EXHIBIT 2.03
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AGREEMENT AND PLAN OF MERGER
AMONG
SYMANTEC CORPORATION,
BRAZIL ACQUISITION CORP.,
BRIGHTMAIL INCORPORATED
AND
JOHN C. COLLIGAN, AS REPRESENTATIVE
MAY 19, 2004
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of May 19, 2004 (the "AGREEMENT DATE") by and among Symantec
Corporation, a Delaware corporation ("ACQUIROR"), Brazil Acquisition Corp., a
California corporation and a wholly owned subsidiary of Acquiror ("MERGER SUB"),
Brightmail Incorporated, a California corporation (the "COMPANY"), and John C.
Colligan, as Representative (the "REPRESENTATIVE").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Merger Sub shall merge with and into the Company (the
"MERGER"), with the Company to be the surviving corporation of the Merger (the
"SURVIVING CORPORATION"), on the terms and subject to the conditions of this
Agreement and pursuant to an Agreement of Merger in customary form to be
attached hereto as Exhibit A (the "AGREEMENT OF MERGER") and the applicable
provisions of the laws of the State of California.
B. The Boards of Directors of Acquiror, Merger Sub and the Company have
determined that the Merger is in the best interests of their respective
companies and stockholders and shareholders and have approved and declared
advisable this Agreement and the Merger.
C. Following the execution and delivery of this Agreement, each Company
Shareholder listed on Exhibit B-1 is executing and delivering a written consent
substantially in the form attached hereto as Exhibit B-2 (the "COMPANY
SHAREHOLDER CONSENT") approving the Merger and this Agreement and a letter
substantially in the form attached hereto as Exhibit B-3 (the "COMPANY
SHAREHOLDER LETTER") in favor of Acquiror agreeing not to revoke or rescind the
Company Shareholder Consent or adopt resolutions rescinding or revoking approval
of the Merger and this Agreement or otherwise precluding approval of the Merger
and this Agreement.
D. Acquiror, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement and to prescribe various conditions to their respective obligations
under this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants and conditions contained herein, the parties hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below. Unless indicated otherwise, all mathematical calculations
contemplated hereby shall be made to the fifth decimal place.
"ACQUIROR ANCILLARY AGREEMENTS" means, collectively, each
certificate to be delivered on behalf of Acquiror by an officer or officers of
Acquiror at the Closing pursuant to Article 8 and each agreement (other than
this Agreement) that Acquiror is to enter into as a party thereto pursuant to
this Agreement.
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"ACQUIROR COMMON STOCK" means the Common Stock, $0.01 par
value per share, of Acquiror.
"ACQUIROR OPTIONS" means options to purchase shares of
Acquiror Common Stock.
"ALTERNATIVE TRANSACTION" means: (A) any acquisition or purchase of
Company Capital Stock from the Company by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) representing more than a 20% voting interest in any class or series
of Company Capital Stock or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning Company Capital Stock representing 20% or more of the voting interest in
any class or series of Company Capital Stock or any merger, consolidation,
business combination or similar transaction involving the Company pursuant to
which the Company Shareholders immediately preceding such transaction hold less
than 80% of the equity interests in any class or series of capital stock of the
surviving or resulting entity of such transaction; (B) any sale, lease,
exchange, transfer, license, acquisition or disposition of a substantial portion
of the assets of Company; (C) any sale, lease, exchange, transfer, license or
disposition to a third party of the Company Business; or (D) any initial public
offering of capital stock or other securities of the Company pursuant to a
registration statement filed under the Securities Act.
"APPLICABLE LAW" means, collectively, all foreign, federal, state,
local or municipal laws, statutes, ordinances, regulations, and rules, and all
orders, writs, injunctions, awards, judgments and decrees applicable to the
Company or any of its assets, properties or business.
"AVERAGE ACQUIROR STOCK PRICE" shall mean the average of the closing
prices for a share of Acquiror Common Stock as quoted on the NASDAQ Stock Market
(or other principal exchange or market on which Acquiror Common Stock is then
listed) for 10 consecutive trading days ending on (and including) the trading
day that is three trading days prior to the Closing Date.
"BALANCE SHEET DATE" means April 30, 2004, the date of the Company
Balance Sheet.
"CALIFORNIA LAW" means the General Corporation Law of the State of
California.
"CLOSING" means the closing of the transactions to consummate the
Merger.
"CLOSING DATE" means a time and date to be specified by the parties,
which shall be no later than the second business day after the satisfaction or
waiver of the conditions set forth in Article 8 and Article 9, or at such other
time, date and location as the parties hereto agree in writing.
"CLOSING FINANCIAL CERTIFICATE" means a certificate executed by the
President or Chief Executive Officer of the Company, dated as of the Closing
Date, certifying the amount of Merger Expenses (including an itemized list of
each Merger Expense with a description of the
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nature of such expense and the Person to whom such expense was or is owed). The
Closing Financial Certificate shall include a representation of the Company,
certified by the President or Chief Executive Officer of the Company, that such
certificate includes all of the Merger Expenses paid or payable at any time
prior to, at or following the Closing Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY ANCILLARY AGREEMENTS" means, collectively, each certificate
to be delivered on behalf of the Company by an officer or officers of the
Company at the Closing pursuant to Article 9 and each agreement (other than this
Agreement) that the Company is to enter into as a party thereto pursuant to this
Agreement.
"COMPANY BALANCE SHEET" means the Company's unaudited balance sheet
as of April 30, 2004 included in the Company Financial Statements.
"COMPANY BUSINESS" means the business of the Company and the Company
Subsidiaries as presently conducted.
"COMPANY CAPITAL STOCK" means the capital stock of the Company.
"COMPANY COMMON STOCK" means the Common Stock, $0.001 par value per
share, of the Company.
"COMPANY FINANCIAL STATEMENTS" means (A) the Company's audited
consolidated balance sheet dated January 31, 2004, (B) the Company's audited
consolidated statement of operations, statement of cash flows and statement of
changes in shareholders' equity for the year ended January 31, 2004, (C) the
Company Balance Sheet, and (D) the Company's unaudited consolidated statement of
operations, statement of cash flows and statement of changes in shareholders'
equity for the three months ended April 30, 2004, and any notes to the foregoing
audited financial statements.
"COMPANY OPTION PLAN" means the 1998 Stock Option Plan of the
Company.
"COMPANY OPTIONHOLDERS" means the holders of Company Options.
"COMPANY OPTIONS" means options to purchase shares of Company
Capital Stock.
"COMPANY PREFERRED STOCK" means the Company Series A Stock, Company
Series B Stock, Company Series C Stock and Company Series D Stock.
"COMPANY SECURITYHOLDERS" means the Company Shareholders, Company
Optionholders and Company Warrantholders, collectively.
"COMPANY SERIES A STOCK" means the Series A Convertible Preferred
Stock, par value $0.001 per share, of the Company.
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"COMPANY SERIES B STOCK" means the Series B Convertible Preferred
Stock, par value $0.001 per share, of the Company.
"COMPANY SERIES C STOCK" means the Series C Convertible Preferred
Stock, par value $0.001 per share, of the Company.
"COMPANY SERIES D STOCK" means the Series D Convertible Preferred
Stock, par value $0.001 per share, of the Company.
"COMPANY SHAREHOLDERS" means the holders of shares of Company
Capital Stock.
"COMPANY SUBSIDIARY" means a corporation or other business entity in
which the Company owns, directly or indirectly, at least a 50% interest or that
is otherwise, directly or indirectly, controlled by the Company.
"COMPANY WARRANTHOLDERS" means the holders of Company Warrants.
"COMPANY WARRANTS" means warrants to purchase shares of Company
Capital Stock.
"CONTRACT" means any written or oral legally binding contract,
agreement, instrument, commitment or undertaking (including leases, licenses,
mortgages, notes, guarantees, sublicenses, subcontracts and purchase orders).
"DISSENTERS DEADLINE DATE" means the first date on which no holder
of Company Capital Stock has the legal right to perfect dissenters' rights in
accordance with California Law in connection with the Merger in respect of any
shares of Company Capital Stock.
"DISSENTING SHARES" means any shares of Company Capital Stock that
are issued and outstanding immediately prior to the Effective Time and in
respect of which dissenters' rights shall have been perfected prior to the
Dissenters Deadline Date in accordance with California Law in connection with
the Merger.
"DISSENTING SHARES EXCESS PAYMENTS" means any payment in respect of
Dissenting Shares in excess of the amount of cash that would have been issuable
pursuant to Section 2.1(b) in respect of such shares had they never been
Dissenting Shares. Dissenting Shares Excess Payments shall constitute "Damages"
for purposes of Section 11 without regard to the Deductible (as defined in
Section 11.3).
"DOCUMENTATION" means, collectively, programmers' notes or logs,
source code annotations, user guides, manuals, instructions, software
architecture designs, layouts, any know-how, and any other designs, plans,
drawings, documentation, materials, supplier lists, software source code and
object code, net lists, photographs, development tools, blueprints, media,
memoranda and records that are primarily related to or otherwise necessary for
the use and exploitation of any products of the Company or Company Subsidiaries,
whether in tangible or intangible form, whether owned by the Company or Company
Subsidiaries or held by the Company or Company Subsidiaries under any licenses
or sublicenses or similar grants of rights.
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"EFFECTIVE TIME" means the time of the filing of the Agreement of
Merger (or such later time as may be mutually agreed in writing by the Company
and Acquiror and specified in the Agreement of Merger).
"ENCUMBRANCE" means, with respect to any asset, any mortgage, deed
of trust, lien, pledge, charge, security interest, title retention device,
collateral assignment, adverse claim, restriction or other encumbrance of any
kind in respect of such asset (including any restriction on the voting of any
security and any restriction on the transfer of any security).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means any entity which is a member of: (A) a
"controlled group of corporations," as defined in Section 414(b) of the Code;
(B) a group of entities under "common control," as defined in Section 414(c) of
the Code; or (C) an "affiliated service group," as defined in Section 414(m) of
the Code, or treasury regulations promulgated under Section 414(o) of the Code,
any of which includes the Company.
"ESCROW CASH" means the amount set forth in the Escrow Agreement as
being escrow cash.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FULLY-DILUTED COMPANY COMMON STOCK" means the sum, without
duplication, of (A) the aggregate number of shares of Company Common Stock that
are issued and outstanding immediately prior to the Effective Time, (B) the
aggregate number of shares of Company Common Stock issuable upon the conversion
of shares of Company Preferred Stock issued and outstanding immediately prior to
the Effective Time, (C) the aggregate number of shares of Company Common Stock
issuable upon the exercise of Company Options (other than Unvested Company
Options), (D) the aggregate number of shares of Company Common Stock issuable
upon the exercise of Company Warrants or other direct or indirect rights to
acquire shares of Company Common Stock, in each case that are issued and
outstanding immediately prior to the Effective Time (whether or not then vested
or exercisable), and (E) the aggregate number of shares of Company Common Stock
issuable upon the conversion of shares of Company Preferred Stock issuable upon
the exercise of Company Warrants or other direct or indirect rights to acquire
shares of Company Preferred Stock, in each case that are issued and outstanding
immediately prior to the Effective Time (whether or not then vested or
exercisable), calculated on a Treasury Stock Basis, as calculated by the
Valuation Spreadsheet.
"FULLY-DILUTED UNVESTED COMPANY OPTIONS" means the sum, without
duplication, of the aggregate number of shares of Company Common Stock issuable
upon the exercise of Unvested Company Options that are issued and outstanding
immediately prior to the Effective Time (whether or not then exercisable),
calculated on a Treasury Stock Basis, as calculated by the Valuation
Spreadsheet.
"GAAP" means United States generally accepted accounting principles
applied on a consistent basis.
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"GENERAL CASH CONVERSION NUMBER" means $11.06. The General Cash
Conversion Number equals (A) the Total Cash Merger Consideration divided by (B)
the Fully-Diluted Company Common Stock.
"GENERAL STOCK CONVERSION NUMBER" means (A) the Total Stock Merger
Consideration divided by (B) the Fully-Diluted Unvested Company Options.
"GOVERNMENTAL AUTHORITY" means any court or tribunal, governmental
or regulatory body, administrative agency, commission or other governmental
authority.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEMNIFIABLE MERGER EXPENSES" means any Merger Expenses in excess
of $2,400,000, which excess shall constitute "Damages" for purposes of Section
11 without regard to the Deductible (as defined in Section 11.3).
"INTELLECTUAL PROPERTY" means, collectively, all worldwide
industrial and intellectual property rights, including patents, patent
applications, patent rights, trademarks, trademark registrations and
applications therefor, trade dress rights, trade names, service marks, service
mark registrations and applications therefor, Internet domain names, Internet
and World Wide Web URLs or addresses, copyrights, copyright registrations and
applications therefor, mask work rights, mask work registrations and
applications therefor.
"KNOWLEDGE" means the knowledge of a particular fact, circumstance,
event or other matter in question of the executive officers of an entity
(collectively, the "ENTITY REPRESENTATIVES"). Any such Entity Representative
will be deemed to have knowledge of a particular fact, circumstance, event or
other matter if such fact, circumstance, event or other matter would reasonably
be expected to be known by an individual who has the duties and responsibilities
of such Entity Representative.
"LIABILITY" means any debt, liability or obligation, whether accrued
or fixed, absolute or contingent, matured or unmatured, determined or
determinable, known or unknown, including those arising under any law, action or
governmental order and those arising under any Contract.
"MATERIAL ADVERSE CHANGE" and "MATERIAL ADVERSE EFFECT" when used in
connection with an entity means any change, event, circumstance, condition or
effect that has, individually or in the aggregate, a materially adverse effect
on the condition (financial or otherwise), capitalization, properties, assets
(including intangible assets), liabilities, business, operations or results of
operations of such entity and its subsidiaries, taken as a whole, except and to
the extent that any such change, event, condition or effect primarily results
from: (A) changes in general economic conditions (provided that such changes do
not affect such entity disproportionately in any material respect as compared to
such entity's competitors); (B) changes affecting the industry generally in
which such entity operates (provided that such changes do not affect such entity
disproportionately in any material respect as compared to such entity's
competitors); (C) the effect of the public announcement or pendency of the
transactions
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contemplated hereby; or (D) the effect of actions by the Company or a Company
Subsidiary taken at the direction of Acquiror or otherwise required pursuant to
this Agreement.
"MERGER EXPENSES" means all costs and expenses incurred by the
Company in connection with the Merger and this Agreement and the transactions
contemplated hereby, (including any fees and expenses of legal counsel,
financial advisors, investment bankers and accountants).
"MERGER SUB ANCILLARY AGREEMENTS" means, collectively, each
certificate to be delivered on behalf of Merger Sub by an officer or officers of
Merger Sub at the Closing pursuant to Article 8 and each agreement (other than
this Agreement) that Merger Sub is to enter into as a party thereto pursuant to
this Agreement.
"MERGER SUB COMMON STOCK" means the Common Stock, no par value per
share, of Merger Sub.
"PERMITTED ENCUMBRANCES" means: (A) statutory liens for taxes that
are not yet due and payable or liens for taxes being contested in good faith any
by appropriate proceedings for which adequate reserves have been established;
(B) statutory liens to secure obligations to landlords, lessors or renters under
leases or rental agreements; (C) deposits or pledges made in connection with, or
to secure payment of, workers' compensation, unemployment insurance or similar
programs mandated by Applicable Law; (D) statutory liens in favor of carriers,
warehousemen, mechanics and materialmen, to secure claims for labor, materials
or supplies and other like liens; and (E) liens in favor of customs and revenue
authorities arising as a matter of Applicable Law to secure payments of customs
duties in connection with the importation of goods.
"PERSON" means any individual, corporation, company, limited
liability company, partnership, limited liability partnership, trust, estate,
proprietorship, joint venture, association, organization, entity or Governmental
Authority.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPREADSHEET" means a spreadsheet in form reasonably acceptable to
Acquiror, which spreadsheet shall be dated as of the Closing Date and shall set
forth, as of the Closing Date and immediately prior to the Effective Time, the
following factual information relating to holders of Company Capital Stock,
Company Options and Company Warrants: (A) the names of all the Company
Shareholders, Company Optionholders and Company Warrantholders and their
respective addresses and where available, taxpayer identification numbers; (B)
the number and kind of shares of Company Capital Stock held by, or subject to
the Company Options or Company Warrants held by, such Persons and, in the case
of outstanding shares, the respective certificate numbers; (C) the exercise
price per share in effect for each Company Option and Company Warrant; (D) the
vesting arrangements with respect to Company Options and Unvested Company Shares
and terms of the Company's rights to repurchase such Unvested Company Shares
(including the repurchase price payable per share under each Unvested Company
Share); (E) the amount of cash issuable to each Company Shareholder, Company
Optionholder and
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Company Warrantholder in exchange for the Company Capital Stock, Company Options
and Company Warrants held by such Persons (and amount of cash required to be
deducted and withheld from such Persons for taxes); (F) the number of shares of
Acquiror Common Stock subject to and exercise price of each Acquiror Option
issuable to each Company Optionholder holding Unvested Company Options and
whether such Acquiror Option is an incentive stock option or non-qualified stock
option under the Code; and (G) the Pro Rata Share of each Effective Time Holder
and the interest in dollar terms of each Effective Time Holder in the Escrow
Cash.
"SPREADSHEET SUBMISSION DATE" means the later of (A) the date on
which the Company delivers the Spreadsheet to Acquiror, (B) the Closing Date,
and (C) the Dissenters Deadline Date.
"TAX" (and, with correlative meaning, "TAXES") means (A) any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other tax, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental entity responsible for the imposition of any such tax (domestic or
foreign), (B) any liability for the payment of any amounts of the type described
in clause (A) of this sentence as a result of being a member of an affiliated,
consolidated, combined, unitary or aggregate group for any taxable period, and
(C) any liability for the payment of any amounts of the type described in clause
(A) or (B) of this sentence as a result of being a transferee of or successor to
any Person or as a result of any express or implied obligation to indemnify any
other Person.
"TOTAL CASH MERGER CONSIDERATION" means the product (rounded to the
nearest cent) of (A) the quotient of (1) the Fully-Diluted Company Common Stock
divided by (2) the sum of the Fully-Diluted Company Common Stock plus the Fully
Diluted Unvested Company Options, multiplied by (B) the Total Merger
Consideration, as calculated by the Valuation Spreadsheet.
"TOTAL MERGER CONSIDERATION" means $370,000,000.
"TOTAL STOCK MERGER CONSIDERATION" means the quotient (rounded to
the nearest whole share) of (A) the product (rounded to the nearest cent) of (1)
the quotient of (a) the Fully-Diluted Unvested Company Options divided by (b)
the sum of the Fully-Diluted Company Common Stock plus the Fully Diluted
Unvested Company Options, multiplied by (2) the Total Merger Consideration (the
"TOTAL STOCK DOLLAR VALUE"), as calculated by the Valuation Spreadsheet, divided
by (B) the Average Acquiror Stock Price.
"TREASURY STOCK BASIS" means a calculation method which assumes that
options and warrants are exercised when the exercise price is below the fair
market value of the underlying security and that the proceeds from exercise are
used by the Company to purchase the underlying security for the treasury. For
the avoidance of doubt, when making such calculation, the fair market value of
Company Common Stock and Company Preferred Stock shall equal the General Cash
Conversion Number.
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"UNVESTED COMPANY OPTIONS" means any Company Options and Company
Capital Stock (issued, or issuable, under any Company Options) that may be
forfeited to or repurchased by the Company under the terms of any Contract with
the Company (including, without limitation, any stock option agreement, or stock
option exercise agreement, or restricted stock purchase agreement).
"UNVESTED COMPANY SHARES" means any Company Capital Stock that may
be forfeited to or repurchased by the Company under the terms of any Contract
with the Company (including, without limitation, any stock option agreement, or
stock option exercise agreement, or restricted stock purchase agreement).
"VALUATION SPREADSHEET" means the spreadsheet attached hereto as
Exhibit C, which sets forth the calculation of (A) the Fully-Diluted Company
Common Stock, (B) the Fully-Diluted Unvested Company Options, (C) the Total Cash
Merger Consideration, and (D) the Total Stock Dollar Value. The determination of
the Fully-Diluted Company Common Stock and Fully-Diluted Unvested Company
Options is based on mutual assumptions of the Company and Acquiror as to the
amount of Merger consideration that would be forfeited by Continuing Employees
whose employment or service is terminated within six months following the
Effective Time. The parties intend that the calculations set forth in the
Valuation Spreadsheet will result in the Company Securityholders receiving
(inclusive of their contributions to the Escrow Cash) no more and no less than
the Total Merger Consideration (valued in cash or with respect to Acquiror
Options, the excess of the Average Acquiror Stock Price over exercise price)
after taking into effect such forfeitures.
Other capitalized terms defined elsewhere in this Agreement and not
defined in this Article 1 shall have the meanings assigned to such terms in this
Agreement.
ARTICLE 2
THE MERGER
2.1 Conversion of Shares.
(a) Conversion of Merger Sub Common Stock. At the Effective Time,
each share of Merger Sub Common Stock that is issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued, fully
paid and nonassessable share of Common Stock, no par value per share, of the
Surviving Corporation, and the shares of the Surviving Corporation into which
the shares of Merger Sub Common Stock are so converted shall be the only shares
of Common Stock of the Company that are issued and outstanding immediately after
the Effective Time.
(b) Conversion of Company Capital Stock, Company Options and
Company Warrants.
(i) Company Capital Stock. Subject to the terms and
conditions of this Agreement, at the Effective Time, each share of Company
Capital Stock that is issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without the need for any further action
on the part of the holder thereof (except as expressly provided herein), be
converted into and represent the right to receive an amount of cash, without
interest,
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equal to the General Cash Conversion Number. The amount of cash each Company
Shareholder is entitled to receive for the shares of Company Capital Stock held
by such Company Shareholder shall be rounded to the nearest cent and computed
after aggregating cash amounts for all shares of Company Capital Stock held by
such Company Shareholder. The preceding provisions of this Section 2.1(b)(i) are
subject to the provisions of Section 2.1(c) (regarding rights of holders of
Dissenting Shares), Section 2.1(e) (regarding the continuation of vesting and
repurchase rights) and Section 2.3 (regarding the withholding of Escrow Cash).
(ii) Vested Company Options. Subject to the terms and
conditions of this Agreement, at the Effective Time, each Company Option (other
than an Unvested Company Option) that is issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without the need
for any further action on the part of the holder thereof (except as expressly
provided herein), be converted into and represent the right to receive an amount
of cash, without interest, equal to the product of (A) the number of shares of
Company Common Stock subject to such Company Option multiplied by (B) (the
General Cash Conversion Number, less the exercise price per share attributable
to such Company Option); provided, however, that the Surviving Corporation and
Acquiror shall be entitled to deduct and withhold from such payment made to the
holder of a Company Option the amount of withholding for taxes required to be
deducted and withheld as a result of the transactions contemplated by this
Section 2.1(b)(ii). The amount of cash each Company Optionholder is entitled to
receive for the Company Options (other than Unvested Company Options) held by
such Company Optionholder shall be rounded to the nearest cent and computed
after aggregating cash amounts for Company Options held by such Company
Optionholder. The preceding provisions of this Section 2.1(b)(ii) are subject to
the provisions of Section 2.3 (regarding the withholding of Escrow Cash).
(iii) Company Warrants. Subject to the terms and conditions of
this Agreement, at the Effective Time, each Company Warrant that is issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without the need for any further action on the part of the holder
thereof (except as expressly provided herein), be converted into and represent
the right to receive an amount of cash, without interest, equal to the product
of (A) the number of shares of Company Capital Stock subject to such Company
Warrant multiplied by (B) (the General Cash Conversion Number, less the exercise
price per share attributable to such Company Warrant). The amount of cash each
Company Warrantholder is entitled to receive for the Company Warrants held by
such Company Shareholder shall be rounded to the nearest cent and computed after
aggregating cash amounts for all Company Warrants held by such Company
Warrantholder.
