EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
F5 NETWORKS, INC.,
SPARROW ACQUISITION CORP.,
SWAN LABS CORPORATION,
AND,
WITH RESPECT TO SECTIONS 1.7.4 AND 1.8 AND ARTICLES VII AND VIII ONLY,
MATTHEW HOWARD AND ANDREW FOSS, AS THE STOCKHOLDER
REPRESENTATIVES
DATED AS OF SEPTEMBER 6, 2005
CONTENTS
ARTICLE I - THE MERGER.......................................................................................... 2
1.1 The Merger......................................................................................... 2
1.2 The Closing........................................................................................ 2
1.3 Effective Date and Time............................................................................ 2
1.4 Certificate of Incorporation of the Surviving Corporation.......................................... 2
1.5 Bylaws of the Surviving Corporation................................................................ 3
1.6 Directors and Officers............................................................................. 3
1.7 Conversion of Shares............................................................................... 3
1.7.1 Merger Consideration.................................................................... 3
1.7.2 Escrow.................................................................................. 4
1.7.3 Appraisal Rights and Dissenters' Rights................................................. 4
1.7.4 Exchange of Certificates................................................................ 5
1.7.5 No Further Transfers.................................................................... 6
1.8 Stockholder Representatives........................................................................ 7
1.8.1 Power and Authority; Replacement........................................................ 7
1.8.2 Limitation of Liability................................................................. 8
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................... 8
2.1 Organization; Subsidiaries......................................................................... 9
2.2 Authorization; Enforceability...................................................................... 9
2.3 Capitalization; Merger Consideration............................................................... 10
2.4 Subsidiaries and Affiliates........................................................................ 11
2.5 No Approvals; No Conflicts......................................................................... 11
2.6 Financial Statements............................................................................... 12
2.7 Absence of Certain Changes or Events............................................................... 13
2.8 Taxes.............................................................................................. 15
2.9 Property........................................................................................... 17
2.10 Contracts......................................................................................... 19
2.10.1 Material Contracts..................................................................... 19
2.10.2 Required Consents...................................................................... 20
2.11 Customers and Suppliers........................................................................... 20
2.12 Warranties and Returns............................................................................ 21
2.13 Claims and Legal Proceedings...................................................................... 21
2.14 Labor and Employment Matters...................................................................... 21
2.15 Employee Benefit Plans............................................................................ 22
2.16 Intellectual Property............................................................................. 26
2.17 Corporate Books and Records....................................................................... 31
2.18 Accounts Receivable............................................................................... 32
2.19 Inventory......................................................................................... 32
2.20 Licenses, Permits, Authorizations, etc............................................................ 33
2.21 Compliance With Laws.............................................................................. 33
2.22 Compliance With Environmental Laws................................................................ 33
2.23 Product Liability................................................................................. 34
2.24 Insurance......................................................................................... 34
2.25 Brokers or Finders................................................................................ 35
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2.26 Absence of Questionable Payments.................................................................. 35
2.27 Bank Accounts..................................................................................... 35
2.28 No Powers of Attorney............................................................................. 36
2.29 Insider Interests................................................................................. 36
2.30 International Trade Matters....................................................................... 36
2.31 Information Supplied by the Company............................................................... 37
2.32 Full Disclosure................................................................................... 37
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................................... 37
3.1 Organization....................................................................................... 37
3.2 Enforceability..................................................................................... 37
3.3 No Approvals or Notices Required; No Conflicts With Instruments.................................... 38
3.4 Brokers or Finders................................................................................. 38
3.5 Interim Operations of Merger Sub................................................................... 39
3.6 Claims and Legal Proceedings....................................................................... 39
3.7 Financing.......................................................................................... 39
ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB....................................... 39
4.1 Accuracy of Representations and Warranties......................................................... 39
4.2 Performance of Agreements.......................................................................... 39
4.3 Opinion of Counsel for the Company................................................................. 40
4.4 Compliance Certificate............................................................................. 40
4.5 Material Adverse Effect............................................................................ 40
4.6 Approvals and Consents............................................................................. 40
4.7 Secretary's Certificate............................................................................ 40
4.8 Nonforeign Affidavit............................................................................... 40
4.9 Compliance With Laws............................................................................... 41
4.10 Stockholder Approval; Irrevocable Proxies......................................................... 41
4.11 Legal Proceedings................................................................................. 41
4.12 Employment and Proprietary Information Arrangements............................................... 41
4.13 Appraisal Rights.................................................................................. 42
4.14 Stockholder Agreement; Transmittal Letters........................................................ 42
4.15 Consents to Merger................................................................................ 42
4.16 Repayment of Indebtedness; Releases of Liens...................................................... 42
4.17 Escrow Agreement.................................................................................. 42
4.18 Resignations...................................................................................... 42
4.19 Exercise or Termination of Company Options........................................................ 42
4.20 Termination of Company's 401(k) Plan, Bonus Plans and Employee Benefit Plans...................... 43
4.21 Transaction Costs Spreadsheet..................................................................... 43
4.22 Tax Matters....................................................................................... 43
4.23 Consideration Allocation Certificate.............................................................. 43
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.................................................. 44
5.1 Accuracy of Representations and Warranties......................................................... 44
5.2 Performance of Agreements.......................................................................... 44
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5.3 Compliance Certificate............................................................................. 44
5.4 Legal Proceedings.................................................................................. 44
5.5 Approvals and Consents............................................................................. 44
5.6 Compliance With Laws............................................................................... 45
5.7 Opinion of Counsel for Parent...................................................................... 45
ARTICLE VI - COVENANTS.......................................................................................... 45
6.1 Conduct of Business by the Company Pending the Merger.............................................. 45
6.2 Access to Information; Confidentiality............................................................. 47
6.3 No Alternative Transactions........................................................................ 47
6.4 Notification of Certain Matters.................................................................... 48
6.5 Further Action; Commercially Reasonable Efforts.................................................... 48
6.6 Notice of Stockholder Action....................................................................... 49
6.7 Dissenting Shares.................................................................................. 49
6.8 Publicity.......................................................................................... 49
6.9 Tax Matters........................................................................................ 49
6.10 Termination of 401(k) Plans and Employee Benefit Plans............................................ 50
6.11 Treatment of Company Options...................................................................... 51
6.12 Award Grants...................................................................................... 51
6.13 Employee Retention Pool........................................................................... 51
6.14 Employee Benefits; Service Credit................................................................. 52
6.16 Indemnification of Company Officers and Directors................................................. 52
6.17 Updated Disclosure Memorandum..................................................................... 53
6.18 Interim Financial Statements...................................................................... 53
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER................................................................. 54
7.1 Termination........................................................................................ 54
7.2 Effect of Termination.............................................................................. 54
7.3 Amendment.......................................................................................... 55
7.4 Waiver............................................................................................. 55
ARTICLE VIII - SURVIVAL AND INDEMNIFICATION..................................................................... 55
8.1 Survival........................................................................................... 55
8.2 Indemnification by the Holders of Company Capital Stock............................................ 56
8.3 Indemnification by Parent.......................................................................... 57
8.4 Limitations........................................................................................ 57
8.5 Establishment and Contesting of Indemnification Liability.......................................... 58
8.6 Defense and Settlement of Third-Party Claims....................................................... 60
8.7 Reduction of Escrow Amount......................................................................... 60
8.8 Termination of Escrow.............................................................................. 61
8.9 Exclusive Remedies; Specific Performance........................................................... 61
ARTICLE IX - GENERAL............................................................................................ 62
9.1 Expenses........................................................................................... 62
9.2 Notices............................................................................................ 62
9.3 Severability....................................................................................... 63
9.4 Entire Agreement................................................................................... 64
9.5 Assignment......................................................................................... 64
9.6 Parties in Interest................................................................................ 64
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9.7 Governing Law; Arbitration; Jurisdiction; Venue.................................................... 64
9.8 Headings........................................................................................... 65
9.9 Counterparts....................................................................................... 65
9.10 Waiver of Jury Trial.............................................................................. 65
ARTICLE X - DEFINITIONS......................................................................................... 66
EXHIBITS
1 Form of Stockholder Agreement
1.4 Surviving Corporation Certificate of Incorporation
1.5 Surviving Corporation Bylaws
1.7.4 Letter of Transmittal
2.2(b)(1) Company Stockholder Consent
2.2(b)(2) Irrevocable Proxy
4.3 Opinion of Counsel for the Company
4.8 Real Property Tax Affidavit
5.7 Opinion of Counsel for Parent
SCHEDULES TO THE DISCLOSURE MEMORANDUM
C Required Stockholders
2.1 Organization; Subsidiaries
2.3 Capitalization; Merger Consideration
2.5 No Approvals; No Conflicts
2.6 Financial Statements
2.7 Absence of Certain Changes or Events
2.8 Taxes
2.9 Property
2.10 Material Contracts and Required Consents
2.11 Customers and Suppliers
2.12 Warranties and Returns
2.13 Claims and Legal Proceedings
2.14 Labor and Employments
2.15 Employee Benefit Plans
2.16 Company Intellectual Property
2.17 Corporate Books and Records
2.18 Accounts Receivable
2.24 Insurance
2.27 Bank Accounts
2.28 No Powers of Attorney
2.29 Insider Interests
4.12 Certain Retention Employees
4.15 Required Consents
6.13(a) Retention Employees
6.13(b) Retention Milestones
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") is made and entered
into as of September 6, 2005, by and among F5 Networks, Inc., a Washington
corporation ("PARENT"), Sparrow Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of Parent ("MERGER SUB"), Swan Labs Corporation, a
Delaware corporation (the "COMPANY"), and, with respect to Sections 1.7.4 and
1.8 and Articles VII and VIII only, Matthew Howard and Andrew Foss, as the
Stockholder Representatives (as defined below).
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, whereby Merger Sub would be merged with and into the
Company (the "MERGER").
B. The Board of Directors of the Company and the requisite number of
stockholders of the Company have approved this Agreement and the Merger as
required by applicable law.
C. Promptly after the execution of this Agreement by the Company, in order
to induce Parent and Merger Sub to enter into this Agreement, the stockholders
of the Company identified on SCHEDULE C TO THE DISCLOSURE MEMORANDUM (the
"REQUIRED STOCKHOLDERS") shall have executed and delivered (a) a written consent
in lieu of special meeting of the stockholders of the Company in the form
attached as EXHIBIT 2.2(b)(1) hereto, approving, among other things, the
adoption of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby (the "COMPANY STOCKHOLDER CONSENT"); and (b) an
Irrevocable Proxy in favor of Parent in substantially the form attached hereto
as EXHIBIT 2.2(b)(2).
D. 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.
E. Capitalized terms not otherwise defined herein have the meanings given
such terms in Article X of this Agreement.
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as follows:
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ARTICLE I - THE MERGER
1.1 THE MERGER
Upon the terms and subject to the conditions hereof, (a) at the Effective
Time the separate existence of Merger Sub shall cease and Merger Sub shall be
merged with and into the Company (the Company as the surviving corporation after
the Merger is sometimes referred to herein as the "SURVIVING CORPORATION") and
(b) from and after the Effective Time, the Merger shall have all the effects of
a merger under the laws of the State of Delaware and other applicable law.
1.2 THE CLOSING
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "CLOSING") shall take place on the earliest practicable business day
(the "CLOSING DATE") after the satisfaction or waiver of the conditions set
forth in Articles IV and V at 10 a.m. local time at the offices of DLA Piper
Rudnick Gray Cary US LLP, 701 Fifth Avenue, Suite 7000, Seattle, WA 98104, or
such other date, time or location as Parent and the Company shall agree;
provided, however, that in no event shall the Closing Date be prior to October
1, 2005.
1.3 EFFECTIVE DATE AND TIME
On the Closing Date and subject to the terms and conditions hereof, the
parties hereto shall cause a certificate of merger (the "CERTIFICATE OF MERGER")
complying with the applicable provisions of the Delaware General Corporation Law
("DELAWARE LAW") 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, as appropriate, will execute
any necessary revisions incorporating such changes, provided such changes are
not inconsistent with and do not result in any material change in the terms of
this Agreement.
1.4 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION
Unless otherwise specified by Parent prior to the Effective Time, at the
Effective Time, the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated in its entirety as of the Effective Time to
conform to the certificate of incorporation attached hereto as EXHIBIT 1.4.
Thereafter, the Certificate of Incorporation of the Surviving Corporation may be
amended in accordance with its terms and as provided by law.
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1.5 BYLAWS OF THE SURVIVING CORPORATION
Unless otherwise specified by Parent prior to the Effective Time, at the
Effective Time, the Bylaws of the Surviving Corporation shall be amended and
restated to conform to the bylaws attached hereto as EXHIBIT 1.5. Thereafter,
the bylaws may be amended or repealed in accordance with their terms and the
Articles of Incorporation of the Surviving Corporation and as provided by law.
1.6 DIRECTORS AND OFFICERS
At the Effective Time, the directors and officers of the Company shall
resign and the directors of Merger Sub shall continue in office as the directors
of the Surviving Corporation and the officers of 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.
1.7 CONVERSION OF SHARES
1.7.1 MERGER CONSIDERATION
Subject to the provisions below, as of the Effective Time, by virtue of
the Merger and without any action on the part of the holders thereof, all of the
outstanding shares of capital stock of the Company ("COMPANY CAPITAL STOCK")
shall be cancelled and converted into the right to receive from Parent an
aggregate sum of $43,000,000 in cash (the "PURCHASE PRICE") and the following
shall occur:
(a) All shares of any class of Company Capital Stock held by the Company
as treasury shares shall be cancelled.
(b) Subject to the provisions of Section 1.7.2 below, the Purchase Price
shall be allocated among the Company Capital Stock as follows:
(i) Each issued and outstanding share of the Company's Series A
Preferred Stock (the "COMPANY SERIES A STOCK"), other than shares cancelled
pursuant to Section 1.7.1(a) and Dissenting Shares, shall be cancelled and
converted into the right to receive from Parent an amount of cash equal to Per
Share Preferred Stock Consideration.
(ii) Each issued and outstanding share of Common Stock of the
Company (the "COMPANY COMMON STOCK"), other than shares cancelled pursuant to
Section 1.7.1(a) and Dissenting Shares, shall be cancelled and converted into
the right to receive from Parent an amount of cash equal to the Per Share Common
Stock Consideration.
(iii) The amount of cash to be paid to each stockholder of the
Company under this Section 1.7.1(b) shall be calculated by aggregating all
shares of Company Capital Stock held by each such stockholder, so that such
amount of cash to be paid shall be equal to the sum of (x) the aggregate number
of shares of Company Common Stock held by such
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stockholder multiplied by the Per Share Common Stock Consideration, and (y) the
aggregate number of shares of Company Series A Stock held by such stockholder
multiplied by the Per Share Preferred Stock Consideration, in each case rounded
to the nearest $0.01, with $0.005 being rounded up.
(c) Each issued and outstanding share of capital stock of Merger Sub shall
be converted into one share of common stock of the Surviving Corporation.
(d) All options, warrants or other outstanding rights to purchase or
otherwise acquire Company Capital Stock (together, the "COMPANY OPTIONS")
outstanding immediately prior to the Effective Time shall be treated in
accordance with Section 6.11 hereof.
1.7.2 ESCROW
Notwithstanding the foregoing, subject to effectiveness of the Merger, an
aggregate of (a) $4,300,000 in cash (the "BASE ESCROW AMOUNT") and (b)
$1,075,000 in cash (the "SPECIAL ESCROW AMOUNT" and, together with the Base
Escrow Amount, the "ESCROW AMOUNT") from the Purchase Price shall be deposited
in escrow (the "ESCROW") with Wells Fargo Bank, National Association (the
"ESCROW AGENT"), to be held and administered in accordance with an Escrow
Agreement in a form reasonably satisfactory to the Company and Parent (the
"ESCROW AGREEMENT"), such Escrow Amount to be deducted, pro rata based on the
aggregate amount of Merger Consideration to be received by each holder of
Company Capital Stock under Section 1.7.1(b), from the aggregate amount
otherwise payable to each such holder of Company Capital Stock as of the
Effective Time. By approving the Merger at a special meeting of the stockholders
or by written consent or by delivering a Letter of Transmittal and their
certificates representing shares of Company Capital Stock to the Escrow Agent in
accordance with the provisions of Section 1.7.4, the stockholders shall agree
(i) that the aggregate amount of the Merger Consideration payable to each such
stockholder pursuant to Section 1.7.1 shall be reduced by their respective
portions of the Escrow Amount, which amounts will be set forth on the
Consideration Allocation Certificate, and (ii) to be bound with respect to the
indemnification obligations of the stockholders and the procedures set forth in
Article VIII. In accordance with the terms of the Escrow Agreement, on or prior
to the Effective Time, Parent will take all steps necessary to enable it or the
Surviving Corporation to deliver to the Escrow Agent the Escrow Amount by wire
transfer in immediately available funds, all to be managed and paid out by the
Escrow Agent in accordance with the terms of the Escrow Agreement.
1.7.3 APPRAISAL RIGHTS AND DISSENTERS' RIGHTS
Notwithstanding any provision of this Agreement to the contrary, any
shares of Company Common Stock or Company Series A Stock held by a holder who
has demanded and perfected such holder's right for appraisal or rights of
dissent of such shares in accordance with California Law or Delaware Law, as the
case may be, and who, as of the Effective Time, has not effectively withdrawn or
lost such right to appraisal or right of dissent ("DISSENTING SHARES"), if any,
shall not be converted into the right to receive the Merger Consideration but
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shall instead be converted into the right to receive such consideration as may
be determined to be due with respect to such Dissenting Shares pursuant to
California Law or Delaware Law, as the case may be. The Company shall give
Parent prompt notice of any demand for appraisal or notice of dissent received
by the Company, and Parent shall have the right to direct and participate in all
negotiations and proceedings with respect to such demand or notice. The Company
agrees that, except with the prior written consent of Parent, or as required
under California Law or Delaware Law, as the case may be, it will not
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand or notice. Each holder of Dissenting Shares (a "DISSENTING
Stockholder") who, pursuant to the provisions of California Law or Delaware Law,
as the case may be, becomes entitled to payment of the fair value for shares of
Company Capital Stock shall receive payment therefor (but only after the value
therefor shall have been agreed upon or finally determined pursuant to such
provisions). If, after the Effective Time, any Dissenting Shares shall lose
their status as Dissenting Shares, Parent shall issue and deliver, upon
surrender by such stockholder of a certificate or certificates representing
shares of Company Capital Stock, the portion of the Merger Consideration to
which such stockholder would otherwise be entitled under this Section 1.7.3 and
this Agreement less the portion of the Merger Consideration allocable to such
stockholder that has been deposited with the Escrow Agent in respect of such
shares of Company Capital Stock pursuant to Section 1.7.2. To the extent that
Parent or the Company makes any payment in respect of any Dissenting Shares,
Parent shall be entitled to recover under Article VIII hereof (i) the aggregate
amount by which such payment (plus the amounts paid at the Effective Time)
exceeds the Merger Consideration allocable to such stockholder and (ii) any
other costs and expenses, including attorney fees and expenses, incurred in
connection with investigating, defending and settling such demands for appraisal
(the amounts in clauses (i) and (ii) collectively, "EXCESS DISSENTING SHARE
PAYMENTS").
1.7.4 EXCHANGE OF CERTIFICATES
(a) Prior to the Effective Time, Parent shall designate an agent (which
may be Parent or a subsidiary of Parent) to act as a disbursement or exchange
agent (the "EXCHANGE AGENT") in the Merger.
(b) Parent or the Exchange Agent shall cause to be mailed, no later than
20 days prior to the Closing Date, to each holder of shares of Company Capital
Stock and each holder of Company Options: (i) a letter of transmittal (the
"LETTER OF TRANSMITTAL") containing (A) an agreement to be obligated for such
holder's pro rata potion of the indemnification obligations set forth in Article
VIII below, and (B) an obligation to execute and deliver the Stockholder
Agreement, which document is substantially in the form attached hereto as
EXHIBIT 1.7.4; and (ii) instructions for effecting the surrender of the
certificates in exchange for a portion of the Merger Consideration. 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 specified in the Letter
of Transmittal, and immediately following the Closing, the holder of such
certificate shall be entitled to receive in exchange therefor a check or wire
transfer representing the portion of the Merger
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Consideration that such stockholder of the Company is entitled to receive
pursuant to Section 1.7.1 as of the Effective Time. If 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 of
the Company claiming such certificate to be lost, stolen or destroyed, in form
satisfactory to Parent, and delivery of the Letter of Transmittal, Parent shall
issue in exchange for such lost, stolen or destroyed certificate the portion of
the Merger Consideration that such stockholder of the Company is entitled to
receive pursuant to Section 1.7.1; provided, however, that Parent may in its
discretion and as a condition precedent to the issuance thereof, require such
stockholder to provide Parent with an indemnity agreement against any Claim that
may be made against Parent with respect to the certificate alleged to have been
lost, stolen or destroyed. No interest shall accrue on the Merger Consideration.
