Agreement and Plan of Reorganization - Palm Inc. and Handspring Inc.
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PALM, INC.
PEACE SEPARATION CORPORATION
HARMONY ACQUISITION CORPORATION
AND
HANDSPRING, INC.
Dated as of June 4, 2003
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ARTICLE I THE MERGERS...................................................... 3
1.1 The Parent Merger........................................ 3
1.2 The Company Merger....................................... 3
1.3 Closing.................................................. 3
1.4 Effective Time........................................... 3
1.5 Effects of the Mergers................................... 3
1.6 Certificate of Incorporation and Bylaws.................. 4
1.7 Directors and Officers................................... 4
1.8 Effect of Parent Merger on Capital Stock................. 4
1.9 Effect of Company Merger on Capital Stock................ 6
1.10 No Exchange of Parent Certificates....................... 7
1.11 Exchange of Company Certificates......................... 8
1.12 No Further Ownership Rights in the Company Common Stock.. 10
1.13 Lost, Stolen or Destroyed Certificates................... 10
1.14 Tax Consequences......................................... 10
1.15 Further Action........................................... 11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 11
2.1 Organization; Standing and Power; Charter Documents;
Subsidiaries............................................. 11
2.2 Capital Structure........................................ 12
2.3 Authority; Non-Contravention; Necessary Consents......... 14
2.4 SEC Filings; Financial Statements; Internal Controls..... 16
2.5 Absence of Certain Changes or Events..................... 17
2.6 Taxes.................................................... 18
2.7 Intellectual Property.................................... 20
2.8 Compliance; Permits...................................... 26
2.9 Litigation............................................... 26
2.10 Brokers' and Finders' Fees; Fees and Expenses............ 26
2.11 Transactions with Affiliates............................. 27
2.12 Employee Benefit Plans................................... 27
2.13 Title to Properties...................................... 31
2.14 Environmental Matters.................................... 31
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2.15 Contracts................................................ 32
2.16 Disclosure............................................... 34
2.17 Board Approval........................................... 35
2.18 Fairness Opinion......................................... 35
2.19 Takeover Statutes........................................ 35
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT....................... 36
3.1 Organization; Standing and Power; Charter Documents;
Subsidiaries............................................. 36
3.2 Capital Structure........................................ 37
3.3 Authority; Non-Contravention; Necessary Consents......... 39
3.4 SEC Filings; Financial Statements; Internal Controls..... 40
3.5 Absence of Certain Changes or Events..................... 41
3.6 Taxes.................................................... 41
3.7 Intellectual Property.................................... 43
3.8 Compliance; Permits...................................... 44
3.9 Litigation............................................... 44
3.10 Brokers' and Finders' Fees............................... 45
3.11 Transactions with Affiliates............................. 45
3.12 Parent Employee Benefit Plans............................ 45
3.13 Title to Properties...................................... 48
3.14 Environmental Matters.................................... 48
3.15 Contracts................................................ 48
3.16 Disclosure............................................... 49
3.17 Board Approval; Subsidiary Stockholder Approval.......... 49
3.18 Fairness Opinion......................................... 50
3.19 Rights Plan.............................................. 50
3.20 Takeover Statutes........................................ 50
3.21 Separation Agreements.................................... 50
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME............................. 51
4.1 Conduct of Business of the Company....................... 51
4.2 Certain Parent Actions................................... 55
ARTICLE V ADDITIONAL AGREEMENTS............................................ 56
5.1 Prospectus/Proxy Statement; Registration Statements...... 56
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5.2 Meetings of Stockholders; Board Recommendation........... 57
5.3 Acquisition Proposals.................................... 58
5.4 Confidentiality; Access to Information; No Modification of
Representations, Warranties or Covenants................. 62
5.5 Public Disclosure........................................ 62
5.6 Regulatory Filings; Reasonable Efforts................... 63
5.7 Notification of Certain Matters.......................... 64
5.8 Third-Party Consents and Certificates.................... 65
5.9 Equity Awards; Warrants and Employee Benefits............ 65
5.10 Form S-8................................................. 67
5.11 Indemnification.......................................... 67
5.12 Nasdaq Listing........................................... 68
5.13 Company Affiliates; Restrictive Legend................... 68
5.14 Treatment as Tax Free Distribution; Treatment as
Reorganization........................................... 68
5.15 Company Rights........................................... 69
5.16 Section 16 Matters....................................... 69
5.17 Merger Sub Compliance.................................... 70
5.18 Board of Directors....................................... 70
5.19 Comfort Letter........................................... 70
ARTICLE VI CONDITIONS TO THE MERGERS....................................... 70
6.1 Conditions to the Obligations of Each Party to Effect
the Mergers.............................................. 70
6.2 Additional Conditions to the Obligations of the Company.. 71
6.3 Additional Conditions to the Obligations of Parent,
Separation Sub and Merger Sub............................ 72
6.4 Condition to the Company Merger.......................... 73
6.5 Condition to the Parent Merger........................... 73
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.............................. 73
7.1 Termination.............................................. 73
7.2 Notice of Termination; Effect of Termination............. 76
7.3 Fees and Expenses........................................ 76
7.4 Amendment................................................ 78
7.5 Extension; Waiver........................................ 78
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ARTICLE VIII GENERAL PROVISIONS............................................ 79
8.1 Non-Survival of Representations and Warranties........... 79
8.2 Notices.................................................. 79
8.3 Interpretation; Knowledge................................ 80
8.4 Counterparts............................................. 81
8.5 Entire Agreement; Third-Party Beneficiaries.............. 81
8.6 Severability............................................. 81
8.7 Other Remedies; Specific Performance..................... 82
8.8 Governing Law............................................ 82
8.9 Rules of Construction.................................... 82
8.10 Assignment............................................... 82
8.11 Waiver of Jury Trial..................................... 82
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Exhibits
A. Non-Competition and Non-Solicitation Agreement
B. Company Voting Agreement
C. Company Transfer Agreement
D. Parent Voting Agreement
E. Loan Agreement
F. Company Rights Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made
and entered into as of June 4, 2003, by and among Palm, Inc., a Delaware
corporation ("PARENT"), Peace Separation Corporation, a Delaware corporation and
direct wholly-owned subsidiary of Parent ("SEPARATION SUB"), Harmony Acquisition
Corporation, a Delaware corporation and direct wholly-owned subsidiary of Parent
("MERGER SUB") and Handspring, Inc., a Delaware corporation (the "COMPANY").
RECITALS
A. The parties contemplate a transaction pursuant to which (i)
the common stock of PalmSource, Inc., a Delaware corporation ("SOURCE"), held by
Parent will be distributed to the existing stockholders of Parent by means of
the merger of Separation Sub with and into Parent (the "PARENT MERGER") and (ii)
following such distribution, the remaining business of Parent and the Company
will be combined in a business combination transaction by means of the merger of
Merger Sub with and into the Company (the "COMPANY MERGER"). The Parent Merger
and the Company Merger are sometimes collectively referred to herein as the
"MERGERS."
B. The Board of Directors of Parent has unanimously approved, in
accordance with applicable provisions of the laws of the state of Delaware
("DELAWARE LAW"), this Agreement and the transactions contemplated hereby,
including the Mergers and the issuance of Parent Common Stock (as defined in
Section 1.8(a)) in connection with the Company Merger.
C. The Board of Directors of Parent has unanimously resolved to
recommend to its stockholders adoption and approval of this Agreement and
approval of the Parent Merger and approval of the issuance of Parent Common
Stock in connection with the Company Merger.
D. The Board of Directors of the Company has unanimously
approved, in accordance with applicable provisions of Delaware Law, this
Agreement and the transactions contemplated hereby, including the Company
Merger.
E. The Board of Directors of the Company has unanimously resolved
to recommend to its stockholders adoption and approval of this Agreement and
approval of the Company Merger.
F. The Board of Directors of Separation Sub has unanimously
approved, in accordance with applicable provisions of Delaware Law, this
Agreement and the transactions contemplated hereby, including the Parent Merger.
G. Parent, as the sole stockholder of Separation Sub, has
approved and adopted this Agreement and approved the Parent Merger.
H. The Board of Directors of Merger Sub has unanimously approved,
in accordance with applicable provisions of Delaware Law, this Agreement and the
transactions contemplated hereby, including the Company Merger.
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I. Parent, as the sole stockholder of Merger Sub, has approved
and adopted this Agreement and approved the Company Merger.
J. Concurrent with the execution and delivery of this Agreement,
and as a material inducement for Parent to consummate the Mergers, (i) certain
employees of the Company identified on Schedule 6.3(e) are accepting offers of
employment from Parent, contingent upon the Closing (as defined in Section 1.3)
and (ii) certain stockholders of the Company are entering into non-competition
and non-solicitation agreements substantially in the form attached hereto as
Exhibit A (the "NON-COMPETITION AGREEMENT") with Parent, each of which shall
become effective as of the Effective Time of the Company Merger (as defined in
Section 1.4).
K. Concurrent with the execution and delivery of this Agreement,
and as a material inducement for Parent to consummate the Mergers, certain
stockholders who are executive officers, directors and principal stockholders of
the Company are executing and delivering to Parent voting agreements and
irrevocable proxies (the "COMPANY VOTING AGREEMENTS"), substantially in the form
attached hereto as Exhibit B-1 and Exhibit B-2.
M. Concurrent with the execution and delivery of this Agreement,
and as a material inducement for Parent to consummate the Mergers, certain
stockholders who are executive officers, directors and principal stockholder of
the Company are executing and delivering to the Parent transfer restriction
agreements (the "COMPANY TRANSFER AGREEMENTS"), substantially in the form
attached hereto as Exhibit C-1 and Exhibit C-2.
N. Concurrent with the execution and delivery of this Agreement,
and as a material inducement for the Company to consummate the Company Merger,
certain stockholders who are executive officers and directors of Parent are
executing and delivering to the Company voting agreements and irrevocable
proxies (the "PARENT VOTING AGREEMENTS"), substantially in the form attached
hereto as Exhibit D.
O. Concurrent with the execution and delivery of this Agreement,
and as a material inducement for the Company to consummate the Company Merger,
Parent and the Company are entering into that certain Loan Agreement,
substantially in the form attached hereto as Exhibit E (the "LOAN AGREEMENT"),
and the Company is entering into that certain Security Agreement, substantially
in the form attached as Exhibit A to the Loan Agreement, in favor of Parent.
P. For United States federal income tax purposes, Parent intends
that the distribution of Source Common Stock to the stockholders of Parent
pursuant to Sections 1.8(a) and 1.10(b) qualify as a tax-free distribution under
Section 355 of the Internal Revenue Code of 1986, as amended (the "CODE").