(iv) Unvested Company Options. Subject to the terms and
conditions of this Agreement, at the Effective Time, each Unvested Company
Option that is issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without the need for any further action on
the part of the holder thereof (except as expressly provided herein), be assumed
by Acquiror and converted into an Acquiror Option, and each holder of an assumed
Unvested Company Option shall be entitled, in accordance with the terms of such
Acquiror Option, to purchase after the Effective Time that number of shares of
Acquiror Common Stock, determined by multiplying the number of shares of Company
Common Stock subject to such Unvested Company Option immediately prior to the
Effective Time by the
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General Stock Conversion Number, and the exercise price per share for each such
Acquiror Option will equal the exercise price of the Unvested Company Option
immediately prior to the Effective Time divided by the General Stock Conversion
Number, such exercise price being rounded up to the nearest whole cent. If the
foregoing calculation results in an assumed Unvested Company Option being
exercisable for a fraction of a share, then the number of shares of Acquiror
Common Stock subject to such Acquiror Option will be rounded down to the nearest
whole number with no cash being payable for such fractional share. In no event
shall the number of shares of Acquiror Common Stock, exercise price or any other
term or provision of any Acquiror Option issued pursuant to this Section
2.1(b)(iv) be adjusted or modified in any manner as a result of any of the
provisions of Section 2.1(b)(v). The term, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the Code, if
applicable, and all other material terms of the Unvested Company Option will
otherwise be unchanged; provided, however, that the Acquiror Option shall not be
exercisable for shares of Acquiror Common Stock which are not then vested
according to such vesting schedule. Promptly after the Effective Time, Acquiror
will notify in writing each holder of an Unvested Company Option of the
assumption of such Unvested Company Option by Acquiror, and the number of shares
of Acquiror Common Stock that are then subject to such option and the exercise
price of such option, as determined pursuant to this Section 2.1(b)(iv), and
each Company Optionholder shall, as a condition to receipt of an Acquiror Option
pursuant to this Section 2.1(b)(iv), countersign such notice and agree to the
treatment of such Person's Company Options in the manner set forth in Sections
2.1(b)(ii) and (iv). Acquiror will cause the Acquiror Common Stock issuable upon
exercise of the assumed Unvested Company Options to be registered on Form S-8 of
the SEC within 10 business days after the Effective Time (assuming timely
receipt of the Spreadsheet, all option documentation relating to the Unvested
Company Options outstanding immediately prior to the Effective Time and all
signatures, opinions and consents required for such registration statement),
will exercise commercially reasonable efforts to maintain the effectiveness of
such registration statement for so long as such assumed Unvested Company Options
remain outstanding and will reserve a sufficient number of shares of Acquiror
Common Stock for issuance upon exercise thereof. The Form S-8 shall not cover
the shares of Acquiror Common Stock subject to any Unvested Company Options
which are held by persons who do not become employees of the Acquiror at the
Effective Time or do not otherwise have a service relationship with the Acquiror
at the Effective Time.
(v) Adjustment.
(1) Following the Effective Time, Acquiror shall
calculate (a) the aggregate amount of cash payable to Company Securityholders
pursuant to Section 2.1(b)(i)-(iii) (prior to any deduction of any tax
withholding and withholding of Escrow Cash) and (b) for each Acquiror Option,
the number of shares of Acquiror Common Stock subject to each Acquiror Option
multiplied by the difference between the Average Acquiror Stock Price and the
exercise price of such Acquiror Option (the aggregate of the amounts specified
in the foregoing clauses (a)-(b) being "CLOSING MERGER CONSIDERATION VALUE").
(2) If, on or prior to the six month anniversary of
the Effective Time, any Continuing Employee who has had Unvested Cash withheld
on his or her behalf pursuant to Section 2.1(b)(i) or an Acquiror Option issued
pursuant to Section 2.1(b)(iv) shall have his or her employment or service
relationship with Acquiror or the Surviving Corporation
11
terminated for any reason (including a voluntary departure) and Acquiror or the
Surviving Corporation exercises its right of repurchase with respect to such
Unvested Cash or such Continuing Employee otherwise forfeits such Unvested Cash
or any unvested portion of such Acquiror Option, then Acquiror shall calculate
(a) the dollar amount of such repurchased or forfeited Unvested Cash (calculated
net of payment of any repurchase price for such Unvested Cash) and (b) for each
Acquiror Option held by such Continuing Employee, the number of shares of
Acquiror Common Stock subject to the unvested portion of such Acquiror Option
forfeited by such person upon termination multiplied by the difference between
the Average Acquiror Stock Price and the exercise price of such Acquiror Option
(the aggregate of the amounts specified in the foregoing clauses (a)-(b) for all
such Continuing Employees being the "FORFEITED MERGER CONSIDERATION VALUE"). The
amount obtained by subtracting the Forfeited Merger Consideration Value from the
Closing Merger Consideration Value shall be the "ADJUSTED MERGER CONSIDERATION
VALUE". If the Adjusted Merger Consideration Value is less than the Total Merger
Consideration, then the difference between the two (expressed as a positive
number) shall be the "MERGER CONSIDERATION UNDERPAYMENT". If the Adjusted Merger
Consideration Value is greater than the Total Merger Consideration, then the
difference between the two (expressed as a positive number) shall be the "MERGER
CONSIDERATION OVERPAYMENT".
(3) As soon as reasonably practicable (but in no event
more than five business days) following the six-month anniversary of the
Effective Time, the Acquiror shall prepare and deliver to the Representative a
statement (the "ADJUSTMENT AMOUNT STATEMENT") setting forth the Acquiror's
calculation of the Closing Merger Consideration Value, Forfeited Merger
Consideration Value, Adjusted Merger Consideration Value, Merger Consideration
Underpayment (if any) and Merger Consideration Overpayment (if any). The
Adjustment Amount Statement shall be final and binding on the Representative,
the Effective Time Holders and the Acquiror unless the Representative shall
notify the Acquiror in writing (a "NOTICE OF DISPUTE"), within ten business days
of its receipt of the Adjustment Amount Statement, that the Representative
wishes to dispute one or more items set forth in the Adjustment Amount Statement
(a "DISPUTED ITEM"), which Notice of Dispute shall set out in reasonable detail
each Disputed Item, the basis for such dispute, the amount in dispute and the
Representative's calculation of the Closing Merger Consideration Value,
Forfeited Merger Consideration Value, Adjusted Merger Consideration Value,
Merger Consideration Underpayment (if any) and Merger Consideration Overpayment
(if any). In the event that the Representative shall fail to notify the Acquiror
of any dispute with respect to any items set forth in the Adjustment Amount
Statement within such ten business day period, (i) the Representative shall be
deemed to have accepted and approved the Adjustment Amount Statement (or any
items with respect to which the Representative has not so notified the Acquiror
of a dispute), and (ii) the Adjustment Amount Statement shall be deemed to be
final and binding on the Representative, the Effective Time Holders and the
Acquiror with respect to any item set forth in the Adjustment Amount Statement
that is not a Disputed Item. The Acquiror shall permit the Representative and
its accountants and other advisors reasonable access during normal business
hours, and on reasonable notice, to any relevant accounts, documents and records
within its possession which are reasonably necessary for the purposes of
reviewing the Adjustment Amount Statement, and will permit them to make copies
of such accounts, documents and records at their own cost and expense. If the
Representative shall notify the Acquiror of one or more Disputed Items in
accordance with this Section 2.1(b)(v)(3), the Representative and the Acquiror
shall consult with each other and attempt in good faith to resolve any and all
Disputed
12
Items. If the Representative and the Acquiror are unable to resolve any Disputed
Items within 30 calendar days of the delivery of a Notice of Dispute, such
Dispute Items shall be referred, on the application of either the Representative
or the Acquiror, for determination by a nationally recognized, independent
auditing firm that is mutually acceptable to the Representative and the Acquiror
(the "ACCOUNTING FIRM"). The following terms shall apply to any such
determination:
a. each of the Representative and the Acquiror
shall promptly prepare a written statement on the Disputed Items which (together
with the relevant documents) will be submitted to Accounting Firm for
determination;
b. in giving its determination, the Accounting
Firm shall state what adjustments (if any) are necessary to the Adjustment
Amount Statement in respect of the Disputed Items in order to comply with the
requirements of this Agreement;
c. the Accounting Firm shall act as an expert
(and not as an arbitrator) in making any determination with respect to any
Disputed Items, which shall be final and binding on the Representative, the
Effective Time Holders and the Acquiror; and
d. the fees and expenses of the Accounting Firm
shall be paid (i) by the Effective Time Holders, if the Adjusted Merger
Consideration Value calculated based upon any determinations of the Accounting
Firm and the Representative's calculation of the Adjusted Merger Consideration
Value is greater than the difference between the Adjusted Merger Consideration
Value calculated based upon any determinations of the Accounting Firm and the
Acquiror's calculation of the Adjusted Merger Consideration Value, (ii) by the
Acquiror, if the difference between the Adjusted Merger Consideration Value
calculated based upon any determinations of the Accounting Firm and the
Acquiror's calculation of the Adjusted Merger Consideration Value is greater
than the difference between the Adjusted Merger Consideration Value calculated
based upon any determinations of the Accounting Firm and the Representative's
calculation of the Adjusted Merger Consideration Value, and (iii) by the
Representative and the Acquiror equally if the difference between the Adjusted
Merger Consideration Value calculated based upon any determinations of the
Accounting Firm and Representative's calculation of the Adjusted Merger
Consideration Value is equal to the difference between the Adjusted Merger
Consideration Value calculated based upon any determinations of the Accounting
Firm and Acquiror's calculation of the Adjusted Merger Consideration Value.
If the Representative and the Acquiror reach (or pursuant to this Section
2.1(b)(v)(3) hereof are deemed to reach) agreement on the Adjustment Amount
Statement, or the Adjustment Amount Statement is finally determined at any stage
in the procedures set out in this Section 2.1(b)(v)(3), the Adjustment Amount
Statement as so agreed or determined (including the values for the Closing
Merger Consideration Value, Forfeited Merger Consideration Value, Adjusted
Merger Consideration Value, Merger Consideration Underpayment (if any) and
Merger Consideration Overpayment (if any) set forth therein) shall be final and
binding on the Representative, Effective Time Holders and the Acquiror and shall
be deemed to be the "FINAL ADJUSTMENT AMOUNT STATEMENT," for all purposes of and
under this Agreement.
13
(4) If the Final Adjustment Amount Statement indicates
a Merger Consideration Underpayment, then within five business days after
determination of the Final Adjustment Amount Statement, Acquiror shall make
available to the Exchange Agent (as defined in Section 7.2(b)) cash in an amount
equal to the Merger Consideration Underpayment and direct the Exchange Agent to
pay to each Tendering Company Holder (as defined in Section 7.2(b)) an amount of
cash (rounded to the nearest cent), without interest, equal to its Pro Rata
Share (as defined in Section 2.3) of such Merger Consideration Underpayment. The
amount of cash each Tendering Company Holder is entitled to receive shall be (a)
subject to deduction and withholding for the amount of withholding for taxes
required to be deducted and withheld as a result of the transactions
contemplated by this Section 2.1(b)(v), (b) subject to the provisions of Section
2.1(e) (regarding the continuation of vesting and repurchase rights), and (c)
treated as payment of an additional consideration in the Merger for the Company
Capital Stock, Company Options (other than Unvested Company Options) and Company
Warrants tendered by such holder.
(5) If the Final Adjustment Amount Statement indicates
a Merger Consideration Overpayment, then (a) the amount of the Merger
Consideration Overpayment shall constitute "Damages" for purposes of Section 11
without regard to the Deductible (as defined in Section 11.3) and (b) Acquiror
shall be entitled to recover the amount of the Merger Consideration Overpayment
from the Escrow Cash and neither the Representative nor any Effective Time
Holder shall have any power or authority to object under any provision of
Article 11 to the amount of any such claim by or on behalf of Acquiror against
the Escrow Cash.
(c) Dissenting Shares. As more fully set forth in Section 7.3,
holders of shares of Company Capital Stock who have complied with all
requirements for perfecting dissenters' rights, as set forth in California Law,
shall be entitled to their rights under California Law with respect to such
shares.
(d) Cancellation of Company-Owned Stock. Notwithstanding Section
2.1(b), each share of Company Capital Stock held by the Company or any of the
Company Subsidiaries immediately prior to the Effective Time shall be cancelled
and extinguished without any conversion thereof.
(e) Continuation of Vesting and Repurchase Rights. If there are
any Unvested Company Shares issued and outstanding immediately prior to the
Effective Time, then the right to recover or extinguish such Unvested Company
Shares under the terms of any Contract with the Company shall be assigned to
Acquiror and the cash payable upon conversion of such Unvested Company Shares in
the Merger (the "UNVESTED CASH") shall be, in place of such Unvested Company
Shares, equally subject to such right assigned to Acquiror and shall be withheld
by Acquiror and paid without interest to the holders of such Unvested Company
Shares if and to the extent such assigned right expires unexercised by Acquiror
pursuant to the terms of the applicable Contract with the Company; provided,
however, that the Surviving Corporation and Acquiror shall be entitled to deduct
and withhold from such payments the amount of withholding imposed for taxes;
provided further, that a portion of such newly vested cash so distributed may be
treated as imputed interest and will be so treated to the extent required under
the Code and the regulations promulgated thereunder. Notwithstanding the
foregoing, if any
14
such holder paid for Unvested Company Shares with promissory notes, Unvested
Cash which vests shall first be applied towards repayment of accrued interest
and then outstanding principal under such promissory notes before being
distributed to such holder. The Company shall take all actions that may be
necessary to ensure that, from and after the Effective Time, Acquiror (or its
assignee) is entitled to exercise any such right assigned hereunder, such that
any Unvested Cash shall be returned to the Acquiror without payment to such
holder (other than payment of the original purchase price of any Unvested
Company Shares converted into Unvested Cash upon exercise of the applicable
right by Acquiror according to the terms of the Contract with the Company
governing such Unvested Company Shares as of immediately prior to the Effective
Time). No Unvested Cash, or right thereto, may be pledged, encumbered, sold,
assigned or transferred (including any transfer by operation of law), by any
Person, other than Acquiror, or be taken or reached by any legal or equitable
process in satisfaction of any debt or other liability of such Person, prior to
the distribution to such Person of such Unvested Cash in accordance with this
Agreement.
2.2 Company Options, Company Warrants and Other Rights Not Assumed.
Acquiror is not assuming, and shall not assume, any obligations or Liabilities
under (a) the Company Option Plan, (b) any outstanding Company Options (other
than Unvested Company Options), (c) any outstanding Company Warrants, or (d) any
other direct or indirect rights to acquire shares of Company Capital Stock. On
the Closing Date, the Company Plan, the Company Options (other than Unvested
Company Options), the Company Warrants and any other direct or indirect rights
to acquire shares of Company Capital Stock shall be terminated without further
obligation or Liability of the Company, Acquiror or the Surviving Corporation
(other than to make the cash payments contemplated by Section 2.1(b)). Acquiror
shall not substitute any equivalent option, warrant or right for any such
terminated Company Option, Company Warrant or right.
2.3 Escrow. At the Effective Time, Acquiror shall withhold the Escrow
Cash from the cash payable pursuant to Section 2.1(b) to the Company
Shareholders and Company Optionholders as of immediately prior to the Effective
Time (other than holders of solely shares of Company Capital Stock which
constitute and remain Dissenting Shares and holders of solely Unvested Company
Options) ("EFFECTIVE TIME HOLDERS"), on a pro rata basis (based upon the amount
of cash each such holder is entitled to receive pursuant to Section 2.1(b) with
respect to its Company Capital Stock (other than Dissenting Shares) and Company
Options relative to the amount of cash all such holders are entitled to receive
pursuant to Section 2.1(b) with respect to their Company Capital Stock (other
than Dissenting Shares) and Company Options) ("PRO RATA SHARE"). Prior to the
Closing, Acquiror, the Representative and Wells Fargo Bank, N.A. (the "ESCROW
AGENT") shall enter into an escrow agreement substantially in the form attached
hereto as Exhibit D (the "ESCROW AGREEMENT"). Within three business days after
the Spreadsheet Submission Date, Acquiror shall cause the Escrow Cash to be
deposited with the Escrow Agent. If a Company Securityholder holds Unvested
Company Shares, then the cash to be paid upon conversion hereunder of shares of
Company Capital Stock, Company Options or Company Warrants held by such Company
Securityholder which are not Unvested Company Shares (the "VESTED CASH") shall
be withheld and placed in escrow first and, thereafter, the Unvested Cash shall
be withheld and placed in escrow (with the understanding that any Unvested Cash
so placed in escrow shall vest prior to any such Unvested Cash not placed in
escrow but withheld by Acquiror pursuant to Section 2.1(e)) to the extent
necessary to satisfy such Effective Time Holders' escrow obligations as set
forth in the first sentence of this Section 2.4. The payment of
15
any Escrow Cash in satisfaction of any indemnification obligations under Article
11 shall be made, with respect to each Effective Time Holder, first with Vested
Cash and then, if such cash is insufficient to satisfy such indemnification
obligation and only to the extent of such insufficiency, shall such payment be
made with Unvested Cash. The Escrow Agent shall hold the Escrow Cash as the sole
and exclusive security for the Effective Time Holders' indemnification
obligations for Damages under Article 11.
2.4 Effects of the Merger. At and upon the Effective Time:
(a) the separate existence of Merger Sub shall cease and Merger
Sub shall be merged with and into the Company, and the Company shall be the
surviving corporation of the Merger pursuant to the terms of this Agreement and
the Agreement of Merger;
(b) the Articles of Incorporation of the Surviving Corporation
shall be amended in its entirety to read as set forth in the Agreement of
Merger;
(c) the Bylaws of the Surviving Corporation shall be amended in
their entirety to read as the Bylaws of Merger Sub;
(d) the officers of Merger Sub immediately prior to the Effective
Time shall be appointed as the officers of the Surviving Corporation immediately
after the Effective Time until their respective successors are duly appointed;
(e) the members of the Board of Directors of Merger Sub
immediately prior to the Effective Time shall be appointed as the members of the
Board of Directors of the Surviving Corporation immediately after the Effective
Time until their respective successors are duly elected or appointed and
qualified; and
(f) the Merger shall, from and after the Effective Time, have all
of the effects provided by California Law.
2.5 Tax Consequences and Withholding.
(a) The parties intend that the Merger shall be treated as a
taxable purchase of securities of the Company pursuant to the Code. However,
Acquiror makes no representations or warranties to the Company or to any Company
Shareholder, Company Optionholder or Company Warrantholder regarding (a) the tax
treatment of the Merger or (b) any of the tax consequences to the Company or any
Company Shareholder, Company Optionholder or Company Warrantholder of this
Agreement, the Merger or any of the other transactions or agreements
contemplated hereby. The Company and, by virtue of the Company Shareholders
approving the Merger, this Agreement and the other transactions or agreements
contemplated hereby, the Company Shareholders acknowledge that the Company and
the Company Shareholders are relying solely on their own tax advisors in
connection with the Merger, this Agreement and the other transactions or
agreements contemplated hereby.
(b) Acquiror or Acquiror's agent shall be entitled to deduct and
withhold from the Total Merger Consideration or other payment otherwise payable
pursuant to this Agreement to any Company Shareholder, Company Optionholder or
Company Warrantholder, the amounts
16
required to be deducted and withheld under the Code, or any provision of state,
local or foreign tax law, with respect to the making of such payment. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the Company Shareholder,
Company Optionholder or Company Warrantholder in respect of whom such deduction
and withholding was made.
2.6 Further Assurances. If, at any time before or after the Effective
Time, Acquiror reasonably believes or is advised that any further instruments,
deeds, assignments or assurances are reasonably necessary or desirable to
consummate the Merger or to carry out the purposes and intent of this Agreement
at or after the Effective Time, then the Company, Acquiror, the Surviving
Corporation and their respective officers and directors shall execute and
deliver all such proper deeds, assignments, instruments and assurances and do
all other things reasonably necessary or desirable to consummate the Merger and
to carry out the purposes and intent of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to the exceptions set forth in a numbered or lettered section of
the disclosure letter of the Company addressed to Acquiror, dated as of the
Agreement Date and delivered to Acquiror concurrently with the parties'
execution of this Agreement (the "COMPANY DISCLOSURE LETTER") referencing a
representation or warranty herein (each of which exceptions, in order to be
effective, shall clearly indicate the section and, if applicable, the subsection
of this Article 3 to which it relates (unless and to the extent the relevance to
other representations and warranties is reasonably apparent from the face of the
disclosed exception), and each of which exceptions shall also be deemed to be
representations and warranties made by the Company under this Article 3), the
Company represents and warrants to Acquiror as follows:
3.1 Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company has the corporate power and authority to own, operate
and lease its properties and to carry on the Company Business. The Company is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where the failure to so qualify would not reasonably be
expected to have a Material Adverse Effect on the Company; without limiting the
foregoing, as of the Closing Date, the Company will be so qualified or licensed
and in good standing in each jurisdiction listed on Schedule 3.1 of the Company
Disclosure Letter. The Company has delivered to Acquiror's legal counsel true
and complete copies of the currently effective Articles of Incorporation and
Bylaws of the Company, each as amended to date. The Company is not in violation
of its Articles of Incorporation or Bylaws, each as amended to date.
3.2 Company Subsidiaries. Schedule 3.2 of the Company Disclosure Letter
sets forth a true, correct and complete list of each Company Subsidiary. Each
Company Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each Company
Subsidiary has the corporate power and authority to
17
own, operate and lease its properties and to carry on its business. Each Company
Subsidiary is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to so qualify
would not reasonably be expected to have a Material Adverse Effect on such
Company Subsidiary; without limiting the foregoing, as of the Closing Date, each
respective Company Subsidiary will be so qualified or licensed and in good
standing in each jurisdiction listed on Schedule 3.2 of the Company Disclosure
Letter. The Company has delivered to Acquiror's legal counsel true and complete
copies of the currently effective Articles of Incorporation and Bylaws (or other
comparable charter documents) of each Company Subsidiary, each as amended to
date. Each Company Subsidiary is not in violation of its Articles of
Incorporation or Bylaws (or other comparable charter documents), each as amended
to date. The Company is the owner of all of the issued and outstanding shares of
capital stock of each Company Subsidiary and all such shares are duly
authorized, validly issued, fully paid and nonassessable. All of the issued and
outstanding shares of capital stock of each Company Subsidiary are owned by the
Company free and clear of all Encumbrances (other than Permitted Encumbrances)
and are not subject to any preemptive right or right of first refusal created by
statute, the Articles of Incorporation and Bylaws (or other comparable charter
documents), as applicable, of such Company Subsidiary or any agreement to which
such Company Subsidiary is a party or by which it is bound. There are no stock
appreciation rights, options, warrants, calls, rights, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
or otherwise acquire any shares of capital stock of a Company Subsidiary or any
securities or debt convertible into or exchangeable for capital stock of a
Company Subsidiary or obligating the Company or any Company Subsidiary to grant,
extend or enter into any such option, warrant, call, right, commitment,
conversion privilege or preemptive or other right or agreement. Other than the
Company Subsidiaries set forth in Schedule 3.2, the Company does not have any
Company Subsidiary or any equity or ownership interest (or any interest
convertible or exchangeable or exercisable for, any equity or ownership
interest), whether direct or indirect, in any Person. The Company is not
obligated to make nor is it bound by any agreement or obligation to make any
investment in or capital contribution in or on behalf of any other Person.
