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AGREEMENT AND PLAN OF MERGER
AMONG
EXABYTE CORPORATION,
BRONCO ACQUISITION, INC.,
ECRIX CORPORATION,
CERTAIN LENDERS,
AND
CERTAIN INVESTORS
DATED AS OF AUGUST 22, 2001
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TABLE OF CONTENTS
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PAGE
ARTICLE I THE MERGER......................................................................1
1.1 The Merger........................................................................1
1.2 The Closing.......................................................................1
1.3 Effective Date and Time...........................................................2
1.4 Certificate of Incorporation of the Surviving Corporation.........................2
1.5 Bylaws of the Surviving Corporation...............................................2
1.6 Effects of Merger.................................................................2
1.7 Directors and Officers............................................................3
1.8 Conversion of Shares..............................................................4
1.9 Tax-Free Reorganization...........................................................9
ARTICLE II PURCHASE OF CONVERTIBLE SECURED PROMISSORY NOTES...............................9
2.1 The Loan..........................................................................9
2.2 Delivery..........................................................................9
ARTICLE III PURCHASE OF SERIES H CONVERTIBLE PREFERRED STOCK.............................10
3.1 Authorization; Agreement To Sell And Purchase....................................10
3.2 Closing, Delivery and Payment....................................................10
3.3 Rights and Preferences of Series H Shares........................................11
3.4 Registration Agreement...........................................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................11
4.1 Organization.....................................................................11
4.2 Enforceability...................................................................12
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4.3 Capitalization...................................................................12
4.4 Subsidiaries and Affiliates......................................................14
4.5 No Approvals; No Conflicts.......................................................14
4.6 Financial Statements.............................................................15
4.7 Absence of Certain Changes or Events.............................................15
4.8 Taxes............................................................................17
4.9 Property.........................................................................20
4.10 Contracts.......................................................................22
4.11 Customers and Suppliers.........................................................23
4.12 Warranties and Returns..........................................................24
4.13 Claims and Legal Proceedings....................................................24
4.14 Labor and Employment Matters....................................................24
4.15 Employee Benefit Plans..........................................................25
4.16 Personnel.......................................................................29
4.17 Intellectual Property...........................................................29
4.18 Accounts Receivable.............................................................33
4.19 Inventory.......................................................................33
4.20 Corporate Books and Records.....................................................33
4.21 Licenses, Permits, Authorizations, etc..........................................33
4.22 Compliance With Laws............................................................34
4.23 Insurance.......................................................................34
4.24 Brokers or Finders..............................................................34
4.25 Bank Accounts...................................................................35
4.26 Insider Interests...............................................................35
4.27 Compliance WITH ENVIRONMENTAL Laws..............................................35
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4.28 Information Supplied by the Company.............................................36
4.29 Full Disclosure.................................................................37
4.30 Absence of Undisclosed Liabilities..............................................37
4.31 Government Contracts............................................................37
ARTICLE V REPRESENTATIONS AND WARRANTIES OF INVESTORS
AND LENDERS REGARDING SECURITIES MATTERS.........................................38
5.1 Requisite Power and Authority....................................................38
5.2 Investment Representations.......................................................38
5.3 Investor Bears Economic Risk.....................................................38
5.4 Acquisition for Own Account......................................................38
5.5 Investor and Lender Can Protect Its Interest.....................................39
5.6 Accredited Investor..............................................................39
5.7 Parent Information...............................................................39
5.8 Rule 144.........................................................................39
5.9 Information Furnished by Investors and Lenders...................................39
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......................40
6.1 Organization.....................................................................40
6.2 Enforceability...................................................................41
6.3 Capitalization...................................................................42
6.4 Subsidiaries and Affiliates......................................................43
6.5 No Approvals; No Conflicts.......................................................43
6.6 Financial Statements.............................................................44
6.7 Absence of Certain Changes or Events.............................................44
6.8 Taxes............................................................................46
6.9 Property.........................................................................49
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6.10 Contracts.......................................................................51
6.11 Customers and Suppliers.........................................................52
6.12 Warranties and Returns..........................................................53
6.13 Claims and Legal Proceedings....................................................53
6.14 Labor and Employment Matters....................................................53
6.15 Employee Benefit Plans..........................................................54
6.16 Personnel.......................................................................58
6.17 Intellectual Property...........................................................58
6.18 Accounts Receivable.............................................................61
6.19 Inventory.......................................................................61
6.20 Corporate Books and Records.....................................................62
6.21 Licenses, Permits, Authorizations, etc..........................................62
6.22 Compliance With Laws............................................................62
6.23 Insurance.......................................................................62
6.24 Brokers or Finders..............................................................63
6.25 Insider Interests...............................................................63
6.26 Compliance WITH ENVIRONMENTAL Laws..............................................64
6.27 Information Supplied by Parent..................................................64
6.28 Full Disclosure.................................................................65
6.29 Absence of Undisclosed Liabilities..............................................65
6.30 Government Contracts............................................................65
6.31 Securities -- Parent Common Stock...............................................65
6.32 Securities -- H Shares and Notes................................................65
6.33 SEC Documents; Parent Financial Statements......................................66
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ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB.................67
7.1 Accuracy of Representations and Warranties.......................................67
7.2 Performance of Agreements........................................................67
7.3 Compliance Certificate...........................................................67
7.4 No Material Adverse Change.......................................................67
7.5 Approvals........................................................................68
7.6 Secretary's Certificate..........................................................68
7.7 Compliance With Laws.............................................................68
7.8 Stockholder Approval.............................................................68
7.9 Legal Proceedings................................................................68
7.10 Affiliate Letters...............................................................69
7.11 Termination of Certain Agreements...............................................69
7.12 Dissenter Rights Exercised Greater Than 20% of Stock............................69
7.13 Consents to Merger..............................................................69
7.14 Receipt of Loan from Company....................................................69
7.15 Amendment to Certificate........................................................70
7.16 Lock-Up Agreements..............................................................70
7.17 SEC Effectiveness...............................................................70
7.18 Series H Purchase...............................................................70
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY..........................70
8.1 Accuracy of Representations and Warranties.......................................70
8.2 Performance of Agreements........................................................71
8.3 Compliance Certificate...........................................................71
8.4 No Material Adverse Change.......................................................71
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8.5 Approvals and Consents...........................................................71
8.6 Secretary's Certificate..........................................................71
8.7 Compliance With Laws.............................................................72
8.8 Legal Proceeding.................................................................72
8.9 Stockholder Approval.............................................................72
8.10 Parent's Trading Market Listing.................................................72
8.11 S-4 Effectiveness...............................................................72
8.12 Congress Consent................................................................73
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INVESTORS..........................73
9.1 Closing of the Merger............................................................73
9.2 Compliance With Laws.............................................................73
9.3 Registration Rights Agreement....................................................73
ARTICLE X COVENANTS......................................................................73
10.1 Conduct of Business by the Company Pending the Merger...........................73
10.2 Conduct of Business by Parent Pending the Merger................................76
10.3 Access to Information; Confidentiality..........................................79
10.4 Notification of Certain Matters.................................................80
10.5 Further Action; Best Efforts....................................................80
10.6 Approval of Parent Stockholders; Preparation of Proxy Statement.................80
10.7 Company Stockholder Approval....................................................81
10.8 Preparation of S-4..............................................................81
10.9 Parent Common Stock.............................................................82
10.10 Dissenting Shares..............................................................82
10.11 Publicity......................................................................82
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10.12 No Solicitation, etc...........................................................83
10.13 Regulatory and Other Approvals.................................................84
10.14 Company Employees..............................................................85
10.15 Rights Agreement...............................................................86
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER.............................................86
11.1 Termination.....................................................................86
11.2 Effect Of Termination...........................................................87
11.3 Amendment.......................................................................88
11.4 Waiver..........................................................................88
ARTICLE XII GENERAL......................................................................89
12.1 No Survival of Representations and Warranties...................................89
12.2 Expenses........................................................................89
12.3 Notices.........................................................................89
12.4 Severability....................................................................90
12.5 Entire Agreement................................................................90
12.6 Assignment......................................................................90
12.7 Parties in Interest.............................................................91
12.8 Governing Law; Jurisdiction; Venue..............................................91
12.9 No Third-Party Beneficiary......................................................91
12.10 Counterparts...................................................................91
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EXHIBITS
Exhibit 1.3 Certificate of Merger
Exhibit 2.1 Notes
Exhibit 3.1.1(a) Parent H Certificate
Exhibit 3.1.2 Investor Purchase Schedule
Exhibit 3.4 Registration Rights Agreement
Exhibit 4 Company Disclosure Memorandum
Exhibit 6 Parent Disclosure Memorandum
Exhibit 6.5(b) Rights Agreement Amendment
Exhibit 7.10 Affiliate Letter
Exhibit 7.16 Lock Up Agreement
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") is made and
entered into as of August 22, 2001, by and among Exabyte Corporation, a Delaware
corporation ("PARENT"), Bronco Acquisition, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("MERGER SUB"), Ecrix Corporation, a Delaware
corporation (the "COMPANY"), the investors listed on the signature page of this
Agreement (the "INVESTORS") and the lenders listed on the signature pages of
this Agreement (the "LENDERS").
RECITALS
A. The Company, Parent and Merger Sub believe it advisable and in
their respective best interests to effect a merger of the Company and Merger Sub
pursuant to this Agreement (the "MERGER").
B. The Board of Directors of the Company has approved this
Agreement and the Merger as required by applicable law, and will submit this
Agreement to the Company's stockholders for their approval.
C. The Boards of Directors of Parent and Merger Sub and the sole
stockholder of Merger Sub have approved this Agreement and the Merger as
required by applicable law.
AGREEMENT
In consideration of the terms of this Agreement, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER
Upon the terms and subject to the conditions of this Agreement, at the
Effective Time (as defined in SECTION 1.3) the separate existence of Merger Sub
shall cease and Merger Sub shall be merged with and into the Company, and the
Company shall continue as the surviving corporation in the Merger and a wholly
owned subsidiary of Parent (the Company as the surviving corporation after the
Merger is sometimes referred to herein as the "SURVIVING CORPORATION").
1.2 THE CLOSING
Upon the terms and subject to the conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place on the earliest
practicable business day (the "CLOSING DATE"), but not later than the fifth
business day, after the satisfaction or
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waiver of the conditions set forth in ARTICLES VII AND VIII at 10 a.m. local
time at the offices of Holland & Hart LLP, Suite 500, 1050 Walnut Street,
Boulder, CO 80302, or such other date, time or location as Parent and the
Company shall agree.
1.3 EFFECTIVE DATE AND TIME
On the Closing Date and upon the terms and subject to the conditions of
this Agreement, the Company and Merger Sub shall cause the appropriate
certificate (the "CERTIFICATE OF MERGER") substantially in the form attached as
EXHIBIT 1.3 complying with the applicable provisions of the Delaware General
Corporate Law ("DGCL") to be properly executed and filed with the Secretary of
State of the State of Delaware (the "DELAWARE SECRETARY OF STATE"). The Merger
shall become effective on the date (the "EFFECTIVE DATE") and at the time (the
"EFFECTIVE TIME") of filing of the Certificate of Merger or at such other time
as may be specified in the Certificate of Merger as filed. If the Delaware
Secretary of State requires any changes in the Certificate of Merger as a
condition to filing or to issuing its certificate to the effect that the Merger
is effective, Parent, Merger Sub and the Company will execute any necessary
revisions incorporating such changes, provided such changes are not materially
inconsistent with and do not result in any material change in the terms of this
Agreement.
1.4 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION
At the Effective Time, the Certificate of Incorporation of Merger Sub
as in effect immediately prior to the Effective Time shall become the
Certificate of Incorporation of the Surviving Corporation, except that the name
of the corporation shall set forth therein shall be changed to the name of the
Company. Thereafter, the Certificate of Incorporation of the Surviving
Corporation may be amended in accordance with its terms and as provided by law.
1.5 BYLAWS OF THE SURVIVING CORPORATION
At the Effective Time, the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall become the Bylaws of the Surviving
Corporation, except that the name of the corporation set forth therein shall be
changed to the name of the Company. Thereafter, the Bylaws may be amended or
repealed in accordance with their terms and the Certificate of Incorporation of
the Surviving Corporation and as provided by law.
1.6 EFFECTS OF MERGER
The Surviving Corporation shall, by virtue of the Merger and in
accordance with the DGCL, possess all the properties and rights and be subject
to all the liabilities of the Company and Merger Sub. From and after the
Effective Time, the Merger shall have all effects provided by applicable law.
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1.7 DIRECTORS AND OFFICERS
At the Effective Time, the directors of Merger Sub shall continue in
office as the directors of the Surviving Corporation and the officers of the
Merger Sub shall continue in office as the officers of the Surviving
Corporation, and such directors and officers shall hold office in accordance
with and subject to the Certificate of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time,(i) the number of members of the Board of
Directors of Parent (the "Board") shall be increased to seven (7), (ii) Parent
shall remove or accept the resignations of two members of the Board, and (iii)
the resulting vacancies on the Board shall be filled by the election of G.
Jackson Tankersley, Jr., William J. Almon, Sr. and Juan A. Rodriguez ("COMPANY
DESIGNEES") as directors of Parent, each to serve until the next annual meeting
of stockholders of Parent at which such directorship is up for reelection and
until their successors are elected and qualified. These directors shall be
placed in one or more classes of directors whose staggered terms expire at the
2002, 2003 and 2004 Annual Meetings of stockholders of Parent, respectively.
Except as provided in the last sentence of this Section 1.7 the Parent agrees to
take all action necessary such that the Parent's Board of Directors shall at all
times include three directors (or such greater number of directors as shall
constitute the maximum number of members that represent a numerical minority of
the Board) who are nominated by the Company Designees and included in the slate
of proposed directors put forth by the Parent to its stockholders and
recommended for election in the proxy solicitation materials disseminated by the
Parent. Upon the death, resignation or removal of any Company Designee, Parent
will cause the vacancy to be filled by a subsequent designee recommended by the
remaining Company Designees then serving on the Board. The Company Designees
shall be covered by any directors' and officers' liability insurance maintained
from time to time on the same terms as the other members of the Board and shall
be entitled to the benefit of any indemnification arrangements applicable to
other members of the Board. The Company Designees shall have the right to
receive all fees paid and options and other awards granted and expenses
reimbursed to non-employee directors generally, except that in the event that
any Company Designee shall also be an employee of Parent, such Company Designee
shall only be entitled to receive compensation for his service on the Board of
Directors consistent with the policies of Parent's Board of Directors governing
the compensation of employee directors generally. If at any time, the Investors
shall beneficially own (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as currently in effect) less than 30% of the then
outstanding voting power of all classes of the Parent's voting securities, the
number of directors that Parent shall be obligated to include on the Board of
Directors pursuant to the fourth sentence of this Section 1.7 shall be reduced
so that the number of Company Designees expressed as a percentage of the entire
Board of Directors is approximately equal to the percentage of the outstanding
voting power then beneficially owned by the Investors rounded to the nearest
whole directorship but in any event not a majority; provided, however that if
the Investors shall beneficially own less than 10% of the outstanding voting
power of all classes of the Parent's voting securities, the number of Company
Designees shall be zero.
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1.8 CONVERSION OF SHARES
1.8.1 Exchange Ratios
As of the Effective Time, by virtue of the Merger and without any
action on the part of the Company, Merger Sub, Parent or any of their respective
stockholders:
(a) All shares of any class of capital stock of the
Company held by the Parent, Merger Sub or any other subsidiary of the Parent or
held by the Company as treasury shares shall be canceled.
(b) The outstanding shares of preferred stock of the
Company (the "COMPANY PREFERRED STOCK"), other than shares of Company Preferred
Stock for which dissenters' rights are perfected and shares canceled pursuant to
paragraph (a) above, shall be converted into the right to receive up to
9,000,000 shares of Parent's common stock, $0.001 par value per share ("PARENT
COMMON STOCK"), with the exchange ratio for each series of Company Preferred
Stock to be as follows (each, a "COMPANY PREFERRED STOCK EXCHANGE RATIO"):
(i) Each issued and outstanding share of the
Company's Series D-1 Preferred Stock (other than dissenters shares)
shall be converted into the right to receive .82400 shares of Parent
Common Stock (the "SERIES D-1 PREFERRED STOCK EXCHANGE RATIO").
(ii) Each issued and outstanding share of the
Company's Series D Preferred Stock (other than dissenters shares) shall
be converted into the right to receive .04857 shares of Parent Common
Stock.
(iii) Each issued and outstanding share of the
Company's Series C Preferred Stock (other than dissenters shares) shall
be converted into the right to receive .04048 shares of Parent Common
Stock.
(iv) Each issued and outstanding share of the
Company's Series B Preferred Stock (other than dissenters shares) shall
be converted into the right to receive .02371 shares of Parent Common
Stock.
(v) Each issued and outstanding share of the
Company's Series A Preferred Stock (other than dissenters shares) shall
be converted into the right to receive .00952 shares of Parent Common
Stock.
(c) The outstanding shares of common stock of the Company
(the "COMPANY COMMON STOCK" and together with the Company Preferred Stock, the
"COMPANY CAPITAL STOCK"), other than shares of Company Common Stock for which
dissenters' rights are perfected and shares that are canceled pursuant to
paragraph 1.8.1(a) above, shall be converted into the right to receive a total
of 1,000,000 shares of Parent Common Stock, with each outstanding share of
Company Common Stock
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converted into the right to receive a number of shares of Parent Common Stock
equal to (i) 1,000,000 divided by (ii) the total number of shares of Company
Common Stock outstanding immediately prior to the Effective Time (the "COMPANY
COMMON STOCK EXCHANGE RATIO") provided that the 1,000,000 shares of Parent
Common Stock issuable to holders of the Company Common Stock shall be reduced by
the number of shares of Parent Common Stock attributable to shares of Company
Common Stock for which dissenters' rights have been properly exercised under the
DGCL.
(d) In the event there is any change after the date of
this Agreement to the number of shares of Company Preferred Stock to be
exchanged as a result of the Merger, the applicable Company Preferred Stock
Exchange Ratio shall be appropriately adjusted so that the aggregate number of
shares of Parent Common Stock issuable as a result of the Merger upon conversion
of the Company Preferred Stock shall not exceed 9,000,000 shares (less any
shares otherwise issuable to holders of Company Preferred Stock that have
properly exercised dissenters' rights under the DGCL). The number of shares of
Parent Common Stock shall be appropriately adjusted in the event of a stock
split, stock combination or other similar change in the Parent's Capital Stock
effected prior to Closing.
(e) Each issued and outstanding share of capital stock of
Merger Sub shall be converted into one share of common stock of the Surviving
Corporation.
(f) Each outstanding Option to purchase shares of Company
Common Stock (the "OPTIONS") issued pursuant to the Company's 1998 Incentive
Stock Option Plan and Equity Incentive Plan (the "COMPANY OPTION PLANS"), and
each warrant to purchase shares of the Company's Series B Preferred Stock (the
"WARRANTS"), whether or not vested or exercisable, shall, unless such Option of
Warrant shall have been exercised prior to consummation of the Merger, terminate
by its terms in connection with the Merger. The Board of Directors of the
Company shall take such action or make such determinations as necessary to
terminate the Options and Warrants at the Effective Time of the Merger.
Notwithstanding the foregoing, to the extent any B Warrants are exercised prior
to the Effective Time, the shares of the Company's Series B Preferred Stock
issued upon such exercise shall be converted into shares of Parent Common Stock
in accordance with the applicable Company Preferred Stock Exchange Ratio;
provided, however, that such Company Preferred Stock Exchange Ratio shall be
adjusted to the product of the applicable Company Preferred Stock Exchange Ratio
multiplied by a fraction, (i) the numerator of which shall be the aggregate
number of shares of the Company's Series B Preferred Stock outstanding as of the
date of this Agreement and (ii) the denominator of which shall be the aggregate
number of shares of the Company's Series B Preferred Stock outstanding
immediately prior to the Effective Time. Notwithstanding the foregoing, to the
extent any D-2 Warrants are exercised prior to the Effective Time, the shares of
the Company's Series D-2 Preferred Stock issued upon such exercise shall be
converted into shares of Parent Common Stock in accordance with the Series D-1
Preferred Stock Exchange Ratio; provided, however, that such Series D-1
Preferred Stock Exchange Ratio shall be adjusted to the product of
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the Series D-1 Preferred Stock Exchange Ratio multiplied by a fraction, (i) the
numerator of which shall be the aggregate number of shares of the Company's
Series D-1 Preferred Stock outstanding as of the date of this Agreement and (ii)
the denominator of which shall be the aggregate number of shares of the
Company's Series D-1 Preferred Stock and Series D-2 Preferred Stock outstanding
immediately prior to the Effective Time.
(g) Holders of shares of Company Capital Stock who have
complied with all the requirements for perfecting dissenters' rights, as
required under the DGCL, shall be entitled to their rights under the DGCL with
respect to such shares (the "DISSENTING SHARES"). Notwithstanding the foregoing,
if any holder of Dissenting Shares shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to dissent, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
shares of Parent Common Stock to which such holder is then entitled under this
Agreement and the DGCL, without interest thereon and upon surrender of the
certificate or certificates representing such shares. Notwithstanding any
provision of this Agreement to the contrary, any Dissenting Shares held by a
stockholder who has perfected dissenter's rights for such shares in accordance
with the DGCL shall not be converted into Parent Common Stock pursuant to this
SECTION 1.8.1.
(h) If, prior to the Effective Time, Parent or the
Company effects a subdivision of its outstanding shares into a greater number of
shares, or a combination of its outstanding shares into a lesser number of
shares, or reorganizes, reclassifies or otherwise changes its outstanding shares
into the same or a different number of shares or other classes, or declares a
dividend on its outstanding shares payable in shares of its capital stock or
securities convertible into shares of its capital stock, then the Company Common
Stock Exchange Ratio and the Company Preferred Stock Exchange Ratios will be
adjusted appropriately so as to maintain the relative proportionate interests of
the holders of shares of Company Capital Stock and the holders of shares of
Parent Common Stock.
1.8.2 Exchange of Certificates
(a) As promptly as practicable after the Effective Time,
Parent shall make available to BankBoston, N.A., the "EXCHANGE AGENT," the
certificates representing the whole shares of Parent Common Stock issued
pursuant to Section 1.8.1 in exchange for outstanding shares of Company Capital
Stock.
(b) The Exchange Agent shall mail on or prior to the
Closing Date to each holder of record as of the date 10 business days prior to
the Closing Date of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock (and as
soon as practicable to stockholders that became holders of Company Capital Stock
subsequent to such date), other than shares to be canceled in accordance with
Section 1.8.1(a), (i) a letter of
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transmittal (the "LETTER OF TRANSMITTAL") in customary form and (ii)
instructions for effecting the surrender of the certificates in exchange for
certificates representing Parent Common Stock. Upon surrender of a certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such Letter of Transmittal, duly executed,
and such other documents as may reasonably be required by the Exchange Agent,
the holder of such certificate shall be entitled to receive in exchange
therefor, by the later of (a) ten business days following the Effective Time and
(b) ten business days following the surrender of such certificate, a certificate
representing that number of whole shares of Parent Common Stock which such
holder has the right to receive pursuant to the provisions of SECTION 1.8.1, and
the certificate so surrendered shall forthwith be canceled.
(c) In the event that any certificates representing
shares of Company Capital Stock shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the stockholder claiming such
certificate to be lost, stolen or destroyed, Parent shall issue in exchange for
such lost, stolen or destroyed certificate the shares of Parent Common Stock
that such stockholder is entitled to receive pursuant to SECTION 1.8.1;
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require such stockholder to provide Parent
with a reasonable and customary indemnity agreement against any claim that may
be made against Parent with respect to the certificate alleged to have been
lost, stolen or destroyed.
(d) The shares of Parent Common Stock that each
stockholder of the Company shall be entitled to receive pursuant to the Merger
shall be deemed to have been issued at the Effective Time. If the Merger
Consideration (or any portion thereof) is to be delivered to any person other
than the person in whose name the certificate or certificates representing
shares of Company Capital Stock surrendered in exchange therefor are registered,
it shall be a condition to such exchange that the person requesting such
exchange pay to Parent any transfer or other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the certificate or certificates so surrendered, or shall establish to the
satisfaction of Parent that such tax has been paid or is not applicable.
Notwithstanding anything to the contrary, neither Parent nor any other party
hereto shall be liable to a holder of shares of Company Capital Stock for any
Merger Consideration delivered to a public official pursuant to applicable law,
including abandoned property, escheat and similar laws to the extent required
under law to be so delivered.
(e) Parent or the Exchange Agent will be entitled to
deduct and withhold from the Merger Consideration such amounts as Parent or the
Exchange Agent are required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld, such amounts will be treated
for all purposes of this Agreement as having been paid to the former holder of
the Company Capital Stock in respect of whom such deduction and withholding were
made by Parent or the Exchange Agent.
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1.8.3 Fractional Shares
No Parent Common Stock representing a fraction of Parent
Common Stock or book-entry credit of the same will be issued pursuant to the
Merger, but in lieu thereof each former holder of Company Capital Stock
otherwise entitled to receive a fractional interest in Parent Common Stock will
be entitled to receive in accordance with the provisions of this Section 1.8.3 a
cash payment in lieu of that fractional interest representing the holder's
proportionate interest in the net proceeds from the sale by the Exchange Agent
on behalf of all holders otherwise entitled to fractional interests in shares of
Parent Common Stock (the "EXCESS SHARES"). The sale of the Excess Shares by the
Exchange Agent shall be executed through the Parent's Trading Market. Until the
net proceeds of the sale of the Excess Shares have been distributed to the
former holders of Company Capital Stock, the Exchange Agent will hold the
proceeds in trust for those former holders (the "EXCESS SHARES TRUST").
Commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation, of the Exchange Agent incurred in connection with
the sale of the Excess Shares shall be paid from cash held in the Excess Shares
Trust. The Exchange Agent shall determine the portion of the Excess Shares Trust
to which each former holder of Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Excess
Shares Trust by a fraction the numerator of which shall be the fractional
interest of Parent Common Stock to which such former holder would otherwise be
entitled and the denominator of which is the aggregate amount of fractional
interests in Parent Common Stock to which all former holders of Company Capital
Stock would otherwise be entitled. As soon as practicable after the
determination of the amount of cash, if any, to be paid to former holders of
Company Capital Stock in lieu of fractional interests in Parent Common Stock,
the Exchange Agent shall make available those amounts to the former holders
without interest.
1.8.4 No Further Transfers; No Further Ownership Rights In
Company Capital Stock; No Dividends or Other Distributions
All shares of Parent Common Stock issued upon the surrender for
exchange of shares of Company Capital Stock in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates formerly representing
shares of Company Capital Stock are presented to the Surviving Corporation, they
shall be forwarded to Parent and shall be canceled and exchanged in accordance
with this SECTION 1.8, unless such certificates for Parent Common Stock have
already been issued in respect of such shares in reliance upon an affidavit of
loss or otherwise, in any case subject to applicable law in the case of
Dissenting Shares. No dividends or other distributions payable with respect to
Parent Common Stock shall be paid to the holder of any unsurrendered
certificates evidencing Company Capital Stock until such certificates are
surrendered and exchanged for shares of Parent Common Stock in accordance with
this Agreement.
