shall deliver to each holder of an
outstanding Substitute Stock Option an appropriate notice setting forth such
holder's rights pursuant thereto and such Substitute Stock Option shall continue
in effect on the same terms and conditions as applicable to the corresponding
Company Stock Option subject to the adjustments required by this Section 2.07
after giving effect to the Merger). Parent shall reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon exercise of
the Company Stock Options assumed in accordance with this Section 2.07.
Section 2.08 Dissenters' Rights. Notwithstanding anything in this
Agreement to the contrary, any Company Stockholder who delivers to the Company a
written demand for appraisal of such Stockholder's Company Common Shares and
perfects his appraisal rights in the manner provided in the DGCL shall be
entitled to an appraisal of the fair market value of such stockholder's Company
Common Shares and payment of such value together with interest thereon, if any,
under the DGCL and the Company Common Shares held by any such Company
Stockholder shall not represent the right to receive the Per Share Merger
Consideration. If such Company Stockholder shall have failed to perfect or shall
have effectively withdrawn or lost his right to appraisal and payment under the
DGCL, as the case may be, each Company Common Share held by such stockholder
shall thereupon, subject to and in accordance with the procedures set forth in
this Article II, represent the right to receive the Per Share Merger
Consideration.
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ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure schedule dated and delivered as of the date hereof by
the Company to Parent (the "Company Disclosure Schedule"), which relates to this
Agreement and is designated therein as being the Company Disclosure Schedule.
The Company Disclosure Schedule shall be arranged in paragraphs corresponding
to, and each exception to a representation and warranty set forth therein shall
be deemed to qualify, the specific numbered paragraph(s) of this Article III
which is referenced or cross-referenced in the applicable exception set forth on
the Company Disclosure Schedule.
Section 3.01 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power to own, lease and operate its property and to
carry on its business as now being conducted, and is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which it owns or leases property or conducts any business so as to require
such qualification, except where the failure to be so qualified would not have a
Material Adverse Effect (as defined in Section 3.12(a)) on the Company. Except
as set forth in the Company Disclosure Schedule, the Company does not directly
or indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture or other business association or entity. The Company is not in violation
of its Certificate of Incorporation or Bylaws, in each case as amended to date.
The Certificate of Incorporation and Bylaws of the Company in the forms attached
to the Company Disclosure Schedule are the Certificate of Incorporation and the
Bylaws of the Company as in effect on the date of this Agreement.
Section 3.02 Capital Structure.
(a) The authorized capital stock of the Company consists of
(i) 35,000,000 shares of Common Stock, $.0001 par value per share, of which
5,073,269 shares are issued and outstanding as of the date hereof, and (ii)
5,000,000 shares of Series A Preferred Stock, $.0001 par value per share
("Company Preferred Shares" and, together with the Company Common Shares, the
"Company Shares"), of which 4,485,047 shares are issued and outstanding as of
the date hereof. All issued and outstanding Company Shares are duly authorized,
validly issued, fully paid and nonassessable, and were issued in compliance with
all applicable federal and state securities laws. Any repurchase by the Company
of any shares of its capital stock was duly approved and authorized by the Board
of Directors and complied in all respects with applicable law, and the Company
has no liability, contingent or otherwise, to make any payments with respect to
any such repurchased shares. There are no obligations, contingent or otherwise,
of the Company to repurchase, redeem or otherwise acquire any shares of its
capital stock or to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any entity. The Company Disclosure
Schedule contains a true and complete list of the record holders of the Company
Shares and sets forth the full name and number, class and series, of Company
Shares owned by each, and, with respect to the Company Preferred Shares, the
number of
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Company Common Shares into which such Company Preferred Shares are convertible.
The Company Disclosure Schedule contains a complete list of the Restricted Stock
Agreements and sets forth the name of each Company Stockholder who is a party
thereto, and the purchase dates, purchase prices and vesting schedules
applicable thereto.
(b) Other than (i) the Company Stock Options, a complete list
of which, including the names of the option holders, grant dates, exercise
prices and vesting schedules, is included in the Company Disclosure Schedule,
(ii) the Company Preferred Shares, all of which will be converted into Company
Common Shares prior to the Closing, (iii) the warrants to purchase Common Stock
of the Company pursuant to the Convertible Subordinated Note and Warrant
Purchase Agreement dated as of March 15, 1999, as amended, by and among the
Company and the persons and entities listed on Exhibit A attached thereto (the
"Bridge Warrants"), (iv) the Warrant Agreement to which reference is made in the
letter agreement dated December 1, 1999 between Comdisco, Inc. ("Comdisco") and
the Company (the "Comdisco Warrant"), (v) the purchase option set forth in
Section 8 of that certain Subordinated Loan and Security Agreement dated
December 1, 1999 (the "Comdisco Loan Agreement") by and between the Company and
Comdisco (the "Comdisco Purchase Option"), (vi) the purchase right set forth in
Section 7.12 of the Comdisco Loan Agreement (the "Comdisco Loan Agreement
Purchase Right"), (vii) the purchase right set forth in Section 6 of that
certain Equipment Schedule VL-1 dated as of December 1, 1999 to Master Lease
Agreement dated as of December 1, 1999 by and between the Company and Comdisco
(the "Comdisco Equipment Schedule Purchase Right"), (viii) the Convertible
Subordinated Promissory Note issued to Impact Venture Partners ("Impact") dated
January 18, 2000 (the "Impact Note"), (ix) the Stock Purchase Warrant issued to
Impact dated January 18, 2000 (the "Impact Warrant"), and (x) the rights to
purchase securities of the Company granted to Douglas Hibberd and Andres
Carvallo pursuant to their offer letters dated March 12, 1999 and December 23,
1999, respectively (the "Offer Letters" and collectively with the Bridge
Warrants, the Comdisco Warrant, the Comdisco Purchase Option, the Comdisco Loan
Agreement Purchase Right, the Comdisco Equipment Schedule Purchase Right, the
Impact Note and the Impact Warrant, the "Other Purchase Rights"), the Company
does not have outstanding (A) any securities convertible into, or exchangeable
or exercisable for, any of its capital stock, or (B) any subscription, option,
put, call, warrant or other right or commitment of any nature to issue, sell or
deliver any of its capital stock, or securities or other instruments convertible
into, or exchangeable or exercisable for, its capital stock. All outstanding
Company Stock Options and Other Purchase Rights were duly authorized and were
validly issued in compliance with all applicable federal and state securities
laws. The Company is not a party to any other agreement obligating the Company
to issue additional shares of its capital stock. There are no shares of capital
stock of the Company that have been issued or transferred in violation of, or
are subject to, any preemptive rights, rights of first offer or subscription
agreements. The Company is not a party to any stockholder agreements, voting
agreements, voting trusts or any such other similar arrangements which have the
effect of restricting or limiting the transfer, voting or other rights
associated with the capital stock of the Company, and,
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to the Company's knowledge, there are no such agreements to which the Company is
not a party. Except as described in the Company Disclosure Schedule, none of the
Company Stock Options or Company Restricted Stock is or will be subject to any
acceleration of vesting or other change as a result of the Merger or any of the
transactions contemplated hereby.
(c) The exercise of any Other Purchase Rights prior to the
Effective Time shall be in compliance with the terms of the agreements pursuant
to which such Other Purchase Rights were granted, and the issuance of Company
Shares upon exercise thereof shall have been duly authorized by all requisite
corporate action on the part of the Company. Any such issuance of Company Shares
upon exercise of any Other Purchase Rights shall be in accordance with the
Company's Certificate of Incorporation and Bylaws and shall not violate the
rights of any other Company Stockholder.
Section 3.03 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject only to,
in the case of the Merger, the approval and adoption of this Agreement by the
requisite vote of the Company Stockholders as contemplated by Section 5.05
hereof. This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable against
it in accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to creditors rights generally, and (ii) the availability
of injunctive relief and other equitable remedies.
(b) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated herein, by the Company (in
each case, with or without the passage of time or the giving of notice) will (i)
violate or conflict with any of the provisions of any of the Certificate of
Incorporation or Bylaws of the Company, (ii) violate or constitute a default, an
event of default or an event creating rights of acceleration, termination,
cancellation or other additional rights, or loss of rights under, any Material
Contract (as defined in Section 3.15) to which the Company is a party or by
which it or any of its assets or property are bound, (iii) violate any statute,
rule, regulation, injunction, decree, order, judgment or ruling of any foreign,
federal, state, local or other governmental authority or regulatory or judicial
body ("Governmental Entity") to which the Company is subject, or (iv) result in
the creation of any Liens upon any of the assets or property of the Company,
except with respect to (ii), (iii) and (iv), where such violation, conflict,
default, event or Lien would not have a Material Adverse Effect on the Company.
The term "Liens" means liens, claims, charges, security interests, mortgages,
pledges, easements, conditional sale or other title retention agreements,
defects in title, covenants or other restrictions of any kind, including, any
restrictions on the use, voting, transfer or other attributes of ownership.
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(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or other
Person, is required by or with respect to the Company in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the laws of any foreign country, (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings listed on Schedule
3.03(c), and (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings which, if not obtained or made, would
not have a Material Adverse Effect on the Company.
(d) The Company hereby approves and consents to the execution
by each Stockholder Party of such Stockholder Party's Stockholder Agreement and
the consummation of the transactions contemplated thereby, and represents that
the Board of Directors of the Company unanimously adopted resolutions approving
and consenting to the execution of the Stockholder Agreements and the
consummation of the transactions contemplated thereby.
Section 3.04 Financial Statements. True and complete copies of the
audited financial statements of the Company (collectively the "Financial
Statements") consisting of the balance sheet of the Company and the related
statements of income and retained earnings, stockholders' equity and cash flow,
for the year ended December 31, 1999, including the notes thereto, are included
in the Company Disclosure Schedule. The Financial Statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements). The Financial Statements are based
on the books and records of the Company, and fairly present the financial
condition of the Company as of the date they were prepared and the results of
the operations of the Company for the period indicated. The consolidated balance
sheet of the Company as of December 31, 1999 is referred to herein as the
"Balance Sheet" and the date thereof as the "Balance Sheet Date."
Section 3.05 Inventory. All inventory of the Company (including
materials, supplies, parts, work-in-process and finished goods) is of a quality,
quantity and condition useable or saleable in the ordinary course of business
and none of such inventory is obsolete. The quantities of each item of inventory
are not excessive and are reasonable in the present circumstances of the
Company. All work in process and finished goods inventory is free of any defect
or other deficiency. All of such inventory is located at the Company's
facilities and no inventory is held on a consignment basis.
Section 3.06 Accounts Receivable. The accounts receivable of the
Company as set forth on the Balance Sheet or arising since the date thereof are
valid and genuine; have arisen solely out of bona fide sales and deliveries of
goods, performance of services and other business transactions in the ordinary
course of business consistent with past practice; are not subject to valid
defenses, set-offs or counterclaims; and are collectible within 90 days after
billing at the
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full recorded amount thereof less, in the case of accounts receivable appearing
on the Balance Sheet, the recorded allowance for collection losses on the
Balance Sheet. The allowance for collection losses on the Balance Sheet has been
determined in accordance with GAAP consistent with past practice. The accounts
receivable existing as of the Closing Date will be collectible within 90 days
after billing at the full recorded amount thereof net of the reserves shown on
the accounting records of the Company as of the Closing Date (which reserve
shall have been determined in accordance with GAAP consistent with past
practice).
Section 3.07 Taxes.
(a) All federal, state, local and foreign tax returns,
reports, statements and other similar filings required to be filed by the
Company (the "Tax Returns") with respect to any federal, state, local or foreign
taxes, assessments, interest, penalties, deficiencies, fees and other similar
governmental charges or impositions (including without limitation all income
tax, unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) ("Taxes") have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed, and all such Tax Returns are true and correct.
(b) All Taxes, including without limitation those which are
called for by the Tax Returns, required to be paid, withheld or accrued by the
Company and any deficiency assessments, penalties and interest have been timely
paid, withheld or accrued. The accruals for Taxes contained in the Balance Sheet
are adequate to cover the tax liabilities of the Company as of that date and
include adequate provision for all deferred taxes, and nothing has occurred
subsequent to that date to make any of such accruals inadequate to cover the tax
liabilities of the Company as of such date.
(c) The Company has not received any notice of assessment or
proposed assessment in connection with any Tax Returns and there are not pending
tax examinations of or tax claims asserted against the Company or any of its
assets or properties. There are no tax liens (other than any lien for current
taxes not yet due and payable) on any of the assets or properties of the Company
nor, to the knowledge of the Company, are any such liens threatened or pending
on such assets or properties. The Company has no knowledge of any basis for any
additional assessment of any Taxes in connection with any Tax Returns.
(d) All tax payments related to employees, including income
tax withholding, FICA, FUTA, unemployment and worker's compensation, required to
be made by the Company have been fully and properly paid, withheld, accrued or
recorded.
