Exhibit 10.1 EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CONCURRENT COMPUTER CORPORATION
(THE PURCHASER),
STREAM ACQUISITION, INC.
(NEWCO),
EVERSTREAM HOLDINGS, INC.
(THE COMPANY)
CERTAIN SELLING SHAREHOLDERS OF THE COMPANY
(THE SELLERS)
AS OF AUGUST 19, 2005
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Other Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.4 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE II TERMS OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.1 Statutory Merger . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.2 Effective Tim e. . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.3 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . 15
Section 2.4 Certificate of Incorporation; By-laws. . . . . . . . . . . . . . 15
Section 2.5 Directors and Officers.. . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES . . . . . . . 15
Section 3.1 Merger Consideration; Conversion and Cancellation of Securities. 15
Section 3.2 Exchange of Certificates.. . . . . . . . . . . . . . . . . . . . 16
Section 3.3 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.4 Escrow.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.5 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV COMPANY REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 19
Section 4.1 Organization.. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.3 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.4 Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.5 Absence of Restrictions and Conflicts. . . . . . . . . . . . . . 21
Section 4.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.7 Title to Personal Property; Related Matters. . . . . . . . . . . 22
Section 4.8 Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.9 Financial Statements.. . . . . . . . . . . . . . . . . . . . . . 23
Section 4.10 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 23
Section 4.11 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . 24
Section 4.12 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.13 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.14 Company Contracts. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.15 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.16 Officers and Employees . . . . . . . . . . . . . . . . . . . . . 27
Section 4.17 Company Benefit Plans. . . . . . . . . . . . . . . . . . . . . . 28
Section 4.18 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.19 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.20 Environmental, Health, and Safety Matters. . . . . . . . . . . . 32
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TABLE OF CONTENTS
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Section 4.21 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 33
Section 4.22 Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.23 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 37
Section 4.24 Undisclosed Payments . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.25 Accounts Receivable; Accounts Payable. . . . . . . . . . . . . . 37
Section 4.26 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.27 Ethical Practices. . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.28 Brokers, Finders, and Investment Bankers . . . . . . . . . . . . 38
Section 4.29 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.30 Sellers Authority. . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.31 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE V REPRESENTATIONS AND WARRANTIES OF NEWCO AND
PURCHASER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.1 Organization.. . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.3 Purchaser and Newco Capital Stock. . . . . . . . . . . . . . . . 40
Section 5.4 Purchaser SEC Reports. . . . . . . . . . . . . . . . . . . . . . 41
Section 5.5 Absence of Restrictions and Conflicts. . . . . . . . . . . . . . 41
Section 5.6 No Stockholder Approval. . . . . . . . . . . . . . . . . . . . . 42
Section 5.7 No Undisclosed Liabilities.. . . . . . . . . . . . . . . . . . . 42
Section 5.8 Absence of Certain Changes.. . . . . . . . . . . . . . . . . . . 42
Section 5.9 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.10 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.11 Purchaser Contracts. . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.13 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.14 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.15 Brokers, Finders, and Investment Bankers . . . . . . . . . . . . 44
Section 5.16 Investment Representation. . . . . . . . . . . . . . . . . . . . 44
ARTICLE VI CERTAIN COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . 45
Section 6.1 Company Business Conduct . . . . . . . . . . . . . . . . . . . . 45
Section 6.2 Inspection and Access to Information . . . . . . . . . . . . . . 48
Section 6.3 No Solicitation of Transactions. . . . . . . . . . . . . . . . . 48
Section 6.4 Reasonable Efforts; Further Assurances; Cooperation. . . . . . . 50
Section 6.5 Public Announcements . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.6 Supplements to Schedules.. . . . . . . . . . . . . . . . . . . . 52
Section 6.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 6.8 Contract Consents. . . . . . . . . . . . . . . . . . . . . . . . 52
Section 6.9 Tax Free Reorganization. . . . . . . . . . . . . . . . . . . . . 52
Section 6.10 Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.11 Employment Matters . . . . . . . . . . . . . . . . . . . . . . . 53
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Section 6.12 Securities Laws Matters. . . . . . . . . . . . . . . . . . . . . 53
Section 6.13 Section 3(a)(10) Exemption . . . . . . . . . . . . . . . . . . . 55
Section 6.14 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 6.15 Directors' and Officers' Indemnification . . . . . . . . . . . . 56
Section 6.16 Closing Date Capital Structure . . . . . . . . . . . . . . . . . 57
Section 6.17 Termination of 401(k) Plan . . . . . . . . . . . . . . . . . . . 57
Section 6.18 Alternative Exemption or Registration. . . . . . . . . . . . . . 57
Section 6.19 Transaction Expenses . . . . . . . . . . . . . . . . . . . . . . 57
Section 6.20 Special Legal Fees . . . . . . . . . . . . . . . . . . . . . . . 57
Section 6.21 At home Corporation Shares . . . . . . . . . . . . . . . . . . . 57
ARTICLE VII CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.1 Conditions to Each Party's Obligations . . . . . . . . . . . . . 58
Section 7.2 Conditions to the Purchaser's Obligations. . . . . . . . . . . . 58
Section 7.3 Conditions to the Company's Obligations. . . . . . . . . . . . . 60
ARTICLE VIII TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.2 Specific Performance and Other Remedies. . . . . . . . . . . . . 63
Section 8.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 63
Section 8.4 Termination Fees.. . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE IX INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.1 Company Stockholders' Indemnification Obligations. . . . . . . . 64
Section 9.2 McHale Indemnification Obligations.. . . . . . . . . . . . . . . 64
Section 9.3 Purchaser and Newco Indemnification Obligations. . . . . . . . . 65
Section 9.4 Indemnification Procedure. . . . . . . . . . . . . . . . . . . . 65
Section 9.5 Claims Period. . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.6 Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.7 Investigations.. . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 9.8 Escrow Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE X MISCELLANEOUS PROVISION. . . . . . . . . . . . . . . . . . . . . 69
Section 10.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.2 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . 70
Section 10.3 Assignment; Successors in Interest . . . . . . . . . . . . . . . 70
Section 10.4 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.5 Controlling Law; Venue . . . . . . . . . . . . . . . . . . . . . 70
Section 10.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.7 Counterparts; Execution. . . . . . . . . . . . . . . . . . . . . 71
Section 10.8 Enforcement of Certain Rights. . . . . . . . . . . . . . . . . . 71
Section 10.9 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.10 Integration; Amendment . . . . . . . . . . . . . . . . . . . . . 72
Section 10.11 Cooperation after the Closing. . . . . . . . . . . . . . . . . . 72
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(continued)
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Section 10.12 Transaction Costs. . . . . . . . . . . . . . . . . . . . . . . . 72
Section 10.13 Sellers Representative . . . . . . . . . . . . . . . . . . . . . 72
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LIST OF EXHIBITS
Exhibit A Sellers
Exhibit 1.2(a) Form of Escrow Agreement
Exhibit 1.2(b) Company Knowledge
Exhibit 1.2(c) Purchaser Knowledge
Exhibit 6.10 Form of Notice for Cancellation of Options
Exhibit 7.2(e) Form of Affiliate Agreement
Exhibit 7.2(f) Form of Waiver and Release
Exhibit 7.2(i) Form of Non-Competition Agreement
LIST OF SCHEDULES
Schedule 1.2(b) Employee Shareholder Agreements
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Schedule 4.1(c) Company Qualifications
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Schedule 4.1(d) Company Fictitious Names; Assumed Names; Trade Names; Etc.
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Schedule 4.1(e) Company Members of the Board and Officers
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Schedule 4.3 Company Capital Stock
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Schedule 4.4 Company Subsidiaries
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Schedule 4.5 Company Conflicts
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Schedule 4.6(b) Company Leased Real Property
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Schedule 4.7 Company Title to Personal Property; Related Matters
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Schedule 4.9 Company Financial Statement Exceptions
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Schedule 4.10 Company Undisclosed Liabilities
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Schedule 4.11 Company Absence of Certain Changes
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Schedule 4.12 Company Legal Proceedings
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Schedule 4.14 Company Contracts
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Schedule 4.15 Company Taxes
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Schedule 4.16 Company Officers and Employees
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Schedule 4.17 Company Benefit Plans
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Schedule 4.17(e) Company Options
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Schedule 4.19 Company Insurance Policies
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Schedule 4.21 Company Intellectual Property
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Schedule 4.22 Company Software
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Schedule 4.22(g) Company Open Source Software
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Schedule 4.23 Company Transactions with Affiliates
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Schedule 4.24 Company Undisclosed Payments
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Schedule 4.26 Company Licenses and Permits
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Schedule 4.29 Company Bank Accounts
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Schedule 5.4 Purchaser Disclosure Controls and Procedures
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Schedule 5.6 Purchaser Stockholder Approval
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Schedule 6.1 Company Business Conduct
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated August 19, 2005 (the "AGREEMENT
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DATE"), is made and entered into by and among Concurrent Computer Corporation, a
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Delaware corporation (the "PURCHASER"), Stream Acquisition, Inc., a Delaware
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corporation ("NEWCO," and collectively with the Purchaser, the "PURCHASER
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PARTIES"), Everstream Holdings, Inc., a Delaware corporation (the "COMPANY"),
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and the parties listed on Exhibit A (each, individually a "SELLER" and
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collectively the "SELLERS"). In this Agreement, the Purchaser, Newco, the
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Company, and the Sellers are sometimes individually referred to as a "PARTY" and
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collectively as the "PARTIES." Certain capitalized terms used in this Agreement
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are defined in Section 1.2.
RECITALS
Subject to the terms and conditions of this Agreement, the boards of
directors of Purchaser, Newco, and the Company deem it advisable and in the best
interests of their respective companies and their respective stockholders to
enter into a business combination by means of a merger of Newco with and into
the Company (the "MERGER"), and the boards of directors of Purchaser, Newco, and
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the Company have approved and adopted this Agreement.
Concurrently with the execution and delivery of this Agreement, each Seller
has (i) entered into a voting agreement (each, a "VOTING AGREEMENT") under which
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such Seller has agreed, among other things, to vote shares of Company Common
Stock and Company Preferred Stock in favor of the Merger and (ii) entered into a
waiver and release agreement (each, a "SELLER WAIVER AGREEMENT") under which
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such Seller has agreed to release the Company and each Company Subsidiary from
certain claims.
The Parties desire to make certain representations and warranties in
connection with the Merger, and the Parties desire to make certain agreements as
set forth in this Agreement.
The Parties intend that the Merger will constitute a reorganization within
the meaning of Code Section 368(a).
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants, agreements, and conditions set forth in this Agreement,
and intending to be legally bound by this Agreement, the Parties agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Construction.
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(a) Unless the context of this Agreement clearly requires otherwise:
(i) references in this Agreement to the plural include the singular, and
references to the singular include the plural; (ii) references in this
Agreement to any gender include the other genders; (iii) the words
"include," "includes," "included," and "including" do not limit the
preceding terms or words and will be deemed to be followed by the words
"without limitation"; (iv) the terms "day" and "days" mean and refer to
calendar day(s); and (v) the terms "year" and "years" mean and refer to
calendar year(s).
(b) Unless otherwise set forth in this Agreement, references in this
Agreement to any document, instrument, or agreement (including this
Agreement): (i) include and incorporate all exhibits, schedules, and other
attachments to such document, instrument, or agreement; (ii) include all
documents, instruments, or agreements issued or executed in replacement of
such document, instrument, or agreement; and (iii) mean such document,
instrument, or agreement, or replacement or predecessor to such document,
instrument, or agreement, in each case as amended, modified, or
supplemented from time to time in accordance with its terms and in effect
at any given time.
(c) Unless otherwise specified in this Agreement, all Article,
Section, Exhibit, and Schedule references in this Agreement are references
to Articles, Sections, Exhibits, and Schedules of this Agreement.
(d) This Agreement will not be construed as if prepared by one of the
Parties, but rather according to its fair meaning as a whole, as if all
Parties had prepared this Agreement.
Section 1.2 Certain Defined Terms. As used in this Agreement, the
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following terms will have the following meanings:
"ADA" means the United States Americans with Disabilities Act and the rules
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and regulations promulgated thereunder.
"ADEA" means the United States Age Discrimination in Employment Act and the
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rules and regulations promulgated thereunder.
"AFFILIATE," with respect to any Person, means any other Person that
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controls, is controlled by, or is under common control with such Person.
"AGREEMENT" means this Agreement and Plan of Merger, made and entered into
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as of the Agreement Date, by and among the Purchaser, Newco, the Company and the
Sellers.
"APPLICABLE BENEFIT LAWS" means all Laws or other legislative,
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administrative, or judicial promulgations, other than ERISA and the Code,
including those of a jurisdiction outside the United State of America,
applicable to any Company Benefit Plan or ERISA Affiliate Plan.
"BUSINESS" means, collectively, the business of the Company and each
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Company Subsidiary as a going concern.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, or a day on
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which banks in the State of Georgia or the State of Ohio are authorized or
obligated to be closed.
"CLOSING" means a meeting, which will be held in accordance with Section
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3.5 and at which all documents necessary to evidence the fulfillment or waiver
of all conditions precedent
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to the consummation of the transactions contemplated by this Agreement are
executed and delivered.
"CLOSING DATE" means the date on which the Closing occurs.
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"CODE" means the Internal Revenue Code of 1986, as amended.
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"COMMON STOCK RESIDUAL NUMBER" means the number of shares of Purchaser
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Common Stock equal to the greater of (i) the quotient of (A) the Total Merger
Shares less the sum of the Total First Tier Distribution, divided by (B) the
Total Company Stock Number or (ii) the quotient of (A) the Total Merger Shares
less the sum of the Total First Tier Distribution, the Total Series C Residual
Distribution, the Total Series A Residual Distribution and the Total Series B
Residual Distribution, divided by (B) the Total Company Stock Number less the
Total Series C Preferred Number, less the Total Series A Preferred Number, less
the Total Series B Preferred Number.
"COMPANY AFFILIATE" means an Affiliate of the Company.
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"COMPANY COMMON STOCK" means the Company's Common Stock, par value $0.0001
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per share.
"COMPANY DISCLOSURE SCHEDULE" means a schedule, dated as of the Agreement
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Date and delivered by the Company to the Purchaser concurrently with the
execution and delivery of this Agreement, which, among other things, will
identify exceptions to the Company's representations and warranties contained in
Article IV.
"COMPANY INTELLECTUAL PROPERTY" means any Intellectual Property that is
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owned by the Company or any Company Subsidiary, including the Company
Proprietary Software.
"COMPANY LICENSED INTELLECTUAL PROPERTY" means any Intellectual Property
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that is licensed to the Company or to any Company Subsidiary.
"COMPANY LICENSED SOFTWARE" means all software (other than Company
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Proprietary Software) used by the Company or any Company Subsidiary.
"COMPANY MATERIAL ADVERSE EFFECT" means any state of facts, change, event,
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effect, or occurrence (when taken together with other states of fact, changes,
events, effects, or occurrences) that is, or that are reasonably likely to be,
materially adverse to the financial condition, results of operations,
properties, assets, or liabilities of the Company or any of the Company's
Subsidiaries taken as a whole, but excludes any state of facts, change, event,
effect, or occurrence (a) resulting from general economic, capital market,
regulatory or political conditions (whether as a result of acts of terrorism,
war (whether or not declared), armed conflict or otherwise) not
disproportionately affecting the Company or any of the Company's Subsidiaries,
(b) impacting companies in the industry in which the Company operates generally
not disproportionately affecting the Company or any of the Company's
Subsidiaries, or (c) resulting from the announcement or performance of this
Agreement or the Company Ancillary Documents or the transactions contemplated
hereby or thereby. A Company Material Adverse Effect will also include any state
of facts, change, event, or occurrence that (when taken together
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with other states of facts, changes, events, effects, or occurrences) will, or
that is reasonably likely to, prevent or materially delay the Company's
performance of the Company's obligations under this Agreement or the Company
Ancillary Documents or the consummation of the transactions contemplated by this
Agreement or the Company Ancillary Documents.
"COMPANY OPTIONS" means any and all outstanding options to purchase Company
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Common Stock granted under the Company's Stock Option Plan or otherwise.
"COMPANY PREFERRED STOCK" means collectively, the Company Series A
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Preferred Stock, Company Series B Preferred Stock and the Company Series C
Preferred Stock.
"COMPANY PROPRIETARY SOFTWARE" means all software owned by the Company or
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any Company Subsidiary.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the Registered
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Intellectual Property owned by or filed in the name of the Company or any
Company Subsidiary.
"COMPANY SERIES A PREFERRED STOCK" means the Company's Series A Preferred
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Stock, par value $0.0001 per share.
"COMPANY SERIES B PREFERRED STOCK" means the Company's Series B Preferred
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Stock, par value $0.0001 per share.
"COMPANY SERIES C PREFERRED STOCK" means the Company's Series C Preferred
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Stock, par value $0.0001 per share.
"COMPANY SOFTWARE" means the Company Licensed Software and the Company
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Proprietary Software.
"COMPANY STOCK" means the Company Common Stock and the Company Preferred
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Stock.
"COMPANY STOCKHOLDER" means a holder of issued and outstanding shares of
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Company Common Stock or Company Preferred Stock as of immediately before the
Effective Time.
"COMPANY STOCKHOLDER AGREEMENTS" means (i) that certain Amended and
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Restated Voting Agreement by and among the Company and the stockholders
identified therein dated April 17, 2002, (ii) that certain Amended and Restated
Investors' Rights Agreement by and among the Company and the stockholders
identified therein dated April 17, 2002, (iii) that certain Amended and Restated
Right of First Refusal and Co-Sale Agreement by and among the Company and the
stockholders identified therein dated April 17, 2002, and (iv) any other
agreement with a holder of Company Stock granting any rights with respect to the
Company Stock, including voting rights, preemptive rights, registration rights,
or first refusal rights.
"COMPANY STOCKHOLDER APPROVAL" means the affirmative vote of the Company
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Stockholders as required to approve and adopt this Agreement and the
transactions contemplated hereby, including the Merger and the Company Ancillary
Documents.
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"COMPANY STOCK OPTION PLAN" means the Second Amended and Restated 2001
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Stock Option Plan of Everstream Holdings, Inc., as amended.
"COMPANY SUBSIDIARY" means a Subsidiary of the Company.
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"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement by and
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between the Purchaser and the Company, dated as of May 28, 2003, as amended.
"CONTROL" (including the terms "controlled," "controlled by," and "under
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common control with"), with respect to any Person, means such Person's
possession, directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the management or policies of another Person,
whether through stock ownership, as trustee or executor, by contract, by credit
arrangement, or otherwise.
"COURT" means any court or arbitration tribunal of the United States, any
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domestic state, or any foreign country, and any political subdivision thereof.
"DGCL" means the Delaware General Corporation Law, as amended.
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"EFFECTIVE TIME" means the effective time of the Merger as designated by
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the Delaware Secretary of State.
"EMPLOYMENT AGREEMENT" means any oral or written employment contract,
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consulting agreement, termination or severance agreement, change-of-control
agreement, or any other agreement respecting employment terms and conditions,
compensation payments, or consulting or independent contractor relationships, in
each case with respect to any current or former officer, employee, consultant,
or independent contractor pursuant to which any obligations remain outstanding.
"ENVIRONMENTAL LAW" means any Law pertaining to: (i) the protection of the
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indoor or outdoor environment; (ii) the conservation, management, or use of
natural resources and wildlife; (iii) the protection or use of surface water and
ground water; (iv) the management, manufacture, possession, presence, use,
generation, transportation, treatment, storage, disposal, release, threatened
release, abatement, removal, remediation, or handling of, or exposure to, any
Hazardous Material; or (v) pollution (including any release to air, land,
surface water, and ground water); and includes the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980, as amended, and the
Regulations promulgated thereunder and the Solid Waste Disposal Act, as amended,
42 U.S.C. Sec.Sec. 6901, et seq.
"ESCROW AGENT" means SunTrust Bank, Atlanta.
-------------
"ESCROW AGREEMENT" means the Escrow Agreement to be dated as of the Closing
----------------
Date among the Company, the Sellers, the Purchaser, and the Escrow Agent in
substantially the form of Exhibit 1.2(a).
---------------
"EXCESS COMPANY TRANSACTION COSTS" means all Company Transaction Costs in
----------------------------------
excess of $250,000.
-5-
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
-------------
the Regulations promulgated thereunder.
"FINANCIAL STATEMENTS" means (i) the Company's audited balance sheet as of
---------------------
December 31, 2004 and the Company's unaudited statements of income and cash
flows for the period then ended, (ii) each Company Subsidiary's audited balance
sheet as of December 31, 2004 and each Company Subsidiary's unaudited statements
of income and cash flows for the period then ended, (iii) the Company's
unaudited balance sheet as of June 30, 2005 and the Company's unaudited
statements of income and cash flows for the period then ended, and (iv) each
Company Subsidiary's unaudited balance sheet as of June 30, 2005.
"FLSA" means the United States Fair Labor Standards Act and the rules and
----
regulations promulgated thereunder.
"FMLA" means the United States Family and Medical Leave Act and the rules
----
and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles as applied in the
----
United States.
"GOVERNMENTAL ENTITY" means all federal, state, local, foreign and
--------------------
provincial governments and all administrative and regulatory agencies and
--
commissions and other governmental authorities and agencies, domestic and
foreign.
"HARMFUL CODE" means any "back door," "drop dead device," "time bomb,"
-------------
"Trojan horse," "virus," or "worm" (as such terms are commonly understood in the
software industry) or any other software code designed or intended to have any
of the following functions: (i) disrupting, disabling, harming or otherwise
impeding in any manner the operation of, or providing unauthorized access to, a
computer system or network or other device on which such code is stored or
installed; or (ii) damaging or destroying any data or file without the user's
consent.
"HAZARDOUS MATERIAL" means any waste, pollutant, contaminant, hazardous
-------------------
substance, toxic, ignitable, reactive substance, corrosive substance, hazardous
waste, special waste, industrial substance, by-product, process intermediate
product or waste, petroleum or petroleum-derived substance or waste, chemical
liquids or solids, liquid or gaseous products, or any constituent of any such
substance or waste, the use, handling, or disposal of which by the Company is in
any way governed by or subject to any applicable Environmental Law.
"INTELLECTUAL PROPERTY" means any or all of the following and all rights
----------------------
arising out of or associated with any of the following: (i) all United States,
international, and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations, and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know-how, technology, technical data, and customer lists, and all documentation
relating to any of the foregoing throughout the world; (iii) all copyrights,
copyright registrations, and applications therefor, and all other rights
corresponding thereto throughout the world; (iv) all industrial designs and any
registrations and applications therefor throughout the world; (v) all Internet
uniform resource locators, domain names, trade names, logos, slogans, designs,
common law
-6-
trademarks and service marks, trademark and service mark registrations, and
applications therefor throughout the world; (vi) all databases and data
collections and all rights in such databases and data collections throughout the
world; (vii) all moral and economic rights of authors and inventors, however
denominated, throughout the world; and (viii) any similar or equivalent rights
to any of the foregoing anywhere in the world.
"KNOWLEDGE" (i) with respect to the Company with respect to any particular
---------
matter, means all facts actually known by any Company officer listed on Exhibit
-------
1.2(b), and all facts that would have been known after reasonable inquiry of
- ------
such persons who such identified individual reasonably believes would have had
knowledge of a particular fact, and (ii) with respect to the Purchaser with
respect to any particular matter, means all facts actually known by any
Purchaser officer listed on Exhibit 1.2(c), and all facts that would have been
--------------
known after reasonable inquiry of such persons such identified individual
reasonably believes would have had knowledge of a particular fact.
"LABOR LAWS" means all Laws and all contracts or collective bargaining
-----------
agreements governing or concerning labor relations, unions and collective
bargaining, conditions of employment, employment discrimination and harassment,
wages, hours or occupational safety and health, including, without limitation,
the United States Immigration Reform and Control Act of 1986, the United States
National Labor Relations Act, the United States Civil Rights Acts of 1866 and
1964, as amended, the Equal Pay Act, ADEA, ADA, FMLA, WARN, Occupational Safety
and Health Act, the United States Davis Bacon Act, the United States Walsh-Healy
Act, the United States Service Contract Act, United States Executive Order
11246, FLSA, and the United States Rehabilitation Act of 1973 and all rules and
regulations promulgated under such acts.
"LAW" means all laws, statutes, ordinances, and Regulations of any
---
Governmental Entity, including all decisions of Courts having the effect of
law.
"LIEN" means any mortgage, pledge, security interest, attachment,
----
encumbrance, title defect or other lien of any kind (including any agreement to
give any of the foregoing); provided, however, that the term "Lien" does not
-------- ------- ----
include (i) statutory liens for Taxes that are not yet due and payable or that
are being contested in good faith by appropriate proceedings and disclosed in
the Company Disclosure Schedule, (ii) statutory or common law liens to secure
landlords, lessors, or renters under leases or rental agreements confined to the
premises rented, (iii) deposits or pledges made in connection with, or to secure
payment of, workers' compensation, unemployment insurance, old age pension, or
other social security programs mandated under applicable Laws, (iv) statutory or
common law liens in favor of carriers, warehousemen, mechanics, and materialmen,
to secure claims for labor, materials, or supplies and other similar liens, (v)
restrictions on transfer of securities imposed by applicable state, federal,
and/or foreign securities Laws, or (vi) easements, encroachments, restrictions,
rights of way and other non-monetary defects and zoning, building and other
restrictions that do not individually or in the aggregate impact the continued
use or operation of the property to which they relate.