Unless otherwise approved by Parent, which approval shall not be unreasonably
withheld, the Merger Consideration (or any portion thereof) shall be delivered
only to the Person in whose name the certificate or certificates representing
shares of Company Capital Stock surrendered in exchange therefor is registered.
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.
(c) Parent or the Exchange Agent will be entitled to deduct and withhold
from the Merger Consideration such amounts as Parent, the Company or the
Exchange Agent may be required to deduct and withhold with respect to either the
making of such payment under the Code or acquiring and/or disposing the shares
of Company Capital Stock (through exercise of options or otherwise), or any
provision of state, local or foreign Tax law, provided that no amount of Merger
Consideration shall be withheld with respect to Taxes arising from the
acquisition of shares of Company Capital Stock pursuant to option exercises
unless the Company has failed to comply with applicable Tax withholding
requirements in respect thereto. 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 is made by Parent or the Exchange Agent. Prior to the
Closing, the stockholders of the Company will provide Parent or the Exchange
Agent any Forms W-9 or other certificates or forms required to allow Parent or
the Exchange Agent to meet its withholding obligations under the law.
1.7.5 NO FURTHER TRANSFERS
After the Effective Time, there shall be no transfers of any shares of
Company Capital Stock on the stock transfer books of the Surviving Corporation.
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 cancelled and exchanged in accordance with this
Section 1.7, subject, in the case of Dissenting Shares, to Section 1.7.3.
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1.8 STOCKHOLDER REPRESENTATIVES
1.8.1 POWER AND AUTHORITY; REPLACEMENT
(a) By the approval of the Merger at a special meeting of stockholders or
by written consent of the stockholders, or by execution of the Stockholder
Agreement, each stockholder of the Company shall be deemed to have irrevocably
authorized and appointed each of Matthew Howard and Andrew Foss (each a
"STOCKHOLDER REPRESENTATIVE" and together the "STOCKHOLDER REPRESENTATIVES"),
with full power of substitution and resubstitution, as his, her or its
representative and true and lawful attorney-in-fact and agent to act in his, her
or its name, place and stead with respect to all matters arising in connection
with this Agreement, including, without limitation, the power and authority, in
their respective sole discretion, prior to and after the Effective Time, to:
(i) take any action contemplated to be taken by the stockholders of
the Company under this Agreement or any other Operative Document, including,
without limitation, pursuant to Article VIII;
(ii) negotiate, determine, defend and settle any disputes that may
arise under or in connection with this Agreement or any other Operative
Document, including, without limitation, with respect to any Indemnification
Claim pursuant to Article VIII; and
(iii) make, execute, acknowledge and deliver any releases,
assurances, receipts, requests, instructions, notices, agreements, certificates
and any other instruments, and generally do any and all things and take any and
all actions that may be requisite, proper or advisable in connection with this
Agreement or any other Operative Document, including, without limitation,
pursuant to Article VIII.
(b) At any time during the term of the Escrow Agreement, the former
stockholders of the Company may, by written consent of the holders of a majority
of the former shares of Company Capital Stock (based on the respective ownership
amounts immediately prior to the Closing), appoint new representatives as the
Stockholder Representatives, including in the event that any Stockholder
Representative becomes unable or unwilling to continue in his capacity as
Stockholder Representative, or if any Stockholder Representative resigns as a
Stockholder Representative. Written notice, together with a copy of the written
consent appointing such new representative and bearing the signatures of the
applicable stockholders, must be delivered to Parent and the Escrow Agent not
less than ten (10) calendar days prior to such appointment. Upon approval of the
new representative by Parent, which approval may not be unreasonably withheld,
such appointment will be effective upon the later of (i) the date indicated in
the consent, (ii) the date that Parent approves such new representative or (iii)
the date such written consent is received by Parent and the Escrow Agent.
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1.8.2 LIMITATION OF LIABILITY
(a) The Stockholder Representatives will incur no liability with respect
to any action taken or suffered by any party in reliance upon any notice,
direction, instruction, consent, statement or other document believed by such
Stockholder Representative to be genuine and to have been signed by the proper
person (and shall have no responsibility to determine the authenticity thereof),
nor for any other action or inaction, except his own gross negligence, bad faith
or willful misconduct. In all questions arising under this Agreement or the
Escrow Agreement, the Stockholder Representatives may rely on the advice of
outside counsel, and the Stockholder Representatives will not be liable to
anyone for anything done, omitted or suffered in good faith by the Stockholder
Representatives based on such advice. Except as expressly provided herein, the
Stockholder Representatives will not be required to take any action involving
any expense unless the payment of such expense is made or provided for in a
manner satisfactory to both the Stockholder Representatives.
(b) Each stockholder shall severally but not jointly indemnify the
Stockholder Representatives and hold the Stockholder Representatives harmless
against any loss, liability or expense incurred without gross negligence, bad
faith or willful misconduct, to the extent permitted by applicable law, on the
part of the Stockholder Representatives and arising out of or in connection with
the acceptance or administration of the Stockholder Representatives' duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Stockholder Representatives.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
Except as is otherwise set forth in detail in the Company Disclosure
Memorandum delivered by the Company to Parent and dated as of the date of this
Agreement (and which shall be updated as of the Closing, subject to Section 6.17
below) (the "DISCLOSURE MEMORANDUM"), which refers specifically to the
representations and warranties in this Agreement and which identifies by section
number the section and subsection to which such disclosure relates (provided
that any information disclosed under any section or subsection shall be deemed
to be disclosed and incorporated into any other section or subsection where such
disclosure would on its face and without reference to any separate or
independent document or information reasonably be deemed to apply, and provided
further that the fact that any disclosure in the Disclosure Memorandum is not
required to be disclosed in order to render the applicable representation or
warranty to which is relates true, or that the absence of such disclosure in the
Disclosure Memorandum would not constitute a breach of such representation or
warranty, shall not be deemed or construed to expand the scope of any
representation or warranty hereunder or to establish a standard of disclosure in
respect of any representation or warranty), and in order to induce Parent and
Merger Sub to enter into and perform this Agreement and the other agreements and
certificates that are required to be executed pursuant to this Agreement
(collectively, the "OPERATIVE DOCUMENTS"), the Company represents and warrants
to Parent and Merger Sub as of the date of this Agreement and as of the Closing
as follows in this Article II. For the purposes of Section 2.7 through Section.
2.32
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of this Article II, the term "Company" shall refer to the Company and each and
all of its subsidiaries.
2.1 ORGANIZATION; SUBSIDIARIES
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company's subsidiaries are
duly organized and validly existing under the laws of the jurisdictions in which
they are organized. The Company has all requisite corporate power and authority
to own, operate and lease its properties and assets, to carry on its business as
now conducted, and to enter into and perform its obligations under this
Agreement and the other Operative Documents to which the Company is a party, and
to consummate the transactions contemplated hereby and thereby. The Company and
its subsidiaries are duly qualified and licensed as a foreign corporation to do
business and is in good standing in each of the jurisdictions specified in
SCHEDULE 2.1 TO THE DISCLOSURE MEMORANDUM, which are the only jurisdictions in
which the failure to be so qualified and in good standing would reasonably be
expected to have a Material Adverse Effect. SCHEDULE 2.1 TO THE DISCLOSURE
MEMORANDUM lists each of the Company's direct and indirect subsidiaries and the
jurisdiction in which each is incorporated or formed.
2.2 AUTHORIZATION; ENFORCEABILITY
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the other Operative
Documents to which the Company is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Company, subject only to the adoption
of this Agreement by the Company's stockholders holding at least (i) a majority
of the outstanding shares of Company Common Stock, (ii) 55% of the outstanding
shares of Company Series A Stock and (iii) a majority of the outstanding shares
of Company Capital Stock (the votes referred to in clauses "(i)", "(ii)" and
"(iii)" of this sentence being collectively referred to as the "REQUIRED
STOCKHOLDER VOTE"), which consents have been obtained as of the date hereof
following execution of this Agreement by the Company. The Board of Directors of
the Company has taken all necessary corporate action to approve the transactions
contemplated by the Irrevocable Proxies pursuant to Section 203(a) of the
Delaware Law. This Agreement has been, and each of the other Operative Documents
to which the Company is a party at the Closing will have been, duly executed and
delivered by the Company, and this Agreement is, and each of the other Operative
Documents to which the Company is a party will be at the Closing, a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other laws affecting the rights and remedies of creditors generally and
general principles of equity.
(b) The Board of Directors has, by the unanimous vote of all directors in
office, (i) duly approved this Agreement, the Operative Documents to which the
Company is a party, the Merger and the transactions contemplated hereby and
thereby, (ii) determined that the Merger
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is advisable and in the best interests of the stockholders of the Company, and
(iii) recommended that the stockholders of the Company adopt this Agreement and
directed that this Agreement be submitted to the stockholders of the Company for
adoption. All such corporate action by the Board of Directors has been taken in
accordance with its obligations under the Certificate of Incorporation and
Bylaws of the Company and the laws of the State of Delaware.
(c) The shares of the Company's capital stock that are subject to the
Company Stockholder Consent delivered pursuant to Recital C hereof are (and will
continue through the Closing to be) sufficient to obtain the Required
Stockholder Vote.
2.3 CAPITALIZATION; MERGER CONSIDERATION
(a) The authorized capital stock of the Company consists solely of
89,000,000 shares of Company Common Stock, par value $0.0001 per share, and
35,750,000 shares of preferred stock, par value $0.001 per share, all of which
are designated as Company Series A Stock.
(b) As of the date of this Agreement, the issued and outstanding capital
stock of the Company consists solely of 30,670,117 shares of Company Common
Stock and 35,344,710 shares of Company Series A Stock, which are held of record
and beneficially by the stockholders of the Company as set forth on SCHEDULE
2.3(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, and issued in compliance with all applicable
federal and state securities laws. To the Company's knowledge, no Person, other
than the stockholders of the Company listed on SCHEDULE 2.3(b) TO THE DISCLOSURE
MEMORANDUM, holds any interest in any of the outstanding shares.
(c) As of the date of this Agreement, other than as set forth on SCHEDULE
2.3(c) TO THE DISCLOSURE MEMORANDUM, there are no outstanding rights of first
refusal or offer, preemptive rights, options, warrants, conversion rights, other
rights or other agreements, either directly or indirectly, for the purchase or
acquisition from the Company or any stockholder of the Company of any shares of
Company Capital Stock or any securities or instruments convertible into or
exchangeable for shares of Company Capital Stock (collectively, "STOCK PURCHASE
RIGHTS"). SCHEDULE 2.3(c) TO THE DISCLOSURE MEMORANDUM also identifies any Stock
Purchase Rights that have been offered in connection with any employment or
consulting agreement but that, as of the date hereof, have not been issued or
granted.
(d) Except as set forth on SCHEDULE 2.3(d) TO THE DISCLOSURE MEMORANDUM,
the Company is not a party or subject to any agreement or understanding and
(other than voting agreements entered into in connection with this Agreement)
there is no agreement or understanding between any Persons that affects or
relates to the voting or giving of written consents with respect to any
securities of the Company or the voting of any securities of the Company by any
director or officer of the Company. The Company has no contractual or
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other obligation to register any of its presently outstanding securities or any
of its securities that may hereafter be issued.
(e) All rights of refusal, rights of first offer, co-sale or tag-along
rights, drag-along rights, registration rights or similar rights granted by the
Company with respect to the Company's capital stock or Stock Purchase Rights are
described on SCHEDULE 2.3(e) TO THE DISCLOSURE MEMORANDUM.
(f) All Company Options have been granted or issued at fair market value,
as determined by the Company's Board of Directors at the date of grant or
issuance.
2.4 SUBSIDIARIES AND AFFILIATES
Except as set forth in SCHEDULE 2.1 TO THE DISCLOSURE MEMORANDUM, the
Company does not (a) own or control, and has not in the past owned or
controlled, directly or indirectly, any corporation, partnership, limited
liability company or other entity, and (b) own, directly or indirectly, any
ownership, equity, or voting or other interest in, any corporation, partnership,
joint venture or other entity, and has no agreement or commitment to purchase
any such interest.
2.5 NO APPROVALS; NO CONFLICTS
The execution, delivery and performance by the Company of this Agreement
and the other Operative Documents to which the Company is a party and the
consummation of the transactions contemplated hereby and thereby will not (a) to
the Company's knowledge, constitute a 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 Body
applicable to the Company, (b) require any consent, approval or authorization
of, or declaration, filing or registration with, any Person, except for (i) the
filing of all documents necessary to consummate the Merger with the Delaware
Secretary of State, (ii) the approval by the stockholders of the Company of the
transactions contemplated hereby, as provided under California Law and Delaware
Law and the Certificate of Incorporation and Bylaws of the Company, which
approval is set forth in the Company Stockholder Consent, and (iii) such filings
as may be required to be made by the Company in connection with the Merger by
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HART-SCOTT-RODINO ACT"), or any other federal or state antitrust or fair trade
law, (c) result in a default (with or without the giving of notice or lapse of
time, or both) under, or acceleration or termination of, or the creation in any
party of the right to accelerate, terminate, modify or cancel, any agreement,
lease, note or other restriction, Encumbrance (other than Permitted
Encumbrances), obligation or liability to which the Company is a party or by
which it is bound or to which any material assets of the Company are subject
(other than the acceleration of vesting or the release of the Company's
repurchase rights of outstanding Company Options issued to employees,
consultants and directors of the Company) and except as would not have a
Material Adverse Effect, (d) result in the creation of any Encumbrance (other
than Permitted Encumbrances) upon any material assets of the Company, (e)
conflict with or result in a
-11-
breach of or constitute a default under any provision of the Certificate of
Incorporation or Bylaws of the Company, or (f) invalidate or adversely affect
any material permit, license or authorization used in the conduct of the
business of the Company.
2.6 FINANCIAL STATEMENTS
(a) The Company has delivered to Parent (i) an unaudited balance sheet,
statement of income and expense, statement of cash flow and statement of
stockholders' equity of the Company as of or for the fiscal year ended July 31,
2005 (the "Financial Statements") and (ii) true and complete copies of all
management letters and other correspondence received from the Company's
accountants since December 31, 2004 relating to the foregoing financial
statements, accounting controls of the Company and all related matters. The
balance sheet of the Company as of July 31, 2005 is herein referred to as the
"COMPANY BALANCE SHEET." The Financial Statements have been prepared in
conformity with GAAP 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,
except that unaudited Financial Statements may not contain footnotes required by
GAAP. The Company has no liabilities or obligations of any nature (absolute,
contingent or otherwise) that are not fully reflected or fully reserved against
in the Company Balance Sheet, except liabilities or obligations incurred in the
ordinary course of business and consistent with past practice since the date of
the Company Balance Sheet. The Company is not a guarantor, indemnitor, surety or
other obligor of any indebtedness of any other Person. SCHEDULE 2.6(a) TO THE
DISCLOSURE MEMORANDUM sets forth (A) all indebtedness, receivables and other
obligations of the stockholders, directors, officers or employees of the
Company, or any of their respective Affiliates, relating to the Company,
together with all amounts owed by such stockholders, directors, officers or
employees of the Company, or any of their respective Affiliates, in respect
thereof, that are outstanding immediately prior to the Closing; and (B) all
outstanding liabilities of the Company with respect to the stockholders,
directors, officers or employees of the Company, or any of their respective
Affiliates, including, but not limited to, unpaid accrued salaries, bonuses and
other employee, director or officer compensation, that are outstanding
immediately prior to the Closing.
(b) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that: (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. There has been no incidence of fraud, whether or not material, that
involves any current or former directors, officers or employees of the Company
and during the periods covered by the Financial Statements there have been no
changes in the internal control over financial reporting that have materially
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affected, or are Reasonably Likely to materially affect, such internal control
over financial reporting.
(c) SCHEDULE 2.6(c) TO THE DISCLOSURE MEMORANDUM lists all services
currently being performed, or which have been performed within the last three
years, by PriceWaterhouseCoopers LLP for the Company.
(d) SCHEDULE 2.6(d) TO THE DISCLOSURE MEMORANDUM lists, and the Company
has delivered to Parent copies of the documentation creating or governing, all
securitization transactions and "off-balance sheet arrangements" (as defined in
Item 303(a) of Regulation S-K of the SEC) effected by the Company since
inception.
(e) SCHEDULE 2.6(e) TO THE DISCLOSURE MEMORANDUM sets forth the amount of
the cash and cash equivalents listed on the Company's books and records as of
the date of this Agreement, which amount has been calculated in conformity with
GAAP on a basis consistent with prior accounting periods.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except for transactions specifically contemplated in this Agreement, since
the date of the Company Balance Sheet, neither the Company nor any of its
officers or directors in their representative capacities on behalf of the
Company has:
(a) taken any action or entered into or amended, terminated, granted a
waiver under or given a consent with respect to any transaction, agreement or
commitment other than in the ordinary course of business;
(b) forgiven or cancelled 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), other
than waivers of the Company's right of repurchase with respect to restricted
stock of the Company issued to the Company's employees, consultants or
directors;
(c) granted any increase in the compensation of directors, officers,
employees or consultants (including any such increase pursuant to any employment
agreement or bonus, pension, profit-sharing, lease payment or other plan or
commitment) or any increase in the compensation payable or to become payable to
any director, officer, employee or consultant;
(d) become subject to any change or circumstance having a Material Adverse
Effect;
(e) borrowed or agreed to borrow any funds, incurred or become subject to,
whether directly or by way of assumption or guarantee or otherwise, any
obligations or liabilities (absolute, accrued, contingent or otherwise) (other
than trade payables or accruals in the ordinary course of business), or
increased, or experienced any change in any
-13-
assumptions underlying or methods of calculating, any bad debt, contingency or
other reserves;
(f) paid, discharged or satisfied any material Claims, liabilities or
obligations (absolute, accrued, 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 prepaid any obligation having a fixed maturity of more than 90 days
from the date such obligation was issued or incurred;
(g) knowingly permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any Encumbrance;
(h) purchased or sold, transferred or otherwise disposed of any material
properties or assets (real, personal or mixed, tangible or intangible);
(i) disposed of or permitted to lapse any rights to the use of any
trademark, trade name, patent or copyright, or disposed of or disclosed to any
Person without obtaining an appropriate confidentiality agreement from any such
Person any trade secret, formula, process or know-how not theretofore a matter
of public knowledge;
(j) made any single capital expenditure or commitment in excess of $5,000
for additions to property, plant, equipment or intangible capital assets or made
aggregate capital expenditures in excess of $15,000 for additions to property,
plant, equipment or intangible capital assets;
(k) made any change in accounting methods or practices or internal
accounting control, inventory, investment, credit, allowance or Tax procedure or
practices;
(l) made or approved any write off or write down or any determination to
write-off or write down any of the assets or properties of the Company;
(m) issued any capital stock or other securities, or declared, paid or set
aside for payment any dividend or other distribution in respect of its capital
stock, or redeemed, purchased or otherwise acquired, directly or indirectly, any
shares of capital stock or other securities of the Company, or otherwise
permitted the withdrawal by any of the holders of the Company's capital stock of
any cash or other assets (real, personal or mixed, tangible or intangible), in
compensation, indebtedness or otherwise, other than payments of compensation in
the ordinary course of business and consistent with past practice;
(n) paid, loaned or advanced any amount to, or sold, transferred or leased
any properties or assets (real, personal or mixed, tangible or intangible) to
any of the Company's stockholders, officers, directors or employees or any
Affiliate of any of the Company's stockholders, officers, directors or
employees, except compensation paid to officers and
-14-
employees at rates not exceeding the rates of compensation paid during the
fiscal year last ended and except for advances for travel and other
business-related expenses;
(o) amended the Certificate of Incorporation, the Company's bylaws or
comparable corporate charter documents; or
(p) agreed, whether in writing or otherwise, to take any action described
in this Section 2.7.
2.8 TAXES
(a) SCHEDULE 2.8(a) TO THE DISCLOSURE MEMORANDUM sets forth (i) a list of
all jurisdictions in which Tax Returns are required to be filed by or on behalf
of the Company or any of its Affiliates, (ii) all Tax Returns filed by or on
behalf of the Company and its Affiliates with any jurisdiction for income taxes,
franchise taxes, gross income taxes and sales or use taxes for which the
applicable statute of limitations on assessment and collection has not expired,
and (iii) all jurisdictions in which the Company or any of its Affiliates are
required to pay sales, use, excise, property, VAT, GST or PST Taxes. The Company
will provide copies of all income and franchise Tax Returns and make available
all other Tax Returns filed by or on behalf of the Company and its Affiliates
and supporting documentation to the Parent on or prior to Closing.