Q. For United States federal income tax purposes, the parties
intend that the Company Merger qualify as a reorganization under the provisions
of Section 368(a) of the Code, and the parties intend, by executing this
Agreement, to adopt a plan of reorganization within the meaning of Treasury
Regulations Sections 1.368-2(g) and 1.368-3.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
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ARTICLE I
THE MERGERS
1.1 The Parent Merger. Subject to and upon the terms and
conditions of this Agreement and the applicable provisions of Delaware Law,
Parent shall cause a certificate of merger to be filed with the Secretary of
State of the State of Delaware in accordance with the relevant provisions of
Delaware Law (the "PARENT CERTIFICATE OF MERGER") providing for the Parent
Merger. Upon the Parent Merger, the separate corporate existence of Separation
Sub shall cease and Parent shall continue as the surviving corporation in the
Parent Merger (Parent, as the surviving corporation in the Parent Merger, is
sometimes referred to herein as the "SURVIVING CORPORATION IN THE PARENT
MERGER").
1.2 The Company Merger. Subject to and upon the terms and
conditions of this Agreement and the applicable provisions of Delaware Law, and
following filing of the Parent Certificate of Merger, the Company shall cause a
certificate of merger to be filed with the Secretary of State of the State of
Delaware in accordance with the relevant provisions of Delaware Law (the
"COMPANY CERTIFICATE OF MERGER") providing for the Company Merger. The Company
Certificate of Merger shall provide that the Company Merger shall only be
effective upon consummation of the Parent Merger. Upon the Company Merger, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation in the Company Merger (the Company, as the
surviving corporation in the Company Merger, is sometimes referred to herein as
the "SURVIVING CORPORATION IN THE COMPANY MERGER").
1.3 Closing. Subject to the provisions of this Agreement,
including the satisfaction of the conditions set forth in Article VI, the
closing of the transactions contemplated hereby (the "CLOSING") shall take place
at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
located at 650 Page Mill Road, Palo Alto, California 94304, at a time and date
to be specified by the parties, which shall be no later than the second business
day after the satisfaction or waiver of the conditions set forth in Article VI,
or at such other time, date and location as the parties hereto agree in writing
(the "CLOSING DATE").
1.4 Effective Time. As soon as practicable following the Closing,
the parties hereto shall cause the Mergers to be consummated by filing the
Parent Certificate of Merger and the Company Certificate of Merger with the
Secretary of State of the State of Delaware in such form as is required by, and
executed and acknowledged in accordance with, the applicable provisions of
Delaware Law. The Parent Merger shall become effective at the date and time at
which the Parent Certificate of Merger is duly filed with the Secretary of State
of the State of Delaware in accordance with the applicable provisions of
Delaware Law or such subsequent date and time as the parties hereto shall
mutually agree and as shall be specified in the Parent Certificate of Merger
(the "EFFECTIVE TIME OF THE PARENT MERGER"). The Company Merger shall become
effective (and the Company Certificate of Merger shall state the Company Merger
shall become effective) immediately following the Parent Merger or such
subsequent date and time as the parties hereto shall mutually agree and as shall
be specified in the Company Certificate of Merger (the "EFFECTIVE TIME OF THE
COMPANY MERGER").
1.5 Effects of the Mergers. At the Effective Time of the Parent
Merger, the effect of the Parent Merger shall be as provided in this Agreement
and the applicable provisions of Delaware Law. At the Effective Time of the
Company Merger, the effect of the Company Merger shall be as provided in this
Agreement and the applicable provisions of Delaware Law.
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1.6 Certificate of Incorporation and Bylaws.
(a) Parent. At the Effective Time of the Parent Merger,
the Certificate of Incorporation of Parent, as in effect immediately prior to
the Effective Time of the Parent Merger, shall be the Certificate of
Incorporation of the Surviving Corporation in the Parent Merger until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation in the Parent Merger. At the Effective Time of the Parent
Merger, the Bylaws of Parent, as in effect immediately prior to the Effective
Time of the Parent Merger, shall be the Bylaws of the Surviving Corporation in
the Parent Merger until thereafter amended as provided by law and such Bylaws of
the Surviving Corporation in the Parent Merger.
(b) Company. At the Effective Time of the Company Merger,
the Certificate of Incorporation of the Company shall be amended and restated in
its entirety to be identical to the Certificate of Incorporation of Merger Sub,
as in effect immediately prior to the Effective Time of the Company Merger,
until thereafter amended in accordance with Delaware Law and as provided in such
Certificate of Incorporation of Merger Sub; provided, however, that at the
Effective Time of the Company Merger, Article I of the Certificate of
Incorporation of the Surviving Corporation in the Company Merger shall be
amended and restated in its entirety to read as follows: "The name of the
corporation is Handspring, Inc." At the Effective Time of the Company Merger,
the Bylaws of the Company shall be amended and restated in their entirety to be
identical to the Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time of the Company Merger, until thereafter amended in accordance
with Delaware Law and as provided in such Bylaws of the Surviving Corporation in
the Company Merger.
1.7 Directors and Officers.
(a) Parent. Subject to Section 5.18, the initial
directors of the Surviving Corporation in the Parent Merger shall be the
directors of Parent immediately prior to the Effective Time of the Parent
Merger, until their respective successors are duly elected or appointed and
qualified. The initial officers of the Surviving Corporation in the Parent
Merger shall be the officers of Parent immediately prior to the Effective Time
of the Parent Merger, until their respective successors are duly appointed.
(b) Company. The initial directors of the Surviving
Corporation in the Company Merger shall be the directors of Merger Sub
immediately prior to the Effective Time of the Company Merger, until their
respective successors are duly elected or appointed and qualified. The initial
officers of the Surviving Corporation in the Company Merger shall be the
officers of Merger Sub immediately prior to the Effective Time of the Company
Merger, until their respective successors are duly appointed.
1.8 Effect of Parent Merger on Capital Stock. Subject to the terms
and conditions of this Agreement, at the Effective Time of the Parent Merger, by
virtue of the Parent Merger and without any action on the part of Parent,
Separation Sub, Merger Sub or the Company or the holders of any shares of
capital stock of the Parent, the following shall occur:
(a) Parent Common Stock. Each share of the Common Stock,
par value $0.001 per share, of Parent (together with the associated Parent Right
(as defined in Section 3.2(a)) under the Parent Rights Agreement (as defined in
Section 3.2(a)) ("PARENT COMMON STOCK") issued and outstanding immediately prior
to the Effective Time of the Parent Merger will be automatically converted into
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(i) one validly issued, fully paid and nonassessable share of Parent Common
Stock (together with the associated Parent Right) and (ii) the right to receive
a number of shares of the Common Stock, par value $0.001 per share of Source
("SOURCE COMMON STOCK") currently outstanding and held by Parent such that all
shares of Source Common Stock outstanding and held by Parent immediately prior
to the Effective Time of the Parent Merger are distributed to all holders of
Parent Common Stock issued and outstanding immediately prior to the Effective
Time of the Parent Merger, on a pro rata basis (based on the number of shares of
Parent Common Stock held).
(b) Parent Restricted Stock. If any shares of Parent
Common Stock are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with Parent ("PARENT RESTRICTED STOCK"), then the
shares of Parent Common Stock shall remain unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock will accordingly continue to be
marked with appropriate legends.
(c) Capital Stock of Separation Sub. Each share of common
stock, par value $0.001, of Separation Sub (the "SEPARATION SUB COMMON STOCK")
issued and outstanding immediately prior to the Effective Time of the Parent
Merger shall be canceled and extinguished without any conversion thereof, and no
consideration shall be issued in exchange therefor.
(d) Stock Options; Employee Stock Purchase Plan. At the
Effective Time of the Parent Merger, all options to purchase Parent Common Stock
then outstanding shall either continue in effect at the Surviving Corporation in
the Parent Merger or be assumed by the Surviving Corporation in the Parent
Merger, as necessary, in accordance with Section 5.9(a). At the Effective Time
of the Parent Merger, rights outstanding under Parent's 1999 Employee Stock
Purchase Plan (the "PARENT PURCHASE PLAN") shall remain outstanding and
exercisable for Parent Common Stock without alteration.
(e) Fractional Shares. No fraction of a share of Source
Common Stock will be issued by virtue of the Parent Merger, but in lieu thereof
each holder of shares of Parent Common Stock who would otherwise be entitled to
a fraction of share of Source Common Stock (after aggregating all fractional
shares of Source Common Stock that would otherwise be received by such holder)
shall receive from Parent an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product of: (i) such fraction, multiplied by (ii)
the average closing price of one share of Source Common Stock for the five (5)
most recent trading days that Source Common Stock has traded following the
Effective Time of the Parent Merger, as reported by The Nasdaq Stock Market,
Inc.'s National Market ("NASDAQ"). Notwithstanding the foregoing, at the
election of Parent in its sole discretion, each holder of shares of Parent
Common Stock who would otherwise have been entitled to receive a fraction of a
share of Source Common Stock shall receive from the Exchange Agent (as defined
in Section 1.11(a)) a cash payment in lieu of such fractional share of Source
Common Stock representing such holder's proportionate interest in the net
proceeds from the sale by the Exchange Agent in one or more transactions (which
sale transactions shall be made at such times, in such manner and on such terms
as the Exchange Agent shall determine in its reasonable discretion) on behalf of
all such holders of the aggregate of the fractional shares of Source Common
Stock, as applicable, which would otherwise have issued (the "EXCESS SOURCE
COMMON STOCK"). The sale of the Excess Source Common Stock by the Exchange Agent
shall be executed on Nasdaq and shall be executed in round lots to the extent
practicable. Until the proceeds of such sale or sales have been distributed to
the holders of Parent Common Stock, the Exchange Agent shall hold such proceeds
for the benefit of such holders
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without liability or obligation to invest such amounts or to pay interest
thereon to such holders. Parent shall reimburse the Exchange Agent for all
reasonable commissions, transfer taxes and other out-of-pocket transaction
costs, including expenses incurred and commissions paid by the Exchange Agent in
connection with the sale of the Excess Source Common Stock. The Exchange Agent
shall determine the portion of such net proceeds to which each holder of shares
of Parent Common Stock shall be entitled, if any, by multiplying the amount of
the aggregate net proceeds by a fraction the numerator of which is the amount of
the fractional share interest of Source Common Stock to which such holder of
shares of Parent Common Stock is entitled (after taking into account all shares
of Source Common Stock to be received held by such holder) and the denominator
of which is the aggregate amount of fractional interests to which all holders of
certificates representing shares of Source Common Stock are entitled.