3.3 Power, Authorization and Validity.
(a) Power and Authority. Subject to approval of the Merger and
this Agreement by (i) holders of a majority of the outstanding shares of Company
Common Stock (voting as a separate voting class), (ii) holders of a majority of
the outstanding shares of Company Preferred Stock (voting together as a single
voting class on an as-converted to Company Common Stock basis), (iii) holders of
a majority of the outstanding shares of Company Series A Stock (voting as a
separate voting class), (iv) holders of a majority of the outstanding shares of
Company Series B Stock (voting as a separate voting class), and (v) holders of a
majority of the outstanding shares of Company Series C Stock and Company Series
D Stock (voting together as a single voting class on an as-converted to Company
Common Stock basis) (the "COMPANY SHAREHOLDER APPROVAL"), the Company has all
requisite corporate power and authority to enter into, execute, deliver and
perform its obligations under this Agreement and each of the Company Ancillary
Agreements and to consummate the Merger. The Merger and the execution, delivery
and performance by the Company of this Agreement, each of the Company Ancillary
Agreements and all other agreements, transactions and actions contemplated
hereby or
18
thereby, have been duly and validly approved and authorized by the Company's
Board of Directors.
(b) No Consents. No consent, approval, order, authorization,
release or waiver of, or registration, declaration or filing with, any
Governmental Authority, or any other Person (governmental or otherwise), is
necessary or required to be made or obtained by the Company to enable the
Company to lawfully execute and deliver, enter into, and perform its obligations
under this Agreement and each of the Company Ancillary Agreements or to
consummate the Merger (including the consent of any Person required to be
obtained in order to keep any Company Material Contract (as defined in Section
3.11) between such Person and the Company in effect following the Merger or to
provide that the Company is not in breach or violation of any such Contract
following the Merger), except for (i) the filing of the Agreement of Merger with
the California Secretary of State, (ii) such filings and notifications as may be
required to be made by the Company in connection with the Merger under the HSR
Act and Applicable Laws of Germany and the expiration or early termination of
applicable waiting periods under the HSR Act and Applicable Laws of Germany, and
(iii) the Company Shareholder Approval.
(c) Enforceability. This Agreement has been duly executed and
delivered by the Company. This Agreement and each of the Company Ancillary
Agreements are, or when executed by the Company shall be, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to the effect of (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to rights of creditors generally and (ii) rules of law and
equity governing specific performance, injunctive relief and other equitable
remedies.
3.4 Capitalization of the Company.
(a) Authorized and Outstanding Capital Stock of the Company. The
authorized capital stock of the Company consists solely of 51,000,000 shares of
Company Common Stock, 2,889,962 shares of Company Series A Stock, 6,026,158
shares of Company Series B Stock, 5,048,270 shares of Company Series C Stock and
7,171,315 shares of Company Series D Stock. A total of 6,282,283 shares of
Company Common Stock, 2,889,962 shares of Company Series A Stock, 5,952,824
shares of Company Series B Stock, 5,020,364 shares of Company Series C Stock and
7,076,225 shares of Company Series D Stock are issued and outstanding as of the
Agreement Date. Each share of Company Preferred Stock is convertible into one
share of Company Common Stock. The numbers and kind of issued and outstanding
shares of Company Capital Stock held by each Company Shareholder as of the
Agreement Date are set forth on Schedule 3.4(a)-1 of the Company Disclosure
Letter, and no shares of Company Capital Stock are issued or outstanding as of
the Agreement Date that are not set forth on Schedule 3.4(a)-1 of the Company
Disclosure Letter and no such shares shall be issued or outstanding as of the
Closing Date that are not set forth on Schedule 3.4(a)-1 of the Company
Disclosure Letter except for shares of Company Capital Stock issued pursuant to
the exercise of outstanding Company Options listed on Schedule 3.4(b)-1 of the
Company Disclosure Letter or Company Warrants listed on Schedule 3.4(b)-2 of the
Company Disclosure Letter or pursuant to the conversion of outstanding shares of
Company Preferred Stock. Schedule 3.4(a)-2 of the Company Disclosure Letter sets
forth as of the Agreement Date all holders of Unvested
19
Company Shares, and for each such Company Shareholder, (i) the number of
Unvested Company Shares held, (ii) the terms of the Company's rights to
repurchase such Unvested Company Shares, (iii) the schedule on which such rights
lapse and (iv) whether such repurchase rights lapse in full or in part as a
result of any of the transactions contemplated by this Agreement or any Company
Ancillary Agreement or upon any other event or condition. All issued and
outstanding shares of Company Stock have been duly authorized and validly
issued, are fully paid and nonassessable, were not issued in violation of and
are not subject to any right of rescission, right of first refusal or preemptive
right, and have been offered, issued, sold and delivered by the Company in
compliance with all requirements of Applicable Law and all requirements set
forth in applicable Contracts. There is no Liability for dividends accrued and
unpaid by the Company.
(b) Options, Warrants and Rights. The Company has reserved an
aggregate of 9,909,974 shares of Company Common Stock for issuance pursuant to
the Company Option Plan (including shares subject to outstanding Company
Options). A total of 7,302,407 shares of Company Common Stock are subject to
outstanding Company Options as of the Agreement Date and as of the Closing Date,
except for Company Options that are exercised in accordance with their terms.
Schedule 3.4(b)-1 of the Company Disclosure Letter sets forth as of the
Agreement Date, for each Company Option, (i) the name of the holder of such
Company Option, (ii) the exercise price per share of such Company Option, (iii)
the number of shares covered by such Company Option, (iv) the vesting schedule
for such Company Option, (v) the extent such Company Option is vested as of the
Agreement Date, (vi) whether such Company Option is an incentive stock option or
non-statutory stock option under the Code, (vii) whether the exercisability of
such Company Option shall be accelerated in any manner by any of the
transactions contemplated by this Agreement or upon any other event or condition
and the extent of acceleration, if any, and (viii) whether such Company Option
was granted under the Company Option Plan. The terms of the Company Option Plan
permit the conversion of Company Options into cash as provided in this
Agreement, without the consent or approval of the holders of such Company
Options, the Company Shareholders or otherwise and without acceleration of the
exercise schedule or vesting provisions in effect for such Company Options.
Schedule 3.4(b)-2 of the Company Disclosure Letter sets forth as of the
Agreement Date, for each Company Warrant, (i) the name of the holder of such
Company Warrant, (ii) the exercise price per share of such Company Warrant,
(iii) the number and kind of shares covered by such Company Warrant, (iv) the
vesting schedule for such Company Warrant, (v) the extent such Company Warrant
is vested as of the Agreement Date, (vi) whether such Company Warrant was issued
in connection with the performance of services, and (vii) whether the
exercisability of such Company Warrant shall be accelerated in any manner by any
of the transactions contemplated by this Agreement or upon any other event or
condition and the extent of acceleration, if any. True and correct copies of the
Company Option Plan, the standard agreement under the Company Option Plan, each
agreement for each Company Option that does not conform to the standard
agreement under the Company Option Plan and each Company Warrant have been made
available by the Company to Acquiror's legal counsel. All Company Options and
Company Warrants have been issued and granted in compliance with Applicable Law
and all requirements set forth in applicable Contracts. On the Closing Date, the
Company Plan, the Company Options, the Company Warrants and any other direct or
indirect rights to acquire shares of Company Capital Stock shall be terminated
without further obligation or Liability of the Company, Acquiror or the
Surviving Corporation (other than the obligations of Acquiror to make the
payments contemplated by
20
Section 2.1(b)). A true, correct and complete copy of the Company Option Plan is
included as Schedule 3.4(b)-3 of the Company Disclosure Letter and the terms of
such plan govern the outstanding Company Options.
(c) No Other Rights. Except for Company Options and Company
Warrants and the conversion rights of the Company Preferred Stock, there are no
stock appreciation rights, options, warrants, calls, rights, commitments,
conversion privileges or preemptive or other rights or Contracts outstanding to
purchase or otherwise acquire any shares of Company Capital Stock or any
securities or debt convertible into or exchangeable for Company Capital Stock or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right, commitment, conversion privilege or preemptive or other right or
Contract. The Company's Articles of Incorporation and Bylaws do not provide, and
the Company is not a party to or otherwise bound by any Contract providing,
registration rights, rights of first refusal, preemptive rights, co-sale rights
or other similar rights or other restrictions applicable to any outstanding
securities of the Company. The Company is not a party to any Contract regarding
the voting of any outstanding securities of the Company.
3.5 No Conflict. Neither the execution and delivery of this Agreement or
any of the Company Ancillary Agreements by the Company, nor the consummation of
the Merger or any other transaction contemplated hereby or thereby, conflicts
with, or (with or without notice or lapse of time, or both) results in a
termination, breach, impairment or violation of, or constitutes a default under:
(a) any provision of the Articles of Incorporation or Bylaws (or other
comparable charter documents) of the Company or any Company Subsidiary, each as
currently in effect; (b) any Applicable Law applicable to the Company, any
Company Subsidiary or any of their respective assets or properties; or (c) any
Company Material Contract (as defined in Section 3.11). Neither the Company's
entering into this Agreement nor the consummation of the Merger or the
transactions contemplated thereby shall give rise to, or trigger the application
of, any material rights of any third party or any obligations of the Company or
any Company Subsidiary that would come into effect upon the consummation of the
Merger.
3.6 Litigation. As of the date hereof, there is no action, suit,
arbitration, mediation, proceeding, claim or investigation pending against the
Company or any Company Subsidiary (or against any officer, director, employee or
agent of the Company or any Company Subsidiary in their capacity as such or
relating to their employment, services or relationship with the Company or such
Company Subsidiary) before any Governmental Authority, arbitrator or mediator,
nor, to the knowledge of the Company, has any such action, suit, arbitration,
mediation, proceeding, claim or investigation before any Governmental Authority
been threatened. As of the date hereof, there is no judgment, decree,
injunction, rule or order of any Governmental Authority, arbitrator or mediator
outstanding against the Company or any Company Subsidiary. Neither the Company
nor any Company Subsidiary has any action, suit, arbitration, mediation,
proceeding, claim or investigation pending against any Governmental Authority or
other Person. To the knowledge of the Company, there is no current basis for any
indemnity claim under Section 6.5(a).
3.7 Taxes. The Company and each Company Subsidiary (and any
consolidated, combined, unitary or aggregate group for tax purposes of which the
Company or any Subsidiary is or has been a member), (a) has properly completed
and timely filed all foreign, federal, state,
21
local and municipal tax and information returns (the "RETURNS") required to be
filed by it, (b) has timely paid all taxes required to be paid by it for which
payment was due, (c) has established an adequate accrual or reserve in
accordance with GAAP for the payment of all unpaid taxes incurred in respect of
the periods or portions thereof prior to the Balance Sheet Date (which accrual
or reserve as of the Balance Sheet Date is fully reflected on the Company
Balance Sheet), (d) has made all necessary estimated tax payments, and (e) has
no Liability (fixed or contingent) for taxes in excess of the amount so paid or
accruals or reserves so established except for taxes subsequent to the Balance
Sheet Date incurred in the ordinary course of business. All such Returns are
true, correct and complete, and the Company has provided or made available to
Acquiror or its counsel true and correct copies of such Returns. Neither the
Company nor any Company Subsidiary is delinquent in the payment of any tax or in
the filing of any Returns, and no deficiencies for any tax have been threatened,
claimed, proposed or assessed against the Company or any Company Subsidiary.
Neither the Company nor any Company Subsidiary has received any notification
from the Internal Revenue Service or any other taxing authority regarding any
material issues that (a) are currently pending before the Internal Revenue
Service or any other taxing agency or authority (including any sales or use
taxing authority) regarding the Company, or (b) have been raised by the Internal
Revenue Service or other taxing agency or authority and not yet finally
resolved. No Return of the Company or any Subsidiary is under audit by the
Internal Revenue Service or any other taxing agency or authority and any such
past audits (if any) have been completed and fully resolved to the satisfaction
of the applicable taxing agency or authority conducting such audit and all taxes
determined by such audit to be due from the Company or any Subsidiary have been
paid in full to the applicable taxing agencies or authorities. No tax liens are
currently in effect against any of the assets of the Company or any Subsidiary
other than liens that arise by operation of law for taxes not yet due and
payable. There is not in effect any waiver by the Company or any Company
Subsidiary of any statute of limitations with respect to any taxes. Neither the
Company nor any Company Subsidiary has consented to extend to a date later than
the Agreement Date the period in which any tax may be assessed or collected by
any taxing agency or authority. The Company and each Company Subsidiary have
complied (and until the Closing Date will comply) with all Applicable Law
relating to the payment and withholding of taxes (including withholding of taxes
pursuant to Sections 1441, 1442, 1445 and 1446 of the Code or similar provisions
under any foreign law), have, within the time and in the manner prescribed by
law, withheld from employee wages and paid over to the proper taxing agencies
and authorities all amounts required to be so withheld and paid over under all
Applicable Law (including Federal Insurance Contribution Act, Medicare and
relevant state income and employment tax withholding laws), and have timely
filed all withholding tax Returns. Neither the Company nor any Company
Subsidiary is a party to or bound by any tax sharing, tax indemnity, or tax
allocation agreement nor does the Company or any Company Subsidiary have any
liability or potential liability to another party under any such agreement.
Neither the Company nor any Company Subsidiary has filed any disclosures under
Section 6662 of the Code or comparable provisions of state, local or foreign law
to prevent the imposition of penalties with respect to any tax reporting
position taken on any Return. Neither the Company nor any Company Subsidiary has
consummated, has participated in, or is currently participating in any
transaction which was or is a "tax shelter" transaction as defined in Sections
6662, 6011, 6012 or 6111 of the Code or the Treasury Regulations promulgated
thereunder. Neither the Company nor any Company Subsidiary has ever been a
member of a consolidated, combined, unitary or aggregate group of which the
Company was not the ultimate parent
22
corporation. Neither the Company nor any Company Subsidiary has any liability
for the taxes of any Person (other than the Company or any Company Subsidiary)
under Section 1.1502-6 of the Treasury Regulations (or any similar provision of
state, local or foreign law) as a transferee or successor, by contract or
otherwise. Neither the Company, any Company Subsidiary, nor any "dual resident
corporation" (within the meaning of Section 1503(d) of the Code) in which either
the Company or any Company Subsidiary is considered to hold an interest, has
incurred a dual consolidated loss within the meaning of Section 1503 of the
Code. Neither the Company nor any Company Subsidiary has been or will be
required to include any material adjustment in taxable income for any tax period
(or portion thereof) ending after the Closing Date pursuant to Section 481 of
the Code or any comparable provision under state or foreign tax laws as a result
of transactions, events or accounting methods employed prior to the Merger.
Neither the Company nor any Company Subsidiary is a "personal holding company"
within the meaning of the Code. Neither the Company nor any Company Subsidiary
has ever been a "United States real property holding corporation" within the
meaning of Section 897 of the Code, and the Company and each Company Subsidiary
has filed with the Internal Revenue Service all statements, if any, which are
required under Section 1.897-2(h) of the Treasury Regulations. There is
currently no limitation on the utilization of net operating losses, capital
losses, built-in losses, tax credits or similar items of the Company under
Sections 269, 382, 383, 384 or 1502 of the Code (and any comparable provisions
of foreign, state, local or municipal law). Neither the Company nor any Company
Subsidiary has constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code (a) in the two years prior to the Agreement Date or (b)
in a distribution that could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
3.8 Company Financial Statements. Schedule 3.8 of the Company Disclosure
Letter includes the Company Financial Statements. The Company Financial
Statements: (a) are derived from and are in accordance with the books and
records of the Company; (b) fairly present the consolidated financial condition
of the Company and the Company Subsidiaries at the dates therein indicated and
the consolidated results of operations and cash flows of the Company and the
Company Subsidiaries for the periods therein specified; and (c) have been
prepared in accordance with GAAP applied on a basis consistent with prior
periods. The Company and the Company Subsidiaries have no Liability, except for
those (a) shown on the Company Balance Sheet and (b) that were incurred after
the Balance Sheet Date in the ordinary course of the Company's business
consistent with its past practices. All reserves established by the Company that
are set forth in or reflected in the Company Balance Sheet have been established
in accordance with GAAP.
3.9 Title to Properties. The Company and each Company Subsidiary has
good and valid title to all of their respective assets and properties (including
those shown on the Company Balance Sheet), free and clear of all Encumbrances
(other than Permitted Encumbrances). All properties used in the operations of
the Company Business are reflected on the Company Balance Sheet to the extent
required under GAAP to be so reflected. All machinery, vehicles, equipment and
other tangible personal property owned or leased by the Company or any Company
Subsidiary or used in the Company Business are in good operating condition,
normal wear and tear excepted. All leases of real or personal property to which
the Company or any Company Subsidiary is a party are in full force and effect
and afford the Company or such
23
Company Subsidiary valid leasehold possession of the real or personal property
that is the subject of the lease without material disruption (except as provided
under such leases and Applicable Laws). Neither the Company nor any Company
Subsidiary owns any real property.
3.10 Absence of Certain Changes. From the Balance Sheet Date through the
date hereof, the Company and each Company Subsidiary has operated its business
in the ordinary course consistent with its past practices, and from the Balance
Sheet Date through the date hereof there has not been with respect to the
Company or any Company Subsidiary any:
(a) Material Adverse Change;
(b) amendment or change in its Articles of Incorporation or Bylaws
(or other comparable charter documents);
(c) incurrence, creation or assumption of (i) any Encumbrance on
any of its assets or properties (other than Permitted Encumbrances), (ii) any
Liability or any other indebtedness for borrowed money, or (iii) any Liability
as a guarantor or surety with respect to the obligations of others;
(d) acceleration or release of any vesting condition to the right
to exercise any option, warrant or other right to purchase or otherwise acquire
any shares of its capital stock, or any acceleration or release of any right to
repurchase shares of its capital stock upon the shareholder's termination of
employment or services with it or pursuant to any right of first refusal;
(e) payment or discharge of any Encumbrance on any of its assets
or properties, or payment or discharge of any of its Liabilities, in each case
that was not either shown on the Company Balance Sheet or incurred in the
ordinary course of its business consistent with its past practices after the
Balance Sheet Date in an amount not in excess of $50,000 for any single
Liability to a particular creditor;
(f) purchase, license, sale, grant, assignment or other
disposition or transfer, or any agreement or other arrangement for the purchase,
license, sale, assignment or other disposition or transfer, of any of its
material assets (including Company IP Rights (as defined in Section 3.13(a)) and
other intangible assets), properties or goodwill other than the sale or
nonexclusive license of Company Products or Services (as defined in Section
3.13(c)) to its customers in the ordinary course of its business consistent with
its past practices;
(g) material damage, destruction or loss of any material property
or material asset, whether or not covered by insurance;
(h) declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, its capital stock, or any
split, combination or recapitalization of its capital stock or any direct or
indirect redemption, purchase or other acquisition of any of its capital stock
or any change in any rights, preferences, privileges or restrictions of any of
its outstanding securities (other than repurchases of stock in accordance with
the Company Option Plan or applicable Contracts in connection with the
termination of service of employees or other service providers);
24
(i) material change or increase in the compensation payable or to
become payable to any of its officers, directors, employees or consultants, or
in any bonus, pension, severance, retention, insurance or other benefit payment
or arrangement (including, without limitation, stock awards, stock option
grants, or stock appreciation rights ) made to or with any of such officers,
directors, employees or consultants (other than increases in the base salaries
of employees who are not officers in an amount that does not exceed 10% of such
base salaries);
(j) change with respect to its management, supervisory or other
key personnel, any termination of employment of a material number of employees,
or any labor dispute or claim of unfair labor practices;
(k) Liability incurred by it to any of its officers, directors or
shareholders, except for normal and customary compensation and expense
allowances payable to officers in the ordinary course of its business consistent
with its past practices;
(l) making by it of any loan, advance or capital contribution to,
or any investment in, any of its officers, directors or shareholders or any firm
or business enterprise in which any such person had a direct or indirect
material interest at the time of such loan, advance, capital contribution or
investment;
(m) entering into, amendment of, relinquishment or termination by
it of any Company Material Contract (as defined in Section 3.11) or material
transaction (or any other right or obligation) other than in the ordinary course
of its business consistent with its past practices, or any default by it under
such Company Material Contract (or other right or obligation), or any written
indication or written assertion by the other party thereto of any material
problems with its services or performance under such Company Material Contract
(or other right or obligation) or such other party's desire to so amend,
relinquish or terminate any such Company Material Contract (or other right or
obligation);
(n) material change in the manner in which it extends discounts,
credits or warranties to customers or otherwise deals with its customers;
(o) making or entering into any Contract with respect to any
acquisition, sale or transfer of any material asset of the Company or any
Subsidiary;
(p) except as required by GAAP, any change in accounting methods
or practices (including any change in depreciation or amortization policies or
rates or revenue recognition policies) or any revaluation of any of its assets;
(q) any deferral of the payment of any accounts payable other than
in the ordinary course of business, consistent with past practices, or in an
amount in excess of $100,000, or any discount, accommodation or other concession
made other than in the ordinary course of business, consistent with past
practices, in order to accelerate or induce the collection of any receivable;
(r) entry into any Contract that would be required to be disclosed
as an off-balance sheet arrangement under GAAP; or
25
(s) announcement of, any negotiation by or any entry into any
Contract to do any of the things described in the preceding clauses (a) through
(r) (other than negotiations and agreements with Acquiror and its
representatives regarding the transactions contemplated by this Agreement).
3.11 Contracts, Agreements, Arrangements, Commitments and Undertakings.
Schedules 3.11(a)-(r) of the Company Disclosure Letter set forth a list of each
of the following Contracts to which the Company or any Subsidiary is a party or
to which the Company or any Subsidiary or any of their respective assets or
properties is bound as of the date hereof (each a "COMPANY MATERIAL CONTRACT"):
(a) any Contract (i) pursuant to which the Company and the Company
Subsidiaries recognized revenue in excess of $100,000 for the fiscal year ended
January 31, 2004, (ii) pursuant to which the Company and the Company
Subsidiaries recognized revenue in excess of $50,000 for the fiscal quarter
ended April 30, 2004, (iii) executed by the Company or any Company Subsidiary
after April 30, 2004 pursuant to which to the knowledge of the Company, the
Company and the Company Subsidiaries are reasonably likely to recognize revenue
in excess of $100,000 per annum for fiscal 2005, or (iv) which as of April 30,
2004 involved a deferred revenue balance in excess of $200,000;
(b) any Contract (other than for employment) providing for
payments (whether fixed, contingent or otherwise) by it in excess of $100,000
per annum at any time from and after the Balance Sheet Date;
(c) any Contract of the type described in subsections (a)-(b)
above (i) with any dealer, distributor, OEM (original equipment manufacturer),
VAR (value added reseller), sales representative or (ii) under which any third
party is authorized to sell, sublicense, lease, distribute, market or take
orders for any Company Products or Services (as defined in Section 3.13(c));
(d) any Contract providing for the development of any material
software, content (including textual content and visual, photographic or
graphics content), technology or intellectual property for (or for the benefit
or use of) it, or providing for the purchase by or license to (or for the
benefit or use of) it of any material software, content (including textual
content and visual, photographic or graphics content), technology or
intellectual property, which software, content, technology or intellectual
property is incorporated in any Company Product or Service (other than software,
content or technology generally available to the public at a license fee of less
than $1,000 per copy);
(e) any joint venture or partnership Contract that has involved,
or is reasonably expected to involve, a sharing of revenues, profits, cash
flows, expenses or losses with any other party or a payment of royalties to any
other party in excess of $100,000 per annum;
(f) any Contract for or relating to the employment by it of any
director, officer, employee or consultant or any other type of Contract with any
of its officers, employees or consultants, in either case that is not terminable
within 30 days by it without cost or other
26
Liability (except ratable compensation costs to be made during such 30 day
notice period), including any contract requiring it to make a payment to any
director, officer, employee or consultant on account of the Merger, any
transaction contemplated by this Agreement or any Contract that is entered into
in connection with this Agreement;
(g) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other Contract for or with respect
to the borrowing of money, a line of credit, any currency exchange, commodities
or other hedging arrangement, or a leasing transaction of a type required to be
capitalized in accordance with GAAP;
(h) any lease or other Contract under which it is lessee of or
holds or operates any material items of tangible personal property or real
property owned by any third party;
(i) any Contract (i) that restricts it from engaging in any aspect
of its business (other than performance of the terms of the Contract to the
other party thereto), (ii) that restricts it from participating or competing in
any line of business or market, (iii) of the type described in subsection (a)
above that restricts it from freely setting prices for its products, services or
technologies (including most favored customer pricing provisions), (iv) that
restricts it from engaging in any business in any market or geographic area or
that grants any exclusive rights, material rights of refusal, material rights of
first negotiation or similar material rights to any party, or (v) that restricts
it from soliciting potential employees, consultants, contractors or other
suppliers or customers;
(j) any Contract of the type described in subsections (a)-(d),
(i), (m)-(n) and (s) of this Section 3.11 governing any Company IP Right
("COMPANY IP RIGHTS AGREEMENT");
(k) any Contract relating to the sale, issuance, grant, exercise,
award, purchase, repurchase or redemption of any shares of its capital stock or
other securities or any options, warrants or other rights to purchase or
otherwise acquire any such shares of capital stock, other securities or options,
warrants or other rights therefor, except for those Contracts conforming to the
standard agreement under the Company Option Plan;
(l) any Contract with any labor union or any collective bargaining
agreement or similar Contract with its employees;
(m) any Contract of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other Person (other than pursuant to its standard customer
agreement, the form of which has been made available to counsel to Acquiror, or
a Contract entered into in the ordinary course of business consistent with past
practices);
(n) any Contract providing for indemnification or warranting by it
(other than pursuant to its standard customer agreement, the form of which the
form of which has been made available to counsel to Acquiror, or a Contract
entered into in the ordinary course of business consistent with past practices);
27
(o) any Contract (i) in which its officers, directors, employees
or shareholders or any member of their immediate families is directly or
indirectly interested (whether as a party or otherwise) or (ii) with any Person
with whom it does not deal at arm's length;
(p) any Contract pursuant to which it has acquired a business or
entity, or assets of a third party business or entity, whether by way of merger,
consolidation, purchase of stock, purchase of assets, license or otherwise since
January 31, 2001;
(q) any Contract with a Governmental Authority also required to be
included on Schedule 3.11(a) or (b) or any Governmental Permit (as defined in
Section 3.14(c));
(r) any Contract of the type described in subsections (a)-(b)
above under which the Company's entering into this Agreement or the consummation
of the Merger or the transactions contemplated thereby shall give rise to, or
trigger the application of, any rights of any third party or any obligations of
the Company or any Company Subsidiary that would come into effect upon the
consummation of the Merger; or
(s) any other Contract not otherwise required to be disclosed
pursuant to the foregoing subsections (a)-(r) that is material to it or its
business, operations, financial condition, properties or assets.