(e) The Company (i) is not a party to any Tax allocation or
sharing agreement or tax indemnification agreement, and (ii) has never been (or
has any liability for unpaid Tax because it was) a member of an affiliated
group.
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(f) The Company is not party to any joint venture,
partnership, or other arrangement that is treated as a partnership for federal
income tax purposes.
Section 3.08 No Undisclosed Liabilities. The Company has no material
liabilities, obligations or commitments of any nature whatsoever, absolute,
accrued, contingent or otherwise, matured or unmatured ("Liabilities"), except
(a) Liabilities which are adequately reflected or reserved against in the
Financial Statements, (b) Liabilities which have been disclosed in the Company
Disclosure Schedule, and (c) Liabilities which have been incurred in the
ordinary course of business and consistent with past practice since the Balance
Sheet Date and which are not, individually or in the aggregate, material in
amount.
Section 3.09 Title to Properties. The Company has good, valid and
marketable title to all of its properties and assets, real, personal (other than
Company Intellectual Property Rights which are covered by Section 3.14) and
mixed, including, without limitation, all of the properties and assets reflected
on the Balance Sheet (except for inventory sold since the date thereof in the
ordinary course of business consistent with past practice) free and clear of all
Liens, except for (i) liens for current personal property taxes not yet due and
payable, (ii) worker's, carrier's and materialman's liens which in the aggregate
are not material in amount, (iii) liens that are immaterial in character,
amount, and extent and which do not detract from the value or interfere with the
present or proposed use of the properties they affect, and (iv) Liens in favor
of Comdisco, Inc. existing on the date of this Agreement ("Permitted Liens").
Section 3.10 Condition of Tangible Assets. All buildings, plants,
leasehold improvements, structures, facilities, equipment and other items of
tangible property and assets which are owned, leased or used by the Company are
structurally sound, are in good operating condition and repair, subject to
normal wear and maintenance, are usable in the regular and ordinary course of
business and conform in all material respects to all applicable Regulations and
Authorizations (as defined in Section 3.11) relating to their construction, use
and operation. No Person other than the Company and holders of Permitted Liens,
but solely to the extent of such Permitted Liens, owns, or has any interest in,
any equipment or other tangible assets or properties situated on the premises of
the Company or used or held for use in or necessary to the operation of the
business of the Company.
Section 3.11 Compliance with Law; Authorizations.
(a) The Company has complied in all material respects with
each, and is not in violation of, any, law, ordinance, code or governmental or
regulatory rule or regulation, whether federal, state, local or foreign, to
which the Company's business, operations, assets or properties is subject
("Regulations"). The Company owns, holds, possesses or lawfully uses in the
operation of its business all government franchises, licenses, permits,
easements, rights, applications, filings, registrations, approvals and other
authorizations ("Authorizations") which are necessary for it to conduct its
business as now or previously or proposed to be conducted or for the ownership
and use of the assets owned or used by the Company or in the conduct of the
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business of the Company, free and clear of all Liens and in material compliance
with all Regulations. Such Authorizations are valid and in full force and effect
and none of such Authorizations will be terminated or impaired or become
terminable as a result of the transactions contemplated by this Agreement. All
such Authorizations are listed and described in the Company Disclosure Schedule.
(b) The Company is not in material default, nor has the
Company received any notice of any claim of default, with respect to any
Authorization. All Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
No Person other than the Company owns or has any proprietary, financial or other
interest (direct or indirect) in any Authorization which the Company owns,
possesses or uses in the operation of the business of the Company as now or
previously conducted.
Section 3.12 Absence of Certain Changes or Events. Since the Balance
Sheet Date, the Company has operated its business only in the ordinary course
and there has not been:
(a) any event, act, occurrence or omission to act or occur
which has had a Material Adverse Effect on the Company or any event, fact or
condition of which the Company is aware that could reasonably be expected to
have a Material Adverse Effect on the Company and that has not been disclosed in
the Company Disclosure Schedule. As used in this Agreement, the term "Material
Adverse Effect" shall mean any effect on, or change in, the business, prospects,
financial condition, results of operations, properties, assets or liabilities of
the party affected thereby that is materially adverse to such party and, in the
case of Parent, its consolidated subsidiaries, taken as a whole; provided,
however, that the impact of general economic conditions or circumstances
resulting from the filing of the complaint for trademark infringement against
the Company in the United States District Court for the District of Connecticut
as set forth in Section 3.12(a) of the Company Disclosure Schedule shall not be
deemed to constitute a Material Adverse Effect.
(b) any amendment of or change to the Certificate of
Incorporation or Bylaws of the Company;
(c) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to the
Company's capital stock;
(d) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for, shares of
capital stock;
(e) (i) any increase in or modification of the compensation or
benefits payable or to become payable by the Company to any of its directors or
employees; (ii) any grant by the Company to any employee of any increase in
severance or termination pay, (iii) any entry by the Company into any
employment, severance or termination agreement with any employee, or (iv)
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any grant, whether or not to an employee of the Company, of any option, warrant
or right to purchase or otherwise acquire any shares of capital stock of the
Company;
(f) any increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement made to, for or
with any employees of the Company;
(g) any sale of the property or assets of the Company
individually in excess of $25,000 or in the aggregate in excess of $75,000,
except for sales of inventory in the ordinary course of business;
(h) any alteration in any term of any outstanding security of
the Company;
(i) any (i) incurrence, assumption or guarantee by the Company
of any debt for borrowed money; (ii) issuance or sale of any securities
convertible into or exchangeable or exercisable for debt securities of the
Company; or (iii) issuance or sale of options or other rights to acquire from
the Company, directly or indirectly, debt securities of the Company or any
securities convertible into or exchangeable or exercisable for any such debt
securities;
(j) any creation or assumption by the Company of any mortgage,
pledge, security interest or lien or other encumbrance on any asset (other than
liens arising under existing lease financing arrangements, liens arising in the
ordinary course of the Company's business which in the aggregate are not
material and liens for taxes not yet due and payable);
(k) any making of any loan, advance or capital contribution
to, or investment in, any person other than travel loans or advances in the
ordinary course of business consistent with past practice;
(l) any entry into, amendment of, relinquishment, termination
or nonrenewal by the Company of any Material Contract or other right or
obligation material to the Company other than in the ordinary course of business
consistent with past practice;
(m) any transfer, grant or loss by the Company (or to the
knowledge of the Company, a material reduction in the value) of a right under
the Company Intellectual Property Rights (as defined in Section 3.14 hereof)
other than those transferred or granted in the ordinary course of business
consistent with past practice under existing agreements;
(n) any labor dispute, other than individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company;
(o) any violation of or conflict with any applicable laws,
statutes, orders, rules and regulations promulgated or judgment entered by any
Governmental Entity which,
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individually or in the aggregate, has had (or, insofar as the Company is aware,
could be expected to have) a Material Adverse Effect on the Company;
(p) any agreement or arrangement made by the Company to take
any action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Article III untrue or incorrect as
of the date when made;
(q) any damage, destruction or loss, whether or not covered by
insurance, that has had or could have a Material Adverse Effect on the Company;
(r) any change in accounting practices by the Company; or
(s) any agreement, whether or not in writing, to do any of the
foregoing.
Section 3.13 Real Property. The Company Disclosure Schedule contains a
complete and accurate description of all Real Property (as defined in Section
3.13(b)). The Real Property listed on the Company Disclosure Schedule includes
all interests in real property necessary to conduct the business and operations
of the Company as presently conducted. Except as set forth in the Company
Disclosure Schedule:
(a) Owned Real Property. The Company does not own any real
property.
(b) Leased Real Property. Real property that is leased by the
Company is identified on the Company Disclosure Schedule ( the "Real Property")
and, in connection therewith: (i) the Company has delivered to Parent a true and
complete copy of every lease and sublease pursuant to which the Company is a
tenant or subtenant (the "Leases"); and (ii) each Lease is, and at Closing shall
be, in full force and effect and has not been assigned, modified, supplemented
or amended, and neither the Company nor, to the knowledge of the Company, the
landlord or sublandlord under any Lease is in default under any of the Leases,
and no circumstances or state of facts presently exists which, with the giving
of notice or passage of time, or both, would permit the landlord or sublandlord
under any Lease to terminate any Lease.
(c) Zoning. To the knowledge of the Company, the uses for
which the buildings, facilities and other improvements comprising the Real
Property are zoned do not materially restrict, or in any manner materially
impair, the use of the Real Property for purposes of the business. The Company
has not received any notice from any landlord or Governmental Entity that the
Real Property does not comply with all applicable building and zoning codes,
deed restrictions, ordinances and rules.
(d) Eminent Domain. To the knowledge of the Company, no
Governmental Entity having the power of eminent domain over the Real Property
has commenced or, to the knowledge of the Company, intends to exercise the power
of eminent domain or a similar power with respect to all or any part of the Real
Property.
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(e) No Violations. To the knowledge of the Company, the Real
Property and the present uses thereof materially comply with all Regulations of
all Governmental Entities, and the Company has not received any notices, oral or
written, from any landlord or Governmental Entity, nor does the Company have any
reason to believe, that the Real Property, or the conduct of the Company's
business thereon, violates any Regulations of any Governmental Entity.
(f) Condition. The Real Property is in good condition and, to
the Company's knowledge, is structurally sound, and all mechanical and other
systems located therein are in good operating condition, subject to normal wear,
and no condition exists requiring material repairs, alterations or corrections.
Section 3.14 Intellectual Property.
(a) The Company owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights, mask works, processes, formulas, algorithms, schematics,
technology, know-how, computer software programs or code and tangible or
intangible proprietary information or material and any applications for and
registrations of any patents, trademarks, trade names, service marks,
copyrights, mask works or other proprietary rights that are or will be used in
the Company's business as it is currently conducted or proposed to be conducted
by the Company (collectively, the "Company Intellectual Property Rights").
(b) The Company Disclosure Schedule lists (i) all patents,
trademarks, service marks, registered copyrights and all applications for
patents, or for registrations of trademarks, service marks, and copyrights which
are owned by the Company and included in the Company Intellectual Property
Rights, (ii) all licenses, sublicenses and other agreements as to which the
Company is a party and pursuant to which any person is authorized to use any
Company Intellectual Property Rights, and (iii) all licenses, sublicenses and
other agreements as to which the Company is a party and pursuant to which the
Company is authorized to use any third party patents, trademarks, trade names,
service marks, copyrights, mask works, processes, formulas, algorithms,
schematics, technology, know-how, computer software programs or code and
tangible or intangible proprietary information or material ("Company Third Party
Intellectual Property Rights") which are incorporated in, are, or form a part of
any product or service currently offered by, or proposed to be offered by, the
Company.
(c) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Company Intellectual Property Rights or the Company Third Party
Intellectual Property Rights.
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(d) All patents, registered trademarks, service marks and
copyrights which are owned by the Company and included in the Company
Intellectual Property Rights are valid and subsisting. The Company has not
infringed, and does not infringe, upon or unlawfully or wrongfully use any
patent, trademark, trade name, service mark, mask work right, copyright or trade
secret owned or claimed by another. The Company has not received any
communication alleging that the Company has violated or, by conducting its
business as now conducted or as currently proposed to be conducted by the
Company, would violate, any patent, trademark, trade name, service mark,
copyright, trade secret or other proprietary right owned or claimed by another.
No action, suit, proceeding or investigation has been instituted, or, to the
knowledge of the Company, threatened, relating to any patent, trademark, trade
name, service mark, copyright, trade secret or other proprietary right formerly
or currently used by the Company. None of the Company Intellectual Property
Rights owned by the Company is subject to any outstanding order, decree or
judgment.
(e) The Company has taken all commercially reasonable steps to
protect and preserve the confidentiality of all Company Intellectual Property
Rights not otherwise protected by patents ("Confidential Information"). All use
or appropriation of Confidential Information by a third party, and all
disclosure of Confidential Information to a third party, by the Company has been
pursuant to the terms of a written agreement between the Company and such third
party. The Company has received valid written assignments from all consultants
and employees sufficient to vest title in the Company of all Company
Intellectual Property Rights created by such employee in the scope of his or her
employment with the Company.
(f) No employee of the Company is obligated under any
fiduciary duty or any contract (including licenses, covenants or commitments of
any nature) or other agreements, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as now conducted or currently proposed to
be conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as now conducted or currently proposed to be
conducted by the Company, will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under or a violation of,
any fiduciary duty or any contract, covenant or instrument under which any of
such employees is now obligated. It is not, nor will it be necessary, to utilize
any inventions of any of the Company's employees (or people it currently intends
to hire) made prior to their employment by the Company.