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1.9 TAX-FREE REORGANIZATION
It is intended that the Merger shall constitute a "REORGANIZATION"
within the meaning of Section 368(a) of the Code, and that this Agreement shall
constitute a "PLAN OF REORGANIZATION" for purposes of the Code
ARTICLE II
PURCHASE OF CONVERTIBLE SECURED PROMISSORY NOTES
2.1 THE LOAN
At the time of full execution of this Agreement (the "EXECUTION TIME"),
pursuant to a Loan and Security Agreement of even date herewith (the "LOAN
AGREEMENT") Meritage, Centennial and Almon or their respective affiliates (the
"LENDERS") severally and not jointly agree to lend to Parent the aggregate
amount of Two Million Dollars ($2,000,000) (the "LOAN AMOUNT"), of which the
Lenders' respective participation amounts shall be $1,139,847 for Meritage,
$603,688 for Centennial and $256,465 for Almon, against the issuance and
delivery by the Parent of convertible secured promissory notes in substantially
the form attached hereto as EXHIBIT 2.1 (the "NOTES"); provided, however, that
the Loan Amount shall be advanced in two separate installments, the first of
which shall be in the amount of One Million Five Hundred Thousand Dollars
($1,500,000) and the second of which shall be subject to the satisfaction of
certain conditions contained in the Loan Agreement and shall be in the amount of
Five Hundred Thousand Dollars ($500,000), each of which installments shall be
advanced by the Lenders on a pro rata basis. In the event of termination of this
Agreement, the Notes shall be subject to acceleration, extension or conversion
in accordance with the provisions set forth therein.
2.2 DELIVERY
At the Execution Time (i) the Lenders shall deliver to Parent certified
checks or wire transfer funds in the aggregate amount of One Million Five
Hundred Thousand Dollars ($1,500,000) (the "INITIAL LOAN AMOUNT") and (ii)
Parent shall issue and deliver to the Lenders (i) Convertible Secured Promissory
Notes in favor of the Lenders in their respective participation amounts
substantially in the form attached hereto as EXHIBIT 2.1 and (ii) UCC-1
financing statements or other security documents reasonably satisfactory to the
Lenders evidencing a second priority security interest in substantially all the
assets of Parent. Upon the satisfaction of the requirements set forth in the
Loan Agreement, the Lenders shall deliver to Parent certified checks or wire
transfer funds in the aggregate amount of Five Hundred Thousand Dollars
($500,000) (the "REMAINING LOAN AMOUNT").
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ARTICLE III
PURCHASE OF SERIES H CONVERTIBLE PREFERRED STOCK
3.1 AUTHORIZATION; AGREEMENT TO SELL AND PURCHASE
3.1.1 On or prior to the Closing, Parent shall authorize
the sale and issuance of shares of its Series H Convertible Preferred Stock (the
"H SHARES") having the rights, preferences, privileges and restrictions set
forth in the Certificate of Designations of Powers, Preferences, Qualifications,
Limitations and Restrictions of Series H Convertible Preferred Stock of Parent,
attached hereto as EXHIBIT 3.1.1(a) (the "PARENT H CERTIFICATE").
3.1.2 At the Closing, Parent hereby agrees to issue and
sell to those persons and entities identified as Investors, and each Investor
severally agrees to purchase from Parent, the number of H Shares set forth
opposite such Investor's name on EXHIBIT 3.1.2, at a purchase price of One
Dollar ($1.00) per Share.
3.1.3 Notwithstanding the preceding sentence, any amounts
that an Investor has advanced to Parent as a loan pursuant to Article II of this
Agreement and any unpaid accrued interest on such amounts shall, unless earlier
repaid, be credited to such Investor and such Investor's total purchase price
for the H Shares under this Article III shall be reduced by the sum of the
unpaid principal amount plus any unpaid accrued interest.
3.1.4 Any amounts to be paid to Parent hereunder shall be
paid by certified check or wire transfer of funds to a designated account of
Parent, provided that in the event of a wire transfer, wire transfer
instructions are delivered to the Investors at least one business day prior to
the Closing.
3.1.5 If prior to the Effective Time, Parent effects a
subdivision of its outstanding shares into a greater number of shares, or a
combination of its outstanding shares into a lesser number of shares, or
reorganizes, reclassifies or otherwise changes its outstanding shares into the
same or a different number of shares or other classes, or declares a dividend on
its outstanding shares payable in shares of its capital stock or securities
convertible into shares of its capital stock, then (i) the number of H Shares,
(ii) the purchase price per H Share and (iii) the Series H Conversion Price (as
defined in the Parent H Certificate), shall each be proportionately increased or
decreased so that the aggregate purchase price of the H Shares shall equal
$9,400,000.
3.2 CLOSING, DELIVERY AND PAYMENT
At the Closing, Parent will deliver to the Investors certificates
representing the number of H Shares to be purchased at the Closing by each
Investor, against payment of the purchase price therefor by certified check or
wire transfer of immediately available funds.
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3.3 RIGHTS AND PREFERENCES OF SERIES H SHARES
The rights, preferences, privileges and restrictions of the H Shares
shall be as set forth in the Parent H Certificate.
3.4 REGISTRATION AGREEMENT
At Closing, the Parent and the Investors shall execute and deliver a
Registration Rights Agreement for the benefit of the Investors in the form set
forth hereto as EXHIBIT 3.4.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as is otherwise set forth in the Company Disclosure Memorandum
attached hereto as EXHIBIT 4 (the "DISCLOSURE MEMORANDUM") under a reference to
the appropriate Section to which such disclosure relates (unless the
applicability of such disclosure to any other Section is reasonably apparent in
light of the nature of the disclosure), and in order to induce Parent, Merger
Sub, each Lender and each Investor to enter into and perform this Agreement and
the other agreements and certificates that are required to be executed pursuant
to this Agreement (collectively, the "OPERATIVE DOCUMENTS"), the Company
represents and warrants to Parent, Merger Sub, each Lender and each Investor as
of the date of this Agreement as follows in this ARTICLE IV. The Company shall
be deemed to have "KNOWLEDGE" of a fact or circumstance, if any executive
officer or director of the Company has actual knowledge of any such fact or
circumstance, including, without limitation, any fact or circumstance brought to
the attention of an executive officer or director of the Company by Parent
subsequent to the date of this Agreement.
4.1 ORGANIZATION
The Company is a corporation duly organized, validly existing and in
good standing (to the extent such terms exist) under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to own,
operate and lease its properties and assets and to carry on its business as now
conducted and as currently proposed to be conducted. The Company is duly
qualified and licensed as a foreign corporation to do business and is in good
standing (to the extent "qualified to do business" and "good standing" exist) in
each jurisdiction in which the character of the Company's properties occupied,
owned or held under lease or the nature of the business conducted by the Company
makes such qualification or licensing necessary, except where the failure to be
so qualified or in good standing would not have a Company Material Adverse
Effect. For purposes of this Agreement, the term "Company Material Adverse
Effect" shall mean any material adverse effect on the business, operations,
assets, financial condition or results of operations of the Company; provided,
however, that Company Material Adverse Effect shall not include any change,
circumstance, event or effect that relates to or results from the announcement
or other disclosure or
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consummation of the transactions contemplated by this Agreement or general
economic conditions.
4.2 ENFORCEABILITY
The Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each of the other
Operative Documents to which it is a party and each of the certificates,
instruments and documents executed or delivered by it pursuant to the terms of
this Agreement. All corporate action on the part of the Company and its
officers, directors and stockholders necessary for (i) the authorization,
execution, delivery and performance of this Agreement and the other Operative
Documents to which the Company is a party, (ii) the consummation of the Merger,
and (iii) the performance of all the Company's obligations under this Agreement
and the other Operative Documents to which the Company is a party, required to
be taken as of the Closing, has been taken, or will as of the Closing have been
taken. The affirmative vote of (x) a majority of the shares of the Company
Capital Stock voting on an as-converted basis, (y) two-thirds of the shares of
all classes of Company Preferred Stock voting as a single class, and (z)
two-thirds of the shares of the Series D-1 Preferred Stock in favor of a waiver
of certain rights under the Company's Restated Certificate of Incorporation is
required to duly approve this Agreement and the Merger in accordance with its
terms. This Agreement has been, and each of the other Operative Documents to
which the Company is a party at the Closing will have been, duly executed and
delivered by the Company, and this Agreement is, and each of the other Operative
Documents to which the Company is a party will be at the Closing, assuming due
authorization, execution and delivery of this Agreement and the other Operative
Documents by Parent and Merger Sub, a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
to the effect, if any, of (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other similar federal and state laws affecting the rights or
remedies of creditors generally and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
4.3 CAPITALIZATION
(a) The authorized capital stock of the Company consists
of 125,000,000 shares, consisting of 70,000,000 shares of Company Common Stock,
par value $.001 per share, and 55,000,000 shares of Company Preferred Stock, par
value $.01 per share. Of the authorized Company Preferred Stock, 1,420,875
shares are designated as Series A Preferred Stock, 2,612,275 shares are
designated as Series B Preferred Stock, 4,894,118 shares are designated as
Series C Preferred Stock, 16,000,000 shares are designated as Series D Preferred
Stock, 10,000,000 shares are designated as Series D-1 Preferred Stock,
20,000,000 shares are designated as Series D-2 Preferred Stock and 10,000,000
shares are designated as Series D-3 Preferred Stock.
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(b) As of the date of this Agreement, the issued and
outstanding capital stock of the Company consists solely of 6,185,127 shares of
Company Common Stock; 1,420,875 shares of Series A Preferred Stock, 2,612,275
shares of Series B Preferred Stock, 4,879,412 shares of Series C Preferred
Stock, 15,368,224 shares of Series D Preferred Stock, and 9,708,737 shares of
Series D-1 Preferred Stock, which are held of record by the stockholders of the
Company as set forth on Schedule 4.3(b) to the Disclosure Memorandum. Such
outstanding shares are, and immediately prior to the Closing will be, duly
authorized and validly issued, fully paid and nonassessable. True and correct
copies of the stock records of the Company, showing all issuances and transfers
of shares of capital stock of the Company since inception, have been provided to
Parent or its counsel.
(c) As of the date of this Agreement, other than (i)
Options to purchase up to 5,830,260 shares of Company Common Stock that have
been granted under the Company Option Plan, (ii) Warrants to purchase up to
19,417,474 shares of Series D-2 Preferred Stock (the "D-2 WARRANTS"), (iii)
Warrants to purchase 20,625 shares of Series B Preferred Stock, and (iv) the
rights created pursuant to the Company's Third Amended and Restated Stockholders
Agreement and this Agreement, there are no outstanding rights of first refusal
or offer, preemptive rights, options, warrants, conversion rights or other
agreements (or obligations to issue such options, warrants or conversion
rights), either directly or indirectly, for the purchase or acquisition from the
Company or, to the Company's knowledge, any stockholder of any shares of Company
Capital Stock or any securities convertible into or exchangeable for shares of
Company Capital Stock (all such Options, Warrants and other rights are sometimes
referred to herein as "STOCK PURCHASE RIGHTS"). The Company has provided to
Parent a spreadsheet referencing this representation that accurately reflects
the number of such Options, any Warrants and Stock Purchase Rights outstanding,
the grant or issue dates, vesting schedules and exercise or conversion prices
thereof and, in each case, the identities of the holders and an indication of
their relationships to the Company (if any exist other than a security holder).
The Company has delivered to Parent true and correct copies of the Company
Option Plan, the form of stock option agreements relating to Options granted
thereunder, and all Warrants and the Third Amended and Restated Stockholders
Agreement.
(d) The Company is not a party to any agreement and, to
the Company's knowledge, there is no agreement between any person, that affects
or relates to the voting or giving of written consents with respect to any
securities of the Company or the voting by any director of the Company, other
than the Third Amended and Restated Stockholders Agreement. No stockholder of
the Company or any affiliate thereof is indebted to the Company, and the Company
is not indebted to any stockholder of the Company or any affiliate thereof,
except (i) directors' fees and compensation paid to officers and employees at
rates not exceeding the rates of compensation disclosed on Schedule 4.16 to the
Disclosure Memorandum, and (ii) travel or similar expenses advanced to employees
in connection with their employment duties in the ordinary course of business.
The Company is not under any contractual or other obligation to
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register any of its presently outstanding securities or any of its securities
that may hereafter be issued other than pursuant to the Third Amended and
Restated Stockholders Agreement, which Agreement shall terminate as of the
Closing.
(e) All rights of refusal, preemptive, co-sale rights and
registration rights granted by the Company with respect to the Company Capital
Stock or Stock Purchase Rights of the Company are described on Schedule 4.3(e)
to the Disclosure Memorandum.
(f) All Options have been granted at the price determined
by the Board of Directors of the Company in good faith to be equal to the fair
market value of the Company Common Stock at the date of grant.
4.4 SUBSIDIARIES AND AFFILIATES
The Company does not own or control, and has not since its inception
owned or controlled, directly or indirectly, any corporation, partnership,
limited liability company or other business entity. The Company does not own,
directly or indirectly, any ownership, equity or voting interest in any
corporation, partnership, joint venture or other entity, and has no agreement or
commitment to purchase any such interest.
4.5 NO APPROVALS; NO CONFLICTS
The execution, delivery and performance by the Company of this
Agreement and the other Operative Documents to which the Company is a party, the
effectiveness of the Merger and the performance by the Company of its
obligations pursuant to this Agreement and the other Operative Documents to
which it is a party, will not (a) constitute a material violation (with or
without the giving of notice or lapse of time, or both) of any provision of law
or any judgment, decree, order, regulation or rule of any court or other
governmental authority applicable to the Company; (b) require any consent,
approval or authorization of, or declaration, filing or registration with, any
person, corporation, partnership, joint venture, association, organization,
other entity or governmental or regulatory authority (a "PERSON"), except for
(i) compliance with applicable securities laws, (ii) the filing of all documents
necessary to consummate the Merger with the Delaware Secretary of State, (iii)
the approval by the stockholders of the Company of the transactions contemplated
hereby, as provided under the DGCL and the Certificate of Incorporation and
Bylaws of the Company, and (iv) if applicable, the notification requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HART-SCOTT-RODINO
ACT"); (c) result in a material default (with or without the giving of notice or
lapse of time, or both) under, or acceleration or termination of, or the
creation in any party of the right to accelerate, terminate, modify or cancel,
any material agreement, lease, note or other restriction, encumbrance,
obligation or liability to which the Company is a party or by which it is bound
or to which any assets of the Company are subject; (d) result in the creation of
any Encumbrance (as defined in SECTION 4.9(d) other than a Permitted
Encumbrance) upon any material assets of the Company; (e) conflict with or
result in a breach of or constitute a default under any provision of
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the Certificate of Incorporation or Bylaws of the Company; or (f) invalidate or
materially adversely affect any permit, license or authorization currently
material to the conduct of the business of the Company.
4.6 FINANCIAL STATEMENTS
The Company has delivered to Parent (a) a balance sheet and statements
of operations, stockholders' equity and cash flows of the Company at and for
each of the fiscal years ended February 28, 2001, February 29, 2000 and February
28, 1999, and accompanying notes, audited by PriceWaterhouseCoopers LLP,
independent auditors and certified public accountants, and (b) the unaudited
balance sheet and unaudited statement of operations, stockholders' equity and
cash flows of the Company at and for the three month period ended May 31, 2001
(the "UNAUDITED FINANCIAL STATEMENTS"). All the foregoing financial statements
are herein referred to as the "FINANCIAL STATEMENTS." The balance sheet of the
Company as of February 28, 2001 is herein referred to as the "COMPANY BALANCE
SHEET." The Financial Statements have been prepared in conformity with generally
accepted accounting principles in the United States ("GAAP") (except in the case
of the Unaudited Financial Statements with respect to the absence of footnotes
and subject to normal year-end audit adjustments) on a basis consistent with
prior accounting periods and fairly present the financial position, results of
operations and changes in financial position of the Company as of the dates and
for the periods indicated. Schedule 4.6 to the Disclosure Memorandum sets forth
all promissory notes, loans, lines of credits or similar obligations pursuant to
which the Company is an obligor, together with all the amounts owed by the
Company under such obligations, as of February 28, 2001, and all liabilities
under equipment leases of the Company (the "OPERATING LEASE LIABILITIES") as of
February 28, 2001. Schedule 4.6 sets forth all indebtedness or other amounts
owed by stockholders to the Company, as of the date hereof.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
From the date of the Company Balance Sheet through and including the
date hereof, the Company has conducted its business in the ordinary course and
has not entered into or agreed to enter into any transactions, agreements or
commitments, suffered the occurrence of any event or events or experienced any
change in business, operations, assets, financial condition or results of
operations that, in the aggregate, has resulted in a Company Material Adverse
Effect. Without limiting the generality of the foregoing, except for
transactions specifically contemplated in this Agreement or the other Operative
Documents, from the date of the Company Balance Sheet through and including the
date hereof, the Company has not:
(a) received written notice or, to the knowledge of the
Company, oral notice that there has been or will be a loss of, or contract
cancellation by, any current customer, supplier or licenser of the Company,
which loss or cancellation would result in lost annual revenues to the Company
of at least $1,000,000;
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(b) forgiven or canceled any indebtedness or waived any
claims or rights of material value (including, without limitation, any
indebtedness owing by any stockholder, officer, director, employee or affiliate
of the Company);
(c) granted, other than in the ordinary course of
business and consistent with past practice or as would otherwise not be
material, any increase in the compensation of directors, officers, employees or
consultants;
(d) borrowed or agreed to borrow any funds, assumed or
become subject to, whether directly or by way of guarantee or otherwise, any
material liabilities or obligations (absolute, accrued or contingent), or
incurred any material liabilities or obligations (absolute, accrued or
contingent), except liabilities and obligations incurred in the ordinary course
of business and consistent with past practice not in excess of $50,000
individually;
(e) paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued or contingent) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of claims, liabilities and obligations reflected
or reserved against in the Company Balance Sheet or incurred in the ordinary
course of business and consistent with past practice since the date of the
Company Balance Sheet, or prepaid any obligation having a fixed maturity of more
than 90 days from the date such obligation was issued or incurred;
(f) permitted or allowed any of its material property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
Encumbrance, except conditional sales or similar security interests granted in
connection with the purchase of equipment or supplies in the ordinary course of
business;
(g) written down the value of any inventory (including
write-downs by reason of shrinkage or markdown) or written off as uncollectible
any notes or accounts receivable, except for write-downs and write-offs that are
in the aggregate less than $250,000, incurred in the ordinary course of business
and consistent with past practice;
(h) sold, transferred or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible) with an
aggregate net book value in excess of $100,000, except the sale of inventory in
the ordinary course of business and consistent with past practice;
(i) made any single capital expenditure or commitment in
excess of $100,000 for additions to property, plant, equipment or intangible
capital assets or made aggregate capital expenditures in excess of $500,000 for
additions to property, plant, equipment or intangible capital assets;
(j) made any change in any method of accounting or
accounting practice or internal control procedure, except for any change which
is required by reason of U.S. GAAP or Regulation S-X under the Exchange Act;
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(k) issued any capital stock, other securities or options
or other rights to acquire capital stock or other securities, or declared, paid
or set aside for payment any dividend or other distribution in respect of its
capital stock, or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of the Company
except for the issuance of shares of Company Capital Stock upon exercise or
conversion of outstanding Options or Stock Purchase Rights;
(l) except for transactions that are not material in the
aggregate, loaned or advanced any amount to, or sold, transferred or leased any
properties or assets (real, personal or mixed, tangible or intangible) to, or
entered into any agreement or arrangement with, any of the Company's officers,
directors or employees or any affiliate of the Company's officers, directors or
employees, except (i) directors' fees and compensation paid to officers and
employees at rates not exceeding the rates of compensation disclosed on Schedule
4.16 of the Disclosure Memorandum, and (ii) travel or similar expenses advanced
to employees in connection with their employment duties in the ordinary course
of business;
(m) entered into or agreed to any sale, assignment,
transfer or license of any patents, trademarks, copyrights, trade secrets or
other intangible assets of the Company to a third party or any amendment or
change to any existing license or other agreement relating to intellectual
property, except in the ordinary course of business;
(n) incurred, assumed or guaranteed any indebtedness for
borrowed money other than in the ordinary and usual course of business,
consistent with past practice, and in amounts and on terms consistent with past
practice; or
(o) agreed, whether in writing or otherwise, to take any
action described in this SECTION 4.7.
4.8 TAXES
(a) (i) All Tax Returns (as defined below) required to be
filed by or on behalf of the Company have been filed on a timely basis with the
appropriate governmental authority in all jurisdictions in which such Tax
Returns are required to be filed, and all such Tax Returns were at the time they
were filed true, correct and complete in all material aspects; (ii) all Taxes
(as defined below) of the Company (whether or not reflected on any Tax Return)
have been fully and timely paid or properly accrued; (iii) no waivers of
statutes of limitation have been given by the Company that remain in effect or
requested from the Company in connection with any Tax Returns covering the
Company with respect to any Taxes payable by it; (iv) no taxing authority in a
jurisdiction where the Company does not file Tax Returns has made in writing or
otherwise a claim, assertion or threat to the Company that the Company is or may
be subject to taxation by such jurisdiction; (v) the Company has duly and timely
withheld from employee salaries, wages, compensation and other payments and paid
over to the appropriate governmental authority all amounts required to be so
withheld and paid over for all periods under all applicable laws; (vi) there are
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no liens with respect to Taxes on any of the Company's property or assets other
than liens for current Taxes not yet payable; (vii) there are no Tax rulings,
requests for rulings or closing agreements relating to the Company that could
affect the liability for Taxes or the amount of taxable income of the Company
for any period (or portion of a period) after the date hereof; and (viii) any
adjustment of Taxes of the Company made by the IRS (as defined in Section
4.15.1(f)) in any examination that is required to be reported to the appropriate
state, local or foreign taxing authorities has been reported, and any additional
Taxes due with respect thereto have been paid.
(b) There is no dispute or claim concerning any Tax
liability of the Company either (i) claimed or raised by any governmental
authority in writing or (ii) as to which any of the directors and officers (and
employees responsible for Tax matters) of the Company have knowledge based on
contact or correspondence with any agent of such authority. Schedule 4.8 to the
Disclosure Memorandum lists all Tax Returns filed with respect to the Company
for taxable periods ended on or after the Company's 1997 fiscal year that have
been audited, and indicates those Tax Returns that currently are the subject of
audit. The Company has made available to Parent correct and complete copies of
all Tax Returns, examination reports and statements of deficiencies assessed
against or agreed to by the Company since the Company's inception.
(c) The Company has not made any payment or payments, is
not obligated to make any payment or payments and is not a party to (or a
participating employer in) any agreement or Employee Benefit Plan (as defined in
Section 4.15.1(c)) that could obligate it, the Surviving Corporation or Parent
to make any payment or payments that would constitute an "excess parachute
payment," as defined in Section 280G of the Code (or any similar provision of
state, local or foreign law) or that would otherwise not be deductible under
Section 162 or Section 404 of the Code.
(d) The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(e) The Company is not a party to any Tax allocation or
sharing agreement. The Company (i) has not been a member of a Tax Group filing a
consolidated income Tax Return under Section 1501 of the Code (or any similar
provision of state, local or foreign law) and (ii) does not have any liability
for Taxes of any person under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a transferee or successor
by contract or otherwise.
(f) The unpaid Taxes of the Company (i) did not, as of
February 28, 2001, exceed the reserve for Tax liability set forth on the face
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) of the Company Balance Sheet and (ii)
do not exceed that reserve as adjusted for the passage of time and operations in
the ordinary course of business through the Closing Date.
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(g) All Options that the Company has treated as incentive
stock options under Section 421 of the Code meet the requirements of Section 422
of the Code.
(h) None of the assets of the Company (i) is "tax exempt
use property" within the meaning of Section 168(h) of the Code; (ii) is property
that the Company is required to treat as being owned by any other person
pursuant to the "safe harbor lease" provisions of former Section 168(f)(8) of
the Internal Revenue Code of 1954; or (iii) directly or indirectly secures any
debt the interest on which is tax-exempt under Section 103(a) of the Code.
(i) The Company has not taken or agreed to take any
action, or failed to take any action, that would prevent the Merger from
qualifying as a reorganization within the meaning of the Code.
(j) The Company has not been a party to a distribution to
which Section 355(d) or (e) of the Code applies.
(k) The Company has not filed a consent under Section
341(f) of the Code concerning collapsible corporations.
(l) The Company has disclosed on its federal Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662 of the Code.
As used in this Agreement, the following terms shall have the following
meanings:
"TAXES" means (i) all foreign, federal, state, county or local taxes,
charges, fees, levies, imposts, duties and other assessments, including, but not
limited to, any income, alternative minimum or add-on, estimated, gross income,
gross receipts, sales, use, transfer, transactions, intangibles, ad valorem,
value-added, franchise, registration, title, license, capital, paid-up capital,
profits, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, real property, recording, personal property, federal highway use,
commercial rent, environmental (including, but not limited to, taxes under
Section 59A of the Code) or windfall profit tax, custom, duty or other fee or
other like assessment or charge of any kind whatsoever imposed by any tax
authority, together with any interest, penalties or additions to tax; (ii) any
liability for payment of amounts described in clause (i) whether as a result of
transferee liability, of being a member of an affiliated, consolidated, combined
or unitary group for any period, or otherwise through operation of law; and
(iii) any liability for the payment of amounts described in clause (i) or (ii)
as a result of any tax sharing, tax indemnity or tax allocation agreement, or
any other express or implied agreement to indemnify any other person; and "TAX"
means any of the foregoing Taxes.
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"TAX GROUP" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Company is now
or was formerly a member.
"TAX RETURNS" means any return, declaration, report, claim for refund,
information return, statement or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
4.9 PROPERTY
(a) Schedule 4.9(a) to the Disclosure Memorandum contains
a complete and accurate list of all real property owned, leased or currently
being used by the Company (the "REAL PROPERTY"). The Company has delivered to
Parent or its counsel true and complete copies of all written leases, subleases,
rental agreements, contracts of sale, tenancies or licenses relating to the Real
Property.
(b) Schedule 4.9(b) to the Disclosure Memorandum contains
a complete and accurate list of each item of personal property having a book
value in excess of $1,000 that is owned, leased, rented or used by the Company
(the "PERSONAL PROPERTY"); provided that such list need not describe the Company
Intellectual Property (as defined in SECTION 4.17 below), listed on Schedule
4.17 to the Disclosure Memorandum or Inventory. The Company has delivered or
made available to Parent true and complete copies of all leases, subleases,
rental agreements, contracts of sale, tenancies or licenses to which the
Personal Property is subject.