A true and complete copy of each agreement or document required by these
subsections (a)-(s) of this Section 3.11 to be listed on Schedule 3.11 of the
Company Disclosure Letter has been made available to Acquiror's legal counsel.
All Company Material Contracts are in written form.
3.12 No Default; No Restrictions.
(a) The Company or the applicable Company Subsidiary has performed
all of the material obligations required to be performed by it and is entitled
to all material benefits under each Company Material Contract. Each of the
Company Material Contracts is in full force and effect. There exists no default
or event of default or event, occurrence, condition or act, with respect to the
Company or any Company Subsidiary, or to the knowledge of the Company as of the
date hereof, with respect to any other contracting party, which, with the giving
of notice, the lapse of time or the happening of any other event or conditions,
would reasonably be expected to (i) become a default or event of default under
any Company Material Contract or (ii) give any third party (1) the right to
declare a default or exercise any remedy under any Company Material Contract,
(2) the right to accelerate the maturity or performance of any obligation of the
Company or any of the Company Subsidiaries under any Company Material Contract,
or (3) the right to cancel, terminate or modify any Company Material Contract.
As of the date hereof, Company has not received any written notice or other
communication regarding any actual or possible violation or breach of or default
under, or intention to cancel or modify, any Company Material Contract.
(b) As of the date hereof, neither the Company nor any Company
Subsidiary is a party to, and no asset or property of the Company or any
Subsidiary is bound by, any judgment, injunction, order, decree, Contract
(noncompete or otherwise) that restricts or prohibits, or purports to restrict
or prohibit, the Company or any Company Subsidiary or,
28
following the Effective Time, the Surviving Corporation or Acquiror, from freely
engaging in the Company Business or from competing anywhere in the world
(including any judgments, injunctions, orders, decrees or Contracts restricting
the geographic area in which the Company or any Company Subsidiary may sell,
license, market, distribute or support any Company Products or Services (as
defined in Section 3.13(c)) or restricting the markets, customers or industries
that the Company or any Company Subsidiary may address in operating the Company
Business or restricting the prices which the Company or any Company Subsidiary
may charge for Company Products or Services (including most favored customer
pricing provisions)), or includes any grants by the Company or any Company
Subsidiary of exclusive rights or licenses, rights of refusal, rights of first
negotiation or similar rights.
3.13 Intellectual Property.
(a) As used in this Agreement, "COMPANY-OWNED IP RIGHTS" means
Intellectual Property that is or is purportedly owned by the Company or any
Company Subsidiary; "COMPANY-LICENSED IP RIGHTS" means Intellectual Property
that is used by the Company or any Company Subsidiary in the conduct of the
Company Business and is licensed from third parties; and "COMPANY IP RIGHTS"
means Company-Owned IP Rights and Company-Licensed IP Rights collectively.
(b) Neither the execution, delivery and performance of this
Agreement or the Company Ancillary Agreements nor the consummation of the Merger
and the other transactions contemplated by this Agreement and/or by the Company
Ancillary Agreements shall, in accordance with their terms: (i) constitute a
material breach of or default under any Company IP Rights Agreement; (ii) cause
the forfeiture or termination of, or give rise to a right of forfeiture or
termination of, any material Company IP Right; or (iii) materially impair the
right of the Company or the Surviving Corporation or any Company Subsidiary to
use, develop, make, have made, offer for sale, sell, import, copy, modify,
create derivative works of, distribute, license, and/or dispose of any material
Company IP Right or portion thereof. There are no royalties, honoraria, fees or
other payments payable by the Company or any Company Subsidiary to any third
person (other than salaries payable to employees and independent contractors not
contingent on or related to use of their work product) as a result of the use,
license-in, manufacture, sale, offering for sale, copying, distribution, or
disposition of any Company IP Rights by the Company or any Company Subsidiary
and none shall become payable as a result of the consummation of the
transactions contemplated by this Agreement. Except with respect to Contracts to
which Acquiror or Surviving Corporation is a party, after the Closing, all
Company-Owned IP Rights will be fully transferable, alienable or licensable by
the Surviving Corporation and Acquiror without restriction and without payment
of any kind to any third party.
(c) Schedule 3.13(c) of the Company Disclosure Letter sets forth a
list (by name and version number) of each version of the products and services
currently produced, manufactured, marketed, licensed, sold, or distributed by
the Company and the Company Subsidiaries and the next version of the Company's
software product (each a "COMPANY PRODUCT OR SERVICE"). Neither the use,
development, manufacture, marketing, licensing, sale, offering for sale, or
distribution of any Company Product or Service as currently licensed, utilized,
developed, manufactured, marketed, sold, offered for sale, distributed or
provided by the Company or any Company Subsidiary (i) violates any license or
other Contract between the
29
Company or such Company Subsidiary and any third party, or (ii) infringes or
misappropriates any Intellectual Property of any other party. Neither the use,
development, manufacture, licensing, sale, offering for sale, distribution, or
intended use of the next version of the Company's software product identified in
Schedule 3.13(c) (i) violates any Contract between Company or such Subsidiary
and any third party, or (ii) infringes or misappropriates, or will infringe or
misappropriate, any Intellectual Property of any other party. As of the date
hereof, there is no pending, or to the knowledge of the Company, threatened,
claim or litigation contesting the validity, ownership or right of the Company
or any Company Subsidiary to exercise any Company IP Right, nor has the Company
or any Company Subsidiary as of the date hereof received any notice asserting
that any Company IP Right or the proposed use, development, manufacture, sale,
offering for sale, licensing, or distribution thereof infringes or shall
infringe the Intellectual Property of any other party, and as of the date hereof
neither the Company nor any Company Subsidiary has received any written notice
from any third party offering a license under any such third party patents.
Except for knowledge acquired based on a claim, litigation, notice or offer to
license of the type described in the preceding sentence after the date hereof
("IP NOTICE", as to which no representation is made), to the knowledge of the
Company, there is no legitimate basis for any claim or assertion that the
proposed use, development, manufacture, sale, offering for sale, licensing, or
distribution of Company-Owned IP infringes or shall infringe the Intellectual
Property of any other party. As of the date hereof, none of the Company-Owned IP
Rights, the Company Products or Services, the Company or any of the Company
Subsidiaries is subject to any proceeding or outstanding order, contract or
stipulation (i) restricting in any manner the use, distribution, transfer, or
licensing by the Company or any Company Subsidiaries of any Company-Owned IP
Rights, or any Company Product or Service, or which may affect the validity, use
or enforceability of any such Company-Owned IP Rights, Company-Licensed IP
Rights or Company Product or Service, or (ii) restricting the conduct of the
Company Business because of an infringement or misappropriation of any
Intellectual Property rights of a third party.
(d) To the knowledge of the Company, no current or former
employee, consultant or independent contractor of the Company or any Company
Subsidiary: (i) is in material violation of any term or covenant of any
employment contract, patent disclosure agreement, invention assignment
agreement, nondisclosure agreement, noncompetition agreement or any other
Contract with any other party by virtue of such employee's, consultant's or
independent contractor's being employed by, or performing services for, the
Company or any Company Subsidiary or using trade secrets or proprietary
information of others without permission; or (ii) has developed any technology,
software or other copyrightable, patentable or otherwise proprietary work for
the Company or any Company Subsidiary that is subject to any Contract under
which such employee, consultant or independent contractor has assigned or
otherwise granted to any third party any rights (including Intellectual
Property) in or to such technology, software or other copyrightable, patentable
or otherwise proprietary work. Neither the employment of any employee of the
Company or any Company Subsidiary, nor the use by the Company or any Company
Subsidiary of the services of any consultant or independent contractor subjects
the Company or such Company Subsidiary to any Liability to any third party for
improperly soliciting such employee, consultant or independent contractor to
work for the Company or such Company Subsidiary, whether such Liability is based
on contractual or other legal obligations to such third party.
30
(e) The Company and each Company Subsidiary has taken commercially
reasonable steps to protect, preserve and maintain the secrecy and
confidentiality of the Company IP Rights that it desires to maintain as a trade
secret and confidential. All current and former officers, employees, consultants
and independent contractors of the Company and any Company Subsidiary having
access to proprietary information of the Company or such Company Subsidiary, its
customers or business partners and inventions owned by the Company or such
Company Subsidiary have executed and delivered to the Company or such Company
Subsidiary an agreement regarding the protection of such proprietary information
and the assignment of inventions to the Company or such Company Subsidiary (in
the case of proprietary information of the Company's or such Company
Subsidiary's customers and business partners, to the extent required by such
customers and business partners); and copies of all forms of such agreements
have been made available to Acquiror's legal counsel. Except to the extent that
such persons or entities may be a licensee under the Company's standard form
license agreement, no current or former employee, officer, director, consultant
or independent contractor of the Company or any Company Subsidiary has any
right, license, claim or interest whatsoever in or with respect to any
Company-Owned IP Rights. Schedule 3.13(e) of the Company Disclosure Letter sets
forth a list of all technology, software or Intellectual Property owned by a
third party that is incorporated into, integrated or bundled with the Company
Products or Services ("THIRD PARTY PRODUCT TECHNOLOGY"). Each Contract pursuant
to which the Company licenses any Third Party Product Technology is identified
in Schedule 3.11(d).
(f) Schedule 3.13(f) of the Company Disclosure Letter contains a
true and complete list of (i) all worldwide registrations in the name of the
Company or any Company Subsidiary of any patents, copyrights, mask works,
trademarks, service marks, with any Governmental Authority or quasi-governmental
authority and domain names that the Company uses to interact with its customers,
(ii) all applications, registrations, filings and other formal written
governmental actions made or taken pursuant to Applicable Law by the Company or
any Company Subsidiary to secure, perfect or protect its interest in the Company
IP Rights, including all patent applications, copyright applications, mask work
applications and applications for registration of trademarks and service marks,
and where applicable the jurisdiction in which each of the items of the Company
IP Rights has been applied for, filed, issued or registered, and (iii) all inter
parties proceedings or actions before any court or tribunal (including the
United States Patent and Trademark Office) or equivalent authority anywhere else
in the world) to which the Company is a party related to any of the Company IP
Rights. All registered patents, trademarks, service marks, Internet domain
names, Internet or World Wide Web URLs or addresses, copyrights and mask work
rights held by the Company or any Company Subsidiary are subsisting, and the
Company or such Company Subsidiary is the record owner thereof. The Company and
the Company Subsidiaries are the exclusive owner of all trademarks and trade
names for the applicable class of goods and services used on or in the marketing
of any Company Products or Services by the Company or any of the Company
Subsidiaries.
(g) The Company and the Company Subsidiaries own all right, title
and interest in and to all Company-Owned IP Rights free and clear of all
Encumbrances and licenses (other than licenses and rights listed in Schedule
3.13(h) of the Company Disclosure Letter and Permitted Encumbrances). The right,
license and interest of the Company and the Company Subsidiaries in and to all
Company-Licensed IP Rights are free and clear of all Encumbrances
31
and licenses (other than licenses and rights listed in Schedule 3.13(h) of the
Company Disclosure Letter and Permitted Encumbrances).
(h) Except for non-disclosure agreements, evaluation agreements
and non-exclusive customer and distribution agreements in the ordinary course of
business, Schedule 3.13(h) of the Company Disclosure Letter contains a true and
complete list of all licenses, sublicenses and other Contracts as to which the
Company is a party and pursuant to which any person is authorized to use any
Company IP Rights. None of the licenses or other Contracts listed in Schedule
3.13(h) of the Company Disclosure Letter grants any third party exclusive rights
to or under any Company-Owned IP Rights. Schedule 3.13(h) of the Company
Disclosure Letter contains a true and complete list of all Intellectual Property
that was sold or otherwise transferred by the Company to any third party.
(i) No third party is currently in legal possession of any Company
Source Code (as defined below), and neither the Company nor any Company
Subsidiary nor any other party acting on its behalf has an obligation to
disclose or deliver to any party, or permitted the disclosure or delivery to any
escrow agent or other party of, any Company Source Code (as defined below). No
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time, or both) shall, or would reasonably be expected
to, result in the disclosure or delivery by the Company or any Company
Subsidiary or any other party acting on its behalf to any party of any Company
Source Code. Schedule 3.13(i) of the Company Disclosure Letter identifies each
Contract pursuant to which the Company or any Company Subsidiary has deposited,
or is or may be required to deposit, with an escrow agent or other party, any
Company Source Code and further describes whether the execution of this
Agreement or the consummation of the Merger or any of the other transactions
contemplated by this Agreement, in and of itself, would reasonably be expected
to result in the release from escrow of any Company Source Code. As used in this
Section 3.13(i), "COMPANY SOURCE CODE" means, collectively, any human readable
software source code, or any material portion or aspect of the software source
code contained in any Company Product or Service.
(j) As of the date hereof, to the knowledge of the Company, there
is no unauthorized use, disclosure, infringement or misappropriation of any
Company-Owned IP Rights by any third party, including any employee or former
employee of the Company or any Company Subsidiary.
(k) All Company Products or Services provided by or through the
Company or any Company Subsidiary to customers on or prior to the Closing Date
conform in all material respects (to the extent required in Contracts with such
customers) to applicable contractual commitments, express and implied
warranties, product specifications and product Documentation and to any material
representations provided to customers, and the neither Company nor any Company
Subsidiary has any material Liability (and, to the knowledge of the Company or
any Company Subsidiary, there is no legitimate basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against the Company or any Company Subsidiary giving rise to any material
Liability relating to the foregoing Contracts) for replacement or repair thereof
or other damages in connection therewith in excess of any reserves therefor
reflected on the Company Balance Sheet. The Company has a policy and procedure
for tracking material bugs, errors and defects of which it becomes aware in
32
any Company Products or Services, and maintains a database covering the
foregoing. For all software incorporated by the Company and the Company
Subsidiaries into the Company Products or Services, the Company and the Company
Subsidiaries have implemented or will implement within a reasonable period of
time any and all security patches or upgrades that are generally available for
that software.
(l) No government funding, facilities of a university, college,
other educational institution or research center, or funding from third parties
(other than funds received in consideration for Company Capital Stock) was used
in the development of the Company Products or Services. No current or former
employee, consultant or independent contractor of the Company or any Company
Subsidiary who was involved in, or who contributed to, the creation or
development of any Company-Owned IP Rights to the knowledge of the Company, has
performed services for the government, for a university, college or other
educational institution or for a research center during a period of time during
which such employee, consultant or independent contractor was also performing
services for the Company or any Company Subsidiary.
(m) The Company Products or Services do not include any Public
Software. As used in this Section 3.13(m), "PUBLIC SOFTWARE" means any software
that (i) contains, or is derived in any manner (in whole or in part) from, any
software that is distributed as free software, open source software (e.g.,
Linux) and (ii) requires as a condition of its use, modification or distribution
that it be disclosed or distributed in source code form or made available at no
charge. Public Software includes without limitation software licensed under the
GNU's General Public License (GPL) or Lesser/Library GPL.
3.14 Compliance with Laws.
(a) The Company and each Subsidiary has materially complied, and
is now in material compliance, with, all Applicable Law.
(b) All materials, products and services distributed or marketed
by the Company and each Company Subsidiary have at all times made all material
disclosures to users or customers required by Applicable Law, and none of such
disclosures made or contained in any such materials have been inaccurate,
misleading or deceptive in any material respect in violation of Applicable Law.
(c) The Company and each Company Subsidiary holds all material
permits, licenses and approvals from, and has made all material filings with,
government (and quasi-governmental) agencies and authorities, that are necessary
and/or legally required to be held by it to conduct the Company Business (but
excluding Environmental Permits (as defined in Section 3.21)) without any
material violation of Applicable Law ("GOVERNMENTAL PERMITS"), and as of the
date hereof, all such Governmental Permits are valid and in full force and
effect. As of the date hereof, neither the Company nor any Company Subsidiary
has received any written notice or other communication from any Governmental
Authority regarding (i) any actual or possible violation of law or any
Governmental Permit or any failure to comply with any term or requirement of any
Governmental Permit or (ii) any actual or possible revocation, withdrawal,
suspension, cancellation, termination or modification of any Governmental
Permit.
33
(d) Neither the Company nor any Company Subsidiary nor any
director, officer, agent or employee of the Company or any Company Subsidiary
has, for or on behalf of the Company or any Company Subsidiary, (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, (iii) made any other payment in violation of
Applicable Law; or (iv) exported any Company Products or Services, software, or
technology in violation of the United States Export Administration Regulations
or any other Applicable Law.
3.15 Certain Transactions and Agreements. None of the officers and
directors of the Company or any Company Subsidiary and, to the knowledge of the
Company, none of the employees or shareholders of the Company or any Company
Subsidiary, nor any immediate family member of an officer, director, employee or
shareholder of the Company or any Company Subsidiary, has any direct ownership
interest in any firm or corporation that competes with, or does business with,
or has any contractual arrangement with, the Company or any Company Subsidiary
(except with respect to any interest in less than 5% of the stock of any
corporation whose stock is publicly traded). To the Company's knowledge, none of
the officers, directors, employees or shareholders of the Company or any Company
Subsidiary, nor any member of their immediate families, has any indirect
ownership interest in any firm or corporation that competes with, or does
business with, or has any contractual arrangement with, the Company or any
Subsidiary (except with respect to any interest in less than 5% of the stock of
any corporation whose stock is publicly traded). None of said officers,
directors, employees or shareholders or any member of their immediate families,
is a party to, or to the knowledge of the Company, otherwise directly or
indirectly interested in, any Contract with the Company or any Subsidiary,
except for normal compensation for services as an officer, director or employee
thereof that have been disclosed to Acquiror. To the knowledge of the Company,
none of said officers, directors, employees, shareholders or immediate family
members has any interest in any property, real or personal, tangible or
intangible (including any Company IP Rights or any other Intellectual Property),
that is used in, or that pertains to, the Company Business, except for the
rights of a shareholder under Applicable Law.
3.16 Employees, ERISA and Other Compliance.
(a) The Company and each Company Subsidiary is in compliance in
all material respects with all Applicable Law and Contracts relating to
employment, employment practices, immigration, wages, hours, and terms and
conditions of employment, including employee compensation matters, and has
correctly classified employees as exempt employees and nonexempt employees under
the Fair Labor Standards Act. A complete list of all current employees, officers
and consultants of the Company and the Company Subsidiaries and their current
title and/or job description and compensation (base salary and bonuses) is set
forth on Schedule 3.16(a) of the Company Disclosure Letter. All employees of the
Company or any of the Company Subsidiaries are legally permitted to be employed
by the Company or such Company Subsidiary in the jurisdiction in which such
employee is employed in their current job capacities. All independent
contractors providing services to the Company or any of the Company Subsidiaries
have been properly classified as independent contractors for purposes of federal
and applicable state tax laws, laws applicable to employee benefits and other
Applicable
34
Law. The Company and the Company Subsidiaries do not have any employment or
consulting Contracts currently in effect that are not terminable at will, or are
not terminable at will, but such termination can be effected without material
liability to the Company or any Company Subsidiary (other than agreements with
the sole purpose of providing for the confidentiality of proprietary information
or assignment of inventions).
(b) Neither the Company nor any Company Subsidiary (i) is as of
the date hereof, or has ever been, subject to a union organizing effort, (ii) is
subject to any collective bargaining agreement with respect to any of its
employees, (iii) is subject to any other Contract with any trade or labor union,
employees' association or similar organization, and (iv) has, as of the date
hereof, any labor disputes. As of the date hereof, each of the Company and the
Company Subsidiaries has good labor relations, and as of the date hereof, the
Company has no knowledge of any facts indicating that the consummation of the
Merger or any of the other transactions contemplated hereby shall have a
material adverse effect on such labor relations, and has no knowledge that any
of its key employees intends to leave their employ. As of the date hereof, there
are no pending, or to the knowledge of the Company, threatened, efforts to
certify any Person as the collective bargaining agent of all or some of the
employees of the Company or any Company Subsidiary.
(c) The Company has no Company Benefit Arrangement that
constitutes, or has since the enactment of ERISA, constituted, (i) a
"multiemployer plan" as defined in Section 3(37) of ERISA, (ii) a "multiple
employer plan" as defined in ERISA or Code Section 413(c), or (iii) a "funded
welfare plan" within the meaning of Code Section 419. No pension plan of the
Company is subject to Title IV of ERISA.
(d) (i) Schedule 3.16(d) of the Company Disclosure Letter lists
each employment, consulting, severance or other similar Contract, each "employee
benefit plan" as defined in Section 3(3) of ERISA and each plan or arrangement
providing for insurance coverage (including any self-insured arrangements that
are clearly identified as such), workers' benefits, vacation benefits, severance
benefits, retention, disability benefits, death benefits, hospitalization
benefits, retirement benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock purchase, phantom stock, stock appreciation or other forms
of incentive compensation or post-retirement insurance, compensation or benefits
for employees, consultants or directors that is currently in effect, maintained
or contributed to by the Company, any Company Subsidiary or any ERISA Affiliate
and which covers any employee or former employee of the Company or any Company
Subsidiary. Such Contracts, plans and arrangements as are described in this
Section 3.16(d) are hereinafter collectively referred to as "COMPANY BENEFIT
ARRANGEMENTS".