Section 3.15 Agreements, Contracts and Commitments. The Company
Disclosure Schedule sets forth an accurate, correct and complete list of all
agreements, contracts, commitments, arrangements and understandings, written or
oral, including all amendments and supplements thereto (collectively, the
"Material Contracts"), to which the Company is a party or is bound, or by which
any of its assets are bound, and which involve:
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(a) any present or former employee or consultant or the
employment of any person, including any consultant, which is not terminable
at-will by the Company without liability to the Company;
(b) the future purchase of, or payment for, supplies or
products, or the future performance of services by a third party involving in
any one case $30,000 or more;
(c) the sale or supply of products or performance of services
involving in any one case $30,000 or more;
(d) any requirements or "take or pay" provisions;
(e) any arrangement continuing over a period of more than six
months from the date hereof or exceeding $30,000 in value;
(f) any distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) any lease under which the Company is either lessor or
lessee;
(h) the indemnification of any Person or the assumption of any
Tax, environmental or other Liability;
(i) any federal, state, local, regulatory or other
governmental entities;
(j) any note, debenture, bond, equipment trust agreement,
letter of credit agreement, loan agreement or other contract or commitment for
the borrowing or lending of money or agreement or arrangement for a line of
credit or guarantee, pledge or undertaking of the indebtedness of any other
person;
(k) any charitable or political contribution;
(l) any capital expenditure or leasehold improvement in excess
of $30,000;
(m) any restraint on the ability of the Company to engage or
compete in any manner or in any business;
(n) any license, franchise, distributorship or other agreement
which relates in whole or in part to any Company Intellectual Property Right or
Company Third Party Intellectual Property Right; and
(o) any agreement, contract, commitment, arrangement or
understanding that is otherwise material to the Company and not previously
disclosed pursuant to this Section 3.15.
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Each of the Material Contracts is valid and enforceable in accordance with its
terms; the Company is, and to the Company's knowledge, all other parties thereto
are, in compliance in all material respects with the provisions thereof. The
Company is not, and to the Company's knowledge, no other party thereto is, in
default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained therein; and no event has occurred
which with or without the giving of notice or lapse of time, or both, would
constitute a material default thereunder by the Company or, to the knowledge of
the Company, by the other party thereto. None of the rights of the Company under
any Material Contract will be impaired by the consummation of the transactions
contemplated hereby, and all such rights will be enforceable by the Surviving
Corporation and/or Parent after the Closing Date without the consent or
agreement of any other party and without payment of any kind. The Company has
delivered accurate and complete copies of each Material Contract to Parent. No
Material Contract requires the consent of any party to its assignment in
connection with the transactions contemplated hereby.
Section 3.16 Litigation. There is no action, suit or proceeding, claim,
arbitration, litigation or investigation (each, an "Action") pending or, to the
knowledge of the Company, threatened, against the Company, and, to the knowledge
of the Company, there is no reasonable basis therefor. There is no such Action
against any current or, to the knowledge of the Company, former affiliate of the
Company with respect to which the Company has or may have an indemnification
obligation. Except as set forth in the Company Disclosure Schedule, (i) there is
no unsatisfied judgment, penalty or award against or affecting the Company or
any of its properties or assets, and (ii) there is no award, injunction,
judgment, order, ruling, subpoena or verdict of other decision entered, issued
or rendered by any Governmental Entity to which the Company or any of its
properties or assets are subject.
Section 3.17 Employees.
(a) The Company Disclosure Schedule sets forth (i) a list of
all employees of the Company (including name, title and position), and (ii) the
compensation (including terms of payment, bonuses, commissions and deferred
compensation, as well as any benefits) of each employee.
(b) (i) There have not been since inception and, to the
Company's knowledge, there are not pending, any labor disputes, work stoppages,
requests for representation, pickets, work slow-downs due to labor disagreements
or any actions or arbitrations which involve the labor or employment relations
of the Company; (ii) the Company has not violated any laws relating to
antidiscrimination and equal employment opportunities; (iii) there are and have
been no material violations of any other Regulations of any Governmental Entity
respecting the employment or benefits of any employees; (iv) there is no unfair
labor practice, charge or complaint pending, unresolved or, to the knowledge of
the Company, threatened before the National Labor Relations Board; (v) there is
no employment handbook, personnel policy manual, or similar document that
creates prospective employment rights or obligations; (vi) the employees of the
Company are not covered by any collective bargaining agreement; (vii) the
Company is not a party to any agreement which restricts the Company from
relocating, closing
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or terminating any of its operations or facilities or any portion thereof;
(viii) the Company has provided or will timely provide prior to Closing all
notices required by law to be given prior to Closing to all local, state,
federal or national labor, wage-payment, equal employment opportunity,
unemployment insurance and related agencies; (ix) the Company has paid or
properly accrued in the ordinary course of business all wages and compensation
due to employees, including all vacations or vacation pay, holidays or holiday
pay, sick days or sick pay, and bonuses; (x) the transactions contemplated by
this Agreement will not in and of themselves create liability under any
Regulations of any Governmental Entity respecting reductions in force or the
impact on employees on plant closing or sales of businesses; and (xi) all
employees of the Company are legally able to work in the United States.
Section 3.18 Benefits Plans. Except as set forth in the Company
Disclosure Schedule, the Company is not, nor has previously been, a party to (1)
any "employee benefit plan" as defined in Section 3(3) of ERISA ("Plan"), or (2)
any formal or informal deferred compensation, bonus, performance compensation,
stock purchase, stock option, stock appreciation, severance, vacation, sick
leave, holiday pay, fringe benefits, personnel policy, reimbursement program,
incentive, insurance, welfare or similar plan, program, policy or arrangement
("Benefit Plan"). The Company does not have any intent or commitment to create
any additional Plan or Benefit Plan or amend any Plan or Benefit Plan so as to
increase benefits thereunder except in the ordinary course of business
consistent with past practice. A current, accurate and complete copy of each
such Plan and each Benefit Plan has been made available to Parent.
(a) Each Plan and Benefit Plan is in material compliance with
all reporting, disclosure and other requirements of ERISA and the Code and any
other law applicable to such Plan or Benefit Plan.
(b) Each Plan which is an employee pension benefit plan (a
"Pension Plan"), as defined in Section 3(2) of ERISA, and which is intended to
be qualified under Section 401(a) of the Code, has been determined by the
Internal Revenue Service to be so qualified or still has time to qualify under
applicable Treasury regulations or IRS pronouncements and no condition exists
that would adversely affect any such determination. No such Pension Plan is a
"defined benefit plan" as defined in Section 3(35) of ERISA.
(c) Neither any Plan nor the Company, nor, to the Company's
knowledge, any trustee or agent has been or are presently engaged in any
prohibited transactions as defined by Section 406 of ERISA or Section 4975 of
the Code for which an exemption is not applicable which could subject the
Company to any tax or penalty imposed by Section 4975 of the Code or Section 502
of ERISA.
(d) The Company and any member of its "controlled group" (as
defined in Section 4001(a)(14) of ERISA) are not, and have not been, parties to
any "multi-employer plan," as defined in Section 3(37) of ERISA.
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(e) True and correct copies of Form 5500 and any attached
schedules since inception of the Company for each Plan and a true and correct
copy of the most recent determination letter, if applicable, issued by the
Internal Revenue Service for each Pension Plan has been made available to
Parent.
(f) With respect to each Plan and Benefit Plan, there are no
actions, suits or claims (other than routine claims for benefits in the ordinary
course) pending or, to the best of the Company's knowledge, threatened against
any Plan or Benefit Plan, the Company or any trustee or agent of any Plan or
Benefit Plan.
(g) With respect to each welfare benefit plan to which the
Company is a party which constitutes a group health plan subject to Section
4980B of the Code or Section 601 of ERISA, each such Plan substantially
complies, and in each case has substantially complied, with all applicable
requirements of Section 4980B of the Code and Section 601 of ERISA.
(h) (i) Full payment has been made, within the time limits
prescribed by law for a current deduction thereof, of all amounts which the
Company was required to have paid as a contribution to any Plan, and all other
such contributions have been properly accrued on the Financial Statements, and
none of the Plans has incurred any "accumulated funding deficiency" (as defined
in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as
of the last day of the most recent fiscal year of each such Plan ended prior to
the date of this Agreement;
(ii) Each of the Plans and Benefit Plans is, and its
administration is and has been in material compliance with, and the Company has
not received any claim or notice that any such Plan or Benefit Plan is not in
compliance with, all applicable laws and orders and prohibited transaction
exemptions, including without limitation, to the extent applicable, the
requirements of ERISA and the Code;
(iii) The Company is in not default in performing any of
its material contractual obligations under any of the Plans or Benefit Plans or
any related trust agreement or insurance contract;
(iv) There are no material outstanding liabilities of any
Plan or Benefit Plan other than liabilities for benefits to be paid to
participants in such Plan or Benefit Plan and their beneficiaries in accordance
with the terms of such Plan or Benefit Plan;
(v) Each Plan or Benefit Plan may be amended, modified,
terminated or otherwise discontinued by the Company at any time without
liability other than ordinary administration expenses typically incurred in a
termination;
(vi) No Plan or Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan or as required by (COBRA) Section 4980B
of the Code, any applicable
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statute or any benefits provided by life insurance, or at the employee's own
expense, provides benefits to any individual after termination of employment;
(vii) The consummation of the transactions contemplated by
this Agreement will not (in and of itself) (i) entitle any employee of the
Company to severance pay, unemployment compensation or any other payment; (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee; (iii) result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available or (iv) result (either alone or in
conjunction with any other event) in the payment or series of payments by the
Company or any of its Affiliates to any person of an "excess parachute payment"
within the meaning of Section 280G of the Code. The term "Affiliate" shall mean,
with respect to any Person, any individual, corporation, partnership or other
entity which directly or indirectly controls, is controlled by or is under
common control with, such Person;
(viii) With respect to each Plan or Benefit Plan that is
funded wholly or partially through an insurance policy, all premiums required to
have been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Closing will have
been paid on or before the Closing and, as of the Closing, there will be no
liability of the Company under any insurance policy or ancillary agreement with
respect to such insurance policy in the nature of a retroactive rate adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events occurring prior to the Closing; and
(ix) Each Plan that constitutes a "welfare benefit plan"
within the meaning of Section 3(1) of ERISA, and for which contributions are
claimed by the Company as deductions under any provision of the Code, is in
material compliance with all applicable requirements pertaining to such
deduction, (ii) with respect to any welfare benefit fund (within the meaning of
Section 419 of the Code) related to a welfare benefit plan, there is no
disqualified benefit (within the meaning of Section 4976(b) of the Code) that
would result in the imposition of a tax under Section 4976(a) of the Code, and
(iii) all welfare benefit funds intended to be exempt from tax under Section
501(a) of the Code have been determined by the Internal Revenue Service to be so
exempt and no event or condition exists which would adversely affect any such
determination.
Section 3.19 Transactions with Affiliates. There is no lease, sublease,
indebtedness, contract, agreement, commitment, understanding, or other
arrangement of any kind entered into by the Company with, or for the benefit of,
any officer, director or stockholder of the Company or, to the knowledge of the
Company, any affiliate of any of them, except in each case, for (a) employment
agreements, fringe benefits and other compensation paid to directors and
officers consistent with previously established policies (including normal merit
increases in such compensation in the ordinary course of business) and copies of
which have been provided to Parent and are listed on the Company Disclosure
Schedule; and (b) reimbursements of ordinary
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and necessary expenses incurred in connection with their employment, and amounts
paid pursuant to employee benefit plans of which copies have been provided to
Parent.
Section 3.20 Environmental Matters.
(a) The Company has secured, and is in compliance in all
material respects with, all Environmental Permits, with respect to its
operations and the Real Property. All such Environmental Permits are valid and
in full force and effect and none of such Environmental Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. The Company has always been, and is currently,
in compliance in all material respects with all Environmental Laws.
(b) There are no past, pending, or, to the knowledge of the
Company, threatened Environmental Claims against the Company, and the Company is
not aware of any facts or circumstances which could reasonably be expected to
form the basis for any Environmental Claim against it.
(c) No Lien has been attached, asserted, or to the knowledge
of the Company, threatened to or against the assets or any property of the
Company pursuant to any Environmental Law, and, to the Company's knowledge,
there are no facts, circumstances, or conditions that could be expected to
restrict, encumber, or result in the imposition of special conditions under any
Environmental Law with respect to the ownership, occupancy, development, use, or
transferability of any real property currently operated, owned or leased by the
Company.
(d) There has been no treatment, storage, disposal or Release
of any Hazardous Substance at, from, in to, on or under any Real Property or any
other property owned, operated or leased by the Company, and, to the Company's
knowledge, no Hazardous Substances are present in, on, about or migrating to or
from any Real Property that could give rise to an Environmental Claim against
the Company.
(e) The Company has not received a CERCLA 104(e) information
request nor has the Company been named a potentially responsible party for any
National Priorities List site under CERCLA or any site under analogous state law
nor has the Company received an analogous notice or request from any non-U.S.