1.9 Effect of Company Merger on Capital Stock. Subject to the
terms and conditions of this Agreement, at the Effective Time of the Company
Merger, by virtue of the Company Merger and without any action on the part of
Parent, Separation Sub, Merger Sub or the Company or the holders of any shares
of capital stock of the Company, the following shall occur:
(a) Company Common Stock. Each share of the Common Stock,
par value $0.001 per share, of the Company (together with any associated Company
Right (as defined in Section 5.15) under the Company Rights Agreement (as
defined in Section 5.15)) ("COMPANY COMMON STOCK") issued and outstanding
immediately prior to the Effective Time of the Company Merger, other than any
shares of the Company Common Stock to be canceled pursuant to Section 1.9(c),
will be canceled and extinguished and automatically converted (subject to
Section 1.9(f)) into the right to receive 0.09 of a validly issued, fully paid
and nonassessable share (the "EXCHANGE RATIO") of Parent Common Stock upon
surrender of the certificate representing such share of the Company Common Stock
in the manner provided in Section 1.11 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond, if required) in
the manner provided in Section 1.13).
(b) Company Restricted Stock. If any shares of Company
Common Stock are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with the Company ("COMPANY RESTRICTED STOCK"),
then, except as otherwise provided in such restricted purchase agreement or
other agreement relating to such Company Restricted Stock, the shares of Parent
Common Stock issued in exchange for such shares of the Company Restricted Stock
will also be unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends. The
Company shall take all action that may be necessary to ensure that, except as
otherwise provided in such restricted purchase agreement or other agreement
relating to such Company Restricted Stock, from and after the Effective Time of
the Company Merger, the Surviving Corporation in the Company Merger will be
entitled to exercise any such repurchase option or other right set forth in any
such restricted stock purchase agreement or other agreement.
(c) Cancellation of Treasury and Parent Owned Stock. Each
share of the Company Common Stock held by the Company or Parent or any direct or
indirect wholly-owned Subsidiary (as defined in Section 2.1(a)) of the Company
or of Parent immediately prior to the Effective Time of the Company Merger shall
be canceled and extinguished without any conversion thereof.
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(d) Capital Stock of Company Merger Sub. Each share of
common stock, par value $0.001, of Merger Sub (the "COMPANY MERGER SUB COMMON
STOCK") issued and outstanding immediately prior to the Effective Time of the
Company Merger shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $0.001 per share, of the
Surviving Corporation in the Company Merger.
(e) Company Stock Options and Warrants; Company Employee
Stock Purchase Plan. At the Effective Time of the Company Merger, all
outstanding Company Options (as defined in Section 2.2(b)) and Company Warrants
(as defined in Section 2.2(d)) shall be assumed by Parent in accordance with
Section 5.9(b) and Section 5.9(c). Rights outstanding under the Company's 2000
Employee Stock Purchase Plan (the "COMPANY PURCHASE PLAN") shall be treated as
set forth in Section 5.9(d).
(f) Fractional Shares. No fraction of a share of Parent
Common Stock will be issued by virtue of the Company Merger, but in lieu thereof
each holder of shares of Company Common Stock who would otherwise be entitled to
a fraction of share of Parent Common Stock (after aggregating all fractional
shares of Parent Common Stock that would otherwise be received by such holder)
shall, upon surrender of such holder's Certificate(s) (as defined in Section
1.11(c)) (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner provided in
Section 1.13), receive from Parent an amount of cash (rounded to the nearest
whole cent), without interest, equal to the product of: (i) such fraction,
multiplied by (ii) the average closing price of one share of Parent Common Stock
for the ten (10) most recent trading days that Parent Common Stock has traded
ending on and including the trading day one day prior to the Effective Time of
the Company Merger, as reported by Nasdaq.
(g) Adjustment to Exchange Ratio. The Exchange Ratio
shall be adjusted to reflect fully the appropriate effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to Parent Common Stock or Company Common Stock having a record date on
or after the date hereof and prior to the Effective Time of the Company Merger;
provided, however, no adjustment shall be made hereunder to the Exchange Ratio
with respect to the distribution of the shares of common stock owned by Parent
of Source to the stockholders of Parent (the "SOURCE DISTRIBUTION").
1.10 No Exchange of Parent Certificates.
(a) No Exchange of Parent Certificates. Following the
Parent Merger, each certificate previously representing shares of Parent Common
Stock shall, without any action on the part of the holder thereof, continue to
represent the same number of shares of Parent Common Stock
(b) Distribution of Source Stock. Promptly following the
Parent Merger, Parent shall cause its transfer agent to distribute to each
holder of shares of Parent Common Stock at the Effective Time of the Parent
Merger the number of shares of Source Common Stock to which such holder is
entitled pursuant to Section 1.8(a).
(c) Required Withholding. Each of the transfer agent and
the Surviving Corporation in the Parent Merger shall be entitled to deduct and
withhold from any consideration payable or
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otherwise deliverable pursuant to this Agreement to any holder of the Parent
Common Stock such amounts as may be required to be deducted or withheld
therefrom under the Code or under any provision of state, local or foreign Tax
law or under any other applicable Legal Requirement (as defined in Section
2.2(d)). To the extent such amounts are so deducted or withheld, the amount of
such consideration shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such consideration would otherwise have
been paid.
1.11 Exchange of Company Certificates.
(a) Exchange Agent for Company Merger. Parent shall
designate a bank or trust company reasonably satisfactory to the Company to act
as the exchange agent (the "EXCHANGE AGENT") in the Company Merger.
(b) Parent to Provide Common Stock. Prior to or promptly
after the Effective Time of the Company Merger, Parent shall enter into an
agreement with the Exchange Agent, reasonably satisfactory to the Company, which
shall provide that, promptly after the Effective Time of the Company Merger,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I, the shares of Parent Common Stock issuable pursuant to
Section 1.9(a) in exchange for outstanding shares of the Company Common Stock in
the Company Merger. In addition, Parent shall make available promptly after the
Effective Time of the Company Merger and as necessary from time to time after
the Effective Time of the Company Merger, in each case as needed, cash in an
amount sufficient for payment in lieu of fractional shares pursuant to Section
1.9(f) and any dividends or distributions which holders of shares of Company
Common Stock may be entitled to pursuant to Section 1.11(d). Any cash and Parent
Common Stock deposited with the Exchange Agent shall hereinafter be referred to
as the "EXCHANGE FUND."
(c) Exchange Procedures. Promptly after the Effective
Time of the Company Merger, Parent shall cause the Exchange Agent to mail to
each holder of record (as of the Effective Time of the Company Merger) of a
certificate or certificates (the "CERTIFICATES") which immediately prior to the
Effective Time of the Company Merger represented outstanding shares of the
Company Common Stock whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.9(a), cash in lieu of any
fractional shares pursuant to Section 1.9(f) and any dividends or other
distributions pursuant to Section 1.11(d): (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing whole shares of
Parent Common Stock, cash in lieu of any fractional shares pursuant to Section
1.9(f) and any dividends or other distributions pursuant to Section 1.11(d).
Upon surrender of Certificates for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto and such other documents as may reasonably be required by
the Exchange Agent, the holder of such Certificates shall be entitled to receive
in exchange therefor the number of whole shares of Parent Common Stock (after
taking into account all Certificates surrendered by such holder) to which such
holder is entitled pursuant to Section 1.9(a), payment in lieu of fractional
shares which such holder has the right to receive pursuant to Section 1.9(f) and
any dividends or distributions payable pursuant to Section 1.11(d), and the
Certificates so surrendered shall forthwith be canceled. Until so surrendered,
outstanding Certificates
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will be deemed from and after the Effective Time of the Company Merger, for all
corporate purposes, to evidence the ownership of the number of full shares of
Parent Common Stock into which such shares of the Company Common Stock shall
have been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.9(f) and any
dividends or distributions payable pursuant to Section 1.11(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date hereof with
respect to Parent Common Stock with a record date after the Effective Time of
the Company Merger and no payment in lieu of fractional shares pursuant to
Section 1.9(f) will be paid to the holders of any unsurrendered Certificates
with respect to the shares of Parent Common Stock represented thereby until the
holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates, the
Exchange Agent shall deliver to the record holders thereof, without interest (i)
promptly after such surrender, the number of whole shares of Parent Common Stock
issued in exchange therefor along with payment in lieu of fractional shares
pursuant to Section 1.9(f) and the amount of any such dividends or other
distributions with a record date after the Effective Time of the Company Merger
and theretofore paid with respect to such whole shares of Parent Common Stock
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time of the Company Merger
and a payment date subsequent to such surrender payable with respect to such
whole shares of Parent Common Stock.
(e) Transfers of Ownership. If shares of Parent Common
Stock are to be issued in connection with the Company Merger in a name other
than that in which the Certificates surrendered in exchange therefor are
registered, it will be a condition of the issuance thereof that the Certificates
so surrendered will be properly endorsed and otherwise in proper form for
transfer and that the Persons (as defined in Section 8.3(d)) requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other Taxes (as defined in Section 2.6(a)) required by reason of the issuance of
shares of Parent Common Stock in any name other than that of the registered
holder of the Certificates surrendered, or established to the satisfaction of
Parent or any agent designated by it that such Tax has been paid or is not
payable.
(f) Required Withholding. Each of the Exchange Agent and
the Surviving Corporation in the Company Merger shall be entitled to deduct and
withhold from any consideration payable or otherwise deliverable pursuant to
this Agreement to any holder or former holder of the Company Common Stock such
amounts as may be required to be deducted or withheld therefrom under the Code
or under any provision of state, local or foreign Tax law or under any other
applicable Legal Requirement. To the extent such amounts are so deducted or
withheld, the amount of such consideration shall be treated for all purposes
under this Agreement as having been paid to the Person to whom such
consideration would otherwise have been paid.
(g) No Liability. Notwithstanding anything to the
contrary in this Section 1.11, neither the Exchange Agent, the Surviving
Corporation in the Company Merger nor any party hereto shall be liable to a
holder of shares of Parent Common Stock or Company Common Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
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(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by Parent on a daily
basis; provided that no such investment or loss thereon shall affect the amounts
payable to the Company stockholders pursuant to this Article I. Any interest and
other income resulting from such investment shall become a part of the Exchange
Fund, and any amounts in excess of the amounts payable to the Company
stockholders pursuant to this Article I shall promptly be paid to Parent.
(i) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of Certificates six (6)
months after the Effective Time of the Company Merger shall, at the request of
the Surviving Corporation in the Company Merger, be delivered to the Surviving
Corporation in the Company Merger or otherwise on the instruction of the
Surviving Corporation in the Company Merger, and any holders of the Certificates
who have not surrendered such Certificates in compliance with this Section 1.11
shall after such delivery to Surviving Corporation look only to the Surviving
Corporation in the Company Merger for the shares of Parent Common Stock pursuant
to Section 1.9(a), cash in lieu of any fractional shares pursuant to Section
1.9(f) and any dividends or other distributions pursuant to Section 1.11(d) with
respect to the shares of the Company Common Stock formerly represented thereby.