(ii) Each Company Benefit Arrangement has been maintained in
compliance in all material respects with its terms and with the requirements
prescribed by any and all Applicable Law that is applicable to such Company
Benefit Arrangement. To the knowledge of the Company, each such Company Benefit
Arrangement that is an "employee pension benefit plan" as defined in Section
3(2) of ERISA that is intended to qualify under Code Section 401(a) is so
qualified. Unless otherwise indicated in Schedule 3.16(d) of the Company
Disclosure Letter, with respect to each such Company Benefit Arrangement that is
an "employee pension benefit plan" as defined in Section 3(2) of ERISA that is
intended to qualify under Code Section 401(a), the Company (1) has received a
favorable opinion, advisory, notification and/or
35
determination letter, as applicable, that such plan satisfied the requirements
of the Uruguay Round Agreements Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996
and the Taxpayer Relief Act of 1997 (collectively referred to as "GUST"), the
Tax Reform Act of 1986, the IRS Restructuring and Reform Act of 1998 and the
Community Renewal Tax Relief Act of 2000 (a copy of which letter(s) have been
made available to Acquiror and its counsel), and nothing has occurred since the
issuance of such opinion, advisory, notification and/or determination letter, as
applicable, which would reasonably be expected to cause the loss of the
tax-qualified status of such Company Benefit Arrangement; (2) has applied timely
to the Internal Revenue Service for such letter; (3) has a remaining period of
time to apply for such letter; or (4) if reliance is permitted under IRS
Announcement 2001-77, relies on the favorable opinion letter or advisory letter
of the master and prototype or volume submitter plan sponsor of such Employee
Plan. No Company Benefit Arrangement shall be subject to any surrender fees or
services fees upon termination other than the normal administrative fees
associated with the termination of benefit plans.
(iii) The Company has made available to Acquiror and its legal
counsel a complete and correct copy and description of each Company Benefit
Arrangement, including, where applicable, all amendments thereto and all related
trust documents, administrative services agreements, group annuity contracts,
financial statements, investment policy statements, prospectuses, bonds required
by ERISA, insurance policies (including policies pertaining to fiduciary
liability insurance covering the fiduciaries of each Company Benefit
Arrangement), vendor contracts, employee booklets, summary plan descriptions,
summary of material modifications and other authorizing documents, and any
material employee communications relating thereto.
(iv) The Company has timely filed and made available to
Acquiror and its legal counsel the three most recent annual reports (Form 5500),
including all schedules, financial statements, and attachments thereto, for each
Company Benefit Arrangement that is subject to ERISA and Code reporting
requirements, and all material communications with participants, the Internal
Revenue Service ("IRS"), the U.S. Department of Labor ("DOL") or any other
Governmental Authority, administrators, trustees, beneficiaries and alternate
payees relating to any Company Benefit Arrangement.
(v) As of the date hereof, no suit, administrative
proceeding, action or other litigation has been brought, or to the knowledge of
the Company or any Company Subsidiary, is threatened against or with respect to
any Company Benefit Arrangement, including any audit or inquiry by the IRS or
the DOL. Neither the Company nor any Company Subsidiary has ever been a
participant in any "prohibited transaction" within the meaning of Section 406 of
ERISA with respect to any employee pension benefit plan (as defined in Section
3(2) of ERISA) that the Company or such Company Subsidiary sponsors as employer
or in which the Company or such Company Subsidiary participates as an employer
which was not otherwise exempt pursuant to Section 408 of ERISA (including any
individual exemption granted under Section 408(a) of ERISA) or that could result
in an excise tax under the Code or the assessment of a civil penalty under
Section 502(i) of ERISA.
(vi) All contributions due from the Company with respect to
the Company Benefit Arrangements have been timely made under the terms of the
applicable
36
Company Benefit Arrangement, ERISA, the Code and any other Applicable Law, or
there is a period of time remaining for such contributions to be timely made .
No further contributions shall be due or shall have accrued thereunder as of the
Closing Date (other than contributions accrued in the ordinary course of
business, consistent with past practices, after the Balance Sheet Date as a
result of the operations of the Company and the Company Subsidiaries after the
Balance Sheet Date). All claims as of the Closing Date made under any
self-insured Company Benefit Arrangement that is an "employee welfare benefit
plan" as defined in Section 3(1) of ERISA have been paid or, if not paid, will
be paid by the Company.
(vii) All individuals who are entitled to participate in any
Company Benefit Arrangement, are currently participating in such Company Benefit
Arrangement or, after having been timely offered an opportunity to participate
consistent with the terms of such Company Benefit Arrangement, have either
declined in writing or failed to accept such offer.
(viii) The Company shall not have any Liability to any
employee or to any organization or any other entity as a result of the
termination of any employee leasing arrangement.
(ix) There has been no termination or partial termination,
within the meaning of Section 411(d)(3) of the Code, of any Company Benefit
Arrangement that is an "employee pension benefit plan" as defined in Section
3(2) of ERISA.
(x) No Company Benefit Arrangement (other than life
insurance arrangements) provides post-termination or retiree welfare benefits to
any person for any reason, except as may be required by COBRA or other
Applicable Law.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company relating to, or change in
employee participation or coverage under, any Company Benefit Arrangement that
would increase materially the expense of maintaining such Company Benefit
Arrangement above the level of the expense incurred in respect thereof during
the fiscal year ended January 31, 2004.
(f) Each Company Benefit Arrangement, to the extent applicable, is
in compliance, in all material respects, with the continuation coverage
requirements of Section 4980B of the Code, Sections 601 through 608 of ERISA,
the Americans with Disabilities Act of 1990, the Health Insurance Portability
and Accountability Act of 1996, the Women's Health and Cancer Rights Act of
1998, and the Family Medical Leave Act of 1993, and the Newborns' and Mothers'
Health Protection Act of 1996 (including any amendments to or regulations
promulgated under any of the foregoing acts), or any similar provisions of state
law, as such requirements affect the Company, the Company Subsidiaries and their
employees. There are no outstanding, uncorrected violations under the
Consolidation Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
with respect to any of the Company Benefit Arrangements, covered employees or
qualified beneficiaries that would be reasonably likely to result in a Material
Adverse Effect on the Company, any Company Subsidiary or Acquiror.
(g) No benefit payable or that may become payable by the Company
or any Company Subsidiary pursuant to any Company Benefit Arrangement or as a
result of, in
37
connection with or arising under this Agreement or the Agreement of Merger shall
constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Code)
that is subject to the imposition of an excise tax under Section 4999 of the
Code or that would not be deductible by reason of Section 280G of the Code.
Unless otherwise indicated in Schedule 3.16(g) of the Company Disclosure Letter,
neither the Company nor any Company Subsidiary is a party to any: (i) Contract
with any executive officer or other key employee thereof (A) the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company in the nature of the Merger or
any of the other transactions contemplated by this Agreement or any Company
Ancillary Agreement, (B) providing any term of employment or compensation
guarantee, or (C) providing severance benefits or other benefits after the
termination of employment of such employee regardless of the reason for such
termination of employment; or (ii) Company Benefit Arrangement, any of the
benefits of which shall be increased, or the vesting of benefits of which shall
be accelerated, by the occurrence of the Merger or any of the other transactions
contemplated by this Agreement, or any event subsequent to the Merger such as
the termination of employment of any person, or the value of any of the benefits
of which shall be calculated on the basis of any of the transactions
contemplated by this Agreement. Neither the Company nor any of the Company
Subsidiaries has any obligation to pay any material amount or provide any
material benefit to any former employee or officer, other than obligations (i)
for which the Company has established a reserve (or purchased an insurance
policy listed in Schedule 3.20) for such amount on the Company Balance Sheet and
(ii) pursuant to Contracts entered into after the Balance Sheet Date and
disclosed on Schedule 3.16(g) of the Company Disclosure Letter.
(h) As of the date hereof, no employee or consultant of the
Company or any Company Subsidiary is in material violation of (i) any Contract
or (ii) any restrictive covenant relating to the right of any such employee or
consultant to be employed by the Company or such Company Subsidiary or to use
trade secrets or proprietary information of others. The employment of any
employee or consultant by the Company or any Company Subsidiary does not subject
the Company or any Company Subsidiary to any Liability to any third party.
(i) Each Company Benefit Arrangement that has been established or
maintained, or that is required to be maintained or contributed to by the law or
applicable custom or rule of the relevant jurisdiction, outside of the United
States (each such Company Benefit Arrangement, a "FOREIGN PLAN") is listed in
Schedule 3.16(i) of the Company Disclosure Letter. As regards each Foreign Plan,
(i) such Foreign Plan is in material compliance with the provisions of the laws
of each jurisdiction in which such Foreign Plan is maintained, to the extent
those laws are applicable to such Foreign Plan, (ii) all contributions to, and
material payments from, such Foreign Plan which may have been required to be
made in accordance with the terms of such Foreign Plan, and, when applicable,
the law of the jurisdiction in which such Foreign Plan is maintained, have been
timely made or shall be made by the Closing Date, and all such contributions to
such Foreign Plan, and all payments under such Foreign Plan, for any period
ending before the Closing Date that are not yet, but will be, required to be
made, are reflected as an accrued liability on the Company Balance Sheet, (iii)
the Company, each Company Subsidiary, and each ERISA Affiliate has materially
complied with all applicable reporting and notice requirements, and such Foreign
Plan has obtained from the Governmental Entity having jurisdiction with respect
to such Foreign Plan any required determinations, if any, that such Foreign Plan
is in compliance with the laws of the relevant jurisdiction if such
determinations are
38
required in order to give effect to such Foreign Plan, (iv) such Foreign Plan
has been administered in all material respects at all times in accordance with
its terms and Applicable Law and regulations, (v) to the knowledge of the
Company, there are no pending investigations by any governmental body involving
such Foreign Plan, and no pending claims (except for claims for benefits payable
in the normal operation of such Foreign Plan), suits or proceedings against such
Foreign Plan or asserting any rights or claims to benefits under such Foreign
Plan, (vi) the consummation of the transactions contemplated by this Agreement
will not by itself create or otherwise result in any liability with respect to
such Foreign Plan other than the triggering of payment to participants, and
(vii) except as required by Applicable Law, no condition exists that would
prevent the Company or any of the Company Subsidiaries from terminating or
amending any Foreign Plan at any time for any reason in accordance with the
terms of each such Foreign Plan (other than normal and reasonable expenses
typically incurred in a termination event).
(j) In the past two years, there has been no "mass layoff,"
"employment loss," or "plant closing" as defined by the Workers Adjustment and
Retraining Notification Act (the "WARN ACT") in respect of the Company.
3.17 Corporate Documents. The Company has made available to Acquiror's
legal counsel for examination all documents and information listed in the
Company Disclosure Letter (including any Schedule thereto) or in any other
exhibit or schedule called for by this Agreement, including the following: (a)
copies of the Articles of Incorporation and Bylaws (or other comparable charter
documents), each as currently in effect, of the Company and each Company
Subsidiary; (b) the minute books containing all records of all proceedings,
consents, actions and meetings of the Board of Directors and any committees
thereof and shareholders of the Company and each Company Subsidiary; (c) the
stock ledger, option ledger and warrant ledger and journal reflecting all stock
issuances and transfers and all grants of options and warrants relating to the
Company; and (d) all permits, orders and consents issued by, and filings by the
Company with, any regulatory agency with respect to the Company, or any
securities of the Company, and all applications for such permits, orders and
consents.
3.18 No Brokers. Neither the Company nor any affiliate of the Company is
obligated for the payment of any fees or expenses of any investment banker,
broker, finder or similar party in connection with the origin, negotiation or
execution of this Agreement or in connection with the Merger or any other
transaction contemplated by this Agreement. Neither Acquiror nor the Surviving
Corporation shall incur any Liability, either directly or indirectly, to any
such investment banker, broker, finder or similar party as a result of this
Agreement or the Merger.
3.19 Books and Records.
(a) The books, records and accounts of the Company and the Company
Subsidiaries (i) are in all material respects true, complete and correct and
(ii) have been maintained in accordance with good business practices on a basis
consistent with prior years.
(b) The Company has devised and 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 (1) to permit
preparation of financial statements in conformity with GAAP or any
39
other criteria applicable to such statements and (2) to maintain accountability
for assets; and (iii) the amount recorded for assets on the Company's books and
records is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
3.20 Insurance. The Company and the Company Subsidiaries maintain the
policies of insurance and bonds set forth in Schedule 3.20 of the Company
Disclosure Letter. As of the date hereof, there is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been timely paid, and the
Company and each Company Subsidiary is otherwise in compliance with the terms of
such policies and bonds. As of the date hereof, all such policies and bonds
remain in full force and effect, and as of the date hereof, the Company has no
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies or bonds. Each of the Company and each Company
Subsidiary has made available to Acquiror correct and complete copies of all
such policies of insurance and bonds issued at the request or for the benefit of
the Company or any Company Subsidiary.
3.21 Environmental Matters.
(a) The Company, each Company Subsidiary and their respective
predecessors and affiliates are in material compliance with all Environmental
Laws (as defined below), which compliance includes the possession by the Company
or such Company Subsidiary of all permits and other governmental authorizations
required under Environmental Laws ("ENVIRONMENTAL PERMITS") and material
compliance with the terms and conditions thereof. Neither the Company nor any
Company Subsidiary has received any written notice or other communication,
whether from a Governmental Authority, citizens groups, employee or otherwise,
that alleges that the Company or such Company Subsidiary is not in compliance
with any Environmental Law. To the knowledge of the Company, no current or prior
owner of any property leased or possessed by the Company or such Company
Subsidiary has received any written notice or other communication, whether from
a Governmental Authority, citizens group, employee or otherwise, that alleges
that such current or prior owner or the Company or such Company Subsidiary is
not in compliance with any Environmental Law. All Environmental Permits held by
the Company or any Company Subsidiary pursuant to any Environmental Law (if any)
are identified in Schedule 3.21 of the Company Disclosure Letter.
(b) For purposes of this Section 3.21: (i) "ENVIRONMENTAL LAW"
means any federal, state or local statute, law, regulation or other legal
requirement relating to pollution or protection of the environment (including
ambient air, surface water, ground water, land surface or subsurface strata) or
exposure of any person to Materials of Environmental Concern, including any law
or regulation relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern; and (ii) "MATERIALS OF
ENVIRONMENTAL CONCERN" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is currently regulated by an Environmental Law or that is otherwise a danger
40
to health, reproduction or the environment but excluding products used for
office and janitorial purposes properly and safely maintained.
3.22 Customers and Suppliers.
(a) As of the date hereof, neither the Company nor any Company
Subsidiary has any outstanding material dispute, which has been communicated in
writing, concerning its products and/or services with any customer or
distributor who, in the year ended January 31, 2004 or the three months ended
April 30, 2004, was one of the 20 largest sources of revenues recognized under
GAAP for the Company and the Company Subsidiaries during such periods (each, a
"SIGNIFICANT CUSTOMER"). Each Significant Customer is listed on Schedule 3.22(a)
of the Company Disclosure Letter. As of the date hereof, neither the Company nor
any of the Company Subsidiaries has received any written notice from any
Significant Customer that such customer shall not continue as a customer of the
Company (or the Surviving Corporation or Acquiror) after the Closing or that
such customer intends to terminate or materially modify existing Contracts with
the Company (or the Surviving Corporation or Acquiror). As of the date hereof,
the Company has not had any of the Company Products or Services returned by a
purchaser or licensee thereof and has no warranty or indemnity Liability for the
Company Products or Services to purchasers or licensees, except for normal
warranty repair or replacement consistent with past history and those repairs or
replacements that would not result in a reversal of any revenue by the Company
on the statements of operations included in the Company Financial Statements. To
the Company's knowledge, the Company could not reasonably be expected as a
result of warranty or product liability claims against it to recall or modify in
any material respect any Company Product or Service that is material to the
Company.
(b) As of the date hereof, neither the Company nor any Company
Subsidiary has any outstanding material dispute, which has been communicated in
writing, concerning products and/or services provided by any supplier who, in
the year ended January 31, 2004 or the three months ended April 30, 2004, was
one of the 10 largest suppliers of products and/or services to the Company,
based on amounts paid or payable (each, a "SIGNIFICANT SUPPLIER"). Each
Significant Supplier is listed on Schedule 3.22(b) of the Company Disclosure
Letter. As of the date hereof, neither the Company nor any of the Company
Subsidiaries has received any written notice from any Significant Supplier that
such supplier shall not continue as a supplier to the Company (or the Surviving
Corporation or Acquiror) after the Closing or that such supplier intends to
terminate or materially modify existing Contracts with the Company (or the
Surviving Corporation or Acquiror).
3.23 Privacy. The Company's and the Company Subsidiaries' privacy
practices conform, and at all times have conformed, in all material respects to
their respective privacy policies (if any). The Company and each Company
Subsidiary has materially complied with all Applicable Law relating to (a) the
privacy of users of the Company Products or Services and all Internet websites
owned, maintained or operated by the Company and the Company Subsidiaries
(collectively, the "COMPANY WEBSITES"), and (b) the collection, storage and
transfer of any personally identifiable information collected by the Company and
the Company Subsidiaries or by third parties having authorized access to the
Company's and the Company Subsidiaries' records. As of the date hereof, no
claims have been asserted or, to the knowledge of the Company or any of the
41
Company Subsidiaries, are threatened against the Company or any of the Company
Subsidiaries by any person or entity alleging a violation of such person's or
entity's privacy, personal or confidentiality rights under the privacy policies
of the Company or the Company Subsidiaries.
3.24 Accounts Receivable. The accounts receivable shown on the Company
Balance Sheet arose in the ordinary course of business, consistent with past
practices, and represented bona fide claims against debtors for sales and other
charges. The accounts receivable of the Company and the Company Subsidiaries
arising after the Balance Sheet Date and before the Closing Date arose or shall
arise in the ordinary course of business, consistent with past practices, and
represented or shall represent bona fide claims against debtors for sales and
other charges. As of the date hereof, neither the Company nor the Company
Subsidiaries has received written notice that any of the accounts receivable of
the Company and the Company Subsidiaries is subject to any claim of offset,
recoupment, setoff or counter-claim. No material amount of accounts receivable
is contingent upon the performance by the Company or any Company Subsidiary of
any obligation or Contract other than normal warranty repair and replacement. No
Person has any lien on any of such accounts receivable, and no agreement for
deduction or discount has been made with respect to any of such accounts
receivable.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Subject to the exceptions set forth in a numbered or lettered section of
the disclosure letter of the Acquiror addressed to the Company, dated as of the
Agreement Date and delivered to the Company concurrently with the parties'
execution of this Agreement (the "ACQUIROR DISCLOSURE LETTER" (if any))
referencing a representation or warranty herein (each of which exceptions, in
order to be effective, shall clearly indicate the section and, if applicable,
the subsection of this Article 4 to which it relates (unless and to the extent
the relevance to other representations and warranties is reasonably apparent
from the face of the disclosed exception), and each of which exceptions shall
also be deemed to be representations and warranties made by Acquiror and Merger
Sub under this Article 4), Acquiror and Merger Sub represent and warrant to the
Company as follows:
4.1 Organization and Good Standing. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as presently
proposed to be conducted. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. Each of
Acquiror and Merger Sub is duly qualified or licensed to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not individually or in the aggregate be material to
Acquiror's or Merger Sub's ability to consummate the Merger or to perform their
respective obligations under this Agreement, the Acquiror Ancillary Agreements
and the Merger Sub Ancillary Agreements. Acquiror has made available to the
Company true and complete copies of the currently effective Certificate of
Incorporation or Articles of Incorporation, as applicable, and Bylaws of
Acquiror and Merger Sub, each as amended to date. Neither Acquiror
42
nor Merger Sub is in violation of its Certificate of Incorporation or Articles
of Incorporation, as applicable, or Bylaws, each as amended to date.
4.2 Power, Authorization and Validity.
(a) Power and Authority. Acquiror has all requisite corporate
power and authority to enter into, execute, deliver and perform its obligations
under this Agreement and each of the Acquiror Ancillary Agreements and to
consummate the Merger. The execution, delivery and performance by Acquiror of
this Agreement, each of the Acquiror Ancillary Agreements and all other
agreements, transactions and actions contemplated hereby or thereby have been
duly and validly approved and authorized by all necessary corporate action on
the part of Acquiror. Merger Sub has all requisite corporate power and authority
to enter into, execute, deliver and perform its obligations under this Agreement
and each of the Merger Sub Ancillary Agreements and to consummate the Merger.
The execution, delivery and performance by Merger Sub of this Agreement, each of
the Merger Sub Ancillary Agreements and all other agreements, transactions and
actions contemplated hereby or thereby have been duly and validly approved and
authorized by all necessary corporate action on the part of Merger Sub.
(b) No Consents. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority, or any
other Person, governmental or otherwise, is necessary or required to be made or
obtained by Acquiror or Merger Sub to enable Acquiror and Merger Sub to lawfully
execute and deliver, enter into, and perform their respective obligations under
this Agreement, each of the Acquiror Ancillary Agreements and each of the Merger
Sub Ancillary Agreements or to consummate the Merger, except for: (i) the filing
by Acquiror of such reports and information with the SEC under the Exchange Act,
and the rules and regulations promulgated by the SEC thereunder, as may be
required in connection with this Agreement, the Merger and the other
transactions contemplated by this Agreement; (ii) such filings and notifications
as may be required to be made by Acquiror in connection with the Merger under
the HSR Act and Applicable Laws of Germany and the expiration or early
termination of applicable waiting periods under the HSR Act and Applicable Laws
of Germany; (iii) the filing of a registration statement on Form S-8 with the
SEC after the Closing Date covering the shares of Acquiror Common Stock issuable
pursuant to Unvested Company Options assumed by Acquiror; and (iv) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings, if any, that if not made or obtained by Acquiror or Merger Sub would
not be material to Acquiror's or Merger Sub's ability to consummate the Merger
or to perform their respective obligations under this Agreement, the Acquiror
Ancillary Agreements and the Merger Sub Ancillary Agreements.
(c) Enforceability. This Agreement has been duly executed and
delivered by Acquiror and Merger Sub. This Agreement and each of the Acquiror
Ancillary Agreements are, or when executed by Acquiror shall be, valid and
binding obligations of Acquiror, enforceable against Acquiror in accordance with
their respective terms, subject to the effect of (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to rights of creditors generally and (ii) rules of law and
equity governing specific performance, injunctive relief and other equitable
remedies. This Agreement and each of the Merger Sub Ancillary Agreements are, or
when executed by Merger Sub shall be, valid and binding obligations of Merger
Sub, enforceable against Merger Sub in accordance with their
43
respective terms, subject to the effect of (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to rights of creditors generally and (ii) rules of law and
equity governing specific performance, injunctive relief and other equitable
remedies.
4.3 No Conflict. Neither the execution and delivery of this Agreement,
any of the Acquiror Ancillary Agreements or any of the Merger Sub Ancillary
Agreements by Acquiror or Merger Sub, nor the consummation of the Merger or any
other transaction contemplated hereby or thereby, shall conflict with, or (with
or without notice or lapse of time, or both) result in a termination, breach,
impairment or violation of, or constitute a default under: (a) any provision of
the Certificate of Incorporation or Articles of Incorporation, as applicable, or
Bylaws of Acquiror or Merger Sub, each as currently in effect; (b) any
Applicable Law applicable to Acquiror, Merger Sub or any of their respective
material assets or properties; or (c) any Contract to which Acquiror or Merger
Sub is a party or by which Acquiror or Merger Sub or any of their respective
material assets or properties are bound, except in the cases of clauses (b) and
(c) where such conflict, termination, breach, impairment, violation or default
would not be material to Acquiror's or Merger Sub's ability to consummate the
Merger or to perform their respective obligations under this Agreement, the
Acquiror Ancillary Agreements and the Merger Sub Ancillary Agreements.
4.4 Litigation. There is no (a) action, suit, arbitration, mediation,
proceeding, claim or investigation pending against Acquiror or Merger Sub before
any Governmental Authority, arbitrator or mediator or (b) judgment, decree,
injunction, rule or order of any Governmental Authority, arbitrator or mediator
outstanding against Acquiror or Merger Sub, except where such action, suit,
arbitration, mediation, proceeding, claim or investigation or such judgment,
decree, injunction, rule or order would not be material to Acquiror's or Merger
Sub's ability to consummate the Merger or to perform their respective
obligations under this Agreement, the Acquiror Ancillary Agreements and the
Merger Sub Ancillary Agreements.