Governmental Entity, which notice, request or any resulting inquiry or
litigation has not been fully and finally resolved without possibility of
reopening.
(f) To the knowledge of the Company, there are no aboveground
tanks or underground storage tanks on, under or about the Real Property and any
former aboveground or underground tanks on the Real Property have been removed
in accordance with all Environmental Laws and no residual contamination, if any,
remains at such sites in excess of applicable standards.
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(g) To the knowledge of the Company, there are no
polychlorinated biphenyls ("PCBs") leaking from any article, container or
equipment on, under or about the Real Property and there are no such articles,
containers or equipment containing PCBs, and there is no asbestos containing
material or lead based paint containing materials in at, on, under or within the
Real Property.
(h) The Company has not transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Material to any off-site location which is an Environmental Clean-up Site.
(i) None of the Real Property is a current or proposed
Environmental Clean-up Site.
(j) The Company has provided to Parent a true and complete
copies of, or access to, all written environmental assessment materials and
reports in its possession that have been prepared by or on behalf of the
Company.
(l) As used in this Agreement:
(i) The term "Environment" shall mean all air, surface
water, groundwater, or land, including land surface or subsurface, including all
fish, wildlife, biota and all other natural resources.
(ii) The term "Environmental Action" shall mean any claim,
proceeding or action which may be brought or threatened, or which Parent
reasonably believes may be brought or threatened, under any Environmental Law or
otherwise asserting any claim that the Company, at any time on or prior to the
Closing Date, has (i) incurred liability with respect to an environmental
condition, whether on the Real Property or elsewhere, or (ii) otherwise failed
to comply with any Environmental Law.
(iii) The term "Environmental Claim" shall mean any and
all pending and/or threatened administrative or judicial actions, suits, orders,
claims, liens, notices, notices of violations, investigations, complaints,
requests for information, proceedings, or other communication (written or oral),
whether criminal or civil, pursuant to or relating to any Environmental Law.
(iv) The term "Environmental Clean-up Site" shall mean any
location which is listed or proposed for listing on the National Priorities
List, the Comprehensive Environmental Response, Compensation and Liability
Information System, or on any similar state or foreign list of sites requiring
investigation or cleanup, or which is the subject of any pending or threatened
action, suit, proceeding, or investigation related to or arising from any
alleged violation of any Environmental Law, or at which there has been a
threatened or actual Release of a Hazardous Material.
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(v) The term "Environmental Laws" shall mean any and all
applicable treaties, laws, regulations, ordinances, common law, enforceable
requirements, binding determinations, orders, decrees, judgments, injunctions,
permits, approvals, authorizations, licenses or binding agreements issued,
promulgated or entered into by any Governmental Entity, relating to the
Environment, worker health and safety, preservation or reclamation of natural
resources, or to the management, handling, use, generation, treatment, storage,
transportation, disposal, manufacture, distribution, formulation, packaging,
labeling, Release or threatened Release of or exposure to Hazardous Substances,
whether now existing or subsequently amended or enacted, including but not
limited to: the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq. ("CERCLA"), the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et
seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. Section
136 et seq., the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42
U.S.C. Section 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq., the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq., and
any similar or implementing state or local law, and any non-U.S. laws and
regulations of similar import, and all amendments or regulations promulgated
thereunder; and any common law doctrine, including but not limited to,
negligence, nuisance, trespass, personal injury, or property damage related to
or arising out of the presence, Release, or exposure to Hazardous Substances.
(vi) The term "Environmental Permits" shall mean all
permits, licenses, approvals or authorizations from any Governmental Entity
required under Environmental Laws to conduct the operations of the Company, and
includes any and all orders, consent orders or binding agreements issued or
entered into by a Governmental or Regulatory Authority under any applicable
Environmental Law.
(vii) The term "Hazardous Substances" shall mean all
explosive or regulated radioactive materials or substances, hazardous or toxic
materials, wastes or chemicals, petroleum and petroleum products (including
crude oil or any fraction thereof), asbestos or asbestos containing materials,
and all other materials, chemicals or substances which are regulated by, form
the basis of liability or are defined as hazardous, extremely hazardous, toxic
or words of similar import, under any Environmental Law, including materials
listed in 49 C.F.R. Section 172.101 and materials defined as hazardous pursuant
to Section 101(14) of CERCLA (as defined above in the definition of
"Environmental Laws").
(viii) The term "Release" shall mean any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing of Hazardous Substances into the Environment.
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Section 3.21 Insurance. The assets, properties and operations of the
Company are insured under various policies of general liability and other forms
of insurance, all of which are described in the Company Disclosure Schedule,
which discloses for each policy all outstanding claims thereunder. All such
policies are issued by an insurer that is, to the Company's knowledge,
financially sound and reputable, are in full force and effect in accordance with
their terms and will continue in full force and effect following the Effective
Time, no notice of cancellation has been received, and there is no existing
default or event which, with the giving of notice or lapse of time or both,
would constitute a default thereunder. Such policies are in amounts which are
adequate in relation to the business and assets of the Company, are sufficient
for compliance with all laws and contracts to which the Company is a party or by
which it is bound, and all premiums to date have been paid in full.
Section 3.22 Books and Records. The books, records and accounts of the
Company accurately and fairly reflect, in reasonable detail, the transactions
and the assets and liabilities of the Company. The Company has not engaged in
any transaction, maintained any bank account or used any of the funds of the
Company except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the business.
Section 3.23 Product Design; Warranties.
(a) The Company has not agreed to become, or is not otherwise,
responsible for consequential damages; and there are no warranties (express or
implied) outstanding with respect to any products ("Products") currently or
formerly created, manufactured, sold, distributed or licensed, or any services
rendered, by the Company. A copy of the standard warranty of the Company is
included in the Company Disclosure Schedule. The Company has not modified or
expanded its warranty obligation to any customer beyond that set forth in such
standard warranty.
(b) The Balance Sheet reflects appropriate reserves for
warranty claims and nothing has occurred subsequent to the Balance Sheet Date to
make such reserves inadequate as of the date hereof.
Section 3.24 No Excess Parachute Payments; Section 162(m) of the Code.
(a) Any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any person who is a "disqualified individual"
(as such term is defined in Proposed Treasury Regulation Section 1.280G-1) under
any employment, severance or termination agreement or other compensation
arrangement currently in effect would not be characterized as an "excess
parachute payment" (as such term is defined in Section 280G of the Code), or
stockholder approval meeting the requirements of Section 280G will be obtained
prior to the Closing for any amounts that would otherwise be so characterized.
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(b) The disallowance of a deduction under Section 162(m) of
the Code for employee remuneration will not apply to any amount paid or payable
by the Company under any contract, plan, program, arrangement or understanding.
Section 3.25 Conditions Affecting the Company. The Company has used its
reasonable commercial efforts to keep available the services of the employees,
agents, customers and suppliers of the Company. The Company has no reason to
believe that any loss of any employee, agent, customer or supplier or other
advantageous arrangement will result because of the consummation of the
transactions contemplated hereby.
Section 3.26 Brokers. There is no investment banker, broker, finder,
financial advisor or other intermediary which has been retained by or is
authorized to act on behalf of the Company or Company Stockholders who might be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement. No claim (other than any claim of Parent which
may arise pursuant to Section 5.03(b) hereof) exists against the Company or the
Surviving Corporation or, based on any action by the Company, against Parent for
payment of any "topping," "break-up" or "bust-up" fee or any similar
compensation or payment arrangement as a result of the transactions contemplated
hereby.
Section 3.27 No Illegal Payments. Neither the Company nor, to the
knowledge of the Company, any Affiliate, officer, agent or employee thereof,
directly or indirectly, has, since inception, on behalf of or with respect to
the Company, (i) made any unlawful domestic or foreign political contributions,
(ii) made any payment or provided services which were not legal to make or
provide or which the Company or any Affiliate thereof or any such officer,
employee or other Person should have known were not legal for the payee or the
recipient of such services to receive, (iii) received any payment or any
services which were not legal for the payer or the provider of such services to
make or provide, (iv) had any transactions or payments which are not recorded in
its accounting books and records or (v) had any off-book bank or cash accounts
or "slush funds."
Section 3.28 Suppliers and Customers. No supplier or customer material
to the business of the Company has terminated its relationship with the Company
or has decreased or delayed materially, or, to the Company's knowledge,
threatened to decrease or delay materially, its services or supplies to the
Company or decrease its usage of the Company's products or services. The Company
is not aware of any facts or events which may reasonably be expected to form the
basis for such a decrease or delay. The Company Disclosure Schedule sets forth
with respect to the Company (a) each supplier from whom purchases exceeded
$50,000 since inception; and (b) each supplier who constitutes a sole source of
supply to the Company.
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Section 3.29 Voting Requirements. The affirmative vote of the holders
of a majority of the then outstanding Company Common Shares and the affirmative
vote of the holders of at least a majority (on an
as-converted-to-Common-Stock-basis) of the then outstanding Company Preferred
Shares at a duly convened meeting of the Company Stockholders or any adjournment
or postponement thereof to approve and adopt this Agreement is the only vote of
the holders of any class necessary to approve this Agreement and the
transactions contemplated hereby.
Section 3.30 Completeness of Disclosure. No representation or warranty
by the Company in this Agreement, and no written statement made by the Company
in the exhibits attached hereto, or any certificate or schedule furnished or to
be furnished to Parent pursuant hereto, contains or will at the Effective Time
contain any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated herein or therein or necessary to make any
statement herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule dated and delivered as of the date hereof by Parent and Sub
to the Company (the "Parent Disclosure Schedule"), which relates to this
Agreement and is designated therein as being the Parent Disclosure Schedule. The
Parent Disclosure Schedule shall be arranged in paragraphs corresponding to, and
each exception to a representation and warranty set forth therein shall be
deemed to qualify, the specific numbered and lettered paragraph(s) of this
Article IV which is referenced or cross-referenced in the applicable exception
set forth on the Parent Disclosure Schedule.
Section 4.01 Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power to own, lease and operate its
property and to carry on its business as now being conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which it owns or leases property or conducts any business
so as to require such qualification, except where failure to be so qualified
would not have a Material Adverse Effect on Parent. Neither Parent nor Sub is in
violation of its Certificate of Incorporation or Bylaws, in each case as amended
to date.
Section 4.02 Capital Structure. The authorized capital stock of Parent
consists of 200,000,000 shares of Parent Common Stock, and 5,000,000 shares of
Preferred Stock, $.01 par value ("Parent Preferred Stock"). As of March 10,
2000, (i) 35,483,015 shares of Parent Common Stock were issued and outstanding,
all of which are duly authorized, validly issued, fully paid and nonassessable,
and (ii) 15,007,032 shares of Parent Common Stock were reserved for future
issuance pursuant to Parent's stock option plans ("Parent Options") and Parent's
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Employee Stock Purchase Plan ("Parent ESPP"). As of the date of this Agreement,
none of the shares of Parent Preferred Stock is issued and outstanding. The
shares of Parent Common Stock issuable in connection with the Merger have been
duly authorized and reserved for issuance and, when issued in accordance with
the terms of this Agreement, will be validly issued, fully paid, nonassessable
and free of preemptive rights. The authorized capital stock of Sub consists of
1,000 shares of common stock, par value $.01 per share, 100 of which are issued
and outstanding, and all of which shares are validly issued, fully paid and
nonassessable, free of preemptive rights and owned by Parent.
Section 4.03 Authority; No Conflict; Required Filings and Consents.
(a) Each of Parent and Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Sub. No vote of
Parent's stockholders is required under applicable law, the rules of The Nasdaq
Stock Market or the Certificate of Incorporation or bylaws of Parent to approve
this Agreement or the Merger. This Agreement has been duly executed and
delivered by Parent and Sub and constitutes the valid and binding obligation of
Parent and Sub, enforceable in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors rights
generally and (ii) the availability of injunctive relief and other equitable
remedies.
(b) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated herein, by Parent or Sub (in
each case, with or without the passage of time or the giving of notice) will
violate or conflict with (i) any provision of any of the charters or Bylaws of
Parent or Sub, (ii) any mortgage, indenture, deed of trust, lease, contract,
agreement, license or other instrument to which Parent or Sub is a party or by
which they or any of their assets or property are bound, (iii) any statute,
rule, regulation, injunction, decree, order, judgment or ruling of any
Governmental Entity to which Parent or Sub is subject, or any contract filed as
an exhibit to the Parent SEC Reports, except, with respect to (ii) and (iii),
where such violation or conflict would not have a Material Adverse Effect on
Parent.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Parent or Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the laws of any
foreign country, and (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings which, if not obtained or made, would
not have a Material Adverse Effect on Parent.