"MANNING OPTION" means that certain Manning VC Option Agreement dated June
---------------
15, 2001 to purchase 28,828 shares of Series B Preferred Stock.
-7-
"MCHALE DISPOSITION DOCUMENTS" means the agreements executed by and between
----------------------------
Stephen J. McHale and certain employees of the Company and by and between
Stephen J. McHale and Burt Manning, each with respect to the McHale Stock
Dispositions.
"MCHALE STOCK DISPOSITIONS" means the transfers by Stephen J. McHale of
---------------------------
Company Series A Preferred Stock to certain employees of the Company and Burt
Manning as referenced in the Company Disclosure Schedule.
"MCHALE STOCK PURCHASES" means the purchases by Stephen J. McHale of an
------------------------
aggregate of 1,127,820 shares of Company Series A Preferred Stock from Pulitzer
Investment Company, Knight Ridder Investment Company, and CNI Ventures, Inc. in
2005.
"MERGER" means the merger of Newco with and into the Company provided for
------
in this Agreement.
"ORDER" means any judgment, order, or decree of any Court or Governmental
-----
Entity.
"PERMIT" means any and all permits, licenses, authorizations, Orders,
------
certificates, registrations, or other approvals granted by any Governmental
Entity.
"PERSON" means an individual, partnership, limited liability company,
------
corporation, joint stock company, trust, estate, joint venture, association, or
unincorporated organization, or any other form of business or professional
entity, but does not include a Governmental Entity.
"PURCHASER COMMON STOCK" means the Purchaser's common stock, par value
------------------------
$0.01 per share.
"PURCHASER DISCLOSURE SCHEDULE" means a schedule dated as of the Agreement
------------------------------
Date and delivered by the Purchaser to the Company concurrently with the
execution of this Agreement, which, among other things, will identify exceptions
to the Purchaser's representations and warranties contained in Article V by
specific section references.
"PURCHASER MATERIAL ADVERSE EFFECT" means any state of facts, change,
------------------------------------
event, effect, or occurrence (when taken together with other states of fact,
changes, events, effects, or occurrences) that is, or that are reasonably likely
to be, materially adverse to the financial condition, results of operations,
properties, assets, or liabilities of the Purchaser or any of the Purchaser's
Subsidiaries taken as a whole, but excludes any state of facts, change, event,
effect, or occurrence (a) resulting from general economic, capital market,
regulatory or political conditions (whether as a result of acts of terrorism,
war (whether or not declared), armed conflict or otherwise) not
disproportionately affecting the Purchaser or any of the Purchaser's
Subsidiaries, (b) impacting companies in the industry in which the Purchaser
operates generally not disproportionately affecting the Purchaser or any of the
Purchaser's Subsidiaries, or (c) resulting from the announcement or performance
of this Agreement or the Purchaser Ancillary Documents or the transactions
contemplated hereby or thereby. A Purchaser Material Adverse Effect will also
include any state of facts, change, event, or occurrence that (when taken
together with other states of facts, changes, events, effects, or occurrences)
will, or that is reasonably likely to, prevent or materially delay the
Purchaser's performance of the Purchaser's obligations
-8-
under this Agreement or the Purchaser Ancillary Documents or the consummation of
the transactions contemplated by this Agreement or the Purchaser Ancillary
Documents.
"PURCHASER SHARE PRICE" means the average of the closing prices of one
-----------------------
share of Purchaser Common Stock on the Nasdaq National Market over the 30
calendar day period ending on the third calendar day before the Closing Date;
provided, that if the Company and the Sellers elect to fix the Purchaser Share
Price at one dollar fifty-five cents $1.55 as described in Section 7.2(o), then
the Purchaser Share Price will be equal to one dollar fifty-five cents ($1.55).
The Parties acknowledge and agree that the closing price of one share of
Purchaser Common Stock on the Nasdaq National Market for calendar days other
than trading days shall be deemed to be equal to the closing price of one share
of Purchaser Common Stock on the Nasdaq National Market for the last trading day
immediately preceding such date.
"REGISTERED INTELLECTUAL PROPERTY" means all United States, international,
---------------------------------
and foreign: (i) patents and patent applications (including provisional
applications); (ii) registered trademarks and service marks, applications to
register trademarks and service marks, intent-to-use applications, or other
registrations or applications related to trademarks and service marks; (iii)
registered copyrights and applications for copyright registration; (iv) domain
name registrations; and (v) any other Intellectual Property that is the subject
of an application, certificate, filing, registration, or other document issued,
filed with, or recorded with any federal, state, local, or foreign Governmental
Entity or other public body.
"REGULATION" means any rule or regulation of any Governmental Entity having
----------
the effect of Law.
"RESTRICTED STOCK PURCHASE AGREEMENTS" means, those certain Employee
---------------------------------------
Shareholder Agreements identified on Schedule 1.2(b).
----------------
"SEC" means the Securities and Exchange Commission.
---
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
---------------
Regulations promulgated thereunder.
"SELLER INITIAL ESCROW FEES" means fifty percent (50%) of the initial fees
---------------------------
charged by the Escrow Agent under the Escrow Agreement.
"SERIES A ACCUMULATED DIVIDEND NUMBER" means the number of shares of
----------------------------------------
Purchaser Common Stock equal to the quotient of (i) all declared but unpaid
dividends with respect to one share of Company Series A Preferred Stock prior to
the Effective Time, divided by (ii) the Purchaser Share Price.
"SERIES A FIRST TIER DISTRIBUTION" means the number of shares of Purchaser
---------------------------------
Common Stock equal to the lesser of (i) the Series A Preference Number
multiplied by the Total Series A Preferred Number and (ii) the Total Merger
Shares minus the Series C First Tier Distribution.
"SERIES A FIRST TIER RATIO" means the number of shares of Purchaser Common
--------------------------
Stock equal to the quotient of (i) the Series A First Tier Distribution, divided
by (ii) the Total Series A Preferred Number.
-9-
"SERIES A LIQUIDATION PREFERENCE" means $5.32.
----------------------------------
"SERIES A PREFERENCE NUMBER" means a number of shares of Purchaser Common
----------------------------
Stock equal to the sum of (i) the Series A Liquidation Preference divided by the
Purchaser Share Price, plus (ii) the Series A Accumulated Dividend Number.
"SERIES A RESIDUAL NUMBER" means the number of shares of Purchaser Common
--------------------------
Stock equal to the lesser of (i) the product of (A) three, multiplied by (B) the
Series A Preference Number less the Series A Accumulated Dividend Number or (ii)
the quotient of (A) the Total Merger Shares less the sum of the Total First Tier
Distribution and the Total Series C Residual Distribution, divided by (B) the
Total Company Stock Number less the Total Series C Preferred Number.
"SERIES B ACCUMULATED DIVIDEND NUMBER" means the number of shares of
----------------------------------------
Purchaser Common Stock equal to the quotient of (i) all declared but unpaid
dividends with respect to one share of Company Series B Preferred Stock prior to
the Effective Time, divided by (ii) the Purchaser Share Price.
"SERIES B FIRST TIER DISTRIBUTION" means the number of shares of Purchaser
---------------------------------
Common Stock equal to the lesser of (i) the Series B Preference Number
multiplied by the Total Series B Preferred Number and (ii) the Total Merger
Shares minus the Series C First Tier Distribution minus the Series A First Tier
Distribution.
"SERIES B FIRST TIER RATIO" means the number of shares of Purchaser Common
--------------------------
Stock equal to the quotient of (i) the Series B First Tier Distribution, divided
by (ii) the Total Series B Preferred Number.
"SERIES B LIQUIDATION PREFERENCE" means $0.67.
----------------------------------
"SERIES B PREFERENCE NUMBER" means a number of shares of Purchaser Common
----------------------------
Stock equal to the sum of (i) the Series B Liquidation Preference divided by the
Purchaser Share Price, plus (ii) the Series B Accumulated Dividend Number.
"SERIES B RESIDUAL NUMBER" means the number of shares of Purchaser Common
--------------------------
Stock equal to the lesser of (i) the product of (A) three, multiplied by (B) the
Series B Preference Number less the Series B Accumulated Dividend Number or (ii)
the quotient of (A) the Total Merger Shares less the sum of the Total First Tier
Distribution, the Total Series C Residual Distribution and the Total Series A
Residual Distribution, divided by (B) the Total Company Stock Number less the
Total Series C Preferred Number less the Total Series A Preferred Number.
"SERIES C ACCUMULATED DIVIDEND NUMBER" means the number of shares of
----------------------------------------
Purchaser Common Stock equal to the quotient of (i) all declared but unpaid
dividends with respect to one share of Company Series C Preferred Stock prior to
the Effective Time, divided by (ii) the Purchaser Share Price.
-10-
"SERIES C FIRST TIER DISTRIBUTION" means the number of shares of Purchaser
---------------------------------
Common Stock equal to the lesser of (i) the Series C Preference Number
multiplied by the Total Series C Preferred Number and (ii) the Total Merger
Shares.
"SERIES C FIRST TIER RATIO" means the number of shares of Purchaser Common
--------------------------
Stock equal to the quotient of (i) the Series C First Tier Distribution, divided
by (ii) the Total Series C Preferred Number.
"SERIES C LIQUIDATION PREFERENCE" means $1.04.
----------------------------------
"SERIES C PREFERENCE NUMBER" means a number of shares of Purchaser Common
----------------------------
Stock equal to the sum of (i) the Series C Liquidation Preference divided by the
Purchaser Share Price, plus (ii) the Series C Accumulated Dividend Number.
"SERIES C RESIDUAL NUMBER" means the number of shares of Purchaser Common
--------------------------
Stock equal to the lesser of (i) the product of (A) three, multiplied by (B) the
Series C Preference Number less the Series C Accumulated Dividend Number or (ii)
the quotient of (A) the Total Merger Shares less the Total First Tier
Distribution, divided by (B) the Total Company Stock Number.
"SOURCE CODE" means the Company Proprietary Software version(s)
------------
incorporating high-level or assembly language that is used to produce the
software programs directly executable by a processor.
"SPECIAL LEGAL FEES" means, collectively with respect to the Company and
--------------------
each Company Subsidiary, an amount equal to the sum of all fees, costs and
expenses incurred solely in connection with the McHale Stock Purchases and the
claims for breaches of fiduciary duties related thereto, including (i) fees,
costs and expenses of Richards, Layton & Finger, special counsel to the Company,
(ii) fees, costs and expenses of Ulmer & Berne, counsel to Stephen J. McHale,
and (iii) all other fees, costs and expenses (other than fees, costs and
expenses of Jones Day, counsel to the Company), including costs for
indemnification made by Stephen J. McHale to the Company or any Company
Subsidiary in connection with the McHale Stock Purchases and the claims for
breaches of fiduciary duties related thereto.
"SUBSIDIARY," with respect to any particular Person, means any corporation,
----------
partnership, limited liability company, joint venture, or other legal entity of
which such Person (either alone or through or together with any other Person)
owns, directly or indirectly, 50% or more of the stock or other equity or
partnership interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or other legal entity.
"SURVIVING CORPORATION" means the Company after the Effective Time.
----------------------
"TERMINATION FEE" means $600,000.
----------------
"TOTAL COMPANY STOCK NUMBER" means the number of shares of Company Common
----------------------------
Stock outstanding immediately prior to the Effective Time, on a fully-diluted,
as-converted basis, assuming that all outstanding shares of Company Preferred
Stock and any other rights to acquire
-11-
Company Stock outstanding immediately prior to the Effective Time are converted
or exercised and assuming that all outstanding Company Options have been
terminated in accordance with Section 6.10 and the terms of the Company Stock
Option Plan immediately prior to the Effective Time and 28,828 shares of Series
B Preferred Stock issuable upon exercise of Manning Option have been terminated
as of the Effective Time in connection with the McHale Disposition Documents.
The Total Company Stock Number, if determined on the Agreement Date, would be
9,717,368, representing (i) 2,925,152 outstanding shares of Company Common
Stock; (ii) 569,428 shares of Company Common Stock issuable upon exercise of
outstanding Company Options; and (iii) 6,222,788 shares of outstanding Company
Preferred Stock, consisting of 2,121,049 outstanding shares of Series A
Preferred Stock, 1,697,893 outstanding shares of Series B Preferred Stock, and
2,403,846 outstanding shares of Series C Preferred Stock.
"TOTAL FIRST TIER DISTRIBUTION" means the number of shares of Purchaser
--------------------------------
Common Stock equal to the sum of (i) the Series C First Tier Distribution, plus
(ii) the Series A First Tier Distribution, plus (iii) the Series B First Tier
Distribution.
"TOTAL MERGER CONSIDERATION" means Fifteen Million dollars (US $15,000,000)
--------------------------
minus the Special Legal Fees minus Seller Initial Escrow Fees minus Excess
- ----- ----- -----
Company Transaction Costs.
"TOTAL MERGER SHARES" means that number of shares of Purchaser Common Stock
-------------------
equal to the Total Merger Consideration, divided by the Purchaser Share Price.
"TOTAL SERIES A PREFERRED NUMBER" means the number of shares of Company
-----------------------------------
Series A Preferred Stock outstanding immediately prior to the Effective Time
(including the shares of Company Series A Preferred Stock issuable upon exercise
of any rights to acquire Company Series A Preferred Stock).
"TOTAL SERIES A RESIDUAL DISTRIBUTION" means the number of shares of
----------------------------------------
Purchaser Common Stock equal to the product of (i) the Total Series A Preferred
Number, multiplied by (ii) the Series A Residual Number.
"TOTAL SERIES B PREFERRED NUMBER" means the number of shares of Company
-----------------------------------
Series B Preferred Stock outstanding immediately prior to the Effective Time
(including the shares of Company Series B Preferred Stock issuable upon exercise
of any rights to acquire Company Series B Preferred Stock).
"TOTAL SERIES B RESIDUAL DISTRIBUTION" means the number of shares of
----------------------------------------
Purchaser Common Stock equal to the product of (i) the Total Series B Preferred
Number, multiplied by (ii) the Series B Residual Number.
"TOTAL SERIES C PREFERRED NUMBER" means the number of shares of Company
-----------------------------------
Series C Preferred Stock outstanding immediately prior to the Effective Time
(including the shares of Company Series C Preferred Stock that are (i) owned by
Purchaser and will be cancelled in accordance with Section 3.1(b) and (ii)
issuable upon exercise of any rights to acquire Company Series C Preferred
Stock).
-12-
"TOTAL SERIES C RESIDUAL DISTRIBUTION" means the number of shares of
----------------------------------------
Purchaser Common Stock equal to the product of (i) the Total Series C Preferred
Number, multiplied by (ii) the Series C Residual Number.
"WARN" means the United States Worker Adjustment and Retraining
----
Notification Act and the rules and regulations promulgated thereunder.
Section 1.3 Other Defined Terms.
---------------------
Term Section
- ----- -------
Affiliate Agreement. . . . . . 7.2(e)
Aggregate Threshold. . . . . . 9.6(a)
Agreement Date . . . . . . . . Preamble
Agreement of Merger. . . . . . 2.2
Alternative Transaction. . . . 6.3(a)
CERCLA . . . . . . . . . . . . 4.20(b)
Closing Date Capital Structure 6.16
Claims Period. . . . . . . . . 9.5(a)
Common Stock Exchange Ratio. . 3.1(c)
Company. . . . . . . . . . . . Preamble
Company Ancillary Documents. . 4.2
Company Benefit Plan . . . . . 4.17(a)
Company Contracts. . . . . . . 4.14
Company Superior Proposal. . . 6.3(b)
Company Transaction Costs. . . 6.19
Continuing Employee. . . . . . 6.11
Current Company Benefit Plan . 4.17(a)
Dissenting Stockholder . . . . 3.3(a)
Dissenting Shares. . . . . . . 3.3(a)
Employee Benefit Plan. . . . . 4.17(b)
ERISA. . . . . . . . . . . . . 4.17(b)
ERISA Affiliate. . . . . . . . 4.17(c)
ERISA Affiliate Plan . . . . . 4.17(c)
Escrow Account . . . . . . . . 3.4
Escrow Shares. . . . . . . . . 3.4
Exchange Ratios. . . . . . . . 3.1(c)
Final Invoices . . . . . . . . 6.19
Hearing. . . . . . . . . . . . 6.12(a)
Indemnified Party. . . . . . . 9.4(a)
Indemnifying Party . . . . . . 9.4(a)
Information Statement. . . . . 6.12(c)
Leased Real Property . . . . . 4.6(b)
Licenses . . . . . . . . . . . 4.26
Loss Threshold . . . . . . . . 9.6(a)
Losses . . . . . . . . . . . . 9.6(a)
-13-
Merger . . . . . . . . . . . . Recitals
Newco. . . . . . . . . . . . . Preamble
Non-Competition Agreement. . . 7.2(i)
Ohio Permit. . . . . . . . . . 6.12(a)
Parties. . . . . . . . . . . . Preamble
Party. . . . . . . . . . . . . Preamble
Purchaser. . . . . . . . . . . Preamble
Purchaser Ancillary Documents. 5.2
Purchaser Contracts. . . . . . 5.11
Purchaser Indemnified Parties. 9.1
Purchaser Losses . . . . . . . 9.1
Purchaser Parties. . . . . . . Preamble
Purchaser SEC Reports. . . . . 5.4(a)
Representative . . . . . . . . 10.13(a)
Seller . . . . . . . . . . . . Preamble
Sellers. . . . . . . . . . . . Preamble
Seller Indemnified Parties . . 9.3
Seller Waiver Agreement. . . . Recitals
Sellers Losses . . . . . . . . 9.3
Series A Exchange Ratio. . . . 3.1(c)
Series B Exchange Ratio. . . . 3.1(c)
Series C Exchange Ratio. . . . 3.1(c)
Special Obligations. . . . . . 9.5(a)(i)
Special Representations. . . . 9.5(a)(i)
Taxes. . . . . . . . . . . . . 4.15(b)
Tax Return . . . . . . . . . . 4.15(b)
Termination Date . . . . . . . 8.1
Transaction Documents. . . . . 4.2
Voting Agreement . . . . . . . Recitals
Section 1.4 Accounting Terms. In this Agreement, all accounting terms
----------------
not otherwise specifically defined will be construed in accordance with GAAP.
ARTICLE II
TERMS OF MERGER
Section 2.1 Statutory Merger. Subject to the terms and conditions and
----------------
in reliance upon the representations, warranties, covenants and agreements
contained in this Agreement, at the Effective Time, Newco will merge with and
into the Company, Newco's separate corporate existence will cease, and the
Company will succeed to and assume all of Newco's rights and obligations in
accordance with the DGCL.
Section 2.2 Effective Time. As soon as practicable after the
---------------
satisfaction or, if permissible, the waiver of the conditions set forth in
Article VII, the Parties will consummate the Merger by duly filing an agreement
of merger, or other appropriate document or documents, with the Delaware
Secretary of State, in such form as required by, and executed in accordance
with,
-14-
the relevant provisions of, the DGCL (such agreement, or other appropriate
document or documents, the "AGREEMENT OF MERGER"). The Merger will become
---------------------
effective at the Effective Time.
Section 2.3 Effects of the Merger. The Merger will have the effects
----------------------
set forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Newco will be vested in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Newco will
become the debts, liabilities and duties of the Surviving Corporation.
Section 2.4 Certificate of Incorporation; By-laws. At the Effective
--------------------------------------
Time, the certificate of incorporation of the Company, as the Surviving
Corporation, will be amended to be the same as Newco's certificate of
incorporation as in effect immediately before the Effective Time, except that
Section I of the Surviving Corporation's certificate of incorporation will read
as follows: "First: The Corporation's name is Everstream Holdings, Inc." At the
Effective Time, the Surviving Corporation's by-laws will be amended to be the
same as Newco's by-laws as in effect immediately before the Effective Time,
except that all references in such by-laws to Newco will be changed to refer to
"Everstream Holdings, Inc."
Section 2.5 Directors and Officers. Newco's directors immediately
------------------------
before the Effective Time will be the Surviving Corporation's directors, each of
whom will hold office in accordance with the Surviving Corporation's certificate
of incorporation and by-laws, and Newco's officers immediately before the
Effective Time will be the Surviving Corporation's officers, each of whom will
hold office until such officer's successor is duly elected or appointed and
qualified for such election.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 3.1 Merger Consideration; Conversion and Cancellation of
---------------------------------------------------------
Securities. As of the Effective Time, by virtue of the Merger and without any
- ----------
action on the part of the holder of any shares of Company Stock or capital stock
of Newco:
(a) Capital Stock of Newco. Each issued and outstanding share of the
-----------------------
capital stock of Newco shall be converted into and become one fully paid
and nonassessable share of common stock, par value $0.0001 per share, of
the Surviving Corporation.
(b) Cancellation of Treasury Stock and Purchaser-Owned Stock. Any
------------------------------------------------------------
shares of Company Stock that are owned directly or indirectly by the
Company as treasury stock and any shares that are owned by Purchaser, Newco
or any other wholly-owned Subsidiary of Purchaser shall be cancelled and
retired and shall cease to exist and no stock of Purchaser or other
consideration shall be delivered in exchange therefor. All shares of
Purchaser Common Stock owned by Company shall remain unaffected by the
Merger.
(c) Exchange Ratios for Company Stock. Subject to Sections 3.3 and
------------------------------------
3.4, and other than shares, if any, to be cancelled in accordance with
Section 3.1(b), each issued and outstanding share of Company Stock shall be
converted into the right to receive the
-15-
number of validly issued, fully-paid and nonassessable shares of Purchaser
Common Stock determined as follows:
(i) Each issued and outstanding share of Company Series C
Preferred Stock shall be converted into the right to receive the sum
of (A) the Series C First Tier Ratio, plus (B) the Series C Residual
Number;
(ii) Each issued and outstanding share of Company Series A
Preferred Stock shall be converted into the right to receive the sum
of (A) the Series A First Tier Ratio, plus (B) the Series A Residual
Number;
(iii) Each issued and outstanding share of Company Series B
Preferred Stock shall be converted into the right to receive the sum
of (A) the Series B First Tier Ratio, plus (B) the Series B Residual
Number; and
(iv) Each issued and outstanding share of Company Common Stock
shall be converted into the right to receive the Common Stock Residual
Number.
The number of shares of Purchaser Common Stock into which each share of Company
Series C Preferred Stock, Company Series A Preferred Stock, Company Series B
Preferred Stock and Company Common Stock shall be converted, as specified above,
shall be referred to as the "SERIES C EXCHANGE RATIO," the "SERIES A EXCHANGE
----------------------- -----------------
RATIO," the "SERIES B EXCHANGE RATIO," and the "COMMON STOCK EXCHANGE RATIO,"
- ----- ------------------------ ---------------------------
respectively, and collectively, the "EXCHANGE RATIOS." The Exchange Ratios
----------------
shall be adjusted for any stock split, stock dividend or similar transaction
effected between the Agreement Date and the Effective Time.
Section 3.2 Exchange of Certificates.
--------------------------
(a) Surrender; Delivery. Subject to Section 3.4, upon a Company
--------------------
Stockholder's surrender of the certificate or certificates representing the
total amount of Company Stock owned by such Company Stockholder or a
Company Stockholder's delivery of a lost certificate affidavit pursuant to
Section 3.2(d) (with such lost certificate delivery constituting a
"surrender" for all purposes under this Agreement), together with a duly
executed letter of transmittal in a form as the Purchaser's exchange agent
will reasonably specify, the Purchaser will deliver to such Company
Stockholder as soon as practicable (i) a certificate representing the
number of shares of Purchaser Common Stock to which such Company
Stockholder is entitled pursuant to Section 3.1(c), less any fractional
share and (ii) cash instead of fractional shares in accordance with Section
3.2(b). The certificates surrendered to the Purchaser's exchange agent
pursuant to this Section 3.2(a) will be immediately cancelled. Until
surrendered as contemplated by this Section 3.2(a), each such certificate
will be deemed at any time after the Effective Time to represent only the
right to receive, upon such surrender, shares of Purchaser Common Stock and
cash instead of any fractional shares of Purchaser Common Stock as
contemplated by this Section 3.2(a).
(b) No Fractional Shares. No certificates representing fractional
----------------------
shares of Purchaser Common Stock will be issued upon the surrender for
exchange of certificates formerly representing shares of Company Stock
pursuant to this Article III, and no
-16-
dividend, stock split, or other change in the Purchaser's capital structure
will relate to any fractional security and any such fractional interests
will not entitle the owner of such fractional interests to vote or to any
rights of a security holder. Instead of any such fractional shares, each
holder of Company Stock who would otherwise be entitled to a fraction of
one share of Purchaser Common Stock upon the surrender of such holder's
stock certificates for exchange will be paid cash upon such surrender
calculated based upon the Purchaser Share Price. For this purpose, shares
of Company Stock represented by two or more certificates will be
aggregated, and in no event will any holder be paid a cash amount in
respect of one or more than one share of Purchaser Common Stock.
(c) Tax Withholding. The Purchaser will be entitled to deduct and
----------------
withhold from the consideration otherwise payable pursuant to Section
3.1(c) and Section 3.2(b) to any former holder of Company Stock such
amounts as the Purchaser (or any Purchaser Affiliate) is required to deduct
and withhold with respect to making such payment under the Code, or any
provision of Law with respect to Taxes. To the extent that amounts are so
withheld by the Purchaser, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to such former holder of
Company Stock in respect of whom such deduction and withholding was made by
Purchaser.