(c) The Real Property and the Personal Property include
all the properties and assets (whether real, personal or mixed, tangible or
intangible) (other than, in the case of the Personal Property, property rights
with an individual book value of less than $1,000 and the Company Intellectual
Property) reflected in the Company Balance Sheet (except for such properties or
assets sold since the date of the Company Balance Sheet in the ordinary course
of business and consistent with past practice) and all the properties and assets
purchased by the Company since the date of the Company Balance Sheet (other
than, in the case of the Personal Property, property rights with an individual
book value of less than $1,000 and the Company Intellectual Property). The Real
Property and the Personal Property include all material property used in the
business of the Company, other than the Company Intellectual Property. The
Company's offices and other structures and its Personal Property are in good
operating condition and repair, normal wear and tear excepted, and are adequate
for the uses to which they are being put.
(d) The Company's title to or leasehold interest in each
parcel of the Real Property is free and clear of all liens, mortgages, pledges,
deeds of trust, security interests, charges, encumbrances and other adverse
claims or interests of any kind, except for Permitted Encumbrances (as defined
below) (each, an "ENCUMBRANCE"). Each lease of any portion of the Real Property
is valid, binding and enforceable in accordance with its terms against the
Company and, to Company's knowledge, the
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parties thereto, the Company has performed in all material respects all
obligations imposed on it thereunder, and neither the Company nor, to the
Company's knowledge, any other party thereto is in default thereunder, nor is
there any event that with notice or lapse of time, or both, would constitute
a default thereunder by the Company or, to the Company's knowledge, by any
other party. The Company has not granted any lease, sublease, tenancy or
license of, or entered into any rental agreement or contract of sale with
respect to, any portion of the Real Property.
(e) For the purposes of this Agreement, "PERMITTED
ENCUMBRANCES" shall mean (i) liens for Taxes or governmental charges or claims
(A) not yet due and payable or (B) being contested in good faith, if a reserve
or other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor, (ii) statutory liens of landlords, liens of carriers,
warehouse persons, mechanics and material persons and other liens imposed by law
incurred in the ordinary course of business for sums (A) not yet due and payable
or (B) being contested in good faith, if a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor,
(iii) liens incurred or deposits made in connection with workers' compensation,
unemployment insurance and other similar types of social security programs or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return of money bonds
and similar obligations, in each case in the ordinary course of business,
consistent with past practice, (iv) easements, rights-of-way, restrictions and
other similar charges or encumbrances, in each case, which do not interfere with
the ordinary conduct of business of the Company and do not materially detract
from the value of the property upon which such encumbrance exists, and (v) and
liens granted as of the date of this Agreement to Silicon Valley Bank pursuant
to a Loan and Security Agreement with Silicon Valley Bank dated June 29, 2000,
as amended October 31, 2000.
(f) The Personal Property is free and clear of all
Encumbrances except Permitted Encumbrances, and, other than leased Personal
Property that is so noted on the list supplied pursuant to SECTION 4.9(b), the
Company owns such Personal Property. Each lease, license, rental agreement,
contract of sale or other agreement to which the Personal Property is subject is
valid, binding and enforceable in accordance with its terms against the Company
and, to Company's knowledge, parties thereto, the Company has performed in all
material respects all obligations imposed on it thereunder, and neither the
Company nor, to the Company's knowledge, any other party thereto is in default
thereunder, nor is there any event that with notice or lapse of time, or both,
would constitute a default by the Company or, to the Company's knowledge, any
other party thereunder. The Company has not granted any lease, sublease, tenancy
or license of any portion of the Personal Property, except in the ordinary
course of business.
(g) To the Company's knowledge, there are no applicable
adverse zoning, building or land use codes or rules, ordinances, regulations or
other restrictions relating to zoning or land use that currently or could
reasonably be expected to prevent, or cause the imposition of material fines or
penalties as the result of, the use of all or
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any portion of the Real Property for the conduct of the business as presently
conducted. The Company has received all necessary material approvals with regard
to occupancy and maintenance of the Real Property.
4.10 CONTRACTS
4.10.1 Material Contracts
Schedule 4.10.1 to the Disclosure Memorandum contains a complete and
accurate list (other than the IP Rights listed on Schedule 4.17 to the
Disclosure Memorandum) of all written and, to the knowledge of the Company, oral
contracts, agreements and understandings to which the Company is currently a
party or by which the Company is currently bound, providing for potential
payments by or to the Company in excess of $500,000, including, without
limitation, security agreements, license agreements, software development
agreements, distribution agreements, joint venture agreements, reseller
agreements, credit agreements and instruments relating to the borrowing of money
(each, a "MATERIAL CONTRACT"). All contracts set forth on Schedule 4.10.1 are
valid, binding and enforceable in accordance with their terms against Company
and, to the Company's knowledge, the other parties thereto, except as to the
effect, if any, of (a) applicable bankruptcy, insolvency, reorganization,
moratorium and other similar federal and state laws affecting the rights or
remedies of creditors generally, (b) rules of law governing specific
performance, injunctive relief and other equitable remedies, and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities, and are in full force and effect, the
Company has performed in all material respects all material obligations imposed
on it thereunder, and neither the Company nor, to the Company's knowledge, any
other party thereto is in material default thereunder, nor, to the Company's
knowledge, is there any event that with notice or lapse of time, or both, would
constitute a default by the Company or, to the Company's knowledge, any other
party thereunder. True and complete copies of each such written Material
Contract have been delivered to Parent by the Company. Except as set forth on
Schedule 4.10.1 to the Disclosure Memorandum, the Company has no:
(a) contracts, agreements or arrangements (i) with
distributors or dealers that cannot be canceled by the Company within 60 days'
notice without liability, penalty or premium, (ii) with directors, officers,
stockholders, employees, agents, consultants, advisors, salespeople, or sales
representatives providing for the payment of any bonus or commission based on
sales or earnings, or (iii) affecting or relating to former employees of the
Company;
(b) employment agreement, or any other agreement for
services that contains severance or termination pay liabilities or obligations;
(c) noncompetition agreement or other arrangement that
would prevent the Company from carrying on its business anywhere in the world;
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(d) written or, to the knowledge of the Company, oral
notice that any party to a contract listed on Schedule 4.10.1 to the Disclosure
Memorandum intends to cancel, terminate or refuse to renew such contract (if
such contract is renewable);
(e) material dispute with any of its suppliers,
customers, distributors, OEM resellers, licensors or licensees;
(f) product distribution agreement, development agreement
or license agreement as licensor or licensee (except for agreements relating to
"OFF-THE-SHELF SOFTWARE" as defined below in SECTION 4.17.3);
(g) joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons;
(h) instrument evidencing indebtedness for borrowed money
by way of a direct loan, sale of debt securities, purchase money obligation,
conditional sale or guarantee, or otherwise, except for trade indebtedness
incurred in the ordinary course of business, and except as disclosed in the
Financial Statements; or
(i) agreements or commitments to provide indemnification,
other than those entered into in the ordinary course of business.
4.10.2 Required Consents
The execution and delivery of this Agreement and the performance of the
obligations of the Company hereunder will not constitute a material default
under any Material Contract and do not require the consent of any other party to
any Material Contract, except for those consents listed on Schedule 4.10.2 to
the Disclosure Memorandum.
4.11 CUSTOMERS AND SUPPLIERS
Schedule 4.11 to the Disclosure Memorandum sets forth (a) a complete
and accurate list of the customers of the Company accounting for 5% or more of
the Company's revenues during the fiscal year ended February 28, 2001 and (b) a
complete and accurate list of the suppliers of the Company from whom the Company
has purchased 5% or more of the goods or services purchased by the Company in
the fiscal year ended February 28, 2001. As of the date hereof, the Company has
not received any written, or to the knowledge of the Company, oral notice from
its customers or suppliers that would cause it, in its reasonable judgment, to
expect any material reduction in the business activity between the Company and
any customers or suppliers named on such Schedule 4.11.
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4.12 WARRANTIES AND RETURNS
Schedule 4.12 to the Disclosure Memorandum sets forth the Company's
warranties currently made with respect to its business, products and services,
and current policies with respect to returns of products in the course of the
Company's conduct of the business. Except as set forth on the Disclosure
Schedule, the Company has not made any express warranties in connection with the
sale of its products and services. Claims against the Company for warranty costs
(individually or in the aggregate, but net of warranties passed through to
vendors) with respect to products and services during each of the last three
fiscal years did not exceed $350,000, and there are no outstanding or, to the
Company's knowledge, threatened claims for any such warranty costs that would
exceed $300,000 (individually or in the aggregate, but net of warranties passed
through to vendors). As used above, the term "WARRANTY COST" shall mean costs
and expenses associated with correcting, returning or replacing defective or
allegedly defective products or services, whether such costs and expenses arise
out of claims sounding in warranty, contract, tort or otherwise.
4.13 CLAIMS AND LEGAL PROCEEDINGS
Except as disclosed on Schedule 4.13 to the Disclosure Memorandum,
there are no claims, actions, suits, arbitrations, investigations or proceedings
("Proceedings") pending or, to the Company's knowledge, threatened against the
Company or any of its assets before or by any court or governmental entity
except for such Proceedings as would not be material. To the Company's
knowledge, there is no valid basis for any claim, action, suit, arbitration,
proceeding or investigation before or by any person that would have a Company
Material Adverse Effect. There are no outstanding or unsatisfied judgments,
orders, decrees or stipulations to which the Company is a party.
4.14 LABOR AND EMPLOYMENT MATTERS
There are no material labor disputes, employee grievances or
disciplinary actions pending or, to the Company's knowledge, threatened against
the Company or any of its present or former employees. The Company has complied
in all material respects with all material provisions of law relating to
employment and employment practices, terms and conditions of employment, wages
and hours. The Company is not engaged in any unfair labor practice, and there is
no labor strike, dispute, slowdown or stoppage pending or, to the Company's
knowledge, threatened against or affecting the Company. The Company is not a
party to any collective bargaining agreement. The Company has no knowledge of
any organizational efforts presently being made or threatened by or on behalf of
any labor union with respect to employees of the Company. Each current employee,
officer and consultant of the Company has executed a Company Employment
Proprietary Information Agreement in the form provided to Parent. To the
Company's knowledge, no employee (or person performing similar functions) of the
Company is in violation of any such agreement or any employment agreement,
noncompetition agreement, patent disclosure agreement, invention assignment
agreement, proprietary
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information agreement or other contract or agreement relating to the
relationship of such employee with the Company or any other party. Except for
the employees identified on Schedule 4.14 to the Disclosure Memorandum, all
employees of the Company are employed on an "at will" basis, and, to the
Company's knowledge, are eligible to work and are lawfully employed in the
United States.
4.15 EMPLOYEE BENEFIT PLANS
4.15.1 Definitions
As used in this Agreement, the following terms shall have the following
meanings:
(a) "COBRA" means the health care continuation provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (as
set forth in Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the
Code).
(b) "DOL" means the United States Department of Labor.
(c) "EMPLOYEE BENEFIT PLAN" means any retirement,
pension, profit sharing, deferred compensation, stock bonus, savings, bonus,
incentive, cafeteria, medical, dental, vision, hospitalization, life insurance,
accidental death and dismemberment, medical expense reimbursement, dependent
care assistance, tuition reimbursement, disability, sick pay, holiday, vacation,
severance, change of control, stock purchase, stock option, restricted stock,
phantom stock, stock appreciation rights, fringe benefit or other employee
benefit plan, fund, policy, program, contract, arrangement or payroll practice
of any kind (including any "employee benefit plan," as defined in Section 3(3)
of ERISA) or any employment, consulting or personal services contract, whether
written or oral, qualified or nonqualified, funded or unfunded, or domestic or
foreign, (i) sponsored, maintained or contributed to by the Company or, if an
employment, consulting or personal services contract, to which the Company is a
party, (ii) covering or benefiting any current or former officer, employee,
agent, director or independent contractor of the Company (or any dependent or
beneficiary of any such individual), or (iii) with respect to which the Company
has (or could have) any obligation or liability.
(d) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(e) "HIPAA" means the Health Insurance Portability and
Accountability Act of 1997, as amended.
(f) "IRS" means the United States Internal Revenue
Service.
4.15.2 Employee Benefit Plan Listing
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Schedule 4.15.2 contains a complete and accurate list of all material
written, and to the knowledge of the Company, oral Employee Benefit Plans. The
Company does not have any agreement, arrangement, commitment or obligation,
whether formal or informal, whether written or unwritten and whether legally
binding or not, to create, enter into or contribute to any additional Employee
Benefit Plan, or to modify or amend any existing Employee Benefit Plan, except
for amendments required by statute, regulation or administrative pronouncement.
There has been no amendment, interpretation or other announcement (written or
oral) by the Company or any other Person relating to, or change in participation
or coverage under, any Employee Benefit Plan that, either alone or together with
other such items or events, could materially increase the expense of maintaining
such Employee Benefit Plan (or the Employee Benefit Plans taken as a whole)
above the level of expense incurred with respect thereto for the most recent
fiscal year included in the Financial Statements. The terms of each Employee
Benefit Plan permit the Company to amend or terminate such Employee Benefit Plan
at any time and for any reason (except to the extent prohibited by law) without
penalty and without material liability or expense. None of the rights of the
Company under any Employee Benefit Plan will be impaired in any way by this
Agreement or the consummation of the transactions contemplated by this
Agreement.
4.15.3 Documents Provided
The Company has made available to Parent true, correct and complete
copies (or, in the case of unwritten Employee Benefit Plans, descriptions) of
all Employee Benefit Plans (and all amendments thereto), along with, to the
extent applicable to the particular Employee Benefit Plan, copies of the
following: (a) the last three annual reports (Form 5500 series) filed with
respect to such Employee Benefit Plan; (b) the most recent summary plan
descriptions (and all summaries of material modifications related thereto) and
employee manuals distributed with respect to such Employee Benefit Plan; (c) all
material communications filed or distributed with respect to such Employee
Benefit Plan during the last year; (d) all contracts and agreements (and any
amendments thereto) relating to such Employee Benefit Plan, including, without
limitation, trust agreements, investment management agreements, annuity
contracts, insurance contracts, bonds, indemnification agreements and service
provider agreements; (e) the most recent determination letter issued by the IRS
with respect to such Employee Benefit Plan; (f) all written communications
relating to the amendment, creation or termination of such Employee Benefit
Plan, or an increase or decrease in benefits, acceleration of payments or
vesting or other events that could result in a material liability to the Company
since the date of the most recently completed and filed annual report (Form 5500
series); (g) all correspondence to or from any governmental entity or agency
relating to such Employee Benefit Plan; (h) samples of all administrative forms
currently in use, including, without limitation, all COBRA and HIPAA forms and
notices; (i) all coverage, nondiscrimination, top heavy and Code Section 415
tests performed with respect to such Employee Benefit Plan for the last three
years; and (j) the most recent Joint Proxy and Registration Statement, annual
report (Form 11-K) and prospectus prepared in connection with such Employee
Benefit Plan.
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4.15.4 Compliance
With respect to each Employee Benefit Plan: (a) such Employee Benefit
Plan is, and at all times since inception has been, maintained, administered,
operated and funded in all material respects in accordance with its terms and in
compliance with all applicable requirements of all applicable laws, statutes,
orders, rules and regulations, including, without limitation, ERISA, COBRA,
HIPAA and the Code; (b) the Company and all other Persons (including, without
limitation, all fiduciaries) have, at all times, properly performed in all
material respects all of their duties and obligations (whether arising by
operation of law or by contract) under or with respect to such Employee Benefit
Plan, including, without limitation, all reporting, disclosure and notification
obligations; (c) all returns, reports and other information (including, without
limitation, all Form 5500 series annual reports, together with all schedules and
audit reports required with respect thereto) relating to such Employee Benefit
Plan required to be filed with any governmental entity or agency have been
accurately completed and timely and properly filed; (d) all notices, statements,
reports and other disclosure (including, without limitation, all summary plan
descriptions) required to be given or made to participants in such Employee
Benefit Plan or their beneficiaries have been accurately completed and timely
and properly disclosed or provided; (e) neither the Company nor any fiduciary of
such Employee Benefit Plan has engaged in any transaction or acted or failed to
act in a manner that violates the fiduciary requirements of ERISA or any other
applicable law; (f) no transaction or event has occurred or is threatened or
about to occur (including any of the transactions contemplated in or by this
Agreement) that constitutes or could constitute a prohibited transaction under
Section 406 or 407 of ERISA or under Section 4975 of the Code for which an
exemption is not available; and (g) the Company has not incurred, and there
exists no condition or set of circumstances in connection with which the
Company, the Surviving Corporation or Parent could incur, directly or
indirectly, any material liability or expense (except for routine contributions,
benefit payments and administrative expenses) under ERISA, the Code or any other
applicable law, statute, order, rule or regulation, or pursuant to any
indemnification or similar agreement, with respect to such Employee Benefit
Plan.
4.15.5 Qualification
Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code is, and at all times since inception has been, so
qualified and its related trust is, and at all times since inception has been,
exempt from taxation under Section 501(a) of the Code. Each such Employee
Benefit Plan either (a) is the subject of an unrevoked favorable determination
letter from the IRS with respect to such Employee Benefit Plan's qualified
status under the Code, as amended by the Tax Reform Act of 1986 and all
subsequent legislation, or (b) has remaining a period of time under the Code or
applicable Treasury regulations or IRS pronouncements in which to apply to the
IRS for such a letter and to make any amendments necessary to obtain such a
letter from the IRS which shall apply retroactively to the inception of
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such Employee Benefit Plan. No fact exists or is reasonably expected by the
Company to arise, that could adversely affect the qualification or exemption of
any such Employee Benefit Plan or its related trust. No such Employee Benefit
Plan is a "top-heavy plan," as defined in Section 416 of the Code.
4.15.6 Contributions, Premiums and Other Payments
All contributions, premiums and other payments due or required to be
paid to (or with respect to) each Employee Benefit Plan have been timely paid,
or, if not yet due but due on or before the Closing Date, or if to become due
with respect to any period before or ending on the Closing Date, have been
accrued as a liability on the Company Balance Sheet. All income taxes and wage
taxes that are required by law to be withheld from benefits derived under the
Employee Benefit Plans have been properly withheld and remitted to the proper
depository.
4.15.7 Related Employers
The Company is not, and has never been, a member of (i) a controlled
group of corporations, within the meaning of Section 414(b) of the Code, (ii) a
group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, (iii) an affiliated service group, within the
meaning of Section 414(m) of the Code, or (iv) any other group of Persons
treated as a single employer under Section 414(o) of the Code.
4.15.8 Multiemployer, Defined Benefit and Money Purchase
Pension Plans and Multiple Employer Welfare Arrangements
The Company does not maintain or contribute to, and has never
maintained or contributed to (or been obligated to contribute to), (a) a
multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA or
414(f) of the Code, (b) a multiple employer plan within the meaning of Section
4063 or 4064 of ERISA or Section 413(c) of the Code, (c) an employee benefit
plan, fund, program, contract or arrangement that is subject to Section 412 of
the Code, Section 302 of ERISA or Title IV of ERISA, or (d) a multiple employer
welfare arrangement as defined in Section 3(40) of ERISA.
4.15.9 Post-Termination Benefits
Neither the Company nor any Employee Benefit Plan provides or has any
obligation to provide (or contribute toward the cost of) post-employment or
post-termination benefits of any kind, including, without limitation, death and
medical benefits, with respect to any current or former officer, employee,
agent, director or independent contractor of the Company, other than (a)
continuation coverage mandated by Sections 601 through 608 of ERISA and Section
4980B(f) of the Code, (b) retirement benefits under any Employee Benefit Plan
that is qualified under Section 401(a) of the Code, and (c) deferred
compensation that is accrued as a current liability on the Company Balance
Sheet.
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4.15.10 Suits, Claims and Investigations
There are no actions, suits or claims (other than routine claims for
benefits and qualified domestic relations orders) pending or, to the knowledge
of the Company, threatened with respect to (or against the assets of) any
Employee Benefit Plan, nor, to the knowledge of the Company, is there a basis
for any such action, suit or claim. No Employee Benefit Plan is currently under
investigation, audit or review, directly or indirectly, by the IRS, the DOL or
any other governmental entity or agency, and, to the knowledge of the Company,
no such action is contemplated or under consideration by the IRS, the DOL or any
other governmental entity or agency.
4.15.11 Effect of Transaction
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement, will (a)
entitle any individual to severance pay, unemployment compensation or any other
payment from the Company, the Surviving Corporation, Parent or any Employee
Benefit Plan, (b) otherwise increase the amount of compensation due to any
individual or forgive indebtedness owed by any individual, (c) result in any
benefit or right becoming established or increased, or accelerate the time of
payment or vesting of any benefit, under any Employee Benefit Plan, or (d)
require the Company, the Surviving Corporation or Parent to transfer or set
aside any assets to fund or otherwise provide for any benefits for any
individual.
4.16 PERSONNEL
Schedule 4.16 to the Disclosure Memorandum lists (a) the names, titles
and current compensation amounts of all employees of the Company with annual
base salaries or wages in excess of $50,000, (b) compensation amounts of all
directors of the Company, and (c) the names and current compensation packages of
all independent contractors and consultants of the Company with annual
compensation in excess of $50,000. The Company is not in default with respect to
any of its obligations relating to payment of wages and has no, and will not
incur any, material obligation or liability for severance or back pay owed
through or by virtue of the Merger.
4.17 INTELLECTUAL PROPERTY
4.17.1 DEFINITIONS
For purposes of this SECTION 4.17, the following terms shall have the
following meanings:
(a) "INTELLECTUAL PROPERTY RIGHTS" means all industrial
and intellectual property rights, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service mark applications, Internet domain names, Internet domain
name applications, copyrights, copyright applications, moral rights, know-how,
trade secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions,
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marketing materials, trade dress, logos and designs and all documentation and
media constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records.
(b) "COMPANY INTELLECTUAL PROPERTY" means all
Intellectual Property Rights owned by, licensed to or otherwise available to the
Company.
4.17.2 GENERAL
The Company owns or has sufficient rights to use, including the right
to bring actions for the infringement of, and the Company Intellectual Property
represents, all Intellectual Property Rights necessary or required for the
conduct of the Company's business as currently conducted and as currently
proposed to be conducted. The Company is not a party to any agreement that
contains any restriction on the Company's ability to use or practice any Company
Intellectual Property that is material to the business of the Company as
presently conducted or as currently proposed to be conducted.
4.17.3 LISTING OF COMPANY INTELLECTUAL PROPERTY
SECTION 4.17.3 contains a true and complete list of all of the
Company's patents, patent applications, trademarks, trademark applications,
trade names, service marks, service mark applications, Internet domain names,
Internet domain name applications, copyrights, copyright registrations and
applications, and any other filings and formal actions made or taken pursuant to
Federal, state, local and foreign laws by the Company to protect its interests
in the Company Intellectual Property.
4.17.4 INBOUND LICENSE AGREEMENTS
SCHEDULE 4.17.4 sets forth a complete and accurate list of each
agreement (the "INBOUND LICENSE AGREEMENTS") granting to the Company any right
to use or practice any Intellectual Property Rights other than rights in
software commercially available on reasonable terms to any person for a license
fee of no more than fifty thousand dollars ($50,000) or shrink wrap licenses to
commercially available software sold at retail, indicating for each agreement
the title, the parties thereto, the term thereof and the amount of any future
royalty or license fee payable thereunder. To the Company's knowledge, all
Inbound License Agreements are valid, binding and in full force and effect. The
Company has performed in all material respects its obligations under the Inbound
License Agreements, the Company is not in default thereunder, and to the
Company's knowledge no event or circumstance has occurred under any Inbound
License Agreement that with notice or lapse of time or both would constitute a
default or event of default on the part of the Company or give to any other
party the right to terminate or modify any of the Company's rights under such
Inbound License Agreement. There is no material outstanding or, to the knowledge
of the Company, threatened dispute or disagreement with respect to any Inbound
License Agreement. The Company has not received written notice that any party to
any Inbound License Agreement intends to cancel, terminate or refuse to renew
(if renewable) any of the Company's rights under such Inbound License Agreement
or to exercise or decline to exercise any option or right thereunder.
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4.17.5 OUTBOUND LICENSE AGREEMENTS
Schedule 4.17.5 sets forth a complete and accurate list of each
agreement (the "OUTBOUND LICENSE AGREEMENTS") under which the Company has
granted any right to use or practice any Intellectual Property Rights other than
nonexclusive rights in software granted in the ordinary course of the Company's
business for which the total payments to the Company did not exceed fifty
thousand dollars ($50,000) and that are not otherwise material to the Company,
indicating for each agreement the title, the parties thereto and the term
thereof. To the Company's knowledge, all Outbound License Agreements are valid,
binding and in full force and effect. The Company has performed in all material
respects its obligations under the Outbound License Agreements, the Company is
not in default thereunder, and to the Company's knowledge no event or
circumstance has occurred under any Outbound License Agreement that with notice
or lapse of time or both would constitute a default or event of default on the
part of the Company or give to any other party the right to terminate or modify
any of the Company's rights under such Outbound License Agreement. There is no
material outstanding or, to the knowledge of the Company, threatened dispute or
disagreement with respect to any Outbound License Agreement. The Company has not
received written notice that any party to any Outbound License Agreement intends
to cancel, terminate or refuse to renew (if renewable) such Outbound License
Agreement or to exercise or decline to exercise any option or right thereunder.
4.17.6 NO INFRINGEMENT BY THE COMPANY
The Company Intellectual Property and the conduct of the Company's
business as currently conducted and as currently proposed to be conducted do not
infringe, violate, misappropriate or otherwise misuse any third party
Intellectual Property Rights, and the Company has not received any complaint,
claim or notice alleging any such infringement, violation, misappropriation or
misuse or any act of unfair competition by the Company. To the best knowledge of
the Company, no goods, services, or other products which are sold, licensed or
otherwise supplied, used or employed by the Company infringe, violate,
misappropriate or otherwise misuse any third party Intellectual Property Rights,
and the Company has not received any complaint, claim or notice alleging any
such infringement, violation, misappropriation or misuse. Nothing has come to
the attention of the Company to the effect that the name of the Company or any
business name, trade mark, service mark or domain name used or owned by the
Company is the same as, or is confusingly or deceptively similar to, the name of
any other company or business, trade name or domain name or to the trade mark or
service mark owned or used by any other person. No litigation is now or, within
the five (5) years prior to the date of this Agreement, was pending and, to the
knowledge of the Company, no notice or other claim in writing has been received
by the Company (i) alleging that the Company has engaged in any activity or
conduct that infringes, violates, misappropriates or otherwise misuses the
Intellectual Property Rights of any third party or (ii) challenging the
ownership, use, validity or enforceability of any Company Intellectual Property.