Any such portion of the Exchange Fund remaining unclaimed by holders of shares
of Company Common Stock immediately prior to such time as such amounts would
otherwise escheat to or become property of any Governmental Entity (as defined
in Section 2.3(c)) shall, to the extent permitted by applicable law, become the
property of Parent free and clear of any claims or interest of any Person
previously entitled thereto.
1.12 No Further Ownership Rights in the Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of shares
of Company Common Stock in accordance with the terms hereof (including any cash
paid in respect thereof pursuant to Section 1.9(f) and 1.11(d)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Common Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation in the Company Merger of shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time of the Company Merger. If, after the Effective Time of the Company Merger,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.13 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.9(f) and any dividends or distributions payable pursuant to Section
1.11(d); provided, however, that Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent, the Company or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
1.14 Tax Consequences.
(a) Parent Merger. It is intended by Parent that the
distribution of Source Common Stock pursuant to Sections 1.8(a) and 1.10(b)
shall constitute a tax-free distribution under Section 355 of the Code.
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(b) Company Merger. It is intended by the parties hereto
that the Company Merger shall constitute a reorganization within the meaning of
Section 368(a) of the Code. The parties hereto adopt this Agreement as a plan of
reorganization within the meaning of Treasury Regulations Sections 1.368-2(g)
and 1.368-3(a).
1.15 Further Action. At and after the Closing, the officers and
directors of Parent (as the Surviving Corporation in the Parent Merger) and the
Surviving Corporation in the Company Merger, as the case may be, will be
authorized to execute and deliver, in the name and on behalf of the Company,
Separation Sub and Merger Sub, as applicable, any deeds, bills of sale,
assignments or assurances and to take and do, in the name and on behalf of the
Company, Separation Sub and Merger Sub, as applicable, any other actions and
things to vest, perfect or confirm of record or otherwise in Parent (as the
Surviving Corporation in the Parent Merger) or the Surviving Corporation in the
Company Merger, as the case may be, any and all right, title and interest in, to
and under any of the rights, properties or assets acquired or to be acquired by
Parent (as the Surviving Corporation in the Parent Merger) or the Surviving
Corporation, as the case may be, as a result of, or in connection with, the
Parent Merger or the Company Merger, as the case may be.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, subject to the
exceptions specifically disclosed (subject to the last sentence of Section
8.3(a)) in writing in the disclosure letter supplied by Company to Parent dated
as of the date hereof and certified by a duly authorized executive officer of
Company (the "COMPANY DISCLOSURE LETTER") as follows:
2.1 Organization; Standing and Power; Charter Documents;
Subsidiaries.
(a) Organization; Standing and Power. The Company and
each of its Subsidiaries (as defined below) (i) is a corporation or other
organization duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, (ii) has the
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and (iii) is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to so qualify or to be in good standing, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
(as defined in Section 8.3(c)) on the Company. For purposes of this Agreement,
"Subsidiary," when used with respect to any party, shall mean any corporation or
other organization, whether incorporated or unincorporated, at least a majority
of the securities or other interests of which having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries,
including, in the case of the Company only, Handspring Facility Company, LLC
("HFC").
(b) Charter Documents. The Company has delivered or made
available to Parent: (i) a true and correct copy of the Certificate of
Incorporation (including any Certificate of Designations) and Bylaws of the
Company, each as amended to date (collectively, the "COMPANY CHARTER
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DOCUMENTS") and (ii) the certificate of incorporation and bylaws, or like
organizational documents (collectively, "SUBSIDIARY CHARTER DOCUMENTS"), of each
of its Subsidiaries, and each such instrument is in full force and effect. The
Company is not in violation of any of the provisions of the Company Charter
Documents and each Subsidiary is not in violation of its respective Subsidiary
Charter Documents.
(c) Minutes. The Company has made available to Parent and
its representatives true and complete copies of the minutes of all meetings of
the stockholders, the Board of Directors and each committee of the Board of
Directors of the Company and each of its Subsidiaries since the Company's
inception.
(d) Subsidiaries. Section 2.1(d) of the Company
Disclosure Letter sets forth a list of each Subsidiary of the Company. All the
outstanding shares of capital stock of, or other equity or voting interests in,
each such Subsidiary have been duly authorized, validly issued and are fully
paid and nonassessable and are owned by the Company, a wholly-owned Subsidiary
of the Company, or, in the case of foreign Subsidiaries, the Company, another
wholly-owned Subsidiary of the Company or solely to the extent required to
comply with local laws regarding ownership, a nominee of the Company, free and
clear of all material Liens. For purposes of this Agreement, the term "LIEN"
shall mean all pledges, liens, charges, encumbrances, options and security
interests of any kind or nature whatsoever, including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests, except for restrictions imposed by applicable securities
laws. Other than the Subsidiaries of the Company, neither the Company nor any of
its Subsidiaries owns any capital stock of, or other equity or voting interests
of any nature in, or any interest convertible, exchangeable or exercisable for,
capital stock of, or other equity or voting interests of any nature in, any
other Person except for passive investments of less than one percent (1%) in the
equity interests of public companies as part of the cash management program of
the Company.
2.2 Capital Structure.
(a) Capital Stock. The authorized capital stock of
Company consists of: (i) 1,000,000,000 shares of Company Common Stock, par value
$0.001 per share and (ii) 10,000,000 shares of preferred stock, par value $0.001
per share (the "COMPANY PREFERRED STOCK"). At the close of business on May 28,
2003: (i) 148,318,397 shares of Company Common Stock were issued and
outstanding, excluding shares of Company Common Stock held by the Company in its
treasury, (ii) no shares of Company Common Stock were issued and held by the
Company in its treasury, and (iii) no shares of Company Preferred Stock were
issued and outstanding. From May 28, 2003 and through the date hereof, there has
been no change in the capitalization of the Company set forth above other than
as a result of the exercise of outstanding Company Options. No shares of Company
Common Stock are owned or held by any Subsidiary of the Company. All of the
outstanding shares of capital stock of Company are duly authorized and validly
issued, fully paid and nonassessable and not subject to any preemptive rights.
Section 2.2(a) of the Company Disclosure Letter sets forth a list of each holder
of Company Restricted Stock and (a) the name and address of the holder of such
Company Restricted Stock, (b) the number of shares of Company Restricted Stock
held by such holder, (c) the repurchase price of such Company Restricted Stock,
(d) the date on which such Company Restricted Stock was purchased or granted,
(e) the applicable vesting schedule pursuant to which the Company's right of
repurchase or forfeiture lapses, and (f) the extent to which such Company right
of repurchase or forfeiture has lapsed as of the date hereof. Upon consummation
of the Company Merger, (A) the shares
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of Parent Common Stock issued in exchange for any shares of Company Restricted
Stock will, without any further act of Parent, Merger Sub, the Company or any
other Person, become subject to the restrictions, conditions and other
provisions contained in the Contract (as defined in Section 2.2(d)) relating to
such Company Restricted Stock and (B) Parent will automatically succeed to and
become entitled to exercise the Company's rights and remedies under any such
Contract without modification. There are no commitments or agreements of any
character to which the Company is bound obligating the Company to waive (in
whole or in part) its right of repurchase or forfeiture with respect to any
Company Restricted Stock as a result of the Company Merger (whether alone or
upon the occurrence of any additional or subsequent events).
(b) Stock Options. As of the close of business on the
date hereof: (i) 21,388,695 shares of Company Common Stock are subject to
issuance pursuant to outstanding options to purchase Company Common Stock (such
options to purchase Company Common Stock, whether or not outstanding, "COMPANY
OPTIONS") under the Company's 1998 Equity Incentive Plan, 1999 Executive Equity
Incentive Plan, 2000 Equity Incentive Plan and Bluelark 2000 Equity Incentive
Plan (collectively, the "COMPANY STOCK PLANS") or otherwise (other than the
Company Purchase Plan); and (ii) as of the date hereof, 1,237,661 shares of
Company Common Stock are reserved for future issuance under the Company Purchase
Plan. Section 2.2(b) of the Company Disclosure Letter sets forth a list of each
outstanding Company Option issued other than pursuant to the Company Purchase
Plan, and (a) the particular Company Stock Plan (if any) pursuant to which such
Company Option was granted), (b) the name of the holder of such Company Option,
(c) the number of shares of Company Common Stock subject to such Company Option,
(d) the exercise price of such Company Option, (e) the date on which such
Company Option was granted, (f) the applicable vesting schedule, and the extent
to which such Company Option is vested and exercisable as of the date hereof,
and (g) the date on which such Company Option expires. All shares of Company
Common Stock subject to issuance pursuant to the exercise of Company Options and
the Company Purchase Plan, upon issuance on the terms and conditions specified
in the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no commitments or
agreements of any character to which the Company is bound obligating the Company
to accelerate the vesting of any Company Option as a result of the Company
Merger (whether alone or upon the occurrence of any additional or subsequent
events). There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or other similar rights with respect to the Company.
(c) Voting Debt. No Voting Debt (as defined below) of the
Company or any of its Subsidiaries is issued or outstanding as of the date
hereof. For purposes of this Agreement, "VOTING DEBT" shall mean all bonds,
debentures, notes or other indebtedness (i) having the right to vote on any
matters on which stockholders may vote (or which is convertible into, or
exchangeable for, securities having such right) or (ii) the value of which is
any way based upon or derived from capital or voting stock.
(d) Warrants. As of the close of business on the date
hereof, 9,150,000 shares of Company Common Stock are subject to issuance
pursuant to outstanding warrants to purchase Company Common Stock ("COMPANY
WARRANTS"). Section 2.2(d) of the Company Disclosure Letter sets forth a list of
each outstanding Company Warrant and (a) the name of the holder of such Company
Warrant, (b) the number of shares of Company Common Stock subject to such
Company Warrant, (c) the exercise or strike price of such Company Warrant, (d)
the date on which such Company Warrant was issued, (e) the applicable vesting
schedule, and the extent to which such Company Warrant is vested and
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exercisable as of the date hereof, and (f) the date on which such Company
Warrant expires. All shares of Company Common Stock subject to issuance
pursuant to the exercise of Company Warrants, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There are
no commitments or agreements of any character to which the Company is bound
obligating Company to accelerate the vesting of any Company Warrant as a result
of the Company Merger (whether alone or upon the occurrence of any additional or
subsequent events).