(d) Lost Certificates. If any Company Stockholder's certificate
------------------
representing Company Stock will have been lost, stolen, or destroyed, then,
upon such Company Stockholder's delivery to the Purchaser of (i) an
affidavit of that fact and, (ii) if required by the Purchaser, a bond in
such reasonable amount as the Purchaser may direct as indemnity against
claims that may be made against the Purchaser with respect to such lost,
stolen, or destroyed certificate, the Purchaser will deliver to such
Company Stockholder the certificate representing the number of shares of
Purchaser Common Stock to which the holder is entitled and the amount of
cash for fractional shares to which such Company Stockholder is entitled
pursuant to this Article III.
(e) Company Transfer Books. At the Effective Time, the Company will
------------------------
close the Company's stock transfer books, and, after the Effective Time,
the Company will not transfer any shares of Company Stock. After the
Effective Time, if any Person delivers to the Surviving Corporation
certificates representing shares of Company Common Stock, then the
Surviving Corporation will cancel such certificates and will exchange such
certificates for the applicable portion of the Merger Consideration and
cash for fractional shares in accordance with this Article III.
Section 3.3 Dissenting Shares.
------------------
(a) Notwithstanding any provision of this Agreement to the contrary,
but subject to Section 3.3(b), if any Company Stockholder, in accordance
with the DGCL, has demanded and perfected appraisal rights (a "DISSENTING
----------
STOCKHOLDER"), with respect to Company Stock held by such Company
------------
Stockholder ("DISSENTING SHARES"), then such Dissenting Stockholder will
------------------
only be entitled to the rights granted by the DGCL and such Dissenting
Shares will not be converted into or represent a right to receive any
Merger Consideration pursuant to Section 3.1(c) or Section 3.2(b).
-17-
(b) Notwithstanding the provisions of Section 3.3(a), if any
Dissenting Stockholder effectively withdraws or loses such Dissenting
Stockholder's appraisal right (through failure to perfect or otherwise),
then, as of the later of the Effective Time and the occurrence of such
effective withdrawal or loss, such Dissenting Stockholder's Dissenting
Shares will automatically be converted into and represent only the right to
receive a portion of the Merger Consideration pursuant to Section 3.1(c)
and Section 3.2(b) (each without interest thereon) upon such Dissenting
Stockholder's surrender of the certificate representing such Dissenting
Shares pursuant to this Article III.
(c) The Company will give the Purchaser (i) prompt written notice of
any written demands for appraisal of any shares of Company Stock,
withdrawals of such demands, and any other instruments served pursuant to
the DGCL and received by the Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to appraisal
demands under the DGCL. Except with the Purchaser's prior written consent,
the Company will not voluntarily make any payment with respect to any
Dissenting Shares or offer to settle or settle any demands with respect to
any Dissenting Shares after the Effective Time. The Company will pay
Dissenting Stockholders for their Dissenting Shares out of its own funds.
No funds will be supplied for that purpose, directly or indirectly, by
Purchaser, nor will Purchaser directly or indirectly reimburse the Company
for any payments to Dissenting Stockholders for their Dissenting Shares.
Section 3.4 Escrow. On the Closing Date and pursuant to the Escrow
------
Agreement, the Purchaser, on behalf of the Company Stockholders, will deposit in
an escrow account (the "ESCROW ACCOUNT") a number of shares of the Purchaser
--------------
Common Stock equal to twenty percent (20%) of the number of shares of the Total
Merger Shares (such shares, the "ESCROW SHARES"), rounded up to the nearest
-------------
whole share. The Escrow Shares will be withheld from the Company Stockholders
on a pro-rata basis in proportion to the total amount of the Total Merger Shares
that would otherwise be paid to the Company Stockholders pursuant to Section
3.1. The Escrow Shares will be held for the Company Stockholders' respective
accounts in accordance with the terms of the Escrow Agreement. Upon a Company
Stockholder's surrender to the Company of the certificate or certificates
representing such Company Stockholder's shares of Company Common Stock, the
Purchaser will deliver to such Company Stockholder pursuant to Section 3.2(a)
the number of shares of Purchaser Common Stock to which such Company Stockholder
is entitled under Section 3.2(a), less the number of Escrow Shares to be held in
----
the Escrow Account for such Company Stockholder's account as specified in the
Escrow Agreement. The Escrow Shares will be held in the Escrow Account and
released to the Company Stockholders or to the Purchaser in accordance with
Section 9.8 and the Escrow Agreement. Until the Escrow Shares are released from
the Escrow Account in accordance with Section 9.8, (a) the Escrow Shares may not
be transferred, sold, assigned, or pledged and (b) certificates evidencing the
Escrow Shares will bear a legend indicating that they are subject to
restrictions on transfer pursuant to this Section 3.4(a). Until the Escrow
Shares held in the Escrow Account for the Company Stockholders are released in
accordance with Section 9.8 and the Escrow Agreement, such Company Stockholders
will be entitled to vote all such Escrow Shares held in the Escrow Account in
such Company Stockholder's name and to receive all dividends and distributions
in respect of such Escrow Shares.
-18-
Section 3.5 Closing. The Closing will occur at the offices of King &
-------
Spalding LLP, 191 Peachtree Street, Atlanta, Georgia, at 10:00 a.m., Eastern
Time, on a Business Day not later than five Business Days after all conditions
to the Closing under Section 7.1, Section 7.2, and Section 7.3 are satisfied (or
waived) (subject to applicable Law), or on such other date, place, or time as
the Parties may agree. In connection with the Closing on the Closing Date, the
Parties will file the Agreement of Merger with the Delaware Secretary of State.
ARTICLE IV
COMPANY REPRESENTATIONS AND WARRANTIES
Subject to such exceptions as are specifically disclosed in writing in the
Company Disclosure Schedule (which will be arranged in a manner corresponding to
the number and lettered paragraphs contained in this Article IV), as of the
Agreement Date, the Company and Sellers hereby jointly and severally represent
and warrant to the Purchaser and Newco, as follows:
Section 4.1 Organization.
------------
(a) The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware. The Company has the requisite
corporate power and authority to own, lease, and operate the Company's
properties and to carry on the Business as now being conducted, and the
Company is duly qualified to transact business under the Laws of each
jurisdiction where the character of the Company's activities or the
location of the properties owned or leased by the Company requires such
qualification, other than in such jurisdictions where the failure to be so
qualified (individually or in the aggregate) would not have a Company
Material Adverse Effect.
(b) The Company has delivered to the Purchaser and Newco correct and
complete copies of the Company's certificate of incorporation and by-laws
as currently in effect and the Company's corporate record books with
respect to actions taken by the Company's stockholders and directors.
(c) Schedule 4.1(c) contains a true and correct list of the
----------------
jurisdictions in which the Company and each Company Subsidiary is qualified
or registered to do business as a foreign corporation.
(d) Neither the Company nor any Company Subsidiary has, since the date
it was acquired by the Company or formed conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious
name, assumed name, trade name or other name, other than the name
"Everstream" and the names set forth in Schedule 4.1(d).
----------------
(e) Schedule 4.1(e) accurately sets forth, as of the Agreement Date
----------------
(i) the names of the members of the board of directors of the Company and
each Company Subsidiary; and (ii) the names and titles of the officers of
the Company and each Company Subsidiary.
Section 4.2 Authorization. The Company has the requisite corporate
-------------
power and authority, and each of the Sellers has the requisite authority, to
execute and deliver this
-19-
Agreement and any other certificate, agreement, document, or other instrument to
be executed and delivered by the Company or such Seller (as applicable) in
connection with the transactions contemplated by this Agreement (collectively,
the "COMPANY ANCILLARY DOCUMENTS," and collectively with this Agreement and the
---------------------------
Purchaser Ancillary Documents, the "TRANSACTION DOCUMENTS"), and, subject to
---------------------
Company Stockholder Approval, to consummate the Merger and the other
transactions contemplated by the Company Ancillary Documents and this Agreement
and to perform the Company's obligations or such Seller's obligations (as
applicable) under the Company Ancillary Documents and this Agreement. The
Company's execution and delivery of the Company Ancillary Documents and this
Agreement and the Company's performance of the Company's obligations under the
Company Ancillary Documents and this Agreement and the consummation of the
transactions contemplated by the Company Ancillary Documents and this Agreement
have been duly authorized by all necessary corporate action of the Company.
This Agreement has been, and the Company Ancillary Documents will be as of the
Closing Date, duly executed and delivered by the Company and the Sellers, and
this Agreement and the Company Ancillary Documents do or will, as the case may
be, constitute valid and binding obligations of the Company and the Sellers,
enforceable against the Company and the Sellers in accordance with the
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar Laws affecting the
enforceability of creditors' rights generally, general equitable principles, and
court discretion in granting equitable remedies (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 4.3 Capital Stock. Schedule 4.3 accurately and completely sets
------------- ------------
forth the Company's capital structure by listing the number of shares of Company
capital stock that are authorized and that are issued and outstanding, including
those shares of Company capital stock held, to the Knowledge of the Company, by
the Purchaser. All of the issued and outstanding shares of Company capital
stock (a) are shares of Company Common Stock or Company Preferred Stock (as set
forth on Schedule 4.3); (b) are duly authorized, validly issued, fully paid, and
------------
non-assessable; (c) are free and clear of any Liens; (d) are held of record and
beneficially owned by Persons as set forth on Schedule 4.3 in the respective
------------
amounts set forth on Schedule 4.3; and (e) were not issued in violation of any
------------
Person's preemptive rights or any agreement or Law or any Order of any Court or
Governmental Entity by which the Company, at the time of issuance, was bound.
The Persons listed on Schedule 4.3 constitute all of the Company Stockholders.
------------
Except with respect to treasury shares cancelled pursuant to the terms of this
Agreement, no shares of Company capital stock are reserved for issuance or are
held as treasury shares, and, except as disclosed on Schedule 4.3 (i) there are
------------
no outstanding options, warrants, rights, calls, commitments, conversion rights,
exchange rights, subscriptions, claims, agreements, obligations, convertible
securities, exchangeable securities or other plans or commitments, contingent or
otherwise, relating to the Company's capital stock, other than as contemplated
by this Agreement; (ii) there are no outstanding contracts or other agreements
of the Company or any other Person to purchase, redeem, or otherwise acquire any
outstanding shares of Company capital stock or securities or obligations of any
kind convertible into any shares of Company capital stock; (iii) there are no
dividends that have accrued or been declared but are unpaid on the Company's
capital stock; and (iv) there are no outstanding or authorized stock
appreciation, phantom stock, stock plans, or similar rights with respect to the
Company. Except as disclosed on Schedule 4.3 neither the Company nor any
-------------
Company Subsidiary has ever repurchased, redeemed or otherwise reacquired any
Company Stock or other capital stock or
-20-
other securities of the Company or any Company Subsidiary, other than Company
Options forfeited by an employee of the Company in connection with the
termination of an employee's employment with the Company or any Company
Subsidiary. All securities so reacquired by the Company or any Company
Subsidiary were reacquired in compliance with (i) all applicable Laws, and (ii)
all requirements set forth in all applicable restricted stock purchase
agreements and other applicable Contracts relating to such acquisitions.
Section 4.4 Subsidiaries. Except as set forth on Schedule 4.4, the
------------ ------------
Company does not currently own, and has not at any time during the past five (5)
years owned, directly or indirectly, any capital stock or other equity,
securities, or interests in any other corporation or in any limited liability
company, partnership, joint venture, joint stock company, trust, estate,
association, unincorporated organization, or any other form of business or
professional entity. Except as set forth on Schedule 4.4, each Company
-------------
Subsidiary is a corporation duly organized, validly existing, and in good
standing under the Laws of such Company Subsidiary's jurisdiction of
incorporation or organization and is duly qualified to do business as a foreign
corporation or foreign business entity in each jurisdiction in which such
Company Subsidiary's property ownership or property leasing or the nature of
such Company Subsidiary's business makes such qualification necessary, other
than in such jurisdictions where the failure to be so qualified (individually or
in the aggregate) would not have a Company Material Adverse Effect. Each
Company Subsidiary has the requisite corporate power and authority to own,
lease, and operate such Company Subsidiary's properties and assets and to carry
on such Company Subsidiary's business as now being conducted. All of the
outstanding shares of each Company Subsidiary's capital stock are owned by the
Company, have been validly issued, and are fully paid and non-assessable, were
not issued in violation of any preemptive rights, upon termination of the
Company Shareholder Agreements will not be subject to any preemptive rights and
are owned free and clear of all Liens. There are no outstanding subscriptions,
options, warrants, rights, conversion rights, convertible securities,
exchangeable securities or any other agreement or commitments of any character
relating to the issued or unissued capital stock or other securities of any
Company Subsidiary obligating any such Company Subsidiary to issue, deliver, or
sell, or cause to be issued, delivered, or sold, additional shares of such
Company Subsidiary's capital stock or obligating any such Company Subsidiary to
grant, extend, or enter into any subscription, option, warrant, right,
convertible security or exchangeable security or other similar agreement or
commitment.
Section 4.5 Absence of Restrictions and Conflicts. The execution and
--------------------------------------
delivery of this Agreement and the Company Ancillary Documents by the Company
and the Sellers (as applicable) do not, and the consummation and performance of
the transactions contemplated by this Agreement and the Company Ancillary
Documents and compliance with the terms and conditions of this Agreement and the
Company Ancillary Documents by the Company and the Sellers (as applicable) will
not, with the passing of time or the giving of notice or both, violate or
conflict with, constitute a breach of or default under, result in the loss of
any benefit under, permit the acceleration of any obligation under, or create in
any party the right to terminate, modify, or cancel (a) the Company's or any
Company Subsidiary's certificate of incorporation or by-laws; (b) except as set
forth on Schedule 4.5, the Company Contracts or any other material contract,
-------------
material agreement, material permit, franchise or material license applicable to
the Company or the Business or applicable to any Company Subsidiary or the
Sellers; (c) any Order of any Court or Governmental Entity to which the Company,
any Company Subsidiary or any of
-21-
the Sellers, is a party or by which the Company, any Company Subsidiary, any of
the Sellers, or any of the properties of the Company or any Company Subsidiary
is bound; or (d) any Law applicable to the Company, any Company Subsidiary or
the Sellers; other than, in the case of clauses (b) or (c), any such violations,
conflicts, breaches, defaults, losses, accelerations or rights to terminate,
modify or cancel that individually or in the aggregate would not have a Company
Material Adverse Effect or would not materially impair the ability of the
Company or any Company Subsidiary to perform their respective obligations under
this Agreement or the Company Ancillary Documents, or prevent the consummation
of any of the transactions contemplated by this Agreement or the Company
Ancillary Documents. No Order or other authorization of, or registration,
declaration, or filing with, any Court or Governmental Entity is required with
respect to the Company, any Company Subsidiary, or any of the Sellers in
connection with the execution, delivery, or performance by the Company or any
Seller of this Agreement or the Company Ancillary Documents, or the consummation
of the transactions contemplated by this Agreement or the Company Ancillary
Documents, except the filing of (w) an Agreement of Merger with the Delaware
Secretary of State, (x) appropriate documents with the relevant authorities of
other jurisdictions in which the Company or the Company Subsidiaries are
qualified to do business, (y) the Ohio Permit, and (z) such other Order or other
authorization of, or registration, declaration, or filing the failure of which
to be obtained or made would not have a Company Material Adverse Effect.
Section 4.6 Real Property.
--------------
(a) The Company and each Company Subsidiary does not own and has not
at any time during the past five (5) years owned any real property.
(b) Schedule 4.6(b) sets forth the addresses of the real property
----------------
leased by the Company or any Company Subsidiary (together with all
buildings, fixtures and improvements on such real property, the "LEASED
------
REAL PROPERTY"). The Company, or the applicable Company Subsidiary, has a
---------------
valid leasehold interest in the Leased Real Property, free and clear of all
Liens. All Leased Real Property leases are valid, binding, and in full
force and effect. The Company, or the applicable Company Subsidiary, has
taken all commercially reasonable action to maintain the Leased Real
Property, except where the failure to so act would not have a Company
Material Adverse Effect. No termination of any Leased Real Property lease
is pending or to the Knowledge of the Company threatened (other than by
expiration upon the end of any term).
(c) No portion of the Leased Real Property violates any Order of any
Court or Governmental Entity. To the Knowledge of the Company, no portion
of the Leased Real Property violates any Laws including without limitation
any Environmental Law.
(d) No condemnation proceedings, appropriation proceedings, or similar
proceedings are pending or, to the Knowledge of the Company, threatened
against any portion of the Leased Real Property.
Section 4.7 Title to Personal Property; Related Matters. Except as set
-------------------------------------------
forth on Schedule 4.7, the Company or a Company Subsidiary, as applicable, has
------------
good and marketable title to, or a valid and binding leasehold or license
interest in, all of the Company's or such
-22-
Company Subsidiary's tangible personal property and assets, free and clear of
all Liens. All of the Company's and Company Subsidiary's equipment and other
items of the Company's and Company Subsidiary's tangible personal property and
assets are in reasonably good operating condition and in a state of reasonably
good maintenance and repair, ordinary wear and tear excepted, are usable in the
regular and ordinary course of business, and, to the Knowledge of the Company,
are free of material defects or problems. Except for any tangible personal
property or assets for which the Company or a Company Subsidiary has a valid and
binding leasehold or license interest, no Person other than the Company or a
Company Subsidiary owns any equipment or other material tangible personal
property or assets situated on the Company's or any Company Subsidiary's
premises that are necessary for operating the Business. Since June 30, 2005,
neither the Company nor any Company Subsidiary has sold, transferred, or
disposed of any assets or tangible personal property having a book value of more
than $25,000, other than sales of inventory in the ordinary course of business.
Schedule 4.7 sets forth a correct and complete list and reasonable description
- -------------
of each item of the Company's and Company Subsidiary's personal property having
a book value of more than $50,000.
Section 4.8 Stockholder Approval. Under the DGCL and the certificate
---------------------
of incorporation of the Company, the Merger requires the approval by (a) at
least a majority of the outstanding stock of the Company entitled to vote on the
Merger and (b) the holders of at least a majority of the outstanding shares of
Company Series A Preferred Stock and Company Series C Preferred Stock voting
together as a single class.
Section 4.9 Financial Statements. The Company has delivered to the
---------------------
Purchaser the Financial Statements. The Financial Statements have been prepared
from, and are in accordance with, the Company's books and records, which are
maintained in accordance with GAAP (except as noted on Schedule 4.9)
-------------
consistently applied throughout the periods indicated, and such books and
records have been maintained on a basis consistent with the Company's past
practice. Each of the balance sheets included in such Financial Statements
(including any related notes and schedules) fairly presents in all material
respects the financial position of the Company and the applicable Company
Subsidiary, as the case may be, as of the date of such balance sheet, and each
of the statements of income and cash flows included in such Financial Statements
(including any related notes and schedules) fairly presents in all material
respects the results of operations and changes in cash flows, as the case may
be, of the Company and the applicable Company Subsidiary, as the case may be,
for the periods set forth in the Financial Statements. Since June 30, 2005,
there has been no material change in any of the accounting (and tax accounting)
policies, practices, or procedures of the Company or any Company Subsidiary.
Neither the Company nor any Company Subsidiary is a party to any securitization
transaction or "off-balance sheet arrangement" (as defined in Item 303(a)(4)(ii)
of Regulation S-K).
Section 4.10 No Undisclosed Liabilities. Neither the Company nor any
---------------------------
Company Subsidiary has any liabilities or obligations (whether absolute,
accrued, or contingent liabilities or otherwise) that are not reflected or
provided for in the Financial Statements, except liabilities and obligations (a)
that, individually or in the aggregate, have not had or would not reasonably be
expected to have a Company Material Adverse Effect, (b) that have been incurred
since the applicable date of the Financial Statements in the ordinary course of
business, and (c) set forth on Schedule 4.10.
--------------
-23-
Section 4.11 Absence of Certain Changes. Since December 31, 2004, and
--------------------------
except as set forth on Schedule 4.11, for the transactions contemplated by this
-------------
Agreement, or as set forth in the Financial Statements (including any related
notes and schedules), there has not been (a) any material adverse change in the
Company's or any Company Subsidiary's assets, liabilities, business, condition
(financial or otherwise), or results of operations, (b) any damage, destruction,
loss, or casualty to property or assets of the Company or any Company Subsidiary
with a value in excess of $25,000, whether or not covered by insurance, or (c)
any action taken by the Company or any Company Subsidiary of the type described
in Section 6.1 that, had such action occurred after the Agreement Date, would be
in violation of Section 6.1.
Section 4.12 Legal Proceedings. Except as set forth on Schedule 4.12,
----------------- -------------
there are no suits, actions, claims, arbitration, proceedings, or investigations
pending or, to the Knowledge of the Company, threatened against, relating to, or
involving the Company, any Company Subsidiary, the Business, or the assets or
properties of the Company or any Company Subsidiary before any Court or
Governmental Entity or other Person that, if finally determined adversely to the
Company or any Company Subsidiary, could reasonably be expected to constitute,
individually or in the aggregate, a Company Material Adverse Effect. The
Company and each Company Subsidiary is not currently subject to any Order of any
Court.
Section 4.13 Compliance with Law. The Company and each Company
---------------------
Subsidiary is (and has been at all times during the past five (5) years) in
compliance with all Laws, including applicable Labor Laws and Environmental
Laws, and all Orders of any Court or Governmental Entity applicable to their
properties and businesses (it being understood and agreed that no representation
or warranty is being made in this Section 4.13 with respect to those Laws and
Orders that are the subject of the representations and warranties set forth in
Sections 4.15, 4.17 and 4.20). Neither the Company nor any Company Subsidiary
has been charged with or, to the Knowledge of the Company, is now under
investigation with respect to, a violation of any Law or any Order of any Court
or Governmental Entity applicable to their property or businesses. Neither the
Company nor any Company Subsidiary is a party to, subject to, or bound by any
order of any Court or any Governmental Entity. The Company and each Company
Subsidiary has filed all reports and has obtained all licenses and permits
required to be filed with or obtained from, as applicable, any Court or
Governmental Entity on or before the Agreement Date.
Section 4.14 Company Contracts. Schedule 4.14 sets forth a correct and
----------------- -------------
complete list of the following contracts to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary is bound
(in each case, other than contracts relating to Intellectual Property, which are
disclosed on Schedule 4.21) (collectively, the "COMPANY CONTRACTS"):
-------------- ------------------
(a) all bonds, debentures, notes, loans, credit agreements, loan
agreements, loan commitments, mortgages, indentures, guarantees, any other
contracts relating to borrowing money, or any other contracts binding upon
any properties or assets (real, personal, mixed, tangible, or intangible)
of the Company or any Company Subsidiary;
(b) any contract or agreement relating to any capital stock of the
Company or any Company Subsidiary or options or voting or other rights with
respect to such capital stock;
-24-
(c) all leases relating to the Leased Real Property or other leases
involving any properties or assets (whether real, personal or mixed,
tangible or intangible) calling for an annual payment to or from the
Company or any Company Subsidiary in excess of $25,000;
(d) all contracts or agreements that limit or restrict the Company or
any Company Subsidiary or any of their respective officers or key employees
from engaging in any business in any jurisdiction;
(e) all franchising and licensing agreements that contain an annual
commitment or annual payment to or from the Company or any Company
Subsidiary of more than $2,500 in the aggregate per Person party to such
agreement;
(f) any contract or agreement for capital expenditures, excluding
expenditures for resale of products, or the acquisition or construction of
assets totaling more than $25,000;
(g) any contract that provides for an increased payment or benefit, or
accelerated vesting, upon the execution of any Transaction Document or in
connection with the consummation of any of the transactions contemplated by
this Agreement;
(h) any contract or agreement granting any Lien on all or any part of
the assets of the Company or any Company Subsidiary;
(i) any contract or agreement for the cleanup, abatement, or other
actions in connection with any Hazardous Materials, for the remediation of
any existing environmental condition, or relating to the performance of any
environmental audit or study;
(j) any contract or agreement granting any option or a first refusal,
first offer, or similar preferential right to purchase or acquire any
assets of the Company or any Company Subsidiary;
(k) any contract or agreement with any sales agent, distributor, or
non-employee sales representative;
(l) any contract or agreement providing for the indemnification or
holding harmless of any current or former officer, director, employee, or
other Person; (m) any joint venture or partnership contract;
(n) any customer contract for the provision of goods or services by
the Company or any Company Subsidiary and any accompanying support
agreements relating to such contracts;
(o) any outstanding power of attorney empowering any Person to act on
behalf of the Company or any Company Subsidiary or any of their Affiliates;
-25-
(p) any contract or agreement for the granting or receiving of a
license or sublicense or under which any Person is obligated to pay or has
the right to receive a royalty, license fee, or similar payment; and
(q) any other contract or commitment (other than those described in
Section 4.14(a) through 4.14(p)) that contain an annual commitment or
annual payment to or from the Company or any Company Subsidiary of more
than $37,500 individually or that is otherwise material to the Business.