4.17.7 NO INFRINGEMENT BY THIRD PARTIES
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To the Company's knowledge, no third party is infringing, violating,
misappropriating or misusing any Company Intellectual Property that is owned or
exclusively licensed to the Company, or committing any act of unfair competition
with respect to the Company, and no such claims have been brought against any
third party by the Company. The Company has not entered into any agreement
granting any Person the right to bring any action with respect to, or otherwise
to enforce, any Company Intellectual Property.
4.17.8 PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
The Company has taken reasonable steps to protect the Company
Intellectual Property. Without limiting the generality of the foregoing, the
Company enforces a policy of requiring each employee, consultant and contractor
of the Company to execute agreements that contain provisions designed to prevent
unauthorized disclosure of the Company Intellectual Property. With respect to
employees, such agreements are substantially in the Company's standard forms and
also assign to the Company all Intellectual Property Rights relating to the
Company's business that are developed by the employee in the course of his or
her activities for the Company or are developed during working hours using the
resources of the Company. With respect to contractors and consultants, the
agreements either assign all Intellectual Property Rights developed pursuant to
the agreement or license such rights on agreed-upon terms. Except under
confidentiality obligations, to the knowledge of the Company, there has been no
disclosure by the Company of material confidential information or trade secrets.
The Company has not disclosed any source code to any software to any person or
entity other than an employee of the Company who is under a written
nondisclosure agreement; and, except as described in Schedule 4.17.8, neither
the Company nor any escrow agent is under any contractual or other obligation to
disclose any source code or other Company Intellectual Property. If, as
disclosed on Schedule 4.17.8, the Company has deposited any source code or other
Company Intellectual Property into source code escrows or similar arrangements,
no event has occurred that has or could reasonably form the basis for a release
of such source code or other Company Intellectual Property from such escrows or
arrangements.
4.17.9 INDEMNIFICATION FOR USE OF INTELLECTUAL PROPERTY
RIGHTS
Other than pursuant to standard agreements with customers or supppliers
of the Company entered into in the ordinary course of business (accurate and
complete copies of which have been made available to Parent by the Company), the
Company has not entered into any agreement or offered to indemnify any Person
against any charge of infringement, violation, misappropriation or misuse of
Intellectual Property Rights.
4.17.10 ASSIGNMENT; CHANGE OF CONTROL
The execution, delivery and performance by the Company of this
Agreement, and the consummation of the transactions contemplated hereby, will
not result in the loss or impairment of, or give rise to any right of any third
party to terminate or alter, any of
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the Company Intellectual Property or the Company's rights under any Inbound
License Agreement or Outbound License Agreement, nor require any consent in
respect of any Company Intellectual Property, nor require any disclosure or
release of any source code or other Company Intellectual Property from any
escrows or other arrangements.
4.18 ACCOUNTS RECEIVABLE
All accounts receivable of the Company reflected in the Company Balance
Sheet ("ACCOUNTS") represent amounts due for services performed or sales
actually made in the ordinary course of business and are carried at values
determined in accordance with GAAP. To the Company's knowledge, the bad debt
reserves and allowances reflected in the Company Balance Sheet are adequate.
4.19 INVENTORY
(a) All items in the inventory reflected in the Company
Balance Sheet or as currently owned by the Company for use in the operation of
the business (i) have been valued consistent with the inventory valuation policy
of the Company in accordance with GAAP consistently applied and (ii) are of a
quality and quantity usable and salable in the ordinary course of business.
(b) The Company's inventories of finished products and
evaluation units as of August 17, 2001, the approximate quantities thereof, and
their locations are set forth in Schedule 4.19 to the Disclosure Memorandum. In
addition, Schedule 4.19 sets forth the value of all raw materials and work in
progress as of August 17, 2001.
(c) The Company is not aware of any adverse condition,
other than shortages of parts, raw materials and supplies common to the industry
generally, affecting the quality or supply of raw materials, intermediates,
supplies, parts and other materials available to the Company that are necessary
to manufacture, package or label the products or are otherwise used in the
business.
4.20 CORPORATE BOOKS AND RECORDS
The Company has furnished to Parent or its representatives for their
examination true and complete copies of (a) the Certificate of Incorporation and
Bylaws of the Company as currently in effect, including all amendments thereto
and (b) the minute books of the Company. Such minutes reflect all meetings of
the Company's stockholders, Board of Directors and any committees thereof since
the Company's inception, and such minutes accurately reflect in all material
respects the events of and actions taken at such meetings.
4.21 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
The Company has received all required material governmental approvals,
authorizations, consents, licenses, orders, registrations and permits of all
agencies,
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whether federal, state, local or foreign (the "PERMITS"), except where the
failure to receive any Permit would not have a Company Material Adverse Effect.
Schedule 4.21 to the Disclosure Memorandum contains a list of all Permits with
expiration dates, if any. The Company is in material compliance with the terms
of all Permits, and all Permits are valid and in full force and effect, and no
proceeding is pending or, to the Company's knowledge, threatened, the object of
which is to revoke, limit or otherwise affect any Permit. The Company has not
received any notifications of any asserted failure to obtain any Permit or any
past and unremedied failure to obtain any Permit.
4.22 COMPLIANCE WITH LAWS
The Company is and has been in material compliance with all federal,
state, local and foreign laws, rules, regulations, ordinances, decrees and
orders applicable to the operation of its business, to its employees, or to its
property, including, without limitation, all such laws, rules, ordinances,
decrees and orders relating to antitrust, consumer protection, currency
exchange, environmental protection, equal opportunity, prevention of domestic
and foreign corrupt practices, health, occupational safety, good laboratory
practices, pension, securities and trading-with-the-enemy matters. The Company
has not received any written notification of any asserted present or past
unremedied failure by the Company to comply with any of such laws, rules,
ordinances, decrees or orders.
4.23 INSURANCE
The Disclosure Memorandum sets forth a true and correct list of all
insurance policies maintained by the Company. The Company maintains commercially
reasonable levels of (a) insurance on its property (including leased premises)
that insures against loss or damage by fire or other casualty and (b) insurance
against liabilities, claims and risks, in each case, of a nature and in such
amounts as are normal and customary in the Company's industry for companies of
similar size and financial condition. All insurance policies of the Company are
in full force and effect, all premiums with respect thereto due as of the date
hereof have been paid, and no written notice of cancellation or termination has
been received with respect to any such policy or binder. Such policies or
binders are sufficient for compliance with all requirements of law currently
applicable to the Company and of all agreements to which the Company is a party.
Such policies will not terminate or lapse by reason of the transactions
contemplated by this Agreement.
4.24 BROKERS OR FINDERS
The Company has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by or on behalf of the Company, any
liability for investment banking, brokerage or finders' fees or agents'
commissions or any similar charges in connection with the Merger, this Agreement
or any transactions contemplated hereby.
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4.25 BANK ACCOUNTS
Schedule 4.25 to the Disclosure Memorandum sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company maintains safe deposit boxes or
accounts of any nature and the names of all Persons authorized to draw thereon,
make withdrawals therefrom or have access thereto.
4.26 INSIDER INTERESTS
No stockholder or officer, director, employee, or consultant of the
Company has any interest (other than as a stockholder of the Company) (a) in any
Real Property, Personal Property, Technology or IP Rights used in or directly
pertaining to the business of the Company, including, without limitation,
inventions, patents, trademarks or trade names, or (b) to the Company's
knowledge, in any agreement, contract, arrangement or obligation relating to the
Company, its business or its operations. There are no agreements, understandings
or proposed transactions between the Company and any of its officers, directors,
stockholders or affiliates other than with respect to officers, employees or
directors, agreements and arrangements relating to their employment or
directorship. To the Company's knowledge, except for beneficial or record
ownership of not more than one percent of the outstanding securities of an
entity whose shares are registered under the Exchange Act (as defined in SECTION
6.26), the Company and its officers and directors have no interest, either
directly or indirectly, in any entity, including, without limitation, any
corporation, partnership, joint venture, proprietorship, firm, licensee,
business or association (whether as an employee, officer, director, stockholder,
agent, independent contractor, security holder, creditor, consultant or
otherwise) that presently (i) provides any services, produces and/or sells any
products or product lines, or engages in any activity that is the same, similar
to or competitive with any activity or business in which the Company is now
engaged or proposes to engage; (ii) is a supplier, customer or creditor; or
(iii) has any direct or indirect interest in any material asset or property,
real or personal, tangible or intangible, of the Company or any property, real
or personal, tangible or intangible, that is necessary for the conduct of the
Company's business.
4.27 COMPLIANCE WITH ENVIRONMENTAL LAWS
4.27.1 FOR PURPOSES OF THIS SECTION 4.27,
(a) "Environmental, Health, and Safety Requirements"
shall mean all federal, state, local and foreign statutes, regulations,
ordinances and other provisions having the force or effect of law, all judicial
and administrative orders and determinations, all contractual obligations and
all common law concerning public health and safety, worker health and safety,
and pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
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Hazardous Materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as
amended, now in effect. This includes, but is not limited to, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, and
the Solid Waste Disposal Act, as amended; and
(b) "Hazardous Materials" shall mean all substances
designated, regulated, defined or addressed by Environmental, Health and Safety
Requirements.
4.27.2 The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental, Health, and Safety Requirements except where such violation
or failure to be in compliance with such Environmental, Health, and Safety
Requirements would not have a Company Material Adverse Effect.
4.27.3 The Company has no basis to expect, nor has it
received any written or oral notice, report, order, summons, inquiry or other
communication from any governmental authority or any person regarding any actual
or alleged violation of or failure to comply with Environmental, Health, and
Safety Requirements, or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) arising under
Environmental, Health, and Safety Requirements, including any investigatory,
remedial or corrective obligations, relating to the Company, its properties,
facilities or operations or any other properties, facilities or assets in which
the Company has had an interest, or with respect to any property at or to which
Hazardous Materials generated, transferred, or used by the Company or any other
person for whose conduct it is or may be held responsible, have been
transported, stored, handled, received or disposed.
4.27.4 To the Company's knowledge, there has been no release
or threat of release of any Hazardous Materials, whether by the Company or any
other person, at or from the Company's properties, facilities or operations, any
other locations where Hazardous Materials were generated, used or transferred
from or by the Company's properties, facilities or operations or any other
properties, facilities or operations in which the Company had an interest.
4.27.5 The Company has delivered to Parent true and complete
copies of any and all environmental assessments and reports relating to the
Company's properties, facilities or operations.
4.28 INFORMATION SUPPLIED BY THE COMPANY
None of the information supplied or to be supplied by the Company for
inclusion in the S-4 or contained in any other material to be delivered to its
stockholders in connection with any written consent by or meeting of such
stockholders (collectively, "STOCKHOLDER MATERIALS"), at the date on which the
S-4 is declared effective by the SEC
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(as defined in SECTION 6.28) or on the date of such approval, contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not materially misleading; provided, however, that the Company makes no
representations or warranties regarding information furnished by or related to
any party other than the Company.
4.29 FULL DISCLOSURE
None of the representations and warranties made by the Company herein
(as modified by the Disclosure Memorandum), nor any statement made in any
schedule or the Compliance Certificate and Secretary's Certificate furnished by
the Company pursuant to SECTIONS 7.3 and 7.6, respectively, of this Agreement,
contains any untrue statement of material fact, or omits to state any material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading.
4.30 ABSENCE OF UNDISCLOSED LIABILITIES
The Company and its consolidated subsidiaries have no material
liabilities or obligations of any nature (absolute, contingent or otherwise)
that are not fully reflected or reserved against in the Company Balance Sheet
and that would be required under GAAP to be reflected or reserved in order for
the Company Balance Sheet to fairly represent the consolidated financial
condition of the Company as of such date, except liabilities or obligations
incurred since the date of the Company Balance Sheet in the ordinary course of
business and consistent with past practices.
4.31 GOVERNMENT CONTRACTS
The Company has not, during the past five years, attempted to sell to
or bid on any contract or subcontract with or for any agency of the U. S.
government or any foreign government and had any such attempt denied as a result
of any prohibition against the Company's dealing with or for or any such agency
or government, and the Company has no knowledge of any such prohibition. The
Company has not been, nor to its knowledge is it currently being, audited or
investigated by the United States Government Accounting Office, the United
States Department of Justice, the United States Department of Defense or any of
its agencies, the Defense Contract Audit Agency or the inspector general or
other authorities of any agency of the U. S. government, or any foreign
government, nor, to the Company's knowledge, has such audit or investigation
been threatened.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
INVESTORS AND LENDERS REGARDING SECURITIES MATTERS
Each Investor and Lender, severally and not jointly, hereby represents
and warrants to Parent as follows:
5.1 REQUISITE POWER AND AUTHORITY
Such Investor and Lender has all necessary power and authority under
all applicable provisions of law to execute and deliver this Agreement and to
carry out its provisions. All actions on such Investor's and Lender's part
required for the lawful execution and delivery of this Agreement have been or
will be effectively taken prior to the Closing
5.2 INVESTMENT REPRESENTATIONS
Such Investor and Lender understands that neither the H Shares, the
Notes nor the shares of Parent Common Stock into which such H Shares and Notes
are convertible (the "CONVERSION SHARES") have been registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"). Such Investor and
Lender also understands that the H Shares and Notes, respectively, are being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon the Investor's representations contained in
this Agreement.
5.3 INVESTOR BEARS ECONOMIC RISK
Such Investor and Lender has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to Parent so that it is capable of evaluating the merits and risks of its
investment in Parent and has the capacity to protect its own interests. Such
Investor and Lender must bear the economic risk of this investment indefinitely
unless the H Shares or the Notes, respectively (or, in the case of each, the
Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. Such Investor and Lender understands
that until the H Shares or the Notes, as the case may be, or the Conversion
Shares are registered, there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow such Investor to transfer all or any
portion of the H Shares or Notes, as the case may be, or the Conversion Shares
under the circumstances, in the amounts or at the times such Investor might
propose.
5.4 ACQUISITION FOR OWN ACCOUNT
Such Investor and Lender is acquiring the H Shares and Notes,
respectively, and will acquire the Conversion Shares for its own account for
investment only, and not with a view towards their distribution in violation of
applicable securities laws.
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5.5 INVESTOR AND LENDER CAN PROTECT ITS INTEREST
Such Investor and Lender represents that, by reason of its or of its
management's business or financial experience, such Investor and Lender has the
capacity to protect its own interests in connection with the transactions
contemplated in this Agreement. Further, such Investor and Lender is aware of no
publication of any advertisement in connection with the transactions
contemplated by the Agreement.
5.6 ACCREDITED INVESTOR
Such Investor and Lender represents that it is an accredited investor
within the meaning of Regulation D under the Securities Act.
5.7 PARENT INFORMATION
Such Investor and Lender has had an opportunity to discuss Parent's
business, management and financial affairs with directors, officers and
management of Parent. Such Investor and Lender has also had the opportunity to
ask questions of, and receive answers from, Parent and its management regarding
the terms and conditions of this investment.
5.8 RULE 144
Such Investor and Lender acknowledges and agrees that the H Shares and
Notes, respectively, and the Conversion Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Such Investor and Lender has been advised or is
aware of the provisions of Rule 144 promulgated under the Securities Act, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about Parent, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934, as amended) and the number of
shares being sold during any three-month period not exceeding specified
limitations.
5.9 INFORMATION FURNISHED BY INVESTORS AND LENDERS
Each Investor and each Lender, as to itself or himself only, represents
and warrants the matters set forth in this Section 5.9. None of the information
supplied or to be supplied by the Investor or the Lender in connection with the
transactions contemplated by this Agreement, at the date on which such
information is given or on the Closing Date, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not materially
misleading; provided, however, that the Investor or the Lender
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make no representations or warranties regarding information furnished by or
related to any party other than the Investors or the Lenders. None of the
information supplied or to be supplied by the Investor or the Lender for
inclusion in the Stockholder Materials, at the date on which the S-4 is declared
effective by the SEC or on the date of approval of any of the transactions
contemplated hereby by the stockholders of the Company, contains or will contain
any untrue statement of a material fact or omit or will omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
materially misleading; provided, however, that the Investor or the Lender makes
no representations or warranties regarding information furnished by or related
to any party other than the Investor or the Lender.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
In order to induce the Company, the Lenders and the Investors to enter
into and perform this Agreement and the other Operative Documents, Parent and
Merger Sub jointly and severally represent and warrant (except where such
representation or warranty specifically related to only one of the Parent or
Merger Sub, in which case only that party makes such representation or
warranty), and except as otherwise set forth in the Parent Disclosure Memorandum
attached hereto as EXHIBIT 6 (the "PARENT DISCLOSURE MEMORANDUM"), to the
Company, the Lenders and the Investors as of the date of this Agreement as
follows in this Article VI: The Parent shall be deemed to have "KNOWLEDGE" of a
fact or circumstance if any executive officer or director of Parent has actual
knowledge of any such fact or circumstance, including without limitation any
fact or circumstance brought to the attention of an officer or director of
Parent by the Company.
6.1 ORGANIZATION
Parent and Merger Sub are corporations duly organized, validly existing
and in good standing (to the extent such terms exist) under the laws of the
State of Delaware. Parent and Merger Sub have all requisite corporate power and
authority to own, operate and lease their respective properties and assets and
to carry on their respective businesses as now conducted and as currently
proposed to be conducted. Parent and Merger Sub are duly qualified and licensed
as foreign corporations to do business and are in good standing (to the extent
"qualified to do business" and "good standing" exist) in each jurisdiction in
which the character of Parent and Merger Sub's properties occupied, owned or
held under lease or the nature of the business conducted by Parent and Merger
Sub makes such qualification or licensing necessary, except where the failure to
be so qualified or in good standing would not have a Parent Material Adverse
Effect. For purposes of this Agreement, the term "Parent Material Adverse
Effect" shall mean any material adverse effect on the business, operations,
assets, financial condition or results of operations of the Parent; provided,
however, that Parent Material Adverse
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Effect shall not include any change, circumstance, event or effect that relates
to or results from the announcement or other disclosure or consummation of the
transactions contemplated by this Agreement or general economic conditions.
6.2 ENFORCEABILITY
6.2.1 Parent and Merger Sub have all requisite corporate
power and authority to execute, deliver and perform their obligations under this
Agreement and each of the other Operative Documents to which they are a party
and each of the certificates, instruments and documents executed or delivered by
them pursuant to the terms of this Agreement. All corporate action on the part
of Parent and Merger Sub and their officers, directors and stockholders
necessary for (i) the authorization, execution, delivery and performance of this
Agreement and the other Operative Documents to which Parent and Merger Sub are a
party, (ii) the consummation of the Merger, and (iii) the performance of all
Parent and Merger Sub obligations under this Agreement and the other Operative
Documents to which Parent and Merger Sub are a party, required to be taken as of
the Closing, has been taken, or will as of the Closing have been taken. Due to
the requirements of the Nasdaq National Market System (the "Parent's Trading
Market"), the stockholders of Parent shall consider this Agreement and the
Merger and the following vote of the holders of Parent Capital Stock is
sufficient for the Parent's stockholders to duly approve this Agreement and the
Merger: the affirmative vote of a majority of the shares of Parent Common Stock
and Series G Preferred Stock, voting together as a single class, present or
represented and voting on the matter at a meeting at which a quorum is present.
With respect to any related amendments to Parent's Restated Certificate of
Incorporation, the following vote of Parent's Capital Stock shall be required:
the affirmative vote of a majority of the outstanding shares of Parent Common
Stock and Series G Preferred Stock voting together as a single class.
6.2.2 This Agreement has been, and each of the other
Operative Documents to which the Parent and Merger Sub are a party at the
Closing will have been, duly executed and delivered by the Parent and Merger
Sub, and this Agreement is, and each of the other Operative Documents to which
Parent and Merger Sub are a party will be at the Closing, assuming due
authorization, execution and delivery of this Agreement and the other Operative
Documents by the Company, the Investors and the Lenders, a legal, valid and
binding obligation of the Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms, except as to the effect, if any, of (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
federal and state laws affecting the rights or remedies of creditors generally
and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies.
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6.3 CAPITALIZATION
(a) The authorized capital stock of Parent consists of
64,000,000 shares, consisting of 50,000,000 shares of Parent Common Stock, par
value $.001 per share, and 14,000,000 shares of preferred stock, par value $.001
per share. Of the authorized preferred stock, 1,500,000 shares are designated as
Series G Preferred Stock, par value $.001 per share (the "SERIES G PREFERRED"),
and 500,000 shares are designated as Series A Preferred Junior Participating
Preferred, and 10,000,000 shares will be designated as Series H Preferred Stock,
par value $.001 per share.
(b) As of the date of this Agreement, the issued and
outstanding capital stock of the Company consists solely of 23,287,184 shares of
Parent Common Stock; and 1,500,000 shares of Series G Preferred Stock. Such
outstanding shares are, and immediately prior to the Closing will be, duly
authorized and validly issued, fully paid and nonassessable.
(c) As of the date of this Agreement, other than (i) Options
to purchase up to 7,167,247 shares of Parent Common Stock that have been granted
under the Parent Option Plans, (ii) Warrants to purchase up to 150,000 shares of
Parent Common Stock, (iii) the rights created pursuant to the Rights Agreement
dated as of January 24, 1991 by and between the Parent and Fleet National Bank
(f/k/a/ The First National Bank of Boston) as amended (the "Rights Agreement")
and 249,529 shares reserved under the Parent's Stock Purchase Plan, this
Agreement, (iv) and the Series G Preferred, there are no outstanding rights of
first refusal or offer, preemptive rights, options, warrants, conversion rights
or other agreements (or obligations to issue such options, warrants or
conversion rights), either directly or indirectly, for the purchase or
acquisition from Parent or, to the Parent's knowledge, any stockholder of any
shares of Capital Stock or any securities convertible into or exchangeable for
shares of any Capital Stock of Parent ("PARENT CAPITAL STOCK") (all such
Options, Warrants and other rights are sometimes referred to herein as "PARENT
STOCK PURCHASE RIGHTS"). Parent has provided to the Company a spreadsheet
referencing this representation that accurately reflects the number of such
Options, any Warrants and Parent Stock Purchase Rights outstanding, the grant or
issue dates, vesting schedules and exercise or conversion prices thereof and, in
each case, the identities of the holders and an indication of their
relationships to Parent (if any exist other than a security holder). Parent has
delivered to the Company true and correct copies of the Parent Option Plans, the
form of stock option agreements relating to Options granted thereunder, and all
warrants to purchase Parent Common Stock.
(d) Parent is not a party to any agreement and, to Parent's
knowledge (other than agreements entered into in connection with this
Agreement), there is no agreement between any person, that affects or relates to
the voting or giving of written consents with respect to any securities of
Parent or the voting by any director of Parent. Based upon a review of the
filings made with the SEC, no stockholder of Parent owning beneficially 5% or
more of any class of Parent Capital Stock ("5% PARENT STOCKHOLDER")
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or any affiliate thereof is indebted to Parent, and Parent is not indebted to
any 5% Parent Stockholder or any affiliate thereof. Parent is not under any
contractual or other obligation to register any of its presently outstanding
securities or any of its securities that may hereafter be issued other than
pursuant to the agreements shown in the Parent Disclosure Memorandum or as
contemplated by this Agreement.
(e) All rights of refusal, preemptive, co-sale rights and
registration rights granted by Parent with respect to Parent Capital Stock or
Parent Stock Purchase Rights are described on Schedule 6.3(e) to the Parent
Disclosure Memorandum.
6.4 SUBSIDIARIES AND AFFILIATES
Except as disclosed in the Parent Disclosure Memorandum, neither Parent
or Merger Sub owns or controls, directly or indirectly, any corporation,
partnership, limited liability company or other business entity.
6.5 NO APPROVALS; NO CONFLICTS
(a) The execution, delivery and performance by Parent of
this Agreement and the other Operative Documents to which Parent and Merger Sub
are a party, the effectiveness of the Merger and the performance by Parent and
Merger Sub of their obligations pursuant to this Agreement and the other
Operative Documents to which they are a party, will not (a) constitute a
material violation (with or without the giving of notice or lapse of time, or
both) of any provision of law or any judgment, decree, order, regulation or rule
of any court or other governmental authority applicable to Parent or Merger Sub;
(b) require any consent, approval or authorization of, or declaration, filing or
registration with, any Person, except for (i) compliance with applicable
securities laws, (ii) the filing of all documents necessary to consummate the
Merger with the Delaware Secretary of State, (iii) the approval by the
stockholders of Parent and Merger Sub of the transactions contemplated hereby,
as provided under the rules of Parent's Trading Market and the Certificate of
Incorporation and Bylaws of Parent and Merger Sub, respectively, and (iv) if
applicable, the notification requirements of the Hart-Scott-Rodino Act; (c)
result in a material default (with or without the giving of notice or lapse of
time, or both) under, or acceleration or termination of, or the creation in any
party of the right to accelerate, terminate, modify or cancel, any material
agreement, lease, note or other restriction, encumbrance, obligation or
liability to which Parent or Merger Sub is a party or by which either is bound
or to which any assets of Parent or Merger Sub are subject; (d) result in the
creation of any Encumbrance upon any material assets of Parent or Merger Sub;
(e) conflict with or result in a breach of or constitute a default under any
provision of the Certificate of Incorporation or Bylaws of Parent or Merger Sub;
or (f) invalidate or materially adversely affect any permit, license or
authorization currently material to the conduct of the business of Parent.
(b) Parent has adopted an amendment to the Rights Agreement,
a true and correct copy of which has been delivered to the Company and its
counsel and attached
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to this Agreement as EXHIBIT 6.5(b), pursuant to which the Investors will not be
deemed to be Acquiring Persons (as defined in the Rights Agreement) as a result
of the execution or consummation of the transactions provided for by this
Agreement including without limitation, the consummation of the Merger, and the
Investors will be permitted to purchase such additional shares of Parent as set
forth in the amendment to the Rights Agreement without being deemed to be
Acquiring Persons.
6.6 FINANCIAL STATEMENTS
Parent has delivered to the Company (a) a consolidated balance sheet
and consolidated statements of operations, stockholders' equity and cash flows
of Parent at and for each of the fiscal years ended December 30, 2000, January
1, 2000, and January 2, 1999, and accompanying notes, audited by
PriceWaterhouseCoopers LLP, independent auditors and certified public
accountants, and (b) the unaudited balance sheet and unaudited statement of
operations, stockholders' equity and cash flows of parent at and for each of the
three month periods ended March 31, 2001 and June 30, 2001 (the "PARENT
UNAUDITED FINANCIAL STATEMENTS"). All the foregoing financial statements are
herein referred to as the "PARENT FINANCIAL STATEMENTS." The balance sheet of
Parent as of December 30, 2000 is herein referred to as the "PARENT BALANCE
SHEET." The Parent Financial Statements have been prepared in conformity with
GAAP (except in the case of the Parent Unaudited Financial Statements with
respect to the absence of footnotes and subject to normal year-end audit
adjustments) on a basis consistent with prior accounting periods and fairly
present the consolidated financial position, results of operations and changes
in financial position of Parent as of the dates and for the periods indicated.