4.5 Financing. Acquiror has, and will have available to it upon the
Effective Time, sufficient funds to consummate the transactions contemplated by
this Agreement, including payment in full of the Total Cash Merger
Consideration.
ARTICLE 5
COMPANY COVENANTS
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10, the Company covenants and agrees with
Acquiror as follows:
5.1 Advice of Changes. The Company shall promptly advise Acquiror in
writing of (a) any event occurring subsequent to the Agreement Date that would
render any representation or warranty of the Company contained in Article 3
untrue or inaccurate such that the condition set forth in Section 9.1 would not
be satisfied, or (b) any breach of any covenant or obligation of the Company
pursuant to this Agreement or any Company Ancillary Agreement such that the
condition set forth in Section 9.2 would not be satisfied; provided, however,
that the delivery of
44
any notice pursuant to this Section 5.1 shall not be deemed to amend or
supplement the Company Disclosure Letter.
5.2 Maintenance of Business.
(a) The Company shall, and shall cause each Company Subsidiary to,
carry on and preserve the Company Business and its relationships with customers,
advertisers, suppliers, employees and others with whom the Company or any
Company Subsidiary has contractual relations in substantially the same manner as
it has prior to the Agreement Date consistent with its past practices. Following
the expiration or early termination of the HSR Act waiting period, at Acquiror's
request such cooperation may include joint customer calls and cooperation in
setting post-closing sales, marketing and manufacturing strategies.
(b) The Company shall, and shall cause each Company Subsidiary to,
(i) pay all of its debts and taxes when due, subject to good faith disputes over
such debts or taxes and (ii) pay or perform its other Liabilities when due.
(c) The Company shall, and shall cause each Company Subsidiary to,
use its commercially reasonable efforts to assure that each of its Company
Material Contracts (other than with Acquiror) entered into after the Agreement
Date will not require the procurement of any consent, waiver or novation or
provide for any material change in the obligations of any party in connection
with, or terminate as a result of the consummation of, the Merger.
5.3 Conduct of Business. The Company shall, and shall cause each Company
Subsidiary to, continue to conduct the Company Business and maintain its
business relationships in the ordinary and usual course consistent with its past
practices, and the Company shall not, and shall not permit any Company
Subsidiary to, without Acquiror's prior written consent:
(a) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person or issue or sell any debt securities or
guarantee any debt securities of another Person;
(b) (i) lend any money, other than reasonable and normal advances
to employees for bona fide expenses that are incurred in the ordinary course of
business consistent with its past practices (provided that no proceeds of any
such advances are used directly or indirectly to purchase shares of Company
Capital Stock), (ii) make any investments in or capital contributions to, any
Person, (iii) forgive or discharge in whole or in part any outstanding loans or
advances, or (iv) prepay any indebtedness;
(c) enter into any Company Material Contract (other than pursuant
to the Company's standard click-through license agreement), violate, terminate,
amend or otherwise modify or waive any of the material terms of any Company
Material Contract;
(d) place or allow the creation of any Encumbrance (other than a
Permitted Encumbrance) on any of its assets or properties;
45
(e) sell, lease, license, transfer or dispose of any assets
material to the Company Business (except for sales, leases or licenses of
Company Products or Services in the ordinary course of business consistent with
its past practices);
(f) (i) pay any bonus, increased salary, severance or special
remuneration to any officer, director, employee or consultant (except in the
ordinary course of business consistent with its past practices pursuant to
arrangements listed on Schedule 5.3(f) of the Company Disclosure Letter), (ii)
amend or enter into any employment or consulting Contract with any such person
(except in the ordinary course of business to fill open positions listed on
Schedule 5.3(f) of the Company Disclosure Letter), or (iii) adopt any plan or
arrangement to provide compensation or benefits to any employees, directors or
consultants, or amend any Company Benefit Arrangements (except in each case as
required under ERISA, or the Code, or Applicable Law);
(g) change any of its accounting methods, unless required by GAAP;
(h) declare, set aside or pay any cash or stock dividend or other
distribution (whether in cash, stock or property) in respect of its capital
stock, or redeem, repurchase or otherwise acquire any of its capital stock or
other securities (except for (i) the repurchase of stock from its employees,
directors, consultants or contractors in connection with the termination of
their services at the original purchase price of such stock or (ii) the
repurchase of stock using proceeds from the exercise of Company Options or
Company Warrants after the Agreement Date), or pay or distribute any cash or
property to any of its shareholders or securityholders or make any other cash
payment to any of its shareholders or securityholders (other than cash payments
to employees or consultants in connection with services rendered by such
employees or consultants to the Company);
(i) terminate, waive or release any material right or claim;
(j) issue, sell, create or authorize any shares of its capital
stock of any class or series or any other of its securities, or issue, grant or
create any warrants, obligations, subscriptions, options, convertible
securities, or other commitments to issue shares of its capital stock or any
securities that are potentially exchangeable for, or convertible into, shares of
its capital stock, other than: (i) the issuance of shares of Company Capital
Stock pursuant to the exercise of Company Options or Company Warrants
outstanding on the Agreement Date; (ii) the issuance pursuant to the Company
Option Plan of Company Options to purchase up to 250,000 shares of Company
Common Stock remaining available for issuance pursuant to the Company Option
Plan between the Agreement Date and the Closing Date, provided that such options
are issued in the ordinary course of business consistent with past practices at
exercise prices at least equal to the fair market value of Company Common Stock
on the date of grant (as approved by Acquiror's independent auditors); and (iii)
the issuance of shares of Company Common Stock upon conversion of Company
Preferred Stock outstanding or subject to outstanding Company Warrants on the
Agreement Date.
(k) subdivide, split, combine or reverse split the outstanding
shares of its capital stock of any class or series or enter into any
recapitalization affecting the number of
46
outstanding shares of its capital stock of any class or series or affecting any
other of its securities;
(l) merge, consolidate or reorganize with, acquire, or enter into
any other business combination with any corporation, partnership, limited
liability company or any other entity (other than Acquiror or Merger Sub),
acquire a substantial portion of the assets of any such entity, or enter into
any negotiations, discussions or agreement for such purpose;
(m) amend its Articles of Incorporation or Bylaws or other
comparable charter documents (other than the amendment to the Company's Articles
of Incorporation contemplated by Section 9.11);
(n) license any of its technology or Intellectual Property (except
for licenses made in the ordinary course of business consistent with its past
practices under its standard customer or distributor agreements or
non-disclosure agreements or the standard agreements of a customer (provided the
terms of such agreement of a customer are not less favorable to it than its
standard form agreements in any material respect)), or acquire any Intellectual
Property (or any license thereto) from any third party (other than licenses of
software generally available to the public at a per copy license fee of less
than $1,000 per copy and such contracts listed on Schedule 5.3(n) of the Company
Disclosure Letter);
(o) materially change any insurance coverage;
(p) (i) agree to any audit assessment by any taxing authority,
(ii) file any Return or amendment to any Return unless copies of such Return or
amendment have first been delivered to Acquiror for its review at a reasonable
time prior to filing, (iii) except as required by Applicable Law, make or change
any material election in respect of taxes or adopt or change any material
accounting method in respect of taxes, or (iv) enter into any closing agreement,
settle any claim or assessment in respect of taxes, or consent to any extension
or waiver of the limitation period applicable to any claim or assessment in
respect of taxes;
(q) modify or change the exercise or conversion rights or exercise
or purchase prices of any of its capital stock, any of its stock options,
warrants or other securities, or accelerate or otherwise modify (i) the right to
exercise any option, warrant or other right to purchase any of its capital stock
or other securities or (ii) the vesting or release of any shares of its capital
stock or other securities from any repurchase options or rights of refusal held
by it or any other party or any other restrictions (other than 25% accelerated
vesting to be granted to Company employees who will not be Continuing Employees
as set forth in Schedule 5.3(q) of the Company Disclosure Letter);
(r) (i) initiate any litigation, action, suit, proceeding, claim
or arbitration (other than for the routine collection of bills) or (ii) settle
or agree to settle any litigation, action, suit, proceeding, claim or
arbitration (except where the amount in controversy does not exceed $50,000 and
does not involve injunctive or other equitable relief);
(s) (i) pay, discharge or satisfy, in an amount in excess of
$50,000 in any one case or $100,000 in the aggregate, any Liability arising
otherwise than in the ordinary course of business, other than (1) the payment,
discharge or satisfaction of Liabilities reflected or reserved
47
against in the Company Balance Sheet and (2) the payment, discharge or
satisfaction of Merger Expenses and professional fees and expenses related to
the proposed initial public offering of the Company, or (ii) make any capital
expenditures, capital additions or capital improvements except in the ordinary
course of business consistent with its past practices;
(t) materially change the policy or practice in which it extends
warranties, discounts or credits to customers;
(u) (i) agree to do any of the things described in the preceding
clauses (a)-(t), (ii) take or agree to take any action which would reasonably be
expected to make any of the Company's representations or warranties contained in
this Agreement materially untrue or incorrect (such that the condition set forth
in Section 9.1 would not be satisfied), or (iii) take or agree to take any
action which would reasonably be expected to prevent the Company from performing
or cause the Company not to perform one or more covenants required hereunder to
be performed by the Company (such that the condition set forth in Section 9.2
would not be satisfied).
For purposes of Section 5.2 and Section 5.3, "Company Material Contract"
includes any Contract arising subsequent to the Agreement Date that would have
been required to be listed on the Company Disclosure Letter pursuant to Section
3.11 or Section 3.13 had such Contract been in effect on the Agreement Date.
5.4 Regulatory Approvals. The Company shall, and shall cause each
Company Subsidiary to, promptly execute and file, or join in the execution and
filing of, any application, notification (including any notification or
provision of information, if any, that may be required under the HSR Act and
Applicable Laws of Germany) or other document that may be necessary in order to
obtain the authorization, approval or consent of any Governmental Authority,
whether federal, state, local or foreign, which may be reasonably required, or
which Acquiror may reasonably request, in connection with the consummation of
the Merger and the other transactions contemplated by this Agreement or any
Company Ancillary Agreement. The Company shall use commercially reasonable
efforts to obtain, and to cooperate with Acquiror to promptly obtain, all such
authorizations, approvals and consents and shall pay any associated filing fees
payable by the Company with respect to such authorizations, approvals and
consents. The Company shall promptly inform Acquiror of any material
communication between the Company and any Governmental Authority regarding any
of the transactions contemplated hereby. If the Company or any affiliate of the
Company receives any formal or informal request for supplemental information or
documentary material from any Governmental Authority with respect to the
transactions contemplated hereby, then the Company shall make, or cause to be
made, as soon as reasonably practicable, a response in compliance with such
request. The Company shall direct, in its sole discretion, the making of such
response, but shall consider in good faith the views of the Acquiror.
5.5 Necessary Consents. The Company shall use commercially reasonable
efforts to obtain the consents, approvals, orders, authorizations, releases and
waivers, and make the registrations, declarations and filings, set forth in
Schedule 3.3(b) of the Company Disclosure Letter.
48
5.6 Litigation. The Company shall notify Acquiror in writing promptly
after learning of any claim, action, suit, arbitration, mediation, proceeding or
investigation by or before any court, arbitrator or arbitration panel, board or
governmental agency, initiated by or against it, or known by the Company to be
threatened in writing against the Company or any Company Subsidiary or any of
their respective officers, directors, employees or shareholders in their
capacity as such.
5.7 No Other Negotiations.
(a) The Company shall not, and shall not authorize, encourage or
permit any Company Subsidiary or any of their respective officers, directors,
employees, shareholders, affiliates, agents, advisors (including any attorneys,
financial advisors, investment bankers or accountants) or other representatives
(collectively, "COMPANY REPRESENTATIVES") to, directly or indirectly: (a)
solicit, initiate, encourage, induce or knowingly facilitate the making,
submission or announcement of any inquiry, offer or proposal from any Person
(other than Acquiror) concerning any Alternative Transaction; (b) furnish any
nonpublic information regarding the Company or the Company Subsidiaries to any
Person (other than Acquiror and its agents and advisors) in connection with or
in response to any inquiry, offer or proposal for or regarding any Alternative
Transaction (other than to respond to such inquiry, offer or proposal by
indicating that the Company is subject to a binding "no shop" covenant); (d)
enter into, participate in, maintain or continue any discussions or negotiations
with any Person (other than Acquiror and its agents and advisors) with respect
to any Alternative Transaction (other than to respond to such inquiry, offer or
proposal by indicating that the Company is subject to a binding "no shop"
covenant); (d) otherwise cooperate with, encourage or knowingly facilitate any
effort or attempt by any Person (other than Acquiror and its agents and
advisors) to effect any Alternative Transaction; or (h) execute, enter into or
become bound by any letter of intent, memorandum of understanding, other
Contract or understanding between the Company and any Person (other than
Acquiror) that is related to, provides for or concerns any Alternative
Transaction.
(b) The Company shall immediately notify Acquiror after receipt by
the Company and/or any Company Subsidiary (or, to the Company's knowledge, by
any of the Company Representatives) of any inquiry, offer or proposal that
constitutes a Alternative Transaction, or any other notice that any Person is
considering making an Alternative Transaction, or any request for nonpublic
information relating to the Company or any Company Subsidiary or for access to
any of the properties, books or records of the Company or any Company Subsidiary
by any Person or Persons other than Acquiror (which notice shall identify the
Person or Persons making, or considering making, such inquiry, offer, proposal
or request) and shall keep Acquiror fully informed of the status and details of
any such inquiry, offer or proposal and any correspondence or communications
related thereto and shall provide to Acquiror a correct and complete copy of
such inquiry, offer or proposal and any amendments, correspondence and
communications related thereto, if it is in writing. The Company shall provide
Acquiror with 48 hours prior notice (or such lesser prior notice as is provided
to the members of the Board of Directors of the Company) of any meeting of the
Board of Directors of the Company at which the Board of Directors of the Company
is reasonably expected to consider any Alternative Transaction. The Company
shall immediately cease and cause to be terminated any and all existing
activities, discussions and negotiations with any Persons conducted heretofore
with respect to a Alternative Transaction.
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5.8 Access to Information. The Company shall allow Acquiror and its
agents and advisors access at reasonable times to the files, books, records,
technology, Contracts, personnel and offices of the Company and the Company
Subsidiaries, including any and all information relating to the Company's and
the Company Subsidiaries' taxes, Contracts, Liabilities, financial condition and
real, personal and intangible property, subject to the terms of the Mutual
Non-Disclosure Letter Agreement between the Company and Acquiror dated May 10,
2004 (the "MUTUAL NDA") and subject to any Applicable Law relating to the
privacy of individually identifiable employee information. The Company shall
cause its and the Company Subsidiaries' accountants to cooperate with Acquiror
and Acquiror's agents and advisors (provided that, prior to any disclosure to
such agents or advisors, such agents or advisors are bound by the terms of a
confidentiality agreement with substantially similar restrictions as included in
the Mutual NDA to restrict the use and disclosure of the Company's and the
Company Subsidiaries' confidential information) in making available all
financial information reasonably requested by Acquiror and its agents and
advisors, including the right to examine all working papers pertaining to all
financial statements prepared or audited by such accountants.
5.9 Satisfaction of Conditions Precedent. The Company shall use its
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent set forth in Article 9, and the Company shall use its
commercially reasonable efforts to cause the Merger and the other transactions
contemplated by this Agreement to be consummated in accordance with the terms of
this Agreement.
5.10 Company Benefit Arrangements. Upon Acquiror's written request
delivered at least five business days prior to the Closing Date, the Company
shall terminate any Company Benefit Arrangement intended to constitute a Code
Section 401(k) arrangement and any employee leasing arrangement or professional
employee organization prior to the Closing Date. If Acquiror requests that the
Company's 401(k) Plan be terminated, the Company's Board of Directors shall
adopt resolutions authorizing the termination of the 401(k) Plan and the Company
shall execute an amendment to the 401(k) Plan that is sufficient to assure
compliance with all applicable requirements of the Code and regulations
thereunder so that the tax-qualified status of the 401(k) Plan shall be
maintained at the time of its termination. The Company shall terminate any and
all group severance, separation, retention and salary continuation plans,
programs or arrangements (other than Contracts disclosed in writing to Acquiror
prior to the Agreement Date and listed on Schedule 5.10 of the Company
Disclosure Letter) prior to the Closing Date.
5.11 Approval of the Company Shareholders.
(a) The Company shall take all action necessary in accordance with
this Agreement, California Law, and the Articles of Incorporation and Bylaws of
the Company to secure the Company Shareholder Approval pursuant to the Company
Shareholder Consent. The Company's obligation to secure the Company Shareholder
Approval in accordance with this Section 5.11(a) shall not be limited to or
otherwise affected by the commencement, disclosure, announcement or submission
to Company of any Alternative Transaction. The Company shall deliver an executed
Company Shareholder Consent and an executed Company Shareholder Letter from each
Company Shareholder listed in Exhibit B-1, which together constitute the Company
Shareholder Approval, no later than 5:00 p.m. Pacific Time on the date
immediately following the Agreement Date. The Company shall exercise
commercially reasonable efforts to
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obtain an executed Company Shareholder Consent and an executed Company
Shareholder Letter from each Company Shareholder not listed in Exhibit B-1.
(b) The Company's Board of Directors shall unanimously recommend
that the Company Shareholders vote in favor of and approve the Merger and this
Agreement pursuant to the Company Shareholder Consent. Neither the Company's
Board of Directors nor any committee thereof shall withdraw, amend or modify, or
propose or resolve to withdraw, amend or modify, in a manner adverse to
Acquiror, the unanimous recommendation of the Company's Board of Directors that
the Company Shareholders vote in favor of and approve the Merger and this
Agreement.
(c) The Company shall use commercially reasonable efforts to
obtain and deliver to Acquiror, prior to the initiation of the requisite
shareholder approval procedure under Section 5.11(d), a Parachute Payment
Waiver, in a form reasonably acceptable to Acquiror, from each Person who the
Company or Acquiror reasonably believes is, with respect to the Company, any
Subsidiary and/or any ERISA Affiliate, a "disqualified individual" (within the
meaning of Section 280G of the Code and the regulations promulgated thereunder),
as determined immediately prior to the initiation of the requisite shareholder
approval procedure under Section 5.11(d), and who Acquiror believes might
otherwise receive, have received, or have the right or entitlement to receive a
parachute payment under Section 280G of the Code (such Persons being set forth
on Schedule 5.11(c) of the Company Disclosure Letter).
(d) The Company shall use commercially reasonable efforts to
obtain the approval by such number of shareholders of the Company as is required
by the terms of Section 280G(b)(5)(B) of the Code so as to render the parachute
payment provisions of Section 280G of the Code inapplicable to any and all
payments and/or benefits provided pursuant to Contracts or arrangements that, in
the absence of the executed Parachute Payment Waivers by the affected Persons
under Section 5.11(c), might otherwise result, separately or in the aggregate,
in the payment of any amount and/or the provision of any benefit that would not
be deductible by reason of Section 280G of the Code, with such shareholder
approval to be obtained in a manner which satisfies all applicable requirements
of such Section 280G(b)(5)(B) of the Code and the proposed Treasury Regulations
thereunder, including Q-7 of Section 1.280G-1 of such proposed Treasury
Regulations.
5.12 Notices to Company Securityholders and Employees.
(a) The Company shall timely provide to holders of Company Capital
Stock, Company Options and Company Warrants all advance notices required to be
given to such holders in connection with this Agreement, the Merger and the
transactions contemplated by this Agreement under the Company's Articles of
Incorporation and Bylaws, the Company Option Plan, the Company Warrants or other
applicable Contracts.
(b) The Company shall give all notices and other information
required to be given to the employees of the Company or any Subsidiary, any
collective bargaining unit representing any group of employees of the Company or
any Subsidiary, and any applicable Governmental Authority under the WARN Act,
the National Labor Relations Act, as amended,
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the Code, COBRA and other Applicable Law in connection with the transactions
contemplated by this Agreement or other applicable Contracts.
5.13 Closing Financial Certificate. At least two business days prior to
the Closing Date, the Company shall deliver a draft of the Closing Financial
Certificate to Acquiror. The Company shall cause such certificate to be derived
from and be in accordance with the books and records of the Company and true,
correct and complete. In preparing such certificate, the Company shall use its
commercially reasonable efforts to include all the Merger Expenses then known or
reasonably estimable. Without limiting the generality or effect of the
provisions of Section 5.8, the Company shall provide to Acquiror, promptly after
Acquiror's request, copies of the documents evidencing the amounts set forth on
any such draft or final certificate.
ARTICLE 6
ACQUIROR COVENANTS
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10, Acquiror covenants and agrees with the
Company as follows:
6.1 Advice of Changes. Acquiror shall promptly advise the Company in
writing of (a) any event occurring subsequent to the Agreement Date that would
render any representation or warranty of Acquiror or Merger Sub contained in
Article 4 untrue or inaccurate such that the condition set forth in Section 8.1
would not be satisfied and (b) any breach of any covenant or obligation of
Acquiror or Merger Sub pursuant to this Agreement, any Acquiror Ancillary
Agreement or any Merger Sub Ancillary Agreement such that the condition set
forth in Section 8.2 would not be satisfied. Acquiror and Merger Sub shall not
(i) take or agree to take any action which would reasonably be expected to make
any of their representations or warranties contained in this Agreement
materially untrue or incorrect (such that the condition set forth in Section 8.1
would not be satisfied), or (ii) take or agree to take any action which would
reasonably be expected to prevent them from performing or cause them not to
perform one or more covenants required hereunder to be performed by them (such
that the condition set forth in Section 8.2 would not be satisfied).
6.2 Regulatory Approvals. Acquiror shall promptly execute and file, or
join in the execution and filing of, any application, notification (including
any notification or provision of information, if any, that may be required under
the HSR Act and Applicable Laws of Germany) or other document that may be
necessary in order to obtain the authorization, approval or consent of any
Governmental Authority, whether foreign, federal, state, local or municipal,
which may be reasonably required in connection with the consummation of the
Merger and the other transactions contemplated by this Agreement, any Acquiror
Ancillary Agreement or any Merger Sub Ancillary Agreement. Acquiror shall use
commercially reasonable efforts to obtain all such authorizations, approvals and
consents and shall pay any associated filing fees payable by Acquiror with
respect to such authorizations, approvals and consents. Acquiror shall promptly
inform the Company of any material communication between Acquiror and any
Governmental Authority regarding any of the transactions contemplated hereby. If
Acquiror or any affiliate of Acquiror receives any formal or informal request
for supplemental information or documentary material from any Governmental
Authority with respect to the transactions contemplated hereby,
52
then Acquiror shall make, or cause to be made, as soon as reasonably
practicable, a response in compliance with such request. Acquiror shall direct,
in its sole discretion, the making of such response, but shall consider in good
faith the views of the Company. If any administrative or judicial action or
proceeding is instituted (or threatened in writing to be instituted) challenging
any transaction contemplated by this Agreement as violative of any Applicable
Law, Acquiror shall use commercially reasonable efforts to defend such action or
proceeding; provided, however, that it is expressly understood and agreed that
neither Acquiror nor any of its Subsidiaries or affiliates shall be under any
obligation to make proposals, execute or carry out agreements or submit to
orders providing for (a) the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories
of assets of Acquiror, any of its subsidiaries or affiliates or the Company or
any of the Company Subsidiaries, or the holding separate of the shares of
Company Common Stock or (b) the imposition of any limitation on the ability of
Acquiror or any of its subsidiaries or affiliates to freely conduct their
business or own such assets or to acquire, hold or exercise full rights of
ownership of the shares of Company Capital Stock.
6.3 Satisfaction of Conditions Precedent. Acquiror shall use its
commercially reasonable efforts to satisfy or cause to be satisfied all of the
conditions precedent that are set forth in Article 8, and Acquiror shall use its
commercially reasonable efforts to cause the Merger and the other transactions
contemplated by this Agreement to be consummated in accordance with the terms of
this Agreement. Acquiror shall vote its shares of Company Capital Stock in favor
of the termination of each of the Company Preferred Stock Agreements (as defined
in Section 9.8) to which it is a party, contingent upon and effective as of the
Closing.