Correct and complete copies of all Company Contracts have been delivered to
the Purchaser. The Company Contracts are legal, valid, binding, and enforceable
in accordance with their respective terms with respect to the Company and each
Company Subsidiary and, to the Knowledge of the Company, with respect to each
other party to such Company Contracts, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
Laws affecting the enforceability of creditors' rights generally, general
equitable principles, and court discretion in granting equitable remedies
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). There are no existing defaults or breaches under any Company
Contract (or events or conditions that, with notice or lapse of time or both,
would constitute a default or a breach) with respect to the Company and each
Company Subsidiary and, to the Knowledge of the Company, with respect to each
other party to such Company Contracts. Except as set forth on Schedule 4.14,
-------------
neither the Company nor any Company Subsidiary is participating in any
discussions or negotiations regarding modification of or amendment to any
Company Contract or entry in any new Company Contract or other contract material
to the Company or any Company Subsidiary.
Section 4.15 Taxes. Except as set forth on Schedule 4.15,
----- --------------
(a) (i) All Tax Returns of the Company and each Company Subsidiary
have been filed through the Agreement Date in accordance with any
applicable Law have been duly filed and are correct and complete in all
material respects; (ii) all Taxes of the Company and each Company
Subsidiary shown as due and owing on any Tax Return have been paid in full;
(iii) the amounts so paid on or before the Agreement Date, together with
any amounts accrued as liabilities for Taxes (including Taxes accrued as
currently payable, but excluding any deferred Taxes attributable to
differences between book and Tax accounting) on the Company's books, and
reflected in the Company's unaudited balance sheet at June 30, 2005 will be
adequate based on the tax rates, applicable Laws, and regulations in effect
on the Agreement Date to satisfy all liabilities for Taxes of the Company
and each Company Subsidiary in any jurisdiction through June 30, 2005, and
the Company will accrue amounts as liabilities for Taxes on the Company's
books and financial statements that will be adequate based on the tax rates
and applicable Laws in effect from time to time before the Closing to
satisfy all liabilities for Taxes of the Company and each Company
Subsidiary in any jurisdiction through the Closing Date; (iv) there are not
now any outstanding extensions of time in effect with respect to the dates
on which any Tax Returns were or are due to be filed; (v) all deficiencies
asserted as a result of any examination of any Tax Returns have been paid
in full, accrued on the books of the Company or the relevant Company
Subsidiary, or finally settled; (vi) no claims have been asserted in
writing and no proposals or deficiencies for any Taxes are
-26-
being asserted, proposed, or threatened in writing, and no audit or
investigation of any return or report of Taxes is currently underway,
pending, or threatened in writing; (vii) no claim has ever been made by an
authority in a jurisdiction in which the Company or any Company Subsidiary
does not file Tax Returns that the Company or such Company Subsidiary is or
may be subject to taxation by that jurisdiction that has not been paid in
full, accrued on the books of the Company or the relevant Company
Subsidiary, or finally settled; (viii) each of the Company and the Company
Subsidiaries has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any current or former
employee, independent contractor, creditor, stockholder, or other third
party; (ix) there are no outstanding waivers or agreements by or on behalf
of the Company or any Company Subsidiary for the extension of time for the
assessment of any Taxes or deficiency of such Taxes, nor are there any
requests for rulings or outstanding subpoenas; (x) there are no Liens for
Taxes (other than Liens for Taxes that are not yet due and payable) pending
or threatened; (xi) none of the Sellers is a foreign person within the
meaning of Section 1445 of the Code; (xii) neither the Company nor any
Company Subsidiary is a party to any Tax allocation or sharing agreement;
(xiii) neither the Company nor any Company Subsidiary has been a member of
an affiliated group filing a consolidated U.S. federal income tax return
(other than a group whose common parent was the Company); (xiv) neither the
Company nor any Company Subsidiary has any liability for the Taxes of any
Person (other than the Company) under U.S. Treasury Regulation section
1.1502-6 (or any similar provision of Law), as a transferee or successor or
by contract, or otherwise; and (xv) neither the Company nor any Company
Subsidiary has taken any action or knows of any fact, agreement, plan or
other circumstance that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(b) For purposes of this Agreement, (i) the term "TAXES" means all
-----
taxes, assessments, charges, duties, fees, levies, or other governmental
charges (including any associated interest, penalties, or additions),
including income, franchise, capital stock, real property, personal
property, tangible, withholding, employment, payroll, social security,
social contribution, unemployment compensation, disability, transfer,
sales, use, excise, gross receipts, value-added, and all other taxes of any
kind for which the Company or any Company Subsidiary, or the Purchaser or
any Purchaser Subsidiary, as applicable, may have any liability imposed by
any Governmental Entity, whether disputed or not, and any charges,
interest, additions, or penalties imposed by any Governmental Entity; and
(ii) the term "TAX RETURN" means any report, return, declaration, or other
----------
information required to be supplied to a Governmental Entity in connection
with Taxes, including any estimated returns and reports of every kind with
respect to Taxes.
Section 4.16 Officers and Employees. Schedule 4.16 contains a correct
---------------------- -------------
and complete list of (a) all of the officers of the Company and each Company
Subsidiary, specifying their position; and (b) all of the employees (whether
full-time, part-time, or otherwise) and independent contractors of the Company
and each Company Subsidiary as of the Agreement Date. Except as set forth on
Schedule 4.16, neither the Company nor any Company Subsidiary is a party to or
- --------------
bound by any Employment Agreement. The Company has delivered to the Purchaser
correct and complete copies of each such Employment Agreement. None of the
-27-
Company, any Company Subsidiary and any of the Sellers has received a claim from
any Governmental Entity to the effect that the Company or any such Company
Subsidiary has improperly classified as an independent contractor any Person
named on Schedule 4.16. None of the Company, any Company Subsidiary and any of
-------------
the Sellers has made any oral commitments to any officer, employee, former
employee, consultant, or independent contractor of the Company or any Company
Subsidiary with respect to compensation, promotion, retention, termination,
severance, or similar matters in connection with the transactions contemplated
hereby.
Section 4.17 Company Benefit Plans.
-----------------------
(a) For purposes of this Agreement, the term "COMPANY BENEFIT PLAN"
--------------------
means each Employee Benefit Plan sponsored or maintained by the Company or
any Company Subsidiary or to which the Company or any Company Subsidiary
makes or has made, or has or has had an obligation to make, contributions
at any time. Schedule 4.17 contains a true and complete list of each
--------------
Company Benefit Plan sponsored, maintained, or contributed to by the
Company or any Company Subsidiary within the last six calendar years. Each
Company Benefit Plan currently in effect ("CURRENT COMPANY BENEFIT PLAN")
----------------------------
is identified as a "current plan" on such schedule.
(b) For purposes of this Agreement, the term "EMPLOYEE BENEFIT PLAN"
---------------------
means, with respect to any Person, each plan, fund, program, agreement, or
arrangement or scheme, including each plan, fund, program, agreement, or
arrangement maintained under the Laws of a jurisdiction outside the United
States of America, in each case, that is or was sponsored or maintained by
such Person or to which such Person makes or has made, or has or has had an
obligation to make, contributions providing for employee benefits or for
the remuneration, direct or indirect, of the employees, former employees,
directors, managers, officers, consultants, independent contractors,
contingent workers, or leased employees of such Person or the dependents of
any of them (whether written or oral), including (i) each deferred
compensation, bonus, incentive compensation, pension, retirement, stock
purchase, stock option, and other equity-based compensation plan, (ii) each
"welfare plan" (within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), determined
-----
without regard to whether such plan is subject to ERISA); (iii) each
"pension plan" (within the meaning of ERISA Section 3(2), determined
without regard to whether such plan is subject to ERISA); (iv) each
severance plan or agreement, (v) each health, vacation, summer hours,
supplemental unemployment benefit, hospitalization insurance, medical,
dental, and legal plan, fund program, agreement or arrangement or
arrangement ad, (vi) each other employee benefit plan, fund, program,
agreement or arrangement.
(c) For purposes of this Agreement, the term "ERISA AFFILIATE PLAN"
--------------------
means each Employee Benefit Plan sponsored or maintained or required to be
sponsored or maintained at any time by any Person (whether incorporated or
unincorporated), that together with the Company would be deemed a "single
employer" within the meaning of Code Section 414 (an "ERISA AFFILIATE"), or
---------------
to which such ERISA Affiliate makes or has made, or has or has had an
obligation to make, contributions at any time.
-28-
(d) Except as set forth in Schedule 4.17,
--------------
(i) With respect to each Current Company Benefit Plan identified
on Schedule 4.17, the Company has delivered to the Purchaser true and
-------------
complete copies of the plan documents and any amendments to the plan
documents (or, in the event the plan is not written, a written
description of such plan), any related trust or other funding vehicle,
any reports or summaries required under ERISA or the Code for the most
recent period for which such report or summary was required, and the
most recent determination letter (or opinion letter, if applicable)
received from the Internal Revenue Service with respect to each
Current Company Benefit Plan intended to qualify under Code Section
401(a).
(ii) The Company's records accurately reflect the employment or
service histories of the employees, independent contractors,
contingent workers, and leased employees of the Company and each
Company Subsidiary, including their respective hours of service, and
all such records are maintained in a usable form.
(iii) No Company Benefit Plan or ERISA Affiliate Plan is or was
subject to ERISA Title IV or Code Section 412, and no Company Benefit
Plan or ERISA Affiliate Plan is or was a "multiemployer pension plan"
(as defined in ERISA Sections 3(37) and 4001(a)(3)) or subject to
ERISA Section 302.
(iv) No Current Company Benefit Plan or ERISA Affiliate Plan is a
"multiple employer welfare arrangement" (as defined in ERISA Section
3(40)).
(v) Each Current Company Benefit Plan has been established,
registered, qualified, invested, operated, and administered in all
material respects in accordance with its terms and in compliance with
ERISA, the Code, and all Applicable Benefit Laws. Neither the Company
nor any Company Subsidiary has incurred, and, to the Knowledge of the
Company, no fact exists that reasonably could be expected to result in
any material liability to the Company or any Company Subsidiary with
respect to any Current Company Benefit Plan or any ERISA Affiliate
Plan, including any current liability, tax, penalty, or fee under
ERISA, the Code, or any Applicable Benefit Law (other than to pay
premiums, contributions, or benefits in the ordinary course).
(vi) To the Knowledge of the Company, no fact or circumstance
exists that could adversely affect the tax-exempt status of a Current
Company Benefit Plan that is intended to be tax-exempt. Each Current
Company Benefit Plan intended to be "qualified" within the meaning of
Code Section 401(a) and the trusts maintained with respect to such
Current Company Benefit Plan that are intended to be exempt from
taxation under Code Section 501(a) has received a favorable
determination letter indicating that such Current Company Benefit Plan
is so qualified or is entitled to rely on an opinion letter issued to
a prototype sponsor that the prototype plan is qualified.
-29-
(vii) There is no pending or, to the Knowledge of the Company,
threatened material complaint, claim (other than a routine claim for
benefits), proceeding, examination, audit, investigation, or action of
any kind in or before any Governmental Entity with respect to any
Current Company Benefit Plan, and, to the Knowledge of the Company, no
state of facts that, after notice or lapse of time or both, reasonably
could be expected to give rise to any such material claim,
investigation, examination, audit, or other proceeding to affect the
tax exempt status of any Company Benefit Plan required to be
tax-exempt.
(viii) No Current Company Benefit Plan provides medical,
surgical, hospitalization or death benefits (whether or not insured)
for current or former employees, directors, officers, consultants,
independent contractors, contingent workers, or leased employees (or
any of their dependents, spouses, or beneficiaries) of the Company or
any Company Subsidiary for periods extending beyond their retirement
or other termination of service, other than (1) continuation coverage
mandated by ERISA, the Code, or Applicable Benefit Law and only to the
extent required under ERISA, the Code, or such Applicable Benefit Law,
(2) death benefits under any qualified Current Company Benefit Plan,
(3) deferred compensation reflected in the Financial Statements, or
(4) insured benefits through the end of the month in which termination
of employment occurs.
(ix) No insurance policy or any other contract or agreement
affecting any Current Company Benefit Plan requires or permits a
retroactive increase in premiums or payments due under such insurance
policy, contract, or agreement.
(x) Neither the Company nor any Company Subsidiary or any of
their respective agents has been in breach of any fiduciary obligation
with respect to the administration of the Company Benefit Plan or the
trusts or other funding media relating to such Company Benefit Plan.
(xi) The Company has reserved the right under the terms of each
Current Company Benefit Plan to amend, revise, merge, or terminate
such plan (or the Company's participation or any Company Subsidiary's
participation in such plan) or transfer such Current Company Benefit
Plan's assets to another arrangement, plan, or fund at any time
exclusively by Company action.
(xii) The execution, delivery, and performance of, and
consummation of the transactions contemplated by, this Agreement will
not (A) entitle any current or former employee, director, officer,
consultant, independent contractor, contingent worker, or leased
employee (or any of their dependents, spouses, or beneficiaries) of
the Company or any Company Subsidiary to severance pay or any other
payment under a Current Company Benefit Plan, or (B) accelerate the
time of payment or vesting, or increase the amount of compensation due
any such individual under a Current Company Benefit Plan.
(xiii) Neither the Company nor any Company Subsidiary has made
any payments, is obligated to make any payments, or is a party to any
agreement that
-30-
under certain circumstances could obligate the Company or any Company
Subsidiary to make any payments that will not be deductible for
federal income tax purposes by reason of Section 280G of the Code.
(xiv) Neither the Company nor any Company Subsidiary has any duty
or obligation to indemnify or hold another Person harmless for any
liability attributable to any acts or omissions by such Person with
respect to any Company Benefit Plan or ERISA Affiliate Plan.
(e) Schedule 4.17(e) contains a complete a correct list of all Company
----------------
Options, including the number of shares covered by each Company Option, the
exercise price of each Company Option and whether such Company Option is
intended to qualify as incentive stock options as defined in Code Section
422.
(f) The Company has delivered to the Purchaser complete and accurate
copies of the Company's Stock Option Plan and all forms of the Company
Options, each as amended to the Agreement Date, and all of the Company
Options have been issued pursuant to such forms.
Section 4.18 Labor Relations. Neither the Company nor a Company
----------------
Subsidiary (a) is a party to or bound by any union contract, collective
bargaining agreement with a labor union or labor organization, or other similar
type of contract, or (b) has agreed to recognize any union or other collective
bargaining unit. No union or collective bargaining unit has been certified as
representing the employees of the Company or a Company Subsidiary and no
organizational attempt has been made or threatened by or on behalf of any labor
union or collective bargaining unit with respect to any employees of the Company
or a Company Subsidiary. Neither the Company nor a Company Subsidiary has
experienced any labor strike, dispute, slowdown or stoppage or any other
material labor difficulty during the past five years. No claim, complaint,
charge or investigation has been filed (within the past five (5) years) or is
pending or, to the Knowledge of the Company, is threatened against the Company
or any Company Subsidiary under any Labor Law. Neither the Company nor any
Company Subsidiary is or has been a Federal or State government contractor and
neither the Company nor any Company Subsidiary is or has been required to
maintain an affirmative action plan.
Section 4.19 Insurance Policies. Schedule 4.19 contains a complete and
------------------ -------------
correct list of all insurance policies carried by or for the benefit of the
Company and each Company Subsidiary, specifying the insurer, amount of coverage,
nature of coverage, the risk insured against, the deductible amount (if any),
and the date through which coverage will continue by virtue of premiums already
paid. All insurance policies and bonds with respect to the business and assets
of the Company and each Company Subsidiary are in full force and effect and will
be maintained by the Company in full force and effect as they apply to any
matter, action, or event relating to the Company or any Company Subsidiary
occurring through the Closing Date and the Company has not reached or exceeded
the Company's policy limits for any insurance policies in effect at any time
since the Company's inception.
-31-
Section 4.20 Environmental, Health, and Safety Matters.
---------------------------------------------
(a) Each of the Company and the Company Subsidiaries possesses, and is
in compliance with, all permits, licenses, and government authorizations
required for the operation of the Business under all applicable
Environmental Laws, and each of the Company and the Company Subsidiaries
has filed all notices that are required of the Company or any Company
Subsidiary under all applicable Environmental Laws, and each of the Company
and the Company Subsidiaries is in material compliance with all applicable
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables contained in those
Environmental Laws or contained in any Order relating to those
Environmental Laws that has been issued, entered, promulgated, or approved.
(b) Neither the Company nor any Company Subsidiary has received notice
of actual or threatened liability under the Federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or any
------
similar Environmental Law from any Governmental Entity or any third-party,
and, there are no past or present facts or circumstances that could
reasonably be expected to form the basis for the assertion of any claim
against the Company or any Company Subsidiary under any Environmental Laws,
including CERCLA or any similar Environmental Law with respect to any
on-site or off-site location.
(c) Neither the Company nor any Company Subsidiary has entered into or
agreed to enter into, and neither the Company nor any Company Subsidiary
intends to enter into, any Order, and neither the Company nor any Company
Subsidiary is subject to any Order relating to compliance with, or the
cleanup of Hazardous Materials under, any applicable Environmental Laws.
(d) Neither the Company nor any Company Subsidiary has been alleged to
be in violation of, and neither the Company nor any Company Subsidiary has
been subject to, any administrative or judicial proceeding pursuant to
applicable Environmental Laws or regulations either now or any time since
the Company's or such Company Subsidiary's inception.
(e) Neither the Company nor any Company Subsidiary is subject to any
claim, obligation, liability, loss, damage, or expense of whatever kind or
nature, contingent or otherwise, incurred or imposed (i) based upon any
provision of any Environmental Law or arising out of any act or omission of
the Company or any Company Subsidiary, or the employees, agents, or
representatives of the Company or any Company Subsidiary or (ii) arising
out of the ownership, use, control, or operation by the Company or any
Company Subsidiary of any plant, facility, site, area, or property
(including any plant, facility, site, area, or property currently or
previously leased by the Company or any Company Subsidiary) from which any
Hazardous Materials were released into the environment. For the purposes of
this Agreement, the term "release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing into the environment, and the term "environment"
means
-32-
any surface or ground water, drinking water supply, soil, surface,
subsurface strata or medium, or ambient air).
(f) The Company has delivered to the Purchaser correct and complete
copies of all files relating to environmental matters and, since inception,
neither the Company nor any Company Subsidiary has paid any fines,
penalties, or assessments since with respect to environmental matters.
(g) To the Knowledge of the Company, neither the Leased Real Property,
improvements, nor any equipment of the Company or any Company Subsidiary
contain any asbestos, PCBs, underground storage tanks, open or closed, or
sumps on or under any such Leased Real Property, improvements, or
equipment.
(h) Neither the Company nor any Company Subsidiary has imported,
manufactured, stored, used, operated, transported, treated, or disposed of
any Hazardous Materials other than in compliance with all Environmental
Laws.
Section 4.21 Intellectual Property. Schedule 4.21 contains a list of
---------------------- -------------
all Company Registered Intellectual Property.
(a) No Company Intellectual Property or Company product or Company
service related to Company Intellectual Property is subject to any
proceeding or outstanding decree, Order, judgment, agreement, or
stipulation restricting in any manner the ownership, use, transfer,
enforceability, or licensing of such Company Intellectual Property by the
Company or any Company Affiliate. To the Knowledge of the Company, each
item of Company Registered Intellectual Property is valid and subsisting.
All necessary registration, maintenance, and renewal fees currently due in
connection with Company Registered Intellectual Property have been made and
all necessary documents, recordations, and certifications currently due in
connection with such Company Registered Intellectual Property have been
filed with the relevant patent, copyright, trademark, or other authorities
in the United States or foreign jurisdiction, as the case may be, for the
purpose of maintaining such Company Registered Intellectual Property.
(b) The Company or a Company Subsidiary owns and has good and
exclusive title to, or has licenses (sufficient for the conduct of the
Business as currently conducted) to, each item of the Company Intellectual
Property and Company Licensed Intellectual Property used in connection with
the conduct of the Business as currently conducted (including the standard
third-party software used by the Company and each Company Subsidiary) free
and clear of any and all Liens (excluding licenses and related
restrictions).
(c) To the extent that any Intellectual Property has been developed or
created by a third party for the Company or any Company Subsidiary, the
Company or such Company Subsidiary has a written agreement with such third
party with respect thereto and the Company or such Company Subsidiary
thereby (i) has obtained ownership of and is the exclusive owner of, or
(ii) has obtained a license (sufficient for the conduct of the Business as
currently conducted) to all of such third party's Intellectual Property in
such
-33-
work, material, or invention by operation of law or by valid assignment to
the fullest extent legally possible.
(d) Schedule 4.21 lists all contracts, licenses, and agreements to
--------------
which the Company or any Company Subsidiary is a party (i) with respect to
Company Intellectual Property licensed or transferred by the Company or any
Company Subsidiary to any third party; or (ii) pursuant to which a
third-party has licensed or transferred any Intellectual Property to the
Company or any Company Subsidiary.
(e) All contracts, licenses, and agreements granting the Company or
any Company Subsidiary rights in the Company Licensed Intellectual Property
are in full force and effect. The consummation of the transactions
contemplated by this Agreement will neither violate nor result in the
breach, modification, cancellation, termination, or suspension of any of
such contracts, licenses, and agreements in accordance with the terms of
such contracts, licenses, and agreements. Except as set forth on Schedule
--------
4.21, each of the Company and the Company Subsidiaries is in material
----
compliance with, and neither the Company nor any Company Subsidiary has
breached any material term of, any of such contracts, licenses, and
agreements and, to the Knowledge of the Company, all other parties to such
contracts, licenses, and agreements are in compliance in all material
respects with, and have not breached any material term of, any of such
contracts, licenses, and agreements. Except as may be provided in any
contract, license or other agreement listed on Schedule 4.21, after the
-------------
Closing Date, the Company or a Company Subsidiary will be permitted to
exercise all of the Company's rights or such Company Subsidiary's rights
under such contracts, licenses, and agreements to the same extent that the
Company or such Company Subsidiary would have been able to do so had the
transactions contemplated by this Agreement not occurred and without the
payment of any additional amounts or consideration other than ongoing fees,
royalties, or payments that the Company or such Company Subsidiary would
otherwise be required to pay.
(f) The operation of the Business as currently conducted, including
the design, development, marketing, and sale of the products or services of
the Company and each Company Subsidiary (including products currently under
development), has not, does not and will not infringe or misappropriate in
any manner the Intellectual Property of any third party or, to the
Knowledge of the Company, constitute unfair competition or trade practices
under the applicable Laws of any jurisdiction.
(g) Except as set forth on Schedule 4.21, neither the Company nor any
-------------
Company Subsidiary has received written notice of, or any overt threat
from, any third party that the operation of the Business as currently
conducted or as proposed to be conducted, or any act, product, or service
of the Company or any Company Subsidiary, infringes or misappropriates the
Intellectual Property of any third party or constitutes unfair competition
or trade practices under the Laws of any jurisdiction.
(h) To the Company's Knowledge, no Person has or is infringing or
misappropriating any rights of the Company or any Company Subsidiary with
respect to Company Intellectual Property.
-34-
(i) To the Knowledge of the Company, no funding, facilities or
personnel of any Governmental Entity or college, university or other
education institution were used, directly or indirectly, to develop or
create, in whole or in part, any Company Intellectual Property.
(j) The Company has taken all reasonable steps to protect the rights
of the Company and each Company Subsidiary in the confidential information
and trade secrets of the Company and each Company Subsidiary or any trade
secrets or confidential information of third-parties used in the Business,
and, without limiting the foregoing the Company has enforced a policy
requiring each employee and contractor of the Company and each Company
Subsidiary to execute a proprietary information/confidentiality agreement
and, except under confidentiality obligations, there has not been any
disclosure by the Company, any Company Subsidiary or any of their
respective officers, directors, employees, agents or representatives of any
such trade secrets or confidential information.
Section 4.22 Software. Schedule 4.22 sets forth a complete and correct
-------- -------------
list of the Company Proprietary Software and the Company Licensed Software.
(a) Each of the Company and the Company Subsidiaries has all right,
title, and interest in and to all intellectual property rights in the
Company Proprietary Software. The Company Proprietary Software is free and
clear of all Liens. The use of the Company Proprietary Software by the
Company or any Company Subsidiary in the Business does not breach any term
of any license or other contract between the Company or any Company
Subsidiary and any third party.
(b) The Company Proprietary Software does not infringe any patent,
copyright, or trade secret or any other intellectual property right of any
third party. The source code for the Company Proprietary Software has been
maintained in confidence.
(c) The Company Proprietary Software was: (i) developed by the
employees of the Company or a Company Subsidiary working within the scope
of their employment at the time of such development; (ii) developed by
agents, consultants, contractors, or other Persons who have executed
appropriate instruments of assignment in favor of the Company or a Company
Subsidiary as assignee that have conveyed to the Company or a Company
Subsidiary ownership of all of its intellectual property rights in the
Company Proprietary Software; or (iii) acquired by the Company or a Company
Subsidiary in connection with acquisitions in which the Company or a
Company Subsidiary obtained reasonably appropriate representations,
warranties, and indemnities from the transferring party relating to the
title to the Company Proprietary Software. Neither the Company nor any
Company Subsidiary has received notice from any third party claiming any
right, title, or interest in the Company Proprietary Software.
(d) Except as may be provided on Schedule 4.14(e) or 4.21, neither the
---------------- ----
Company nor any Company Subsidiary has granted rights in the Company
Software to any third party.