(b) (i) All Tax Returns required to be filed by or on behalf of the
Company and its Affiliates have been timely filed on or before the applicable
due date (with extension(s)) with each appropriate Governmental Body by or with
respect to it, and all such Tax Returns have been properly completed in
compliance with applicable legal requirements and are, in all material respects,
correct and complete, and (ii) the Company and its Affiliates have fully and
timely paid all Taxes required to be paid by or with respect to them (whether or
not such Taxes have been reflected on any Tax Return), or the Company has made
adequate provision on the Financial Statements for all Taxes required to be paid
by or with respect to it (whether or not such Taxes have been reflected on any
Tax Return), including all taxes payable by any Affiliate for which the Company
may be held liable. All Taxes attributable to all Pre-Closing Tax Periods, to
the extent not required to have been previously paid, have been fully and
adequately reserved for on the Company's books and records as required by GAAP.
All Taxes that the Company and its Affiliates have been required by law to
withhold or to collect for payment from directors, officers, employees or other
Persons have been duly withheld and collected, and have been paid over to the
appropriate Governmental Body in compliance with all applicable legal
requirements, and the Company and its Affiliates have complied with all
information reporting and backup withholding requirements under all applicable
legal requirements, including maintenance of required records with respect
thereto. The Tax Returns have not been audited by any Governmental Body and no
such audit is currently pending.
(c) (i) There are no pending or, to the Company's knowledge, threatened
Claims by any Governmental Body with respect to Taxes relating to the Company or
any of its
-15-
Affiliates; (ii) no extension or waiver of the limitation period applicable to
any Tax Return of the Company or any of its Affiliates is in effect or has been
requested; (iii) all deficiencies claimed, proposed or asserted or assessments
made as a result of any examinations by any Governmental Body of the Tax Returns
of, or with respect to, the Company and its Affiliates have been fully paid or
fully settled, or are being contested in good faith by appropriate proceedings
and adequate reserves have been made for such Taxes on the books and records of
the Company; (iv) there are no liens for Taxes upon any of the assets of the
Company or any of its Affiliates, except liens for current Taxes not yet due and
payable; (v) the Company has not entered into or become bound by any agreement
or consent pursuant to former Section 341(f) of the Code; (vi) neither the
Company nor any of its Affiliates is or will be required to include any
adjustment in taxable income for any Tax period pursuant to Section 481 or 263A
of the Code or any comparable provision under state or foreign Tax laws as a
result of transactions or events occurring, or accounting methods employed,
prior to the date of this Agreement; and (vii) no power of attorney that
currently is in effect has been granted by the Company or any of its Affiliates
with respect to any Tax matter.
(d) The Company (i) has not been a member of any Affiliated Group that
filed or was required to file a consolidated, combined or unitary Tax Return,
and (ii) is not and will not be liable for Taxes of any Person (other than its
own Taxes) by reason of contract, agreement, assumption, transferee liability,
operation of law, Treasury Regulations Section 1.1502-6 (or any predecessor or
successor thereof or any similar provision of law) or otherwise. Except as set
forth in SCHEDULE 2.8(d) TO THE DISCLOSURE MEMORANDUM, the Company has not made
any payment or payments, is not obligated to make any payment or payments and is
not a party to, sponsor of or participating employer in any agreement or
Employee Benefit Plan that could obligate it, the Surviving Corporation or
Parent to make any payment or payments that could 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 404 of the Code. Except as set forth in SCHEDULE 2.8(d)
TO THE DISCLOSURE MEMORANDUM, no payments under this Agreement or the other
Operative Agreements would constitute "excess parachute payments" as defined in
Section 280G of the Code (or any similar provision of state, local or foreign
law).
(e) The Company has delivered or made available to Parent correct and
complete copies of all Tax Returns, and all audit reports and statements of
deficiencies assessed against or agreed to by it.
(f) The Company is not and has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code.
(g) The Company is not and has never been a party to or bound by any Tax
indemnity agreement, Tax sharing agreement, Tax allocation agreement or similar
contract.
(h) The Company has not done business in or derived income from any
jurisdiction other than jurisdictions for which Tax Returns have been duly
filed, and no Claim has been made by a Governmental Body in a jurisdiction where
the Company does not file Tax Returns
-16-
that is or may be subject to taxation by that jurisdiction. The Company has
provided copies to Parent of all "Nexus Questionnaires" that it may have
received and its responses to the questions set forth therein.
(i) The Company is not a party to any joint venture, partnership, other
arrangement or contract which could be treated as a partnership for federal
income Tax purposes.
(j) The Company has not distributed stock of another Person, or had its
stock distributed by another Person, in a transaction that was purported or
intended to be governed in whole or in part by Section 355 or Section 361 of the
Code.
(k) The Company has not, in any year for which the statute of limitations
has not expired, (i) taken a reporting position on a Tax Return that, if not
sustained, would be Reasonably Likely to give rise to a penalty for substantial
understatement of federal income Tax under Section 6662 of the Code (or any
similar provision of state, local or foreign law), or (ii) participated in a
reportable transaction within the meaning of Section 1.6011-4(b) of the Treasury
Regulations.
(l) The Company has not entered into a transaction that is being accounted
for under the installment method of Section 453 of the Code or similar provision
of state, local or foreign law, and there is no taxable income of the Company
that will be reportable in the taxable period beginning after the Closing Date
that is attributable to a transaction or event that occurred prior to the
Closing.
(m) Except as set forth in SCHEDULE 2.8(m) TO THE DISCLOSURE MEMORANDUM,
there has been no ownership change, as defined in Section 382(g) of the Code (or
any similar provision of state, local or foreign law), with respect to the
Company during or after any taxable period in which the Company incurred a net
operating loss.
(n) To the Company's knowledge, except as set forth in SCHEDULE 2.8(n) TO
THE DISCLOSURE Memorandum, each stockholder of the Company is a United States
person within the meaning of Section 7701(a)(30) of the Code.
2.9 PROPERTY
(a) The Company owns no real property other than the leasehold interests
described on SCHEDULE 2.9(a) TO THE DISCLOSURE MEMORANDUM, which contains a
complete and accurate list of all real property owned, leased or currently being
used by the Company (the "REAL PROPERTY"). The Company has delivered to Parent
true and complete copies of all written leases, subleases, rental agreements,
contracts of sale, tenancies or licenses relating to the Real Property and
written summaries of the terms of any oral leases, subleases, rental agreements,
contracts of sale, tenancies or licenses to which the Real Property is subject.
-17-
(b) The Company has delivered to Parent true and complete copies of all
leases, subleases, rental agreements, contracts of sale, tenancies or licenses
to which the Personal Property is subject.
(c) The Real Property and the Personal Property include all the properties
and assets (whether real, personal or mixed, tangible or intangible) 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. The Real Property and
the Personal Property include all material property used in the business of the
Company and are sufficient for the conduct of the Company's business as
presently conducted. The Company's offices and other structures and its Personal
Property are of a quality consistent with industry standards, are in good
operating condition and repair, normal wear and tear excepted, are adequate for
the uses to which they are being put, and, to the Company's knowledge, comply
with applicable safety and other laws and regulations.
(d) The Company's leasehold interest in each parcel of the Real Property
is free and clear of all Encumbrances, except for Encumbrances related to Taxes
not yet due and payable, and has been properly accounted for as an operating
lease. Each lease of any portion of the Real Property is valid, binding and
enforceable in accordance with its terms against the parties thereto and, to the
knowledge of the Company, against any other Person with an interest in such Real
Property. The Company has performed in all material respects all obligations
imposed on it under each such lease, and neither the Company nor, to the
knowledge of the Company, 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 knowledge of the Company, 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) The Personal Property is free and clear of all Encumbrances (except
for Encumbrances related to Taxes not yet due and payable by the Company), and,
other than leased Personal Property that is so noted on the list supplied
pursuant to Section 2.9(b), the Company owns such Personal Property. Each lease,
license, rental agreement, contract of sale or other agreement to which the
Personal Property is subject is valid, binding and enforceable in accordance
with its terms against the parties thereto, the Company has performed in all
material respects all obligations imposed on it thereunder, and neither the
Company nor, to the knowledge of the Company, 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 knowledge of the
Company, 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.
-18-
2.10 CONTRACTS
2.10.1 MATERIAL CONTRACTS
SCHEDULE 2.10.1 TO THE DISCLOSURE MEMORANDUM contains a complete and
accurate list of all contracts, agreements and understandings, oral or written,
to which the Company is currently a party or by which the Company is currently
bound providing for potential payments by or to the Company in excess of $5,000
(with Schedule 2.10.1 to the Disclosure Memorandum disclosing the amount
corresponding to each listed contract, agreement and understanding), 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 (collectively, the "CONTRACTS"). All Contracts set forth on SCHEDULE
2.10.1 TO THE DISCLOSURE MEMORANDUM are valid, binding and enforceable in
accordance with their terms against the Company and each other party thereto and
are in full force and effect, the Company has performed all obligations imposed
on it thereunder that, by their terms, were required to be performed as of the
date of this Agreement or the Closing Date, as the case may be, 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. To the Company's knowledge, there is not now and have
not been within the past 18 months any disagreement or dispute of any nature
whatsoever between the Company and any other party to any Contract, nor is there
any pending request or process for renegotiation of any Contract, having a
Material Adverse Effect. True and complete copies of each such written Contract
(or written summaries of the terms of any such oral Contract) have been
delivered to Parent. Except as specifically disclosed on SCHEDULE 2.10.1 TO THE
DISCLOSURE MEMORANDUM, the Company has no:
(a) contracts with directors, officers, stockholders, employees, agents,
consultants, advisors, salespeople, sales representatives, distributors or
dealers that cannot be cancelled by the Company with 30 days' notice without
liability, penalty or premium, any agreement or arrangement providing for the
payment of any bonus or commission based on sales or earnings, or any
compensation agreement or arrangement affecting or relating to former employees
of the Company;
(b) employment agreement, whether express or implied, 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;
(d) notice or knowledge that any party to a Contract listed on SCHEDULE
2.10.1 TO THE DISCLOSURE MEMORANDUM intends to cancel, terminate or refuse to
renew such contract (if such contract is renewable);
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(e) material agreement with any of its suppliers, customers, distributors,
resellers, OEM partners, licensors or licensees;
(f) Contracts with respect to which it is Reasonably Likely that the
actual cost of performing the Company's remaining obligations thereunder exceeds
the additional consideration actually to be received thereunder;
(g) product distribution agreement, development agreement or license
agreement as licensor or licensee (except for standard licenses purchased by the
Company for off-the-shelf software);
(h) joint venture contract or arrangement or any other agreement that
involves a sharing of profits with other Persons;
(i) 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 an immaterial amount of trade
indebtedness incurred in the ordinary course of business and except as disclosed
in the Financial Statements;
(j) contracts in which the Company agrees to provide indemnification that
may result in liability in excess of $10,000;
(k) privacy policy or similar policy; and
(l) agreements or commitments to provide indemnification to any directors,
officers, employees, consultants, agents or advisors.
2.10.2 REQUIRED CONSENTS
The execution and delivery of this Agreement and the performance of the
obligations of the Company hereunder will not constitute a default under any
Contract and do not require the consent of any other party to any Contract,
except for those Contracts listed on SCHEDULE 2.10.2 TO THE DISCLOSURE
MEMORANDUM.
2.11 CUSTOMERS AND SUPPLIERS
SCHEDULE 2.11 TO THE DISCLOSURE MEMORANDUM sets forth: (a) a complete and
accurate list of the customers of the Company accounting for 2% or more of the
Company's revenues during the 12-month period preceding the date hereof, showing
the approximate total revenues from each such customer during such 12-month
period, and (b) a complete and accurate list of the suppliers of the Company
from whom the Company has purchased 2% or more of the goods or services
purchased by the Company during the 12-month period preceding the date hereof,
showing the percentage of goods and services purchased by the Company from such
supplier in such 12-month period. No customer or supplier named on SCHEDULE 2.11
TO THE DISCLOSURE MEMORANDUM has during the last 12 months decreased or limited
materially, or, to the Company's knowledge, threatened to decrease or limit
materially,
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its purchase of the Company's products, or its supply of materials or services
to the Company, as the case may be. The Company has no knowledge of, and has not
received any notice from its customers or suppliers, that would cause the
Company to expect any material modification to the Company's relationship with
any customers or suppliers named on SCHEDULE 2.11 TO THE DISCLOSURE MEMORANDUM,
nor is there or has there been, as of and prior to the date of this Agreement,
any dispute with or Claim by any of the Company's customers or suppliers
concerning the Company's products or services or its supply of materials or
services to the Company, as the case may be, having a Company Material Adverse
Effect. To the Company's knowledge, the consummation of the transactions
contemplated by this Agreement and the other Operative Documents will not
adversely affect the post-Closing relationship of the Surviving Corporation with
any customer or supplier named on SCHEDULE 2.11 TO THE DISCLOSURE MEMORANDUM.
2.12 WARRANTIES AND RETURNS
SCHEDULE 2.12 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. 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) with
respect to products and services since the Company's inception did not exceed
$10,000, and there are no outstanding or, to the Company's knowledge, threatened
Claims for any such warranty costs that would exceed $10,000 (individually or in
the aggregate). As used above, the term "WARRANTY COSTS" shall mean costs and
expenses associated with correcting, returning or replacing defective or
allegedly defective products or services, whether such costs and expenses arise
out of Claims sounding in warranty, contract, tort or otherwise.
2.13 CLAIMS AND LEGAL PROCEEDINGS
There are no Claims pending or involving or, to the Company's knowledge,
threatened against the Company before or by any Person and no pending
disagreements or disputes that are Reasonably Likely to lead to the assertion of
a Claim against the Company. To the Company's knowledge, there is no valid basis
for any such Claim before or by any Person. There are no outstanding or
unsatisfied judgments, orders, decrees or stipulations to which the Company is a
party. SCHEDULE 2.13 TO THE DISCLOSURE MEMORANDUM sets forth, in addition to the
above-referenced items, a description of any material disputes or Claims that
have been settled or resolved by litigation or arbitration since the Company's
inception.
2.14 LABOR AND EMPLOYMENT MATTERS
There are no material labor and/or employment disputes, employee
grievances or disciplinary actions pending or, to the Company's knowledge,
threatened against or involving the Company or any of its present or former
employees. The Company has complied with all provisions of law relating to
employment and employment practices, terms and conditions of employment, wages
and hours. The Company is not engaged in any unfair labor practice and
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has no liability for any unpaid wages or Taxes or penalties for failure to
comply with any such provisions of law. There is no labor strike, dispute,
slowdown or stoppage pending or, to the Company's knowledge, threatened against
or affecting the Company, and the Company has not experienced any work stoppage
or other labor difficulty since its incorporation. The Company is not aware of
any employee that intends to terminate, or is considering terminating, his
employment with the Company. No collective bargaining agreement is binding on
the Company. There are no organizational efforts presently being made or, to the
Company's knowledge, threatened by or on behalf of any labor union with respect
to employees of the Company. Each current and former employee, officer and
consultant of the Company has executed a proprietary information and invention
agreement in the form provided to Parent. To the Company's knowledge, no current
or former employee (or Person performing similar functions) of the Company is in
violation of any such agreement or any employment agreement or other contract or
agreement relating to the relationship of such employee or Person with the
Company or actions by such employee or Person on behalf of the Company. SCHEDULE
2.14 TO THE DISCLOSURE MEMORANDUM lists (a) the names and current compensation
amounts of all directors, officers and employees of the Company (including
without limitation part-time employees and temporary employees); (b) the wage
rates for nonsalaried and nonofficer salaried employees of the Company by
classification, and all union contracts (if any); and (c) the names and current
compensation packages of all leased employees, independent contractors and
consultants of the Company. The Company is not in default with respect to any of
its obligations referred to in clauses (a) through (c) above and has no, and
will not incur any, obligation or liability for severance or back pay owed
through or by virtue of the Merger. Except as disclosed on SCHEDULE 2.14 TO THE
DISCLOSURE MEMORANDUM, all employees of the Company are employed on an "at will"
basis, are eligible to work and are lawfully employed in the United States.
2.15 EMPLOYEE BENEFIT PLANS
2.15.1 PLAN LISTING
SCHEDULE 2.15.1 TO THE DISCLOSURE MEMORANDUM contains a complete and
accurate list of all 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. 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 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
and terminate such Employee Benefit Plan at any time and for any reason without
penalty and without liability or expense (except normal administrative costs).
None
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of the Company's rights under any Employee Benefit Plan will be impaired in any
way by this Agreement or the consummation of the transactions contemplated by
this Agreement.
2.15.2 PROVISION OF DOCUMENTS
The Company has made available to Parent true, correct and complete copies
(or, in the case of unwritten Employee Benefit Plans, descriptions) of all of
the 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 three most recent annual reports (Form 5500 series) filed
with respect to such Employee Benefit Plan; (b) the most recent summary plan
description, and all summaries of material modifications related thereto,
distributed with respect to such Employee Benefit Plan; (c) all contracts and
agreements (and any amendments thereto) relating to such Employee Benefit Plan,
including, without limitation, all trust agreements, investment management
agreements, annuity contracts, insurance contracts, bonds, indemnification
agreements and service provider agreements; (d) the most recent determination
letter issued by the IRS with respect to such Employee Benefit Plan; (e) the
most recent annual actuarial valuation prepared for such Employee Benefit Plan;
(f) all written communications during the last three years relating to the
creation, amendment 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 liability to the Company; (g) all correspondence to or from
any Governmental Body relating to such Employee Benefit Plan; (h) samples of all
administrative forms currently in use with respect to such Employee Benefit
Plan, including, without limitation, all COBRA and HIPAA forms and notices; and
(i) all coverage, nondiscrimination, top heavy and Code Section 415 tests
performed with respect to such Employee Benefit Plan for the last three years.
2.15.3 COMPLIANCE
With respect to each Employee Benefit Plan: (a) such Employee Benefit Plan
is, and at all times has been, established, maintained, administered, operated
and funded in all 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 each other Person (including, without limitation, each
fiduciary) have, at all times, properly performed 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
(including, without limitation, all Form 5500 series annual reports, together
with all schedules and audit reports required with respect thereto), notices,
statements, summary plan descriptions and other disclosures relating to such
Employee Benefit Plan required to be filed with any Governmental Body or
distributed to any Employee Benefit Plan participant have been properly prepared
and duly filed or distributed, as applicable, in a timely manner; (d) neither
the Company nor any fiduciary 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, statute, order, rule or regulation; (e) no transaction or
event has occurred or, to the Company's knowledge, is threatened or about to
occur (including
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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
(f) the Company has not incurred, and, to the Company's knowledge, 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
liability or expense (except for routine contributions and benefit payments)
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.
2.15.4 QUALIFICATION
Each Employee Benefit Plan that is intended to be qualified under Section
401(a) of the Code is so qualified and its related trust and/or group annuity
contract is exempt from taxation under Section 501(a) of the Code. Each such
Employee Benefit Plan (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, including, without limitation, that legislation commonly
referred to as "GUST" and "EGTRRA," (b) has remaining a period of time under the
Code or applicable Treasury regulations or IRS pronouncements in which to
request, and make any amendments necessary to obtain, such a letter from the
IRS, or (c) is entitled, under IRS Announcement 2001-77, to rely on the
favorable opinion or advisory letter issued by the IRS to the prototype or
volume submitter plan sponsor of the Employee Benefit Plan. Nothing has occurred
or is reasonably expected by the Company to occur that could adversely affect
the qualification or exemption of any such Employee Benefit Plan or its related
trust or group annuity contract. No such Employee Benefit Plan is a "top-heavy
plan," as defined in Section 416 of the Code.
2.15.5 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, 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 in a timely manner.
2.15.6 ACTIONS AND INVESTIGATIONS
There are no Claims (other than routine Claims for benefits) pending or,
to the Company's knowledge, threatened with respect to (or against the assets
of) any Employee Benefit Plan, nor is there a basis for any such Claim. No
Employee Benefit Plan is currently under investigation, audit or review,
directly or indirectly, by the IRS, DOL or any other Governmental Body, and, to
the Company's knowledge, no such action is contemplated or under consideration
by the IRS, DOL or any other Governmental Body.
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2.15.7 PENSION PLANS AND MULTIPLE EMPLOYER WELFARE ARRANGEMENTS
The Company does not sponsor, maintain or contribute to, nor has it ever
sponsored, maintained or contributed to (or been obligated to sponsor, maintain
or contribute to), (a) a "multiemployer plan," as defined in Section 3(37) or
Section 4001(a)(3) of ERISA, (b) a multiple employer plan within the meaning of
Section 4063 or Section 4064 of ERISA or Section 413 of the Code, (c) an
employee benefit plan, fund, program, contract or arrangement that is subject to
Section 302 of ERISA, Title IV of ERISA or Section 412 of the Code, or (d) a
"multiple employer welfare arrangement," as defined in Section 3(40) of ERISA.
2.15.8 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.
2.15.9 RELATED EMPLOYERS
The Company is not, nor has it ever been, a member of (a) a controlled
group of corporations, within the meaning of Section 414(b) of the Code, (b) a
group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, (c) an affiliated service group, within the meaning
of Section 414(m) of the Code, or (d) any other group of Persons treated as a
single employer under Section 414(o) of the Code.