Schedule 6.6 to the Disclosure Memorandum sets forth all promissory notes,
loans, lines of credits or similar obligations pursuant to which Parent is an
obligor, together with all the amounts owed by Parent under such obligations, as
of December 30, 2000, and all liabilities under equipment leases of Parent (the
"PARENT OPERATING LEASE LIABILITIES") as of December 30, 2000. Schedule 6.6 sets
forth all indebtedness or other amounts owed by any 5% Parent Stockholders to
the Parent, as of the date hereof.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
From the date of Parent Balance Sheet through and including the date
hereof, Parent has conducted its business in the ordinary course and has not
entered into or agreed to enter into any transactions, agreements or
commitments, suffered the occurrence of any event or events or experienced any
change in business, operations, assets, financial condition or results of
operations that, in the aggregate, has resulted in a Parent Material Adverse
Effect. Without limiting the generality of the foregoing, except for
transactions specifically contemplated in this Agreement or the other Operative
Documents, from the date of the Balance Sheet through and including the date
hereof, Parent has not:
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(a) received written notice or, to the knowledge of Parent,
oral notice that there has been or will be a loss of, or contract cancellation
by, any current customer, supplier or licenser of Parent, which loss or
cancellation would result in lost annual revenues to Parent of at least
$1,000,000;
(b) forgiven or canceled any indebtedness or waived any
claims or rights of material value (including, without limitation, any
indebtedness owing by any stockholder, officer, director, employee or affiliate
of Parent);
(c) granted, other than in the ordinary course of business
and consistent with past practice or as would otherwise not be material, any
increase in the compensation of directors, officers, employees or consultants;
(d) borrowed or agreed to borrow any funds, assumed or
become subject to, whether directly or by way of guarantee or otherwise, any
material liabilities or obligations (absolute, accrued or contingent), or
incurred any material liabilities or obligations (absolute, accrued or
contingent), except liabilities and obligations incurred in the ordinary course
of business and consistent with past practice not in excess of $250,000
individually;
(e) paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued or contingent) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of claims, liabilities and obligations reflected
or reserved against in the Parent Balance Sheet or incurred in the ordinary
course of business and consistent with past practice since the date of the
Parent Balance Sheet, or prepaid any obligation having a fixed maturity of more
than 90 days from the date such obligation was issued or incurred;
(f) permitted or allowed any of its material property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
Encumbrance, except conditional sales or similar security interests granted in
connection with the purchase of equipment or supplies in the ordinary course of
business;
(g) written down the value of any inventory (including
write-downs by reason of shrinkage or markdown) or written off as uncollectible
any notes or accounts receivable, except for write-downs and write-offs that are
in the aggregate less than $500,000, incurred in the ordinary course of business
and consistent with past practice;
(h) sold, transferred or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible) with an
aggregate net book value in excess of $250,000, except the sale of inventory in
the ordinary course of business and consistent with past practice;
(i) made any single capital expenditure or commitment in
excess of $250,000 for additions to property, plant, equipment or intangible
capital assets or
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made aggregate capital expenditures in excess of $2,000,000 for additions to
property, plant, equipment or intangible capital assets;
(j) made any change in any method of accounting or
accounting practice or internal control procedure, except for any change which
is required by reason of U.S. GAAP or Regulation S-X under the Exchange Act;
(k) issued any capital stock, other securities or options or
other rights to acquire capital stock or other securities, or declared, paid or
set aside for payment any dividend or other distribution in respect of its
capital stock, or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of Parent except for
the issuance of shares of Parent Capital Stock upon exercise or conversion of
outstanding Options or Parent Stock Purchase Rights;
(l) except for transactions that are not material in the
aggregate, loaned or advanced any amount to, or sold, transferred or leased any
properties or assets (real, personal or mixed, tangible or intangible) to, or
entered into any agreement or arrangement with, any of Parent's officers,
directors or employees or any affiliate of Parent's officers, directors or
employees, except (i) directors' fees and compensation paid to officers and
employees at rates not exceeding the rates of compensation disclosed on Schedule
6.16 of the Parent Disclosure Memorandum, and (ii) travel or similar expenses
advanced to employees in connection with their employment duties in the ordinary
course of business;
(m) entered into or agreed to any sale, assignment, transfer
or license of any patents, trademarks, copyrights, trade secrets or other
intangible assets of Parent to a third party or any amendment or change to any
existing license or other agreement relating to intellectual property, except in
the ordinary course of business;
(n) incurred, assumed or guaranteed any indebtedness for
borrowed money other than in the ordinary and usual course of business,
consistent with past practice, and in amounts and on terms consistent with past
practice; or
(o) agreed, whether in writing or otherwise, to take any
action described in this SECTION 6.7.
6.8 TAXES
(a) (i) All Parent Tax Returns (as defined below), with
respect to each of the tax years subsequent to fiscal year 1997, required to be
filed by or on behalf of Parent have been filed on a timely basis with the
appropriate governmental authority in all jurisdictions in which such Parent Tax
Returns are required to be filed, and all such Parent Tax Returns were at the
time they were filed true, correct and complete in all material aspects; (ii)
all Taxes of Parent (whether or not reflected on any Parent Tax Return) have
been fully and timely paid or properly accrued; (iii) no waivers of statutes of
limitation have been given by Parent that remain in effect or requested from
Parent
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in connection with any Parent Tax Returns covering Parent with respect to any
Taxes payable by it; (iv) no taxing authority in a jurisdiction where Parent
does not file Parent Tax Returns has made in writing or otherwise a claim,
assertion or threat to Parent that Parent is or may be subject to taxation by
such jurisdiction; (v) Parent has duly and timely withheld from employee
salaries, wages, compensation and other payments and paid over to the
appropriate governmental authority all amounts required to be so withheld and
paid over for all periods under all applicable laws; (vi) there are no liens
with respect to Taxes on any of Parent's property or assets other than liens for
current Taxes not yet payable; (vii) there are no Tax rulings, requests for
rulings or closing agreements relating to Parent that could affect the liability
for Taxes or the amount of taxable income of Parent for any period (or portion
of a period) after the date hereof; and (viii) any adjustment of Taxes of Parent
made by the IRS in any examination that is required to be reported to the
appropriate state, local or foreign taxing authorities has been reported, and
any additional Taxes due with respect thereto have been paid.
(b) There is no dispute or claim concerning any Tax
liability of Parent either (i) claimed or raised by any governmental authority
in writing or (ii) as to which any of the directors and officers (and employees
responsible for Tax matters) of Parent have knowledge based on contact or
correspondence with any agent of such authority. Schedule 6.8 to the Parent
Disclosure Memorandum lists all Parent Federal Income Tax Returns filed with
respect to Parent for taxable periods ended on or after Parent's 1999 fiscal
year that have been audited, and indicates those Parent Federal Income Tax
Returns that currently are the subject of audit. Parent has made available to
the Company correct and complete copies of all Parent Federal Income Tax
Returns, examination reports and statements of deficiencies assessed against or
agreed to by Parent since Parent's 1999 fiscal year.
(c) Parent has not made any payment or payments, is not
obligated to make any payment or payments and is not a party to (or a
participating employer in) any agreement or Employee Benefit Plan that could
obligate it, the Surviving Corporation or the Company to make any payment or
payments that would constitute an "excess parachute payment," as defined in
Section 280G of the Code (or any similar provision of state, local or foreign
law) or that would otherwise not be deductible under Section 162 or Section 404
of the Code.
(d) Parent has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(e) Parent is not a party to any Tax allocation or sharing
agreement. Parent (i) has not been a member of a Parent Tax Group filing a
consolidated income tax return under Section 1501 of the Code (or any similar
provision of state, local or foreign law) and (ii) does not have any liability
for Taxes of any person under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a transferee or successor
by contract or otherwise.
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(f) The unpaid Taxes of Parent (i) did not, as of December
30, 2000, exceed the reserve for Tax liability set forth on the face (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) of the Parent Balance Sheet and (ii) do not exceed
that reserve as adjusted for the passage of time and operations in the ordinary
course of business through the Closing Date.
(g) All Options that Parent has treated as incentive stock
options under Section 421 of the Code meet the requirements of Section 422 of
the Code.
(h) None of the assets of Parent (i) is "tax exempt use
property" within the meaning of Section 168(h) of the Code; (ii) is property
that Parent is required to treat as being owned by any other person pursuant to
the "safe harbor lease" provisions of former Section 168(f)(8) of the Internal
Revenue Code of 1954; or (iii) directly or indirectly secures any debt the
interest on which is tax-exempt under Section 103(a) of the Code.
(i) Parent has not taken or agreed to take any action, or
failed to take any action, that would prevent the Merger from qualifying as a
reorganization within the meaning of the Code.
(j) Parent has not been a party to a distribution to which
Section 355(d) or (e) of the Code applies.
(k) Parent has not filed a consent under Section 341(f) of
the Code concerning collapsible corporations.
(l) Parent has disclosed on its federal Parent Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662 of the Code.
As used in this Agreement, the following terms shall have the following
meanings:
"TAXES" means (i) all foreign, federal, state, county or local taxes,
charges, fees, levies, imposts, duties and other assessments, including, but not
limited to, any income, alternative minimum or add-on, estimated, gross income,
gross receipts, sales, use, transfer, transactions, intangibles, ad valorem,
value-added, franchise, registration, title, license, capital, paid-up capital,
profits, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, real property, recording, personal property, federal highway use,
commercial rent, environmental (including, but not limited to, taxes under
Section 59A of the Code) or windfall profit tax, custom, duty or other fee or
other like assessment or charge of any kind whatsoever imposed by any tax
authority, together with any interest, penalties or additions to tax; (ii) any
liability for payment of amounts described in clause (i) whether as a result of
transferee liability, of being a member of an affiliated, consolidated, combined
or unitary group for any period, or
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otherwise through operation of law; and (iii) any liability for the payment of
amounts described in clause (i) or (ii) as a result of any tax sharing, tax
indemnity or tax allocation agreement, or any other express or implied agreement
to indemnify any other person; and "TAX" means any of the foregoing Taxes.
"PARENT TAX GROUP" means any federal, state, local or foreign
consolidated, affiliated, combined, unitary or other similar group of which
Parent is now or was formerly a member.
"PARENT TAX RETURNS" means any Parent return, declaration, report,
claim for refund, information return, statement or other similar document
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
6.9 PROPERTY
(a) Schedule 6.9(a) to the Parent Disclosure Memorandum
contains a complete and accurate list of all real property owned, leased or
currently being used by Parent (the "PARENT REAL PROPERTY"). Parent has
delivered to the Company or its counsel true and complete copies of all written
leases, subleases, rental agreements, contracts of sale, tenancies or licenses
relating to the Parent Real Property.
(b) Schedule 6.9(b) to the Parent Disclosure Memorandum
contains a complete and accurate list of each item of personal property having a
book value in excess of $100,000 that is owned, leased, rented or used by Parent
(the "PARENT PERSONAL PROPERTY"); provided that such list need not describe
Parent Intellectual Property (as defined in Section 6.17 below), listed on
Schedule 6.17 to the Disclosure Memorandum, or Inventory. Parent has delivered
or made available to the Company true and complete copies of all leases,
subleases, rental agreements, contracts of sale, tenancies or licenses to which
the Parent Personal Property is subject.
(c) The Parent Real Property and the Parent Personal
Property include all the properties and assets (whether real, personal or mixed,
tangible or intangible) (other than, in the case of the Parent Personal
Property, property rights with an individual book value of less than $100,000
and the Parent Intellectual Property) reflected in the Parent Balance Sheet
(except for such properties or assets sold since the date of Parent Balance
Sheet in the ordinary course of business and consistent with past practice) and
all the properties and assets purchased by Parent since the date of the Parent
Balance Sheet (other than, in the case of the Parent Personal Property, property
rights with an individual book value of less than $100,000 and the Parent
Intellectual Property). The Parent Real Property and the Parent Personal
Property include all material property used in the business of Parent, other
than the Parent Intellectual Property. Parent's offices and other structures and
the Parent Personal Property are in good operating condition and repair, normal
wear and tear excepted, and are adequate for the uses to which they are being
put.
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(d) Parent's title to or leasehold interest in each parcel
of the Parent Real Property is free and clear of all Encumbrances except for
Parent Permitted Encumbrances as defined below. Each lease of any portion of the
Parent Real Property is valid, binding and enforceable in accordance with its
terms against Parent and to Parent's knowledge the parties thereto, Parent has
performed in all material respects all obligations imposed on it thereunder, and
neither Parent nor, to Parent's knowledge, any other party thereto is in default
thereunder, nor is there any event that with notice or lapse of time, or both,
would constitute a default thereunder by Parent or, to Parent's knowledge, by
any other party. Parent has not granted any lease, sublease, tenancy or license
of, or entered into any rental agreement or contract of sale with respect to,
any portion of the Parent Real Property, except for any subleases or assignments
that Parent contemplates and has disclosed to the Company regarding Parent's
Boulder facilities, which sublease or assignment is disclosed in the Parent
Disclosure Memorandum.
(e) For the purposes of this Agreement, "PARENT PERMITTED
ENCUMBRANCES" shall mean (i) liens for Taxes or governmental charges or claims
(A) not yet due and payable or (B) being contested in good faith, if a reserve
or other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor, (ii) statutory liens of landlords, liens of carriers,
warehouse persons, mechanics and material persons and other liens imposed by law
incurred in the ordinary course of business for sums (A) not yet due and payable
or (B) being contested in good faith, if a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor,
(iii) liens incurred or deposits made in connection with workers' compensation,
unemployment insurance and other similar types of social security programs or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return of money bonds
and similar obligations, in each case in the ordinary course of business,
consistent with past practice, (iv) security interests incurred under Parent's
line of credit with Congress Financial Corporation and any other security
interests or liens existing at the date of this Agreement as disclosed in the
SEC Documents, and (v) easements, rights-of-way, restrictions and other similar
charges or encumbrances, in each case, which do not interfere with the ordinary
conduct of business of the Parent and do not materially detract from the value
of the property upon which such encumbrance exists.
(f) The Parent Personal Property is free and clear of all
Encumbrances, except Parent Permitted Encumbrances, and other than leased Parent
Personal Property that is so noted on the list supplied pursuant to SECTION
6.9(b), Parent owns such Parent Personal Property. Each lease, license, rental
agreement, contract of sale or other agreement to which the Parent Personal
Property is subject is valid, binding and enforceable in accordance with its
terms against Parent and, to Parent's knowledge, the parties thereto, Parent has
performed in all material respects all obligations imposed on it thereunder, and
neither Parent nor, to Parent's knowledge, any other party thereto is in default
thereunder, nor is there any event that with notice or lapse of time, or both,
would constitute a default by Parent or, to Parent's knowledge, any other party
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thereunder. Parent has not granted any lease, sublease, tenancy or license of
any portion of the Parent Personal Property, except in the ordinary course of
business.
(g) To Parent's knowledge, there are no applicable adverse
zoning, building or land use codes or rules, ordinances, regulations or other
restrictions relating to zoning or land use that currently or could reasonably
be expected to prevent, or cause the imposition of material fines or penalties
as the result of, the use of all or any portion of the Parent Real Property for
the conduct of the business as presently conducted. Parent has received all
necessary material approvals with regard to occupancy and maintenance of the
Parent Real Property.
6.10 CONTRACTS
6.10.1 MATERIAL CONTRACTS
Schedule 6.10.1 to the Parent Disclosure Memorandum contains a complete
and accurate list (other than the Intellectual Property Rights listed on
Schedule 6.17 to the Parent Disclosure Memorandum) of all written and, to the
knowledge of Parent, oral contracts, agreements and understandings to which
Parent is currently a party or by which Parent is currently bound, providing for
potential payments by or to Parent in excess of $2,000,000, including, without
limitation, security agreements, license agreements, software development
agreements, distribution agreements, joint venture agreements, reseller
agreements, credit agreements and instruments relating to the borrowing of money
(each, a "PARENT MATERIAL CONTRACT"). All contracts set forth on Schedule 6.10.1
are valid, binding and enforceable in accordance with their terms against Parent
and, to the Parent's knowledge, the other parties thereto, except as to the
effect, if any, of (a) applicable bankruptcy, insolvency, reorganization,
moratorium and other similar federal and state laws affecting the rights or
remedies of creditors generally, (b) rules of law governing specific
performance, injunctive relief and other equitable remedies, and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities, and are in full force and effect,
Parent has performed in all material respects all material obligations imposed
on it thereunder, and neither Parent nor, to Parent's knowledge, any other party
thereto is in material default thereunder, nor, to Parent's knowledge, is there
any event that with notice or lapse of time, or both, would constitute a default
by Parent or, to Parent's knowledge, any other party thereunder. True and
complete copies of each such written Parent Material Contract have been
delivered to the Company by Parent. Except as set forth on Schedule 6.10.1 to
the Parent Disclosure Memorandum, Parent has no:
(a) contracts, agreements or arrangements (i) with
distributors or dealers that cannot be canceled by Parent within 60 days' notice
without liability, penalty or premium, (ii) with directors, officers,
stockholders, employees, agents, consultants, advisors, salespeople, or sales
representatives providing for the payment of any bonus or commission based on
sales or earnings, or (iii) affecting or relating to former employees of Parent;
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(b) employment agreement, or any other agreement for
services that contains severance or termination pay liabilities or obligations;
(c) noncompetition agreement or other arrangement that would
prevent Parent from carrying on its business anywhere in the world;
(d) written or, to the knowledge of Parent, oral notice that
any party to a contract listed on Schedule 6.10.1 to the Parent Disclosure
Memorandum intends to cancel, terminate or refuse to renew such contract (if
such contract is renewable);
(e) material dispute with any of its suppliers, customers,
distributors, OEM resellers, licensors or licensees;
(f) product distribution agreement, development agreement or
license agreement as licensor or licensee (except for agreements relating to
"Off-The-Shelf Software") or otherwise disclosed in Section 6.17 to the Parent
Disclosure Memorandum;
(g) joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons;
(h) instrument evidencing indebtedness for borrowed money by
way of a direct loan, sale of debt securities, purchase money obligation,
conditional sale or guarantee, or otherwise, except for trade indebtedness
incurred in the ordinary course of business, and except as disclosed in the
Parent Financial Statements; or
(i) agreements or commitments to provide indemnification,
other than those entered into in the ordinary course of business.
6.10.2 REQUIRED CONSENTS
The execution and delivery of this Agreement and the performance of the
obligations of Parent hereunder will not constitute a material default under any
Parent Material Contract and do not require the consent of any other party to
any Parent Material Contract, except for those consents listed on Schedule
6.10.2 to the Parent Disclosure Memorandum.
6.11 CUSTOMERS AND SUPPLIERS
Schedule 6.11 to the Parent Disclosure Memorandum sets forth (a) a
complete and accurate list of the customers of Parent accounting for 5% or more
of Parent's revenues during the fiscal year ended December 30, 2000, and (b) a
complete and accurate list of the suppliers of Parent from whom Parent has
purchased 5% or more of the goods or services purchased by Parent in the fiscal
year ended December 30, 2000. As of the date hereof, Parent has not received any
written, or to the knowledge of Parent, oral notice from its customers or
suppliers that would cause it, in its reasonable
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judgment, to expect any material reduction in the business activity between
Parent and any customers or suppliers named on such Schedule 6.11.
6.12 WARRANTIES AND RETURNS
Schedule 6.12 to the Parent Disclosure Memorandum sets forth Parent's
warranties currently made with respect to its business, products and services,
and current policies with respect to returns of products in the course of
Parent's conduct of the business. Except as set forth on the Parent Disclosure
Memorandum, Parent has not made any express warranties in connection with the
sale of its products and services. Claims against Parent for warranty costs
(individually or in the aggregate, but net of warranties passed through to
vendors) with respect to products and services during each of the last three
fiscal years did not exceed $8,600,000, and there are no outstanding or, to
Parent's knowledge, threatened claims for any such warranty costs that would
exceed $10,200,000 (individually or in the aggregate, but net of warranties
passed through to vendors). As used above, the term "WARRANTY COST" shall mean
costs and expenses associated with correcting, returning or replacing defective
or allegedly defective products or services, whether such costs and expenses
arise out of claims sounding in warranty, contract, tort or otherwise.
6.13 CLAIMS AND LEGAL PROCEEDINGS
Except as disclosed on Schedule 6.13 to the Parent Disclosure
Memorandum, there are no Proceedings pending or, to Parent's knowledge,
threatened against Parent or any of its assets before or by any court or
governmental entity except such Proceedings as would not be material. To
Parent's knowledge, there is no valid basis for any claim, action, suit,
arbitration, proceeding or investigation before or by any person that would have
a Parent Material Adverse Effect. There are no outstanding or unsatisfied
judgments, orders, decrees or stipulations to which Parent is a party.
6.14 LABOR AND EMPLOYMENT MATTERS
There are no material labor disputes, employee grievances or
disciplinary actions pending or, to Parent's knowledge, threatened against
Parent or any of its present or former employees. Parent has complied in all
material respects with all material provisions of law relating to employment and
employment practices, terms and conditions of employment, wages and hours.
Parent is not engaged in any unfair labor practice, and there is no labor
strike, dispute, slowdown or stoppage pending or, to Parent's knowledge,
threatened against or affecting Parent. Parent is not a party to any collective
bargaining agreement. Parent has no knowledge of any organizational efforts
presently being made or threatened by or on behalf of any labor union with
respect to employees of Parent. Except as disclosed in the Parent Disclosure
Memorandum, each current employee, officer and consultant of Parent has executed
a Parent Employment Proprietary Information Agreement in the form provided to
the Company. To Parent's knowledge, no employee (or person performing similar
functions) of Parent is in violation of any such agreement or any employment
agreement, noncompetition
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agreement, patent disclosure agreement, invention assignment agreement,
proprietary information agreement or other contract or agreement relating to the
relationship of such employee with Parent or any other party. All employees of
Parent are employed on an "at will" basis, and, to Parent's knowledge, are
eligible to work and are lawfully employed in the United States.
6.15 EMPLOYEE BENEFIT PLANS
6.15.1 DEFINITIONS
As used in this Agreement, "PARENT EMPLOYEE BENEFIT PLAN" means any
retirement, pension, profit sharing, deferred compensation, stock bonus,
savings, bonus, incentive, cafeteria, medical, dental, vision, hospitalization,
life insurance, accidental death and dismemberment, medical expense
reimbursement, dependent care assistance, tuition reimbursement, disability,
sick pay, holiday, vacation, severance, change of control, stock purchase, stock
option, restricted stock, phantom stock, stock appreciation rights, fringe
benefit or other employee benefit plan, fund, policy, program, contract,
arrangement or payroll practice of any kind (including any "employee benefit
plan," as defined in Section 3(3) of ERISA) or any employment, consulting or
personal services contract, whether written or oral, qualified or nonqualified,
funded or unfunded, or domestic or foreign, (i) sponsored, maintained or
contributed to by Parent or, if an employment, consulting or personal services
contract, to which Parent is a party, (ii) covering or benefiting any current or
former officer, employee, agent, director or independent contractor of Parent
(or any dependent or beneficiary of any such individual), or (iii) with respect
to which Parent has (or could have) any obligation or liability.
6.15.2 EMPLOYEE BENEFIT PLAN LISTING
Schedule 6.15.2 contains a complete and accurate list of all material
written, and to the knowledge of Parent, oral Parent Employee Benefit Plans.
Except as disclosed in the Parent Disclosure Memorandum, Parent does not have
any agreement, arrangement, commitment or obligation, whether formal or
informal, whether written or unwritten and whether legally binding or not, to
create, enter into or contribute to any additional Parent Employee Benefit Plan,
or to modify or amend any existing Parent Employee Benefit Plan, except for
amendments required by statute, regulation or administrative pronouncement.
There has been no amendment, interpretation or other announcement (written or
oral) by Parent or any other Person relating to, or change in participation or
coverage under, any Parent Employee Benefit Plan that, either alone or together
with other such items or events, could materially increase the expense of
maintaining such Parent Employee Benefit Plan (or the Parent Employee Benefit
Plans taken as a whole) above the level of expense incurred with respect thereto
for the most recent fiscal year included in the Parent Financial Statements. The
terms of each Parent Employee Benefit Plan permit Parent to amend or terminate
such Parent Employee Benefit Plan at any time and for any reason (except to the
extent prohibited by law) without penalty
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and without material liability or expense. None of the rights of the Company
under any Parent Employee Benefit Plan will be impaired in any way by this
Agreement or the consummation of the transactions contemplated by this
Agreement.
6.15.3 DOCUMENTS PROVIDED
Parent has made available to the Company true, correct and complete
copies (or, in the case of unwritten Parent Employee Benefit Plans,
descriptions) of all Parent Employee Benefit Plans (and all amendments thereto),
along with, to the extent applicable to the particular Parent Employee Benefit
Plan, copies of the following: (a) the last three annual reports (Form 5500
series) filed with respect to such Parent Employee Benefit Plan; (b) the most
recent summary plan descriptions (and all summaries of material modifications
related thereto) and employee manuals distributed with respect to such Parent
Employee Benefit Plan; (c) all material communications filed or distributed with
respect to such Parent Employee Benefit Plan during the last year; (d) all
contracts and agreements (and any amendments thereto) relating to such Parent
Employee Benefit Plan, including, without limitation, trust agreements,
investment management agreements, annuity contracts, insurance contracts, bonds,
indemnification agreements and service provider agreements; (e) the most recent
determination letter issued by the IRS with respect to such Parent Employee
Benefit Plan; (f) all written communications relating to the amendment, creation
or termination of such Parent Employee Benefit Plan, or an increase or decrease
in benefits, acceleration of payments or vesting or other events that could
result in a material liability to Parent since the date of the most recently
completed and filed annual report (Form 5500 series); (g) all correspondence to
or from any governmental entity or agency relating to such Parent Employee
Benefit Plan; (h) samples of all administrative forms currently in use,
including, without limitation, all COBRA and HIPAA forms and notices; (i) all
coverage, nondiscrimination, top heavy and Code Section 415 tests performed with
respect to such Parent Employee Benefit Plan for the last three years; and (j)
the most recent Joint Proxy and Registration Statement, annual report (Form
11-K) and prospectus prepared in connection with such Parent Employee Benefit
Plan.