-35-
(e) None of the Company Proprietary Software contains any programming
defect, error or bug that is outside the scope of programming defects,
errors and bugs typically corrected in the normal course of the Company's
or a Company Subsidiary's software maintenance procedures and programs and
that, if such defect, error or bug were not corrected, would have a
material adverse effect on the Company's or a Company Subsidiary's ability
to continue marketing and selling (or licensing) the Company Software in
question with the same level of success that the Company's and the Company
Subsidiary's have previously marketed and sold (or licensed) such Company
Software. The Company and each Company Subsidiary maintains a list to which
developers report all discovered programming defects, errors and bugs for
the latest version of the Company Proprietary Software and this list is
maintained on a continuous basis.
(f) None of the Company Proprietary Software contains any Harmful
Code. To the Knowledge of Company, no Company Licensed Software contains
any Harmful Code. The Company has taken commercially reasonable efforts to
scan the Company Proprietary Software for Harmful Code using commercially
available virus scanning software.
(g) Except as set forth on Schedule 4.22(g), none of the Company
----------------
Proprietary Software is subject to any "copyleft" or other obligation or
condition (including any obligation or condition under any "open source"
license such as the GNU Public License, Lesser GNU Public License or
Mozilla Public License) that: (i) could or does require, or could or does
condition the use or distribution of such Company Proprietary Software on,
the disclosure, licensing or distribution of any source code for any
portion of such Company Proprietary Software; or (ii) could or does
otherwise impose any limitation, restriction or condition on the right or
ability of the Company to use or distribute any Company Proprietary
Software.
(h) The Company and each Company Subsidiary has complied with and is
in compliance with any "copyleft" or other obligation or condition imposed
by any "open source" license (such as the GNU Public License, Lesser GNU
Public License or Mozilla Public License), including, but not limited to,
providing notice of open-source license requirements that may be associated
with any Company Proprietary Software or open-source licensed software
distributed to a third party.
(i) No source code for any Company Proprietary Software has been
delivered, licensed or made available to any escrow agent or other Person
who is not, as of the Agreement Date, an employee or consultant of one of
the Company or a Company Subsidiary. Except as required under this
Agreement, neither the Company nor any Company Subsidiary has any duty or
obligation (whether present, contingent or otherwise) to deliver, license
or make available the source code for any Company Software to any escrow
agent or other Person. No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or
could reasonably be expected to, result in the delivery, license or
disclosure of any source code for any Company Proprietary Software to any
other Person.
-36-
Section 4.23 Transactions with Affiliates. No current officer or
------------------------------
director, or, to the Knowledge of the Company, former officer or director, of
the Company or any Company Subsidiary, and no Person with whom any such officer
or director, to the Knowledge of the Company, has any direct or indirect
relation by blood, marriage, or adoption, and no entity in which any such Person
owns any beneficial interest (other than a publicly held corporation whose stock
is traded on a national securities exchange or market or in the over-the-counter
market and 5% or less of whose stock is beneficially owned by all such Persons
in the aggregate), and no current Affiliate, or, to the Knowledge of the
Company, former Affiliate, of any of the foregoing or of the Company or any
Company Subsidiary has any interest in: (a) any contract, arrangement, or
understanding with the Company or any Company Subsidiary or relating to the
properties or assets of the Company or any Company Subsidiary; (b) any loan,
arrangement, understanding, agreement, or contract for or relating to the
properties or assets of the Company or any Company Subsidiary; or (c) any
property (real, personal, or mixed), tangible or intangible, currently used by
the Company or any Company Subsidiary. Schedule 4.23 also sets forth a complete
-------------
list of all Company Affiliates and all material accounts, notes, and other
receivables and accounts payable owed to or due from any Company Affiliate to
the Company or any Company Subsidiary.
Section 4.24 Undisclosed Payments. Except as set forth on Schedule
--------------------- --------
4.24, neither the Company or a Company Subsidiary nor any current officer,
- ----
director, or employee, or, to the Knowledge of the Company, any former officer,
director, or employee, of the Company or any Company Subsidiary nor anyone
acting on behalf of any of such Persons has made any material payments to the
Company or any Company Subsidiary or received any material payments from the
Company or any Company Subsidiary that are not disclosed in the Company's or
such Company Subsidiary's, as applicable, books and records.
Section 4.25 Accounts Receivable; Accounts Payable.
----------------------------------------
(a) Notes Receivable. All notes receivable of the Company and each
-----------------
Company Subsidiary owing to the Company or to such Company Subsidiary by
any director, officer, or employee of the Company or any Company Subsidiary
or by any Seller have been paid in full before the Agreement Date or will
have been paid in full before the Closing Date.
(b) Accounts Receivable. All accounts receivable of the Company and
--------------------
each Company Subsidiary (the "RECEIVABLES") are reflected on the Financial
----------
Statements (net of any reserves shown on the Financial Statements) and (i)
are valid and existing, (ii) represent monies due for goods sold and
delivered or services rendered in the ordinary course of business, and
(iii) are not subject to any refunds or adjustments or any defenses, rights
of set-off, assignment, restrictions, security interests, or other
encumbrances. There are no disputes regarding the collectibility of any
such Receivables. The Company has not factored any of its Receivables. To
the Company's Knowledge, the debtors to which the Receivables relate are
not in or subject to a bankruptcy or insolvency proceeding, and none of the
Receivables have been made subject to an assignment for the benefit of
creditors.
-37-
(c) Accounts Payable. The accounts payable of the Company and the
-----------------
Company Subsidiaries reflected on the Financial Statements arose from bona
fide transactions in the ordinary course of business.
Section 4.26 Licenses and Permits. Schedule 4.26 is a complete and
---------------------- --------------
correct list of all notifications, licenses, permits (including environmental,
construction, and operation permits), franchises, certificates, approvals,
exemptions, classifications, registrations, and other similar documents and
authorizations, and applications therefor (collectively, the "LICENSES") held by
--------
the Company or any Company Subsidiary and issued by, or submitted by the Company
or any Company Subsidiary to, any Governmental Entity or other Person. The
Company or a Company Subsidiary owns or possesses all of the Licenses that are
necessary to enable the Company and each Company Subsidiary to carry on the
Business as presently conducted. All Licenses are valid, binding, and in full
force and effect. The Company and each Company Subsidiary has taken all
necessary action to maintain each License. No loss or expiration of any License
is pending or, to the Knowledge of the Company, threatened or reasonably
foreseeable (other than expiration upon the end of any term).
Section 4.27 Ethical Practices. Neither the Company or any Company
------------------
Subsidiary nor any current or former officer, director, employee,
representative, or agent of the Company or any Company Subsidiary acting on
behalf of the Company or any Company Subsidiary or any Company Stockholder has
offered or given, and, to the Knowledge of the Company, no Company Stockholder
nor any Person acting on behalf of the Company or any Company Subsidiary or any
Company Stockholder has offered or given on its behalf anything of value to:
(a) any member or official of a Governmental Entity, any political party, or
official of any political party, or any candidate for political office; (b) any
customer of any Governmental Entity; or (c) any other Person, in any such case
while knowing or having reason to know that all or a portion of such money or
thing of value may be offered, given, or promised, directly or indirectly, to
any customer, member, or official of any Governmental Entity or candidate for
political office for the purpose of the following: (x) influencing any action or
decision of such Person, in his, her, or its official capacity, including a
decision to fail to perform his, her, or its official function; (y) inducing
such Person to use his, her, or its influence with any Governmental Entity
affect or influence any act or decision of such Governmental Entity to assist
the Company or any Company Subsidiary in obtaining or retaining business for, or
with, or directing business to, any Person; or (z) where such payment would
constitute a bribe, kickback, or illegal or improper payment to assist the
Company or any Company Subsidiary in obtaining or retaining business for, or
with, or directing business to, any Person.
Section 4.28 Brokers, Finders, and Investment Bankers. Neither the
-------------------------------------------
Company nor any Company Subsidiary, nor any officer, director, or employee of
the Company or any Company Affiliate, has employed any broker, finder, or
investment banker or incurred any liability for any investment banking fees,
financial advisory fees, brokerage fees, or finders' fees (a) in connection with
the transactions contemplated by this Agreement or any Company Ancillary
Document or (b) that will become due and payable based on the transactions
contemplated by this Agreement or any Company Ancillary Document.
Section 4.29 Bank Accounts. Schedule 4.29 sets forth a complete and
-------------- --------------
correct list of each bank account used by the Company and each Company
Subsidiary.
-38-
Section 4.30 Sellers Authority. The Sellers (as a collective group)
------------------
have the authority, without the involvement of any other Company Stockholder, to
terminate, amend, restate or otherwise modify all Company Stockholder
Agreements.
Section 4.31 Disclosure. Before the execution of this Agreement, the
----------
Company has delivered or made available to the Purchaser complete and correct
copies of the Company Contracts, documents evidencing the Intellectual Property
listed on Schedule 4.21, and all security agreements and other instruments
--------------
creating or imposing any Lien on the real or personal property of the Company or
any Company Subsidiary, and any other documents or instruments identified or
referred to in the Company Disclosure Schedules.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NEWCO AND PURCHASER
Subject to such exceptions as are specifically disclosed in writing in the
Purchaser Disclosure Schedule (which will be arranged in a manner corresponding
to the number and lettered paragraphs contained in this Article V), and as of
the Agreement Date, Newco and the Purchaser hereby jointly and severally
represent and warrant to the Company and the Sellers, as follows:
Section 5.1 Organization.
------------
(a) The Purchaser is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware. The Purchaser
has the requisite corporate power and authority to own, lease, and operate
its properties and to carry on its business as now being conducted, and the
Purchaser is duly qualified to transact business under the Laws of each
jurisdiction where the character of the Purchaser's activities or the
location of the properties owned or leased by the Purchaser requires such
qualification, other than in such jurisdictions where the failure to be so
qualified (individually or in the aggregate) would not have a Purchaser
Material Adverse Effect. Newco is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware.
Newco has the requisite corporate power and authority to own, lease, and
operate its properties and to carry on its business as now being conducted,
and Newco is duly qualified to transact business under the Laws of each
jurisdiction where the character of Newco's activities or the location of
the properties owned or leased by Newco, if conducted, owned or leased, as
applicable, by Newco would require such qualification.
(b) The Purchaser has made available to the Company and the Sellers
correct and complete copies of Newco's certificate of incorporation and
by-laws as currently in effect.
Section 5.2 Authorization. The Purchaser and Newco each have the
-------------
requisite corporate power and authority to execute and deliver this Agreement
and any other certificate, agreement, document, or other instrument to be
executed and delivered by the Purchaser or Newco in connection with the
transactions contemplated by this Agreement (collectively, the "PURCHASER
---------
ANCILLARY DOCUMENTS"), to consummate the Merger and the other transactions
- --------------------
-39-
contemplated by this Agreement and the Purchaser Ancillary Documents and to
perform the Purchaser's obligations or Newco's obligations (as applicable) under
the Purchaser Ancillary Documents and this Agreement. The execution and
delivery of this Agreement and the Purchaser Ancillary Documents by the
Purchaser and Newco and the Purchaser's and Newco's performance of the Company's
and Newco's obligations under the Purchaser Ancillary Documents and this
Agreement and the consummation of the transactions contemplated by this
Agreement and the Purchaser Ancillary Documents have been duly authorized by all
necessary corporate action on the part of the Purchaser and Newco. This
Agreement has been, and the Purchaser Ancillary Documents will be as of the
Closing Date, duly executed and delivered by the Purchaser and Newco, and this
Agreement and the Purchaser Ancillary Documents do or will, as the case may be,
constitute valid and binding obligations of the Purchaser and Newco, enforceable
against the Purchaser and Newco in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar Laws affecting the enforceability of
creditors' rights generally, general equitable principles and court discretion
in granting equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 5.3 Purchaser and Newco Capital Stock.
-------------------------------------
(a) The number of shares of Purchaser Common Stock issued and
outstanding is not materially different from the most recent amount
reflected in the Purchaser SEC Reports (as defined below), all of which had
been duly authorized and validly issued and were fully paid and
non-assessable. The number of shares of Purchaser Common Stock issuable
upon the exercise of outstanding options is not materially different from
the amounts disclosed in the Purchaser SEC Reports.
(b) Except as reserved for future grants of options under the
Purchaser's stock option plans or as described in the Purchaser SEC
Reports, there are (i) no equity securities of any class of the Purchaser,
or any securities exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding and (ii) no
outstanding subscriptions, options, warrants, puts, calls, rights, or other
commitments or agreements of any character to which the Purchaser is a
party or by which the Purchaser is bound obligating the Purchaser to issue,
deliver, sell, repurchase, or redeem, or cause to be issued, delivered,
sold, repurchased, or redeemed, any of the Purchaser's equity securities.
(c) The shares of Purchaser Common Stock to be issued pursuant to the
Merger, when issued in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid, and non-assessable and will be
issued in compliance with a valid exemption from the registration
requirements of the Securities Act.
(d) The Purchaser is in "control" of Newco within the meaning of
Section 368(c) of the Code and will be in "control" of Newco within the
meaning of Section 368(c) of the Code immediately before the Merger.
(e) The Escrow Shares will appear as issued and outstanding on the
balance sheet of the Purchaser and such stock will be legally outstanding
under applicable state law.
-40-
Section 5.4 Purchaser SEC Reports.
(a) The Purchaser has timely filed and made available to the Company
all forms, reports, and documents, together with any amendments, exhibits
and schedules thereto and documents incorporated therein by reference,
required to be filed by Purchaser with the SEC pursuant to the Exchange Act
since January 1, 2002 (collectively, the "PURCHASER SEC REPORTS"). Each of
---------------------
the Purchaser SEC Reports (i) as of their respective dates, complied as to
form in all material respects with the applicable requirements of the
Securities Act and Exchange Act, as the case may be, and the rules and the
regulations of the SEC promulgated thereunder applicable to the Purchaser
SEC Reports, and (ii) did not, at the time it was filed (or if amended or
superseded by a filing before the Agreement Date, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Purchaser SEC Report or
necessary in order to make the statements in such Purchaser SEC Report, in
the light of the circumstances under which they were made, not misleading.
Except as disclosed on Schedule 5.4, the Purchaser's disclosure controls
------------
and procedures (as defined in the rules and the regulations of the SEC
promulgated under the Exchange Act) provide reasonable assurance that
information required to be disclosed by the Company in reports that it
files with the SEC under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's
rules and forms.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Purchaser SEC Reports, complied
as to form in all material respects with the applicable accounting
requirements and published rules and regulations of the SEC with respect
thereto, was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to
such financial statements or, in the case of unaudited statements, as
permitted by Form 10-Q promulgated by the SEC) and presented fairly, in all
material respects, the consolidated financial position of the Purchaser and
each Purchaser Subsidiary as of their respective dates, and the
consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were
subject to normal and recurring year-end adjustments, which were not
expected to be material in amount.
Section 5.5 Absence of Restrictions and Conflicts. The execution and
--------------------------------------
delivery of this Agreement and the Purchaser Ancillary Documents by the
Purchaser and Newco (as applicable) do not, and the consummation and performance
of the transactions contemplated by this Agreement and the Purchaser Ancillary
Documents and compliance with the terms and conditions of this Agreement and the
Purchaser Ancillary Documents by the Purchaser and Newco (as applicable) will
not, with the passing of time or the giving of notice or both, violate or
conflict with, constitute a breach of or default under, result in the loss of
any benefit under, permit the acceleration of any obligation under, or create in
any party the right to terminate, modify, or cancel (a) the Purchaser's or any
Purchaser Subsidiary's certificate of incorporation or by-laws; (b) the
Purchaser Contracts; (c) any Order of any Court or Governmental Entity to which
the Purchaser, any Purchaser Subsidiary or Newco is a party or by which the
Purchaser, any Purchaser Subsidiary, Newco, or any of the properties of the
Purchaser or any Purchaser Subsidiary is bound; or (d) any Law applicable to the
Purchaser, any Purchaser Subsidiary or
-41-
Newco; other than, in the case of clauses (b), (c) and (d), any such violations,
conflicts, breaches, defaults, losses, accelerations or rights to terminate,
modify or cancel that individually or in the aggregate would not have a
Purchaser Material Adverse Effect or would not materially impair the ability of
the Purchaser or Newco to perform their respective obligations under this
Agreement or the Purchaser Ancillary Documents, or prevent the consummation of
any of the transactions contemplated by this Agreement or the Purchaser
Ancillary Documents. No Order or other authorization of, or registration,
declaration, or filing with, any Court or Governmental Entity is required with
respect to the Purchaser, any Purchaser Subsidiary, or Newco in connection with
the execution, delivery, or performance by the Purchaser or Newco of this
Agreement or the Purchaser Ancillary Documents, or the consummation of the
transactions contemplated by this Agreement or the Purchaser Ancillary
Documents, except the filing of (w) an Agreement of Merger with the Delaware
Secretary of State, (x) appropriate documents with the relevant authorities of
other jurisdictions in which the Purchaser or the Purchaser Subsidiaries are
qualified to do business, (y) the Ohio Permit and all appropriate documents with
the SEC, and (z) such other Order or other authorization of, or registration,
declaration, or filing the failure of which to be obtained or made would not
have a Purchaser Material Adverse Effect.
Section 5.6 No Stockholder Approval. Except as set forth on Schedule
------------------------ --------
5.6, the Merger does not require approval by any of the stockholders of the
- ---
Purchaser.
Section 5.7 No Undisclosed Liabilities. Neither the Purchaser nor any
--------------------------
Purchaser Subsidiary has any liabilities or obligations (whether absolute,
accrued, or contingent liabilities or otherwise) that are not reflected or
provided for in the financial statements included in any Purchaser SEC Reports
(including the related notes and schedules), except liabilities and obligations
(a) that, individually or in the aggregate, have not had or would not reasonably
be expected to have a Purchaser Material Adverse Effect, (b) that have been
incurred since the applicable date of the financial statements included in any
Purchaser SEC Reports in the ordinary course of business, or (c) liabilities
incurred in connection with the Merger and the other transactions contemplated
by this Agreement.
Section 5.8 Absence of Certain Changes. Since December 31, 2004, and
---------------------------
except as set forth on Schedule 5.8, for the transactions contemplated by this
------------
Agreement, or as set forth in the financial statements included in any Purchaser
SEC Reports (including any related notes and schedules), there has not been any
material change in the Purchaser's or any Purchaser Subsidiary's assets,
liabilities, business, condition (financial or otherwise), or results of
operations that individually or in the aggregate constitutes a Purchaser
Material Adverse Effect.
Section 5.9 Legal Proceedings. Except as may be described in the
------------------
Purchaser SEC Reports, there are no suits, actions, claims, arbitration,
proceedings, or investigations pending or, to the Knowledge of the Purchaser,
threatened against, relating to, or involving the Purchaser, any Purchaser
Subsidiary, or the assets or properties of the Purchaser or any Purchaser
Subsidiary before any Court or Governmental Entity or other Person that, if
finally determined adversely to the Purchaser or any Purchaser Subsidiary, could
reasonably be expected to constitute, individually or in the aggregate, a
Purchaser Material Adverse Effect. The Purchaser and each Purchaser Subsidiary
is not currently subject to any Order of any Court which has had, or is
reasonably expected to have, a Purchaser Material Adverse Effect.
-42-
Section 5.10 Compliance with Law. The Purchaser and each Purchaser
---------------------
Subsidiary is (and has been at all times during the past five (5) years) in
compliance with all Laws, including applicable Environmental Laws, and all
Orders of any Court or Governmental Entity applicable to their properties and
businesses, except as may be described in the Purchaser SEC Reports or, except
where failure to be in compliance would not reasonably be expected to
individually or in the aggregate constitute a Purchaser Material Adverse Effect.
Except as may be described in the Purchaser SEC Reports, neither the Purchaser
nor any Purchaser Subsidiary has been charged with at any time within the past
five (5) years or, to the Knowledge of the Purchaser, is now under investigation
with respect to, a violation of any Law or any Order of any Court or
Governmental Entity applicable to their property or businesses that individually
or in the aggregate would reasonably be expected to constitute a Purchaser
Material Adverse Effect. Neither the Purchaser nor any Purchaser Subsidiary is
a party to, subject to, or bound by any order of any Court or any Governmental
Entity that individually or in the aggregate would reasonably be expected to
constitute a Purchaser Material Adverse Effect. The Purchaser and each
Purchaser Subsidiary has filed all reports and has obtained all licenses and
permits required to be filed with or obtained from, as applicable, any Court or
Governmental Entity on or before the Agreement Date, except as may be described
in the Purchaser SEC Reports or except where failure to be in compliance would
not reasonably be expected to individually or in the aggregate constitute a
Purchaser Material Adverse Effect.
Section 5.11 Purchaser Contracts. The contracts and other agreements
--------------------
filed or incorporated by reference as exhibits to the Purchaser SEC Reports
pursuant to Items 601(b)(1), 601(b)(2), 601(b)(4) or 601(b)(10) of Regulation
S-K (the "PURCHASER CONTRACTS") are legal, valid, binding, and enforceable in
--------------------
accordance with their respective terms with respect to the Purchaser and each
Purchaser Subsidiary as applicable, and, to the Knowledge of the Purchaser, with
respect to each other party to such Purchaser Contracts, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar Laws affecting the enforceability of creditors' rights generally,
general equitable principles, and court discretion in granting equitable
remedies (regardless of whether such enforceability is considered in a
proceeding in equity or at law). There are no existing defaults or breaches
under any Purchaser Contract (or events or conditions that, with notice or lapse
of time or both, would constitute a default or a breach) with respect to the
Purchaser and each Purchaser Subsidiary and, to the Knowledge of the Purchaser,
with respect to each other party to such Purchaser Contracts, except for any
defaults or breaches that would not reasonably be expected to individually or in
the aggregate constitute a Purchaser Material Adverse Effect. Except as set
forth on Schedule 5.11 or in the Purchaser SEC Reports, neither the Purchaser
--------------
nor any Purchaser Subsidiary is participating in any discussions or negotiations
regarding modification of or amendment to any Purchaser Contract or entry in any
new Purchaser Contract or other contract material to the Purchaser or any
Purchaser Subsidiary.
Section 5.12 Taxes. Except as may be disclosed in the Purchaser SEC
-----
Reports or as would not have a Purchaser Material Adverse Effect, (a) Purchaser
and each of the Purchaser Subsidiaries have timely filed all Tax Returns
required to be filed by any of them, and all such Tax Returns are correct and
complete, (b) all Taxes of Purchaser and each of the Purchaser Subsidiaries
which are (i) shown as due on such Tax Returns, (ii) otherwise due and payable
or (iii) claimed or asserted by any taxing authority to be due, have been paid,
except for those Taxes being contested in good faith and for which adequate
reserves have been established in the
-43-
financial statements included in the Purchaser SEC Reports filed on or before
the date of this Agreement in accordance with GAAP, (c) there are no Liens for
any Taxes upon the assets of Purchaser or any of the Purchaser Subsidiaries,
other than statutory Liens for Taxes not yet due and payable and Liens for real
estate Taxes being contested in good faith, (d) neither Purchaser nor any of the
Purchaser Subsidiaries has waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency, and (e) neither Purchaser nor any of the Purchaser Subsidiaries has
any liability for the Taxes of any Person (other than the Purchaser or any of
the Purchaser Subsidiaries) under U.S. Treasury Regulation section 1.1502-6 (or
similar provision of state, local or foreign Law), as a transferee or successor,
or by contract, or otherwise. Purchaser has not received written notice of any
proposed or threatened Tax claims or assessments which, if upheld, would
reasonably be expected to have a Purchaser Material Adverse Effect. Neither the
Purchaser nor any Purchaser Subsidiary has taken any action or knows of any
fact, agreement, plan or other circumstance that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Immediately after the Merger, the Purchaser will be in "control" of the Company
within the meaning of Section 368(c) of the Code. Except for the 480,770 shares
of Company Series C Preferred Stock acquired directly from the Company on April
17, 2002, the Purchaser does not own any shares of Company Stock.
Section 5.13 Labor Relations. Neither the Purchaser nor a Purchaser
----------------
Subsidiary is a party to or bound by any union contract, collective bargaining
agreement with a labor union or labor organization.
Section 5.14 Licenses and Permits. Except as may be disclosed in the
---------------------
Purchaser SEC Reports or as would not have a Purchaser Material Adverse Effect,
(a) the Purchaser or a Purchaser Subsidiary owns or possesses all of the
Licenses that are necessary to enable the Purchaser and each Purchaser
Subsidiary to carry on the Purchaser's business as presently conducted, (b) to
the Knowledge of the Purchaser, all Licenses are valid, binding, and in full
force and effect, (c) the Purchaser and each Purchaser Subsidiary has taken all
necessary action to maintain each License, and (d) no loss or expiration of any
License is pending or, to the Knowledge of the Purchaser, threatened or
reasonably foreseeable (other than expiration upon the end of any term).
Section 5.15 Brokers, Finders, and Investment Bankers. Neither the
-------------------------------------------
Purchaser nor any Purchaser Subsidiary, nor any officer, director, or employee
of the Purchaser or any Purchaser Affiliate, has employed any broker, finder, or
investment banker or incurred any liability for any investment banking fees,
financial advisory fees, brokerage fees, or finders' fees (a) in connection with
the transactions contemplated by this Agreement or any Purchaser Ancillary
Document or (b) that will become due and payable based on the transactions
contemplated by this Agreement or any Purchaser Ancillary Document.