Acquiror also covenants and agrees with the Company as follows:
6.4 Employee Benefit Matters. As promptly as reasonably practicable
after the Effective Time, Acquirer shall enroll those persons who were employees
of the Company or its Subsidiaries immediately prior to the Effective Time and
who remain employees of the Surviving Corporation or its Subsidiaries or become
employees of Acquiror following the Effective Time ("CONTINUING EMPLOYEES") in
Acquiror's employee benefit plans for which such employees are eligible (the
"ACQUIROR PLANS"), including its severance plan, medical plan, dental plan, life
insurance plan and disability plan, to the extent permitted by the terms of the
applicable Acquiror Plans on substantially similar terms applicable to employees
of Acquiror who are similarly situated based on positions and levels of
responsibility. Without limiting the generality of the foregoing, Acquiror shall
recognize the prior service with the Company of each of the Continuing Employees
in connection with Acquiror 's PTO policy and severance plan, for purposes of
eligibility, vesting and levels of benefits. Notwithstanding anything in this
Section 6.4 to the contrary, this Section 6.4 shall not operate to (a) duplicate
any benefit provided to any Continuing Employee or to fund any such benefit, (b)
require Acquiror to continue to maintain any severance plan or other employee
benefit plan in effect following the Effective Time for Acquiror's employees,
including the Continuing Employees, or (c) be construed to mean the employment
of the Continuing Employees is not terminable by Acquirer at will at any time,
with or without cause, for any reason or no reason.
6.5 Indemnification of Company Directors and Officers.
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(a) If the Merger is consummated, then until the sixth anniversary
of the Effective Time, Acquiror shall, and shall cause the Surviving Corporation
to, fulfill and honor in all respects the obligations (including with respect to
indemnification, exculpation of liability and advancement of expenses) of the
Company to its directors and officers as of immediately prior to the Effective
Time (the "COMPANY INDEMNIFIED PARTIES") pursuant to any indemnification
provisions under the Company's Articles of Incorporation or Bylaws as in effect
on the Agreement Date and pursuant to any indemnification agreements between the
Company and such Company Indemnified Parties existing as of the Agreement Date
(the "COMPANY INDEMNIFICATION PROVISIONS"), with respect to claims arising out
of acts or omissions occurring at or prior to the Effective Time. Any claims for
indemnification made under this Section 6.5(a) on or prior to the sixth
anniversary of the Effective Time shall survive such anniversary until the final
resolution thereof. However, the foregoing covenants under this Section 6.5(a)
shall not apply to any claim based on a claim for indemnification made by
Acquiror pursuant to Section 11.
(b) For a period of six years from and after the Effective Time,
Acquiror shall, and shall cause the Surviving Corporation to, maintain in
effect, if available, directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy in an amount and on terms no less
advantageous, when taken as a whole, to those applicable to the current
directors and officers of the Company; provided, however, that in no event shall
Acquiror or the Surviving Corporation be required to expend an annual premium
for such coverage in excess of 200% of the annual premium currently paid by the
Company under its directors' and officer's liability insurance policy in effect
as of the date hereof, and if the cost for such coverage is in excess of such
amount, Acquiror or the Surviving Corporation shall only be required to maintain
such coverage as is available for such amount; provided further, however, that
notwithstanding the foregoing, Acquiror may fulfill its obligations under this
Section 6.5(b) by purchasing a policy of directors' and officers' insurance
approved in advance by the Company, or a "tail" policy under the Company's
existing directors' and officers' insurance policy, in either case which (i) has
an effective term of six years from the Effective Time, (ii) covers only those
persons who are currently covered by the Company's directors' and officers'
insurance policy in effect as of the date hereof and only for actions and
omissions occurring on or prior to the Effective Time, (iii) contains terms and
conditions (including, without limitation, coverage amounts) that are no less
advantageous, when taken as a whole, to those applicable to the current
directors and officers of the Company.
(c) This Section 6.5 shall survive the consummation of the Merger,
is intended to benefit each Company Indemnified Party, shall be binding on all
successors and assigns of the Surviving Corporation and Acquiror, and shall be
enforceable by the Company Indemnified Parties.
ARTICLE 7
CLOSING MATTERS
7.1 The Closing. Subject to termination of this Agreement as provided in
Article 10, the Closing shall take place at the offices of Fenwick & West LLP,
Silicon Valley Center, 801 California Street, Mountain View, California, on the
Closing Date. Concurrently with the
54
Closing or at such later date and time as may be mutually agreed in writing by
the Company and Acquiror, the Agreement of Merger shall be filed with the
California Secretary of State in accordance with California Law.
7.2 Exchange.
(a) At the Effective Time, all outstanding Company Capital Stock,
Company Options and Company Warrants shall, by virtue of the Merger and without
further action, cease to exist, and all such securities shall be converted into
the right to receive from Acquiror the cash amount to which the holder thereof
is entitled pursuant to Section 2.1(b), subject to the provisions of Section
2.1(c) (regarding rights of holders of Dissenting Shares), Section 2.1(e)
(regarding the continuation of vesting and repurchase rights) and Section 2.3
(regarding the withholding of the Escrow Cash).
(b) Within three business days after the Spreadsheet Submission
Date, Acquiror shall make available to Equiserve Trust Company, N.A or American
Stock Transfer & Trust Company (the "EXCHANGE AGENT") cash in an amount
sufficient to permit the payment of the cash amounts to which the Company
Securityholders are entitled pursuant to Section 2.1(b), subject to the
provisions of Section 2.1(c) (regarding rights of holders of Dissenting Shares),
Section 2.1(e) (regarding the continuation of vesting and repurchase rights) and
Section 2.3 (regarding the withholding of the Escrow Cash). Unless previously
delivered, as soon as practicable after the Effective Time (and in any event no
later than five business days after the Effective Time), the Acquiror shall
cause to be mailed to each holder of record of Company Capital Stock, Company
Options or Company Warrants that were outstanding immediately prior to the
Effective Time (the certificates or instruments evidencing such securities being
"COMPANY CERTIFICATES") and which were converted into the right to receive cash
pursuant to Section 2.1(b) the following: (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Company Certificates shall pass, only upon delivery of the
Company Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Acquiror and the Company may reasonably specify and
contain an agreement to be bound by the indemnification provisions hereof); and
(ii) instructions for use in effecting the surrender of the Company Certificates
in exchange for the cash amounts specified in Article 2. Upon surrender of a
Company Certificate for cancellation or upon delivery of an affidavit of lost
certificate and an indemnity in form and substance reasonably satisfactory to
Acquiror and the Exchange Agent (the "AFFIDAVIT") (together with any required
Form W-9 or Form W-8) to the Exchange Agent, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the Exchange Agent shall as promptly as reasonably
practicable pay by check to each tendering holder of a Company Certificate or an
Affidavit (each, a "TENDERING COMPANY HOLDER") the cash amounts to which such
Tendering Company Holder is entitled pursuant to Section 2.1(b), subject to the
provisions of Section 2.1(c) (regarding rights of holders of Dissenting Shares),
Section 2.1(e) (regarding the continuation of vesting and repurchase rights) and
Section 2.3 (regarding the withholding of the Escrow Cash).
(c) After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Company or its
transfer agent of any Company Capital Stock, Company Options or Company Warrants
that were outstanding immediately prior to the
55
Effective Time. If, after the Effective Time, any Company Certificates or
Affidavits are presented for any reason, they shall be cancelled and exchanged
as provided in this Section 7.2.
(d) Until Company Certificates are surrendered or an Affidavit is
delivered pursuant to Section 7.2(b), such Company Certificates shall be deemed,
for all purposes, to evidence ownership of the amount of cash which Company
Capital Stock, Company Options or Company Warrants shall have been converted
pursuant to Section 2.1(b), subject to the provisions of Section 2.1(c)
(regarding rights of holders of Dissenting Shares), Section 2.1(e) (regarding
the continuation of vesting and repurchase rights) and Section 2.3 (regarding
the withholding of the Escrow Cash).
7.3 Dissenting Shares. If, in connection with the Merger, holders of
Company Capital Stock are entitled to dissenters' rights pursuant to California
Law, any Dissenting Shares shall not be converted into a right to receive cash
as provided in Section 2.1(b), but shall 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. Each holder of Dissenting Shares
who, pursuant to the provisions of California Law, becomes entitled to payment
of the fair market value of such shares shall receive payment therefor in
accordance with California Law (but only after the value therefor shall have
been agreed upon or finally determined pursuant to California Law). In the event
that any Company Shareholder fails to make an effective demand for payment or
fails to perfect its dissenters' rights as to its shares of Company Capital
Stock or any Dissenting Shares shall otherwise lose their status as Dissenting
Shares, then any such shares shall immediately be converted into the right to
receive the consideration issuable pursuant to Article 2 in respect of such
shares had such shares never been Dissenting Shares, and Acquiror shall issue
and deliver to the holder thereof, at (or as promptly as reasonably practicable
after) the applicable time or times specified in Section 7.2, following the
satisfaction of the applicable conditions set forth in Section 7.2, the cash,
without interest thereon, to which such Company Shareholder would have been
entitled under Section 2.1(b) with respect to such shares, subject to the
provisions of Section 2.1(e) (regarding the continuation of vesting and
repurchase rights) and Section 2.3 (regarding the withholding of the Escrow
Cash). The Company shall give Acquiror prompt notice (and in no event more than
two business days) of any demand received by the Company for appraisal of
Company Capital Stock or notice of exercise of a Company Shareholder's
dissenters' rights, and Acquiror shall have the right to control all
negotiations and proceedings with respect to any such demand. The Company agrees
that, except with Acquiror's prior written consent, it shall not voluntarily
make any payment or offer to make any payment with respect to, or settle or
offer to settle, any such demand for appraisal or exercise of dissenters'
rights.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The Company's obligations to consummate the Merger and take the other
actions required to be taken by the Company at the Closing are subject to the
fulfillment or satisfaction as of the Closing, of each of the following
conditions (it being understood that (a) any one or more of the following
conditions may be waived by the Company in a writing signed on behalf of the
Company and (b) by proceeding with the Closing, the Company shall be deemed to
have waived any of such conditions that remain unfulfilled or unsatisfied):
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8.1 Accuracy of Representations and Warranties. The representations and
warranties of Acquiror and Merger Sub set forth in Article 4 (a) that are
qualified as to materiality shall be true and correct and (b) that are not
qualified as to materiality shall be true and correct in all material respects,
in each case on and as of the Closing with the same force and effect as if they
had been made on the Closing Date (except for any such representations or
warranties that by their terms speak only as of a specific date or dates, in
which case such representations and warranties that are qualified as to
materiality shall be true and correct, and such representations and warranties
that are not qualified as to materiality shall be true and correct in all
material respects, on and as of such specified date or dates), except to the
extent the failure of such representations and warranties to be so true and
correct does not have a material adverse effect on Acquiror's or Merger Sub's
ability to consummate the Merger or to perform their respective obligations
under this Agreement, the Acquiror Ancillary Agreements and the Merger Sub
Ancillary Agreements, and at the Closing the Company shall have received a
certificate to such effect executed by an officer of Acquiror.
8.2 Covenants. Acquiror shall have performed and complied in all
material respects with all of its covenants contained in Article 6 on or before
the Closing (to the extent that such covenants require performance by Acquiror
on or before the Closing), and at the Closing the Company shall have received a
certificate to such effect executed by an officer of Acquiror.
8.3 Compliance with Law; No Legal Restraints; No Litigation. There shall
not be issued, enacted or adopted by any Governmental Authority, any order,
decree, temporary, preliminary or permanent injunction, legislative enactment,
statute, regulation, judgment or ruling that prohibits or renders illegal or
imposes limitations on the Merger or any other material transaction contemplated
by this Agreement.
8.4 Government Consents; HSR Compliance. There shall have been obtained
at or prior to the Closing Date such permits or authorizations, and there shall
have been taken all such other actions by any Governmental Authority or other
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, as may be required to lawfully consummate the Merger. All
applicable waiting periods under the HSR Act and Applicable Laws of Germany
shall have expired or early termination of such waiting periods shall have been
granted by both the Federal Trade Commission and the United States Department of
Justice or applicable Governmental Authorities of Germany without any condition
or requirement requiring or calling for the disposition or divestiture of any
product or other asset of the Company by Acquiror or the Company.
8.5 Company Shareholder Approval. The Merger and this Agreement shall
have been duly and validly approved and adopted, as required by California Law
and the Company's Articles of Incorporation and Bylaws, each as in effect on the
date of such approval and adoption, by the requisite vote or written consent of
the Company Shareholders. In addition, the Merger and this Agreement shall have
been approved and adopted by the holders of a majority of the issued and
outstanding Company Preferred Stock, voting together as a single class, and the
holders of a majority of the issued and outstanding shares of Series C Stock and
Series D Stock, voting together as a single class, in each case excluding shares
of Company Preferred Stock held by Acquiror from the numerator and denominator
in making such calculation.
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8.6 Escrow Agreement. The Escrow Agreement shall have been executed and
delivered by Acquiror, the Escrow Agent and the Representative.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB
Acquiror's and Merger Sub's obligations to consummate the Merger and take
the other actions required to be taken by them at the Closing are subject to the
fulfillment or satisfaction, as of the Closing, of each of the following
conditions (it being understood that (a) any one or more of the following
conditions may be waived by Acquiror and Merger Sub in a writing signed by
Acquiror and (b) by proceeding with the Closing, Acquiror and Merger Sub shall
be deemed to have waived any of such conditions that remains unfulfilled or
unsatisfied):
9.1 Accuracy of Representations and Warranties. The representations and
warranties of the Company set forth in Article 3 shall be true and correct in
all respects on and as of the Closing with the same force and effect as if they
had been made on the Closing Date (except for any such representations or
warranties that by their terms speak only as of a specific date or dates, in
which case such representations and warranties shall be true and correct, in all
respects, on and as of such specified date or dates); provided, however, that
the foregoing condition shall be deemed to have been satisfied even if such
representations or warranties (other than those set forth in Section 3.3(a)) are
not so true and correct so long as the failure of such representations or
warranties to be so true and correct (determined without regard to any
materiality qualifier contained in such representations or warranties),
individually or in the aggregate, does not constitute a Material Adverse Change
with respect to the Company; provided further, that satisfaction of the
foregoing condition pursuant to the immediately preceding clause shall not
affect in any way the rights of Acquiror to seek indemnification pursuant to the
terms of Article 11 hereof for Damages arising out of the failure of any
representation or warranty to be so true and correct. At the Closing Acquiror
shall have received a certificate to the foregoing effect executed by the
Company's President or Chief Executive Officer.
9.2 Covenants. The Company shall have performed and complied in all
material respects with all of its covenants contained in Article 5 at or before
the Closing (to the extent that such covenants require performance by the
Company at or before the Closing), and at the Closing Acquiror shall have
received a certificate to such effect executed by the Company's President or
Chief Executive Officer.
9.3 Compliance with Law; No Legal Restraints; No Litigation. There shall
not be issued, enacted or adopted by any Governmental Authority, any order,
decree, temporary, preliminary or permanent injunction, legislative enactment,
statute, regulation, judgment or ruling that prohibits or renders illegal or
imposes limitations on: (a) the Merger or any other material transaction
contemplated by this Agreement; or (b) Acquiror's right (or the right of any
subsidiary of Acquiror) to conduct the Company Business on or after consummation
of the Merger. There shall be no litigation or proceeding pending against the
Acquiror, the Company or their respective subsidiaries by a Governmental
Authority under which it could reasonably be expected that as a result of such
litigation (i) Acquiror or any of its subsidiaries would be required to the sell
or otherwise dispose of or hold separate (through the establishment of a trust
or otherwise) any assets or categories of assets that are material to Acquiror
and its subsidiaries,
58
taken as a whole, or the Company or any of its subsidiaries would be required to
sell or otherwise dispose of or hold separate (through the establishment of a
trust or otherwise) any assets or categories of assets that are material to the
Company and its subsidiaries taken as a whole, or Acquiror would be required to
hold separate the shares of Company Capital Stock or (ii) there would be imposed
against Acquiror, the Company or any their respective subsidiaries any
limitation on the ability of Acquiror, the Company or any of their respective
subsidiaries to freely conduct their businesses that would be material to
Acquiror and its subsidiaries taken as a whole, the Company and its subsidiaries
taken as a whole, or Acquiror's ability to hold or exercise full rights of
ownership of the shares of Company Capital Stock.
9.4 Government Consents; HSR Compliance. There shall have been obtained
at or prior to the Closing Date such permits or authorizations, and there shall
have been taken all such other actions by any Governmental Authority or other
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, as may be required to consummate the Merger, including
requirements under applicable federal and state securities laws. All applicable
waiting periods under the HSR Act and Applicable Laws of Germany shall have
expired or early termination of such waiting periods shall have been granted by
both the Federal Trade Commission and the United States Department of Justice or
applicable Governmental Authorities of Germany without any condition or
requirement requiring or calling for the disposition or divestiture of any
product or other asset of the Company by Acquiror or the Company.
9.5 Opinion of Company's Legal Counsel. Acquiror shall have received
from Wilson Sonsini Goodrich & Rosati, legal counsel to the Company, an opinion
opining to the matters set forth in Exhibit E.
9.6 Company Shareholder Approval. The Merger and this Agreement shall
have been duly and validly approved and adopted, as required by California Law
and the Company's Articles of Incorporation and Bylaws, each as in effect on the
date of such approval and adoption, by the requisite vote or written consent of
the Company Shareholders.
9.7 Termination of Company Options, Company Warrants and Other Rights.
All Company Options (other than Unvested Company Options), Company Warrants and
all other direct or indirect rights to acquire shares of Company Capital Stock
shall have been exercised and converted into shares of Company Capital Stock or
shall have been terminated without further obligation or Liability of the
Company, Acquiror or the Surviving Corporation (other than to make the payments
contemplated by Section 2.1(b)).
9.8 Termination of Company Shareholder Documents and Rights. Each of the
Amended and Restated Investors' Rights Agreement dated July 20, 2000, Amended
and Restated Right of First Refusal and Co-Sale Agreements dated July 20, 2000
and August 19, 1999, the Voting Agreement July 20, 2000, and Management Rights
Letters dated August 19, 1999 and June 4, 1998 (collectively, the "COMPANY
PREFERRED STOCK AGREEMENTS") shall have been terminated, effective as of the
Closing, in accordance with their respective terms, and there shall be no
continuing obligations of the Company thereunder. Any rights of first refusal,
rights to any liquidation preference or redemption rights of any Company
Shareholder shall have been terminated or waived, effective as of, and
contingent upon, the Closing. The Articles of
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Incorporation of the Company shall have been amended by all necessary corporate
action to exempt the Merger and other transactions contemplated by this
Agreement from application of the liquidation preference provisions of such
Articles of Incorporation.
9.9 Resignations of Directors and Officers. The persons holding the
positions of a director or officer of the Company and each Company Subsidiary,
in office immediately prior to the Effective Time, shall have resigned from such
positions in writing effective as of the Effective Time.
9.10 Closing Financial Certificate and Spreadsheet. Acquiror shall have
received the Closing Financial Certificate and Spreadsheet from the Company;
provided, however, that such receipt shall not be deemed to be an agreement by
Acquiror that the Closing Financial Certificate or Spreadsheet is accurate and
shall not diminish Acquiror's remedies hereunder if the Closing Financial
Certificate or Spreadsheet is not accurate.
9.11 Section 280G Approval. If, in Acquiror's belief, any Contract or
arrangement to which the Company is a party would be reasonably likely to give
rise to or has given rise to the payment of any amount that would not be
deductible pursuant to Section 280G of the Code, such amount shall have been
subject to a vote by the Company Shareholders as required by Section 5.11(d),
and, as required by Section 5.11(c), any "disqualified individuals" (as defined
in Section 280G of the Code) shall have agreed to, and shall, forfeit any
payments that would be non-deductible if the shareholder approval described in
Section 5.11(d) is not obtained.
9.12 Company Good Standing Certificates. Acquiror shall have received a
certificate from the California Secretary of State and each other State or
jurisdiction in which the Company or any Company Subsidiary is qualified to do
business certifying that the Company or such Company Subsidiary is in good
standing and that all applicable taxes and fees of the Company or such Company
Subsidiary through and including the Closing Date have been paid.
9.13 Termination of Company Benefit Arrangements. The Company shall have
delivered (a) a true, correct and complete copy of resolutions adopted by the
Board of Directors of the Company, certified by the Secretary of the Company,
authorizing the termination of each or all of the Company Benefit Arrangements
intended to constitute a Code Section 401(k) arrangement, requested by Acquiror
to be terminated, and (b) an amendment to the 401(k) Plan, executed by the
Company, that is sufficient to assure compliance with all applicable
requirements of the Code and regulations thereunder so that the tax-qualified
status of the 401(k) Plan shall be maintained at the time of its termination.
9.14 Escrow Agreement. The Escrow Agreement shall have been executed and
delivered by the Escrow Agent and the Representative.
9.15 FIRPTA. Acquiror, as agent for the shareholders of the Company,
shall have received a properly executed Foreign Investment and Real Property Tax
Act of 1980 Notification Letter, in form and substance reasonably satisfactory
to Acquiror, which states that shares of Company Capital Stock do not constitute
"United States real property interests" under Section 897(c) of the Code, for
purposes of satisfying Acquiror's obligations under Treasury Regulation Section
1.1445-2(c)(3).
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ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to the Effective Time by the mutual written consent of Acquiror
and the Company.
10.2 Unilateral Termination.
(a) Either Acquiror or the Company, by giving written notice to
the other, may terminate this Agreement if a court of competent jurisdiction or
other Governmental Authority shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger or any
other material transaction contemplated by this Agreement.
(b) Either Acquiror or the Company, by giving written notice to
the other, may terminate this Agreement if the Merger shall not have been
consummated by midnight Pacific Time on August 15, 2004; provided, however, that
the right to terminate this Agreement pursuant to this Section 10.2(b) shall not
be available to any party whose breach of a representation or warranty or
covenant made under this Agreement by such party results in the failure of any
condition set forth in Article 8 or Article 9 to be fulfilled or satisfied on or
before such date.
(c) Either Acquiror or the Company may terminate this Agreement at
any time prior to the Effective Time if (i) the other has committed a breach of
(1) any of its representations and warranties under Article 3 or Article 4, as
applicable, or (2) any of its covenants under Article 5 or Article 6, as
applicable, and has not cured such breach within ten business days after the
party seeking to terminate this Agreement has given the other party written
notice of the material breach and its intention to terminate this Agreement
pursuant to this Section 10.2(c) (provided, however, that no such cure period
shall be available or applicable to any such breach which by its nature cannot
be cured) and (ii) if not cured on or prior to the Closing Date, such breach
would result in the failure of any of the conditions set forth in Article 9 or
Article 8, as applicable, to be fulfilled or satisfied; provided, however, that
the right to terminate this Agreement under this Section 10.2(c) shall not be
available to a party if the party is at that time in material breach of this
Agreement.
(d) Acquiror, by giving written notice to the Company, may
terminate this Agreement if the Company shall have failed to deliver an executed
Company Shareholder Consent and an executed Company Shareholder Letter from each
Company Shareholder listed in Exhibit B-1, which together constitute the Company
Shareholder Approval, no later than 5:00 p.m. Pacific Time on the date
immediately following the Agreement Date.