6.15.4 COMPLIANCE
With respect to each Parent Employee Benefit Plan: (a) such Parent
Employee Benefit Plan is, and at all times since 1997has been, maintained,
administered, operated and funded in all material respects in accordance with
its terms and in compliance with all applicable requirements of all applicable
laws, statutes, orders, rules and regulations, including, without limitation,
ERISA, COBRA, HIPAA and the Code; (b) Parent and all other Persons (including,
without limitation, all fiduciaries) have, at all times, properly performed in
all material respects all of their duties and obligations (whether arising by
operation of law or by contract) under or with respect to such Parent Employee
Benefit Plan, including, without limitation, all reporting, disclosure and
notification obligations; (c) all returns, reports and other information
(including, without limitation, all Form 5500 series annual reports, together
with all schedules and
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audit reports required with respect thereto) relating to such Parent Employee
Benefit Plan required to be filed with any governmental entity or agency have
been accurately completed and timely and properly filed; (d) all notices,
statements, reports and other disclosure (including, without limitation, all
summary plan descriptions) required to be given or made to participants in such
Parent Employee Benefit Plan or their beneficiaries have been accurately
completed and timely and properly disclosed or provided; (e) neither Parent nor
any fiduciary of such Parent Employee Benefit Plan has engaged in any
transaction or acted or failed to act in a manner that violates the fiduciary
requirements of ERISA or any other applicable law; (f) no transaction or event
has occurred or is threatened or about to occur (including any of the
transactions contemplated in or by this Agreement) that constitutes or could
constitute a prohibited transaction under Section 406 or 407 of ERISA or under
Section 4975 of the Code for which an exemption is not available; and (g) Parent
has not incurred, and there exists no condition or set of circumstances in
connection with which Parent, the Surviving Corporation or the Company could
incur, directly or indirectly, any material liability or expense (except for
routine contributions, benefit payments and administrative expenses) under
ERISA, the Code or any other applicable law, statute, order, rule or regulation,
or pursuant to any indemnification or similar agreement, with respect to such
Parent Employee Benefit Plan.
6.15.5 QUALIFICATION
Each Parent Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code is, and at all times since 1997 has been, so
qualified and its related trust is, and at all times since inception has been,
exempt from taxation under Section 501(a) of the Code. Each such Parent Employee
Benefit Plan either (a) is the subject of an unrevoked favorable determination
letter from the IRS with respect to such Parent Employee Benefit Plan's
qualified status under the Code, as amended by the Tax Reform Act of 1986 and
all subsequent legislation, or (b) has remaining a period of time under the Code
or applicable Treasury regulations or IRS pronouncements in which to apply to
the IRS for such a letter and to make any amendments necessary to obtain such a
letter from the IRS which shall apply retroactively to the inception of such
Parent Employee Benefit Plan. No fact exists or is reasonably expected by the
Company to arise, that could adversely affect the qualification or exemption of
any such Parent Employee Benefit Plan or its related trust. No such Parent
Employee Benefit Plan is a "top-heavy plan," as defined in Section 416 of the
Code.
6.15.6 CONTRIBUTIONS, PREMIUMS AND OTHER PAYMENTS
All contributions, premiums and other payments due or required to be
paid to (or with respect to) each Parent Employee Benefit Plan have been timely
paid, or, if not yet due but due on or before the Closing Date, or if to become
due with respect to any period before or ending on the Closing Date, have been
accrued as a liability on the Parent Balance Sheet. All income taxes and wage
taxes that are required by law to be
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withheld from benefits derived under the Parent Employee Benefit Plans have been
properly withheld and remitted to the proper depository.
6.15.7 RELATED EMPLOYERS
Parent is not, and has never been, a member of (i) a controlled group
of corporations, within the meaning of Section 414(b) of the Code, (ii) a group
of trades or businesses under common control, within the meaning of Section
414(c) of the Code, (iii) an affiliated service group, within the meaning of
Section 414(m) of the Code, or (iv) any other group of Persons treated as a
single employer under Section 414(o) of the Code.
6.15.8 MULTIEMPLOYER, DEFINED BENEFIT AND MONEY PURCHASE
PENSION PLANS AND MULTIPLE EMPLOYER WELFARE ARRANGEMENTS
Parent does not maintain or contribute to, and has never maintained or
contributed to (or been obligated to contribute to), (a) a multiemployer plan as
defined in Section 3(37) or Section 4001(a)(3) of ERISA or 414(f) of the Code,
(b) a multiple employer plan within the meaning of Section 4063 or 4064 of ERISA
or Section 413(c) of the Code, (c) an employee benefit plan, fund, program,
contract or arrangement that is subject to Section 412 of the Code, Section 302
of ERISA or Title IV of ERISA, or (d) a multiple employer welfare arrangement as
defined in Section 3(40) of ERISA.
6.15.9 POST-TERMINATION BENEFITS
Neither Parent nor any Parent Employee Benefit Plan provides or has any
obligation to provide (or contribute toward the cost of) post-employment or
post-termination benefits of any kind, including, without limitation, death and
medical benefits, with respect to any current or former officer, employee,
agent, director or independent contractor of Parent, other than (a) continuation
coverage mandated by Sections 601 through 608 of ERISA and Section 4980B(f) of
the Code, (b) retirement benefits under any Parent Employee Benefit Plan that is
qualified under Section 401(a) of the Code, and (c) deferred compensation that
is accrued as a current liability on the Parent Balance Sheet.
6.15.10 SUITS, CLAIMS AND INVESTIGATIONS
There are no actions, suits or claims (other than routine claims for
benefits and qualified domestic relations orders) pending or, to the knowledge
of Parent, threatened with respect to (or against the assets of) any Parent
Employee Benefit Plan, nor, to the knowledge of Parent, is there a basis for any
such action, suit or claim. No Parent Employee Benefit Plan is currently under
investigation, audit or review, directly or indirectly, by the IRS, the DOL or
any other governmental entity or agency, and, to the knowledge of Parent, no
such action is contemplated or under consideration by the IRS, the DOL or any
other governmental entity or agency.
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6.15.11 EFFECT OF TRANSACTION
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement, will (a)
entitle any individual to severance pay, unemployment compensation or any other
payment from Parent, the Surviving Corporation, the Company or any Parent
Employee Benefit Plan, (b) otherwise increase the amount of compensation due to
any individual or forgive indebtedness owed by any individual, (c) result in any
benefit or right becoming established or increased, or accelerate the time of
payment or vesting of any benefit, under any Parent Employee Benefit Plan, or
(d) require Parent, the Surviving Corporation or the Company to transfer or set
aside any assets to fund or otherwise provide for any benefits for any
individual.
6.16 PERSONNEL
Schedule 6.16 to the Parent Disclosure Memorandum lists (a) the names,
titles and current compensation amounts of all employees of Parent with annual
base salaries or wages in excess of $50,000, (b) compensation amounts of all
directors of Parent, and (c) the names and current compensation packages of all
independent contractors and consultants of Parent with annual compensation in
excess of $50,000. Parent is not in default with respect to any of its
obligations relating to payment of wages and has no, and will not incur any,
material obligation or liability for severance or back pay owed through or by
virtue of the Merger.
6.17 INTELLECTUAL PROPERTY
6.17.1 DEFINITIONS
For purposes of this SECTION 6.17, the following terms shall have the
following meanings:
"PARENT INTELLECTUAL PROPERTY" means all Intellectual Property Rights
owned by, licensed to or otherwise available to Parent.
6.17.2 GENERAL
The Parent owns or has sufficient rights to use, including the right to
bring actions for the infringement of, and the Parent Intellectual Property
represents, all Intellectual Property Rights necessary or required for the
conduct of the Parent's business as currently conducted and as currently
proposed to be conducted. Parent is not a party to any agreement that contains
any restriction on Parent's ability to use or practice any Parent Intellectual
Property that is material to the business of Parent as presently conducted or as
currently proposed to be conducted.
6.17.3 LISTING OF PARENT INTELLECTUAL PROPERTY
SECTION 6.17.3 contains a true and complete list of all of Parent's
patents, patent applications, trademarks, trademark applications, trade names,
service marks, service mark
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applications, Internet domain names, Internet domain name applications,
copyrights, copyright registrations and applications, and any other filings and
formal actions made or taken pursuant to Federal, state, local and foreign laws
by Parent to protect its interests in Parent Intellectual Property.
6.17.4 INBOUND LICENSE AGREEMENTS
SCHEDULE 16.17.4 sets forth a complete and accurate list of each
agreement (the "PARENT INBOUND LICENSE AGREEMENTS") granting to Parent any right
to use or practice any Intellectual Property Rights other than rights in
software commercially available on reasonable terms to any person for a license
fee of no more than fifty thousand dollars ($50,000) or shrink wrap licenses to
commercially available software sold at retail, indicating for each agreement
the title, the parties thereto, the term thereof and the amount of any future
royalty or license fee payable thereunder. To Parent's knowledge, all Parent
Inbound License Agreements are valid, binding and in full force and effect.
Parent has performed in all material respects its obligations under the Parent
Inbound License Agreements, Parent is not in default thereunder, and to Parent's
knowledge no event or circumstance has occurred under any Parent Inbound License
Agreement that with notice or lapse of time or both would constitute a default
or event of default on the part of Parent or give to any other party the right
to terminate or modify any of Parent's rights under such Parent Inbound License
Agreement. There is no material outstanding or, to the knowledge of Parent,
threatened dispute or disagreement with respect to any Parent Inbound License
Agreement. Parent has not received written notice that any party to any Parent
Inbound License Agreement intends to cancel, terminate or refuse to renew (if
renewable) any of Parent's rights under such Parent Inbound License Agreement or
to exercise or decline to exercise any option or right thereunder.
6.17.5 OUTBOUND LICENSE AGREEMENTS
Schedule 16.17.5 sets forth a complete and accurate list of each
agreement (the "PARENT OUTBOUND LICENSE AGREEMENTS") under which Parent has
granted any right to use or practice any Intellectual Property Rights other than
nonexclusive rights in software granted in the ordinary course of Parent's
business for which the total payments to Parent did not exceed fifty thousand
dollars ($50,000) and that are not otherwise material to Parent, indicating for
each agreement the title, the parties thereto and the term thereof. To Parent's
knowledge, all Parent Outbound License Agreements are valid, binding and in full
force and effect. Parent has performed in all material respects its obligations
under the Parent Outbound License Agreements, Parent is not in default
thereunder, and to Parent's knowledge no event or circumstance has occurred
under any Parent Outbound License Agreement that with notice or lapse of time or
both would constitute a default or event of default on the part of Parent or
give to any other party the right to terminate or modify any of Parent's rights
under such Parent Outbound License Agreement. There is no material outstanding
or, to the knowledge of Parent, threatened dispute or disagreement with respect
to any Parent Outbound License Agreement. Parent has not received written notice
that any party to any Parent Outbound License Agreement intends to cancel,
terminate or refuse to renew (if renewable) such Parent Outbound License
Agreement or to exercise or decline to exercise any option or right thereunder.
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6.17.6 NO INFRINGEMENT BY PARENT
Parent Intellectual Property and the conduct of Parent's business as
currently conducted and as currently proposed to be conducted do not infringe,
violate, misappropriate or otherwise misuse any third party Intellectual
Property Rights, and Parent has not received any complaint, claim or notice
alleging any such infringement, violation, misappropriation or misuse or any act
of unfair competition by Parent. To the best knowledge of Parent, no goods,
services, or other products which are sold, licensed or otherwise supplied, used
or employed by Parent infringe, violate, misappropriate or otherwise misuse any
third party Intellectual Property Rights, and Parent has not received any
complaint, claim or notice alleging any such infringement, violation,
misappropriation or misuse. Nothing has come to the attention of Parent to the
effect that the name of Parent or any business name, trade mark, service mark or
domain name used or owned by Parent is the same as, or is confusingly or
deceptively similar to, the name of any other company or business, trade name or
domain name or to the trade mark or service mark owned or used by any other
person. No litigation is now or, within the five (5) years prior to the date of
this Agreement, was pending and, to the knowledge of Parent, no notice or other
claim in writing has been received by Parent (i) alleging that Parent has
engaged in any activity or conduct that infringes, violates, misappropriates or
otherwise misuses the Intellectual Property Rights of any third party or (ii)
challenging the ownership, use, validity or enforceability of any Parent
Intellectual Property.
6.17.7 NO INFRINGEMENT BY THIRD PARTIES
To Parent's knowledge, no third party is infringing, violating,
misappropriating or misusing any Parent Intellectual Property that is owned or
exclusively licensed to Parent, or committing any act of unfair competition with
respect to Parent, and no such claims have been brought against any third party
by Parent. Parent has not entered into any agreement granting any Person the
right to bring any action with respect to, or otherwise to enforce, any Parent
Intellectual Property.
6.17.8 PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
Parent has taken reasonable steps to protect Parent Intellectual
Property. Without limiting the generality of the foregoing, Parent enforces a
policy of requiring each employee, consultant and contractor of Parent to
execute agreements that contain provisions designed to prevent unauthorized
disclosure of Parent Intellectual Property. With respect to employees, such
agreements are substantially in Parent's standard forms and also assign to
Parent all Intellectual Property Rights relating to Parent's business that are
developed by the employee in the course of his or her activities for Parent or
are developed during working hours using the resources of Parent. With respect
to contractors and consultants, the agreements either assign all Intellectual
Property Rights developed pursuant to the agreement or license such rights on
agreed-upon terms. Except under confidentiality obligations, to the knowledge of
Parent, there has been no
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disclosure by Parent of material confidential information or trade secrets.
Parent has not disclosed any source code to any software to any person or entity
other than an employee of Parent who is under a written nondisclosure agreement;
and, except as described in Schedule 6.17.8, neither Parent nor any escrow agent
is under any contractual or other obligation to disclose any source code or
other Parent Intellectual Property. If, as disclosed on Schedule 6.17.8, Parent
has deposited any source code or other Parent Intellectual Property into source
code escrows or similar arrangements, no event has occurred that has or could
reasonably form the basis for a release of such source code or other Parent
Intellectual Property from such escrows or arrangements.
6.17.9 INDEMNIFICATION FOR USE OF INTELLECTUAL PROPERTY
RIGHTS
Other than pursuant to standard agreements with customers or supppliers
of Parent entered into in the ordinary course of business (accurate and complete
copies of which have been made available to the Company by Parent), Parent has
not entered into any agreement or offered to indemnify any Person against any
charge of infringement, violation, misappropriation or misuse of Intellectual
Property Rights.
6.17.10 ASSIGNMENT; CHANGE OF CONTROL
The execution, delivery and performance by Parent of this Agreement,
and the consummation of the transactions contemplated hereby, will not result in
the loss or impairment of, or give rise to any right of any third party to
terminate or alter, any of the Parent Intellectual Property or Parent's rights
under any Parent Inbound License Agreement or Parent Outbound License Agreement,
nor require any consent in respect of any Parent Intellectual Property, nor
require any disclosure or release of any source code or other Parent
Intellectual Property from any escrows or other arrangements.
6.18 ACCOUNTS RECEIVABLE
All accounts receivable of Parent reflected in the Parent Balance Sheet
("PARENT ACCOUNTS") represent amounts due for services performed or sales
actually made in the ordinary course of business and are carried at values
determined in accordance with GAAP. To Parent's knowledge, the bad debt reserves
and allowances reflected in the Parent Balance Sheet are adequate.
6.19 INVENTORY
(a) All items in the inventory reflected in the Parent Balance
Sheet or as currently owned by Parent for use in the operation of the business
(i) have been valued consistent with the inventory valuation policy of Parent in
accordance with GAAP consistently applied and (ii) are of a quality and quantity
usable and salable in the ordinary course of business.
(b) Parent's inventories of finished products and evaluation
units as of July 31, 2001, the approximate quantities thereof, and their
locations are set forth in
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Schedule 6.19(b) to the Disclosure Memorandum. In addition, Schedule 6.19(b)
sets forth the value of all raw materials and work in progress as of July 31,
2001.
(c) Parent is not aware of any adverse condition, other than
shortages of parts, raw materials and supplies common to the industry generally,
affecting the quality or supply of raw materials, intermediates, supplies, parts
and other materials available to Parent that are necessary to manufacture,
package or label the products or are otherwise used in the business.
6.20 CORPORATE BOOKS AND RECORDS
Parent and Merger Sub have furnished to the Company or its
representatives for their examination true and complete copies of (a) the
Certificate of Incorporation and Bylaws of Parent and Merger Sub as currently in
effect, including all amendments thereto and (b) the minute books of Parent.
Such minutes reflect all meetings of Parent's stockholders, Board of Directors
and any committees thereof since Parent's inception, and such minutes accurately
reflect in all material respects the events of and actions taken at such
meetings.
6.21 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
Parent has received all required Permits, except where the failure to
receive any Permit would not have a Parent Material Adverse Effect. Schedule
6.21 to the Parent Disclosure Memorandum contains a list of all Permits with
expiration dates, if any. Parent is in material compliance with the terms of all
Permits, and all Permits are valid and in full force and effect, and no
proceeding is pending or, to Parent's knowledge, threatened, the object of which
is to revoke, limit or otherwise affect any Permit. Parent has not received any
notifications of any asserted failure to obtain any Permit or any past and
unremedied failure to obtain any Permit.
6.22 COMPLIANCE WITH LAWS
Parent is and has been in material compliance with all federal, state,
local and foreign laws, rules, regulations, ordinances, decrees and orders
applicable to the operation of its business, to its employees, or to its
property, including, without limitation, all such laws, rules, ordinances,
decrees and orders relating to antitrust, consumer protection, currency
exchange, environmental protection, equal opportunity, prevention of domestic
and foreign corrupt practices, health, occupational safety, good laboratory
practices, pension, securities and trading-with-the-enemy matters. Parent has
not received any written notification of any asserted present or past unremedied
failure by Parent to comply with any of such laws, rules, ordinances, decrees or
orders.
6.23 INSURANCE
The Parent Disclosure Memorandum sets forth a true and correct list of
all insurance policies maintained by Parent at the date of this Agreement.
Parent maintains
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commercially reasonable levels of (a) insurance on its property (including
leased premises) that insures against loss or damage by fire or other casualty
and (b) insurance against liabilities, claims and risks, in each case, of a
nature and in such amounts as are normal and customary in Parent's industry for
companies of similar size and financial condition. All insurance policies of
Parent are in full force and effect, all premiums with respect thereto due as of
the date hereof have been paid, and no written notice of cancellation or
termination has been received with respect to any such policy or binder. Such
policies or binders are sufficient for compliance with all requirements of law
currently applicable to Parent and of all agreements to which Parent is a party.
Such policies will not terminate or lapse by reason of the transactions
contemplated by this Agreement.
6.24 BROKERS OR FINDERS
Except for Broadview International, LLC, whose fees shall be the sole
responsibility of Parent, Parent has not incurred, and will not incur, directly
or indirectly, as a result of any action taken by or on behalf of Parent, any
liability for investment banking, brokerage or finders' fees or agents'
commissions or any similar charges in connection with the Merger, this Agreement
or any transactions contemplated hereby.
6.25 INSIDER INTERESTS
Based solely upon a review of publicly available filings with the
Securities and Exchange Commission (the "SEC"), no 5% Parent Stockholder,
officer or director of Parent has any interest (other than as a stockholder of
Parent) (a) in any Parent Real Property, Parent Personal Property, Parent
Intellectual Property used in or directly pertaining to the business of Parent,
including, without limitation, inventions, patents, trademarks or trade names,
or (b) to Parent's knowledge, in any agreement, contract, arrangement or
obligation relating to Parent, its business or its operations. There are no
agreements, understandings or proposed transactions between Parent and any of
its officers, directors, 5% Parent Stockholders or affiliates other than with
respect to officers, employees or directors, agreements and arrangements
relating to their employment or directorship. To Parent's knowledge, except for
beneficial or record ownership of not more than one percent of the outstanding
securities of an entity whose shares are registered under the Securities
Exchange Act of 1934 (the "EXCHANGE ACT"), Parent and its officers and directors
have no interest, either directly or indirectly, in any entity, including,
without limitation, any corporation, partnership, joint venture, proprietorship,
firm, licensee, business or association (whether as an employee, officer,
director, stockholder, agent, independent contractor, security holder, creditor,
consultant or otherwise) that presently (i) provides any services, produces
and/or sells any products or product lines, or engages in any activity that is
the same, similar to or competitive with any activity or business in which
Parent is now engaged or proposes to engage; (ii) is a supplier, customer or
creditor; or (iii) has any direct or indirect interest in any material asset or
property, real or personal, tangible or intangible, of Parent or
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any property, real or personal, tangible or intangible, that is necessary for
the conduct of Parent's business.
6.26 COMPLIANCE WITH ENVIRONMENTAL LAWS
6.26.1 Parent is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental, Health, and Safety Requirements except where such violation
or failure to be in compliance with such Environmental, Health, and Safety
Requirements would not have a Parent Material Adverse Effect.
6.26.2 Parent has no basis to expect, nor has it received any
written or oral notice, report, order, summons, inquiry or other communication
from any governmental authority or any person regarding any actual or alleged
violation of or failure to comply with Environmental, Health, and Safety
Requirements, or any liabilities or potential liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) arising under Environmental,
Health, and Safety Requirements, including any investigatory, remedial or
corrective obligations, relating to Parent, its properties, facilities or
operations or any other properties, facilities or assets in which Parent has had
an interest, or with respect to any property at or to which Hazardous Materials
generated, transferred, or used by Parent or any other person for whose conduct
it is or may be held responsible, have been transported, stored, handled,
received or disposed.
6.26.3 To Parent's knowledge, there has been no release or
threat of release of any Hazardous Materials, whether by Parent or any other
person, at or from Parent's properties, facilities or operations, any other
locations where Hazardous Materials were generated, used or transferred from or
by Parent's properties, facilities or operations or any other properties,
facilities or operations in which Parent had an interest.
6.26.4 Parent has delivered to the Company true and complete
copies of any and all environmental assessments and reports relating to Parent's
properties, facilities or operations.
6.27 INFORMATION SUPPLIED BY PARENT
None of the information supplied or to be supplied by Parent for
inclusion in the S-4 or contained in any other material to be delivered to its
stockholders in connection with any written consent by or meeting of such
stockholders (collectively, "PARENT STOCKHOLDER MATERIALS"), at the date on
which the S-4 is declared effective by the Securities and Exchange Commission
(the "SEC") or on the date of such approval, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not materially
misleading; provided, however, that Parent makes no representations or
warranties regarding information furnished by or related to any party other than
Parent.
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6.28 FULL DISCLOSURE
None of the representations and warranties made by Parent herein (as
modified by the Parent Disclosure Memorandum), nor any statement made in any
schedule or the Compliance Certificate and Secretary's Certificate furnished by
Parent pursuant to this Agreement, contains any untrue statement of material
fact, or omits to state any material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
6.29 ABSENCE OF UNDISCLOSED LIABILITIES
The Parent and its consolidated subsidiaries have no material
liabilities or obligations of any nature (absolute, contingent or otherwise)
that are not fully reflected or reserved against in the Parent Balance Sheet and
that would be required under GAAP to be reflected or reserved in order for the
Parent Balance Sheet to fairly represent the consolidated financial condition of
the Parent as of such date, except liabilities or obligations incurred since the
date of the Parent Balance Sheet in the ordinary course of business and
consistent with past practices.
6.30 GOVERNMENT CONTRACTS
Parent has not, during the past five years, attempted to sell to or bid
on any contract or subcontract with or for any agency of the U. S. government or
any foreign government and had any such attempt denied as a result of any
prohibition against Parent's dealing with or for or any such agency or
government, and Parent has no knowledge of any such prohibition. Parent has not
been, nor to its knowledge is it currently being, audited or investigated by the
United States Government Accounting Office, the United States Department of
Justice, the United States Department of Defense or any of its agencies, the
Defense Contract Audit Agency or the inspector general or other authorities of
any agency of the U. S. government, or any foreign government, nor, to Parent's
knowledge, has such audit or investigation been threatened.
6.31 SECURITIES -- PARENT COMMON STOCK
The Parent Common Stock to be issued in the Merger pursuant to this
Agreement has been duly authorized for issuance, and such Parent Common Stock,
when issued and delivered to the Company's stockholders pursuant to this
Agreement, (a) will be validly issued, fully paid and nonassessable, free of
preemptive rights and (b) will be registered under the Securities Act of 1933,
as amended (the "Securities Act"), and the Exchange Act and registered or exempt
from registration under applicable blue sky laws.
6.32 SECURITIES -- H SHARES AND NOTES
The H Shares to be issued pursuant to this Agreement have been duly
authorized for issuance, and such H Shares, when issued and delivered to the
Investors pursuant to
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this Agreement, will be validly issued, fully paid and nonassessable and free of
preemptive rights. The Notes to be issued pursuant to this Agreement has been
duly authorized for issuance.
6.33 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS
True and complete copies of all reports or Registration Statements
filed by Parent with the SEC since December 30, 2000, are available to the
Company on the SEC's web site at www.sec.gov, and Parent has made available to
the stockholders true and complete copies of its Annual Report on Form 10-K for
the fiscal year ended December 30, 2000, all Forms 8-K and Forms 10-Q, filed
after the date of the last of the Form 10-K and its Proxy Statement relating to
its 2001 Annual Meeting of Shareholders, (collectively, the "SEC DOCUMENTS").
Parent has filed all required forms, reports and documents with the SEC since
January 1, 1998, including, in the form filed with the SEC, together with any
amendments thereto, (i) Annual Reports on Form 10-K, (ii) proxy statements
relating to the Company's meetings of stockholders (whether annual or special),
(iii) Quarterly Reports on Form 10-Q, and (iv) any required other reports or
registration statements, all of which complied when filed in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "SECURITIES
ACT") and the Exchange Act. As of their respective filing dates, each of the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act, and the rules and regulations of the SEC
promulgated thereunder. Except to the extent that information contained in any
Parent SEC form, report or other document was revised or superseded by a later
filed form, report or other document filed by Parent, none of Parent's forms,
reports or other documents filed with the SEC contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Parent financial
statements, included in the SEC Documents comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC), were true and correct in all material respects as of their
respective dates and present fairly, in accordance with GAAP, the consolidated
financial condition of Parent at the dates thereof and the consolidated results
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end adjustments and any other
adjustments described therein). There has been no material change in Parent
accounting policies except as described in the notes to the Parent Financial
Statements.
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to perform and observe the
covenants, agreements and conditions hereof to be performed and observed by them
at or before the Closing shall be subject to the satisfaction of the following
conditions, which may be expressly waived only in writing signed by Parent:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained herein (as
modified by the Disclosure Memorandum) (a) that are expressly qualified by a
reference to materiality shall be true in all respects as so qualified when made
and at and as of the Effective Time and (b) that are not so qualified shall have
been true and correct in all material respects when made and at and as of the
Effective Time and, except (i) for changes contemplated by this Agreement and
the other Operative Documents, and (ii) to the extent that such representations
and warranties speak as of an earlier date, shall be true and correct in all
material respects as of such date. Notwithstanding the foregoing, the condition
set forth in this Section 7.1 shall be deemed to be satisfied if such breaches
of the Company's representations and warranties (if any) do not have a Company
Material Adverse Effect or a material diminution of benefits expected to be
realized by the Parent as a result of the Merger.
7.2 PERFORMANCE OF AGREEMENTS
The Company shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants contained in this Agreement or any other Operative Document to be
performed and complied with by it at or prior to the Closing. Notwithstanding
the foregoing, the condition set forth in this Section 7.2 shall be deemed to be
satisfied if such nonperformance or noncompliance (if any) do not have a Company
Material Adverse Effect or a material diminution of benefits expected to be
realized by the Parent as a result of the Merger.