Section 5.16 Investment Representation. The Purchaser is acquiring the
-------------------------
Company's issued and outstanding capital stock for the Purchaser's own account
for purposes of investment and not with a view to the distribution thereof or
for resale in connection with any distribution of the Company's capital stock in
violation of the Securities Act, or dividing all or any part of the Purchaser's
interest therein with any other Person. The Purchaser acknowledges that the
sale of the Company's issued and outstanding capital stock has not been
registered under applicable
-44-
Laws (including the Securities Act and any Laws) and that such capital stock may
not be transferred without registration under, pursuant to an exemption from or
in a transaction not subject to, all applicable Laws.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS
Section 6.1 Company Business Conduct. Except as provided on Schedule
------------------------- --------
6.1, from the Agreement Date until the Closing Date or until this Agreement is
- ---
terminated as provided in Article VIII, the Company and each Company Subsidiary
will, and the Sellers will cause the Company and each Company Subsidiary to
(except as expressly required in connection with the transactions contemplated
by this Agreement and except as otherwise consented to in writing by the
Purchaser):
(a) conduct the Business in the ordinary course on a basis consistent
with past practice and not engage in any new line of business or enter into
any agreement, transaction, or activity or make any commitment with respect
to the Business or the properties and assets of the Company or any Company
Subsidiary, except those in the ordinary course of business and not
otherwise prohibited under this Section 6.1;
(b) use its commercially reasonable efforts to preserve intact the
goodwill and business organization of the Company and each Company
Subsidiary, to keep the officers and employees of the Company and each
Company Subsidiary available to the Purchaser, and to preserve the
relationships and goodwill of the Company and each Company Subsidiary with
customers, distributors, suppliers, employees, and others having business
relations with the Company and each Company Subsidiary;
(c) maintain the Company's existence and good standing in the State of
Delaware, maintain the existence of each Company Subsidiary in such Company
Subsidiary's jurisdiction of incorporation or organization and maintain the
existence of the Company and each Company Subsidiary in each other
jurisdiction in which such Party's property ownership or property leasing
requires such qualification or in which such Party's conduct of business
requires such qualification, other than in such jurisdiction where the
failure to be so qualified (individually or in the aggregate) would not
have a Company Material Adverse Effect.
(d) duly and timely file or cause to be filed all material reports and
returns required to be filed with any Court or Governmental Entity and
promptly pay or cause to be paid when due all Taxes and other governmental
charges, including interest and penalties levied or assessed, unless
diligently contested in good faith by appropriate proceedings;
(e) maintain in existing condition and repair (ordinary wear and tear
excepted), consistent with past practices, all buildings, offices, and
other structures located on the Leased Real Property, and all equipment,
fixtures, and other tangible personal property located on the Leased Real
Property;
-45-
(f) not authorize for issuance, issue, and deliver any additional
shares of the capital stock or securities convertible into or exchangeable
for shares of capital stock of the Company or any Company Subsidiary, or
issue or grant any right, option, or other commitment for the issuance of
shares of the capital stock of the Company or any Company Subsidiary, or
split, combine, or reclassify any shares of the capital stock of the
Company or any Company Subsidiary, or pay or declare any dividends on any
of the Company Stock.
(g) not amend or modify the charter documents of the Company or any
Company Subsidiary, except as expressly required or contemplated by this
Agreement or any other Transaction Document;
(h) not declare any dividend, pay, or set aside for payment any
dividend or other distribution or make any payment to any related parties
other than the payment of obligations in the ordinary course of business
under existing contracts and agreements;
(i) not create any Company Subsidiary, acquire any capital stock or
other equity securities of any corporation, or acquire any equity or
ownership interest in any business or entity;
(j) not sell, otherwise license, dispose of, or permit to lapse any
rights to the use of any patent, trademark, trade name, service mark,
license, or copyright of the Company or any Company Subsidiary, except in
the ordinary course of business consistent with past practice as to all
material terms, including any of the Company Intellectual Property, or,
dispose of or disclose to any Person (other than an employee of the Company
who has signed a proprietary information/confidentiality agreement as
referenced in Section 4.21(j)), any trade secret or formula (or except in
the ordinary course of business consistent with past practice, any process,
technology, or know-how) of the Company or any Company Subsidiary that was
not a matter of public knowledge;
(k) not (i) sell or otherwise dispose of any assets, (ii) create,
incur, or assume any indebtedness secured by the real or personal property
of the Company or any Company Subsidiary; (iii) grant, create, incur, or
suffer to exist any Liens on the real or personal properties of the Company
or any Company Subsidiary that did not exist on the Agreement Date; (iv)
incur any liability or obligation (absolute, accrued, or contingent),
except in the ordinary course of business consistent with past practice,
(v) write-off any guaranteed checks, notes, or accounts receivable, in each
case except in the ordinary course of business consistent with past
practice, (vi) write-down the value of any asset or investment on the books
or records of the Company or any Company Subsidiary, except for
depreciation and amortization in the ordinary course of business and
consistent with past practice, (vii) cancel any material debt or waive any
material claims or material rights, (viii) make any commitment for any
capital expenditure in excess of $25,000 individually or $75,000 in the
aggregate, or (ix) enter into any contract or agreement outside the
ordinary course of business involving payments by the Company or any
Company Subsidiary greater than $25,000 individually or in the aggregate;
-46-
(l) not increase in any manner the base compensation of (other than
increases not to exceed 7% of the pre-revised compensation amounts in the
ordinary course of business consistent with past practice), or enter into
any new bonus or incentive agreement or arrangement with, any current or
former employees, directors, or consultants of the Company or any Company
Subsidiary, except to the extent required by Law or as disclosed on the
face of a Company Contract;
(m) not adopt, amend, or terminate any Company Benefit Plan or
increase the benefits provided under any Company Benefit Plan (except as
required by Law) or promise or commit to undertake any of the foregoing in
the future, except to the extent required by Law or as disclosed on the
face of a Company Contract;
(n) not amend or terminate any existing employment, severance,
consulting, or other compensation agreement or enter into any new
Employment Agreement;
(o) maintain supplies and inventory at levels that are in the ordinary
course of business and consistent with past practice;
(p) continue to extend customers credit, collect accounts receivable,
and pay accounts payable and similar obligations in the ordinary course of
business consistent with past practice;
(q) perform all of the Company's and Company Subsidiary's material
obligations under all, and not default or suffer to exist any event or
condition that with notice or lapse of time or both, would constitute a
material default or breach under any Company Contract (except those being
contested in good faith) and not enter into, assume, or amend any contract
or commitment that is or would be a Company Contract, except in the
ordinary course of business consistent with past practice;
(r) not pay, discharge, or satisfy any claim, liability, or obligation
(absolute, contingent, or otherwise), other than the payment, discharge, or
satisfaction in the ordinary course of business consistent with past
practice of claims, liabilities, and obligations reflected or reserved
against in the Company's unaudited balance sheet as set forth in the
Financial Statements, incurred in the ordinary course of business
consistent with past practice;
(s) not increase any reserves for contingent liabilities (excluding
any adjustment to bad debt reserves in the ordinary course of business
consistent with past practice);
(t) maintain in full force and effect and in substantially the same
amounts policies of insurance comparable in amount and scope of coverage to
that now maintained by or on behalf of the Company or any Company
Subsidiary;
(u) continue to maintain the books and records of the Company and each
Company Subsidiary in accordance with GAAP consistently applied, and on a
basis consistent with past practice;
-47-
(v) continue its cash management practices in the ordinary course of
business consistent with past practice;
(w) pay contributions or premiums for each Company Benefit Plan for
the period up to the Closing even though such payment is not otherwise due
until a later date; and
(x) not authorize, or not commit or agree to take, any of the
foregoing actions prohibited in Section 6.1(a) through Section 6.1(w).
In connection with the continued operation of the Business between the
Agreement Date and the Closing Date or until this Agreement is terminated as
provided in Article VIII, the Company and each Company Subsidiary will, and the
Sellers will cause the Company and each Company Subsidiary to, confer in good
faith on a regular and frequent basis with the Purchaser regarding operational
matters and the general status of ongoing Company operations promptly and will
notify the Purchaser of any event or occurrence that could constitute a Company
Material Adverse Effect. The Company and the Sellers acknowledge that the
Purchaser does not and will not waive any rights that the Purchaser may have
under this Agreement as a result of such consultations, unless the Purchaser
expressly agrees in writing to do so. Neither the Company nor the Sellers will,
and the Sellers will cause the Company to, take any action that would, or that
could reasonably be expected to, result in any of the Company's or the Sellers'
representations and warranties set forth in this Agreement becoming untrue.
Section 6.2 Inspection and Access to Information. From the Agreement
-------------------------------------
Date to the Closing Date or until this Agreement is terminated as provided in
Article VIII, and subject to applicable Law, the Company will (and will cause
the Company's officers, directors, employees, auditors, and agents to) and the
Sellers will cause the Company and such officers, directors, employees, auditors
and agents to, provide the Purchaser and the Purchaser's accountants, investment
bankers, counsel, environmental consultants, and other authorized
representatives reasonable access, during normal business hours and under
reasonable circumstances, including in a manner so as not to interfere with the
normal business operations of the Company, any Company Subsidiary or the
Business, to any and all of the premises, employees (including executive
officers), properties, contracts, commitments, books, records, and other
information (including Tax Returns filed and those in preparation) of the
Company or any Company Subsidiary and will cause the officers, directors,
employees, auditors, and agents of the Company and each Company Subsidiary to
furnish to the Purchaser and the Purchaser's authorized representatives,
promptly upon reasonable request therefor, any and all financial, technical, and
operating data and other information pertaining to the Company and each Company
Subsidiary and the Business and otherwise reasonably cooperate with the conduct
of due diligence by the Purchaser and the Purchaser's representatives.
Section 6.3 No Solicitation of Transactions.
----------------------------------
(a) Neither the Company nor any of the Sellers will, and the Sellers
shall cause the Company not to, directly or indirectly, through any
officer, director, employee, investment banker, financial advisor,
attorney, accountant, or other Company representative or otherwise,
initiate, solicit, or encourage (including by way of furnishing non-public
information or assistance), or enter into negotiations of any type,
directly or
-48-
indirectly, or enter into a confidentiality agreement, letter of intent,
purchase agreement, merger agreement, memorandum of understanding,
agreement in principle, option agreement, joint venture agreement,
partnership agreement, or other similar agreement relating to an
Alternative Transaction (an "Acquisition Agreement") with any Person, other
than the Purchaser and Newco, for a merger, consolidation, business
combination, sale of stock, sale of all or any substantial portion of the
assets of the Company or any Company Subsidiary (each of such transactions,
an "ALTERNATIVE TRANSACTION"). The Company and the Sellers will, and the
------------------------
Sellers will cause the Company to, notify the Purchaser orally (within one
(1) Business Day) and in writing (as promptly practicable) of all relevant
material terms of any proposals by any third party to do any of the
foregoing which the Company, any of the Sellers or any of their respective
officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants or other representatives may receive relating to any
of such matters and, if such proposal is in writing, the Company and
Sellers will, and the Sellers will cause the Company to, deliver to the
Purchasers a copy of such inquiry or proposal; provided, however, that
-------- -------
nothing contained in this Section 6.3 will prohibit the Company's board of
directors from furnishing information to, or entering into discussions or
negotiations with, any Person that makes an unsolicited, written bona fide
proposal regarding an Alternative Transaction (after the date hereof and
prior to the Company Stockholder Approval) if, and only to the extent that
(a) the Company's board of directors concludes in good faith, after
consultation with and based upon the advice of outside counsel, that the
Company's board of directors reasonably believes it to be required to
furnish such information or enter into such discussions or negotiations in
order to comply with its fiduciary duties to the Company Stockholders under
applicable Law, (b) before taking such action, the Company receives from
such Person an executed confidentiality agreement and an executed
standstill agreement, each in reasonably customary form (provided that such
agreement is at least as limiting as any such agreement between the
Purchaser and the Company), and (c) the Company's board of directors
concludes in good faith that such Alternative Transaction constitutes a
Company Superior Proposal (as defined below) or determines it is reasonably
likely to lead to a Company Superior Proposal.
(b) Neither the board of directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to the Purchaser or Newco, the approval by such
board of directors or any such committee of this Agreement or the Merger,
(ii) approve or recommend, or propose publicly to approve or recommend, any
Alternative Transaction, or (iii) enter into an Acquisition Agreement.
Notwithstanding the foregoing, at any time prior to receipt of the Company
Stockholder Approval and subject to this Section 6.3(b), in the event the
board of directors of the Company receives an unsolicited, written bona
fide proposal regarding an Alternative Transaction that, in the exercise of
its fiduciary obligations, it determines to be a Company Superior Proposal
or reasonably likely to lead to a Company Superior Proposal, the board of
directors of the Company may withdraw or modify its approval or
recommendation of this Agreement or the Merger and may terminate this
Agreement and concurrently enter into an Acquisition Agreement, if (i) the
Company and the Sellers immediately advise the Purchaser orally and in
writing of (A) the receipt by the Company (or by any of the other entities
or Persons referred to above) of any proposal (whether written or oral)
regarding such Alternative Transaction, or any inquiry
-49-
that could reasonably be expected to lead to any such proposal, (B) the
material terms and conditions of such proposal or inquiry (whether written
or oral), and (C) the identity of the Person making any such proposal or
inquiry, (ii) keep the Purchaser reasonably informed of the status and
details of any such proposal or inquiry, and (iii) negotiate in good faith
with the Purchaser to make such adjustments to the terms and conditions of
this Agreement so that such Alternative Transaction would no longer
constitute a Company Superior Proposal. Without limiting the foregoing, the
Company expressly acknowledges that any violation of the restrictions set
forth in the first sentence of this Section 6.3 by any officer or director
of the Company or any Company Subsidiary or by any Seller or by any
investment banker, attorney, or other advisor, representative, or agent of
the Company, any Company Subsidiary or any Seller, acting on behalf of or
at the request of the Company's board of directors or a Seller, will be
deemed to be a breach of this Section 6.3 by the Company. For purposes of
this Agreement, the term "COMPANY SUPERIOR PROPOSAL" means a bona fide
--------------------------
written proposal for an Alternative Transaction (with respect to a merger,
consolidation, business combination, sale of stock or similar transaction
with respect to the applicable stock of the Company representing at least
80% or more of the then-outstanding capital stock of the Company or an
as-if converted fully diluted basis) that the Company's board of directors
concludes in good faith, after consultation with and based upon the advice
of its financial advisors and legal advisors, taking into account all
legal, financial, regulatory and other aspects of the proposal and the
Person making the proposal (including any break-up fees, expense
reimbursement provisions, and conditions to consummation), (i) is more
favorable to the Company Shareholders, from a financial point of view, than
the transactions contemplated by this Agreement and (ii) is fully financed
or reasonably capable of being fully financed and otherwise reasonably
capable of being completed on the terms proposed within a period not
exceeding 120 days.
Section 6.4 Reasonable Efforts; Further Assurances; Cooperation.
-------------------------------------------------------
Subject to the other provisions of this Agreement, and except to the extent
otherwise required under applicable Law, the Parties will each use their
commercially reasonable efforts to perform their respective obligations in this
Agreement and to take, or cause to be taken, and do, or cause to be done, and to
assist and cooperate with the other Party in doing, all things necessary,
proper, or advisable under applicable Law to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Agreement and the Transaction Documents, including to obtain all consents
required with respect to the Company Contracts described on Schedule 4.14, all
-------------
other consents described on such schedule, and all regulatory approvals and to
satisfy all conditions to their respective obligations under this Agreement and
to cause the transactions contemplated in this Agreement to be effected on or
prior to October 31, 2005, in accordance with the terms of this Agreement.
Additionally, the Parties will cooperate fully with each other and their
respective officers, directors, employees, investment bankers, financial
advisors, attorneys, accountants, and other representatives in connection with
any actions necessary to discharge their respective obligations under this
Agreement, including the following:
(a) Each of the Parties promptly will make their respective filings
and submissions and will take all reasonable actions necessary, proper, or
advisable under applicable Laws to obtain any required approval of any
Governmental Entity with
-50-
jurisdiction over the transactions contemplated by this Agreement (except
that neither the Purchaser nor the Company will have any obligation to take
any action or consent to any action required by any such Governmental
Entity that could adversely affect the such Party, the Business, the
properties and assets of the Company or any Company Subsidiary, or the
transactions contemplated by this Agreement or the Transaction Documents).
Each of the Parties will furnish all information reasonably required for
any application or other filing to be made pursuant to the rules and
regulations of any applicable Law in connection with the transactions
contemplated by this Agreement.
(b) If any Governmental Entity or any other Person commences any
claim, action, suit, investigation, or other proceeding that questions the
validity or legality of the Merger or any of the other transactions
contemplated by this Agreement or the Transaction Documents or seeks
damages in connection with the Merger, then the Parties agree to cooperate
and use all commercially reasonable efforts to defend against such claim,
action, suit, investigation, or other proceeding, and, if an Order is
issued in any such action, suit, or other proceeding, then the Parties
agree to use all commercially reasonable efforts to have such Order lifted
and to cooperate reasonably regarding any other impediment to the
consummation of the transactions contemplated by this Agreement or the
Transaction Documents.
(c) The Company and the Sellers will, and the Sellers will cause the
Company to, give any notices to third parties and use commercially
reasonable efforts (in consultation with the Purchaser) to obtain any third
party consents (i) necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, (ii) disclosed or required to
be disclosed in the Schedules to this Agreement, including, without
limitation, the consents with respect to the Company Contracts described in
Schedule 4.14 and all other consents described in such schedule, (iii)
--------------
required to avoid a breach of or default under any Company Contracts in
connection with the consummation of the transaction contemplated by this
Agreement or (iv) required to prevent a Company Material Adverse Effect
whether prior to or after the Closing Date.
(d) Each Party will give prompt notice to the other Party of (i) the
occurrence, or failure to occur, of any event the occurrence of which or
the failure of which would be reasonably likely to cause any of such
Party's representations or warranties contained in this Agreement to be
untrue or inaccurate at any time from the Agreement Date to the Closing
Date or that will or may result in the failure to satisfy any of the
conditions specified in Article VIII and (ii) any failure by such Party to
comply with or satisfy any covenant, condition, or agreement to be complied
with or satisfied by such Party under this Agreement.
Section 6.5 Public Announcements. Subject to the Parties' respective
---------------------
legal obligations (including requirements of the SEC, stock exchanges and other
similar regulatory bodies), the Parties shall not make any announcements
regarding any aspect of this Agreement or the transactions contemplated by this
Agreement or the Transaction Documents to the financial community, Governmental
Entities, employees, customers, or the general public without the written
consent of all Parties hereto. Each Party agrees to consult in good faith with
one another regarding the timing and content of all announcements regarding any
aspect of this Agreement or
-51-
the transactions contemplated by this Agreement or the Transaction Documents and
will use reasonable efforts to agree upon the text of any such announcement.
Section 6.6 Supplements to Schedules. From time to time up to the
--------------------------
Closing Date, the Company, the Sellers and the Purchaser each will promptly
supplement or amend the Company Disclosure Schedule and the Purchaser Disclosure
Schedule (as applicable) delivered pursuant to this Agreement with respect to
any matter first existing or occurring after the Agreement Date, which, if
existing or occurring at or before the Agreement Date, would have been required
to be set forth or described in such Disclosure Schedule, or which is necessary
to correct any information in such Disclosure Schedule that has been rendered
inaccurate by such matter. No supplement or amendment to any such Disclosure
Schedule will have any effect for the purpose of determining satisfaction of the
conditions set forth in Section 7.2 and Section 7.3, unless the Party receiving
such supplement or amendment fails to deliver a written objection notice to the
Party delivering such supplement or amendment within five Business Days after
the Party delivering such supplement or amendment actually delivers such
supplement or amendment to the Party receiving such supplement or amendment;
provided that, if any such supplement or amendment is delivered to a Party less
than five Business Days before the Closing Date, then such Party may deliver a
written objection notice at any time before the Effective Time.
Section 6.7 Insurance. If the Purchaser requests, the Company and the
---------
Sellers will cooperate with the Purchaser and take all commercially reasonable
actions reasonably requested by the Purchaser that are necessary or desirable to
permit the Purchaser to have it available following the Closing, the benefits
(whether direct or indirect) of the insurance policies maintained by or on
behalf of the Company or any Company Subsidiary that are currently in force.
The Purchaser will pay costs relating to the actions described in this Section
6.7.
Section 6.8 Contract Consents. As promptly as practicable after the
------------------
Agreement Date, the Company shall contact each of the parties to the contracts
listed on Schedule 4.14 and use its commercially reasonable efforts to obtain
--------------
from such parties written consents in form and substance reasonably satisfactory
to the Purchaser required in connection with the Merger. The Company shall not
consent to any amendment or termination of any such contract, waive any rights
of the Company or any Company Subsidiary under any such contract, release any
such party from any claims of the Company or any Company Subsidiary under any
such contract, or agree to make any payments not otherwise required under any
such contract in consideration for any such consent, in any such case without
the prior written consent of the Purchaser. The Company shall not take any
action in connection with such consents if the effect of such action is to
release any such party from its obligation under, or invalidate the obligation
of any such party under, any such contract to maintain the confidentiality of
all confidential, nonpublic information of the Company and each Company
Subsidiary obtained by such party in connection with such contract.
Section 6.9 Tax Free Reorganization. The Purchaser and the Company
-------------------------
each intend that the Merger will qualify for treatment as a reorganization
within the meaning of Code Section 368(a) and will cooperate in restructuring
the Merger to qualify for treatment as a reorganization within the meaning of
Section 368(a) of the Code if the Company reasonably believes after good faith
consultation with the Purchaser that the Merger will not so qualify. The
Purchaser and the Company each agree to refrain from taking or failing to take
any action
-52-
inconsistent with such intended treatment. The Purchaser will continue at least
one significant historical business line of the Company, or use at least a
significant portion of the Company's historic business assets in a business, in
each case within the meaning of Treasury Regulation Section 1.368-1(d).
Section 6.10 Stock Options.
--------------
(a) On the Agreement Date, the Company will deliver to the holders of
the Company Options an appropriate written notice, a form of which is
attached hereto as Exhibit 6.10, setting forth the Company's intention to
------------
terminate all Options effective immediately prior to the Effective Time.
(b) At the Effective Time, the Company shall cause each outstanding
Company Option, whether or not exercisable, to be cancelled.
Section 6.11 Employment Matters. Each Company employee and each
-------------------
Company Subsidiary employee who, after the Effective Time, remains as a
Purchaser employee or a Surviving Corporation employee (each, a "CONTINUING
----------
EMPLOYEE") will be given credit, for the purposes of any service requirements
- --------
for participation eligibility, or vesting (other than voting with regard to any
equity arrangements or awards or retiree health benefits, if any), for such
Continuing Employee's period of continuous service with the Company before the
Effective Time. No Continuing Employee and no Continuing Employee's eligible
dependents, in each case who, at the Effective Time, is participating in the
Company group health plan (including dental and vision) will be excluded from
the Purchaser's group plan (including dental and vision), or limited in coverage
under the Purchaser's group plan, by reason of any waiting period restriction or
pre-existing condition limitation. Each Continuing Employee will receive credit
for any co-payments, deductibles, or other co-insurance features that such
individual has paid or has been charged with under any Company group health plan
during the plan year in effect at the Closing Date.
Section 6.12 Securities Laws Matters.
-------------------------
(a) As soon as practicable after the Parties execute this Agreement,
but in any event not later than 10 Business Days after the Parties execute
this Agreement, the Purchaser will file a request for a hearing (the
"HEARING") before the Ohio Division of Securities to consider the terms,
-------
conditions, and fairness of the transactions contemplated by this Agreement
and the Transaction Documents pursuant to Section 1707.04 of the Ohio
Revised Code, together with an application for a permit relating to the
transactions contemplated by this Agreement, the Transaction Documents and
the Agreement of Merger (the "OHIO PERMIT"). The Company and the Purchaser
-----------
will promptly furnish to each other all data and information relating to
such Party as may be required in connection with such request and
application and such other notices and documents as may be required in
connection with the Hearing. The Purchaser, the Company and the Sellers
will use their respective commercially reasonable efforts to cause the
Hearing to take place and the Ohio Permit to be issued at the earliest
practicable date. Upon receiving the Ohio Permit, the Company will as
promptly as practicable, but in any event within five Business Days after
receiving the Ohio Permit, submit this Agreement and the transactions
contemplated by this Agreement for approval and adoption by the Company
Stockholders as provided by the DGCL and the Company's certificate of
incorporation and bylaws. The Company and the Sellers will use the
Company's and the Seller's commercially reasonable efforts to solicit and
receive sufficient Company Stockholder consents to approve the Merger and
this Agreement and the
-53-
transactions contemplated thereby, which consents shall be acceptable in
form and substance to the Purchaser.
(b) The Purchaser will prepare and file with appropriate state
securities or "Blue Sky" authorities all applications for qualification or
approval (or notices required to perfect exemptions from such compliance)
as may be required in connection with the Merger. The Company will use
commercially reasonable efforts to assist the Purchaser as may be
reasonably necessary to comply with all appropriate state securities or
Blue Sky laws that may be applicable in connection with the Merger.