(e) Other Securities. Except as otherwise set forth in
this Agreement, the Company Rights Plan or Section 2.2 of the Company Disclosure
Letter, as of the date hereof, there are no securities, options, warrants,
calls, rights, Contracts, commitments, agreements, instruments, arrangements,
understandings, obligations or undertakings of any kind to which the Company or
any of its Subsidiaries is a party or by which any of them is bound obligating
Company or any of its Subsidiaries to (including on a deferred basis) issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock, Voting Debt or other voting securities of Company or any of its
Subsidiaries, or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
Contract, commitment, agreement, instrument, arrangement, understanding,
obligation or undertaking. All outstanding shares of Company Common Stock, all
outstanding Company Options, and all outstanding shares of capital stock of each
Subsidiary of Company have been issued and granted in compliance in all material
respects with (i) all applicable securities laws and all other applicable Legal
Requirements (as defined below) and (ii) all requirements set forth in
applicable Contracts. Except for shares of Company Restricted Stock, there are
not any outstanding Contracts of the Company or any of its Subsidiaries to (i)
repurchase, redeem or otherwise acquire any shares of capital stock of, or other
equity or voting interests in, the Company or any of its Subsidiaries or (ii)
dispose of any shares of the capital stock of, or other equity or voting
interests in, any of its Subsidiaries. The Company is not a party to any voting
agreement with respect to shares of the capital stock of, or other equity or
voting interests in, the Company or any of its Subsidiaries and, to the
Knowledge (as defined in Section 8.3(b)) of the Company, other than the Company
Voting Agreements and the irrevocable proxies granted pursuant to the Company
Voting Agreements and the Company Rights Agreement, there are no irrevocable
proxies and no voting agreements, voting trusts, rights plans, anti-takeover
plans or registration rights agreements with respect to any shares of the
capital stock of, or other equity or voting interests in, the Company or any of
its Subsidiaries. For purposes of this Agreement, "CONTRACT" shall mean any
written or oral agreement, contract, subcontract, settlement agreement, lease,
binding understanding, instrument, promissory note, option, warranty, purchase
order, license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature, as in effect as of the date hereof or
as may hereinafter be in effect. For purposes of this Agreement, "LEGAL
REQUIREMENTS" shall mean any federal, state, local, municipal, foreign or other
law, statute, constitution, principle of common law, resolution, ordinance,
code, order, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity.
2.3 Authority; Non-Contravention; Necessary Consents.
(a) Authority. The Company has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby has been duly
authorized by all necessary corporate action on the part of the Company and no
other corporate
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proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement or to consummate the Company Merger and the other
transactions contemplated hereby, subject only to the approval and adoption of
this Agreement and the approval of the Company Merger by the Company's
stockholders as required by Delaware Law and the filing of the Company
Certificate of Merger pursuant to Delaware Law. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock to
approve and adopt this Agreement and approve the Company Merger is the only vote
of the holders of any class or series of Company capital stock necessary to
approve and adopt this Agreement, approve the Company Merger and consummate the
Company Merger and the other transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and, assuming due execution
and delivery by Parent, Separation Sub and Merger Sub, constitutes the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
(b) Non-Contravention. The execution and delivery of this
Agreement by the Company does not, and performance of this Agreement by the
Company and the consummation of the Company Merger and the transactions
contemplated hereby will not: (i) conflict with or violate the Company Charter
Documents or any Subsidiary Charter Documents of any Subsidiary of the Company;
(ii) subject to obtaining the approval and adoption of this Agreement and the
approval of the Company Merger by the Company's stockholders as contemplated in
Section 5.2 and compliance with the requirements set forth in Section 2.3(c),
conflict with or violate any material Legal Requirement applicable to the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries or any of their respective material properties is bound or
affected; or (iii) result in any material breach of or constitute a material
default (or an event that with notice or lapse of time or both would become a
material default) under, or materially impair the Company's rights or materially
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a material Lien on any of the properties or assets of the
Company or any of its Subsidiaries pursuant to, any Company Material Contract
(as defined in Section 2.15). Section 2.3(b) of the Company Disclosure Letter
lists as of the date hereof all consents, waivers and approvals under any of the
Company's or any of its Subsidiaries' Contracts currently in effect required to
be obtained in connection with the consummation of the transactions contemplated
hereby, which, if individually or in the aggregate are not obtained, would
result in a material loss of benefits to the Company, Parent or the Surviving
Corporation as a result of the Company Merger.
(c) Necessary Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with any supranational,
national, state, municipal, local or foreign government, any instrumentality,
subdivision, court, administrative agency or commission or other governmental
authority or instrumentality, or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority (a "GOVERNMENTAL ENTITY") or any other Person is
required to be obtained or made by the Company in connection with the execution
and delivery of this Agreement or the consummation of the Company Merger and
other transactions contemplated hereby and thereby, except for: (i) the filing
of the Parent Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which Parent is qualified to do business; (ii) the filing of the Company
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which the
Company and/or Parent are qualified to do business; (iii) the approval and
adoption of this Agreement and the Company Merger by the requisite vote under
applicable Legal Requirements by the stockholders of the Company; and (iv) the
approval
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and adoption of this Agreement and the Parent Merger approval of the issuance of
Parent Common Stock in connection with the Company Merger by the requisite vote
under applicable Legal Requirements, by the stockholders of Parent; (v) the
filing of the Prospectus/Proxy Statement (as defined in Section 2.16) with the
SEC in accordance with the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT") and the effectiveness of the Registration Statement (as defined
in Section 2.16) and the effectiveness of the Source Registration Statement (as
defined in Section 5.1(b)); (vi) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"); (vii) the consents listed on Section 2.3(c) of the Company Disclosure
Letter; (viii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities or
"blue sky" laws and the securities laws of any foreign country; (ix) those
consents, approvals, orders, authorizations, registrations, declarations or
filings that have already been made or obtained; and (x) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not be material to the Company or Parent or materially adversely
affect the ability of the parties hereto to consummate the Company Merger within
the time frame in which the Company Merger would otherwise be consummated in the
absence of the need for such consent, approval, order, authorization,
registration, declaration or filings. The consents, approvals, orders,
authorizations, registrations, declarations and filings set forth in (i) through
(viii) are referred to herein as the "NECESSARY CONSENTS."
2.4 SEC Filings; Financial Statements; Internal Controls.
(a) SEC Filings. The Company has filed all required
registration statements, prospectuses, reports, schedules, forms, statements and
other documents (including exhibits and all other information incorporated by
reference) required to be filed by it with the SEC since March 31, 2000. The
Company has made available to Parent all such registration statements,
prospectuses, reports, schedules, forms, statements and other documents in the
form filed with the SEC. All such required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
(including those that the Company may file subsequent to the date hereof) are
referred to herein as the "COMPANY SEC REPORTS." As of their respective dates,
the Company SEC Reports (i) were prepared in accordance and complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Reports and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of the Company's Subsidiaries is required to file any
forms, reports or other documents with the SEC. The Company has previously
furnished to Parent a complete and correct copy of any amendments or
modifications, which have not yet been filed with SEC but which are required to
be filed, to agreements, documents or other instruments which previously had
been filed by the Company with the SEC pursuant to the Securities Act or the
Exchange Act and complete and correct copies of any correspondence with, and
inquiries from the SEC with respect to previously filed Company SEC Reports.
(b) Financial Statements. Each of the consolidated
financial statements (including, in each case, any related notes thereto)
contained in the Company SEC Reports (the "COMPANY
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FINANCIALS"), including each Company SEC Report filed after the date hereof
until the Closing: (i) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto; (ii) was
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q, 8-K or any successor form under the Exchange Act); and (iii) fairly
presented in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as at the respective dates thereof and
the consolidated results of the Company operations and cash flows for the
periods indicated. The balance sheet of the Company contained in the Company SEC
Reports as of March 29, 2003 is hereinafter referred to as the "COMPANY BALANCE
SHEET." Except as disclosed in the Company Financials, since the date of the
Company Balance Sheet, neither Company nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a consolidated balance sheet or in the related notes to the
consolidated financial statement prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of the Company and its Subsidiaries taken as a
whole, except those liabilities incurred in the ordinary course of business,
consistent with past practice, of the type which ordinarily recur, and
liabilities incurred in connection with the Loan Agreement and the transactions
contemplated thereby and with respect to fees and expenses of accountants,
brokers, financial advisors, consultants, legal counsel or other Persons
retained by the Company to provide services in connection with this Agreement or
the transactions contemplated hereby.
(c) Internal Controls. The Company has established and
maintains disclosure controls and procedures (as defined in Rules 13a-14 and
15d-14 promulgated under the Exchange Act) designed to ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to the Company's Chief Executive Officer and Chief Financial Officer.
There are no significant deficiencies or material weaknesses in the design or
operation of the Company's internal controls which could adversely affect the
Company's ability to record, process, summarize and report financial data. To
the Company's Knowledge, there is no fraud, whether or not material, that
involves management or other employees who have a significant role in the
Company's internal controls.
2.5 Absence of Certain Changes or Events. Since the date of the
Company Balance Sheet, there has not been: (i) any Material Adverse Effect on
the Company; (ii) any declaration, setting aside or payment of any dividend on,
or other distribution (whether in cash, stock or property) in respect of, any of
the Company's or any of its Subsidiaries' capital stock, or any purchase,
redemption or other acquisition by the Company or any of its Subsidiaries of any
of the Company's capital stock or any other securities of the Company or its
Subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from Company Employees
following their termination pursuant to the terms of their pre-existing stock
option or purchase agreements; (iii) any split, combination or reclassification
of any of the Company's or any of its Subsidiaries' capital stock; (iv) any
granting by the Company or any of its Subsidiaries of any increase in
compensation or increase in benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice
(other than to directors or executive officers of the Company), or any payment
by the Company or any of its Subsidiaries of any bonus, except for bonuses made
in the ordinary course of business consistent with past practice (other than to
directors or executive officers of the Company), or any granting by the Company
or any of its Subsidiaries of any increase in severance or
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termination pay or any entry by the Company or any of its Subsidiaries into, or
modification or amendment of, any currently effective employment, severance,
termination or indemnification agreement or any agreement the benefits of which
are contingent or the terms of which are materially altered upon the occurrence
of a transaction involving the Company of the nature contemplated hereby; (v)
entry by the Company or any of its Subsidiaries into any licensing or other
agreement with regard to the acquisition or disposition of any material
Intellectual Property (as defined in Section 2.7(a)(i)) other than licenses
entered into in the ordinary course of business consistent with past practice,
(vi) any amendment or consent with respect to any Company Material Contract (as
defined in Section 2.15(a)) in effect since the date of the Company Balance
Sheet; (vii) any material change by the Company in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP;
(viii) any material revaluation by the Company of any of its assets, including
writing down the value of capitalized inventory or writing off notes or accounts
receivable other than in the ordinary course of business consistent with past
practice; (ix) any written communication from Nasdaq with respect to the
delisting of the Company Common Stock; (x) any cancellation by the Company or
any of its Subsidiaries of any material debts or waiver of any claims or rights
of material value; (xi) any sale, transfer or other disposition outside of the
ordinary course of business of any properties or assets (real, personal or
mixed, tangible or intangible) by the Company or any of its Subsidiaries; or
(xii) any agreement, whether in writing or otherwise, to take any action
described in this section by the Company or any of its Subsidiaries.