7.3 COMPLIANCE CERTIFICATE
Parent shall have received a certificate of the President and the Chief
Financial Officer of the Company, dated the Closing Date, in form and substance
satisfactory to Parent, certifying that the conditions to the obligations of
Parent and Merger Sub in SECTIONS 7.1, 7.2, 7.4, and 7.5 have been fulfilled.
7.4 NO MATERIAL ADVERSE CHANGE
Since the date of this Agreement and at the Effective Time, there shall
not have occurred any Company Material Adverse Effect.
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7.5 APPROVALS
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby,
or for the continued operation of the Company, shall have been obtained (except
for such of the foregoing as, if not obtained, would not have a Company Material
Adverse Effect)and all waiting periods specified by law (including that required
by the Hart-Scott-Rodino Act) shall have passed.
7.6 SECRETARY'S CERTIFICATE
Parent shall have received a certificate of the Secretary of the
Company, in form and substance satisfactory to Parent, as to the authenticity
and effectiveness of the actions of the Board of Directors and stockholders of
the Company authorizing the Merger and the transactions contemplated by this
Agreement and the other Operative Documents. Copies of the Company's Certificate
of Incorporation, certified by the Delaware Secretary of State, and Bylaws,
certified by the Secretary of the Company, shall be attached to such
certificate.
7.7 COMPLIANCE WITH LAWS
The effectiveness of the Merger and the performance by Parent and the
Company of their respective obligations pursuant to this Agreement and the other
Operative Documents shall be legally permitted by all laws and regulations to
which Parent or the Company is subject.
7.8 STOCKHOLDER APPROVAL
This Agreement and the Merger (and, in the case of Parent, the
amendment of its Certificate of Incorporation to increase the authorized shares
of Parent Common Stock and Parent's Preferred Stock to amounts at least
sufficient to permit consummation of the transactions contemplated in this
Agreement) shall have been approved by (i) the Company's stockholders as
required by the Company's Certificate of Incorporation and applicable law and
(ii) Parent's stockholders are required by Parent's Certificate of Incorporation
and applicable law and any requirements of Parent's Trading Market.
7.9 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any other Operative Document, and no litigation, investigation or administrative
proceeding shall be pending that would enjoin, restrain, condition or prevent
consummation of this Agreement or any other Operative Document.
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7.10 AFFILIATE LETTERS
The Company shall have delivered or caused to be delivered to Parent an
Affiliate Letter substantially in the form of EXHIBIT 7.10 from all of those
Persons who were, on the date on which the requisite number of consents or votes
had been obtained to approve the Merger, "affiliates" of the Company within the
meaning of Rule 145 of the rules and regulations promulgated under the
Securities Act.
7.11 TERMINATION OF CERTAIN AGREEMENTS
Any and all rights of refusal, co-sale rights and registration rights
(other than pursuant to the Registration Rights Agreement) for the benefit of
the holders of Company Capital Stock, or Stock Purchase Rights, all as set forth
in the Disclosure Memorandum, shall have terminated.
7.12 DISSENTER RIGHTS EXERCISED GREATER THAN 20% OF STOCK
Holders of not more than 20% of the outstanding shares of Company
Common Stock shall have not voted in favor of the Merger or not consented
thereto in writing and shall have delivered before the Effective Time timely
written notice of such holders' intent to demand payment as dissenting
stockholders for such shares in accordance with the DGCL.
7.13 CONSENTS TO MERGER
Schedules 4.5, 4.9, 4.10.2 and 4.14 to the Disclosure Memorandum that
treat the Merger as an assignment or otherwise by their terms require consent.
The Company shall have received and shall have delivered to Parent or its
counsel written consents to the Merger from each of the parties (other than the
Company) to such agreements, leases, notes or other documents, which consents
shall be reasonably satisfactory in all respects to Parent, provided however
that the Company shall not be required to obtain any consents required from
Silicon Valley Bank; and provided, further that the Company shall not be
required to deliver any consent if the failure to obtain such consent would not
have a Company Material Adverse Effect. Without limiting the foregoing, the
Company agrees to cooperate with Parent in negotiations with Silicon Valley Bank
regarding financing arrangements of the Surviving Corporation.
7.14 RECEIPT OF LOAN FROM COMPANY
The Lenders shall have loaned Parent the Initial Loan Amount in
accordance with Article II hereof.
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7.15 AMENDMENT TO CERTIFICATE
The Parent H Certificate shall have been duly adopted by Parent by all
necessary corporate action of its Board of Directors and stockholders and shall
have been properly filed with and accepted by the Secretary of State of the
State of Delaware.
7.16 LOCK-UP AGREEMENTS
The Investors shall have executed and delivered a lock-up agreement in
substantially the form attached hereto as EXHIBIT 7.16.
7.17 SEC EFFECTIVENESS
The SEC shall have declared the Proxy /Registration Statement on Form
S-4 prepared pursuant to SECTION 10.6.2 AND 10.8 effective and no stop order
suspending the effectiveness of such Proxy /Registration Statement on Form S-4
or any part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened in writing by the SEC. Such
Proxy/Registration Statement on Form S-4 shall register all shares of Parent
Common Stock issuable at the Closing of the Merger pursuant to SECTION 1.8.1.
7.18 SERIES H PURCHASE
The Investors shall upon the Closing purchase Series H Shares in
accordance with ARTICLE III of this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE COMPANY
The obligations of the Company to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by it at or before
the Closing shall be subject to the satisfaction of the following conditions,
which may be expressly waived only in writing signed by the Company.
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Parent and Merger Sub contained
herein (a) that are expressly qualified by a reference to materiality shall be
true in all respects as so qualified when made and at and as of the Effective
Time and (b) that are not so qualified shall have been true and correct in all
material respects when made and at and as of the Effective Time and, except (i)
for changes contemplated by this Agreement and the other Operative Documents and
(ii) to the extent that such representations and warranties speak as of an
earlier date, shall be true and correct in all material respects as of such
date. Notwithstanding the foregoing, the condition set forth in this Section 8.1
shall be deemed to be satisfied if such breaches of the Parent's representations
and
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warranties (if any) do not have a Parent Material Adverse Effect or a material
diminution of benefits expected to be realized by the Company's stockholders as
a result of the Merger.
8.2 PERFORMANCE OF AGREEMENTS
Parent and Merger Sub shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants contained in this Agreement or any other Operative Document to be
performed and complied with by them at or prior to the Closing. Notwithstanding
the foregoing, the condition set forth in this Section 8.2 shall be deemed to be
satisfied if such nonperformance or noncompliance (if any) do not have a Parent
Material Adverse Effect or a material diminution of benefits expected to be
realized by the Company's stockholders as a result of the Merger.
8.3 COMPLIANCE CERTIFICATE
The Company shall have received a certificate of an officer of each of
Parent and the Merger Sub, dated the Closing Date, substantially in form and
substance reasonably satisfactory to the Company, certifying that the conditions
to the obligations of the Company in SECTIONS 8.1, 8.2, 8.4 and 8.5 have been
fulfilled.
8.4 NO MATERIAL ADVERSE CHANGE
Since the date of this Agreement and at the Effective Time, there shall
not have occurred any Parent Material Adverse Effect.
8.5 APPROVALS AND CONSENTS
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby,
or for the continued operation of Parent, shall have been obtained(except for
such of the foregoing as, if not obtained, would not have a Company Material
Adverse Effect), and all waiting periods specified by law (including that
required by the Hart-Scott-Rodino Act) shall have passed. All other consents,
approvals and notices referred to in this Agreement required to be obtained or
delivered by Parent or Merger Sub shall have been so obtained or delivered;
provided, however, that Parent shall not be required to deliver any consent if
the failure to obtain such consent would not have a Parent Material Adverse
Effect.
8.6 SECRETARY'S CERTIFICATE
The Company shall have received the certificate of the Secretary of
Parent and Merger Sub, in form and substance satisfactory to Company, as to the
authenticity and effectiveness of the actions of the Board of Directors and
stockholders of Parent
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authorizing the Merger and the transactions contemplated by this Agreement and
the other Operative Documents. Copies of Parent's Certificate of Incorporation,
certified by the Delaware Secretary of State, and of Parent's Bylaws, certified
by the Secretary of the Parent, shall be attached to such certificate.
8.7 COMPLIANCE WITH LAWS
The effectiveness of the Merger and the performance by Parent and the
Company of the obligations hereunder and under the other Operative Documents
shall be legally permitted by all laws and regulations to which Parent or the
Company is subject.
8.8 LEGAL PROCEEDING
No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any other Operative Document, and no litigation, investigation or administrative
proceeding shall be pending which would enjoin, restrain, condition or prevent
consummation of this Agreement or any other Operative Document.
8.9 STOCKHOLDER APPROVAL
This Agreement and the Merger (and, in the case of Parent, the
amendment of its Certificate of Incorporation) shall have been approved by (i)
the Company's stockholders as required by the Company's Certificate of
Incorporation and applicable law and (ii) Parent's stockholders as required by
Parent's Certificate of Incorporation and applicable law and any requirements of
Parent's Trading Market.
8.10 PARENT'S TRADING MARKET LISTING
The shares of Parent Common Stock issuable to stockholders of the
Company pursuant to this Agreement shall have been authorized for inclusion on
the Parent's Trading Market, subject to isssuance and Parent's Common Stock
shall not have been delisted from trading on Parent's Trading Market.
8.11 S-4 EFFECTIVENESS
The SEC shall have declared the Proxy/Registration Statement on Form
S-4 prepared pursuant to SECTION 10.8 effective and no stop order suspending the
effectiveness of such Proxy/Registration Statement on Form S-4 or any part
thereof shall have been issued and no proceeding for that purpose shall have
been initiated or threatened in writing by the SEC. Such Proxy/Registration
Statement on Form S-4 shall register all shares of Parent Common Stock issuable
at the Closing of the Merger pursuant to SECTION 1.8.1(b).
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8.12 CONGRESS CONSENT
The consent of Congress to the Merger and the other transactions
contemplated by this Agreement and the other Operative Documents obtained in the
Third Amendment to Loan and Security Agreement, Waiver and Consent shall not
have been revoked, amended or nullified.
ARTICLE IX
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE INVESTORS
The obligation of each Investor to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by such Investor
at or before the Closing shall be subject to the satisfaction of the following
conditions, which, as to such Investor, may be expressly waived only in writing
signed by such Investor:
9.1 CLOSING OF THE MERGER
The Merger shall Close as contemplated by this Agreement.
9.2 COMPLIANCE WITH LAWS
The purchase of the H Shares by the Investors pursuant to Article III
and the performance by Parent and the Company of their respective obligations
pursuant to this Agreement and the other Operative Documents shall be legally
permitted by all laws and regulations to which Parent or the Company is subject.
9.3 REGISTRATION RIGHTS AGREEMENT
The Parent shall have executed and delivered the Registration Rights
Agreement.
ARTICLE X
COVENANTS
Between the date of this Agreement and the Effective Time, or such
later period as set forth in these covenants, the parties covenant and agree as
set forth in this ARTICLE IX.
10.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER
Unless Parent shall otherwise agree in writing, the business of the
Company shall be conducted in, and the Company shall not take any action except
in, the ordinary course of business and in a manner consistent with past
practice and in accordance with applicable law; and the Company shall use
commercially reasonable efforts to preserve
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intact the business organization of the Company, to keep available the services
of the current officers, employees and consultants of the Company and to
preserve the current relationships of the Company with, and the goodwill of,
customers, suppliers and other Persons with which the Company has significant
business relations. By way of amplification and not limitation, except as
otherwise contemplated by this Agreement, the Company shall not, between the
date of this Agreement and the Effective Time, directly or indirectly do any of
the following without the prior written consent of Parent, except as set forth
in Schedule 10.1(a) through (o) to the Company Disclosure Memorandum, which
consent shall not be unreasonably withheld or delayed:
(a) amend or otherwise change its Certificate of Incorporation
or Bylaws, except for an amendment to its Certificate of Incorporation limiting
dividends payable on Company Preferred Stock or an amendment to increase the
authorized capital of the Company solely to satisfy existing dividend
obligations;
(b) except for the issuance of shares of Company Capital Stock
(x) upon the exercise or conversion of currently outstanding Options or Stock
Purchase Rights, or (y) grants of Company Common Stock to existing or new
employees or options to purchase Company Common Stock to existing or new
employees with an exercise price equal to the then current fair market value
determined in good faith by the Board of Directors of the Company, issue, sell,
contract to issue or sell, pledge, dispose of, grant, encumber or authorize the
issuance, sale, pledge, disposition, grant or Encumbrance of (i) any shares of
capital stock of any class of the Company, (ii) any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest) of the Company, or (iii) except in the ordinary course of
business, any assets of the Company;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock or other securities, property or otherwise,
with respect to any Company Capital Stock;
(d) reclassify, combine, split, subdivide, redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or other
securities, except pursuant to rights of repurchase or refusal with respect to
employees or directors pursuant to currently outstanding agreements identified
on the Disclosure Schedule;
(e) (i) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any corporation, partnership,
other business organization or division thereof or, except in the ordinary
course of business, any material amount of assets; (ii) incur or modify any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible for,
the obligations of any Person, or make any loans or advances, except in the
ordinary course of business and consistent with past practice not in excess of
$100,000 and except for equipment lease financings not to exceed $250,000 in the
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aggregate and capital expenditures made in accordance with a written budget
agreed to by Parent that references this section of this Agreement; (iii) enter
into any contract or agreement other than in the ordinary course of business,
consistent with past practice and the value of which does not exceed $100,000;
(iv) authorize any capital expenditure, except in the ordinary course of
business consistent with past practice, in excess of $50,000 or make aggregate
capital expenditures in excess of $100,000; (v) enter into any purchasing or
other similar agreement in which the cash obligation of the Company exceeds
$250,000 or which shall not terminate or be subject to termination for
convenience upon 60 days' or less notice; (vi) license any Company Intellectual
Property, except in the ordinary course of business consistent with past
practice; or (vii) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this SECTION 10.1(e);
(f) except for "stay bonuses" arrangements with employees not
to exceed an aggregate of $300,000, increase the compensation payable or to
become payable to its officers, employees, agents or consultants, or grant any
severance or termination pay to, or enter into or amend any employment or
severance agreement with, any director, officer or other employee of the
Company, or establish, adopt, enter into or amend any Employee Benefit Plan,
compensation, stock option, employment, severance, benefit or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any director,
officer or employee;
(g) except for any change which is required by reason of U.S.
GAAP or Regulation S-X under the Exchange Act make any material change with
respect to accounting methods or policies or procedures (including, without
limitation, procedures with respect to the payment of accounts payable and
collection of accounts receivable);
(h) make any Tax election or settle or compromise any Tax
liability;
(i) pay, discharge or satisfy any material claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of claims, liabilities and
obligations reflected or reserved against in the Company Balance Sheet or
incurred in the ordinary course of business and consistent with past practice
since the date of the Company Balance Sheet, or prepay any obligation having a
fixed maturity of more than 90 days from the date such obligation was issued or
incurred;
(j) sell, transfer or otherwise dispose of any of its
properties or assets (real, personal or mixed, tangible or intangible) with an
aggregate net book value in excess of $50,000, except the sale of inventory in
the ordinary course of business and consistent with past practice;
(k) except for transactions that are not material in the
aggregate, loan or advance any amount to, or sell, transfer or lease any
properties or assets (real, personal or mixed, tangible or intangible) to, or
enter into any agreement or arrangement with,
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any of the Company's officers, directors or employees or any affiliate of the
Company's officers, directors or employees, except (i) directors' fees and
compensation paid to officers and employees at rates not exceeding the rates of
compensation disclosed on Schedule 4.16 of the Disclosure Memorandum, (ii)
travel or similar expenses advanced to employees in connection with their
employment duties in the ordinary course of business, and (iii) agreements and
arrangements that are expressly provided to be entered into with such persons
under the terms of this Agreement;
(l) other than in the ordinary course of business, take any
action, other than the execution of this Agreement or consummation of the
transactions contemplated hereby, that would result in loss of or contract
cancellation by any current customer, supplier or licenser of the Company, which
loss or contract cancellation would result in lost annual revenues to the
Company of at least $100,000;
(m) other than in the ordinary course of business, forgive or
cancel any indebtedness or waive any claims or rights in each case of material
value (including, without limitation, any indebtedness owing by any stockholder,
officer, director, employee or affiliate of the Company);
(n) knowingly take any action that would or is reasonably
likely to result in any of the representations or warranties of the Company set
forth in this Agreement being untrue in any material respect, or in any covenant
of the Company set forth in this Agreement being breached, or in any of the
conditions to the Merger specified in Article VII not being satisfied; or
(o) agree, whether in writing or otherwise, to do any of the
foregoing.
10.2 CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER
Unless the Company shall otherwise agree in writing, the business of
the Company shall be conducted in, and Parent shall not take any action except
in, the ordinary course of business and in a manner consistent with past
practice and in accordance with applicable law; and Parent shall use
commercially reasonable efforts to preserve intact the business organization of
Parent, to keep available the services of the current officers, employees and
consultants of Parent and to preserve the current relationships of Parent with,
and the goodwill of, customers, suppliers and other Persons with which Parent
has significant business relations. By way of amplification and not limitation,
except as otherwise contemplated by this Agreement, Parent shall not, between
the date of this Agreement and the Effective Time, directly or indirectly do any
of the following without the prior written consent of the Company, except as set
forth in Section 10.2 to the Parent Disclosure Memorandum, which consent shall
not be unreasonably withheld or delayed:
(a) amend or otherwise change its Certificate of Incorporation
or Bylaws, except for an amendment to its Certificate of Incorporation limiting
dividends payable
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on Preferred Stock of the Parent or an amendment to increase the authorized
capital of the Company solely to satisfy existing dividend obligations;
(b) except for the issuance of shares of the capital stock of
the Parent upon the exercise or conversion of currently outstanding Options or
Stock Purchase Rights and except for (i) grants of options to purchase in the
aggregate 150,000 shares of Parent Common Stock to existing employees and (ii)
grants to new employees with an exercise price equal to the then current fair
market value determined in good faith by the Board of Directors of Parent, in a
manner consistent with past practice issue, sell, contract to issue or sell,
pledge, dispose of, grant, encumber or authorize the issuance, sale, pledge,
disposition, grant or Encumbrance of (i) any shares of capital stock of any
class of Parent, (ii) any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom interest) of
Parent, or (iii) except in the ordinary course of business or as contemplated by
Schedule 10.2(b), any assets of Parent;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock or other securities, property or otherwise,
with respect to any capital stock of the Parent, except pursuant to the
Certificate of Incorporation as a result of the transactions contemplated
hereby;
(d) reclassify, combine, split, subdivide, redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or other
securities, except pursuant to rights of repurchase or refusal with respect to
employees or directors pursuant to currently outstanding agreements identified
on the Disclosure Schedule;
(e) (i) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any corporation, partnership,
other business organization or division thereof or, except in the ordinary
course of business, any material amount of assets; (ii) incur or modify any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible for,
the obligations of any Person, or make any loans or advances, except in the
ordinary course of business and consistent with past practice not in excess of
$50,000 and except for equipment lease financings not to exceed $250,000 in the
aggregate and capital expenditures made in accordance with a written budget
agreed to by the Company that references this section of this Agreement; (iii)
enter into any contract or agreement other than in the ordinary course of
business, consistent with past practice and the value of which does not exceed
$1,000,000; (iv) authorize any capital expenditure, except as included in the
forecast as of August 3, 2001 and operational plans as of the date of this
Agreement, which is described in Schedule 10.2(e), or in the ordinary course of
business consistent with past practice, in excess of $500,000 or make aggregate
capital expenditures in excess of $1,500,000; (v) enter into any purchasing or
other similar agreement in which the cash obligation of Parent exceeds
$2,000,000 or which shall not terminate or be subject to termination for
convenience upon 60 days' or
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less notice; (vi) license any Parent Intellectual Property, except in the
ordinary course of business consistent with past practice; or (vii) enter into
or amend any contract, agreement, commitment or arrangement with respect to any
matter set forth in this Section 10.2(e);
(f) increase the compensation payable or to become payable to
its officers, employees, agents or consultants, or grant any severance or
termination pay to, or enter into or amend any employment or severance agreement
with, any director, officer or other employee of Parent, or establish, adopt,
enter into or amend any Employee Benefit Plan, compensation, stock option,
employment, severance, benefit or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;
(g) except for any change which is required by reason of U.S.
GAAP or Regulation S-X under the Exchange Act, make any material change with
respect to accounting methods or policies or procedures (including, without
limitation, procedures with respect to the payment of accounts payable and
collection of accounts receivable);
(h) make any Tax election or settle or compromise any Tax
liability;
(i) pay, discharge or satisfy any material claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of claims, liabilities and
obligations reflected or reserved against in the Parent Balance Sheet or
incurred in the ordinary course of business and consistent with past practice
since the date of the Parent Balance Sheet, or prepay any obligation having a
fixed maturity of more than 90 days from the date such obligation was issued or
incurred;
(j) except for transactions that are not material in the
aggregate, loan or advance any amount to, or sell, transfer or lease any
properties or assets (real, personal or mixed, tangible or intangible) to, or
enter into any agreement or arrangement with, any of Parent's officers,
directors or employees or any affiliate of Parent's officers, directors or
employees, except (i) directors' fees and compensation paid to officers and
employees at rates not exceeding the rates of compensation disclosed on Schedule
6.19 of the Disclosure Memorandum, (ii) travel or similar expenses advanced to
employees in connection with their employment duties in the ordinary course of
business, and (iii) agreements and arrangements that are expressly provided to
be entered into with such persons under the terms of this Agreement;
(k) other than in the ordinary course of business, take any
action, other than the execution of this Agreement or consummation of the
transactions contemplated hereby, that would result in loss of or contract
cancellation by any current customer, supplier or licenser of Parent, which loss
or contract cancellation would result in lost annual revenues to Parent of at
least $1,000,000;
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(l) other than in the ordinary course of business, forgive or
cancel any indebtedness or waive any claims or rights in each case of material
value (including, without limitation, any indebtedness owing by any stockholder,
officer, director, employee or affiliate of Parent);
(m) knowingly take any action that would or is reasonably
likely to result in any of the representations or warranties of Parent set forth
in this Agreement being untrue in any material respect, or in any covenant of
Parent set forth in this Agreement being breached, or in any of the conditions
to the Merger specified in Article VIII and IX not being satisfied; or
(n) agree, whether in writing or otherwise, to do any of the
foregoing.
10.3 ACCESS TO INFORMATION; CONFIDENTIALITY
10.3.1 From the date hereof to the Effective Time, the Company
shall, and shall cause the officers, directors, employees and agents of the
Company to, afford the officers, employees and agents of Parent access at all
reasonable times to the officers, employees, agents, properties, offices, plants
and other facilities, books and records of the Company and shall furnish Parent
with all financial, operating and other data and information as Parent, through
its officers, employees or agents, may reasonably request so as to conduct a
full due diligence investigation of the Company's prospects, business, assets,
contracts, rights, liabilities and obligations, including, without limitation,
its intellectual property, financial, marketing, employee, legal, regulatory and
environmental matters. From the date hereof until the Effective Time, the
Company shall provide Parent with monthly and other financial statements of the
Company as they become available internally at the Company, all of which
financial statements will be prepared in good faith and consistent with past
practice.
10.3.2 From the date hereof to the Effective Time, Parent
shall, and shall cause the officers, directors, employees and agents of Parent
to, afford the officers, employees and agents of the Company access at all
reasonable times to the officers, employees, agents, properties, offices, plants
and other facilities, books and records of Parent and shall furnish the Company
with all financial, operating and other data and information as the Company,
through its officers, employees or agents, may reasonably request so as to
conduct a full due diligence investigation of Parent's prospects, business,
assets, contracts, rights, liabilities and obligations, including, without
limitation, its intellectual property, financial, marketing, employee, legal,
regulatory and environmental matters. From the date hereof until the Effective
Time, Parent shall provide the Company with monthly and other financial
statements of Parent as they become available internally at Parent, all of which
financial statements will be prepared in good faith and consistent with past
practice.
10.3.3 The parties shall continue to comply with and to
perform their respective obligations under the Mutual Confidentiality Agreement
between Parent and the Company entered into as of June 21, 2001 (the
"Confidentiality Agreement").
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10.4 NOTIFICATION OF CERTAIN MATTERS
Each party shall give prompt notice to the other parties of (a) the
occurrence or nonoccurrence of any event that would be likely to cause any
representation or warranty made by such party contained in this Agreement to be
untrue or inaccurate in any material respect and (b) any material failure by
such party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this SECTION 10.4 shall not limit or otherwise affect
the remedies available to the parties hereunder.
10.5 FURTHER ACTION; BEST EFFORTS
Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its best efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby, including, without limitation,
using its best efforts to (i) obtain all waivers, licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with the Company as are necessary for the consummation
of the transactions contemplated hereby, (ii) defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby, (iii) lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, (iv) effect all necessary registrations and
filings, including, but not limited to, if applicable, filings under the HSR Act
and submissions of information requested by governmental authorities, (v)
provide all necessary information for the Registration Statement and (vi)
fulfill the conditions to the Merger. Without limiting the generality of the
foregoing, the parties hereto agree that they will seek to close the transaction
no later than December 31, 2001. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or the other Operative Documents, each party to this Agreement shall
use its best efforts to promptly take all such action. After the Closing, each
party hereto, at the request of the other party, and at the sole cost and
expense of Parent, will take any further actions reasonably necessary or
desirable to carry out the purposes of this Agreement or any other Operative
Document, to vest in the Surviving Corporation full title to all properties,
assets and rights of the Company and to effect the issuance of the Parent Common
Stock and the H Shares to the stockholders of the Company pursuant to the terms
and conditions hereof.
10.6 APPROVAL OF PARENT STOCKHOLDERS; PREPARATION OF PROXY
STATEMENT.
10.6.1 APPROVAL OF PARENT STOCKHOLDERS
As soon as reasonably practicable after the public announcement of this
Agreement, Parent shall, through its Board of Directors, duly call, give notice
of, convene and hold a meeting of its stockholders (the "PARENT STOCKHOLDERS
MEETING") for
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the purpose of obtaining such approvals as are required by the applicable rules
and regulations of the Parent's Trading Market and, if applicable, Delaware law,
to consummate the transactions contemplated by this Agreement and the amendment
to increase Parent's authorized shares as described above in SECTION 7.9 (the
"PARENT STOCKHOLDERS' APPROVAL"). Subject to its rights to terminate this
Agreement pursuant to Section 11.1, Parent shall, through its Board of
Directors, include in the Proxy Statement (defined in Section 10.7.2 below) the
recommendation of the Board of Directors that the Parent stockholders grant such
approval, and shall use its reasonable best efforts to obtain such approval.