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Section 4.04 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required
to be filed by Parent with the SEC (collectively, the "Parent SEC Reports"). The
Parent SEC Reports (i) at the time they were filed complied as to form in all
material respects with the applicable requirements of the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The consolidated financial statements (including, in each
case, any related notes) contained in the Company's Prospectus dated December 9,
1999 complied as to form in all material respects with the applicable rules and
regulations of the SEC with respect thereto, were prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by the SEC) and fairly presented the
consolidated financial position of Parent and its Subsidiaries as at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were subject to normal year-end recurring adjustments.
(c) Since December 9, 1999, there has not been any event, act
or occurrence which has had a Material Adverse Effect on Parent.
Section 4.05 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
Section 4.06 Litigation. There is no Action pending or, to the
knowledge of Parent, threatened against Parent which, if decided adversely to
Parent, would have a Material Adverse Effect on Parent.
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ARTICLE V
COVENANTS OF THE PARTIES PENDING CLOSING
The respective parties hereto agree to take the following actions
between the date hereof and the Closing Date:
Section 5.01 Conduct of Business. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except with the prior written consent of
Parent, the Company shall:
(a) maintain its corporate existence, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other obligations when due, and carry on its business in the usual, regular and
ordinary course in a manner consistent with past practice and in accordance with
the provisions of the Agreement and in compliance with all applicable Laws,
Authorizations and Contracts;
(b) use all reasonable efforts consistent with past practices
and policies to preserve intact its present business organization, keep
available the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it, to the end that its goodwill and
ongoing businesses be substantially unimpaired at the Effective Time;
(c) maintain its facilities and assets in the same state of
repair, order and conditions as they are on the date hereof, reasonable wear and
tear excepted;
(d) maintain its books and records in accordance with past
practice, and to use best efforts to maintain in full force and effect all
Authorizations and insurance policies;
(e) promptly notify Parent of any event or occurrence not in
the ordinary course of business; and
(f) use its reasonable commercial efforts to conduct its
business in such a manner that on the Closing Date the representations and
warranties of the Company contained in this Agreement shall be true, as though
such representations and warranties were made on and as of such date, and the
Company shall use its reasonable efforts to cause all of the conditions to the
obligations of Parent under this Agreement to be satisfied on or prior to the
Closing Date.
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Section 5.02 Negative Covenants. Except as expressly provided in this
Agreement, the Company shall not, without the prior written consent of Parent:
(a) sell, assign, transfer, lease, consume or otherwise
dispose of any property or assets except in the ordinary course of business
consistent with past practice, or be party to any merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or any substantial portion of the assets or
any equity securities of, the Company;
(b) amend, modify, cancel or waive any rights under any
Material Contract listed on the Company Disclosure Schedule or enter into any
Material Contract that would be required to be disclosed on the Company
Disclosure Schedule;
(c) make any capital expenditure or commit to make any capital
expenditure which, individually or in the aggregate, exceeds $50,000;
(d) mortgage, pledge or subject to Liens (other than purchase
money liens) any properties or assets of the Company;
(e) assume, incur or guarantee any obligation or liability for
borrowed money, except for endorsements for collection in the ordinary course of
business;
(f) cancel, compromise or waive any debts owed to it, except
for compromises of trade debt in the ordinary course of business consistent with
past practice;
(g) make any changes in its accounting methods, principles or
practices;
(h) knowingly do any act or omit to do any act within its
reasonable control which will cause it to breach of any representation, warranty
or obligation contained in this Agreement;
(i) amend its Certificate of Incorporation or Bylaws;
(j) except upon (i) conversion of the Company Preferred Shares
as contemplated by this Agreement, (ii) the exercise of any Company Stock
Options or (iii) Other Purchase Rights which by their terms are exercisable in
connection with the Merger, issue any of its capital stock or make any change in
its issued and outstanding capital stock, issue any option or any security or
other instrument convertible into, or exchangeable or exercisable for, its
capital stock or redeem, purchase or otherwise acquire any shares of its capital
stock;
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(k) except pursuant to mandatory terms under Company
Restricted Stock, Company Stock Options or the Other Purchase Rights,
accelerate, amend or change the period of exercisability of such options or
warrants or authorize cash payments in exchange for any such options or
warrants;
(l) declare or pay any dividend or make any other payment or
distribution with respect to its capital stock;
(m) increase the wages, salaries, compensation, pension or
other benefits payable to any former employee or any current employee who, as of
the date hereof, receives annual compensation in excess of $75,000, or pay any
bonus or other amount to any such former or current employee other than pursuant
to a written agreement or benefit plan disclosed to Parent in the amount
required thereunder, or enter into any employment, deferred compensation,
retirement or other agreement or arrangement providing for additional or
different benefits with any employee than those payable on the date hereof;
(n) make any filings or registrations, with any Governmental
Entity, except routine filings and registrations made in the ordinary course of
business;
(o) take any actions outside the ordinary course of business;
(p) make any Tax election, change its method of Tax accounting
or settle any claim relating to Taxes; or
(q) agree to do any of the foregoing, except as contemplated
by this Agreement.
Section 5.03 Access. The Company shall give to Parent's officers,
employees, counsel, accountants and other representatives reasonable free and
full access to and the right to inspect, during normal business hours, all of
the premises, properties, assets, records, contracts and other documents of the
Company and shall reasonably permit them to consult with the officers,
employees, accountants, counsel and agents of the Company for the purpose of
making such investigation of the Company as Parent shall desire to make,
provided that such investigation shall not unreasonably interfere with the
Company's business operations and subject to the terms of the Nondisclosure
Agreement between Parent and the Company dated January 19, 2000 (the
"Nondisclosure Agreement"). Furthermore, the Company shall furnish to Parent all
such documents and copies of documents and records and information with respect
to the affairs of the Company and copies of any working papers relating thereto
as Parent shall from time to time reasonably request and shall reasonably permit
Parent and its agents to make such physical inventories and inspections of the
Company as Parent may request from time to time, subject to the terms of the
Nondisclosure Agreement.
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Section 5.04 Exclusivity. Except with respect to this Agreement and the
transactions contemplated hereby, the Company shall not and shall cause its
employees, stockholders, agents and representatives (including, without
limitation, any investment banking, legal or accounting firm retained by any of
them and any individual member or employee of the foregoing) (each, an "Agent")
not to:
(a) initiate, solicit or seek, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders or any of them)
with respect to a merger, acquisition, consolidation, recapitalization,
liquidation, dissolution or similar transaction involving, or any purchase of
all or any material portion of the assets or any equity securities of, the
Company (any such transaction being hereinafter referred to as an "Acquisition"
and any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal");
(b) engage in any negotiations concerning an Acquisition
Proposal, or provide any confidential information or data to, or have any
substantive discussions with, any person relating to an Acquisition Proposal;
(c) otherwise cooperate in any effort or attempt to make,
implement or accept an Acquisition Proposal; or
(d) enter into or consummate any agreement or understanding
with any Person relating to an Acquisition Proposal, except for the Merger
contemplated hereby. If the Company or its Agents have provided any Person
(other than Parent or its Agents or the Company's Agents) with any confidential
information or data relating to an Acquisition Proposal, they shall request the
immediate return thereof. The Company shall notify Parent immediately if any
inquiries, proposals or offers related to an Acquisition Proposal are received
by, any confidential information or data in connection with an Acquisition
Proposal is requested from, or any negotiations or discussions related to an
Acquisition Proposal are sought to be initiated or continued with, the Company,
its directors, officers, 10% stockholders or investment bankers.
Section 5.05 Company Stockholder Approval. The Company shall take all
action necessary under the DGCL and its Certificate of Incorporation and Bylaws,
to solicit the written consent of the Company's Stockholders as promptly as
practicable to adopt and approve this Agreement and the Merger contemplated
hereby, and the other transactions contemplated by this Agreement (the "Company
Stockholder Approval") to the extent such approval is required by the DGCL and
the Company's Certificate of Incorporation. The Company will, through its Board
of Directors, recommend that the Company Stockholder Approval be given.
Section 5.06 Confidentiality. Each party will, and will cause its
principals, Affiliates, associates, officers and other personnel and authorized
representatives to hold all information received by it in connection with the
transactions contemplated hereby in accordance with the Nondisclosure Agreement.
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Section 5.07 Consents. The Company shall use its reasonable efforts to
obtain the consents, waivers, assignments and approvals under any of the
Material Contracts as may be required in connection with the Merger (all of such
consents, waivers and approvals are set forth in the Company Disclosure
Schedule) so as to preserve all rights of, and benefits to, the Surviving
Corporation thereunder.
Section 5.08 Notification of Certain Matters. Each party shall give
prompt notice to the other parties of any fact, event or circumstance known to
it that (a) individually or taken together with all other facts, events and
circumstances known to it, has had or is reasonably likely to have a Material
Adverse Effect on such party, or (b) would cause or constitute a breach of any
of its representations, warranties, covenants or agreements contained herein;
provided, however, that (i) the delivery of any notice pursuant to this Section
5.08 shall not limit or otherwise affect any remedies available to such party,
and (ii) disclosure by any party shall not be deemed to amend or supplement the
Company Disclosure Schedule or Parent Disclosure Schedule, as the case may be,or
prevent or cure any misrepresentations, breach of warranty or breach of
covenant.
Section 5.09 Benefit Plans.
(a) The Company agrees to terminate its 401(k) plan
immediately prior to the Closing, unless Parent, in its sole and absolute
discretion, agrees to sponsor and maintain such plan by providing the Company
with notice of such election at least five days before the Effective Time.
(b) Parent shall take all reasonable actions necessary to
allow eligible employees of the Company that will be employees of the Surviving
Corporation ("Transitioned Employees"), to participate on substantially similar
terms in benefit programs which are substantially comparable to those maintained
for the benefit of, or offered to, similarly situated employees of Parent, as
soon as practicable after the Effective Time, to the extent permitted by the
terms of such Parent benefit plan or any insurance contract or agreement
applicable thereto; provided, however, that in the case of plans for which the
Company maintains a plan offering the same type of benefit, such participation
need not be offered by Parent until the corresponding plan of the Company ceases
to be available or is terminated after the Effective Time. Parent will recognize
rge employment services of each Transitioned Employee with the Company for
purposes of eligibility and vesting (but not benefit accrual) under any Parent
Benefit Plan. Each Transitioned Employee's year of service with the Company
shall be otherwise recognized for all general employment purposes, including,
without limitation, seniority, vacation, personal time and similar general
employment purposes; provided, that any vacation time offered by Parent in the
calendar year of the Effective Time to any Transitioned Employee shall be offset
by any vacation time used by or paid to a Transitioned Employee by the Company
in the calendar year of the Effective Time. In addition, Parent will (i) waive
all limitations as to preexisting conditions, exclusions, waiting periods and
service requirements with respect to participation and coverage requirements
applicable to Transitioned Employees under any group health plan sponsored by
Parent, except to the extent such preexisting conditions, exclusion, waiting
period
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or service requirement had not been satisfied by any such Transitioned Employee
as of the Effective Time under a group health plan sponsored by the Company; and
(ii) provide each Transitioned Employee with credit for any deductible,
copayment and out-of-pocket limits applicable to such employees under any such
group medical plan sponsored by the Company and paid by the Transitioned
Employee prior to the Effective Time during the calendar year of the Effective
Time. Transitioned Employees of the Company as of the Effective Time shall be
permitted to participate in the Parent ESPP commencing on the first enrollment
date following the Effective Time, subject to compliance with the eligibility
provisions of such plan (with employees receiving credit, for purposes of such
eligibility provisions, for service with the Company).
Section 5.10 Form S-8. Within 90 days following the Closing Date,
Parent shall file a registration statement on Form S-8 to register shares of
Parent Common Stock issuable upon exercise of the Substitute Stock Options
assumed by Parent to the extent the shares of Parent Common Stock issuable upon
exercise of such Substitute Stock Options may be registered on Form S-8.
Section 5.11 Tax-Free Reorganization. Parent and the Company shall (and
following the Effective Time, Parent shall cause the Surviving Corporation to)
take no action that would reasonably be expected to cause the Merger to fail to
qualify as a "reorganization" within the meaning of Section 368(a) of the Code.
Section 5.12 Tax Opinions. Parent and the Company agree to make
reasonable and customary representations to counsel for purposes of rendering
the opinions described in Sections 6.02(m) and 6.03(f).
Section 5.13 Public Announcement. Neither Parent nor the Company or any
Company Stockholder shall make any press release or other public statement or
any statement to any analyst or member of the press concerning the transactions
contemplated by this Agreement without the approval of the other party hereto;
provided, however, that Parent may, without such approval, make such press
releases or other public statements as it believes are required under the rules
of The Nasdaq Stock Market or applicable securities laws.
Section 5.14 Further Assurances . Each of the parties hereto shall
execute such documents and other instruments and take such further actions as
may be reasonably required or desirable to carry out the provisions hereof and
consummate the transactions contemplated hereby. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use its respective
reasonable best efforts to (i) take or cause to be taken all actions and to do
or cause to be done all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and (ii) obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings.