2.15.10 EFFECT OF TRANSACTIONS
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated by this Agreement and the other Operative
Documents (either alone or upon the occurrence of any additional or subsequent
event(s)) 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 (except as may be required in connection with the
termination of the Company 401(k) Plans pursuant to Section 6.10), 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.
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2.15.11 LEASED EMPLOYEES
No "leased employee," as defined in Section 414(n) of the Code, performs,
or has ever performed, services for the Company.
2.16 INTELLECTUAL PROPERTY
2.16.1 COMPANY INTELLECTUAL PROPERTY
Company Technology and Company Intellectual Property Rights are
collectively referred to herein as the "COMPANY IP". The Company (a) owns or (b)
has a valid right or license to, all Company IP. The Company IP is sufficient
for the conduct of the Company's business as currently conducted and as
currently proposed to be conducted. As used in this Agreement, "COMPANY-OWNED
IP" means Company IP that is owned by the Company and "THIRD PARTY IP" means
Company IP that is not owned by the Company. SCHEDULE 2.16.1 TO THE DISCLOSURE
MEMORANDUM sets forth a list and description of all of the Company-Owned IP.
2.16.2 INTELLECTUAL PROPERTY AGREEMENTS
SCHEDULE 2.16.2 TO THE DISCLOSURE MEMORANDUM sets forth all license
agreements or other contracts pursuant to which the Company has the right to use
or exploit any Third Party IP, excluding licenses for off-the-shelf software
(the "INBOUND LICENSES"), indicating, with respect to each Inbound License the
Third Party IP covered by such Inbound License and the owner of the Third Party
IP. SCHEDULE 2.16.2 TO THE DISCLOSURE MEMORANDUM also sets forth all license
agreements or other contracts to which the Company is a party and pursuant to
which any Person is authorized to use any Company IP (the "OUTBOUND LICENSES"
and, collectively with the Inbound Licenses, the "INTELLECTUAL PROPERTY
AGREEMENTS"), indicating, with respect to each Outbound License, the Company IP
rights granted by such Outbound License. The Company owns all right, title and
interest in and to all Company-Owned IP free and clear of all Encumbrances
(other than Permitted Encumbrances) and licenses other than the Outbound
Licenses. Other than the Intellectual Property Agreements, there are no
instruments, licenses, contracts or other agreements governing or relating to
any Company IP (other than Permitted Encumbrances). With respect to the
Intellectual Property Agreements: (a) all are valid, binding and in full force
and effect, (b) the Company and, to the knowledge of the Company, each other
party thereto have performed their obligations thereunder, (c) neither the
Company nor, to the knowledge of the Company, any other party thereto is in
default thereunder, (d) there are no restrictions on the direct or indirect
sublicense or assignment of any Inbound License, and (e) to the knowledge of the
Company, there is no event or circumstance which with notice or lapse of time or
both would constitute a default or event of default on the part of the Company
or any other party thereto or give to any other party thereto the right to
terminate or modify any Intellectual Property Agreement. The Company has not
received notice or has any knowledge that any party to any Intellectual Property
Agreement intends to cancel, terminate or refuse to renew (if renewable) such
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Intellectual Property Agreement or to exercise or decline to exercise any option
or right thereunder.
2.16.3 THIRD PARTY INTELLECTUAL PROPERTY
SCHEDULE 2.16.3 TO THE DISCLOSURE MEMORANDUM sets forth a list of all
Third Party IP, excluding licenses for off-the-shelf software. The Company has
the lawful right to use, market, sell, license and otherwise exploit, free of
restrictions, (a) all Third Party IP that is incorporated in or used in the
development or production of the Company IP, and (b) all other Third Party IP
necessary for the conduct of the Company's business as currently conducted.
2.16.4 NO VIOLATION
Neither the execution, delivery or performance of this Agreement or the
other Operative Documents nor the consummation of the transactions contemplated
herein and therein will: (a) constitute a breach of or default under any
Intellectual Property Agreement, (b) cause the forfeiture or termination of, or
give rise to a right of forfeiture or termination of, any Company IP, or (c)
impair the right of the Company or the Surviving Corporation to use, possess,
sell, license or otherwise exploit any Company IP or portion thereof. No
royalties, honoraria, fees or other payments in excess of $1,000 are payable by
the Company to any Person by reason of the use, possession, sale, license or
other exploitation of any of the Company's products or services as a result of
the consummation of the transactions contemplated by this Agreement.
2.16.5 NO INFRINGEMENT
The use of the Company IP and the conduct of the Company's business as
historically conducted and as presently conducted: (a) does not and will not,
and will not upon provision of notice, lapse of time or both, constitute a
breach or default under, or otherwise violate, any Intellectual Property
Agreement, and (b) does not and will not conflict with, infringe, violate or
interfere with or constitute a misappropriation of any right, title or interest
of any Person. There is no pending or, to the Company's knowledge, threatened
Claim or litigation contesting the validity, ownership or right of the Company
to use or exercise any Company IP or to conduct its business as currently
conducted, nor, to the Company's knowledge, is there any basis for any such
Claim. The Company has not received any notice or Claim (whether written, oral
or otherwise) regarding any offer to license, infringement, misappropriation,
misuse, abuse or other interference of or with any third party intellectual
property right by the Company or the Company IP or claiming that any other
entity has any Claim of infringement with respect thereto nor, to the Company's
knowledge, is there any basis for any such Claim. The Company has not received
any written opinions of counsel (outside or inside) relating to infringement,
invalidity or unenforceability of any Company IP.
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2.16.6 INTELLECTUAL PROPERTY REGISTRATIONS
SCHEDULE 2.16.6 TO THE DISCLOSURE MEMORANDUM sets forth all worldwide
registrations made by or on behalf of the Company of any patents, copyrights,
mask works, trademarks, service marks, rights in Internet or World Wide Web
domain names or URLs and all applications and registrations of any Company-Owned
IP and all foreign equivalents (collectively, "COMPANY IP REGISTRATIONS"). All
Company IP Registrations (other than applications) are valid, enforceable and
subsisting. There are no actions that must be taken by the Company within one
hundred eighty (180) days after the date of this Agreement for the purpose of
obtaining, maintaining, perfecting, preserving or renewing any Company IP
Registration. The Company has not conducted its business, and has not used or
enforced (or failed to use or enforce) the Company IP, in a manner that would
result in the abandonment, cancellation or unenforceability of any item of the
Company IP or the Company IP Registrations, and the Company has not taken (or
failed to take) any action that would result in the forfeiture or relinquishment
of any of the Company IP or Company IP Registrations. SCHEDULE 2.16.6 TO THE
DISCLOSURE MEMORANDUM also list(s) all trademarks, trade names, brand names,
service marks, logos, domain names or other identifiers used by the Company, but
for which no registration has yet been sought.
2.16.7 CONFIDENTIALITY
The Company has taken commercially reasonable steps to protect, preserve
and maintain the secrecy and confidentiality of its confidential and proprietary
information and data. Without limiting the foregoing, the Company has (a) not
disclosed confidential or proprietary information to any Person other than an
employee of the Company unless such disclosure was made under a written
nondisclosure agreement, and (b) at all times maintained and diligently enforced
commercially reasonable procedures to protect all confidential and proprietary
information relating to the Company IP, except with regard to the disclosure or
delivery of confidential and proprietary information to employees employed by,
or independent contractors retained by, the Company, which employees and
independent contractors have signed proprietary information agreements on the
Company's standard forms or templates relating to such confidential and
proprietary information. Neither the Company nor, to the Company's knowledge,
any third party acting on the Company's behalf has disclosed or delivered to any
Person, or permitted the disclosure or delivery to any Person, of any Source
Code. No event has occurred, and, to the Company's knowledge, no circumstances
or conditions exist, that with or without notice, lapse of time or both, will,
or would reasonably be expected to, result in the disclosure or delivery to any
Person of any Source Code. SCHEDULE 2.16.7 TO THE DISCLOSURE MEMORANDUM
identifies each contract, agreement and instrument (whether written or oral)
pursuant to which the Company has deposited, or is or may be required to
deposit, with an escrow agent or any Person, any Source Code. The execution of
this Agreement and consummation of the transactions contemplated hereby will not
result in the disclosure or release from escrow of any Source Code. As used in
this Agreement, "SOURCE CODE" means the human readable source code for any
software (other than Public Software) that is part of the Company IP.
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2.16.8 AGREEMENTS WITH EMPLOYEES
SCHEDULE 2.16.8 TO THE DISCLOSURE MEMORANDUM lists all current and former
directors, officers, employees, consultants and contractors (including any
employees and consultants of any predecessor of the Company or the Company's
assets) who have contributed to the creation or development of any Company-Owned
IP. Each Person identified on SCHEDULE 2.16.8 TO THE DISCLOSURE MEMORANDUM has
executed and delivered to the Company (or a predecessor of the Company or the
Company's assets) valid and enforceable assignment of all right, title and
interest that such Person may have or may hereafter acquire in or to such
Company-Owned IP and a valid and enforceable waiver of any and all moral rights
that such Person may have therein. Complete and correct copies of each of these
agreements have been delivered to Parent. No current or former employee,
officer, director, consultant or contractor of the Company (or any predecessor
of the Company or the Company's assets) has any right, license, Claim, moral
right or interest whatsoever in or with respect to any Company IP.
2.16.9 NO VIOLATION OF OTHER AGREEMENTS
To the Company's knowledge, no current or former director, officer,
employee, consultant or contractor of the Company (a) is in violation of any
provision or covenant of any employment contract, patent disclosure agreement,
invention assignment agreement, non-disclosure agreement, noncompetition
agreement or any other contract or agreement with any Person by virtue of such
director's, officer's employee's, consultant's or contractor's being employed by
or performing services for, or serving on the Board of Directors of, the
Company, (b) is or has used any trade secrets or other confidential or
proprietary information of any third party in connection with performing any
services for the Company or the development or creation of any Company-Owned IP,
or (c) has developed or created any Company IP that is subject to any agreement
under which such director, officer, employee, consultant or contractor has
assigned or otherwise granted any third party any rights in or to such Company
IP. To the Company's knowledge, the employment of any current or former employee
of the Company and the use by the Company of any services of any current or
former director, officer, consultant or contractor, has not and does not subject
the Company to any liability to any Person for improperly soliciting such
director, officer, employee, consultant or contractor.
2.16.10 THIRD PARTY INFRINGEMENT
To the Company's knowledge, there is no unauthorized use, disclosure,
infringement, violation or misappropriation of any Company IP by any Person,
including any current or former employee, officer, consultant or independent
contractor of the Company. The Company has not received any notice (whether
written, oral or otherwise) or has any knowledge that any Person is infringing,
violating or misappropriating any part of the Company IP or otherwise making any
unauthorized use of the Company IP.
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2.16.11 EXTERNAL FUNDING OR RESOURCES
No funding, facilities or resources of any Governmental Body, university
or other third party was used in the development or creation of any
Company-Owned IP. To the Company's knowledge, no funding, facilities or
resources of any Governmental Body, university or other third party was used in
the development or creation of any Third Party IP. To the Company's knowledge,
no current or former director, officer, employee, consultant or contractor of
the Company who was involved in, or who contributed to, the creation or
development of any Company IP has performed services for any Governmental Body,
university, college or other educational institution or research center during a
period of time during which such director, officer, employee, consultant or
contractor was also performing services for the Company.
2.16.12 PUBLIC SOFTWARE
No Public Software (a) was or is used in connection with the development
of any Company IP, (b) was or is incorporated in whole or in part into or
otherwise forms any part of any Company IP, or (c) has been distributed in whole
or in part in conjunction with any product or service provided by the Company.
"PUBLIC SOFTWARE" means any software that contains, or is derived (in whole or
in part) from any software that is distributed as free software, open source
software (e.g., Linux) or similar licensing or distribution models, including
but not limited to, software licensed or distributed under any of the following
licenses or distribution models or licenses or distribution models similar to
any of the following: (i) GNU's General Public License (GPL) or Lesser/Library
GPL (LGPL); (ii) the Artistic License (e.g. PERL); (iii) the Mozilla Public
License; (iv) the Netscape Public License; (v) the Sun Community Source License
(SCSL); (vi) the Sun Industry Standards License (SISL); (vii) the BSD License;
and (viii) the Apache License.
2.16.13 WARRANTY AGAINST DEFECTS
The Company-Owned IP is free from known material defects and substantially
conforms to the applicable specifications, documentation and samples of such
Company-Owned IP. To the Company's knowledge, the Third Party IP is free from
known material defects and substantially conforms to the applicable
specifications, documentation and samples of such Third Party IP. The Company IP
does not contain: (a) any clock, timer, counter, or other limiting or disabling
code, design, routine or any viruses, Trojan horses, or other disabling or
disruptive codes or commands that would cause the Company IP contained therein
to be erased, made inoperable or otherwise rendered incapable of performing in
accordance with its performance specifications and descriptions or otherwise
limit or restrict the Company's ability to use the Company IP after a specific
or random period of time or copies; and (b) any back doors or other undocumented
access mechanism allowing unauthorized access to and viewing, manipulation,
modification, or other changes to the Company IP.
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2.16.14 INDEMNIFICATION
The Company has not entered into any agreement or offered to indemnify any
Person against any charge of infringement by the Company IP or use thereof, or
any other intellectual property or right. The Company has not entered into any
agreement granting any Person the right to bring any infringement action with
respect to, or otherwise to enforce, any of the Company IP.
2.16.15 PRIVACY
A privacy statement (the "PRIVACY STATEMENT") regarding the collection,
retention, use and distribution of the personal information of individuals,
including, without limitation, from visitors to the Company website is posted
and is accessible to individuals at all times on each Company website. All
versions of the Privacy Statement, together with accurate information regarding
the times during which such statements were in use, have been provided to
Parent. Such Privacy Statements are accurate and consistent with the Company's
actual practices with respect to the collection, retention, use and disclosure
of personal information of individuals. The Company: (a) complies with the
Privacy Statements as applicable to any given set of personal information
collected by the Company from individuals; (b) complies with all applicable
United States privacy laws and regulations regarding the collection, retention,
use and disclosure of personal information; (c) to the Company's knowledge,
complies with all applicable privacy laws and regulations for all countries
other than the United States regarding the collection, retention, use and
disclosure of personal information; and (d) takes all reasonable measures to
protect and maintain the confidential nature of the personal information
provided to the Company by individuals. The Company does not knowingly collect
information from or target children under the age of thirteen. The Company does
not sell, rent or otherwise make available to third parties any personal
information submitted by individuals. Other than as constrained by the Privacy
Statements and by applicable laws and regulations, the Company is not restricted
in its use and/or distribution of personal information collected by the Company.
2.17 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,
(b) the minute books of the Company, and (c) the stock transfer 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 the events of and actions taken at such meetings.
Such stock transfer books accurately reflect all issuances, transfers and
cancellations of shares of capital stock of the Company since its inception.
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2.18 ACCOUNTS RECEIVABLE
(a) All accounts and notes receivable of the Company reflected in the
Company Balance Sheet, and all accounts and notes receivable arising subsequent
to the date of the Company Balance Sheet, (i) arose from bona fide sales
transactions in the ordinary course of business and are payable on ordinary
trade terms, (ii) are legal, valid and binding obligations of the respective
debtors enforceable in accordance with their terms, (iii) are not subject to any
valid set-off or counterclaim, (iv) do not represent obligations for goods sold
on consignment, on approval or on a sale-or-return basis or subject to any other
repurchase or return arrangement, (v) to the Company's knowledge, are
collectible in the ordinary course of business consistent with past practice in
the aggregate recorded amounts thereof, net of any applicable reserve reflected
in the Company Balance Sheet, and (vi) are not the subject of any action, suit,
proceeding or arbitration brought by or on behalf of the Company. SCHEDULE 2.18
TO THE DISCLOSURE MEMORANDUM sets forth a description of any security
arrangements and collateral securing the repayment or other satisfaction of
receivables of the Company. All steps necessary to render all such security
arrangements legal, valid, binding and enforceable, and to give and maintain for
the Company a perfected security interest in the related collateral, have been
taken.
(b) There are no unpaid invoices or bills representing amounts alleged to
be owed by the Company or other alleged obligations of the Company, which the
Company has disputed or determined to dispute or refuse to pay.
2.19 INVENTORY
(a) All items in the inventory reflected in the Company Balance Sheet and
acquired since the date of the Company Balance Sheet have been valued at the
lesser of cost or fair market value determined in accordance with GAAP
consistently applied.
(b) (i) All inventories of the Company's finished products meet the
Company's current specifications and consist of items of a quality and quantity
that are saleable in the ordinary course of the Company's business consistent
with past practice, and (ii) all inventories of the Company's raw materials,
intermediates, work in process, supplies, parts and packaging and labeling
materials consist of items of a quality and quantity that are currently usable
in the ordinary course of the Company's business consistent with past practice
and appropriate for their intended use, including, where applicable, processing
into inventories of finished products.
(c) The Company is not aware of any adverse condition 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 Company's products or are otherwise used in the Company's business as
currently conducted.
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2.20 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
The Company has received all governmental approvals, authorizations,
consents, licenses, orders, registrations and permits of all agencies, whether
federal, state, local or foreign, necessary for the conduct of the Company's
business as currently conducted. The Company has not received any notifications
or has knowledge of any asserted present failure by the Company to have obtained
any such governmental approval, authorization, consent, license, order,
registration or permit, or any past and unremedied failure to obtain such items.
2.21 COMPLIANCE WITH LAWS
Except as described on SCHEDULE 2.21 TO THE DISCLOSURE MEMORANDUM, the
Company is and has been in compliance with all federal, state, local and foreign
laws, rules, regulations, ordinances, decrees and orders applicable to it, to
its employees or to the Real Property and the Personal Property, except where
such failure would not have a Material Adverse Effect. The Company has not
received any notification or has any knowledge of any asserted present or past
unremedied failure by the Company to comply with any of such laws, rules,
regulations, ordinances, decrees or orders.
2.22 COMPLIANCE WITH ENVIRONMENTAL LAWS
(a) The Company has, to the extent required by applicable Environmental
Laws, obtained and is in compliance with all permits, licenses, approvals or
other authorizations necessary for the conduct of its business and use of the
Real Property or the Personal Property and has caused all registrations, reports
and notifications to be made to all Governmental Bodies with respect to the
conduct of its business and use of the Real Property or the Personal Property.
(b) The Company is, and at all times prior to the date of this Agreement
has been, in compliance with and has not violated, in connection with the
ownership, use, maintenance or operation of the Real Property or the Personal
Property or the conduct of its business, any Environmental Laws. The Company
does not own, use or store at its facilities any Hazardous Materials.
(c) The Company has disclosed to Parent all material information in the
possession of, known by or readily available to the Company regarding
environmental matters or conditions concerning the Real Property, the Personal
Property, the Company's business, or compliance or noncompliance of the Real
Property, the Personal Property or the conduct of the Company's business with
any Environmental Laws and circumstances that may prevent or interfere with such
compliance in the future.
(d) The Company has not received any notice or has knowledge of, and no
claim, demand, action or proceeding has been commenced, asserted or, to the
Company's knowledge, threatened alleging, and no investigation has been
commenced, asserted or, to the Company's knowledge, threatened alleging, (i) any
violation of any Environmental Laws,
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including, without limitation, any violation with respect to the Real Property,
the Personal Property or conduct of the Company's business or (ii) the Company's
potential responsibility for the Release of Hazardous Materials at any site.
(e) To the Company's knowledge, no Release of Hazardous Materials has
occurred from, upon, below, into or on the Real Property or, during the
Company's occupation or control thereof, on any other property. To the Company's
knowledge, no Release of Hazardous Materials has occurred on any adjacent
property that has migrated to, through or under the Real Property. To the
Company's knowledge, no Hazardous Materials are present at the Real Property, or
during the Company's occupation or control thereof, have been present at any
other property, except in compliance with Environmental Laws. Without limiting
the foregoing, to the Company's knowledge, the Company is not responsible or
liable for the Release of Hazardous Materials at any site.
(f) The Company has not generated, transported, treated, stored, handled,
disposed of, or arranged for the transportation, treatment, storage, handling or
disposal of any Hazardous Materials that has resulted in or contributed to a
violation of any Environmental Laws or a Release of Hazardous Materials at any
site, whether or not such violation or Release may occur, become manifest or be
discovered prior to or subsequent to the Closing Date.
2.23 PRODUCT LIABILITY
There are no presently pending, or, to the knowledge of the Company,
threatened, and there is no basis for, any civil, criminal or administrative
Claims relating to any alleged hazard or alleged defect in design, manufacture,
materials or workmanship, including any failure to warn or alleged breach of
express or implied warranty or representation, relating to any product
manufactured, distributed or sold by or on behalf of the Company.