(c) In connection with the Hearing, the Parties will cooperate in
preparing an information statement describing this Agreement and the
transactions contemplated by this Agreement for the purpose of soliciting
Company Stockholder Approval (the "INFORMATION STATEMENT"). The Information
---------------------
Statement will describe the Total Merger Consideration payable pursuant to
Article III. The information supplied by the Company for inclusion in the
Information Statement will not, on the date that the Information Statement
is first mailed to the Company Stockholders or at the Effective Time,
contain any statement that, at such time, is false or misleading with
respect to any material fact, or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they are made, not misleading, or omit to state any material
fact necessary to correct any statement in any earlier communication that
has become false or misleading.
(d) The Information Statement will constitute a disclosure document
for the offer and issuance of shares of Purchaser Common Stock to be
received by the holders of the Company Stock in the Merger. The Purchaser
and the Company will each use commercially reasonable efforts to cause the
Information Statement to comply in all material respects with applicable
Laws. Each of the Purchaser, the Company and the Sellers agrees to provide
promptly to the other such information concerning its business and
financial statements and affairs as, in the reasonable judgment of a Party
or its counsel, may be required or appropriate for inclusion in the
Information Statement or in any amendments or supplements thereto, and to
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the Information Statement. The Company will
promptly advise the Purchaser, and the Purchaser will promptly advise the
Company, in writing, if at any time before the Effective Time, either the
Company or the Purchaser learns of any facts that might make it necessary
or appropriate to amend or supplement the Information Statement in order to
make the statements contained or incorporated by reference therein not
misleading or to comply with applicable Law. Notwithstanding anything to
the contrary contained in this Section 6.12, neither the Purchaser nor the
Company will include in the Information Statement any information with
respect to the other Party or the other Party's Affiliates if the form and
content of such information has not been approved by such other Party
before such inclusion.
-54-
Section 6.13 Section 3(a)(10) Exemption. The Purchaser, the Company,
---------------------------
and each of the Sellers intend that the Purchaser Common Stock issued in the
Merger, if any, will be issued pursuant to the exemption from registration under
Securities Act Section 3(a)(10). The Purchaser, the Company and each of the
Sellers agree to take, or to refrain from taking, any action as necessary to
ensure the availability of such Section 3(a)(10) exemption. If applicable, the
Purchaser, the Company, and each of the Sellers agree to make reasonable
representations as requested by counsel to the Purchaser and the Company with
respect to the rendering of the opinions required pursuant to an exemption from
registration under Securities Act Section 3(a)(10).
Section 6.14 Tax Matters.
------------
(a) Cooperation on Tax Matters.
-----------------------------
(i) The Purchaser, the Company, each Company Subsidiary, and each
Seller will cooperate fully, as and to the extent reasonably requested
by any other Party, in connection with the filing of Tax Returns and
any audit, litigation, or other proceeding with respect to Taxes. Such
cooperation will include the retention and (upon the other Party's
request) the provision of records and information that are reasonably
relevant to any such audit, litigation, or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided under
this Agreement. The Company, each Company Subsidiary, and each Seller
agrees (A) to retain all books and records with respect to Tax matters
pertinent to the Company and any Company Subsidiary relating to any
taxable period beginning before the Closing Date until the expiration
of the applicable statute of limitations (and, to the extent notified
by the Purchaser or any Seller, any extensions thereof) of the
respective taxable periods, and to abide by all records retention
agreements entered into with any taxing authority, and (B) to give any
other Party reasonable written notice before transferring, destroying,
or discarding any such books and records and, if such other Party so
requests, then the Company, each Company Subsidiary, or any Seller, as
the case may be, will allow such other Party to take possession of
such books and records.
(ii) The Purchaser and each Seller further agree, upon request,
to use their respective best efforts to obtain any certificate or
other document from any Governmental Entity or any other Person as may
be necessary to mitigate, reduce, or eliminate any Tax that could be
imposed (including with respect to the transactions contemplated by
this Agreement).
(iii) The Purchaser and each Seller further agree, upon request,
to provide the other Party with all information that either Party may
be required to report pursuant to Code Section 6043 and all Treasury
Regulations promulgated under Code Section 6043.
(b) Certain Taxes and Fees. All transfer, documentary, sales, use,
-------------------------
stamp, registration, and other such Taxes, and all conveyance fees,
recording charges and other
-55-
fees and charges (including any penalties and interest) incurred by any
Seller in connection with consummation of the transactions contemplated by
this Agreement will be paid by such Seller when due, and each Seller will,
at such Seller's own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes, fees, and charges, and, if
required by applicable Law, the Purchaser will, and will cause the
Purchaser's Affiliates to, join in the execution of any such Tax Returns
and other documentation.
(c) Tax Return Preparation and Filing.
-------------------------------------
(i) Purchaser shall prepare or cause to be prepared and timely
file or cause to be timely filed all Tax Returns of the Company and
each Company Subsidiary that are filed after the Closing Date that are
with respect to a taxable period ending on or before the Closing Date
or a taxable period that begins before and ends after the Closing
Date. All such Tax Returns shall be prepared in a manner consistent
with past practice, except as otherwise required by Law. Purchaser
shall provide, or cause to be provided, to the Sellers Representative
drafts of each such Tax Return (and any workpapers or other supporting
documentation as may be reasonably requested by the Sellers
Representative) that relate to income taxes at least thirty (30) days
prior to the due date for the filing of such Tax Return (including
extensions), and Sellers Representative shall provide Purchaser with
Sellers' comments no later than 10 days before the due dates of such
Tax Returns. Purchaser shall make such revisions to such Tax Returns
as are reasonably requested by Sellers.
(ii) Neither Purchaser, the Company, a Company Subsidiary or any
of the Affiliates of the foregoing shall amend, refile, revoke or
otherwise modify any Tax Return or Tax election of any of the Company
or a Company Subsidiary in respect of a taxable period ending on or
before the Closing Date or a taxable period that begins before and
ends after the Closing Date without the prior written consent of the
Sellers Representative, which consent shall not be unreasonably
withheld.
Section 6.15 Directors' and Officers' Indemnification.
-------------------------------------------
(a) For six years after the Effective Time, the Purchaser shall
maintain in effect or cause to be maintained in effect directors' and
officers' liability insurance covering acts or omissions occurring prior to
the Effective Time with respect to those persons who are currently covered
by the Company's directors' and officers' liability insurance policy on
terms with respect to such coverage and amount no less favorable than those
of the policy of the Company in effect on the date hereof; provided,
--------
however, that in no event will the Purchaser be required to pay aggregate
-------
annual premiums for insurance under this Section 6.15 in excess of twice
the most recent aggregate annual premium paid by the Company for such
purpose; provided, further, that if the annual premiums of such insurance
-------- -------
coverage exceed such amount, the Purchaser will be obligated to obtain a
policy with the best coverage available, in the reasonable judgment of the
board of directors of the Purchaser, for a cost up to but not exceeding
such amount.
-56-
(b) The provisions of this Section 6.15 (i) are intended to be for the
benefit of, and will be enforceable by, each director or officer of the
Company and the Company Subsidiaries, his or her heirs and his or her
representatives and (ii) are in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such person
may have by contract or otherwise.
Section 6.16 Closing Date Capital Structure. On or prior to the
---------------------------------
Closing Date, the Company will deliver to the Purchaser and Newco an updated
Schedule 4.3 with respect to the capital structure of the Company as described
- -------------
in Section 4.3 as of the Closing Date (the "CLOSING DATE CAPITAL STRUCTURE").
------------------------------
The Purchaser will rely on the Closing Date Capital Structure for the purposed
of distributing the Merger Consideration pursuant to the terms of this
Agreement.
Section 6.17 Termination of 401(k) Plan. Sellers shall cause the
-----------------------------
Company and each Company Subsidiary to take all appropriate corporate action to
cease all benefit accruals under and terminate the Company's 401(k) plan
effective immediately prior to the Closing. As soon as practicable following
the Closing, the Continuing Employees shall be entitled to participate in the
Purchaser's 401(k) plan to the same extent as similarly situated employees of
the Purchaser.
Section 6.18 Alternative Exemption or Registration. The Purchaser, the
-------------------------------------
Company and each Seller agree that if the Ohio Permit is not received on or
prior to October 15, 2005, they will discuss in good faith options that would
enable the Purchaser to issue the Purchaser Common Stock to the Sellers without
violating the federal securities laws in the absence of the Ohio Permit. For
the avoidance of doubt, nothing in this Section 6.18 shall be deemed to require
Purchaser to issue the Purchaser Common Stock in any transaction in the absence
of the Ohio Permit.
Section 6.19 Transaction Expenses. The Company and the Sellers shall
---------------------
cause their respective financial advisors, accountants and counsel to submit
final invoices (the "FINAL INVOICES") to the Purchaser at least two (2) Business
--------------
Days prior to the Closing for any and all fees, costs, and expenses that are
incurred by the Company or a Company Subsidiary in connection with this
Agreement and the transactions contemplated by this Agreement. The Final
Invoices, together with any and all fees, costs, and expenses that are incurred
prior to the Final Invoices by the Company or a Company Subsidiary in connection
with this Agreement and the transactions contemplated by this Agreement,
including the fees, costs, and expenses of financial advisors, accountants and
counsel shall be collectively referred to in this Agreement as the "COMPANY
-------
TRANSACTION COSTS." The Parties acknowledge and agree that the Special Legal
- ------------------
Fees and broker, finder, and investment banker fees are not to be included in
the Company Transaction Costs.
Section 6.20 Special Legal Fees. As soon as practical, and in no event
------------------
later than ten (10) Business Days, after the date hereof, the Company and the
Sellers will deliver to the Purchaser the estimate of the Special Legal Fees.
Section 6.21 Athome Corporation Shares. The Purchaser and the Company
-------------------------
agree to work together in good faith to determine the appropriate resolution for
the treatment of the shares of Company Stock held on the Company's books and
records for Athome Corporation, which resolution shall be in compliance with all
applicable Laws, including escheat Laws.
-57-
ARTICLE VII
CLOSING CONDITIONS
Section 7.1 Conditions to Each Party's Obligations. Each Party's
------------------------------------------
respective obligations to close the transactions contemplated by this Agreement
will be subject to the fulfillment, at or before the Closing, of each of the
following conditions:
(a) Injunction. No Court or Governmental Entity of competent
----------
jurisdiction will have issued an effective injunction, writ, preliminary
restraining order, or any other Order of any nature to the effect that the
Merger may not be consummated as provided in this Agreement, and no Court
or Governmental Entity will have begun any proceeding or lawsuit requesting
any such injunction, writ, or preliminary restraining order, and no Party
will have received from any Court or Governmental Entity written notice
indicating an intent to restrain, prevent, materially delay, or restructure
the transactions contemplated by this Agreement.
(b) Consents. All Orders and all other authorizations of, or
--------
registrations, declarations, or filings with, any Court or Governmental
Entity required in connection with the execution, delivery, or performance
of this Agreement will have been received or made, except where the failure
to have received or made any such Order, authorization, declaration, or
filing has not constituted a Company Material Adverse Effect.
(c) Company Stockholder Approval. The Merger and the transactions
------------------------------
contemplated by this Agreement will have been approved and adopted by the
Company Stockholders in accordance with the DGCL and the Company's
certificate of incorporation and by-laws.
Section 7.2 Conditions to the Purchaser's Obligations. The Purchaser's
-----------------------------------------
obligations to consummate the transactions contemplated by this Agreement will
be subject to the fulfillment, at or before the Closing, of each of the
following additional conditions:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Company and the Sellers set forth in Article IV will have been true
and correct in all material respects as of the Agreement Date and will be
true and correct in all material respects as of the Closing Date as though
made on and as of the Closing Date, except that those representations and
warranties that, by their terms, are qualified by materiality will be true
and correct in all respects, and except that those representations and
warranties that address matters as of a particular date will be true and
correct as of such particular date.
(b) Performance of the Company's Obligations. The Company and the
--------------------------------------------
Sellers will have performed in all material respects all covenants and
agreements required to be performed by the Company under this Agreement on
or before the Closing Date.
(c) No Material Adverse Change. Between the Agreement Date and the
-----------------------------
Closing Date, there will not have occurred (nor will the Purchaser have
become aware of) any
-58-
development that has had, or is reasonably likely to have, a Company
Material Adverse Effect.
(d) Company Certificate. The Company will have executed and delivered
-------------------
to the Purchaser a certificate as to compliance with the conditions set
forth in Section 7.2(a) and Section 7.2(b).
(e) Affiliate Agreements. Each of the parties identified by the
---------------------
Company in Schedule 4.23 of the Company Disclosure Schedule as being an
Affiliate of the Company owning shares of Company Stock will have delivered
to Purchaser an executed Affiliate Agreement, in the form attached hereto
as Exhibit 7.2(e) (each, an "AFFILIATE AGREEMENT"), which will be in full
--------------- -------------------
force and effect.
(f) Waivers. The Purchaser will have received from each director of
-------
the Company and each Company Subsidiary who has not executed and delivered
a Seller Waiver Agreement a waiver and a release of the Company and each
Company Subsidiary, in the form attached as Exhibit 7.2(f).
---------------
(g) Stockholder Approval of Amendment to Company Stock Option Plan. If
--------------------------------------------------------------
required by applicable Law, any amendment to the Company Stock Option Plan
will have been approved and adopted by the Company Stockholders.
(h) Securities Compliance. The Purchaser will have obtained Orders and
---------------------
all other authorizations of, and made all registrations, declarations, and
filings with, any Court or Governmental Entity required in connection with
the issuance of Purchaser Common Stock to the Company Stockholders,
including receipt of the Ohio Permit.
(i) Non-Competition Agreement. Each of Stephen J. McHale, Charles
--------------------------
Lougheed and Craig Schwabl will have delivered to the Purchaser an executed
Non-Disclosure and Non-Competition Agreement in the form attached as
Exhibit 7.2(i) (each, a "NON-COMPETITION AGREEMENT"), and each
--------------- --------------------------
Non-Competition Agreement will be in full force and effect.
(j) Ancillary Documents. The Company will have delivered, caused to be
-------------------
delivered, or made available in the case of clause (iii) below, to the
Purchaser the following:
(i) evidence of the termination of any powers of attorney on
behalf of the Company or any Company Subsidiary set forth in Schedule
--------
4.14;
----
(ii) a certificate from the Company's Secretary or any Company
Assistant Secretary, dated the Closing Date, as to (A) the Company's
good standing in the State of Delaware and in each other jurisdiction
where the Company or any Company Subsidiary is qualified to do
business and (B) no amendments to the Company's charter documents;
(iii) the Company's organizational record books, minute books,
and corporate seal; and
-59-
(iv) the Escrow Agreement.
(k) Termination of Company Stockholder Agreements. The Company
-------------------------------------------------
Stockholder Agreements will have been terminated and will be of no further
force or effect by written agreements executed by a number of Company
Stockholders sufficient to terminate each such Company Stockholder
Agreement, which written agreements will be reasonably acceptable in form
and substance to the Purchaser.
(l) Appraisal Rights. Company Stockholders shall not exercise
-----------------
appraisal rights with respect to 10% or more of the shares of the Company
Stock issued and outstanding at the Effective Time.
(m) Director and Officer Resignations. The Company's officers and
------------------------------------
directors will have executed and delivered resignation letters resigning
from (i) the board of directors of the Company and each Company Subsidiary
and (ii) any and all other positions as officers of the Company and each
Company Subsidiary, with such resignations to be effective immediately
before the Effective Time, which written letters will be reasonably
acceptable in form and substance to the Purchaser.
(n) Contract Consents. All consents described in Schedule 4.5 will
------------------
have been obtained and will be in full force and effect as of the Effective
Time.
(o) Purchaser Share Price. The Purchaser Share Price is equal to or
-----------------------
greater than one dollar and fifty-five cents ($1.55); provided, that if the
Purchaser Share Price is less than one dollar and fifty-five cents ($1.55),
this closing condition will be deemed to be satisfied if the Company and
the Representative, by joint written notice to the Purchaser, elect to fix
the Purchaser Share Price at an amount equal to one dollar and fifty-five
cents ($1.55).
(p) Claims for Capital Stock. There shall be no claim pending by any
-------------------------
Person relating to any options, warrants, rights, calls, commitments,
conversion rights, exchange rights, subscriptions, agreements, obligations,
convertible securities, exchangeable securities or other plans or
commitments, contingent or otherwise, relating to the Company's capital
stock that reflect a different capital structure of the Company as set
forth in the Closing Date Capital Structure.
Section 7.3 Conditions to the Company's Obligations. The Company's
------------------------------------------
obligations to consummate the transactions contemplated by this Agreement will
be subject to the fulfillment, at or before the Closing, of each of the
following additional conditions:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Newco and the Purchaser set forth in Article V will have been true and
correct in all material respects as of the Agreement Date and will be true
and correct in all material respects as of the Closing Date as though made
on and as of the Closing Date, except that those representations and
warranties that, by their terms, are qualified by materiality will be true
and correct in all respects, and except that those representations and
warranties which address matters as of a particular date will be true and
correct as of such particular date.
-60-
(b) Performance of the Purchaser's Obligations. Newco and the
----------------------------------------------
Purchaser will have performed in all material respects all covenants and
agreements required to be performed by the Purchaser and Newco under this
Agreement on or before the Closing Date.
(c) Certificates. Each of Newco and the Purchaser will have delivered
-----------
to the Company a certificate of an authorized officer as to compliance with
the conditions set forth in Section 7.3(a) and Section 7.3(b).
(d) Purchaser Ancillary Documents. Newco and the Purchaser will have
------------------------------
delivered, or caused to be delivered, to the Company the following:
(i) a copy of the resolutions of the board of directors of Newco
and the Purchaser authorizing the execution, delivery, and performance
of this Agreement by the Purchaser and Newco, and a certificate of
their respective Secretaries or Assistant Secretaries, each dated the
Closing Date, that such resolutions were duly adopted and are in full
force and effect;
(ii) the Escrow Agreement; and
(iii) all other documents required to be entered into or
delivered by Newco or the Purchaser at or before the Closing pursuant
to this Agreement.
(e) No Material Adverse Change. Between the Agreement Date and the
-----------------------------
Closing Date, there will not have occurred (nor will the Company have
become aware of) any development that has had, or is reasonably likely to
have, a Purchaser Material Adverse Effect.
(f) Purchaser Share Price. The Purchaser Share Price is equal to or
-----------------------
less than two dollars and seventy-eight cents ($2.78).
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at any time
-----------
at or before the Closing (the date of any such termination, the "TERMINATION
-----------
DATE"):
- ----
(a) in writing by the Parties' mutual written consent;
(b) by written notice from the Company to the Purchaser, if Newco or
the Purchaser (i) fail to perform in any material respect any of their
respective agreements contained in this Agreement required to be performed
by them on or before the Closing Date or (ii) materially breach any of
their respective representations and warranties contained in this
Agreement, which failure or breach (A) is not cured within 10 days after
the Company has notified the Purchaser of the Company's intent to terminate
this Agreement pursuant to this Section 8.1(b), and (B) constitutes,
whether alone or with any such other breaches, a Purchaser Material Adverse
Effect;
-61-
(c) by written notice from the Purchaser to the Company, if the
Company or any of the Sellers (i) fail to perform in any material respect
any of the Company's or Seller's agreements contained in this Agreement
required to be performed by the Company or the Sellers on or before the
Closing Date, or (ii) materially breaches any of the Company's or Seller's
representations and warranties contained in this Agreement, which failure
or breach (A) is not cured within 10 days after the Purchaser has notified
the Company and the Sellers of the Purchaser's intent to terminate this
Agreement pursuant to this Section 7.1(c), and (B) constitutes, whether
alone or with any such other breaches, a Company Material Adverse Effect;
(d) by written notice from the Company to the Purchaser or from the
Purchaser to the Company, as the case may be, if the Closing has not
occurred on or before October 31, 2005 for any reason other than delay or
nonperformance of the Party seeking such termination;
(e) by written notice from the Purchaser to the Company, if the Merger
and the transactions contemplated by this Agreement have not been approved
and adopted by the Company Stockholders in accordance with the DGCL and the
Company's certificate of incorporation and by-laws on or before October 31,
2005 for any reason other than delay or nonperformance of the Purchaser;
(f) by written notice from the Company to the Purchaser or from the
Purchaser to the Company, if the Ohio Division of Securities has not issued
the Ohio Permit qualifying the Purchaser Common Stock to be issued in the
Merger pursuant to Title XVII of the Ohio Revised Code in accordance with
Section 6.12 on or before October 31, 2005 for any reason;
(g) by written notice from the Company, if the board of directors of
the Company has approved, and the Company has concurrently with such
termination entered into, a definitive Acquisition Agreement providing for
the implementation of the transactions contemplated by a Company Superior
Proposal; provided, however, that (i) the Company is in compliance with
-------- -------
Section 6.3(b) and (ii) no termination pursuant to this Section 8.1(g) will
be effective unless the Company simultaneously makes the payment required
by Section 8.4;
(h) by the Purchaser, if the Company's board of directors has (i)
withdrawn or modified in a manner adverse to the Purchaser its approval of
this Agreement or the Merger recommendation to the Company Stockholders
that they give the Company Stockholder Approval or (ii) approved or
recommended any Alternative Transaction or caused the Company or any
Company Affiliate to enter into any agreement with respect to any Company
Superior Proposal; and
(i) (i) by the Company, if on the date all conditions to the Closing
under Section 7.1, Section 7.2 and Section 7.3 (other than under Section
7.3(e)) are satisfied (or waived) the Purchaser Share Price is greater than
two dollars and seventy-eight cents ($2.78), and (ii) by the Purchaser, if
on the date all conditions to the Closing under Section 7.1, Section 7.2
and Section 7.3 (other than under Section 7.2(o)) are satisfied (or
-62-
waived) the Purchaser Share Price is less than one dollar and fifty-five
cents ($1.55); provided, that Purchaser shall not be permitted to terminate
pursuant to clause (ii) of this Section 8.1(i) if the Company and the
Representative, by joint written notice to the Purchaser, elect to fix the
Purchaser Share Price at an amount equal to one dollar and fifty-five cents
($1.55) as described in Section 7.2(o).
Section 8.2 Specific Performance and Other Remedies. The Parties each
---------------------------------------
acknowledge that each Party's rights to consummate the transactions contemplated
by this Agreement are special, unique, and of extraordinary character and that,
in the event that any Party violates or fails or refuses to perform any covenant
or agreement made by such Party in this Agreement, the non-breaching Party may
lack an adequate remedy at Law. Therefore, the Parties agree that, if any Party
violates or fails or refuses to perform any covenant or agreement made by such
Party in this Agreement, then the non-breaching Party may, subject to the terms
of this Agreement and in addition to any remedies at Law for damages or other
relief, institute and prosecute an action in any Court of competent jurisdiction
to enforce specific performance of such covenant or agreement or seek any other
equitable relief.
Section 8.3 Effect of Termination. If this Agreement is terminated
-----------------------
pursuant to this Article VIII, then this Agreement will immediately become void
and there will be no liability on the part of any Party or such Party's
respective partners, officers, directors, or stockholders under this Agreement,
except for obligations under Section 6.5, this Section 8.3, Section 8.4 and
Section 10.12, all of which will survive the Termination Date, and the Parties'
respective obligations under the Confidentiality Agreement, which will survive
the Termination Date in accordance with its terms. Notwithstanding the
foregoing, but subject to any liability limitations contained in this Agreement
nothing contained in this Agreement will relieve any Party from willful and
material breach of this Agreement.
Section 8.4 Termination Fees. If (a) the Purchaser terminates this
-----------------
Agreement pursuant to Section 8.1(h), (b) the Company terminates this Agreement
pursuant to Section 8.1(g), or (c) the Company or Purchaser terminates this
Agreement pursuant to Section 8.1(d) and on the date of such termination a
proposal for an Alternative Transaction has been made to the Company and within
twelve (12) months after termination of this Agreement the Company enters into a
definitive agreement with respect to an Alternative Transaction or closes an
Alternative Transaction, then the Company will promptly pay to the Purchaser the
Termination Fee, payable in same-day funds, as liquidated damages and not as a
penalty to reimburse the Purchaser for the Purchaser's time, expense, and lost
opportunity costs of pursuing the Merger. If the Company or Purchaser
terminates this Agreement pursuant to Section 8.1(i), then the Company or the
Purchaser (whichever Party is terminating this Agreement) will promptly pay
$350,000 to the other Party, payable in same-day funds, for the other Party to
cover expenses of pursuing the Merger. Notwithstanding anything to the contrary
set forth in this Agreement, if the Company or the Purchaser, as the case may
be, fails promptly to pay to the Purchaser any amounts found by a Court to be
due under this Section 8.4, the Company or the Purchaser, as the case may be,
will pay the costs and expenses (including reasonable legal fees and expenses)
in connection with any action, including filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee or obligation at the publicly announced prime rate of the Escrow
Agent in effect from time to time from the date such fee or obligation was
required to be paid.