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ARTICLE VI
CONDITIONS TO MERGER
Section 6.01 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction on or prior to the Effective Time of
the condition that no Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, temporary restraining order, preliminary or permanent
injunction or other legal restraint or prohibition which is in effect on the
Closing Date and prohibits the consummation of the Merger.
Section 6.02 Conditions to Obligation of Parent and Sub To Effect the
Merger. The obligations of Parent and Sub to consummate the transactions
contemplated by this Agreement will be subject to the satisfaction, on or prior
to the Effective Time, of each of the following conditions unless waived in
writing by Parent:
(a) Representations and Warranties of the Company. Each of the
representations and warranties of the Company set forth in this Agreement that
is qualified by materiality shall be true and correct at and as of the Closing
Date as if made at and as of the Closing Date and each of such representations
and warranties that is not so qualified shall be true and correct in all
material respects at and as of the Closing Date as if made at and as of the
Closing Date, except (i) to the extent that such representations and warranties
refer specifically to an earlier date, in which case such representations and
warranties shall have been true and correct as of such earlier date, or (ii) for
circumstances under which the breach of a representation and warranty,
considered collectively with any and all other breaches of representations and
warranties, would not have a Material Adverse Effect on the Company, and Parent
shall have received a certificate signed on behalf of the Company by the
President of the Company to such effect.
(b) Performance of Obligations. The Company shall have
performed all obligations required to be performed by it under this Agreement at
or prior to the Closing Date, and Parent shall have received a certificate
signed on behalf of the Company by the President of the Company to such effect,
provided, however, that a failure to perform any obligation set forth in Section
5.01 shall not be deemed to constitute the non-satisfaction of this condition
unless such failure has a Material Adverse Effect on the Company.
(c) [INTENTIONALLY LEFT BLANK].
(d) Authorizations, Approvals and Consents. All
authorizations, approvals or consents of any and all Governmental Entities or
other Persons required to be obtained by the Company to consummate the
transactions contemplated by this Agreement, including the consents listed on
Section 3.03 of the Company Disclosure Schedule, shall have been validly
obtained and copies thereof shall have been delivered to Parent.
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(e) No Injunction; No Litigation. No provision of any
applicable law or regulation and no judgment, injunction, order or decree shall
restrain, prohibit or otherwise interfere with the effective operation or
enjoyment by Parent of all or any material portion of the business of the
Company. There shall not be pending or threatened by any Governmental Entity or
other Person any suit, action or proceeding, which imposes any restriction on
Parent or the Company in connection with the consummation of the Merger or with
respect to the operations of the Company's business which, if determined
adversely, would reasonably be expected to have a Material Adverse Effect on the
Company.
(f) Conversion of Company Preferred Shares and Exercise of
Other Purchase Rights. All Company Preferred Shares shall have been converted
into Company Common Shares and all Other Purchase Rights other than the Impact
Note, the Comdisco Loan Agreement Purchase Right and the Comdisco Equipment
Schedule Purchase Right shall have been exercised, and Parent shall have
received a certificate signed on behalf of the Company by the President of the
Company to such effect.
(g) Capitalization Certificate. An updated Company
capitalization schedule, giving effect to the conversion of Company Preferred
Shares and the exercise of the Other Purchase Rights as set forth and in
accordance with Section 6.02(f) to be used in connection with the calculation of
the Exchange Ratio pursuant to Section 2.01(a), shall have been delivered to
Parent, together with a certificate executed on behalf of the Company by the
President of the Company (the "Capitalization Certificate") to the effect that
(i) such Company capitalization schedule sets forth a true and complete list of
the Company Stockholders and Company Optionees outstanding immediately prior to
the Effective Time and the number of Company Common Shares and/or Company Stock
Options owned by each such Company Stockholder and Company Optionee, and (ii)
except as listed on the Company capitalization schedule, there are no Company
Stock Options or other rights to acquire equity securities of the Company, or
securities or other instruments convertible into, or exchangeable or exercisable
for, equity securities of the Company, outstanding immediately prior to the
Effective Time.
(h) Termination of Certain Agreements. The Impact Note, the
Comdisco Loan Agreement Purchase Right and the Comdisco Equipment Schedule
Purchase Right shall have been terminated and any and all rights thereunder
shall have been waived, and evidence reasonably satisfactory to Parent of such
termination and waiver shall have been delivered to Parent. In addition, the
Company shall have delivered to Parent evidence reasonably satisfactory to
Parent that the Investor Rights Agreement dated as of May 28, 1999 by and among
the Company, the Investors and the Founders, has been termnated.
(i) Corporate Action. The Company shall have taken all
corporate action necessary to approve the transactions contemplated by the
Agreement, and the Company shall have furnished Parent and Sub with copies of
resolutions, adopted by the Board of Directors of the Company and by holders of
not less 90% of the outstanding Company Shares on an as-if converted basis (and
the requisite vote of the holders of the Company Preferred Shares) and
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certified by the Secretary of the Company as of the Closing Date, in form and
substance reasonably satisfactory to counsel for Parent, in connection with such
transactions.
(j) Indemnity Escrow Agreement. The Indemnity Escrow Agreement
shall have been duly executed and delivered by the Company Stockholders'
Representative and the Indemnity Escrow Agent named therein in substantially the
form attached as Exhibit E hereto (the "Indemnity Escrow Agreement").
(k) The Company Stockholders' Representative. Parent shall
have received a true and complete copy of the Stockholders' Representative
Agreement executed by J. Ross Cockrell as the Company Stockholders'
Representative and the holders of not less than 93% of the holders of Company
Common Shares outstanding as of the Closing authorizing the Company
Stockholders' Representative to act on behalf of the Company Stockholders in
regard to matters arising under the Indemnity Escrow Agreement and the Second
Amended and Restated Registration Rights Agreement.
(l) Opinion of Counsel. Parent and Sub shall have received a
written opinion from Venture Law Group, A Professional Corporation, counsel to
the Company, addressed to Parent and Sub, dated as of the Closing Date, in the
form attached hereto as Exhibit F.
(m) Tax Opinion. Parent shall have received the written
opinion of Morgan, Lewis & Bockius LLP, counsel to Parent, to the effect that
the Merger will be treated for Federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, counsel may rely upon the representations and certificates of
Parent, Sub and the Company.
(n) Resignation of Directors and Officers. Parent shall have
received resignations in writing from all of the directors and such of the
officers of the Company as Parent shall have requested.
(o) Company Stockholder Letter Agreements. Each Company
Stockholder who is an "accredited investor" (as defined in Regulation D under
the Securities Act) shall have executed and delivered to Parent a Letter
Agreement in the form attached hereto as Exhibit G-1. Each Company Stockholder
who is not an "accredited investor" shall have executed and delivered to Parent
a Letter Agreement in the form attached hereto as Exhibit G-2. Based on such
letters there shall be no more than 35 Company Stockholders who are
non-accredited investors.
(p) Noncompetition Agreements. Each of the persons separately
identified on Schedule 6.02(p) shall have executed and delivered to Parent a
noncompetition agreement in substantially the form attached hereto as Exhibit H.
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(q) Lock-Up Agreements. Each employee of the Company,
including, without limitation, Brian Magierski and David Milam, immediately
prior to the Effective Time shall have executed and delivered to Parent a
lock-up agreement in substantially the form attached hereto as Exhibit I
("Lock-Up Agreement").
(r) Company Stock Options. Other than as set forth on the
Company Disclosure Schedule, none of the Company Stock Options or Restricted
Stock shall be subject to accelerated vesting as a result of the Merger or any
other transaction contemplated hereby.
(s) Intellectual Property Assignments. The Company shall have
received in a form reasonably acceptable to Parent executed assignment letters
from the Persons listed in Schedule 6.02(s).
(t) Releases. Each of the persons separately identified on
Schedule 6.02(t) shall have executed and delivered to Parent a waiver and
release in substantially the form attached hereto as Exhibit J.
Section 6.03 Conditions to Obligations of the Company To Effect the
Merger. The obligation of the Company to effect the Merger is subject to the
satisfaction of each of the following conditions, unless waived in writing by
the Company:
(a) Representations and Warranties. Each of the
representations and warranties of Parent and Sub set forth in this Agreement
that is qualified by materiality shall be true and correct at and as of the
Closing Date as if made at and as of the Closing Date and each of such
representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Closing Date as if made at and
as of the Closing Date, except (i) to the extent that such representations and
warranties refer specifically to an earlier date, in which case such
representations and warranties shall have been true and correct as of such
earlier date, or (ii) for circumstances under which the breach of a
representation and warranty, considered collectively with any and all other
breaches of representations and warranties, would not have a Material Adverse
Effect on Parent, and the Company shall have received a certificate signed on
behalf of Parent by the President or Chief Financial Officer of Parent to such
effect.
(b) Performance Of Obligations. Parent and Sub shall have
performed all obligations required to be performed by them under this Agreement
at or prior to the Closing Date and the Company shall have received a
certificate signed on behalf of Parent by the President or Chief Financial
Officer of Parent to such effect.
(c) Corporate Action. Parent and Sub shall have taken all
corporate action necessary to approve the transactions contemplated by this
Agreement, and Parent and Sub shall have furnished the Company with copies of
resolutions, adopted by their respective Boards of Directors and, if necessary,
stockholders and certified by their respective secretaries as of the Closing
Date, in form and substance reasonably satisfactory to counsel for the Company,
in connection with such transactions.
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(d) Indemnity Escrow Agreement. The Indemnity Escrow Agreement
shall have been duly executed and delivered by Parent and the Indemnity Escrow
Agent named therein.
(e) Legal Opinion. The Company shall have received a written
opinion from Morgan, Lewis & Bockius LLP, dated as of the Closing Date, in the
form attached hereto as Exhibit K.
(f) Tax Opinion. The Company shall have received the written
opinion of Venture Law Group, A Professional Corporation, to the effect that the
Merger will be treated for Federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, counsel may rely upon the representations and certificates of
Parent, Sub and the Company.
(g) Second Amended and Restated Registration Rights Agreement.
The Second Amended and Restated Registration Rights Agreement in the form
attached hereto as Exhibit L shall have been duly executed and delivered by
Parent and holders of 66-2/3% of the Registrable Securities (as defined in the
Amended and Restated Registration Rights Agreement dated August 3, 1999 by and
among Parent and the parties listed on Schedule A thereto).
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.01 Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time by written notice by
the terminating party to the other party under the circumstances set forth
below:
(a) by mutual written consent of Parent and the Company: or
(b) by either Parent or the Company if the Merger shall not
have been consummated by March 31, 2000 (provided, however, that the right to
terminate this Agreement under this Section 7.01(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Merger to occur on or before such
date); or
(c) by Parent if a breach or failure of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement shall have occurred which would cause any condition set forth in
Sections 6.01 or 6.02 not to be satisfied and such breach is not cured within 10
business days thereof; provided, however, that there shall be no cure period
with respect to any breach of Sections 5.04, 5.06 and 5.13; or
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(d) by the Company, if a breach or failure of any
representation, warranty, covenant or agreement on the part of Parent set forth
in this Agreement shall have occurred which would cause any condition set forth
in Sections 6.01 or 6.03 not to be satisfied and such breach is not cured within
10 business days thereof; provided, however, that there shall be no cure period
with respect to any breach of Sections 5.06 and 5.13.
Section 7.02 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.01, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Parent, Sub,
the Company or their respective officers, directors, stockholders or Affiliates,
except as set forth in Section 7.03; provided, however, that the provisions of
Sections 5.06 and 5.13 and 7.03 of this Agreement shall remain in full force and
effect and survive any termination of this Agreement.
Section 7.03 Remedies. Any party terminating this Agreement pursuant to
Section 7.01 (b), (c) or (d) shall have the right to recover damages sustained
by such party if the basis for termination is a result of the other party's
fraud or willful and intentional breach of its obligations hereunder, provided
that the party seeking relief is not in breach of its obligations hereunder
under circumstances which would have permitted the other party to terminate the
Agreement under Section 7.01.
Section 7.04 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the Company Stockholders or by Parent, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 7.05 Waiver. At any time prior to the Effective Time, Parent
and Sub may waive compliance by the Company or any Company Stockholder, and the
Company may waive compliance by Parent or Sub, by an instrument in writing
signed by or on behalf of the party waiving compliance, with any term or
provision of this Agreement that the other party was or is obligated to comply
with or perform.
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ARTICLE VIII
INDEMNIFICATION
Section 8.01 Indemnification by the Company Stockholders.