2.24 INSURANCE
SCHEDULE 2.24 TO THE DISCLOSURE MEMORANDUM sets forth a true and correct
list of all insurance policies maintained by the Company and includes the policy
number, amount of coverage and contact information for each such policy. The
Company maintains commercially reasonable levels of (a) insurance on its
property (including leased premises) that insures against loss or damage by fire
or other casualty and (b) insurance against liabilities, claims and risks of a
nature and in such amounts as are normal and customary in the Company's industry
for companies of similar size and financial condition. All insurance policies of
the Company are in full force and effect, all premiums with respect thereto
covering all periods up to and including the date this representation is made
have been paid, and no notice of cancellation or termination has been received
with respect to any such policy or binder. Such policies or binders are
sufficient for compliance with all requirements of law currently applicable to
the Company and of all agreements to which the Company is a party, will remain
in full force and effect through the respective expiration dates of such
policies or binders without the payment of additional premiums, and will not in
any way be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. The
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Company has not been refused any insurance with respect to its assets or
operations, nor has its coverage been limited, by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance.
The Company has no contractual obligation to provide insurance for the benefit
of any officer or third party.
2.25 BROKERS OR FINDERS
Except for fees payable to UBS Securities LLC ("UBS") pursuant to the
engagement letter between the Company and UBS, a copy of which has been provided
to Parent prior to the date of this Agreement, the Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement, the Merger, or any transaction contemplated hereby.
2.26 ABSENCE OF QUESTIONABLE PAYMENTS
Neither the Company nor, to the Company's knowledge, any director,
officer, agent, employee or other Person acting on behalf of the Company has
used any Company funds for improper or unlawful contributions, payments, gifts
or entertainment, or made any improper or unlawful expenditures relating to
political activity to domestic or foreign government officials or others. The
Company has financial controls to prevent such improper or unlawful
contributions, payments, gifts, entertainment or expenditures. Neither the
Company nor, to the Company's knowledge, any current director, officer, agent,
employee or other Person acting on behalf of the Company has accepted or
received any improper or unlawful contributions, payments, gifts or
expenditures. The Company has at all times complied, and is in compliance, in
all respects with the Foreign Corrupt Practices Act and all foreign laws and
regulations relating to prevention of corrupt practices and similar matters.
2.27 BANK ACCOUNTS
SCHEDULE 2.27 TO THE DISCLOSURE MEMORANDUM sets forth: (a) a true and
complete list of the names and locations of all banks, trust companies,
securities brokers and other financial institutions at which the Company has an
account or safe deposit box or maintains a banking, custodial, trading or other
similar relationship; (b) a true and complete list and description of each such
account, box and relationship, indicating in each case the account number and
the names of the respective officers, employees, agents or other similar
representatives of the Company having signatory power with respect thereto; and
(c) a list of each Investment Asset held through or in each such account, box
and relationship, including the name of the record and beneficial owner thereof,
the location of the certificates, if any, the maturity date, if any, and any
stock or bond powers or other authority for transfer granted with respect
thereto. "INVESTMENT ASSETS" means all debentures, notes and other evidences of
indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
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2.28 NO POWERS OF ATTORNEY
The Company has no powers of attorney or comparable delegations of
authority outstanding.
2.29 INSIDER INTERESTS
To the Company's knowledge, no stockholder, officer or director of the
Company has any interest (other than as a stockholder of the Company or by
virtue of such director's status as a partner of a venture capital firm) (a) in
any Real Property or Personal Property used in or directly pertaining to the
business of the Company, including, without limitation, inventions, patents,
trademarks or trade names, or (b) in any agreement, contract, arrangement or
obligation relating to the Company, its present business or its operations.
There are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, stockholders, Affiliates or any
Affiliates thereof. 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), or other than ownership of capital stock comprising less than 1% of
any publicly held company, 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 asset or property,
real or personal, tangible or intangible, of the Company or any property, real
or personal, tangible or intangible, that is necessary or desirable for the
present or currently anticipated future conduct of the Company's business.
2.30 INTERNATIONAL TRADE MATTERS
The Company is, and at all times has been, in compliance with and has not
been and is not in material violation of any International Trade Law, including
but not limited to, all laws and regulations related to the import and export of
commodities, software, and technology from and into the United States and the
foreign jurisdictions in which the Company currently operates, and the payment
of required duties and tariffs in connection with same. The Company is not aware
of and has no basis to expect, nor has the Company or, to the Company's
knowledge, any other Person for whose conduct they are or may be held to be
responsible received, any actual or, to the Company's knowledge, threatened
order, notice, or other communication from any governmental body of any actual
or potential violation or failure to comply with any International Trade Law.
"INTERNATIONAL TRADE LAW" shall mean U.S. and applicable foreign statutes, laws
and regulations applicable to international transactions, including, but not
limited to, the Export Administration Act, the Export Administration
Regulations, the Foreign Corrupt Practices Act, the Arms Export Control Act, the
International Traffic in Arms Regulations, the International Emergency Economic
Powers
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Act, the Trading with the Enemy Act, the U.S. Customs laws and regulations, the
Foreign Asset Control Regulations, and any regulations or orders issued
thereunder.
2.31 INFORMATION SUPPLIED BY THE COMPANY
None of the information supplied or to be supplied in writing by the
Company for inclusion in any documents to be delivered to its stockholders in
connection with (a) the solicitation of any written consent by such
stockholders, (b) the notice of action taken to be delivered to the stockholders
of the Company, (c) appraisal rights or dissenters' rights or (d) other matters
necessary to comply with California Law or Delaware Law, copies of such
documents are in substantially the form reasonably satisfactory to Parent
(collectively, "STOCKHOLDER MATERIALS"), at the date on which such information
was supplied, 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 Parent or Merger Sub.
2.32 FULL DISCLOSURE
No information furnished by the Company to Parent or its representatives
in connection with this Agreement (including, but not limited to, the Financial
Statements and all information in the Disclosure Memorandum and the other
Exhibits hereto) or the other Operative Documents contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements so made or information so delivered not misleading.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
In order to induce the Company to enter into and perform this Agreement
and the other Operative Documents, Parent and Merger Sub jointly and severally
represent and warrant to the Company as follows in this Article III:
3.1 ORGANIZATION
Parent is a corporation duly organized and validly existing under the laws
of the State of Washington. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. All the
issued and outstanding shares of capital stock of Merger Sub are held of record
and beneficially by Parent.
3.2 ENFORCEABILITY
Parent and Merger Sub each have full corporate power and authority to
execute, deliver and perform their obligations under this Agreement and each of
the other Operative
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Documents to which they are a party and each of the certificates, instruments
and documents executed or delivered by them pursuant to the terms of this
Agreement. All corporate action on the part of Parent and Merger Sub and their
respective officers, directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement and the other applicable
Operative Documents to which Parent or Merger Sub is a party, the consummation
of the Merger and the performance of all their respective obligations under this
Agreement and the other applicable Operative Documents to which Parent or Merger
Sub is a party has been taken or will be taken prior to the Effective Time. This
Agreement has been, and each of the other Operative Documents to which Parent is
a party will have been at the Closing, duly executed and delivered by Parent,
and this Agreement is, and each of the other Operative Documents to which Parent
is a party will be at the Closing, a legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms. This Agreement
has been, and each of the other Operative Documents to which Merger Sub is a
party will have been at the Closing, duly executed and delivered by Merger Sub,
and this Agreement is, and each of the other Operative Documents to which Merger
Sub is a party will be at the Closing, a legal, valid and binding obligation of
Merger Sub, enforceable against Merger Sub in accordance with its terms.
3.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement and the other
Operative Documents by Merger Sub and Parent, as applicable, and the
consummation by them of the transactions contemplated hereby and thereby, will
not (a) to Parent's knowledge, constitute a violation (with or without the
giving of notice or lapse of time, or both) of any provision of law applicable
to Parent or Merger Sub; (b) require any consent, approval or authorization of
any Person, except the filing of all documents necessary to consummate the
Merger with the Delaware Secretary of State; (c) result in a default (with or
without the giving of notice or lapse of time, or both) under, or acceleration
or termination of, or the creation in any party of the right to accelerate,
terminate, modify or cancel, any agreement, lease, note or other restriction,
Encumbrance, obligation or liability to which Parent or Merger Sub is a party or
by which it is bound or to which any assets of Parent or Merger Sub are subject;
or (d) conflict with or result in a breach of or constitute a default under any
provision of the Articles of Incorporation or Bylaws of Parent or the
Certificate of Incorporation or Bylaws of Merger Sub.
3.4 BROKERS OR FINDERS
Parent has not incurred, and will not incur, directly or indirectly, as a
result of any action taken by or on behalf of Parent, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Merger, this Agreement or any transaction contemplated
hereby that would result in a Claim against the Company.
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3.5 INTERIM OPERATIONS OF MERGER SUB
Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement.
3.6 CLAIMS AND LEGAL PROCEEDINGS
There are no Claims pending or involving or, to Parent's knowledge,
threatened against Parent or Merger Sub before or by any Person that could
reasonably be expected to delay or to result in the issuance of an order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Documents or otherwise to impair the ability of Parent or Merger
Sub to perform their obligations under this Agreement and any of the Operative
Documents to which any of them are a party and to consummate the transactions
contemplated hereby and thereby. To Parent's knowledge, there is no valid basis
for any such Claim before or by any Person.
3.7 FINANCING
Parent has, or has available to it, sufficient funds to consummate the
transactions contemplated by this Agreement.
ARTICLE IV - 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 waived only expressly and in writing signed by Parent:
4.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained herein
(including applicable Exhibits or Schedules to the Disclosure Memorandum) and in
the other Operative Documents shall have been true and correct in all material
respects when made and, except (a) for changes contemplated by this Agreement
and the other Operative Documents and (b) to the extent that such
representations and warranties speak as of an earlier date, shall be true and
correct as of the Closing Date, as though made on that date.
4.2 PERFORMANCE OF AGREEMENTS
The Company shall have performed in all material respects all obligations
and agreements and complied with all covenants contained in this Agreement or
any other
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Operative Document to be performed and complied with by him, her or it at or
prior to the Closing.
4.3 OPINION OF COUNSEL FOR THE COMPANY
Parent shall have received the opinion letter of Heller Ehrman LLP,
counsel for the Company, dated the Closing Date, substantially in the form
attached hereto as EXHIBIT 4.3.
4.4 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 4.1, 4.2, 4.5, 4.6, 4.9, 4.10, 4.11, 4.13,
4.15, 4.16, 4.19, 4.20 and 4.22 have been fulfilled.
4.5 MATERIAL ADVERSE EFFECT
Since the date of this Agreement and through the Closing, there shall not
have occurred a Material Adverse Effect.
4.6 APPROVALS AND CONSENTS
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby,
including, if applicable, approvals or notices required by the Hart-Scott-Rodino
Act, or any other federal or state antitrust or fair trade law, or for the
continued operation of the Company, shall have been obtained, and all waiting
periods specified by law shall have passed.
4.7 SECRETARY'S CERTIFICATE
Parent shall have received a certificate of the Secretary (or duly
appointed Assistant 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.
4.8 NONFOREIGN AFFIDAVIT
Parent shall have received from the Company, pursuant to Section 1445 of
the Code, a Foreign Investment in Real Property Tax Act Affidavit substantially
in the form attached hereto as EXHIBIT 4.8.
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4.9 COMPLIANCE WITH LAWS
The consummation of the transactions contemplated by this Agreement and
the other Operative Documents shall be legally permitted by all laws and
regulations to which Parent, Merger Sub, the Company or any of the stockholders
of the Company is subject.
4.10 STOCKHOLDER APPROVAL; IRREVOCABLE PROXIES
The Company Stockholder Consent (a) has not been amended, rescinded or
modified since its adoption and (b) remains in full force and effect on the
Closing Date. Parent shall have received evidence reasonably satisfactory to
Parent that the stockholders of the Company have approved by the requisite vote
under Section 280G of the Code for any payments that could constitute "parachute
payments" pursuant to such section. Each Required Stockholder has delivered an
Irrevocable Proxy to Parent, each of which remains in full force and effect on
the Closing Date.
4.11 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any other Operative Document, and no litigation, investigation or administrative
proceeding by any court or administrative agency shall be pending or threatened
that would enjoin, restrain, condition or prevent consummation of the
transactions contemplated by this Agreement or any other Operative Document. (a)
No stockholder of the Company shall have made any Claim or written or oral
assertion that the Merger should not be consummated due to unfairness,
inadequate disclosure, improper corporate process or lack of fiduciary duty
compliance on the part of the Company's stockholders, and (b) no third party
shall have made any Claim or written or oral assertion that the Merger violates
applicable law or would result in breach of any contract to which such third
party is a party or would wrongfully cause damages to such third party;
provided, however, that in each of subsections (a) and (b) of this Section, the
Claim or written or oral assertion must (x) have a valid basis in fact or law,
(y) be Reasonably Likely to succeed on the merits and applicable law, and (z) be
Reasonably Likely, if finally adjudicated, to result in Losses having a value of
at least $250,000, each of (x) through (z) as estimated in good faith by Parent
upon advice of counsel.
4.12 EMPLOYMENT AND PROPRIETARY INFORMATION ARRANGEMENTS
At least four (4) of the Persons listed on SCHEDULE 4.12 TO THE DISCLOSURE
MEMORANDUM shall have signed a letter describing the terms of his employment
with Parent (or its designated Affiliate) and shall have executed Parent's
standard form of employment agreement (including confidentiality and invention
assignment provisions) and each such letter or agreement shall remain in full
force and effect on the Closing Date.
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4.13 APPRAISAL RIGHTS
Not more than seven percent (7%) of the Company Capital Stock outstanding
immediately prior to the Effective Time shall be eligible as Dissenting Shares.
4.14 STOCKHOLDER AGREEMENT; TRANSMITTAL LETTERS
Except as otherwise provided in Section 4.13, all stockholders of the
Company shall have executed and delivered to Parent or the Exchange Agent the
Stockholder Agreement and the Letters of Transmittal in the form attached hereto
as EXHIBIT 1.7.4.
4.15 CONSENTS TO MERGER
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 the agreements, leases, notes or other documents listed on SCHEDULE
4.15 TO THE DISCLOSURE MEMORANDUM, which consents shall be satisfactory in all
material respects to Parent.
4.16 REPAYMENT OF INDEBTEDNESS; RELEASES OF LIENS
Prior to the Effective Time, the Company shall retire all notes, bonds or
other debt and pay all amounts owing under any loans or other lending agreements
or arrangements, and shall obtain the release of any and all Encumbrances with
respect to any of the Company's assets. Any note wherein the holder has the
option to convert such note into shares of Company Capital Stock shall be so
converted (and not retired for cash) prior to the Effective Time.
4.17 ESCROW AGREEMENT
The Stockholder Representative, on behalf of the Company's stockholders,
and the Escrow Agent shall have executed and delivered the Escrow Agreement.
4.18 RESIGNATIONS
Parent shall have received copies of the resignations, effective as of the
Effective Time, of all the directors, officers and employees of the Company.
4.19 EXERCISE OR TERMINATION OF COMPANY OPTIONS
Any and all Company Options and any and all securities and notes
convertible at any time into Company Common Stock, vested and unvested, and
regardless of restrictions on exercise or conversion, shall have been exercised
or converted for shares of Company Common Stock, or shall have been terminated,
as the case may be, immediately prior to the Effective Time.
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4.20 TERMINATION OF COMPANY'S 401(k) PLAN, BONUS PLANS AND EMPLOYEE BENEFIT
PLANS
The Company shall have terminated, or arranged for the termination of the
Company 401(k) Plan (unless otherwise notified by Parent in writing), as
provided in Section 6.10 below, and, unless otherwise agreed to by Parent in
writing, shall have terminated all director, officer, and employee bonus plans
and all other Employee Benefit Plans at no cost, and with no liability, to
Parent.
4.21 TRANSACTION COSTS SPREADSHEET
The Company shall have provided Parent a spreadsheet (the "TRANSACTION
COSTS SPREADSHEET") that sets forth the actual amount of the Transaction Costs
of the Company as of the Closing Date, together with an itemized list of each
such Transaction Cost and the applicable creditor relating to such Transaction
Cost. The Transaction Cost Spreadsheet shall be certified by an officer of the
Company to be accurate and complete as of the Closing Date. Parent and the
Company acknowledge and agree that all Transaction Costs shall be paid at the
Closing.
4.22 TAX MATTERS
All Tax Returns for periods up to and including the Closing Date that are
required to be filed prior to the Closing Date have been or will be filed by the
Company with each appropriate Government Body and all such Prior Period Returns
have been properly completed or will be completed in compliance with applicable
legal requirements of each applicable Government taxing jurisdiction (other than
applicable due dates) and are correct and complete. The Company shall have
delivered evidence reasonably satisfactory to Parent that adequate amounts have
been withheld by the Company with respect to Taxes arising from the acquisition
of shares of Company Capital Stock pursuant to exercises of Company Options
prior to the Closing.
4.23 CONSIDERATION ALLOCATION CERTIFICATE.
The Company shall deliver a "CONSIDERATION ALLOCATION CERTIFICATE," which
spreadsheet shall be certified as complete and correct by the Chief Executive
Officer of the Company as of the Closing and which shall separately list, as of
the Closing: (a) all Company stockholders and their respective addresses as
reflected in the Company's stock records, (b) the number of shares of Company
Common Stock and Company Series A Stock held by such persons and the respective
certificate numbers, (b) the Merger Consideration to be paid to each stockholder
of the Company, (c) a description and the amount of the Transaction Expenses,
and (d) each such stockholder's portion of the Escrow Amount.
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ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE COMPANY
The obligations of the Company to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by it at or before
the Closing shall be subject to the satisfaction of the following conditions,
which may be expressly waived only in writing signed by the Company.
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Parent and Merger Sub contained
herein and in the other Operative Documents shall have been true and correct in
all material respects when made and, except (a) for changes contemplated by this
Agreement and the other Operative Documents and (b) to the extent that such
representations and warranties speak as of an earlier date, shall be true and
correct as of the Closing Date as though made on that date.
5.2 PERFORMANCE OF AGREEMENTS
Parent and Merger Sub shall have performed in all material respects all
obligations and agreements and complied 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.
5.3 COMPLIANCE CERTIFICATE
The Company shall have received a certificate of an officer of Parent,
dated the Closing Date, substantially in form and substance satisfactory to the
Company, certifying that the conditions to the obligations of the Company in
Sections 5.1, 5.2 and 5.5 have been fulfilled.
5.4 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any other Operative Document, and no litigation, investigation or administrative
proceeding initiated by any Person other than the Company or any of the
stockholders of the Company shall be pending or threatened which would enjoin,
restrain, condition or prevent consummation of the transactions contemplated by
this Agreement or any other Operative Document.
5.5 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 on the part of Parent and Merger Sub for the consummation of
the transactions contemplated hereby, including, if applicable, approvals or
notices required by the Hart-Scott-Rodino Act or any other federal or state
antitrust or fair trade law, shall have been obtained, and all waiting periods
specified by law shall have passed. All other consents, approvals and notices on
the
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part of Parent and Merger Sub referred to in this Agreement shall have been
obtained or delivered.
5.6 COMPLIANCE WITH LAWS
The consummation of transactions contemplated by this Agreement and under
the other Operative Documents shall be legally permitted by all laws and
regulations to which Parent or the Company is subject.
5.7 OPINION OF COUNSEL FOR PARENT
Parent shall have received the opinion letter of the General Counsel of
Parent, dated the Closing Date, substantially in the form attached hereto as
EXHIBIT 5.7.