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ARTICLE IX
INDEMNIFICATION
Section 9.1 Company Stockholders' Indemnification Obligations. Subject
-------------------------------------------------
to the terms, conditions, and limitations of this Article IX, the Company
Stockholders, on a joint and several basis (other than with respect to Section
9.1(c), which shall be on a several basis), will indemnify, defend, and hold
harmless the Purchaser, Newco, the Company, and the Purchaser's Affiliates, each
of their respective officers, directors, employees, agents, and representatives,
and each of the heirs, executors, successors, and assigns of any of the
foregoing (collectively, the "PURCHASER INDEMNIFIED PARTIES") from, against, and
-----------------------------
in respect of any and all claims, liabilities, obligations, losses, costs,
expenses, penalties, fines, judgments (at equity or at law), and damages,
whenever arising or incurred (including amounts paid in settlement, costs of
investigation, and reasonable attorneys' fees and expenses) arising out of or
relating to:
(a) any breach or inaccuracy of any representation or warranty made by
the Company or the Sellers in this Agreement or in any of the Company
Ancillary Documents;
(b) any breach of any covenant, agreement, or undertaking made by the
Company or any of the Sellers in this Agreement or in any of the Company
Ancillary Documents; and
(c) any fraud by the Company or any of the Sellers in connection with
this Agreement or the Company Ancillary Documents;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, no Company Stockholder will be liable for indemnification of any
Purchaser Indemnified Party in excess of the number of shares of Purchaser
Common Stock to be received by such Company Stockholder pursuant to this
Agreement. The Purchaser Indemnified Parties' claims, liabilities, obligations,
losses, costs, expenses, penalties, fines, and damages described in this Section
9.1 as to which the Purchaser Indemnified Parties are entitled to
indemnification are collectively referred to as the "PURCHASER LOSSES."
-----------------
Notwithstanding anything to the contrary herein, the Sellers have no obligation
to indemnify or pay any Purchaser Losses attributable to any breach of any
representation or warranty contained in Section 4.15 hereof, resulting from: (A)
actions taken by Purchaser or caused to be taken by Purchaser outside of the
ordinary course of business occurring on the Closing Date but after the Closing;
(B) transactions occurring at Closing initiated by the Purchaser and not
contemplated by this Agreement or consented to by the Company, the
Representative or any Seller; or (C) any election under Section 338 of the Code
with respect to the transactions contemplated by this Agreement.
Section 9.2 McHale Indemnification Obligations. Subject to the terms,
----------------------------------
conditions, and limitations of this Article IX, Stephen J. McHale, will
indemnify, defend, and hold harmless the Purchaser Indemnified Parties from,
against, and in respect of any and all claims, liabilities, obligations, losses,
costs, expenses, penalties, fines, judgments (at equity or at law), and damages,
whenever arising or incurred (including amounts paid in settlement, costs of
investigation, and reasonable attorneys' fees and expenses) arising out of or
relating to any liability relating to, resulting from or arising out of (a) the
McHale Stock Purchases and (b) if Stephen J. McHale fails to fulfill his
obligations under the McHale Disposition Documents, other
-64-
than as a result of a failure that is caused by Purchaser or another third party
(except a Court or Governmental Entity of competent jurisdiction), the McHale
Stock Dispositions.
Section 9.3 Purchaser and Newco Indemnification Obligations. Subject
------------------------------------------------
to the terms and conditions of this Article IX, the Purchaser and Newco, on a
joint and several basis, will indemnify and hold harmless the Company
Stockholders and their respective agents and representatives and each of their
respective heirs, executors, successors, and assigns (collectively, the "SELLER
------
INDEMNIFIED PARTIES") from, against, and in respect of any and all claims,
- --------------------
liabilities, obligations, losses, costs, expenses, penalties, fines, and
judgments (at equity or at law, including statutory and common) and damages
whenever arising or incurred (including amounts paid in settlement, costs of
investigation, and reasonable attorneys' fees and expenses) arising out of or
relating to:
(a) any breach or inaccuracy of any representation or warranty made by
the Purchaser or Newco in this Agreement or in any of the Purchaser
Ancillary Documents;
(b) any breach of any covenant, agreement, or undertaking made by the
Purchaser or Newco in this Agreement or in any of the Purchaser Ancillary
Documents; or
(c) any fraud by the Purchaser or Newco in connection with this
Agreement or the Purchaser Ancillary Documents.
The Seller Indemnified Parties' claims, liabilities, obligations, losses, costs,
expenses, penalties, fines, and damages described in this Section 9.2 as to
which the Seller Indemnified Parties are entitled to indemnification are
collectively referred to as "SELLERS LOSSES."
---------------
Section 9.4 Indemnification Procedure.
--------------------------
(a) Promptly after a Purchaser Indemnified Party or a Seller
Indemnified Party (as applicable, an "INDEMNIFIED PARTY") receives notice
-----------------
from a third-party (including any Court or Governmental Entity) of any
complaint or the commencement of any audit, investigation, action, or
proceeding with respect to which such Indemnified Party may be entitled to
receive payment from the other Party for any Purchaser Losses or any
Sellers Losses (as applicable), such Indemnified Party will deliver written
notification to the Purchaser or the Representative, as applicable (the
"INDEMNIFYING PARTY") that the Indemnified Party has received such notice;
-------------------
provided, however, that the Indemnified Party's failure to so notify the
-------- -------
Indemnifying Party will relieve the Indemnifying Party from liability under
this Agreement with respect to such claim only if, and only to the extent
that, such failure to notify the Indemnifying Party results in the
Indemnifying Party's forfeiture of rights and defenses otherwise available
to the Indemnifying Party or to the Indemnified Party with respect to such
claim. Upon delivering written notice to the Indemnified Party within 10
days after receiving the initial notice assuming full responsibility for
any Purchaser Losses or Sellers Losses (as the case may be) resulting from
such audit, investigation, action, or proceeding, the Indemnifying Party
will have the right to assume the defense of such audit, investigation,
action or proceeding, including employing counsel reasonably satisfactory
to the Indemnified Party and paying the fees and disbursements of such
counsel. However, if the Indemnifying Party declines
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or fails to assume the defense of the audit, investigation, action, or
proceeding on the terms provided above or to employ counsel reasonably
satisfactory to the Indemnified Party, in either case within such 10-day
period, then such Indemnified Party may employ counsel to represent or
defend the Indemnified Party in any such audit, investigation, action, or
proceeding and the Indemnifying Party will pay the reasonable fees and
disbursements of such counsel as incurred; provided, however, that the
-------- -------
Indemnifying Party will not be required to pay the fees and disbursements
of more than one counsel for all Indemnified Parties in any jurisdiction in
any single audit, investigation, action, or proceeding. In any audit,
investigation, action, or proceeding with respect to which the Indemnified
Party is seeking indemnification under this Article IX, the Indemnified
Party or the Indemnifying Party, whichever is not assuming the defense of
such action, will have the right to participate in such matter and to
retain such Party's own counsel at such Party's own expense. The
Indemnifying Party or the Indemnified Party, as the case may be, will at
all times use reasonable efforts to keep the Indemnifying Party or the
Indemnified Party, as the case may be, reasonably apprised of the status of
any matter for which such Party is maintaining the defense and to cooperate
in good faith with each other with respect to the defense of any such
matter.
(b) Without the Indemnifying Party's prior written consent, which will
not be unreasonably withheld or delayed, no Indemnified Party may settle or
compromise any claim or consent to the entry of any judgment for which the
Indemnified Party is seeking indemnification under this Article IX, unless
the Indemnifying Party fails to assume and maintain the defense of such
claim pursuant to Section 9.4(a). Without the Indemnified Party's prior
written consent, which will not be unreasonably withheld or delayed, an
Indemnifying Party may not settle or compromise any claim or consent to the
entry of any judgment for which the Indemnified Party is seeking
indemnification under this Article IX, unless such settlement, compromise,
or consent (i) includes an unconditional release of the Indemnified Party
from all liability arising out of such claim, (ii) does not contain any
admission or statement suggesting any wrongdoing or liability on the
Indemnified Party's behalf, and (iii) does not contain any equitable order,
judgment, or term that, in any manner, affects, restrains, or interferes
with the business of the Indemnified Party or any of the Indemnified
Party's Affiliates.
(c) If an Indemnified Party claims a right to payment pursuant to this
Agreement, then such Indemnified Party will send written notice of such
claim to the appropriate Indemnifying Party, and such notice will specify
the basis for such claim. As promptly as possible after the Indemnified
Party has given such written notice, such Indemnified Party and the
appropriate Indemnifying Party will establish the merits and amount of such
claim (by mutual agreement, litigation, arbitration, or otherwise). Within
five Business Days of the final determination of the merits and amount of
such claim, (i) the Indemnifying Party, if such Indemnifying Party is the
Purchaser, will pay to the Indemnified Party immediately available funds in
an amount equal to such claim as determined under this Article IX and (ii)
the Indemnifying Party, if such Indemnifying Party is the Company
Stockholders, will cause the Representative to deliver a written notice to
the Escrow Agent as required under the Escrow Agreement instructing the
Escrow Agent to distribute Escrow Shares to the Indemnified Party in an
amount equal to
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such claim as determined under this Article IX in accordance with the terms
of the Escrow Agreement.
Section 9.5 Claims Period.
--------------
(a) For purposes of this Agreement, the term "CLAIMS PERIOD" means the
time period during which an Indemnified Party may assert a claim for
indemnification under this Agreement. Notwithstanding anything to the
contrary in this Agreement or in any other Transaction Document, but
subject to Section 9.5(b):
(i) with respect to Purchaser Losses arising under (i) Section
9.1(a) with respect to any breach or inaccuracy of any representation
or warranty in Section 4.2 (Authorization), Section 4.3 (Capital
Stock), Section 4.21 (Intellectual Property), Section 4.22 (Software),
and Section 4.28 (Brokers, Finders, and Investment Bankers)
(collectively, the "SPECIAL REPRESENTATIONS") or (ii) Section 9.1(b)
-----------------------
with respect to Section 6.19 (Transaction Expenses), Section 9.1(c) or
Section 9.2 (collectively, the "SPECIAL OBLIGATIONS"), the Claims
--------------------
Period shall terminate on the date that is twenty-one (21) months
following the Closing Date;
(ii) with respect to Company Losses arising under Sections 9.3(b)
and 9.3(c), the Claims Period shall terminate on the date that is
twenty-one (21) months following the Closing Date; and
(iii) with respect to all other Purchaser Losses or Company
Losses arising hereunder, the Claims Period shall terminate on the
fifth Business Day following the date the Purchaser files its Annual
Report on Form 10-K for its fiscal year ending June 30, 2006.
(b) Notwithstanding the provisions of Sections 9.5(a), if, before the
close of business on the last day of the Claims Period, an Indemnifying
Party will have been properly notified of a good faith claim for indemnity
under this Article IX and such claim will not have been finally resolved or
disposed of at such date, then such claim will continue to survive and will
remain a basis for indemnity under this Article IX until such claim is
finally resolved or disposed of in accordance with the terms of this
Article IX.
Section 9.6 Limitations.
-----------
(a) Notwithstanding anything to the contrary set forth in this
Agreement or in any other Transaction Document, the Indemnified Parties
will not make a claim against the Indemnifying Parties for indemnification
under this Article IX for Purchaser Losses or Sellers Losses, as applicable
(collectively, "LOSSES"), unless and until (i) any individual loss exceeds
------
$2,500 (the "LOSS THRESHOLD"), in which case such Indemnified Party shall
--------------
be liable for the entire amount in excess of such Loss, subject to the
Aggregate Threshold (as hereunder defined) and (ii) the aggregate amount of
such Losses exceeds $300,000 (the "AGGREGATE THRESHOLD"), in which event
-------------------
the Indemnified Parties may claim indemnification for all such Losses,
including the initial $300,000; provided, however,
-------- -------
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the Purchaser Losses arising under the Special Obligations shall not be
subject to the Loss Threshold or the Aggregate Threshold.
(b) Notwithstanding anything to the contrary set forth in this
Agreement or in any other Transaction Document, the maximum liability of
Stephen J. McHale pursuant to Section 9.2 for all Purchaser Losses together
with indemnity losses paid by Stephen J. McHale pursuant to any other
indemnity relating to the McHale Stock Purchases in favor of the Company
shall not exceed the value of the number of shares of Purchaser Common
Stock issuable for 845,865 shares of Company Series A Preferred Stock in
accordance with the provisions of this Agreement.
(c) The Purchaser Indemnified Parties' right to recovery pursuant to
Section 9.1 hereof on account of any Purchaser Losses will be reduced by
all insurance or other third party indemnification proceeds actually
received by the Purchaser Indemnified Parties. The Purchaser and the
Company shall use commercially reasonable efforts to claim and recover any
Purchaser Losses suffered by the Purchaser Indemnified Parties under any
such insurance policies or other third party indemnities. If a Purchaser
Indemnified Party (or one of its Affiliates) actually recognizes a cash Tax
benefit in a taxable year as a result of incurring indemnifiable Purchaser
Losses that have been indemnified, the Purchaser Indemnified Party shall,
to the extent the indemnifiable Purchaser Losses have actually been
indemnified, pay the amount of such Tax benefit to the Indemnifying Party
within 30 days of filing its final Tax return for the year in which it has
realized a Tax benefit. The amount of a Tax benefit will be computed
assuming that all items of deduction, loss, income, gain and credit
attributable to incurring the indemnifiable Purchaser Losses are the last
items incurred by the Purchaser Indemnified Party.
(d) The Parties agree that, from and after the Effective Time, the
exclusive remedies of the Parties for any Sellers Losses and Purchaser
Losses arising out of or based upon the matters set forth in this Agreement
are the indemnification and/or reimbursement obligations of the parties set
forth in this Article IX. The provisions of this Section 9.6 will not,
however, prevent or limit a cause of action (i) on account of fraud, or
(ii) under Section 8.2 to obtain an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
provisions hereof.
(e) Except with respect to Purchaser Losses actually awarded to a
third party in an action brought against a Purchaser Indemnified Party, the
Purchaser Indemnified Parties are not entitled to recovery pursuant to
Section 9.1 hereof for punitive damages, or for lost profits,
consequential, exemplary or special damages. Except with respect to Seller
Losses actually awarded to a third party in an action brought against a
Seller Indemnified Party, the Seller Indemnified Parties are not entitled
to recovery pursuant to Section 9.1 hereof for punitive damages, or for
lost profits, consequential, exemplary or special damages.
Section 9.7 Investigations. The respective representations and
--------------
warranties of the Parties contained in this Agreement or in any certificate or
other document delivered by any Party before the Closing and the rights to
indemnification set forth in this Article IX will not be deemed waived or
otherwise affected by any investigation made by a Party to this Agreement.
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Section 9.8 Escrow Shares. The Escrow Shares held in the Escrow
--------------
Account are the sole source of recovery by Purchaser Indemnified Parties for any
Purchaser Losses pursuant to this Article IX, except with respect to Purchaser
Losses arising under the Special Obligations. The Escrow Shares shall be held
in the Escrow Account and released to Sellers or Purchaser in accordance with
the Escrow Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Notices. All notices, communications, and other
-------
deliveries under this Agreement will be made in writing signed by or on the
delivering Party's behalf, will specify the Section under this Agreement
pursuant to which such delivery is given or being made, and will be delivered
personally or by facsimile transmission or sent by registered or certified mail
(return receipt requested) or by a reputable overnight courier (with evidence of
delivery and postage and other fees prepaid) as follows:
To the Purchaser: Concurrent Computer Corporation
4375 River Green Parkway, Suite 100
Duluth, GA 30096, USA
Attn: Kirk L. Somers
Fax No.: (678) 258-4300
with a copy to: King & Spalding LLP
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attn: John D. Capers, Jr.
Fax No.: (404) 572-5136
To the Sellers: Charles Lougheed, as Representative
c/o Everstream Holdings, Inc.
6001 Cochran Road
Suite 300
Cleveland, OH 44139
Fax No.: (440) 498-8866
with a copy to: Jones Day
901 Lakeside Avenue
Attn:Cleveland, Ohio 44114-1190
Denise A. Carkhuff
Fax No.: (216) 579-0212
To the Company: Everstream Holdings, Inc.
6001 Cochran Road
Suite 300
Cleveland, OH 44139
Attn: Stephen J. McHale
Fax No.: (440) 498-8866
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with a copy to: Jones Day
901 Lakeside Avenue
Cleveland, Ohio 44114-1190
Attn: Denise A. Carkhuff
Fax No.: (216) 579-0212
or to such other representative or at such other Party's address as such Party
may furnish to the other parties in writing. Any such notice, communication, or
delivery will be deemed given or made (a) on the date of delivery if delivered
in person, (b) on the first Business Day after delivery to such Party if sent by
UPS Next Day Air, (c) upon transmission by facsimile if receipt is confirmed by
telephone, or (d) on the fifth Business Day after mailed by registered or
certified mail.
Section 10.2 Schedules and Exhibits. The Schedules and Exhibits to
------------------------
this Agreement are hereby incorporated into this Agreement and are hereby made a
part of this Agreement as if set out in full in this Agreement.
Section 10.3 Assignment; Successors in Interest. No Party will assign,
----------------------------------
delegate, or transfer such Party's rights or obligations under this Agreement,
except with the prior written consent of the other Parties to this Agreement;
provided that the Purchaser shall, without the obligation to obtain the prior
written consent of the Company or any of its Sellers will be entitled to assign
this Agreement or all or any part of the Purchaser's rights or obligations under
this Agreement to any one or more Purchaser Affiliates. This Agreement will be
binding upon and will inure to the benefit of the Parties and their successors
and permitted assigns, and any reference to a Party will also be a reference to
a successor or permitted assign.
Section 10.4 Captions. The titles, captions, and table of contents
--------
contained in this Agreement are inserted in this Agreement only as a matter of
convenience and for reference and do not, in any way, define, limit, extend, or
describe the scope of this Agreement or the intent of any provision of this
Agreement.
Section 10.5 Controlling Law; Venue. This Agreement will be governed
-----------------------
by and construed and enforced in accordance with the internal laws of the State
of Delaware without reference to Delaware choice-of-law rules. Each of the
Parties irrevocably and unconditionally submits to the exclusive jurisdiction of
the United States District Court for District of Delaware, or if such court does
not have jurisdiction, the state courts of the State of Delaware, located in the
City of Wilmington, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the Parties further agrees that service of any process, summons, notice or
document by U.S. registered mail to such Party's respective address set forth in
Section 10.1 shall be effective service of process for any action, suit or
proceeding in Delaware with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. Each of
the Parties irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement or any
transaction contemplated hereby or thereby in (a) the United States District
Court for District of Delaware or (b) the state courts of the State of Delaware,
located in the City of Wilmington, and hereby further irrevocably and
unconditionally (i) waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in
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any such litigation or proceeding, any claim that it is not personally subject
to the jurisdiction of the aforesaid courts for any reason other than the
failure to serve process in accordance with this Section 10.5, that it or its
property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), and to the fullest extent permitted by Law,
that the litigation in any such court is brought in an inconvenient forum and
(ii) agrees not to commence any action, claim, cause of action or suit, in
contract, tort or otherwise arising out of this Agreement or the transactions
contemplated hereby and thereby other than in (a) the United States District
Court for District of Delaware or (b) the state courts of the State of Delaware,
located in the City of Wilmington. The Parties intend that any judgment of
either such court shall be enforceable in all other jurisdictions. EACH OF THE
PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY
LITIGATION OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 10.6 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction will not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by Law, the Parties waive any provision of Law that renders any such
provision prohibited or unenforceable in any respect.
Section 10.7 Counterparts; Execution. This Agreement may be executed
------------------------
in two or more counterparts, each of which will be deemed an original. A
facsimile, telecopy, electronic mail, or other reproduction of this Agreement
and/or the other Transaction Documents may be executed by one or more Parties,
and an executed copy of this Agreement and/or the other Transaction Documents
may be delivered by one or more Parties by facsimile, telecopy, electronic mail,
or similar electronic transmission device pursuant to which the signature of or
on behalf of such Party can be seen, and such execution and delivery will be
considered valid, binding, and effective for all purposes. At the request of
any Party, all Parties agree to execute an original of this Agreement and/or any
other Transaction Documents as well as any facsimile, telecopy, electronic mail,
or other reproduction of this Agreement and/or of any other Transaction
Document.
Section 10.8 Enforcement of Certain Rights. Nothing expressed or
--------------------------------
implied in this Agreement is intended, or will be construed, to confer upon or
give any Person other than the Parties and the Sellers, and their successors or
permitted assigns, any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, or result in such Person being deemed a third-party
beneficiary of this Agreement.
Section 10.9 Waiver. Any Party's agreement to any extension or waiver
------
of any provision of this Agreement will be valid only if set forth in an
instrument in writing signed on such Party's behalf. A Party's waiver of any
other Party's performance of any covenant, agreement, obligation, condition,
representation, or warranty will not be construed as a waiver of
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any other covenant, agreement, obligation, condition, representation, or
warranty. A Party's waiver of the other Party's performance of any act will not
constitute a waiver of such other Party's performance of any other act or an
identical act that such other Party is required to perform at a later time.
Section 10.10 Integration; Amendment. This Agreement and the documents
----------------------
executed pursuant to this Agreement supersede all negotiations, agreements, and
understandings among the Parties with respect to the subject matter of this
Agreement, except for the Confidentiality Agreement, and this Agreement
constitutes the entire agreement between the Parties. This Agreement may not be
amended, modified, or supplemented except by written agreement of the Parties.
Section 10.11 Cooperation after the Closing. After the Closing, each
------------------------------
Party will deliver to the other Parties such further information and documents
and will execute and deliver to the other Parties such further instruments and
agreements as such Party will reasonably request to consummate or confirm the
transactions provided for in this Agreement, to accomplish the purpose of this
Agreement, or to assure to such Party the benefits of this Agreement.
Section 10.12 Transaction Costs. Except as provided above or as
------------------
otherwise expressly provided in this Agreement, (a) the Purchaser will pay the
Purchaser's own fees, costs, and expenses, and the Purchaser will pay Newco's
fees, costs, and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement, including the fees, costs, and
expenses of their respective financial advisors, accountants and counsel and (b)
the Sellers will pay the fees, costs, and expenses that the Sellers incurred in
connection with this Agreement and the transactions contemplated by this
Agreement, if any, including the fees, costs, and expenses of their respective
financial advisors, accountants, and counsel.
Section 10.13 Sellers Representative.
-----------------------
(a) Charles Lougheed is hereby irrevocably constituted and appointed
as the true and lawful agent and attorney-in-fact of each stockholder of
the Company as of the date hereof and immediately prior to the Effective
Time (the "REPRESENTATIVE") with full powers of substitution to act in the
--------------
name, place, and stead of each such stockholder with respect to the
stockholder's performance under terms and provisions of this Agreement and
each Company Ancillary Document and to do or refrain from doing all such
further acts and things, and to execute all such documents, as the
Representative will deem necessary or appropriate in connection with any of
the transactions contemplated under this Agreement.
(b) The Representative's appointment will be deemed coupled with an
interest and will be irrevocable, and any other Person may conclusively and
absolutely rely, without inquiry, upon any actions of the Representative as
the collective acts of each stockholder of the Company as of the date
hereof and immediately prior to the Effective Time in all matters referred
to in this Agreement. Each such stockholder ratifies and confirms all
actions that the Representative will take or cause to be taken by virtue of
the Representative's appointment. On all matters set forth in this
Agreement, the Representative will act for such stockholders in the manner
that the Representative
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believes to be in the best interest of such stockholders, but the
Representative will not be responsible to any such stockholder for any loss
or damage that such stockholder may suffer by reason of the
Representative's performance of the Representative's duties under this
Agreement, other than loss or damage arising from the Representative's
willful misconduct in performing the Representative's duties under this
Agreement.
(c) Each stockholder of the Company as of the date hereof and
immediately prior to the Effective Time expressly acknowledges and agrees
that the Representative is authorized to act on behalf of such stockholder
notwithstanding any dispute or disagreement among the Company Stockholders,
and that any Person will be entitled to rely on any and all action taken by
the Representative under this Agreement without liability to, or obligation
to inquire of, any of such stockholders. If the Representative resigns or
ceases to function in such capacity for any reason whatsoever, then the
successor Representative will be the Person appointed by such stockholders;
provided, however, that, if for any reason no successor has been appointed
-------- -------
within 30 days after the Representative ceases to function as the
Representative, then any such stockholder will have the right to petition a
court of competent jurisdiction for appointment of a successor
Representative. Each such stockholder agrees to indemnify and hold the
Representative harmless from and against any and all liability, loss, cost,
damage, or expense (including attorneys' fees) reasonably incurred or
suffered as a result of the Representative's performance of the
Representative's duties under this Agreement, except in cases of willful
misconduct.
[SIGNATURE PAGES TO FOLLOW]
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The Parties have caused this Agreement to be duly executed as of the
Agreement Date.
CONCURRENT COMPUTER CORPORATION
By:
---------------------------------
Name:
---------------------------------
Title:
--------------------------------
STREAM ACQUISITION, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
--------------------------------
EVERSTREAM HOLDINGS, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
--------------------------------
REPRESENTATIVE:
---------------------------------
SELLERS:
CANOE EVERSTREAM, LLC:
BY:
-------------------------------
BY:
-------------------------------
NAME:
-----------------------------
TITLE:
----------------------------
EVERSTREAM, LLC:
BY:
-------------------------------
BY:
-------------------------------
NAME:
-----------------------------
TITLE:
----------------------------
---------------------------------
JIM HICKEY
---------------------------------
SCOTT KEGLOVIC
LAUDER PARTNERS LLC:
BY:
-------------------------------
BY:
-------------------------------
NAME:
-----------------------------
TITLE:
----------------------------
---------------------------------
JOHN F. MCHALE
---------------------------------
STEPHEN J. MCHALE
---------------------------------
KATHY WOLFE
---------------------------------
ROBERT WOLFE