(a) Subject to Sections 8.01(b) and 8.03, each Company
Stockholder (collectively, the "Company Indemnifying Parties") shall, jointly
and severally, indemnify and defend Parent and its Affiliates, officers,
directors and employees, (the "Parent Indemnified Parties") against, and shall
hold them harmless from, any loss, liability of every type and nature (whether
known or unknown, fixed or contingent), claim, including, without limitation,
any third-party claim, charge, action, suit, proceeding, assessed interest,
penalty, damage, Tax or expense (including reasonable legal and other
professional fees and expenses) (collectively, "Losses") resulting from, arising
out of, or incurred by any Parent Indemnified Party in connection with, or
otherwise with respect to:
(i) any breach of a representation and warranty or other
statement by the Company contained in this Agreement, the Company Disclosure
Schedule, any exhibit attached hereto, or any certificate or schedule furnished
or to be furnished to Parent pursuant hereto;
(ii) any breach of any covenant of the Company contained
in this Agreement or any exhibit attached hereto, or any certificate or schedule
furnished or to be furnished to Parent pursuant hereto;
(iii) the matters disclosed in Section 3.14 of the Company
Disclosure Schedule;
(iv) in the event that any Company Stockholder properly
exercises any appraisal rights under applicable law, the amount, if any, by
which the fair market value (determined in accordance with applicable law) of
Dissenting Shares exceeds the amount such Company Stockholder was otherwise
entitled to receive pursuant to Section 2.01 of this Agreement; and
(v) the extent to which Company Third Party Expenses
exceed $200,000.
(b) At the Effective Time, the Escrow Shares (as defined
below) shall be delivered to Chase Manhattan Trust Company, N.A. as Indemnity
Escrow Agent. Such Escrow Shares, together with any and all income and proceeds
thereon, shall be referred to hereinafter as the "Indemnity Escrow Fund." The
Indemnity Escrow Fund shall be available to compensate the Parent Indemnified
Parties pursuant to the indemnification obligations of the Company Indemnifying
Parties. The Indemnity Escrow Fund shall be held and disbursed by the Indemnity
Escrow Agent in accordance with the Indemnity Escrow Agreement. The term "Escrow
Shares"
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means ONE HUNDRED SEVENTY FIVE THOUSAND (175,000) shares of Parent Common Stock
issued to the Company Stockholders in the Merger. The number of Escrow Shares
attributable to each Company Stockholder shall be equal to the aggregate number
of Escrow Shares multiplied by a fraction the numerator of which is the number
of shares of Parent Common Stock issuable to each such Company Stockholder and
the denominator of which is the aggregate number of Parent Common Shares
issuable to all Company Stockholders. Parent's sole and exclusive remedy for
Losses shall be the release of Escrow Shares from the Indemnity Escrow Fund to
Parent subject to and in accordance with the Indemnity Escrow Agreement;
provided, however, this Article VIII and the rights and restrictions set forth
herein do not limit any other potential remedies of Parent with respect to any
act of fraud by the Company. The Company Stockholder shall not have any right of
indemnification or contribution from Parent or the Surviving Corporation with
respect to any Loss claimed by any Parent Indemnified Party after the Effective
Time.
Section 8.02 Survival. The representations, warranties, covenants and
agreements of the Company, Parent and Sub contained in this Agreement shall
survive the Closing for a period of one (1) year following the Closing Date. No
claim for indemnification may be made by an Indemnitee (as defined below) after
such date, provided that in the event that a Notice of Claim (as defined below)
shall have been delivered within the survival period (whether or not formal
legal action shall have been commenced based upon such claim), the claim
specified therein shall continue to be subject to indemnification in accordance
herewith.
Section 8.03 Limitations.
(a) No Escrow Shares shall be released to Parent from the
Indemnity Escrow Fund under the Indemnity Escrow Agreement until the aggregate
amount of all Losses as to which claims have been asserted exceeds $200,000 (the
"Indemnification Floor"). Subject to and in accordance with the Indemnity Escrow
Agreement, once the Indemnification Floor has been reached, a number of Escrow
Shares shall be released to Parent from the Indemnity Escrow Fund that have an
aggregate value equal to the amount of all Losses from the first dollar,
computed, with respect to Losses attributable to each respective claim, on the
basis of $198.75 as the deemed value of an Escrow Share.
(b) The indemnification provided in this Article VIII shall be
the exclusive post-closing remedy for Losses available to Parent and Sub for any
breach of any representation, warranty, covenant or agreement contained in this
Agreement or any agreement attached as an exhibit hereto (other than the Letter
of Transmittal), or any certificate or schedule furnished or to be furnished to
Parent pursuant hereto. In no event shall the liability of the Company
Stockholders for any such breach exceed the total number of Escrow Shares in the
Indemnity Escrow Fund. Notwithstanding the foregoing, Parent shall not be
entitled to make a claim against the Indemnity Escrow Fund for any breach by a
Company Stockholder of the representations and warranties set forth in such
Company Stockholder's Transmittal Letter delivered to Parent pursuant to Section
2.02 but Parent shall be entitled to pursue any and all remedies directly
against such Company Stockholder for any such breach.
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<PAGE> 48
Section 8.04 Notice of Claims. Any Parent Indemnified Party entitled to
indemnification under this Article VIII (the "Indemnitee") shall notify the
Company Stockholders' Representative (the "Indemnitor") in writing of any claim,
which the Indemnitee shall have determined has given rise to a claim for
indemnification under this Article VIII ("Notice of Claim").
Section 8.05 Third Party Claims.
(a) If the facts giving rise to any indemnification provided
for in this Agreement involve any actual or threatened claim or demand by any
third party ("Third Party Claim") against any Indemnitee, the Indemnitee shall
give prompt written notice of such Third Party Claim to the Indemnitor. Failure
or delay in notifying the Indemnitor will not relieve the Indemnitor of any
liability it may have to the Indemnitee, except to the extent that such failure
or delay causes actual harm to the Indemnitor with respect to such claim. The
Indemnitor will be entitled, upon its election, by written notice given to the
Indemnitee within thirty (30) days after the date on which the Indemnitee has
given notice of such Third Party Claim to the Indemnitor (without prejudice to
the right of such Indemnitee to participate at its expense through counsel of
its own choosing), to assume the defense or prosecution of such claim and any
litigation resulting therefrom (a "Third Party Defense") at its expense and
through counsel of its own choosing reasonably acceptable to the Indemnitee;
provided, however, that the Indemnitor shall not have the right to assume the
Third Party Defense (i) if any such claim seeks, in addition to or in lieu of
monetary damages, any injunctive or other equitable relief, or (ii) if, in the
reasonable opinion of the Indemnitee and its counsel, there is or could
reasonably be expected to be a conflict of interest with respect to a third
party between the position of the Indemnitor and the Indemnitee, (iii) the
Indemnitor fails to provide reasonable assurance to the Indemnitee of its
financial capacity to defend such proceeding and provide indemnification in
accordance with the provisions of this Agreement with respect to such
proceeding, or (iv) if the Third Party Claim, when aggregated with all other
claims pending against the Indemnity Escrow Fund, exceeds the then current value
of the Escrow Shares remaining in the Indemnity Escrow Fund based on $198.75 as
the deemed value of an Escrow Share; and provided further, that if, by reason of
the claim of such third party a lien, attachment, garnishment or execution is
placed upon any of the property or assets of such Indemnitee, the Indemnitor, if
it desires to exercise its right to assume such Third Party Defense, must
furnish a satisfactory indemnity bond to obtain the prompt release of such lien,
attachment, garnishment or execution. If the Indemnitor assumes a Third Party
Defense, it will conduct the Third Party Defense actively and diligently, and
will hold all Indemnitees harmless from and against all Losses caused by or
arising out of any settlement thereof (other than such Indemnitee's expenses of
participation in such defense, prosecution or settlement). Except with the
written consent of the Indemnitee to which the Indemnitor is obligated to
furnish indemnification pursuant to this Agreement, the Indemnitor will not, in
a Third Party Defense, consent to the entry of any judgment or enter into any
settlement (i) which does not include as an unconditional term thereof the
giving to the Indemnitee by the third party of a release from all liability in
respect of such suit, claim, action, or proceeding, (ii) unless there is no
finding or admission of any violation of law by the Indemnitee (or any affiliate
thereof) or any violation of the rights of any Person and no effect on any other
claims of a similar nature that
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<PAGE> 49
may be made by the same third party against the Indemnitee, or (iii) which
imposes any form of relief other than monetary damages. Parent or its affiliates
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnitor (not to be unreasonably withheld). Parent will provide reasonable
cooperate in the defense of the Third Party Claim.
(b) In the event that the Indemnitor fails or elects not to
assume the defense of Parent or its affiliates against such Third Party Claim,
which the Indemnitor had the right to assume under this Section 8.05, the
Indemnitee shall have the right, at the expense of the Indemnitor, to defend or
prosecute such claim or litigation in such manner as it may deem appropriate and
may settle such claim or litigation after giving written notice thereof to the
Indemnitor, on such terms as such Indemnitee may deem appropriate and the
Indemnitor will promptly reimburse such Indemnitee for any Losses incurred in
connection with such settlement. If no settlement of such claim or litigation is
made, the Indemnitor will promptly reimburse such Indemnitee for any Losses
arising out of any judgment rendered with respect to such claim or litigation.
Any Losses for which an Indemnitee is entitled to indemnification hereunder
shall be promptly paid as incurred. If the Indemnitor does not elect to assume a
Third Party Defense which it has the right to assume hereunder, the Indemnitee
shall have no obligation to do so.
(c) In the event that the Indemnitor is not entitled to assume
the defense of the Indemnitee against such Third Party Claim pursuant to this
Section 8.05, the Indemnitee shall have the right to undertake the defense,
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim in any manner it may deem appropriate (and Parent or
its affiliates need not consult with, or obtain any consent from, the Indemnitor
in connection therewith). In each case, Parent or its affiliates shall conduct
the defense of the Third Party Claim actively and diligently, and the Indemnitor
will provide reasonable cooperation in the defense of the Third Party Claim.
Section 8.06 Effect of Investigation; Waiver.
(a) Parent's right to indemnification or other remedies based
upon the representations and warranties, covenants, agreements and undertakings
of the Company will not be affected by any investigation, knowledge or waiver of
any condition of by Parent. Such representations and warranties shall not be
affected or deemed waived by reason of the fact that Parent knew or should have
known that any of the same is or might be inaccurate. Any investigation by such
party shall be for its own protection only and shall not affect or impair any
right or remedy hereunder.
(b) The waiver by Parent of any condition based on the
accuracy of any representation or warranty, or compliance with any covenant or
obligation, will not affect any right to indemnification or other remedy based
on such warranties, covenants and obligations unless otherwise expressly agreed
in writing by Parent.
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<PAGE> 50
ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Contents of Agreement; Parties in Interest; etc. This
Agreement sets forth the entire understanding of the parties hereto with respect
to the Merger. Any and all previous agreements and understandings between or
among the parties regarding the subject matter hereof, whether written or oral,
are superseded by this Agreement.
Section 9.02 Assignment and Binding Effect. This Agreement may not be
assigned by any party hereto without the prior written consent of the other
parties. Subject to the foregoing, all of the terms and provisions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective executors, heirs, personal representatives, successors and
assigns.
Section 9.03 Expenses. Parent and the Company shall each bear its own
costs and expenses in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties,
whether or not the Merger is consummated. The Company represents that the sum of
all such expenses incurred by the Company in connection with this Agreement and
the consummation of the transactions contemplated hereby ("Company Third Party
Expenses") shall not exceed $200,000.
Section 9.04 Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given on the day established by the sender as
having been delivered personally; on the day delivered by a private courier as
established by the sender by evidence obtained from the courier; or on the fifth
(5th) day after the date mailed, by certified or registered mail, return receipt
requested, postage prepaid. Such communications, to be valid, must be addressed
as follows:
If to Parent or Sub, to:
FreeMarkets, Inc.
22nd Floor, FreeMarkets Center
210 Sixth Avenue
Pittsburgh, PA 15222
Attention: Glen T. Meakem
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<PAGE> 51
With a required copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre
Pittsburgh, PA 15232
Attention: Marlee S. Myers, Esq.
If to the Company to:
iMark.com., Inc.
5000 Plaza on the Lake
Austin, TX 78746
Attention: Brian Magierski
With a required copy to:
Venture Law Group, A Professional Corporation
2800 Sand Hill Road
Menlo Park, CA 94025
Attention: Steven J. Tonsfeldt
Glen R. Van Ligten
or to such other address or to the attention of person or persons as the
recipient party has specified by prior written notice to the sending party (or
in the case of counsel, to such other readily ascertainable business address as
such counsel may hereafter maintain). If more than one method for sending notice
as set forth above is used, the earliest notice date established as set forth
above shall control.
Section 9.05 Delaware Law to Govern. This Agreement shall be governed
by and interpreted and enforced in accordance with the laws of the State of
Delaware, excluding any laws that would cause the laws of another jurisdiction
to apply.
Section 9.06 No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and, in the case of Article VIII hereof, the other
Indemnified Parties, and their heirs, executors, administrators, legal
representatives, successors and assigns, and they shall not be construed as
conferring any rights on any other persons.