10.3 Effect of Termination. In the event of termination of this Agreement
as provided in Section 10.2, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Acquiror, Merger Sub or
the Company or their respective officers, directors, shareholders or affiliates;
provided, however, that (i) the provisions of this Section 10.3 (Effect of
Termination) and Article 12 (Miscellaneous) shall remain in full force and
effect and survive any termination of this Agreement and (ii) nothing herein
shall relieve any
61
party hereto from liability in connection with any material breach of any of
such party's representations, warranties or covenants contained herein.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
AND REMEDIES; CONTINUING COVENANTS
11.1 Survival. If the Merger is consummated, the representations and
warranties of the Company contained in this Agreement and the other agreements,
certificates and documents contemplated hereby shall survive the Effective Time
and remain in full force and effect, regardless of any investigation or
disclosure made by or on behalf of any of the parties to this Agreement, until
the one year anniversary of the Effective Time; provided, however, that no right
to indemnification pursuant to Article 11 in respect of any claim based upon any
failure of a representation or warranty that is set forth in a Notice of Claim
delivered prior to the applicable expiration date of such representation or
warranty shall be affected by the expiration of such representation or warranty;
and provided, further, that such expiration shall not affect the rights of
Acquiror under Article 11 or otherwise to seek recovery of Damages arising out
of any fraud, willful breach or intentional misrepresentation until the
expiration of the applicable statute of limitations. If the Merger is
consummated, the representations and warranties of Acquiror contained in this
Agreement and the other agreements, certificates and documents contemplated
hereby shall expire and be of no further force or effect as of the Effective
Time. If the Merger is consummated, all covenants of the parties (including the
covenants set forth in Article 5 and Article 6) shall expire and be of no
further force or effect as of the Effective Time, except to the extent such
covenants provide that they are to be performed after the Effective Time;
provided, however, that no right to indemnification pursuant to Article 11 in
respect of any claim based upon any breach of a covenant shall be affected by
the expiration of such covenant.
11.2 Agreement to Indemnify. Each Effective Time Holder shall severally
(based on each such holder's Pro Rata Share), and not jointly, indemnify and
hold harmless Acquiror from and against any and all Damages directly or
indirectly arising out of, resulting from or in connection with: (a) any failure
of any representation or warranty made by the Company in this Agreement, the
Company Disclosure Letter or any Company Ancillary Agreement to be true and
correct as of the date of this Agreement and as of the Closing Date (as though
such representation or warranty were made as of the Closing Date, except in the
case of representations and warranties which by their terms speak only as of a
specific date or dates); (b) any failure of any certification, representation or
warranty made by the Company in any certificate delivered to Acquiror pursuant
to Article 9 (other than the Closing Financial Certificate) to be true and
correct as of the date such certificate is delivered to Acquiror; (c) any breach
of or default in connection with any of the covenants or agreements made by the
Company in this Agreement, the Company Disclosure Letter or any Company
Ancillary Agreement; (d) any inaccuracies in the Spreadsheet or Closing
Financial Certificate; (e) any Indemnifiable Merger Expenses; or (f) any
Dissenting Shares Excess Payments. "DAMAGES" means losses, costs, damages,
liabilities and expenses, including reasonable attorneys' fees, other
professionals' and experts fees, costs of investigation and court costs, and
including amounts that Acquiror properly pays to officers, directors or other
agents of Acquiror or the Company, but excluding special, consequential,
incidental, punitive or exemplary damages (except that such excluded damages
shall not be so excluded to the extent that Acquiror pays any such damages to
62
a third party or records a liability or reserve on its financial statements in
accordance with GAAP for such payment). In determining the amount of any Damages
in respect of the failure of any representation or warranty to be true and
correct as of any particular date (but not in determining whether any such
representation and warranty is, in fact, true and correct), any materiality
qualifier contained in such representation or warranty shall be disregarded.
11.3 Limitations.
(a) Nothing in this Agreement shall limit the liability of the
Company for any breach of any representation, warranty, covenant or agreement if
the Merger is not consummated.
(b) If the Merger is consummated, the indemnification provisions
set forth in Section 11.2 shall be the sole and exclusive remedy under this
Agreement for the matters listed in the foregoing clauses (a)-(f) of Section
11.2, except in the case of fraud, willful breach or intentional
misrepresentation. The Escrow Cash shall be the sole and exclusive security for
Acquiror's indemnification claims under this Article 11.
(c) If the Merger is consummated, notwithstanding anything
contained herein to the contrary, Acquiror may not receive any Escrow Cash in
respect of any claim for indemnification that is made pursuant to clauses
(a)-(b) of Section 11.2 that does not involve fraud, willful breach or
intentional misrepresentation unless and until Damages in an aggregate amount
greater than $150,000 (the "DEDUCTIBLE") have been incurred, paid or properly
accrued, in which case Acquiror may make claims for indemnification for only
those Damages that exceed the Deductible.
(d) If the Merger is consummated, notwithstanding anything to the
contrary set forth herein, in determining the amount of any Damages, the amount
of such Damages shall be calculated net of any insurance proceeds (net of any
collection costs incurred by Acquiror) and any indemnity, contribution or other
similar payment received by the Acquiror from any third party with respect
thereto (it being understood and hereby agreed that the Indemnified Party shall
use commercially reasonable efforts to collect any available insurance proceeds
and any indemnities, contributions or other similar payments from third parties,
but shall not be required to commence litigation against any third parties). In
the event that Acquiror shall collect any available insurance proceeds and any
indemnities, contributions or other similar payments from third parties
following its receipt of any Escrow Cash in respect of a claim hereunder but
prior to the release of the Escrow Cash pursuant hereto, Acquiror shall
redeposit into the Escrow Cash account the amounts so collected from the Escrow
Cash in an amount equal to the amount of such proceeds or other payments used to
reduce the amount of Damages as set forth in the first sentence of this
paragraph.
11.4 Appointment of Representative.
(a) By voting in favor of the Merger or participating in the
conversion of Company Common Stock and Company Options, each Effective Time
Holder approves the designation of and designates the Representative as the
representative of the Effective Time Holders and as the attorney-in-fact and
agent for and on behalf of each Effective Time Holder
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solely with respect to claims for indemnification under this Article 11, which
shall include the right to: (a) give and receive notices and communications to
or from and/or the Escrow Agent relating to this Agreement, the Escrow Agreement
or any of the transactions and other matters contemplated hereby or thereby
(except to the extent that this Agreement or the Escrow Agreement expressly
contemplates that any such notice or communication shall be given or received by
such holders individually); (b) authorize the release or delivery to Acquiror of
the Escrow Cash in satisfaction of indemnification claims by Acquiror pursuant
to this Article 11 (including by not objecting to such claims); (c) agree to,
object to, negotiate, resolve, enter into settlements and compromises of, demand
litigation of, and comply with orders of courts with respect to, indemnification
claims by Acquiror pursuant to this Article 11; and (d) take all actions
necessary or appropriate in the judgment of the Representative for the
accomplishment of the foregoing. The Representative shall have authority and
power to act on behalf of each Effective Time Holder with respect to the
disposition, settlement or other handling of all indemnification claims under
this Article 11 and all rights or obligations arising under this Article 11. The
Effective Time Holders shall be bound by all actions taken and documents
executed by the Representative in connection with any indemnification claims
under this Article 11, and Acquiror shall be entitled to rely on any action or
decision of the Representative. The individual serving as the Representative may
be replaced from time to time by the holders of a majority in interest of the
Escrow Cash then on deposit with the Escrow Agent upon not less than ten days
prior written notice to Acquiror. No bond shall be required of the
Representative, and the Representative shall receive no compensation for his
services. Notices or communications to or from the Representative shall
constitute notice to or from each of the Effective Time Holders.
(b) In performing the functions specified in this Agreement, the
Representative shall not be liable to any Effective Time Holder in the absence
of gross negligence or willful misconduct on the part of the Representative.
Each Effective Time Holder shall severally (based on each such holder's Pro Rata
Share), and not jointly, indemnify and hold harmless the Representative from and
against any loss, liability or expense incurred without gross negligence or
willful misconduct on the part of the Representative and arising out of or in
connection with the acceptance or administration of his duties hereunder,
including any out-of-pocket costs and expenses and legal fees and other legal
costs reasonably incurred by the Representative. If not paid directly to the
Representative by the Effective Time Holders, such losses, liabilities or
expenses may be recovered by the Representative from Escrow Cash otherwise
distributable to the Effective Time Holders (and not distributed or
distributable to Acquiror or subject to a pending indemnification claim of
Acquiror) following the one year anniversary of the Effective Time pursuant to
the terms hereof and of the Escrow Agreement, at the time of distribution, and
such recovery will be made from the Effective Time Holders according to their
respective Pro Rata Shares.
11.5 Notice of Claim.
(a) As used herein, the term "CLAIM" means a claim for
indemnification of Acquiror under this Article 11. Subject to the terms of
Section 11.5(b) and (c), Acquiror shall give written notice of a Claim executed
by an officer of Acquiror (a "NOTICE OF CLAIM") to the Representative (with a
copy to the Escrow Agent if the Claim involves recovery against the Escrow Cash)
promptly after Acquiror becomes aware of the existence of any potential claim by
Acquiror for indemnification from the Effective Time Holders under this Article
11.
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(b) Each Notice of Claim by Acquiror given pursuant to Section
11.5 shall contain the following information: (i) that Acquiror has directly or
indirectly incurred, paid or properly accrued (in accordance with GAAP) or, in
good faith, believes it shall have to directly or indirectly incur, pay or
accrue (in accordance with GAAP), Damages in an aggregate stated amount arising
from such Claim (which amount may be the amount of damages claimed by a third
party in an action brought against the Acquiror based on alleged facts, which if
true, would give rise to liability for Damages to Acquiror under this Article
11); and (ii) a brief description, in reasonable detail (to the extent
reasonably available to Acquiror), of the facts, circumstances or events giving
rise to the alleged Damages based on Acquiror's good faith belief thereof,
including the identity and address of any third-party claimant (to the extent
reasonably available to Acquiror) and copies of any formal demand or complaint,
the amount of Damages, the date each such item was incurred, paid or properly
accrued, or the basis for such anticipated liability, and the specific nature of
the breach to which such item is related.
(c) The Acquiror may submit a Notice of Claim at any time during
the period commencing with the Effective Time and ending on the one year
anniversary of the Effective Time (the "SURVIVAL PERIOD"), but shall not be
permitted to bring a Notice of Claim at any time after the expiration of the
Survival Period (and any delivery or attempted delivery of a Notice of Claim
after such time shall be void and of no force or effect). Notwithstanding
anything contained herein to the contrary, any Claims for Damages specified in
any Notice of Claim delivered to the Representative prior to expiration of the
Survival Period shall remain outstanding until such Claims for Damages have been
resolved or satisfied, notwithstanding the expiration of the Survival Period.
Until the expiration of the Survival Period, no delay on the part of Acquiror in
giving the Representative a Notice of Claim shall relieve any Effective Time
Holder from any of its obligations under this Article 11 unless (and then only
to the extent that) the Representative or the Effective Time Holders are
materially prejudiced thereby.
11.6 Defense of Third-Party Claims.
(a) Acquiror shall determine and conduct the defense or settlement
of any claim, demand, suit, action, arbitration, investigation, inquiry or
proceeding brought by a third party against Acquiror (in each such case, a
"THIRD-PARTY CLAIM") and the costs and expenses incurred by Acquiror in
connection with such defense or settlement (including reasonable attorneys'
fees, other professionals' and experts' fees and court or arbitration costs)
shall be included in the Damages for which Acquiror may seek indemnification
pursuant to a Claim made hereunder.
(b) The Representative shall have the right to receive copies of
all pleadings, notices and communications with respect to the Third-Party Claim
to the extent that receipt of such documents by the Representative does not
affect any privilege relating to Acquiror and may participate in, but not to
determine or conduct, any defense of the Third-Party Claim or settlement
negotiations with respect to the Third-Party Claim.
(c) No settlement of any such Third-Party Claim with any third
party claimant shall be determinative of the existence of or amount of Damages
relating to such matter, except with the consent of the Representative, which
consent shall not be unreasonably withheld, conditioned or delayed and which
shall be deemed to have been given unless the Representative
65
shall have objected within 15 days after a written request for such consent by
Acquiror. In the event that the Representative has consented to any such
settlement, neither the Representative nor any Effective Time Holder shall have
any power or authority to object under any provision of this Article 11 to the
amount of any claim by or on behalf of Acquiror against the Escrow Cash or
Effective Time Holders for indemnity with respect to such settlement.
11.7 Resolution of Notice of Claim. Each Notice of Claim given by
Acquiror shall be resolved as follows:
(a) Uncontested Claims. If, within 15 business days after a Notice
of Claim is received by the Representative, the Representative does not contest
such Notice of Claim in writing to Acquiror as provided in Section 11.7(b), the
Representative shall be conclusively deemed to have consented, on behalf of all
Effective Time Holders, (i) to the recovery by Acquiror of the full amount of
Damages specified in the Notice of Claim in accordance with this Article 11,
including the forfeiture of Escrow Cash, solely to the extent that such Damages
do not exceed the amount of Escrow Cash then held in escrow by the Escrow Agent,
and (ii) without further notice, to have stipulated to the entry of a final
judgment for damages against the Effective Time Holders for such amount in any
court having jurisdiction over the matter where venue is proper.
(b) Contested Claims. If the Representative gives Acquiror written
notice contesting all or any portion of a Notice of Claim (a "CONTESTED CLAIM")
(with a copy to the Escrow Agent) within the 15 business day period specified in
Section 11.7(a), then such Contested Claim shall be resolved by either (i) a
written settlement agreement executed by Acquiror and the Representative (a copy
of which shall be furnished to the Escrow Agent) or (ii) in the absence of such
a written settlement agreement within 30 business days following receipt by
Acquiror of the written notice from the Representative, by binding litigation
between Acquiror and the Representative in accordance with the terms and
provisions of Section 11.7(c).
(c) Litigation of Contested Claims. Either Acquiror or the
Representative may bring suit in the courts of the State of California and the
Federal courts of the United States of America located within the County of
Santa Clara in the State of California to resolve the Contested Claim.
Regardless of which party brings suit to resolve a matter, Acquiror shall bear
the burden of proof by a preponderance of the evidence that Acquiror is entitled
to indemnification pursuant to this Article 11. Judgment upon any award rendered
by the trial court may be entered in any court having jurisdiction. For purposes
of this Section 11.8(c), in any suit hereunder in which any claim or the amount
thereof stated in the Notice of Claim is at issue, Acquiror shall be deemed to
be the non-prevailing party unless the trial court awards Acquiror more than
one-half of the amount in dispute; otherwise, the Representative and Effective
Time Holders shall be deemed to be the non-prevailing party. The non-prevailing
party to a suit shall pay its own expenses and the expenses, including
attorneys' fees and costs, reasonably incurred by the other party to the suit.
11.8 Release of Remaining Escrow Cash. Within five business days
following the expiration of the Survival Period, Acquiror shall instruct the
Escrow Agent to deliver to the Effective Time Holders all of the Escrow Cash
then remaining in escrow under the Escrow Agreement (if any) in excess of any
amount of Escrow Cash that is necessary to satisfy all
66
unresolved, unsatisfied or disputed claims for Damages specified in any Notice
of Claim delivered to the Representative before the expiration of the Survival
Period. If any Claims are unresolved, unsatisfied or disputed as of the
expiration of the Survival Period, then the Escrow Agent shall retain possession
and custody of that amount of Escrow Cash that equals the total maximum amount
of Damages then being claimed by Acquiror in all such unresolved, unsatisfied or
disputed Claims, and as soon as all such Claims have been resolved, the Escrow
Agent shall deliver to the Effective Time Holders all remaining Escrow Cash (if
any) not required to satisfy such Claims.
11.9 Tax Consequences of Indemnification Payments. All payments (if any)
made to Acquiror pursuant to any indemnification obligations under this Article
11 will be treated as adjustments to the purchase price for tax purposes and
such agreed treatment will govern for purposes of this Agreement, unless
otherwise required by law.
ARTICLE 12
MISCELLANEOUS
12.1 Governing Law. The internal laws of the State of California,
irrespective of its conflicts of law principles, shall govern the validity of
this Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto. The parties hereto
hereby irrevocably submit to the exclusive jurisdiction of the courts of the
State of California and the Federal courts of the United States of America
located within the County of Santa Clara in the State of California solely in
respect of the interpretation and enforcement of the provisions of this
Agreement and of the documents referred to in this Agreement, and in respect of
the transactions contemplated hereby and thereby (including resolution of
disputes under Section 11.8(c)), and hereby waive, and agree not to assert, as a
defense in any action, suit or proceeding for the interpretation or enforcement
hereof or thereof, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such document
may not be enforced in or by such courts, and the parties hereto irrevocably
agree that all claims with respect to such action or proceeding shall be heard
and determined in such a California State or Federal court. The parties hereby
consent to and grant any such court jurisdiction over the person of such parties
and over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner
provided in Section 12.9 or in such other manner as may be permitted by
Applicable Law, shall be valid and sufficient service thereof. With respect to
any particular action, suit or proceeding, venue shall lie solely in Santa Clara
County, California.
12.2 Assignment; Binding Upon Successors and Assigns. This Agreement
shall inure to the benefit of the successors and assigns of Acquiror, including
any successor to, or assignee of, all or substantially all of the business and
assets of Acquiror. Except as set forth in the preceding sentence, no party
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other parties hereto. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Any assignment in violation of this provision
shall be void.
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12.3 Severability. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or unenforceable,
then the remainder of this Agreement and the application of such provision to
other persons or circumstances shall be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that shall achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original as regards any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all parties reflected hereon as signatories.
12.5 Other Remedies. Except as otherwise expressly provided herein, any
and all remedies herein expressly conferred upon a party hereunder shall be
deemed cumulative with and not exclusive of any other remedy conferred hereby or
by law on such party, and the exercise of any one remedy shall not preclude the
exercise of any other. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any State
having jurisdiction.
12.6 Amendments and Waivers. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof
shall not be deemed to constitute a waiver of any other default or any
succeeding breach or default. This Agreement may be amended by the parties
hereto as provided in this Section 12.6 at any time before or after adoption of
this Agreement by the Company Shareholders, but, after such adoption, no
amendment shall be made which by Applicable Law requires the further approval of
the Company Shareholders without obtaining such further approval. At any time
prior to the Effective Time, each of Company and Acquiror, by action taken by
its Board of Directors, may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the other, (b)
waive any inaccuracies in the representations and warranties made to it
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements or conditions for its benefit contained
herein. No such waiver or extension shall be effective unless signed in writing
by the party against whom such waiver or extension is asserted. The failure of
any party to enforce any of the provisions hereof shall not be construed to be a
waiver of the right of such party thereafter to enforce such provisions.
12.7 Expenses. Whether or not the Merger is successfully consummated,
each party shall bear its respective legal, auditors', investment bankers' and
financial advisors' fees and other expenses incurred with respect to this
Agreement, the Merger and the transactions contemplated hereby.
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12.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party shall be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including costs, expenses and fees on any appeal). The
prevailing party shall be entitled to recover its costs of suit, regardless of
whether such suit proceeds to final judgment.
12.9 Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be either hand delivered in
person, sent by facsimile, sent by certified or registered first-class mail,
postage pre-paid, or sent by nationally recognized express courier service. Such
notices and other communications shall be effective upon receipt if hand
delivered or sent by facsimile, three days after mailing if sent by mail, and
one day after dispatch if sent by express courier, to the following addresses,
or such other addresses as any party may notify the other parties in accordance
with this Section 12.9:
If to Acquiror or Merger Sub:
Symantec Corporation
20330 Stevens Creek Blvd.
Cupertino, CA 95014
Attention: Arthur F. Courville, Sr. V.P. and General Counsel
Facsimile No.: (408) 517-8121
Telephone No.: (408) 517-7676
with a copy to:
Fenwick & West LLP
Silicon Valley Center
801 California Street
Mountain View, CA 94041
Attention: Daniel J. Winnike, Esq.
Facsimile No.: (650) 988-8500
Telephone No.: (650) 938-5200
If to the Company:
Brightmail Incorporated
301 Howard Street, Suite 1800
San Francisco, CA 94105
Attention: Enrique Salem, President and CEO
Fax Number: (415) 348-9636
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with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: John T. Sheridan, Esq.
Fax Number: (650) 493-6811
If to the Representative:
John C. Colligan
Accel Partners
428 University Avenue
Palo Alto, CA 94301
Fax Number: (650) 614-4880
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: John T. Sheridan, Esq.
Fax Number: (650) 493-6811
12.10 Interpretation; Rules of Construction. When a reference is made in
this Agreement to Exhibits, such reference shall be to an Exhibit to this
Agreement unless otherwise indicated. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. When a reference is made in this Agreement to Articles,
such reference shall be to an Article of this Agreement unless otherwise
indicated. The words "include", "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation".
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Reference to the Subsidiaries of an entity shall be deemed to include all direct
and indirect Subsidiaries of such entity. The parties hereto agree that they
have been represented by legal counsel during the negotiation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document shall be construed against the party drafting such agreement or
document.
12.11 No Joint Venture. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall have
the power to control the activities and operations of any other and their status
is, and at all times shall continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other party. No party shall hold itself out as having any authority
or relationship in contravention of this Section 12.11.
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12.12 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
12.13 Third Party Beneficiary Rights. No provisions of this Agreement are
intended, nor shall be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
employee, affiliate, shareholder, partner or any party hereto or any other
Person unless specifically provided otherwise herein and, except as so provided,
all provisions hereof shall be personal solely between the parties to this
Agreement; except that (a) Article 2 is intended to benefit Company
Securityholders; (b) Section 6.4 is intended to benefit Continuing Employees;
and (c) Section 6.5 is intended to benefit the Company Indemnified Persons.
12.14 Public Announcement. Upon execution of this Agreement, Acquiror and
the Company shall issue a press release approved by both parties announcing the
Merger. Thereafter, Acquiror may issue such press releases, and make such other
disclosures regarding the Merger, as it determines are required under applicable
securities laws or regulatory rules. Prior to the publication of such initial
and mutually agreed press release, neither party shall make any public
announcement relating to this Agreement or the transactions contemplated hereby
(except as may be required by law) and the Company shall use its reasonable
efforts to prevent any trading in shares of Acquiror Common Stock by its
officers, directors, employees, shareholders and agents.
12.15 Confidentiality. The Company and Acquiror each confirm that they
have entered into the Mutual NDA and that they are each bound by, and shall
abide by, the provisions of such Mutual NDA; provided, however, that Acquiror
shall not be bound by such Mutual NDA after the Closing. If this Agreement is
terminated, the Mutual NDA shall remain in full force and effect, and all copies
of documents containing confidential information of a disclosing party shall be
returned by the receiving party to the disclosing party or be destroyed, as
provided in the Mutual NDA.
12.16 Entire Agreement. This Agreement, the exhibits and schedules hereto,
the Company Ancillary Agreements, the Acquiror Ancillary Agreements and the
Merger Sub Ancillary Agreements constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect hereto other than the Mutual NDA. The express terms hereof
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
12.17 Waiver of Jury Trial. EACH OF ACQUIROR, MERGER SUB, THE COMPANY AND
THE REPRESENTATIVE 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 OR THE ACTIONS OF
ACQUIROR, MERGER SUB,
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THE COMPANY, SUB AND THE REPRESENTATIVE IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
[SIGNATURE PAGE NEXT]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SYMANTEC CORPORATION BRIGHTMAIL INCORPORATED
By:___________________________ By:_____________________________
Name:_________________________ Name:___________________________
Title:________________________ Title:__________________________
BRAZIL ACQUISITION CORP. REPRESENTATIVE
By:___________________________ By:_____________________________
Name:_________________________ Name:___________________________
Title:________________________
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
LIST OF EXHIBITS
Exhibit A Form of Agreement of Merger
Exhibit B-1 List of Initial Signatories to Company Shareholder Consent
Exhibit B-2 Form of Company Shareholder Consent
Exhibit B-3 Form of Company Shareholder Letter
Exhibit C Valuation Spreadsheet
Exhibit D Form of Escrow Agreement
Exhibit E Matters to be Covered in the Opinion of Wilson Sonsini Goodrich &
Rosati
THE EXHIBITS AND SCHEDULES TO THIS AGREEMENT HAVE BEEN OMITTED PURSUANT TO ITEM
601(b)(2) OF REGULATION S-K. THE COMPANY WILL FURNISH COPIES OF ANY OF THE
EXHIBITS AND SCHEDULES TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.