2.6 Taxes.
(a) Definition. For the purposes of this Agreement, the
term "TAX" or, collectively, "TAXES" shall mean (i) any and all federal, state,
local and foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts, (ii) any liability for the payment of any
amounts of the type described in clause (i) of this Section 2.6(a) as a result
of being a member of an affiliated, consolidated, combined or unitary group for
any period, and (iii) any liability for the payment of any amounts of the type
described in clauses (i) or (ii) of this Section 2.6(a) as a result of any
express or implied obligation to indemnify any other person or as a result of
any obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
or transferor entity.
(b) Tax Returns and Audits.
(i) The Company and each of its Subsidiaries
have filed all required federal, state, local and foreign returns, estimates,
information statements and reports and any amendments thereto ("TAX RETURNS")
relating to any and all Taxes concerning or attributable to the Company, its
Subsidiaries or their respective operations. Such Tax Returns are true and
correct, and have been completed in accordance with applicable law and were
timely filed, except in each case as would not be material to the Company.
(ii) The Company and each of its Subsidiaries
have paid all Taxes required to be paid and withheld with respect to their
Employees or other third parties and paid over to the
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appropriate Taxing authority all Taxes and any other amounts required to be paid
or withheld. Such Taxes were timely paid except as would not be material to the
Company.
(iii) Neither the Company nor any of its
Subsidiaries is currently delinquent in the payment of any Tax, nor is there any
material Tax deficiency outstanding, assessed or, to the Knowledge of the
Company, proposed against the Company or any of its Subsidiaries, nor has the
Company or any of its Subsidiaries executed any outstanding waiver of any
statute of limitations on or extension of the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Tax
Return of the Company or any of its Subsidiaries is presently in progress, nor
has the Company or any of its Subsidiaries been notified of any request for such
an audit or other examination. No outstanding adjustment relating to any Tax
Return filed by the Company or any of its Subsidiaries has been proposed
formally or, to the Knowledge of the Company or any of its Subsidiaries,
informally by any tax authority to the Company, any of its Subsidiaries or any
representative thereof.
(v) Neither the Company nor any of its
Subsidiaries has any liabilities for unpaid Taxes as of the date of the Company
Balance Sheet which have not been accrued or reserved on the Company Balance
Sheet in accordance with GAAP, whether asserted or unasserted, contingent or
otherwise, and neither the Company nor any of its Subsidiaries has incurred any
liability for Taxes since the date of the Company Balance Sheet other than in
the ordinary course of business.
(vi) The Company has made available to Parent or
its legal counsel, copies of all federal and California income and all other
material Tax Returns for the Company and each of its Subsidiaries filed for all
periods since inception.
(vii) There are no Liens on the assets of the
Company or any of its Subsidiaries relating to or attributable to Taxes, other
than customary Liens for Taxes not yet due and payable. To the Knowledge of the
Company, there is no basis for the assertion of any material claim relating or
attributable to Taxes which, if adversely determined, would result in any Lien
for Taxes on the assets of the Company or any of its Subsidiaries.
(viii) Neither the Company nor any of its
Subsidiaries has filed any consent agreement under Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the
Company or any of its Subsidiaries.
(ix) Neither the Company nor any of its
Subsidiaries is, nor has been at any time, a "United States Real Property
Holding Corporation" within the meaning of Section 897(c)(2) of the Code.
(x) Neither the Company nor any of its
Subsidiaries (a) has ever been a member of an affiliated group (within the
meaning of Code Section 1504(a)) filing a consolidated federal income Tax Return
(other than a group the common parent of which was Company), (b) is a party to
any Tax sharing, indemnification or allocation agreement (other than between the
Company and any of its Subsidiaries), nor does the Company or any of its
Subsidiaries owe any amount under any such agreement, (c) has any material
liability for the Taxes of any person (other than Company or any of its
Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local or foreign law), as a
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transferee or successor, by contract, or otherwise, or (d) is a party to any
joint venture, partnership or other agreement that could be treated as a
partnership for Tax purposes.
(xi) Neither the Company nor any of its
Subsidiaries has constituted either a "distributing corporation" or a
"controlled corporation" in a distribution of stock intended to qualify for
tax-free treatment under Section 355 of the Code (a) in the two years prior to
the date of this Agreement or (b) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the Company Merger.
(xii) Neither the Company nor any of its
Affiliates has taken or agreed to take any action that would prevent the Company
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code. The Company has no Knowledge of any agreement, plan, fact or other
circumstance that would prevent the Company Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
2.7 Intellectual Property.
(a) Definitions. For the purposes of this Agreement, the
following terms have the following meanings:
(i) "INTELLECTUAL PROPERTY" shall mean any or
all of the following and all rights in, arising out of, or associated therewith:
(a) all United States, international and foreign patents and applications
therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof; (b) 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; (c) all
copyrights, copyrights registrations and applications therefor, and all other
rights corresponding thereto throughout the world; (d) all mask works, mask work
registrations and applications therefor, and any equivalent or similar rights in
semiconductor masks, layouts, architectures or topology; (e) domain names,
uniform resource locators ("URLs") and other names and locators associated with
the Internet (collectively, "DOMAIN NAMES"), (f) all computer software,
including all source code, object code, firmware, development tools, files,
records and data, and all media on which any of the foregoing is recorded; (g)
all schematics, netlists, test methodologies, test vectors, emulation and
simulation tools and reports, hardware development tools, and all rights in
prototypes, breadboards and other devices; (h) all industrial designs and any
registrations and applications therefor throughout the world; (i) all trade
names, logos, common law trademarks and service marks, trademark and service
mark registrations and applications therefor throughout the world; (j) all
databases and data collections and all rights therein throughout the world; (k)
all moral and economic rights of authors and inventors, however denominated,
throughout the world, and (l) any similar or equivalent rights to any of the
foregoing anywhere in the world, and all tangible embodiments of the foregoing.
(ii) "COMPANY INTELLECTUAL PROPERTY" shall mean
any Intellectual Property that is owned by, or exclusively licensed to, the
Company or any of its Subsidiaries.
(iii) "REGISTERED INTELLECTUAL PROPERTY" shall
mean all United States, international and foreign: (a) patents and patent
applications (including provisional applications);
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(b) registered trademarks, applications to register trademarks, intent-to-use
applications, or other registrations or applications related to trademarks; (c)
registered copyrights and applications for copyright registration; and (d) any
other rights in or to an application, certificate, filing, registration or other
document issued, filed with, or recorded by any Governmental Authority with
respect to Intellectual Property.
(iv) "COMPANY REGISTERED INTELLECTUAL PROPERTY"
shall mean all of the Registered Intellectual Property owned by, registered or
filed in the name of, the Company or any of its Subsidiaries.
(v) "SOFTWARE" shall mean any and all computer
software and code, including assemblers, applets, compilers, source code, object
code, data (including image and sound data) and databases and data collections,
design tools and user interfaces, in any form or format, however fixed. Software
shall include source code listings and documentation.
(vi) "COMPANY PRODUCTS" shall mean all products,
Software or service offerings (i) that have been sold or offered for sale,
distributed or otherwise disposed of prior to the date of this Agreement by or
on behalf of the Company or any of its Subsidiaries, or (ii) for which
significant development work has been done and which the Company or any of its
Subsidiaries currently intends to sell, distribute or otherwise dispose of in
the future, including the product referred to internally at the Company as
"Duo."
(b) Registered Intellectual Property; Proceedings.
Section 2.7(b) of the Company Disclosure Letter sets forth, as of the date
hereof, (i) all Company Registered Intellectual Property and specifies, where
applicable, the jurisdictions in which each such item of Company Registered
Intellectual Property has been issued or registered, and (ii) all proceedings or
actions with respect to which Company has Knowledge or has received notice, and
which is currently before any court or tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere else in
the world) related to any of the Company Intellectual Property.
(c) Company Products. Section 2.7(c) of the Company
Disclosure Letter sets forth, as of the date hereof, a list (by name and version
number) of all Company Products.
(d) Documentation of Defects. The Company maintains a
policy of documenting all bugs, errors and defects in all the Company Products.
The Company has documented all material bugs, errors and defects of which the
Company has Knowledge in compliance with such policy, and such documentation is
retained and is available internally at the Company.
(e) No Order. None of the Company Intellectual Property,
the Company Products (excluding Intellectual Property owned by a third party),
the Company or any of its Subsidiaries is subject to any judgment, order, writ,
injunction, or decree of any court or Governmental Entity or arbitrator, or any
stipulation made to any court, Governmental Entity or arbitrator or in
connection with any proceeding before any such entity, or any settlement
agreement restricting the use, transfer, or licensing by the Company or any of
its Subsidiaries of any Company Intellectual Property, any Company Product or,
to the Company's Knowledge, any Intellectual Property owned by a third party
(including any Intellectual Property that is or is included in a Company
Product) that the Company or any of its Subsidiaries has a right to use, exploit
or practice by virtue of a license grant, immunity from
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suit or otherwise, or which may affect the validity, use or enforceability of
any such Company Intellectual Property, Company Product (excluding Intellectual
Property owned by a third party) or, to the Company's Knowledge, any
Intellectual Property owned by a third party (including any Intellectual
Property that is or is included in a Company Product).
(f) Registration. Each item of Company Registered
Intellectual Property is valid and subsisting, all necessary registration,
maintenance and renewal fees currently due in connection with such Company
Registered Intellectual Property have been made and all necessary documents,
recordations and certificates 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 jurisdictions, as
the case may be, for the purposes of prosecuting, maintaining or perfecting such
Company Registered Intellectual Property, except for any failure to pay fees or
failure to so file as would not (with or without the lapse of time) adversely
affect the Company's rights in any such item of Company Registered Intellectual
Property and except that the foregoing shall not apply to any Company
Intellectual Property with respect to which Company has intentionally abandoned
its rights as listed in Section 2.7(f) of the Company Disclosure Letter.
(g) Further Actions. Section 2.7(g) of the Company
Disclosure Letter sets forth a list of all actions that are required to be taken
by the Company within ninety (90) days of the date hereof with respect to any of
the Company Registered Intellectual Property.