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<PAGE> 52
Section 9.07 Headings, Gender and "Person." All section headings
contained in this Agreement are for convenience of reference only, do not form a
part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine, or
neuter, as the context requires. Any reference to a "person" herein shall
include an individual, firm, corporation, partnership, trust, governmental
authority or body, association, unincorporated organization or any other entity.
Section 9.08 Schedules and Exhibits. All Exhibits and Schedules
referred to herein are intended to be and hereby are specifically made a part of
this Agreement.
Section 9.09 Severability. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 9.10 Counterparts. This Agreement may be executed in any number
of counterparts, and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
Section 9.11 Specific Performance. The Company and Parent each agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed by them in accordance with the terms hereof
and that each party shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
ARTICLE X
DEFINITIONS
Section 10.01 Definitions. As used in this Agreement, the following
terms shall have the following meanings:
Acquisition 5.04(a)
Acquisition Proposal 5.04(a)
Action 3.16
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Affiliate 3.18(h)(vii)
Agent 5.04
Agreement Title
Authorizations 3.11(a)
Balance Sheet 3.18
Balance Sheet Date 3.18
Benefit Plan 3.18
Bridge Warrants 2.03(b)
CERCLA 3.20(l)
Closing 1.02
Closing Date 1.02
Certificates 2.02(a)
Code Recitals
Company Title
Company Common Shares 2.01(a)
Company Disclosure Schedule Article III
Company Holder 2.09(b)
Company Indemnifying Parties 8.01(a)
Company Intellectual Property Rights 3.14(a)
Company Optionees 2.02
Company Preferred Shares 3.02(a)
Company Restricted Stock 2.02(a)
Company Shares 3.02(a)
Company Stockholder 2.01(b)
Company Stockholder Approval 5.05
Company Stockholders' Representative 6.02(k)
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<PAGE> 54
Company Stock Options 2.07
Company Stock Option Plan 2.07
Company Third Party Expenses 9.03
Company Third Party Intellectual Property Rights 3.14(b)
Confidential Information 3.14(e)
Constituent Corporations 1.03(a)
DGCL 1.01
Dissenting Shares 2.01(b)
Effective Time 1.02
Environment 3.20(l)
Environmental Action 3.20(l)
Environmental Claim 3.20(l)
Environmental Clean-up Site 3.20(l)
Environmental Laws 3.20(l)
Environmental Permits 3.20(l)
Escrow Agent 2.03(a)
Escrow Shares 8.01(b)
Exchange Act 4.04(a)
Exchange Ratio 2.02(b)
Financial Statements 3.04
GAAP 3.04
Governmental Entity 3.03(b)
Hazardous Substances 3.20(l)
Indemnification Floor 8.03(a)
Indemnity Escrow Agent 2.02(a)
Indemnity Escrow Agreement 6.02(i)
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<PAGE> 55
Indemnity Escrow Fund 8.01(b)
Indemnitee 8.04
Indemnitor 8.04
Leased Property 3.13(b)
Leases 3.13(b)
Liabilities 3.08
Liens 3.03(b)
Lock-Up Agreement 6.02(q)
Losses 8.01(a)
Material Adverse Change 6.02(c)
Material Adverse Effect 3.12(a)
Material Contract 3.15
Merger 1.01
Nondisclosure Agreement 5.03
Notice of Claim 8.04
PCBS 3.20(h)
Parent Title
Parent Balance Sheet 4.04(b)
Parent Common Stock 2.01(a)
Parent Disclosure Schedule Article IV
Parent Indemnified Parties 8.01(a)
Parent Material Contracts 4.06
Parent Options 4.02(a)
Parent Preferred Stock 4.02(a)
Parent SEC Reports 4.04(a)
Pension Plan 3.18(b)
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<PAGE> 56
Per Share Merger Consideration 2.01(a)
Permitted Liens 3.09
Person 9.08
Plan 3.18
Products 3.23(a)
RCRA 3.20(l)
Real Property 3.13(b)
Regulations 3.11(a)
Release 3.20(l)
Representative Agreement 2.02(a)
Repurchase Restrictions 2.09(b)
Restricted Stock Agreements 2.02(a)
Section 368 Reorganization 2.09(c)
Stockholder Agreements Recitals
Stockholder Parties Recitals
Sub Title
Substitute Stock Options 2.07
Surviving Corporation 1.03(a)
Taxes 3.07(a)
Tax Returns 3.07(a)
Third-Party Claim 8.05
Third-Party Defense 8.05
Transmittal Letter 2.02(a)
Treasury Shares 2.01(a)
Unvested Shares 2.02(a)
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Section 10.02 Knowledge. When any of the representations and warranties
of any Person are qualified by the expression "to the knowledge of" or any
similar expression, such representations and warranties shall be deemed to be
given to the best knowledge of such Person after due investigation and, if such
Person is the Company, then to the actual knowledge of each officer or director
of the Company and the knowledge that could reasonably be expected to be
obtained by each such officer or director after due inquiry of the Company's
employees and advisors concerning the subject matter.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto, duly authorized
as of the date first written above.
FREEMARKETS, INC.
By: /s/ GLEN T. MEAKEM
-----------------------------
Name: Glen Meakem
Title: President
EMARK ACQUISITION CORPORATION
By: /s/ GLEN T. MEAKEM
-----------------------------
Name: Glen Meakem
Title: President
IMARK.COM, INC.
By: /s/ BRIAN MAGIERSKI
-----------------------------
Name: Brian Magierski
Title: Chief Executive Officer
<PAGE> 1
EXHIBIT 99.1
FreeMarkets Announces Definitive Agreement to Acquire iMark.com
Acquisition adds eMarketplace for surplus equipment and inventory to
FreeMarkets(R)B2B eMarketplace
PITTSBURGH, PA -- March 15, 2000 -- FreeMarkets, Inc. (NASDAQ: FMKT)
the world's leading B2B eMarketplace, today announced that it has signed a
definitive agreement to acquire iMark.com, Inc., a privately-held
business-to-business online marketplace for surplus equipment and inventory
based in Austin, Texas. The FreeMarkets(R) Online Asset Marketplace and the
iMark.com Internet marketplace will be combined to form the FreeMarkets Surplus
Asset eMarketplace, which will feature a global network of buyers and sellers
that includes over 20,000 registered users, $265 million in posted assets and
over $28 million in asset sales to date.
Under the terms of the agreement, 1,750,000 shares and options to
acquire shares of FreeMarkets common stock will be exchanged for all outstanding
shares, options and warrants in iMark.com. The acquisition will be accounted for
as a purchase and is expected to close by March 31, 2000. At closing, which is
subject to customary conditions, iMark.com will become a wholly-owned subsidiary
of FreeMarkets. The definitive agreement has been unanimously approved by both
companies' boards. Shareholders owning approximately 88% of iMark.com's capital
stock have agreed to vote in favor of the transaction.
The acquisition positions FreeMarkets as a leader in the emerging B2B
online surplus asset space. Industry analysts estimate that the worldwide market
for surplus equipment and inventory is approximately $300 billion annually.
FreeMarkets' client base of large purchasing organizations generates substantial
amounts of surplus equipment and inventory. Today, most of these assets are sold
offline. This acquisition enhances FreeMarkets' ability to leverage its client
base as large industrial companies increasingly turn to the Internet to sell
their surplus equipment and inventory.
"Global 1000 clients who use our B2B eMarketplace for purchasing also
have the need to sell surplus equipment and inventory," said Glen Meakem,
chairman and CEO of FreeMarkets. "Our unique combination of auction technology
and market making services addresses this need and creates a powerful network
effect. By teaming with iMark.com, we can leverage our overall market position
and blue-chip client relationships, as well as iMark.com's top-tier management,
expertise in online asset recovery, best-in-class, patent-pending technology and
range of value-added asset recovery services, to capitalize on this enormous
market opportunity."
"We are pleased to be joining the FreeMarkets team," said Brian
Magierski, co-founder and CEO of iMark.com. "FreeMarkets is the leading B2B
eMarketplace and we are excited about becoming a part of it. We believe that
buyers and sellers of surplus assets will benefit from the enhanced liquidity
and value that this combination will provide."
Features of the FreeMarkets Surplus Asset eMarketplace will include:
Full-Service Auctions. Real-time, Web-based auctions, along with market
making services such as detailed specification of posted assets and
buyer research and recruitment.
<PAGE> 2
Self-Service Exchange. A 24x7 Web exchange where sellers will be able
to post surplus equipment and inventory, and buyers will be able to
view and compete to purchase this equipment and inventory. Buyers and
sellers will be able to communicate and close deals according to
flexible time tables.
FreeMarkets Surplus Asset Portal Solution. Web technology that will
allow FreeMarkets to create co-branded web portals for surplus
equipment and inventory on behalf of large and medium-sized businesses
as well as governmental organizations. Sellers will be able to post
surplus equipment and inventory on their own portals for efficient
transfer within their own organizations. These postings can also be
mirrored to the FreeMarkets Surplus Asset eMarketplace.
Value-added services, including leasing services, transportation and
rigging services and investment recovery services.
Complete customer support required to successfully manage the trading
of high-value surplus equipment and inventory, including technical
operations, market making services and call center support to buyers
and sellers in over 30 languages.
The 70-person iMark.com team will join the FreeMarkets asset marketplace team.
The FreeMarkets Surplus Asset eMarketplace will be headed by Mr. Magierski, who
has been named a vice president of FreeMarkets. Douglas Hibberd, iMark.com's
chief technology officer has also been named a vice president of FreeMarkets.
iMark.com launched its website in September 1999 and did not generate material
revenues in 1999. The combination is expected to add to FreeMarkets' revenues
and anticipated cash losses in 2000 and to result in one-time non-cash charges
in the first quarter of 2000, as well as substantial ongoing non-cash charges
related to the amortization of the goodwill associated with the purchase.
About FreeMarkets
FreeMarkets is the world's leading B2B eMarketplace, with online
auction markets for industrial parts, raw materials, commodities and services.
The Company created online auctions for over $2.7 billion worth of purchase
orders in 1999 and nearly $1.0 billion worth of purchase orders in 1998. Since
1995, FreeMarkets has created online auctions for products in more than 70
supply verticals, including injection molded plastic parts, commercial
machinings, metal fabrications, chemicals, printed circuit boards, corrugated
packaging and coal. More than 3,000 suppliers from over 45 countries have
participated in the FreeMarkets B2B eMarketplace. FreeMarkets provides access to
its eMarketplace to industrial buyers and suppliers. The FreeMarkets B2B
eMarketplace includes industry-leading online auction technology, technical
operations, market making services, access to a global database of suppliers and
supplier research, call center support to buyers and suppliers in over 30
languages, and marketplace rules. The Company's current clients include The
Commonwealth of Pennsylvania, United Technologies Corporation, The Quaker Oats
Company, Owens Corning, Eaton Corporation, Emerson Electric Company, FirstEnergy
Corp., SmithKline Beecham plc, Navistar International and Delphi Automotive
Systems Corporation. FreeMarkets can be found on the Web at www.freemarkets.com.
FreeMarkets is a registered trademark of FreeMarkets, Inc.
<PAGE> 3
About iMark.com
iMark.com is a business-to-business Internet marketplace for the
exchange of used equipment. iMark.com brings together buyers and sellers in a
fair and neutral marketplace, and offers services associated with buying and
selling equipment, including Leasing Services, Transportation & Rigging
Services, and Investment Recovery Services. iMark.com improves the speed and
efficiency of the used equipment market. iMark.com ActiveLead(TM) for sellers
and iMark.com ActiveSearch(TM) for buyers can reduce the sales cycle from
several months to a few days. iMark.com serves Fortune 1000 companies, large and
small manufacturers, OEMs, leasing companies and used equipment dealers -
anybody with an interest in finding or selling used equipment. iMark.com can be
found on the Web at www.imark.com.
Forward-looking statements
Statements in this press release that are not historical facts,
including those statements that refer to FreeMarkets' plans, prospects,
expectations, strategies, intentions, hopes and beliefs, are forward-looking
statements. These forward-looking statements are based on information available
to FreeMarkets today, and FreeMarkets assumes no obligation to update these
statements as circumstances change. There are risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements,
including, without limitation, market acceptance of our online auction
marketplace, the competitive nature of the market for business-to-business
online auction services, FreeMarkets' ability to retain and increase revenue
from existing clients and to execute agreements with new clients, FreeMarkets'
ability to attract and retain qualified personnel, the size of the market for
used equipment and surplus inventory, the demand for online auction and other
asset recovery services by buyers and suppliers, and FreeMarkets' ability to
successfully integrate iMark.com. Risk factors are described in more detail in
FreeMarkets' prospectus dated December 9, 1999, which is included as part of its
Registration Statement on Form S-1, filed with the Securities and Exchange
Commission.