10.6.2 PREPARATION OF PROXY STATEMENT
As soon as reasonably practicable after the public announcement of this
Agreement, Parent shall in consultation with the Company prepare and file with
the SEC a preliminary proxy statement (the "PROXY STATEMENT"), and all other
required materials, to be used in connection with the solicitation of proxies by
Parent for the Parent Stockholders Meeting. Parent shall use commercially
reasonable efforts to respond to any SEC comments regarding its Proxy Statement
and to have such comments cleared as promptly as practicable, and shall promptly
mail the Proxy Statement in its definitive form to its shareholders. The Company
agrees to provide as promptly as practicable to Parent such information
concerning its stockholders and its business and financial statements and
affairs as may reasonably be required or appropriate for inclusion in the
Proxy/Registration Statement (as defined below) or in any amendments or
supplements thereto, and to cause its counsel and auditors to cooperate with
Parent's counsel and auditors in the preparation of the Proxy/Registration
Statement, including responses to SEC comments, as appropriate.
10.7 COMPANY STOCKHOLDER APPROVAL
The Company will seek the approval at a special meeting of stockholders
or the written consent of the stockholders at the earliest practicable date
approving this Agreement, the Merger and related matters, which approval will be
recommended by the Board of Directors of the Company, provided however, that
such recommendation is subject to Section 10.13 hereof.
10.8 PREPARATION OF S-4
As promptly as practicable after the date hereof, Parent and the
Company will prepare and Parent will file with the SEC a Registration Statement
on Form S-4 (containing Parent's Proxy Statement (the "PROXY/REGISTRATION
STATEMENT") to register all shares of Parent Common Stock issuable at the
Closing of the Merger. Parent will use its reasonable best efforts to have the
Proxy/Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. Parent shall make all necessary
filings with respect to the Merger and the transactions contemplated thereby
under the Securities Act and the Exchange Act and applicable state blue sky laws
and the rules and regulations thereunder. Parent shall also take any
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action required to be taken under any applicable state securities laws in
connection with the issuance of Parent Common Stock in the Merger and issuance
of the H Shares and the Notes. No filing of, or amendment or supplement to, the
Proxy/Registration Statement will be made by Parent without providing the
Company and its counsel the opportunity to review and comment thereon. The
Parent will advise the Company, promptly after it receives notice thereof, of
the time when the Proxy/Registration Statement has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy/Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
If at any time prior to the Effective Time any information relating to the
Company or Parent, or any of their respective affiliates, officers or directors,
should be discovered by the Company or Parent which should be set forth in an
amendment or supplement to any of the Proxy/Registration Statement, so that any
of such documents would not include any misstatement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company and Parent.
10.9 PARENT COMMON STOCK
Parent agrees to apply for listing on the Parent's Trading Market the
shares of Parent Common Stock comprising the Merger Consideration, and those
shares required to be reserved for issuance upon exercise of Options assumed in
connection with the Merger by filing with the Parent's Trading Market a
Notification of Listing of Additional Shares (or such other form as may be
required by the Parent's Trading Market) from and after the Closing and
otherwise in accordance with the rules and regulations of the Parent's Trading
Market.
10.10 DISSENTING SHARES
Prior to the Closing Date, the Company shall furnish Parent with the
name and address of each stockholder of the Company who, prior to the Closing,
has requested appraisal rights pursuant to the DGCL and the number of Dissenting
Shares owned by such stockholder.
10.11 PUBLICITY
No party hereto shall issue any press release or otherwise make any
statements to any third party with respect to this Agreement or the transactions
contemplated hereby, other than press releases mutually acceptable to the
parties hereto to be issued as soon as practicable after the date hereof and
after the Closing, and the filing of a Current Report on Form 8-K, the Proxy
Statement and the S-4 by Parent; provided, however,
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that communications by the Company to its investors shall not be deemed to be
statements to a third party. Notwithstanding the foregoing, Parent shall be
permitted to make any public statement without obtaining the approval of any
other party hereto if (a) Parent shall have been advised by counsel that
disclosure is required under applicable securities laws, and (b) Parent has
first used reasonable efforts to obtain the approval of the Company, which
approval shall not be unreasonably withheld or delayed; and provided, further,
that Parent shall be permitted to make additional public statements so long as
such public statements are consistent with the statements contained in the
mutually approved press releases, the Form 8-K or the S-4.
10.12 NO SOLICITATION, ETC.
(a) Each of the Company and Parent (the "Agreeing Party")
agrees that it shall not, nor shall it permit any of its subsidiaries to, nor
shall it authorize any officer, director or employee or any investment banker,
attorney, accountant, agent or other advisor or representative or any of its
subsidiaries to (i) solicit, initiate or knowingly encourage the submission of
any Takeover Proposal (as hereinafter defined), (ii) enter into any agreement
with respect to a Takeover Proposal or (iii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal; PROVIDED, HOWEVER,
that to the extent required by the fiduciary obligations of the Board of
Directors of the Agreeing Party, as determined in good faith by a majority of
the members thereof (after consultation with outside legal counsel), the
Agreeing Party may, in response to unsolicited requests therefor, participate in
discussions or negotiations with, or furnish information pursuant to a
confidentiality agreement no less favorable to such party in all material
respects than the Confidentiality Agreement to, any person who indicates a
willingness to make a Superior Proposal (as hereinafter defined). For all
purposes of this Agreement, "TAKEOVER PROPOSAL" means any proposal for a merger,
consolidation, share exchange, business combination or other similar transaction
involving the Agreeing Party or any of its Significant Subsidiaries (as
hereinafter defined), or any proposal or offer to acquire, directly or
indirectly, 25% or more of any class of equity securities in, 25% or more of any
voting securities of, or 25% or more of the assets of, the Agreeing Party or any
of its Significant Subsidiaries, as the case may be. The Agreeing Party shall
cease and cause to be terminated all existing discussions or negotiations with
any persons conducted heretofore with respect to, or that could reasonably be
expected to lead to, any Takeover Proposal. As used herein, a "SIGNIFICANT
SUBSIDIARY" means any subsidiary of the Agreeing Party that would constitute a
"SIGNIFICANT SUBSIDIARY" within the meaning of Rule 1-02 of Regulation S-X of
the SEC.
(b) Except to the extent permitted below, neither the Board of
Directors of the Agreeing Party nor any committee thereof shall (i) withdraw or
modify, in a manner adverse to the other party (either the Company or Parent),
the approval or recommendation by the Board of Directors of the Agreeing Party
or any such committee
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of this Agreement or the Merger or (ii) approve or recommend, or propose to
approve or recommend, any Takeover Proposal. Notwithstanding the foregoing, (i)
the Board of Directors of the Agreeing Party, to the extent required by its
fiduciary obligations and subject to Section 11.2 hereof, as determined in good
faith by a majority of the members thereof (after consultation with outside
legal counsel), may approve or recommend a Superior Proposal (and, in connection
therewith, withdraw or modify its approval or recommendation of this Agreement
or the Merger) and (ii) nothing contained in this Agreement shall prevent the
Board of Directors of the Agreeing Party from complying with Rule 14d-9 and Rule
14e-2 promulgated under the Exchange Act with regard to a Takeover Proposal, if
applicable. For all purposes of this Agreement, "SUPERIOR PROPOSAL" means a bona
fide written proposal made by a third party to acquire the Agreeing Party
pursuant to a tender or exchange offer, a merger or other business combination,
a share exchange, a sale of all or substantially all its assets or otherwise on
terms which a majority of the members of the Board of Directors of the Agreeing
Party determines in good faith (taking into account the advice of any
independent financial advisors) to be more favorable to the Agreeing Party and
its stockholders than the Merger (and any revised proposal made by the other
party) and for which financing, to the extent required, is then fully committed
or reasonably determined to be likely to be available by the Board of Directors
of the Agreeing Party.
(c) The Agreeing Party shall notify the other party (either
the Company or Parent) promptly (but in no event later than the next business
day) after receipt by the Agreeing Party (or its advisors) of any Takeover
Proposal or any request for nonpublic information in connection with a Takeover
Proposal or for access to the properties, books or records of the Company by any
person or entity that informs the Company or its advisors that it is considering
making, or has made, a Takeover Proposal. Such notice shall indicate the
identity of the person making the Takeover Proposal, inquiry or contact, and the
material terms and conditions of the Takeover Proposal, inquiry or contact and
shall include copies of any written materials received by the Agreeing Party or
its representatives in connection with such proposal, discussion, negotiation or
inquiry.
10.13 REGULATORY AND OTHER APPROVALS.
10.13.1 Subject to the terms and conditions of this Agreement
and the other Operative Documents, each of the Company and Parent will use
commercially reasonable efforts to do, or cause to be done, all things
necessary, proper or advisable to, as promptly as practicable, obtain all
consents, approvals or actions of, make all filings with and give all notices to
any court, tribunal or administrative, governmental or regulatory body, agency,
commission, division, department, public body or other authority, whether
federal, state, local or foreign (each a "GOVERNMENTAL ENTITY") or any other
public or private third parties required of the Company, Parent or the Merger
Sub to consummate the Merger and provide such other information and
communications to such Governmental Entities or other public or private third
parties as the other party hereto or such Governmental Entities or other public
or private third parties may
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reasonably request. In addition to and not in limitation of the foregoing, each
of the parties will (x) take promptly all actions necessary to make the filings
required of Parent and the Company or their affiliates under the
Hart-Scott-Rodino Act and under comparable merger notification or competition
laws of non-U.S. jurisdictions, (y) comply at the earliest practicable date with
any request for additional information received by such party or its affiliates
from the Federal Trade Commission (the "FTC") or the Antitrust Division of the
Department of Justice (the "Antitrust Division") pursuant to the
Hart-Scott-Rodino Act or the authorities of such other jurisdictions, and (z)
cooperate with the other party in connection with such party's filings under the
Hart-Scott-Rodino Act and in connection with resolving any investigation or
other inquiry concerning the Merger or the other matters contemplated by this
Agreement commenced by the FTC, the Antitrust Division, state attorneys general
or any other Governmental Entity.
10.13.2 In furtherance and not in limitation of the covenants
in Section 10.5, Parent and the Company shall each use all reasonable efforts to
resolve such objections, if any, as may be asserted with respect to any
transactions contemplated by this Agreement by any Governmental Entity. If any
administrative, judicial or legislative action or proceeding is threatened to be
instituted by any such authority challenging any of the transactions
contemplated by this Agreement, Parent and the Company will each cooperate to
contest and resist the institution of any such action or proceeding.
10.14 COMPANY EMPLOYEES
10.14.1 From and after the Effective Time, Parent and the
Surviving Corporation will honor and assume (and Parent guarantees the
obligations of Surviving Corporation hereunder), in accordance with their terms,
all indemnification obligations of the Company under the Company's Certificate
of Incorporation and Bylaws, each as in effect as of the date of this Agreement
to any officer, director, agent or employee of the Company for acts and
omissions prior to the Closing. Parent shall cause all employees of the
Surviving Corporation immediately after the Effective Time to be eligible to
participate in the "employee welfare benefit plans" and "employee pension plans"
(within the meaning of Section 3(1) and Section 3(2) of ERISA, respectively) of
Parent in which similarly situated employees of Parent are generally eligible to
participate (or, alternatively, may choose in their discretion to continue
certain or all of the benefit plans currently provided by Company to its
employees or otherwise to provide benefits comparable to some or all of such
plans); provided that nothing herein shall prevent Merger Sub or Parent from
terminating the employment of any such employee or modifying or terminating such
plans from time to time. For purposes of any length of service requirements,
waiting periods, vesting periods or differential benefits based on length of
service in any such plan for which an employee may be eligible after the
Effective Time, Merger Sub or Parent shall ensure that service by such employee
with the Company shall be deemed to have been service with Merger Sub or Parent,
as applicable, including with respect to existing options held by employees of
the Company: provided that options granted by Parent to employees of the
Surviving Corporation
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immediately following the Effective Time to effect the intent of this
paragraph shall be vested no more than to the same extent that they would
have been vested had they been granted pursuant to the customary terms of
Parent's stock option grants (which currently vest in equal monthly
increments over a four year period) and had such employee been hired upon the
later of (i) two years prior to such date of grant or (ii) the date that such
employee commenced full-time employment at the Company as though such grant
had been made on such deemed date of hire, and in no event shall such options
be vested on the date of grant by Parent as to more than 50% of the shares
subject to such option and the Company and Parent agree to cooperate
reasonably to implement this provision on a case by case basis.
10.14.2 Parent confirms that it is Parent's intention that,
subject to applicable law, Parent and the Surviving Corporation will provide
salary and benefits to employees of the Company who continue to be employed by
the Surviving Corporation after the Effective Time, including participation in
the stock option and other compensatory plans of Parent, which will, in the
aggregate, be substantially equivalent, to those currently provided by Parent
to its similarly situated employees. Notwithstanding the foregoing, nothing in
this Agreement shall otherwise limit the Surviving Corporation's right to
amend, modify or terminate any employee benefit plan or arrangement. Parent
agrees that any person employed by the Company at the Effective Time whose
employment is terminated by the Surviving Corporation on or prior to the first
anniversary of the Effective Time shall be provided severance benefits pursuant
to any written severance agreement, substantially as described on the Company's
Disclosure Memorandum or substantially similar to that provided to similarly
situated employees of Parent at the time of termination.
10.15 RIGHTS AGREEMENT.
Parent will not take any action to revoke, amend or nullify the
amendment to the Rights Agreement referred to in Section 6.5(b), (the "Rights
Amendment"); provided, however that Parent may amend the Rights Amendment (i)
solely for the purpose of including in the definition of "Acquiring Person"
Meritage and its Affiliates and Associates in the event that they
beneficially hold 20% or more of the Common Shares then outstanding and (ii)
with the prior written consent of Meritage.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 TERMINATION
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this Agreement
by the stockholders of the Company):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Merger has not
been consummated by December 31, 2001; provided, however, that (x) the right to
terminate this Agreement under this subsection (b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date and (y) such date shall be extended by one day for each day
following 14 days after the execution of this Agreement that the Company has not
provided to Parent the information referred to in
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the last sentence of Section 10.6.2 in the form for inclusion in the
Proxy/Registration Statement;
(c) by either the Company or Parent, if there shall be any law
or regulation that makes consummation of the Merger illegal or if any judgment,
injunction, order or decree enjoining Parent, Merger Sub or the Company from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final, binding and nonappealable; provided, however, that
the party seeking to terminate this Agreement pursuant to this subsection (c)
shall have used all reasonable efforts to remove such judgment, injunction,
order or decree;
(d) by the Company, in the event of a breach by Parent of any
representation, warranty or agreement contained herein that has not been cured,
or as to which best efforts are not being employed to cure within 30 days after
notice thereof is given to Parent and such breach has resulted in a Parent
Material Adverse Effect or if the conditions to the Company's obligations in
Article VIII become incapable of satisfaction through no fault of the Company;
(e) by Parent, in the event of a breach by the Company of any
representation, warranty or agreement contained herein that has not been cured
or as to which best efforts are not being employed to cure within 30 days after
notice thereof is given to the Company and such breach has resulted in a Company
Material Adverse Effect or if the conditions to Parent's obligations in Article
VII become incapable of satisfaction through no fault of Parent;
(f) by Parent or the Company in connection with entering into
a definitive agreement permitted by Section 10.12; provided that the terminating
party has complied with all provisions thereof, including the notice provisions
therein and the payment of amounts pursuant to Section 11.2;
(g) by Parent if the votes required by the holders of the
Company Capital Stock in order to approve the Merger and the transactions
contemplated by this Agreement and the other Operative Documents are not
received on or before the Closing Date by written consent or at a duly held
meeting of the holders of the Company Capital Stock after such a meeting has
been held; or
(h) by the Company if the votes required by the holders of the
Parent Capital Stock in order to approve the Merger and the transactions
contemplated by this Agreement and the other Operative Documents are not
received on or before the Closing Date at a duly held meeting of the holders of
the Parent Capital Stock after such a meeting has been held.
11.2 EFFECT OF TERMINATION.
11.2.1 In the event of termination of this Agreement by either
the Company or Parent as provided in Section 11.1, written notice thereof shall
be given as
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promptly as possible to the other party hereto, and this Agreement shall
forthwith become null and void and there shall be no liability or obligation on
the part of either the Company or Parent (or any of their respective
Representatives or affiliates), except (i) that the provisions of Sections 10.3
and 10.5, this Section 11.2 and Article XII will continue to apply following any
such termination, (ii) that nothing contained herein shall relieve any party
hereto from liability for breach of its representations, warranties, covenants
or agreements contained in this Agreement, and (iii) as provided in Section
11.2.2 below.
11.2.2 If either party terminates this Agreement pursuant to
Section 11.1(f), the terminating party shall pay to the non-terminating party by
wire transfer in immediately available funds to an account specified in writing
by the non-terminating party immediately upon notice of such termination, a
termination fee of One Million US Dollars (US$1,000,000) and, if the Parent is
the non-terminating party, the Parent shall immediately repay the Notes in full
in accordance with their terms.
11.2.3 The parties acknowledge that the agreements in Section
11.2.2 are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, they each would not enter into this
Agreement; accordingly, if either party fails to pay in a timely manner the
amounts due pursuant to Section 11.2.2 and, in order to obtain such payment, the
non-terminating party makes a claim that results in a judgment against the other
party for the amounts set forth in Section 11.2.2, the terminating party shall
pay to the non- terminating party its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) in connection with such suit, together
with interest on the amounts set forth in Section 11.2.2 from the date of demand
to the date of payment at the rate published as the "prime rate" daily in THE
WALL STREET JOURNAL in effect on the date such payment was required to be made.
11.2.4 If any provision of this Section 11.2 shall be void
under applicable law, or if the performance by any party of its obligations
hereunder is prohibited by applicable law, but such provision or action would be
permissible if some part or all of Section 11.2 were deleted, then such
modification as may be necessary to make such provision or action permissible
shall be deemed to have taken place.
11.3 AMENDMENT
This Agreement may be amended by the parties hereto at any time before
or after approval of Parent's or Company's stockholders; after such approval,
however, no amendment will be made that by applicable law requires the further
approval of Parent's or Company's stockholders without obtaining such further
approval.
11.4 WAIVER
At any time prior to the Effective Time, any party hereto may (a)
extend the time for the performance of any obligation or other act of any other
party hereto, (b) waive any inaccuracy in the representations and warranties
contained herein or in any
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document delivered pursuant hereto, or (c) waive compliance with any agreement
or condition contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby.
ARTICLE XII
GENERAL
12.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
None of the representations and warranties in this Agreement
or in any instrument or document delivered pursuant to this Agreement shall
survive the Effective Time. THIS SECTION 12.1 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
12.2 EXPENSES
Regardless of whether the transactions contemplated by this Agreement
are consummated, each party shall pay its own fees and expenses incident to the
negotiation, preparation and execution of this Agreement and the other Operative
Documents (including investment banking, legal and accounting fees and
expenses),
12.3 NOTICES
Any notice, request or demand desired or required to be given hereunder
shall be in writing given by personal delivery, confirmed facsimile transmission
or overnight courier service, in each case addressed as respectively set forth
below or to such other address as any party shall have previously designated by
such a notice. The effective date of any notice, request or demand shall be the
date of personal delivery, the date on which successful facsimile transmission
is confirmed or the date actually delivered by a reputable overnight courier
service, as the case may be, in each case properly addressed as provided herein
and with all charges prepaid.
To Parent or Merger Sub:
Exabyte Corporation
1685 38th Street
Boulder, Colorado 80301
Fax: (303) 417-7900
Attention: President
with a copy to:
Holland & Hart LLP
1050 Walnut Street
Suite 500
Boulder, CO 80302
89
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Fax: (303) 473-2720
Attention: Nina Lopez
To the Company:
Ecrix Corporation
5525 Central Avenue
Boulder, CO 80301
Fax:
Attention:
with a copy to:
Bartlit Beck Herman Palenchar & Scott
1899 Wynkoop Street, Suite 800
Denver, CO 80202
Fax: (303) 592-3140
Attention: James L. Palenchar
12.4 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby may be consummated as originally contemplated
to the fullest extent possible.
12.5 ENTIRE AGREEMENT
This Agreement, the Confidentiality Agreement and the other Operative
Documents constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof.
12.6 ASSIGNMENT
This Agreement shall not be assigned by operation of law or otherwise;
provided, however, that Merger Sub's rights and obligations may be assigned to
and assumed by Parent or any other corporation wholly owned (directly or through
intermediate wholly owned subsidiaries) by Parent, provided that in such event
Parent shall unconditionally guarantee the full payment and performance of all
obligations of such assignee.
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12.7 PARTIES IN INTEREST
This Agreement shall be binding on and inure solely to the benefit of
the parties hereto and their respective successors, heirs, legal representatives
and permitted assigns.
12.8 GOVERNING LAW; JURISDICTION; VENUE
This Agreement and the transactions contemplated hereby, including the
Merger, shall be governed by and construed in accordance with the laws of the
State of Delaware.
Any request for relief related to any dispute that arises out of or is
related to this Agreement or any of the transactions contemplated by this
Agreement or the other Operative Documents, shall be brought in any federal
court located in the State of Colorado or any federal or state court located in
the State of Delaware. Each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of any such court located in the State of Colorado
or the State of Delaware, as the case may be, in the event any dispute arises
out of or relates to this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
including, without limitation, a motion to dismiss on the grounds of forum non
conveniens, (c) agrees that it will not bring any action arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal court sitting in the State of
Delaware or the State of Colorado or a Delaware state court, (d) agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
specified by law, and (e) waives any right to a trial by jury with respect to
any claim, counterclaim or action arising out of or in connection with this
Agreement or the transactions contemplated hereby.
12.9 NO THIRD-PARTY BENEFICIARY
The terms and provisions of this Agreement are intended solely for the
benefit of each party hereto and their respective successors or permitted
assigns, and, except as provided in Sections 10.14.1 and 10.14.2, it is not the
intention of the parties to confer third-party beneficiary rights under any
other person.
12.10 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement. To expedite the process of entering into this Agreement,
the parties acknowledge that Transmitted Copies of this Agreement will be
equivalent to original documents until
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such time as original documents are completely executed and delivered.
"TRANSMITTED COPIES" will mean copies that are reproduced or transmitted via
photocopy, facsimile or other process of complete and accurate reproduction
and transmission.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement and Plan of Merger as of the date and year first above written.
EXABYTE CORPORATION
By
----------------------------------------------
Name:
Title:
<Page>
BRONCO ACQUISITION, INC.
By
----------------------------------------------
Name:
Title:
<Page>
ECRIX CORPORATION
By
----------------------------------------------
Name: Juan A. Rodriguez
Title: Chairman and CEO
<Page>
INVESTORS:
MERITAGE PRIVATE EQUITY FUND, L.P.
By: Meritage Investment Partners, LLC
Its: General Partner
By:
---------------------------------------------
Name: G. Jackson Tankersley, Jr.
Title: Member
<Page>
MERITAGE PRIVATE EQUITY PARALLEL FUND, L.P.
By: Meritage Investment Partners, LLC
Its: General Partner
By:
---------------------------------------------
G. Jackson Tankersley, Jr.
Member
<Page>
MERITAGE ENTREPRENEURS FUND, L.P.
By: Meritage Investment Partners, LLC
Its: General Partner
By:
--------------------------------------
G. Jackson Tankersley, Jr.
Member
<Page>
MILLENNIAL HOLDINGS LLC
By:
--------------------------------------
G. Jackson Tankersley, Jr.
Managing Member
<Page>
THE MILLENNIAL FUND
By:
--------------------------------------
Name: G. Jackson Tankersley, Jr.
<Page>
TANKERSLEY FAMILY LIMITED PARTNERSHIP
By:
--------------------------------------
G. Jackson Tankersley, Jr.
General Partner
<Page>
CENTENNIAL FUND V, L.P.
By: Centennial Holdings V, L.P.
its General Partner
By:
--------------------------------------
Jeffrey H. Schutz, General Partner
<Page>
CENTENNIAL ENTREPRENEURS FUND V, L.P.
By: Centennial Holdings V, L.P.
its General Partner
By:
--------------------------------------
Jeffrey H. Schutz, General Partner
<Page>
CENTENNIAL FUND VI, L.P.
By: Centennial Holdings VI, LLC
its General Partner
By:
--------------------------------------
Jeffrey H. Schutz, Managing Principal
<Page>
CENTENNIAL ENTREPRENEURS FUND VI, L.P.
By: Centennial Holdings VI, LLC
its General Partner
By:
--------------------------------------
Jeffrey H. Schutz, Managing Principal
<Page>
CENTENNIAL HOLDINGS I, LLC
By:
-------------------------------------------------
Jeffrey H. Schutz, Managing Director
<Page>
BIG PARTNERS V.L.P.
By
----------------------------------------------
Name: Allen A. Builder
Title: General Partner
<Page>
HEXAGON INVESTMENTS LLC
By: Hexagon Investments, Inc., its Manager
By:
----------------------------------------
Brian Fleischmann, VP
<Page>
GRANDHAVEN LLC
By: Hexagon Investments, Inc., its Manager
By:
----------------------------------------
Brian Fleischmann, VP
<Page>
LEGACY ENTERPRISES LLC
By: Hexagon Investments, Inc., its Manager
By:
----------------------------------------
Brian Fleischmann, VP
<Page>
LABYRINTH ENTERPRISES LLC
By: Hexagon Investments, Inc., its Manager
By:
----------------------------------------
Brian Fleischmann, VP
<Page>
JAMES MONROE III, GRANTOR TRUST
By
--------------------------------------------
James Monroe III, Trustee
<Page>
VALLEY VENTURES II, L.P.
By: Valley Ventures II, Management LLC
General Partner
By
--------------------------------------------
Name: John M. Holliman III
Title: Managing Member
<Page>
----------------------------------
CURTIS R. JENSEN
<Page>
----------------------------------
WILLIAM J. ALMON, SR.
<Page>
----------------------------------
MARK ROSSI
<Page>
LENDERS:
----------------------------------
WILLIAM J. ALMON, SR.
<Page>
MERITAGE PRIVATE EQUITY FUND, L.P.
By: Meritage Investment Partners, LLC,
Its: General Partner
By:
-----------------------------------------
John Garrett, Principal
<Page>
CENTENNIAL FUND V, L.P.
By: Centennial Holdings V, L.P.
Its: General Partner
By
--------------------------------------------
Name: Jeffrey H. Schutz
Title: General Partner
<Page>
CENTENNIAL ENTREPRENEURS FUND V, L.P.
By: Centennial Holdings V, L.P.
its General Partner
By:
----------------------------------------
Jeffrey H. Schutz, General Partner
<Page>
CENTENNIAL FUND VI, L.P.
By: Centennial Holdings VI, LLC
its General Partner
By:
----------------------------------------
Jeffrey H. Schutz, Managing Principal
<Page>
CENTENNIAL ENTREPRENEURS FUND VI, L.P.
By: Centennial Holdings VI, LLC
its General Partner
By:
----------------------------------------
Jeffrey H. Schutz, Managing Principal
<Page>
CENTENNIAL HOLDINGS I, LLC
By:
-----------------------------------------------
Jeffrey H. Schutz, Managing Director