ARTICLE VI - COVENANTS
6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER
Prior to the Effective Time, unless Parent shall otherwise agree in
writing, the business of the Company shall be conducted in and only in, and the
Company shall not take any action except in, the ordinary course of business and
in a manner consistent with past practice and in accordance with applicable law;
and the Company shall use commercially reasonable best efforts to preserve
intact the business organization of the Company, to keep available the services
of the current officers, employees and consultants of the Company and to
preserve the current relationships of the Company with, and the goodwill of,
customers, suppliers and other Persons with which the Company has significant
business relations. In addition, and without in any way limiting the foregoing,
except as otherwise contemplated by this Agreement, the Company shall not,
between the date of this Agreement and the Effective Time, directly or
indirectly do, or propose to do, any of the following without the prior written
consent of Parent:
(a) amend or otherwise change its Certificate of Incorporation or Bylaws;
(b) 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
(other than issuances of Company Common Stock upon exercise of the Company
Options), (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
any revenue or profit-sharing interest in respect of the Company, or (iii) any
assets of the Company, except in the ordinary course of business and in a manner
consistent with past practice;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock or other securities, property or otherwise, with respect
to any of its capital stock;
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(d) reclassify, combine, split, subdivide, redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock or other securities;
(e) (i) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any corporation, partnership, other business
organization or division thereof or any other entity; (ii) incur 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; (iii) enter into
any contract or agreement other than in the ordinary course of business,
consistent with past practice; (iv) authorize any single capital expenditure
which is in excess of $5,000 or capital expenditures which are, in the
aggregate, in excess of $15,000 for the Company; (v) enter into any agreement in
which the obligation of the Company exceeds $5,000 or which does not terminate,
or is not subject to termination for convenience, within 30 days following
execution; (vi) assign, transfer or license any Company IP, other than in the
ordinary course of business, consistent with past practice; (vii) enter into any
contract or agreement with any Competitor, or (viii) enter into or amend any
contract, agreement, commitment or arrangement with respect to any matter set
forth in this subsection (e);
(f) enter into or amend any employment, consulting or agency agreement,
increase the compensation payable or to become payable to its officers,
employees, agents or consultants, pay any special bonus or special remuneration
to any employee or director, or grant any severance or termination pay to, or
enter into any employment or severance agreement with, any director, officer or
other employee of the Company, or establish, adopt, enter into or amend any
Employee Benefit Plan, collective bargaining, bonus, profit-sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance, benefit or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any director,
officer or employee; provided that the Company may amend any restricted stock
purchase agreements or stock option agreements entered into with any employee,
consultant or director of the Company for the purpose of including any provision
regarding acceleration of vesting or release of repurchase rights without the
prior consent of Parent;
(g) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting methods, policies or procedures (including, without limitation,
procedures with respect to the payment of accounts payable and collection of
accounts receivable);
(h) make any Tax election (including any change in accounting method) or
settle or compromise any Tax liability;
(i) except as set forth herein, pay, discharge or satisfy any Claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice;
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(j) commit to any patent strategy or take any action for the purpose of
obtaining, maintaining, perfecting, preserving or renewing any patent
registration, application, renewal, extension, divisional or continuation (in
whole or in part);
(k) take any action that would or is Reasonably Likely to result in any of
the representations or warranties of the Company set forth in this Agreement
being untrue in any material respect, or in any covenant of the Company set
forth in this Agreement being breached, or in any of the conditions to the
Merger specified in Article IV or V not being satisfied; or
(l) agree to do any of the foregoing.
6.2 ACCESS TO INFORMATION; CONFIDENTIALITY
From the date hereof to the Effective Time, the Company shall, and shall
cause the officers, directors, employees and agents of the Company to, afford
the officers, employees and agents of Parent access at all reasonable times to
the officers, employees, agents, properties, offices, plants and other
facilities, books and records of the Company and shall furnish Parent with all
financial, operating and other data and information as Parent, through its
officers, employees or agents, may reasonably request. From the date hereof
until the Effective Time, the Company shall provide Parent with monthly and
other financial statements of the Company as they become available internally at
the Company (but, in any event, not later than 25 days after the end of the
applicable period), all of which financial statements shall fairly present the
financial position and results of operations of the Company as of the dates and
for the periods therein specified. No investigation pursuant to this Section 6.2
shall affect any representation or warranty in this Agreement of any party
hereto or any condition to the obligations of the parties hereto. The parties
shall continue to comply with and to perform their respective obligations under
the Mutual Nondisclosure Agreement between Parent and the Company entered into
as of May 19, 2005, as amended through the date hereof (the "MUTUAL
NONDISCLOSURE AGREEMENT").
6.3 NO ALTERNATIVE TRANSACTIONS
Unless this Agreement shall have been terminated in accordance with its
terms, the Company shall not, and shall cause its stockholders not to, directly
or indirectly, through any stockholder, officer, director, agent or otherwise,
solicit, initiate or encourage the submission of any proposal or offer from any
Person relating to (a) any acquisition or purchase of all or any material
portion of the assets of, or any equity interest in, the Company or any business
combination with the Company (other than (x) sales of the Company's products in
the ordinary course of business consistent with past practice and (y) issuance
of Company Capital Stock in connection with exercises of Company Options) or (b)
any other transaction that could Reasonably Likely interfere, conflict or
compete with the Merger and the other transactions described herein
(collectively, an "ALTERNATIVE TRANSACTION"), or participate in any negotiations
regarding, or furnish to any other Person any information with respect to, or
otherwise cooperate or negotiate in any way with, or assist or participate in,
facilitate or
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encourage, any effort or attempt by any other Person to do or seek any of the
foregoing. Prior to the date hereof, the Company has fully terminated all
discussions and negotiations concerning an Alternative Transaction. The Company
shall notify Parent promptly if any such proposal or offer, or any inquiry or
contact with any Person with respect thereto, is made and shall, in any such
notice to Parent, indicate in reasonable detail the identity of the Person
making such proposal, offer, inquiry or contact and the terms and conditions of
such proposal, offer, inquiry or contact. Except as set forth herein, the
Company agrees not to, and shall cause its stockholders not to, release any
third party from, or waive any provision of, any confidentiality or standstill
(e.g., agreement not to invest in or seek change of control of the Company)
agreement to which the Company or any of its stockholders is a party, or to
grant any proxies relating to any shares of Company Capital Stock, transfer any
shares of Company Capital Stock (or any interest therein) or enter into any
agreement concerning the voting of shares of Company Capital Stock.
6.4 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 Reasonably 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 6.4 shall not
limit or otherwise affect the remedies available to the parties hereunder.
6.5 FURTHER ACTION; COMMERCIALLY REASONABLE EFFORTS
Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use commercially reasonable efforts to take, or cause to be taken,
all appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby, including, without limitation,
using commercially reasonable efforts to obtain all waivers, licenses, permits,
consents, approvals, authorizations, qualifications and orders of any
Governmental Body and parties to contracts with the Company as are necessary for
the consummation of the transactions contemplated hereby and to fulfill the
conditions to the Merger, including any consent required under the
Hart-Scott-Rodino Act. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement or
the other Operative Documents, each party to this Agreement shall use
commercially reasonable efforts to promptly take all such action. After the
Closing, each party hereto, at the request of and without any further cost or
expense to the other parties, will take any further actions necessary or
desirable to carry out the purposes of this Agreement or any other Operative
Document, and to vest in the Surviving Corporation full title to all properties,
assets and rights of the Company. The parties hereto will consult and cooperate
with one another, and consider in good faith the views of one another, in
connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals
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made or submitted by or on behalf of any party hereto in connection with
proceedings under or relating to the Hart-Scott-Rodino Act or any other federal
or state antitrust or fair trade law.
6.6 NOTICE OF STOCKHOLDER ACTION
The Company will send the Stockholder Materials to those record
stockholders of the Company who did not sign the Company Stockholder Consent, no
later than ten (10) business days following the date of this Agreement, for the
purposes of notifying such stockholders of the actions taken by the Required
Stockholders for purposes of, and in accordance with, California Law, Delaware
Law, the Certificate of Incorporation and the Bylaws of the Company. The Company
shall be solely responsible for any statement, information or omission in the
Stockholder Materials relating to it or its Affiliates, and Parent shall be
solely responsible for any statement, information or omission in the Stockholder
Materials relating to it, Merger Sub or its Affiliates. The Company will not
provide or publish to the stockholders of the Company any material concerning it
or its Affiliates that violates the Securities Act, the Exchange Act, California
Law or Delaware Law with respect to the transactions contemplated hereby.
6.7 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 or dissenters' rights pursuant to California Law or
Delaware Law, as the case may be, and the number of Dissenting Shares owned by
such stockholder. The Company shall not, and shall cause its officers,
directors, employees and agents of the Company not to, make any statements to
any stockholder of the Company regarding (a) the fair value of any shares of
Company Capital Stock or (b) the appraisal rights and dissenters' rights process
and procedures under California Law or Delaware Law except as set forth in the
Stockholder Materials.
6.8 PUBLICITY
At all times at or before the Closing and, except with respect to Parent,
for one year following the Closing, 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 (a) the issuance by
Parent of a press release announcing this Agreement and the transactions
contemplated hereby, (b) any consultations with legal counsel, financial
advisors or accountants necessary for a party to perform its obligations under
this Agreement and the Ancillary Agreements or (c) as required by law.
6.9 TAX MATTERS
(a) Parent shall be responsible for making or causing to be made proper
and timely filings of all Tax Returns required to be filed by the Company after
the Closing Date. Prior to the Closing Date, the Company shall make or cause to
be made proper, complete and accurate
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filings of all Tax Returns required to be filed by the Company for any period
prior to and including the Closing Date (the "PRIOR PERIOD"), including any Tax
Returns for federal, state, local, foreign, income, sales, use, excise,
property, gross receipts, VAT, GST or PST Tax and any required annual reports
thereto (collectively, the "PRIOR PERIOD RETURNS"), which Tax Returns were
required to filed by the Company prior to the Closing Date. The Company shall
provide Parent with copies of each Prior Period Return prior to the filing of
such Tax Return and shall be responsible for all Pre-Closing Taxes.
(b) Any Tax sharing or similar agreements with respect to or involving the
Company shall be terminated as of the Closing Date and, after the Closing Date,
Parent and the Company and the Surviving Corporation shall not be bound thereby
or have any liability thereunder.
(c) The parties shall provide each other with such assistance as may
reasonably be requested by the others in connection with the preparation of any
Prior Period Return, any audit or other examination by any taxing authority
relating to a Prior Period Return or any Prior Period, or any judicial or
administrative proceedings relating to liabilities for Taxes with respect to a
Prior Period or Prior Period Return. Such assistance shall include making
employees available on a mutually convenient basis to provide additional
information or explanation of material provided hereunder and shall include
providing copies of relevant Tax Returns and supporting material. The parties
will provide each other with any records or information which may be relevant to
such preparation, audit, examination, proceeding or determination.
(d) The parties agree to treat any indemnification payment made pursuant
to Article VIII as an adjustment to the Merger Consideration for federal, state,
and local income Tax purposes.
(e) For all Tax Return filing purposes, the parties shall treat and report
the Merger as a taxable sale by the stockholders of the Company of shares of
Company Capital Stock to Parent in exchange for their allocable share of the
Purchase Price as determined under this Agreement.
6.10 TERMINATION OF 401(k) PLANS AND EMPLOYEE BENEFIT PLANS
(a) The Company shall terminate each of its Employee Benefit Plans that
constitutes a "Code Section 401(k) plan" (each such Employee Benefit Plan, a
"COMPANY 401(k) PLAN") prior to the Closing Date, unless Parent, in its sole and
absolute discretion, agrees to sponsor and maintain (or cause Merger Sub to
sponsor and maintain) such plan by providing the Company with written notice of
such election not less than five (5) days prior to the Closing Date. Prior to
the Closing Date, the Company shall provide Parent with evidence reasonably
satisfactory to Parent that each Company 401(k) Plan with respect to which
Parent has not provided the notice specified in the immediately preceding
sentence has been terminated pursuant to resolutions of the Company's Board of
Directors (the form and substance of such resolutions shall be subject to
advance review and approval by Parent,
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which approval shall not be unreasonably withheld), effective not later than the
day immediately preceding the Closing Date.
(b) Unless Parent shall otherwise agree in writing, the Company shall
terminate, effective at least one day prior to the Closing Date, any other
Employee Benefit Plan. The Company shall provide evidence reasonably
satisfactory to Parent to ensure that all liabilities of Company under all other
Company Benefit Plans (including any liability relating to services performed
prior to the Closing Date) shall be, effective as of such Company Benefit Plans'
termination, either fully extinguished at no cost, and with no liability, to
Parent, or accurately accounted for on Company's financial statements.
6.11 TREATMENT OF COMPANY OPTIONS
Promptly following the date of this Agreement, the Company shall provided
a notice to each holder of an outstanding Company Option, including any options
outstanding under the Company's 2004 Stock Option Plan, as amended and/or
restated to date (the "COMPANY STOCK OPTION PLAN"), stating that the Company is
requiring all holders of any Company Option to exercise all of the unexercised
portion of the Company Options prior to if not properly exercised prior to, or
contingent on, the Effective Time or suffer the forfeiture of the unexercised
portion of the Company Stock Options. The Company shall take such actions
necessary to cause the Company Options and any other securities and notes
convertible at any time into Company Common Stock, vested and unvested, and
regardless of restrictions on exercise or conversion, to be exercised or
converted into shares of Company Common Stock, or be terminated, as the case may
be, immediately prior to the Effective Time. All unexercised Company Stock
Options and such other convertible securities shall be null and void following
the Effective Time.
6.12 AWARD GRANTS
Promptly following the Effective Time in accordance with Parent's standard
practices, Parent will act to grant stock awards to acquire shares of Parent
Common Stock (through stock options, stock purchase awards or similar rights)
under any of the Company's shareholder-approved stock-based compensation plans,
as determined by Parent in its sole discretion, to certain Retention Employees
at an exercise per share equal to fair market value per share of Parent Common
Stock on the date of grant, and with vesting in accordance with Parent's
standard four-year vesting schedule for newly hired employees. The number of
stock awards granted to each such Retention Employee shall be determined by
Parent in the sole discretion; provided, however, that the number of stock
awards granted to any such employee shall be no less than the amount granted to
other new employees of Parent holding comparable positions and titles.
6.13 EMPLOYEE RETENTION POOL
Promptly following the Effective Time, Parent will establish a pool in an
amount equal to $2,000,000 (the "RETENTION POOL") that will be distributed to
the Retention Employees
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pursuant to this Section 6.13 and SCHEDULES 6.13(a) AND 6.13(b) TO THE
DISCLOSURE MEMORANDUM. Except as set forth in SCHEDULES 6.13(a) AND 6.13(b) TO
THE DISCLOSURE MEMORANDUM, in the event that, by the expiration of the 18 month
period following the Effective Time (the "RETENTION EXPIRATION DATE"), the
milestones set forth in SCHEDULE 6.13(b) TO THE DISCLOSURE MEMORANDUM (the
"RETENTION MILESTONES") have been satisfactorily achieved (as determined in the
manner set forth in such Schedule), promptly following the Retention Expiration
Date, Parent shall pay those Retention Employees who are employed by Parent or
its Affiliates on the Retention Expiration Date the amounts set forth opposite
each such Retention Employee's name on SCHEDULE 6.13(a) TO THE DISCLOSURE
MEMORANDUM, which amounts equal each such Retention Employee's share of the
Retention Pool. Notwithstanding the foregoing and except as set forth in
SCHEDULES 6.13(a) AND 6.13(b) TO THE DISCLOSURE MEMORANDUM, in the event that:
(a) the Retention Milestones are not satisfactorily achieved by the Retention
Expiration Date (as determined in the manner set forth in such Schedule), the
Retention Pool shall immediately be forfeited to Parent and no Retention
Employee shall be entitled to any portion of the Retention Pool; and (b) prior
to the Retention Expiration Date, a Retention Employee (i) voluntarily ceases to
be employed by Parent or its Affiliates or (ii) is terminated by Parent or its
Affiliates for Cause, such Retention Employee shall immediately forfeit to
Parent, without any action required on the part of such Retention Employee, the
amount set forth opposite such Retention Employee's name on SCHEDULE 6.13(a) TO
THE DISCLOSURE MEMORANDUM. Notwithstanding the foregoing, all amounts forfeited
to Parent in accordance with the immediately prior sentence shall be distributed
by Parent promptly following the Retention Expiration Date to those Retention
Employees that are employed by Parent or its Affiliates on the Retention
Expiration Date in such amounts as determined by the Chief Executive Officer of
Parent in his sole discretion. The parties agree that (A) the Retention Pool
shall neither be an adjustment to the Purchase Price nor reduce the number of
stock awards described in Section 6.12, and (B) Parent is not obligated to
provide any guaranteed return pursuant to any securities of Parent issued to the
Retention Employees pursuant to this Section 6.13 or Section 6.12.
6.14 EMPLOYEE BENEFITS; SERVICE CREDIT
Following the Effective Time, Parent or its affiliates will provide each
Retention Employee employee benefits that are substantially equivalent to
employee benefits provided to similarly situated employees of Parent, and full
credit for prior service with the Company for purposes of determination of
benefits levels under any Parent policies relating to vacation or severance, in
each case for which the Retention Employee is otherwise eligible and in which
the Retention Employee is offered participation, but except where such crediting
would (A) result in a duplication of benefits or (B) otherwise cause Parent or
its affiliates or any Parent employee benefit plan or trust relating thereto to
pay for benefits that relate to any time period prior to the Retention
Employee's participation in the Parent's employee benefit plan.
6.16 INDEMNIFICATION OF COMPANY OFFICERS AND DIRECTORS
From and after the Closing Date and for a period of six (6) years, Parent
shall, or shall cause the Company to, fulfill the obligations of the Company to
indemnify each Person who is
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or was a director, officer or employee of the Company as of the date of this
Agreement against any losses such Person may incur based upon matters existing
or occurring prior to the Closing pursuant to any applicable indemnification
agreement and any indemnification provisions set forth in the Certificate of
Incorporation or Bylaws of the Company as in effect on the date hereof. The
Certificate of Incorporation and Bylaws of the Surviving Corporation will
contain provisions with respect to the exculpation and indemnification and
expense advancement that are at least as favorable to the directors, officers
and employees of the Company as in effect on the date hereof, which provisions
will not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who, immediately prior to the Effective Time, were
directors, officers or employees of the Company, unless such modification is
required by law. Nothing contained in this Section 6.16 shall be deemed to limit
or prohibit any indemnification rights of a Parent Indemnified Party pursuant to
Article VIII.
6.17 UPDATED DISCLOSURE MEMORANDUM
Any updated Disclosure Memorandum delivered as of the Closing (as provided
in Article II above) shall refer only to (x) disclosures of facts, events or
circumstances contained in the Disclosure Memorandum delivered to Parent and
dated as of the date of this Agreement, and (y) disclosures of facts, events or
circumstances that have occurred or been discovered since the date of this
Agreement, and any updated Disclosure Memorandum shall not otherwise limit or
modify any of the representations and warranties made in this Agreement or the
Disclosure Memorandum as of the date of this Agreement. No disclosure of a fact,
event or circumstance on any updated Disclosure Memorandum shall be deemed to
cure (i) any representation or warranty made in this Agreement or the Disclosure
Memorandum as of the date of this Agreement or (ii) any failure to disclose such
fact, event or circumstance on the previously delivered Disclosure Memorandum,
or otherwise amend the previously delivered Disclosure Memorandum, unless agreed
to in writing by Parent.
6.18 INTERIM FINANCIAL STATEMENTS
Prior to the Closing, the Company shall deliver to parent an unaudited
balance sheet, statement of income and expense, statement of cash flow and
statement of stockholders' equity of the Company as of and for the one-month
period ended August 30, 2005, which financial statements will have bee prepared
in conformity with GAAP 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,
except that such financial statements may not contain footnotes required by
GAAP.
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ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this Agreement
by the Board of Directors or the stockholders of the Company):
(a) by mutual written consent of Parent and the Company;
(b) by either the Company or Parent, if the Merger has not been
consummated by October 5, 2005; provided, however, that the right to terminate
this Agreement under this subsection (b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date;
(c) by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the Merger illegal or if any judgment,
injunction, order or decree enjoining Parent, Merger Sub or the Company from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable;
(d) by the Company, in the event of a material breach by Parent of any
representation, warranty or agreement contained herein that has not been cured
or is not curable by Parent within 15 business days after the Company gives
written notice to Parent regarding the material breach;
(e) by Parent, in the event of a material breach by the Company or any of
the stockholders of the Company of any representation, warranty or agreement
contained herein or in any of the Operative documents that has not been cured or
is not curable by the Company within 15 business days after Parent gives written
notice to the Company regarding the material breach; or
(f) by Parent, if Parent concludes that it is Reasonably Likely that the
satisfaction of any of the conditions set forth in Article IV is or has become
impossible (other than through the failure of Parent to comply with its
obligations under this Agreement) and Parent has not waived such condition.
7.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to Section 7.1,
there shall be no further obligation on the part of any party hereto, except
that nothing herein shall relieve any party from liability for any willful
breach hereof or from any obligation under that the Mutual Nondisclosure
Agreement and except that the provisions of Section 9.1 (Expenses) and shall
remain in full force and effect.
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7.3 AMENDMENT
This Agreement may be amended at any time only pursuant to an instrument
in writing signed by the Company (prior to the Closing), Parent, Merger Sub and
the Stockholder Representative, and any such amendment shall be binding on each
stockholder of the Company; provided, however, no amendment will be made to this
Agreement that by applicable law requires the further approval of the
stockholders of the Company without obtaining such further approval.
7.4 WAIVER
At any time prior to the Effective Time,
(a) Parent may (i) extend the time for the performance of any obligation
or other act of the Company or any stockholder of the Company under this
Agreement or any other Operative Document, (ii) waive any inaccuracy in the
representations and warranties of the Company or any of the stockholders of the
Company contained in this Agreement or any other Operative Document (which
waiver will not in any manner affect the rights of Parent under Article VIII of
this Agreement), or (iii) waive compliance by the Company of any of the
stockholders of the Company with any agreement or condition contained in this
Agreement or any other Operative Document; and
(b) the Company (acting through its officers or the Stockholder
Representative) may (i) extend the time for the performance of any obligation or
other act of Parent or Merger Sub under this Agreement or any other Operative
Document, (ii) waive any inaccuracy in the representations and warranties of
Parent or Merger Sub contained in this Agreement or any other Operative
Document, or (iii) waive compliance by Parent or Merger Sub with any agreement
or condition contained in this Agreement or any other Operative Document.
Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by Parent or the Company, as applicable, and any
such extension or waiver by the Company shall be binding upon each stockholder
of the Company.
ARTICLE VIII - SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL
All representations and warranties contained in this Agreement or in the
other Operative Documents or in any certificate delivered pursuant hereto or
thereto shall survive the Closing for a period of 12 months after the Effective
Time (the "SURVIVAL PERIOD"), and shall not be deemed waived or otherwise
affected by any investigation made or any knowledge acquired with respect
thereto, or by any notice delivered pursuant to Section 6.4; provided, however,
that any Indemnification Claim based on fraud shall survive the Closing
indefinitely. The covenants and agreements contained in this Agreement or in the
other Operative Documents shall survive the Closing and shall continue until all
obligations with
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respect thereto shall have been performed or satisfied or shall have been
terminated in accordance with their terms.
8.2 INDEMNIFICATION BY THE HOLDERS OF COMPANY CAPITAL STOCK
(a) Subject to the limitations set forth in this Article VIII, from and
after the Closing, the stockholders of the Company immediately prior to the
Effective Time shall, severally and not jointly, indemnify and hold Parent, the
Surviving Corporation and each of their officers, directors, employees, agents
and Affiliates (each, a "PARENT INDEMNIFIED PARTY" and together, the "PARENT
INDEMNIFIED PARTIES") harmless from and against, and shall reimburse the Parent
Indemnified Parties for, any and all losses, damages, debts, liabilities,
obligations, judgments, orders, awards, writs, injunctions, decrees, fines,
penalties, Taxes, costs or expenses (including, but not limited to, any
reasonable out-of-pocket legal or accounting fees or expenses and any Taxes or
other costs or damages arising under, caused by or related to Section 280G of
the Code or any comparable provision of state, local or foreign law) ("LOSSES")
arising out of:
(i) any inaccuracy or misrepresentation in, or breach of, any
representation or warranty made by the Company in this Agreement, together with
the Disclosure Memorandum as delivered upon execution of this Agreement, or in
any other Operative Document;
(ii) any failure by the Company to perform or comply, in whole or in
part, with any covenant or agreement in this Agreement or in any other Operative
Document;
(iii) any and all Pre-Closing Taxes;
(iv) those Transaction Costs of the Company incurred in excess of
$2,000,000 (as such amount is described and limited in Section 9.1 hereof);
(v) any Excess Dissenting Share Payments;
(vi) any inaccuracy or misrepresentation in, or breach of, the
representation and warranty set forth in Section 2.6(e); or
(viii) any fraud by the Company.
(b) Subject to the limitations set forth in this Article VIII, from and
after the Closing, each stockholder of the Company immediately prior to the
Effective Time shall, severally and not jointly, indemnify and hold each Parent
Indemnified Party harmless from and against, and shall reimburse the Parent
Indemnified Parties for, any and all Losses arising out of:
(i) any inaccuracy or misrepresentation in, or breach of, any
representation or warranty made by such stockholder in a Stockholder Agreement
or in any other Operative Document to which such stockholder is a party;
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(ii) any failure by such stockholder to perform or comply, in whole
or in part, with any covenant or agreement in a Stockholder Agreement or in any
other Operative Document to which the stockholder is a party; or
(iii) any fraud by such stockholder.
8.3 INDEMNIFICATION BY PARENT
Subject to the limitations set forth in this Article VIII, from and after
the Closing, Parent shall indemnify and hold the stockholders of the Company and
their respective officers, directors, employees, agents and Affiliates (the
"STOCKHOLDER INDEMNIFIED PARTIES") harmless from and against, and shall
reimburse the Stockholder Indemnified Parties for, any and all Losses arising
out of:
(a) any inaccuracy or misrepresentation in, or breach of, any
representation or warranty made by the Company or Merger Sub in this Agreement
or in any other Operative Document; or
(b) any failure by Parent or Merger Sub to perform or comply, in
whole or in part, with any covenant or agreement in this Agreement or in any
other Operative Document.
8.4 LIMITATIONS
(a) Except for Losses based on any Excluded Claims, (i) the aggregate
liability of all stockholders of the Company pursuant to this Article VIII or
for any matter arising out of, relating to or resulting from the transactions
contemplated by this Agreement shall be limited to the aggregate Escrow Amount
and (ii) the aggregate liability of each stockholder of the Company shall be
limited to such stockholder's portion of the aggregate Escrow Amount (based on
the aggregate amount of Merger Consideration to be received by each stockholder
of the Company under Section 1.7.1(b)). The aggregate liability of Parent to all
stockholders of the Company shall be limited to the Base Escrow Amount.
(b) Any Person against whom an Indemnification Claim is being asserted (an
"INDEMNIFYING PARTY") shall not be obligated to defend and hold harmless any
Person claiming indemnification under this Article VIII (an "INDEMNIFIED
PARTY"), or otherwise be liable to such Indemnified Party, with respect to any
Indemnification Claim made by the Indemnified Party after the expiration of the
Survival Period or other applicable time period described in Section 8.1, except
that indemnity may be sought after the expiration of the Survival Period or
other applicable time limitation if a Claim Notice with respect to such
Indemnification Claim shall have been delivered to the Indemnified Party prior
to the expiration of such time period.
(c) No Indemnifying Party will be required to indemnify an Indemnified
Party hereunder until such time as the aggregate amount of Loses for which (i)
Parent Indemnified
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Parties, on the one hand, or (ii) the Stockholder Indemnified Parties, on the
other hand, are otherwise entitled to indemnification pursuant to this Article
VIII exceeds $100,000, at which time the Indemnifying Party shall be obligated
to indemnify the Indemnified Party for the full amount of such Losses subject to
limitations of this Article VIII. Notwithstanding anything to the contrary in
this Section 8.4, the threshold limits imposed by this Section 8.4(c) shall not
apply to any Losses arising out of or in connection with (A) any breach by the
Company of Section 2.3 (Capitalization), Section 2.8 (Taxes), Section 2.16
(Intellectual Property), Section 2.25 (Brokers or Finders), or Section 2.6(e)
(cash and cash equivalents), (B) any Excess Dissenting Share Payments or any
Pre-Closing Taxes, or (C) any intentional or willful breaches of this Agreement,
or fraud or similar circumstances.
(d) The aggregate value of Indemnification Claims paid to Parent pursuant
to the Escrow Agreement shall be deemed to reduce the total Merger Consideration
otherwise payable to the stockholders of the Company pursuant to Section 1.7.
Subject to Section 8.7, any such Indemnification Claims shall be paid out of the
Escrow Amount, pro rata, with respect to each stockholder of the Company, as
determined by reference to the aggregate amount of Merger Consideration such
stockholder is entitled to receive in the Merger as compared to all other
stockholders of the Company. No Claim for contribution or other Claim, whether
under any indemnification agreement or pursuant to general principles of
contribution, tort or other liability laws, shall be made by the stockholders of
the Company against the Surviving Corporation for any Losses suffered by Parent
or the Surviving Corporation in connection with this Article VIII.
8.5 ESTABLISHMENT AND CONTESTING OF INDEMNIFICATION LIABILITY
(a) An Indemnified Party shall give written notice (the "CLAIM NOTICE") of
any Indemnification Claim (i) in the case of an Indemnification Claim against
Parent, to Parent and (ii) in the case of an Indemnification Claim against the
stockholders of the Company, to the Stockholder Representative, reasonably
promptly, but in any event (A) prior to expiration of any survival period for
such Indemnification Claim and (B) if such Indemnification Claim relates to the
assertion against an Indemnified Party of any Claim by a third party (a "THIRD
PARTY CLAIM"), within thirty (30) days after assertion of such Third Party
Claim; provided, however, that the failure or delay to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of any obligation or
liability that the Indemnifying Party may have to the Indemnified Party except
to the extent that the Indemnifying Party demonstrates that the Indemnifying
Party's ability to defend or resolve such Indemnification Claim is materially
and adversely affected thereby. Any such Claim Notice shall describe in
reasonable detail the facts and circumstances on which the asserted
Indemnification Claim is based, specify the amount of such Indemnification Claim
if then ascertainable and, if not then ascertainable, the estimated amount
thereof, and shall specify how such Indemnified Party intends to recover such
amount pursuant to this Agreement.
(b) Unless the Indemnifying Party contests in a writing given to the
Indemnified Party within thirty (30) days of receipt by the Indemnifying Party
of a Claim Notice that Losses identified in such Claim Notice constitute
indemnifiable claims or the amount of such
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alleged Losses (a "CONTEST NOTICE"), the Indemnified Party shall, subject to the
other terms of this Article VIII, be paid the amount of the Losses related to
such Indemnification Claim or the uncontested portion thereof in accordance with
Section 8.5(c). An Indemnifying Party shall not object to any Indemnification
Claim unless (i) it believes in good faith that the Indemnified Party is not
entitled to be indemnified with respect to the Losses specified therein, or (ii)
it lacks sufficient information to assess the validity or amount of the
Indemnification Claim or Loses that are in dispute. If the Indemnifying Party
objects to an Indemnification Claim on the basis that it lacks sufficient
information, it shall promptly request from the Indemnified Party any additional
information reasonably necessary for it to assess such Indemnification Claim and
the Indemnified Party shall, to the extent the Indemnified Party reasonably can,
provide additional information reasonably requested. Upon receipt of such
additional information, the Indemnifying Party shall review it as soon as
reasonably practicable and notify the Indemnified Party of any withdrawal or
modification of the objection. If a Contest Notice relating to a non-Third Party
Claim is given in such time period, and the Indemnified Party and the
Indemnifying Party are unable to reach agreement with respect to any contested
Losses within thirty (30) days of the delivery of the Contest Notice, the matter
shall be settled by binding arbitration in Seattle, Washington as set forth in
Section 9.7 below. The Indemnified Party and the Indemnifying Party shall cause
the arbitrator to decide the matter to be arbitrated pursuant hereto within
thirty (30) days after the appointment of the arbitrator. The arbitrator's
decision with respect to such a Contest Notice shall relate solely to whether
the Indemnified Party is entitled to be indemnified for the contested Losses, or
the contested portion thereof, pursuant to the applicable terms of this
Agreement. The final decision of the arbitrator shall be furnished to the
Indemnified Party and the Indemnifying Party in writing and shall constitute the
conclusive determination of the issue in question binding upon the Indemnified
Party and the Indemnifying Party, and shall not be contested by any of them.
Such decision may be used in a court of law only for the purpose of seeking
enforcement of the arbitrator's decision. If a Contest Notice relating to a
Third Party Claim is given in such 30-day time period, such Third Party Claim
shall be deemed an Open Claim under Section 8.5(d).
(c) Upon final determination of the amount of the Losses that is the
subject of an Indemnification Claim, whether such determination is the result of
an Indemnifying Party's acceptance of, or failure to contest, a Claim Notice, or
a resolution of any dispute with respect thereto by agreement of the parties, or
a final, non-appealable court order of a court of competent jurisdiction, or
pursuant to Section 8.6(c) or otherwise (each, "FINALLY DETERMINED LOSSES"), the
Indemnifying Party or parties shall be obligated to pay the amount of such
Finally Determined Losses within five (5) days of such final determination.
Notwithstanding the foregoing, any Finally Determined Losses that are payable to
any Parent Indemnified Party and must be resolved through the Escrow Amount
shall be paid by the Escrow Agent in accordance with the terms of the Escrow
Agreement, subject to the exclusions and limitations set forth in this Article
VIII.
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8.6 DEFENSE AND SETTLEMENT OF THIRD-PARTY CLAIMS.
(a) The Indemnifying Party will have the right to assume the defense of
any Third Party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party at any time within thirty (30) days after the Indemnified
Party has delivered the Claim Notice for the Third Party Claim; provided,
however, that the Indemnifying Party must conduct the defense of the Third Party
Claim actively and diligently thereafter in order to preserve its rights in this
regard; and provided, further, that the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense of the
Third Party Claim.
(b) So long as the Indemnifying Party has assumed and is conducting the
defense of the Third Party Claim in accordance with Section 8.6(a) above, the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably), unless the
judgment or proposed settlement involves only the payment of money damages by
the Indemnifying Party and does not impose an injunction or other equitable
relief or any other Losses upon the Indemnified Party and will not give rise to
any increase in any Tax liability of the Parent, the Company, or any of their
Affiliates.
(c) In the event any of the conditions in Section 8.6(a) is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith), (ii) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including attorneys fees and expenses),
(iii) the Indemnifying Party will remain responsible for any adverse
consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim to the fullest
extent provided in this Article VIII including payment of any judgment or
settlement.
8.7 REDUCTION OF ESCROW AMOUNT
Any Finally Determined Losses that are payable to any Parent Indemnified
Party by the Escrow Agent pursuant to this Article VIII and the Escrow Agreement
shall reduce the aggregate Escrow Amount as follows: (i) any Finally Determined
Losses arising in connection with any inaccuracy or misrepresentation in, or
breach of, any representation or warranty made by the Company in Section 2.16
(an "IP CLAIM"), shall first reduce the Special Escrow Amount until the full
amount of the Special Escrow Amount has been paid to the Parent Indemnified
Party and then, with respect to any excess Finally Determined Losses owing under
an IP Claim or for additional Finally Determined Losses owing under an IP Claims
after the Special Escrow Amount has been reduced to zero, the Base Escrow Amount
shall be reduced; and (ii) any Finally Determined Losses, other than those
resulting from IP Claims, shall reduce only the Base Escrow Amount until the
full amount of the Base Escrow
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Amount has been paid to the Parent Indemnified Party. In no event shall any
Finally Determined Losses arising out of any non-IP Claim reduce the Special
Escrow Amount.
8.8 TERMINATION OF ESCROW
(a) Subject to the provisions of this Section 8.8 and the Escrow
Agreement, upon the date of expiration of the Survival Period (the "ESCROW
TERMINATION DATE"), the Escrow Agent shall deliver to the stockholders of the
Company (other than Dissenting Stockholders) any cash remaining in the Escrow.
(b) During the pendency of any Indemnification Claim subject to a Claim
Notice delivered in accordance with the terms of this Article VIII prior to the
expiration of the Survival Period that is the subject of a Contest Notice,
unless the Indemnifying Party has assumed all Losses for such Indemnification
Claim, then such claim for Losses shall be deemed to be a "OPEN CLAIM." Unless
and until an Open Claim becomes a Claim with Finally Determined Losses, the
amount of the Losses related to such Open Claim shall not be due or payable. In
the event that a Parent Indemnified Person is the Indemnified Party pursuant to
an Open Claim and such Claim must be resolved through the Escrow Amount, Parent
may instruct the Escrow Agent to reserve the full amount of the Losses set forth
in the Claim Notice for such Open Claim from the Base Escrow Amount and/or the
Special Escrow Amount (as applicable) pending resolution of such Claim. Any such
reserved amount shall remain in the Escrow Amount and be subject to the Escrow
until such Claims have been resolved and become Finally Determined Losses.
8.9 EXCLUSIVE REMEDIES; SPECIFIC PERFORMANCE
Except for Claims based on (a) fraud, (b) a breach of Section 2.3 of this
Agreement, (c) any breach of any capitalization representation or any
nonsolicitation, noncompetition or release of claims provision in a Stockholder
Agreement, (d) any agreement or arrangement related to, arising under or entered
into in connection with any employment or consulting relationship with Parent,
the Company or their respective Affiliates, (e) a breach of any confidentiality
provisions contained herein or in any of the Operative Documents, or (f) a
breach of Section 1.7, 1.8, 6.9, 6.13 and 6.16 (collectively, "EXCLUDED
CLAIMS"), the indemnification provisions of this Article VIII are the sole and
exclusive remedy for any matter arising out of, relating to or resulting from
the transactions contemplated by this Agreement, including but not limited to a
breach of any representation, warranty, covenant or failure to perform any
condition or obligation contained herein or any Operative Document.
Notwithstanding the preceding sentence, each of the parties acknowledges and
agrees that the other parties hereto would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties hereto shall be entitled to an injunction
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof (including the
indemnification provisions hereof) in any competent court having jurisdiction
over the parties, in addition to any other remedy to which they may be entitled
at law or in equity.
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ARTICLE IX - GENERAL
9.1 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, and the consummation of the transactions contemplated hereby and
thereby, including legal, accounting and financial advisory fees and expenses
and brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Merger ("TRANSACTION COSTS"); provided that the Transaction
Costs incurred by the Company in connection with this Agreement and the other
Operative Documents in excess of $2,000,000 shall be paid solely by the
stockholders of the Company, severally and not jointly, and, notwithstanding
anything to the contrary contained herein, Parent shall be entitled in its sole
discretion to deduct each such stockholder's pro rata portion of such excess
Transaction Costs from the Merger Consideration payable to such stockholder, in
which case the amount payable to such stockholder at the Effective Time shall be
appropriately reduced; and provided, further, should any action be brought
hereunder, the attorneys' fees and expenses of the substantially prevailing
party shall be paid by the other party to such action.
9.2 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 next business day after deposit with a reputable overnight
courier service, as the case may be, in each case properly addressed as provided
herein and with all charges prepaid. Notice given to the Stockholder
Representatives shall constitute notice given to each former stockholder of the
Company.
TO PARENT, MERGER SUB OR, AFTER THE CLOSING, THE SURVIVING CORPORATION:
F5 Networks, Inc.
401 Elliott Avenue West
Seattle, WA 98119
Fax: 206-272-6897
Attention: General Counsel
with a copy to:
DLA Piper Rudnick Gray Cary US LLP
701 Fifth Avenue, Suite 7000
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Seattle, WA 98104
Fax: (206) 839-4801
Attention: Steven R. Yentzer
TO THE COMPANY PRIOR TO THE CLOSING:
Swan Labs Corporation
99 W. Tasman Drive, Suite 100
San Jose, CA 95134
Fax: (408) 433-9762
Attention: Chief Executive Officer
with a copy to:
Heller Ehrman LLP
275 Middlefield Road
Menlo Park, CA 94025
Fax: (650) 324-0638
Attention: Elias J. Blawie
TO THE STOCKHOLDER REPRESENTATIVES:
Matthew Howard
c/o Norwest Venture Partners
525 University Avenue, Suite 800
Palo Alto, CA 94301-1922
Fax: (650) 321-8010
and:
Andrew Foss
c/o Swan Labs Corporation
99 W. Tasman Drive, Suite 100
San Jose, CA 95134
Fax: (408) 324-5171
9.3 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
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acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
9.4 ENTIRE AGREEMENT
This Agreement, the Mutual Nondisclosure Agreement and the other Operative
Documents constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof.
9.5 ASSIGNMENT
This Agreement shall not be assigned by operation of law or otherwise;
provided, however, that any or all of rights and obligations of each of Merger
Sub and Parent may be assigned to one or more Affiliates of Parent only if
Parent makes an unconditional guarantee to satisfy its obligations with respect
to payment of the Merger Consideration pursuant to the terms of this Agreement.
9.6 PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto and their respective successors, heirs, legal representatives
and permitted assigns, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, except for the
persons intended to be benefited pursuant to Sections 6.11, 6.12, 6.13, 6.14,
6.15, 6.16, 8.3, 8.4 and 8.9.
9.7 GOVERNING LAW; ARBITRATION; JURISDICTION; VENUE.
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware applicable to contracts executed in and to be
performed in that state.
(b) Except as otherwise set forth herein, any controversy, dispute or
claim arising out of or relating to this Agreement or the breach hereof that
cannot be settled by mutual agreement (except for actions by any party seeking
exclusively injunctive relief) shall be exclusively subject to arbitration. Any
party who is aggrieved shall deliver a notice to the other parties hereto
setting forth the specific points in dispute. Any points remaining in dispute
thirty (30) days after the giving of such notice shall be submitted to binding
arbitration as set forth below. All claims shall be settled in accordance with
the Commercial Arbitration Rules then in effect of the American Arbitration
Association (the "AAA RULES"), before a single arbitrator appointed in
accordance with AAA Rules. Such arbitration shall be held in Seattle,
Washington. The arbitrator may enter a default decision against any party who
fails to participate in the arbitration proceedings. The decision of the
arbitrator on the points in
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dispute will be final, unappealable and binding, and judgment on the award may
be entered in any court having jurisdiction. Subject to the other terms of this
Section 9.7(b), the parties irrevocably consent to the jurisdiction and venue of
the state and federal courts located in King County, Washington in connection
with any action relating to this Agreement. Notwithstanding any other provision
of this Agreement, the arbitrator will be authorized to apportion its fees and
expenses and the reasonable attorneys' fees and expenses of the parties as the
arbitrator deems appropriate. In the absence of any such apportionment, the fees
and expenses of the arbitrator will be borne 50% by Parent, on the one hand, and
50% by the Company or, if the Closing has occurred, by the stockholders of the
Company, severally and not jointly, on the other hand, and each such party will
bear the fees and expenses of its own attorneys. The parties agree that this
clause has been included to rapidly and inexpensively resolve any disputes
between them with respect to this Agreement, and that this clause shall be
grounds for dismissal of any court action commenced by either party with respect
to this Agreement, other than actions for exclusively injunctive relief and post
arbitration actions seeking to enforce an arbitration award. The parties shall
keep confidential, and shall not disclose to any person, except as may be
required by law, the existence of any controversy hereunder, the referral of any
such controversy to arbitration, or the status or resolution thereof; provided,
that each party may make such disclosure to the extent it is required to
disclose such matters under applicable securities or accounting rules, as
advised by its counsel.