(h) Absence of Liens. The Company owns and has good and
exclusive title to each item of Company Registered Intellectual Property and
other material Company Intellectual Property owned by it, free and clear of any
Liens (excluding non-exclusive licenses and related restrictions granted in the
ordinary course of business consistent with past practice and Liens in
connection with the Loan Agreement), and, after the Closing, all Company
Intellectual Property will be fully transferable, alienable or licensable by
Parent without restriction and without payment of any kind to any third party.
Without limiting the generality of the foregoing, (i) the Company is the
exclusive owner of all registered trademarks and, to the Company's Knowledge,
has valid and sufficient rights to use all other trademarks used in connection
with the operation or conduct of the business of the Company and its
Subsidiaries, including the sale, distribution or provision of any Company
Products by the Company or any of its Subsidiaries, (ii) to the Company's
Knowledge, the Company owns exclusively, or has valid and sufficient rights to
use, all copyrighted works that are included or incorporated into Company
Products or which the Company or any of its Subsidiaries otherwise purports to
own, and (iii) to the extent that any patents would be infringed by any Company
Products or the operation or conduct of the business of the Company and its
Subsidiaries as currently conducted or currently contemplated to be conducted,
to the Company's Knowledge, the Company is the exclusive owner of, or has valid
and sufficient rights to use, such patents.
(i) Source Code. Neither the Company nor any of its
Subsidiaries has disclosed the source code for any of the Software owned by it
or incorporated in any Company Products to any third party, and the Company has
taken commercially reasonable measures to prevent disclosure of such source
code.
(j) Open Source Software. No Software that is open
source, public source or freeware, or any modification or derivative thereof,
including any version of Software licensed pursuant to any GNU general public
license or lesser general public license (collectively, "OPEN SOURCE
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SOFTWARE") was or is used in, incorporated into, integrated or bundled with any
Company Products (only to the Company's Knowledge with respect to Company
Products owned by third parties) or Company Intellectual Property, or was, is or
is currently planned to be used in the Company's business or the development or
compilation of any Company Products, except in each case for any such Open
Source Software whose terms: (i) do not grant any third party rights to, or
otherwise impair the exclusive ownership of the Company or its Subsidiaries of,
the modifications or improvements by the Company or any of its Subsidiaries to
such Software; (ii) do not require the distribution by the Company or any
Subsidiary of any source code; (iii) do not prohibit the Company or its
Subsidiaries from charging a fee or otherwise restricts the ability of the
Company or any of its Subsidiaries to seek compensation for any such Software;
(iv) allow use and distribution of such Software in the manner used and
distributed and proposed to be distributed by the Company or any of its
Subsidiaries; (v) do not contain any other material restrictions or obligations
that the Company and its Subsidiaries has not complied with; and (vi) do not,
have not and will not otherwise result in any material liability to the Company
or any of its Subsidiaries.
(k) Third-Party Development. (i) To the extent that any
technology, Software or Intellectual Property incorporated into a Company
Product or any other material item of technology, Software or Intellectual
Property has been developed or created independently or jointly by a third party
for the Company or any of its Subsidiaries, the Company and its Subsidiaries
have a written agreement with such third party with respect thereto pursuant to
which the Company and its Subsidiaries have obtained complete, unencumbered and
unrestricted ownership of, and are the exclusive owners of all such third
party's Intellectual Property in such work, material or invention and such third
party has not retained any rights or licenses with respect thereto. (ii) To the
extent that (a) any technology, Software or Intellectual Property developed or
otherwise owned by a third party is incorporated into or integrated with any of
the Company Products, or (b) any material item of technology, Software or
Intellectual Property developed or otherwise owned by a third party is bundled
with or used by the Company or its Subsidiaries in the development, manufacture
or compilation of any of the Company Products (such technology, Software or
Intellectual Property described in this Section 2.7(k)(ii)(a) and (b), the
"THIRD PARTY PRODUCT TECHNOLOGY"), the Company and its Subsidiaries have a
written agreement with respect thereto pursuant to which the Company and its
Subsidiaries either (A) have obtained complete, unencumbered and unrestricted
ownership of, and are the exclusive owners of, or (B) have obtained a license
with a term not less than the projected life of such Company Product to all such
Intellectual Property in such work, material or invention. (iii) Section
2.7(k)(iii) of the Company Disclosure Letter sets forth a list of all Contracts
currently in effect granting the Company or its Subsidiaries rights with respect
to Third Party Product Technology, and copies of all such contracts have been
provided or made available to Parent. (iv) To the extent any technology,
Software or Intellectual Property incorporated into any of the Company Products
or any other item of material technology, Software or Intellectual Property was
originally owned, invented or created by a Company employee, (a) all right,
title and interest in and to such Intellectual Property was transferred and
assigned to the Company, by contract or operation of law, and (b) no such
employee or consultant has retained any rights (other than the right to be named
as an inventor or author) in or to such Intellectual Property.
(l) Transfers. Neither the Company nor any of its
Subsidiaries has transferred ownership of, or granted any exclusive license with
respect to, any Intellectual Property that is or was material Company
Intellectual Property, to any third party, or knowingly permitted the Company's
rights in such Company Intellectual Property to lapse or enter the public domain
(other than through the expiration of Registered Intellectual Property at the
end of its statutory term).
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(m) Licenses. Other than "shrink wrap," "click wrap" and
similar widely available commercial end-user licenses that have an individual
acquisition cost of $25,000 or less, Section 2.7(m) of the Company Disclosure
Letter sets forth a list of all Contracts currently in effect to which the
Company or any of its Subsidiaries is a party (i) with respect to Company
Intellectual Property licensed or transferred to any third party, (ii) pursuant
to which a third party has licensed or transferred any Intellectual Property to
the Company or any of its Subsidiaries, or (iii) pursuant to which the Company
or any of its Subsidiaries has agreed to any restriction on the right of the
Company or any of its Subsidiaries to use or enforce any Company Intellectual
Property. None of the Contracts required to be listed in Section 2.7(m) of the
Company Disclosure Letter grants any third party exclusive rights to or under
any Company Intellectual Property, and none of the Contracts required to be
listed in Section 2.7(m) of the Company Disclosure Letter grants any third party
the right to sublicense any Company Intellectual Property.
(n) No Conflict. (i) The consummation of the transactions
contemplated by this Agreement will neither materially violate nor result in the
material breach, or the material modification, cancellation, termination,
suspension of, or acceleration of any payments with respect to the Contracts
required to be listed in Section 2.7(m) of the Company Disclosure Letter, or
give any non-Company party to any such Contract the right to do any of the
foregoing. Following the Closing Date, the Surviving Corporation in the Company
Merger will be permitted to exercise all of the Company's and its Subsidiaries'
rights under such Contracts to the same extent the Company and its Subsidiaries
would have been able to 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 which the Company or any of its
Subsidiaries would otherwise be required to pay. (ii) Neither this Agreement nor
the transactions contemplated by this Agreement, including the assignment to
Parent or Merger Sub by operation of law or otherwise of any contracts or
agreements to which the Company or any of its Subsidiaries are a party, will
result in (a) either Parent's or the Merger Sub's granting to any third party
any right or license to or with respect to any material Intellectual Property
right owned by, or licensed to, either of them prior to the Closing, (b) either
Parent or Merger Sub being bound by, or subject to, any non-compete or other
material restriction on the operation or scope or their respective businesses
(including a covenant not to sue), or (c) either Parent or Merger Sub being
obligated to pay any royalties or other material amounts to any third party in
excess of those payable by Parent or Merger Sub, respectively, prior to the
Closing.
(o) No Infringement. To the Knowledge of the Company, the
operation of the business of the Company and its Subsidiaries as such business
currently is conducted and as currently proposed to be conducted, including the
Company's and its Subsidiaries' design, development, manufacture, distribution,
reproduction, marketing or sale of the products, Software or services of the
Company and its Subsidiaries (including Company Products) has not, does not and
will not, as so proposed, infringe or misappropriate the Intellectual Property
of any third party or, to its Knowledge, constitute unfair competition or unfair
trade practices under the laws of any jurisdiction.
(p) All Necessary Intellectual Property. The Company
Intellectual Property, and the Company's rights in the Third Party Product
Technology, constitute, to the Knowledge of the Company, all the material
Intellectual Property used in and/or necessary to the conduct of the business of
the Company and its Subsidiaries as it currently is conducted, and as it is
currently planned to be conducted by the Company and its Subsidiaries, including
the design, development, manufacture, use, import and sale of products,
technology and performance of services (including the Company Products).
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(q) No Notice of Infringement. Neither the Company nor
any of its Subsidiaries has received written notice from any third party that
the operation of the business of the Company or any of its Subsidiaries or any
Company Product, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or unfair trade practices under
the laws of any jurisdiction.
(r) No Third Party Infringement. To the Knowledge of the
Company, no person has or is infringing or misappropriating any Company
Intellectual Property.
(s) Government Funding. No government funding, facilities
of a university, college, other educational institution or research center or
development funding from third parties was used in the development of any
Company Intellectual Property. To the Knowledge of the Company, no current or
former employee, consultant or independent contractor of the Company, who was
involved in, or who contributed to, the creation or development of any Company
Intellectual Property, has performed services for the government, university,
college, or other educational institution or research center during a period of
time during which such employee, consultant or independent contractor was also
performing services for the Company.
(t) Proprietary Information Agreements. The Company and
each of its Subsidiaries has taken reasonable steps to protect the Company's and
its Subsidiaries' rights in the Company's confidential information and trade
secrets that it wishes to protect or any trade secrets or confidential
information of third parties provided to the Company or any of its Subsidiaries,
and, without limiting the foregoing, each of the Company and its Subsidiaries
has and enforces a policy requiring each Employee to execute a proprietary
information/confidentiality agreement substantially in the form provided to
Parent, and all Employees of the Company and any of its Subsidiaries have
executed such an agreement, except where the failure to do so is not reasonably
expected to be material to the Company.
(u) Privacy and Data Protection. The Company and its
Subsidiaries have at all times complied in all material respects with all
applicable Legal Requirements relating to privacy, data protection and the
collection and use personal information and user information gathered or
accessed in the course of the operations of the Company or any of its
Subsidiaries. The Company and its Subsidiaries have at all times complied in all
material respects with all rules, policies and procedures established by the
Company or any of its Subsidiaries from time to time with respect to privacy,
data protection or collection and use of personal information and user
information gathered or accessed in the course of the operations of the Company
or any of its Subsidiaries, current versions of which are set forth in Section
2.7(u) of the Company Disclosure Letter. No claims have been asserted in writing
or, to the Knowledge of the Company, threatened against the Company or any of
its Subsidiaries by any person or entity alleging a violation of such person's
or entity's privacy, personal or confidentiality rights under any such rules,
policies or procedures. The execution of this Agreement and the consummation of
the transactions contemplated herein will not breach or otherwise cause any
violation of any such applicable Legal Requirements related to privacy, data
protection or the collection and use of personal information and user
information gathered or accessed in the course of the operations of the Company
or any of its Subsidiaries.