9.8 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.9 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement. 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 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.
9.10 WAIVER OF JURY TRIAL
Each of Parent, Merger Sub, and the Company hereby irrevocably waives all
right to trial by jury in any action, proceeding or counterclaim (whether based
on contract, tort or otherwise) arising out of or relating to this Agreement,
the transactions contemplated hereby or the actions of such parties in the
negotiation, administration, performance and enforcement hereof.
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ARTICLE X - DEFINITIONS
As used in this Agreement, the following defined terms shall have the
meanings indicated below:
"AAA RULES": Is defined in Section 9.7(b).
"AFFILIATE": of a Person (the "SUBJECT") means any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with the Subject.
"AFFILIATED GROUP": Any affiliated group as defined in Section 1504 of the
Code (or any analogous combined, consolidated or unitary group defined under
state, local or foreign income Tax law).
"AGGREGATE COMMON STOCK PAYMENT": The Purchase Price minus the Preferred
Stock Preference Payment.
"AGREEMENT": Is defined in the Preamble.
"ALTERNATIVE TRANSACTION": Is defined in Section 6.3.
"BASE ESCROW AMOUNT": Is defined in Section 1.7.2.
"CALIFORNIA LAW": The California Corporations Code.
"CAUSE": Is defined as, with respect to any Person: (i) such Person's act
of fraud, or embezzlement with respect to the Company, Parent or any Affiliate
of Parent; (ii) such Person's material violation of any agreement with the
Company, Parent or any Affiliate of Parent, including this Agreement, or
Parent's form Confidentiality, Noncompetition and Invention Assignment
Agreement; (iii) the conviction of a felony or any crime involving moral
turpitude; (iv) an act of personal dishonesty by such Person in connection with
his or her responsibilities as an employee of the Company, Parent or any
Affiliate of Parent and which results in personal enrichment of such Person; (v)
such Person's (a) failure or refusal to perform his lawful duties as an employee
of the Company, Parent or any Affiliate of Parent or to comply with the
Company's rules, policies or procedures, (b) conduct that constitutes
insubordination or gross incompetence or (c) conduct that demonstrates habitual
neglect of duties, each as determined by Parent in its good faith discretion and
the failure to "cure" such misconduct within a period of fifteen (15) days
following such receipt of written notice of such misconduct; or (vi)
misappropriation of a business opportunity.
"CERTIFICATE OF INCORPORATION": The Amended and Restated Certificate of
Incorporation of the Company, as amended through the date hereof.
"CERTIFICATE OF MERGER": Is defined in Section 1.3.
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"CLAIM": Any claim, demand, cause of action, suit, proceeding,
arbitration, audit, hearing, investigation or inquiry (whether formal or
informal).
"CLAIM NOTICE": Is defined in Section 8.5(a).
"CLOSING": Is defined in Section 1.2.
"CLOSING DATE": Is defined in Section 1.2.
"COBRA": The health care continuation provision of the Consolidated
Omnibus Budget Reconciliation Act of 1985, and all rules and regulations
promulgated thereunder, all as in effect from time to time.
"CODE": The Internal Revenue Code of 1986, and all rules and regulations
promulgated thereunder, as in effect from time to time.
"COMPANY": Is defined in the Preamble.
"COMPANY 401(k) PLAN": Is defined in Section 6.10(a).
"COMPANY BALANCE SHEET": Is defined in Section 2.6(a).
"COMPANY CAPITAL STOCK": Is defined in Section 1.7.1.
"COMPANY COMMON STOCK": Is defined in Section 1.7.1(b)(ii).
"COMPANY INTELLECTUAL PROPERTY RIGHTS": All intellectual property and
proprietary rights worldwide owned, used or licensed (whether as licensor or
licensee) by the Company in its business as currently conducted, including,
without limitation, any and all foreign and domestic trade names, trademarks,
service marks, domain names, copyrights, moral rights, trade secret rights,
rights in mask works, patent and all associated rights and all registrations,
applications, renewals, extensions, divisionals and continuations (in whole or
in part) of any of the foregoing, together with all goodwill associated
therewith and all rights and causes of action for infringement,
misappropriation, misuse, dilution, unfair trade practice or otherwise
associated therewith.
"COMPANY IP": Is defined in Section 2.16.1.
"COMPANY IP REGISTRATIONS": Is defined in Section 2.16.6.
"COMPANY OPTIONS": Is defined in Section 1.7.1(d).
"COMPANY-OWNED IP": Is defined in Section 2.16.1.
"COMPANY SERIES A STOCK": Is defined in Section 1.7.1(b)(i).
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"COMPANY STOCKHOLDER CONSENT": Is defined in Section 2.2(c).
"COMPANY STOCK OPTION PLAN": Is defined in Section 6.11.
"COMPANY TECHNOLOGY": All products, tools, devices, mask works, computer
programs, software, source code, object code, development tools, techniques,
concepts, know-how, algorithms, methods, processes, procedures, formulae,
designs, drawings, customer lists, supplier lists, databases, specifications,
programmer notes, specifications, packaging, trade dress, content, graphics,
images, user interfaces, "look and feel," inventions (whether or not
patentable), invention disclosures, discoveries, works of authorship (whether or
not copyrightable) and other technology owned, used or licensed (whether as
licensor or licensee) by the Company in its business as currently conducted.
"CONSIDERATION ALLOCATION CERTIFICATE": Is defined in Section 4.23.
"CONTEST NOTICE": Is defined in Section 8.5(b).
"CONTRACTS": Is defined in Section 2.10.1.
"DELAWARE LAW": Is defined in Section 1.3.
"DELAWARE SECRETARY OF STATE": Is defined in Section 1.3.
"DISCLOSURE MEMORANDUM": Is defined in Article II.
"DISSENTING SHARES": Is defined in Section 1.7.3.
"DISSENTING STOCKHOLDER": Is defined in Section 1.7.3.
"DOL": The United States Department of Labor.
"EFFECTIVE DATE": Is defined in Section 1.3.
"EFFECTIVE TIME": Is defined in Section 1.3.
"EMPLOYEE BENEFIT PLAN": 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, program,
policy, practice, contract, agreement, fund or arrangement (including, without
limitation, any "employee benefit plan," as defined in Section 3(3) of ERISA) or
any employment, consulting or personal services contract, whether written or
oral, funded or unfunded or domestic or foreign, (a) sponsored, maintained or
contributed to by the Company or to which the Company is a party, (b) covering
or benefiting any current or former officer, employee, agent, director or
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independent contractor of the Company (or any dependent or beneficiary of any
such individual), or (c) with respect to which the Company has (or could have)
any obligation or liability.
"ENCUMBRANCE": Liens, mortgages, pledges, deeds of trust, security
interests, charges, encumbrances and other adverse claims or interests of any
kind.
"ENVIRONMENTAL LAWS": All foreign, federal, state, county and local laws
(whether under common law, statute, ordinance, rule, regulation or otherwise),
codes permits, licenses, orders, decrees, judgments, guidelines, standards,
policies and other requirements of governmental authorities, whether existing as
of Closing or any time prior to the Closing, relating to the protection of human
health, safety, natural resources or the environment.
"ERISA": The Employee Retirement Income Security Act of 1974, and all
rules and regulations promulgated thereunder, all as in effect from time to
time.
"ESCROW": Is defined in Section 1.7.2.
"ESCROW AGENT": Is defined in Section 1.7.2.
"ESCROW AGREEMENT": Is defined in Section 1.7.2.
"ESCROW AMOUNT": Is defined in Section 1.7.2.
"ESCROW TERMINATION DATE": Is defined in Section 8.8.
"EXCHANGE ACT": Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT": Is defined in Section 1.7.4(a).
"EXCESS DISSENTING SHARE PAYMENTS": Is defined in Section 1.7.3.
"EXCLUDED CLAIMS": Is defined in Section 8.9.
"FINALLY DETERMINED LOSSES": Is defined in Section 8.5(c).
"FINANCIAL STATEMENTS": Is defined in Section 2.6(a).
"GAAP": Generally accepted accounting principles in the United States.
"GOVERNMENTAL BODY": Any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"HART-SCOTT-RODINO ACT": Is defined in Section 2.5.
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"HAZARDOUS MATERIALS": All chemicals, materials, substances, or wastes
that are regulated, designated, defined or included in any definition under any
Environmental Laws as dangerous, hazardous, radioactive, infectious or toxic or
as a pollutant or contaminant, including, without limitation, asbestos or
asbestos-containing materials, petroleum or petroleum products, polychlorinated
biphenyls and urea formaldehyde.
"HIPAA": The Health Insurance Portability and Accountability Act of 1997,
and all rules and regulations promulgated thereunder, all as in effect from time
to time.
"INBOUND LICENSES": Is defined in Section 2.16.2.
"INDEMNIFICATION CLAIM(s)": Any claim(s) for indemnification under Article
VIII.
"INDEMNIFIED PARTY": Is defined in Section 8.4(b).
"INDEMNIFYING PARTY": Is defined in Section 8.4(b).
"INTERNATIONAL TRADE LAW": Is defined in Section 2.30.
"INVESTMENT ASSETS": Is defined in Section 2.27.
"IP CLAIM": Is defined in Section 8.7.
"IRREVOCABLE PROXY": The Irrevocable Proxy in the form of attached EXHIBIT
2.2(b)(2).
"IRS": The United States Internal Revenue Service.
"KNOWLEDGE": With respect to the Company, the actual knowledge of a fact
or other matter after reasonable investigation, of the Company's Chief Executive
Officer, Senior Controller, Vice President of Marketing or those Persons listed
on SCHEDULE 4.12 TO THE DISCLOSURE MEMORANDUM. With respect to Parent, the
actual knowledge of a fact or other matter after reasonable investigation, of
the Company's Chief Executive Officer or General Counsel.
"LETTER OF TRANSMITTAL": Is defined in Section 1.7.4(b).
"LOSSES": Is defined in Section 8.2.
"MATERIAL ADVERSE EFFECT": Any event, circumstance, change or effect that,
when taken individually or together with all other adverse events,
circumstances, changes or effects, is more likely than not of being materially
adverse to the business, operations, assets, liabilities (absolute, accrued,
contingent or otherwise), condition (financial or other) or prospects of the
Company and its subsidiaries taken as a whole; provided, however, that none of
the following shall be deemed either alone or in combination to constitute, and
none of the following shall be taken into account in determining whether there
has been or would be, a Material Adverse Effect: (A) any adverse effect that
results from general economic, business,
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financial or market conditions; (B) any adverse effect attributable to
conditions affecting any of the industries or industry sectors in which the
Company or its subsidiaries operates (except to the extent that the Company or
its subsidiaries is adversely affected disproportionately relative to the other
participants in such industries or industry sectors); (C) any adverse effect
arising from or otherwise relating to fluctuations in the value of any currency;
(D) any adverse effect arising from or otherwise relating to any act of
terrorism, war, national or international calamity or any other similar event;
(E) any adverse effect (including any loss of employees, other than those
Persons listed on SCHEDULE 4.12 OF THE DISCLOSURE MEMORANDUM, or any
cancellation of or delay in customer orders) directly arising from or otherwise
directly relating to the announcement or pendency of this Agreement or the
Merger; (F) any adverse effect arising from or otherwise relating to actions
taken by the Company pursuant to, and consistent with, the Company's obligations
under this Agreement; (G) any adverse effect arising from or otherwise relating
to changes in GAAP; (H) any adverse effect that arises from any matter
specifically described in the Disclosure Memorandum; or (I) the failure of the
Company to meet expectations or projections previously provided in writing to
Parent (provided that (i) shortfalls in financial results which result in such
missed expectations or projections and (ii) the underlying causes of any such
shortfalls, may in each case, individually or when aggregated with other
effects, qualify as a "Material Adverse Effect").
"MERGER": Is defined in the Recitals.
"MERGER CONSIDERATION": The aggregate cash distributed to the holders of
Company Capital Stock pursuant to this Section 1.7.1(b).
"MERGER SUB": Is defined in the Preamble.
"MUTUAL NONDISCLOSURE AGREEMENT": Is defined in Section 6.2.
"OPEN CLAIM": Is defined in Section 8.8(b).
"OPERATIVE DOCUMENTS": Is defined in Article II.
"OUTBOUND LICENSES": Is defined in Section 2.16.2.
"PARENT": Is defined in the Preamble.
"PARENT COMMON STOCK": Common Stock of Parent.
"PARENT INDEMNIFIED PARTY" and "PARENT INDEMNIFIED PARTIES": Each is
defined in Section 8.2(a).
"PERMITTED ENCUMBRANCES": Means (a) statutory liens of landlords, liens of
carriers, warehousepersons, mechanics and material persons, and purchase money
liens incurred in the ordinary course of business for sums (i) not yet due and
payable, or (ii) being contested in good faith, if, in either such case, an
adequate reserve shall have been made therefor in the Financial Statements, (b)
liens incurred or deposits made in connection with workers'
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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, (c) 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, (d) liens securing taxes, assessments and governmental charges not yet
due and payable and are set forth on SCHEDULE 2.8(a) OF THE DISCLOSURE
MEMORANDUM, and (e) banker's liens, rights of setoff and similar common law or
statutory liens incurred on deposits made in the ordinary course of business.
"PER SHARE COMMON STOCK CONSIDERATION": A cash amount equal to (a) the
Aggregate Common Stock Payment multiplied by (b) a fraction, the numerator of
which is one (1) and the denominator of which is the sum of (x) the aggregate
number of shares of Company Series A Stock issued and outstanding as of
immediately prior to the Effective Time plus (y) the aggregate number of shares
of Company Common Stock issued and outstanding as of immediately prior to the
Effective Time.
"PER SHARE PREFERRED STOCK CONSIDERATION": A cash amount equal to the sum
of (x) $0.4295 (as adjusted for any stock splits, dividends, recapitalizations
and the like with respect to the Company prior to the Effective Time), plus (y)
the Per Share Common Stock Consideration.
"PERSON": Any individual, corporation, partnership, trust, joint venture,
limited liability company, association, organization, other entity or
Governmental Body or regulatory authority.
"PERSONAL PROPERTY": All personal property owned, leased or rented by the
Company.
"PRE-CLOSING TAX PERIODS": Collectively, all taxable periods ending on or
prior to the Closing Date and the portion through the end of the Closing Date.
"PRE-CLOSING TAXES": Any and all Taxes (a) of the Company for all
Pre-Closing Tax Periods other than any Taxes for which adequate reserves in
accordance with GAAP have been included on the Financial Statements, (b) of any
member of an Affiliated Group of which the Company (or any predecessor thereof)
is or was a member on or prior to the Closing Date, including pursuant to
Treasury Regulations Section 1.1502-6 (or any predecessor or successor thereof
or any analogous or similar state, local, or foreign law or regulation), (c) of
any Person imposed on the Company as a transferee or successor, by contract or
pursuant to any law, rule, or regulation, which Taxes relate to an event or
transaction occurring before the Closing, or (d) resulting from the transactions
contemplated by this Agreement (including, without limitation, any and all
sales, transfer, stamp and similar Taxes, levies, charges and fees), other than
any Company Taxes arising from Parent making an election under Section 338(g)
with respect to the Merger.
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"PREFERRED STOCK PREFERENCE PAYMENT": A cash amount equal to the product
of (x) the aggregate number of shares of Company Series A Stock issued and
outstanding as of immediately prior to the Effective Time multiplied by (y)
$0.4295 (as adjusted for any stock splits, dividends, recapitalizations and the
like with respect to the Company prior to the Effective Time).
"PRIOR PERIOD": Is defined in Section 6.9(a).
"PRIOR PERIOD RETURNS": Is defined in Section 6.9(a).
"PRIVACY STATEMENT": Is defined in Section 2.16.15.
"PUBLIC SOFTWARE": Is defined in Section 2.16.12.
"PURCHASE PRICE": Is defined in Section 1.7.1.
"REAL PROPERTY": Is defined in Section 2.9(a).
"REASONABLY LIKELY": Means a meaningful chance (but not necessarily a
probability) of occurring.
"RELEASE": Releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, migrating, disposing or
dumping.
"REQUIRED STOCKHOLDERS": Is defined in the Recitals.
"REQUIRED STOCKHOLDER VOTE": Is defined in Section 2.2(a).
"RETENTION EMPLOYEES": Those employees of the Company immediately prior to
the Effective Time set forth on SCHEDULE 6.13(a) TO THE DISCLOSURE MEMORANDUM
who have been offered and have accepted employment with Parent or the Surviving
Corporation and commence employment with Parent or the Surviving Corporation
after the Effective Time.
"RETENTION EXPIRATION DATE": Is defined in Section 6.13.
"RETENTION MILESTONES": Is defined in Section 6.13, and which are set
forth on SCHEDULE 6.13(b) TO THE DISCLOSURE MEMORANDUM.
"RETENTION POOL": Is defined in Section 6.13.
"SEC": United States Securities and Exchange Commission.
"SECURITIES ACT": Securities Act of 1933, as amended.
"SOURCE CODE": Is defined in Section 2.16.7.
"SPECIAL ESCROW AMOUNT": Is defined in Section 1.7.2.
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"STOCK PURCHASE RIGHTS": Is defined in Section 2.3(c).
"STOCKHOLDER INDEMNIFIED PARTIES": Is defined in Section 8.3.
"STOCKHOLDER MATERIALS": Is defined in Section 2.31.
"STOCKHOLDER REPRESENTATIVE": Is defined in Section 1.8.
"STOCKHOLDER AGREEMENT": The Stockholder Agreement to be executed and
delivered by each stockholder of the Company (other than Dissenting
Stockholders) in the form of attached EXHIBIT 1.
"SURVIVAL PERIOD": Is defined in Section 8.1.
"SURVIVING CORPORATION": Is defined in Section 1.1.
"TAX" (and, in the plural, "TAXES"): Any and all (a) domestic or foreign
federal, state or local taxes, charges, fees, levies, imposts, duties and
governmental fees or other like assessments or charges of any kind whatsoever
(including, without limitation, any income, net income, gross income, receipts,
windfall profit, severance, property, production, sales, use, business and
occupation, license, excise, registration, franchise, employment, payroll,
withholding, alternative or add-on minimum, intangibles, ad valorem, transfer,
gains, stamp, estimated, transaction, title, capital, paid-up capital, profits,
occupation, premium, value-added, recording, real property, personal property,
inventory and merchandise, business privilege, federal highway use, commercial
rent or environmental tax, and any liability under unclaimed property or similar
laws), (b) interest, penalties, fines, additions to tax or additional amounts
imposed by any taxing authority in connection with (i) any item described in
clause (a) or (ii) the failure to comply with any requirement imposed with
respect to any Tax Returns, and (c) liability in respect of any items described
in clause (a) and/or (b) payable by reason of contract, assumption, transferee
liability, operation of law or otherwise.
"TAX RETURNS": Any report, return, statement or other written information,
including any schedules or attachments thereto and any amendment thereof,
required to be supplied to a taxing authority in connection with Taxes.
"THIRD PARTY CLAIM": Is defined in Section 8.5(a).
"THIRD PARTY IP": Is defined in Section 2.16.1.
"TRANSACTION COSTS": Is defined in Section 9.1.
"TRANSACTION COSTS SPREADSHEET": Is defined in Section 4.21.
"TRANSMITTED COPIES": Is defined in Section 9.9.
"UBS": Is defined in Section 2.25.
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"WARRANTY COSTS": Is defined in Section 2.12.
[Signature Pages Follow]
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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.
F5 NETWORKS, INC.
By /s/ John McAdam
--------------------------------------
Its President and Chief Executive Officer
SPARROW ACQUISITION CORP.
By /s/ Joann Reiter
--------------------------------------
Its President
SWAN LABS CORPORATION
By /s/ Andrew Foss
--------------------------------------
Its Chief Executive Officer
STOCKHOLDER REPRESENTATIVES
/s/ Matthew Howard
-----------------------------------------
Matthew Howard
/s/ Andrew Foss
-----------------------------------------
Andrew Foss