(v) Protection of Information. With respect to all
personal and user information described in Section 2.7(u), the Company and its
Subsidiaries have at all times taken all reasonable steps (including
implementing and monitoring compliance with adequate measures with respect to
technical and physical security) to ensure that the information is protected
against loss and against unauthorized
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access, use, modification, disclosure or other misuse. To the Knowledge of the
Company, there has been no material unauthorized access to or other misuse of
that information.
2.8 Compliance; Permits.
(a) Compliance. Neither the Company nor any of its
Subsidiaries is in conflict with, or in default or in violation of any material
Legal Requirement applicable to the Company or any of its Subsidiaries or by
which the Company or any of its Subsidiaries or any of their respective
businesses or properties is, or the Company believes is reasonably likely to be,
bound or affected, except, in each case, or in the aggregate, for those
conflicts, violations and defaults that would not cause the Company to lose any
material benefit or incur any material liability. To the Knowledge of the
Company, no investigation or review by any Governmental Entity is pending or,
has been threatened in writing against the Company or any of its Subsidiaries.
There is no judgment, injunction, order or decree binding upon the Company or
any of its Subsidiaries which has or would reasonably be expected to have the
effect of prohibiting or impairing any business practice of the Company or any
of its Subsidiaries, any acquisition of property by the Company or any of its
Subsidiaries or the conduct of business by the Company and its Subsidiaries as
currently conducted.
(b) Permits. The Company and its Subsidiaries hold, to
the extent legally required, all permits, licenses, variances, clearances,
consents, commissions, franchises, exemptions, orders , authorizations and
approvals from Governmental Entities ("PERMITS") that are required for the
operation of the business of the Company (collectively, "COMPANY PERMITS")
except where the failure to hold such Permits would not be material to the
Company or its Subsidiaries. As of the date hereof, no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
the Company, threatened. The Company and its Subsidiaries are in compliance in
all material respects with the terms of the Company Permits.
2.9 Litigation. There are no material claims, suits, actions or
proceedings pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries, before any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator.
2.10 Brokers' and Finders' Fees; Fees and Expenses. Except for fees
payable to Credit Suisse First Boston LLC pursuant to an engagement letter dated
March 4, 2003, a copy of which has been provided to Parent (the "CSFB ENGAGEMENT
LETTER"), the Company has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby and, except pursuant to the CSFB Engagement Letter, the
Company has not entered into any indemnification agreement or indemnification
arrangement with any Person in connection with this Agreement and the
transactions contemplated hereby. An itemized good faith estimate of the fees
and expenses of any accountant, broker, financial advisor, consultant, legal
counsel or other Person retained by the Company in connection with this
Agreement or the transactions contemplated hereby incurred through the date
hereof by the Company in connection with this Agreement and the transactions
contemplated hereby (including any agreement or understanding with respect to
such agreement or understanding, whether written or oral), other than the CSFB
Engagement Letter, is set forth in Section 2.10 of the Company Disclosure
Letter. Other than the CSFB Engagement Letter, as of the date hereof, the
Company is not a party to any Contract with any accountant, broker, financial
advisor, consultant, legal counsel or other Person retained by the Company in
connection with this Agreement or the transactions contemplated
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hereby, other than Contracts for the provision of services on a "time and
materials" basis at reasonable and customary rates.
2.11 Transactions with Affiliates. Except as set forth in the
Company SEC Reports, since the date of the Company's last proxy statement filed
with the SEC until the date hereof, no event or transaction has occurred of the
type that would be reportable by the Company pursuant to Item 404 of Regulation
S-K promulgated by the SEC. Section 2.11 of the Company Disclosure Letter
identifies each Person who the Company deems to be an "affiliate" (as that term
is used in Rule 145 promulgated under the Securities Act) of the Company as of
the date hereof.
2.12 Employee Benefit Plans.
(a) Schedule. Section 2.12(a) of the Company Disclosure
Letter contains a list of (i) each plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance,
termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including each "employee benefit plan," within the meaning of Section 3(3) of
ERISA which is or has been, within the past three years, maintained, contributed
to, or required to be contributed to, by the Company or any Subsidiary of the
Company or any other person or entity under common control with the Company or
any Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the
Code and the regulations issued thereunder (each a "COMPANY ERISA AFFILIATE")
for the benefit of any current or former or retired employee, consultant or
director of the Company or any Company ERISA Affiliate (each a "COMPANY
EMPLOYEE"), or with respect to which the Company or any Company ERISA Affiliate
has or may have any liability or obligation (collectively, the "COMPANY EMPLOYEE
PLANS"), and (ii) each employment, severance or consulting agreement between the
Company or any Company ERISA Affiliate and any current Company Employee or
former Company Employee, to the extent the Company or any Company ERISA
Affiliate has or may have any liability or obligation (each a "COMPANY EMPLOYEE
AGREEMENT"), except to the extent a Company Employee Agreement provides for
"at-will" employment and does not provide for severance payments or benefits.
Neither the Company nor any Company ERISA Affiliate has any plan or commitment
to establish any new Company Employee Plan or Company Employee Agreement, to
modify any Company Employee Plan or Company Employee Agreement (except to the
extent required by law or to conform any such Company Employee Plan or Company
Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to Parent in writing, or as required by this Agreement), or
to adopt or enter into any Company Employee Plan or Company Employee Agreement.
(b) Documents. The Company has provided or made available
to Parent correct and complete copies of: (i) all documents embodying each
Company Employee Plan and each Company Employee Agreement including all
amendments thereto and all related trust documents, administrative service
agreements, group annuity contracts, group insurance contracts, and policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Company Employee Plan; (ii) each relocation, repatriation and expatriation
agreement; (iii) the most recent annual actuarial valuations, if any, prepared
for each Company Employee Plan; (iv) the three (3) most recent annual reports
(Form Series 5500 and all schedules and financial statements attached thereto),
if any, required under ERISA or the Code in connection with each Company
Employee Plan; (v) if the Company Employee Plan is funded, the most recent
annual and periodic accounting of Company Employee Plan assets; (vi) the most
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recent summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan; (vii) all IRS determination, opinion, notification and advisory
letters; (viii) all material communications made to any Company Employee or
Company Employees after January 1, 2002, relating to any Company Employee Plan
and any proposed Company Employee Plans, in each case, relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would result
in any material liability to the Company; (ix) all COBRA (as defined below)
forms and related notices (or such forms and notices as required under
comparable law); (x) all material correspondence to or from any governmental
agency in the past three years relating to any Company Employee Plan (including
any filings with any governmental agency); (xi) the most recent plan years
discrimination tests for each Company Employee Plan; and (xii) all prospectuses
prepared in connection with each Company Employee Plan. As used in this
Agreement, "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended and as codified in Section 4980B of the Code and Section 601
et. seq. of ERISA.
(c) Company Employee Plan Compliance. The Company and its
Company ERISA Affiliates have performed in all material respects all obligations
required to be performed by them under each Company Employee Plan, and each
Company Employee Plan has been established and maintained in all material
respects in accordance with its terms and in material compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code. Any Company Employee Plan intended to be qualified
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code (i) has either applied for, prior to the expiration
of the requisite period under applicable Treasury Regulations or IRS
pronouncements, or obtained a favorable determination, notification, advisory
and/or opinion letter, as applicable, as to its qualified status from the IRS or
still has a remaining period of time under applicable Treasury Regulations or
IRS pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination, and (ii) incorporates or has been
amended to incorporate all provisions required to comply with the Tax Reform Act
of 1986 and subsequent legislation. To the Knowledge of the Company, for each
Company Employee Plan that is intended to be qualified under Section 401(a) of
the Code there has been no event, condition or circumstance that has adversely
affected or is likely to adversely affect such qualified status. No "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any Company Employee Plan. There are no actions, suits or claims
pending, or, to the Knowledge of the Company, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan. Each Company
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time of the Company Merger in accordance with its terms, without
material liability to Parent, Company or any of its Company ERISA Affiliates
(other than ordinary administration expenses). There are no audits, inquiries or
proceedings pending or, to the Knowledge of the Company or any Company ERISA
Affiliates, threatened by the IRS, the U.S. Department of Labor ("DOL"), or any
other Governmental Entity with respect to any Company Employee Plan. Neither the
Company nor any Company ERISA Affiliate is subject to any penalty or tax with
respect to any Company Employee Plan under Section 502(i) of ERISA or Sections
4975 through 4980 of the Code. The Company and each Company ERISA Affiliate have
timely made all contributions and other payments required by and due under the
terms of each Company Employee Plan, except as would not result in material
liability to the Company or its Subsidiaries.
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(d) No Pension or Welfare Plans. Neither the Company nor
any Company ERISA Affiliate has ever maintained, established, sponsored,
participated in, or contributed to, any (i) Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA (a
"PENSION PLAN") and is subject to Title IV of ERISA or Section 412 of the Code,
(ii) Pension Plan which is a "multiemployer plan," as defined in Section 3(37)
of ERISA, (iii) "multiple employer plan" as defined in ERISA or the Code, or
(iv) "funded welfare plan" within the meaning of Section 419 of the Code.
Neither the Company nor any ERISA Affiliate has maintained, established,
sponsored, participated in or contributed to any self-insured Company Employee
Plan or created any such similar obligation under any Company Employee Agreement
nor has the Company or any ERISA Affiliate established a policy or practice that
would give rise to the creation of a self-insured Company Employee Plan or
obligation under any Company Employee Agreement (including any such plan or
practice pursuant to which a stop-loss policy or contract applies).
(e) No Post-Employment Obligations. No Company Employee
Plan provides, or reflects or represents any liability to provide
post-termination or retiree welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and neither the
Company nor any Company ERISA Affiliate has ever represented, promised or
contracted (other than in written form) to any Employee (either individually or
to Company Employees as a group) or any other person that such Employee(s) or
other person would be provided with post-termination or retiree welfare
benefits, except to the extent required by statute.
(f) Health Care Compliance. Neither the Company nor any
Company ERISA Affiliate has, prior to the Effective Time of the Company Merger
and in any material respect, violated any of the health care continuation
requirements of COBRA, the requirements of the Family Medical Leave Act of 1993,
as amended, the requirements of the Health Insurance Portability and
Accountability Act of 1996, the requirements of the Women's Health and Cancer
Rights Act of 1998, the requirements of the Newborns' and Mothers' Health
Protection Act of 1996, or any amendment to each such act, or any similar
provisions of state law applicable to its Employees.
(g) Loans and Advances. Section 2.12(g) of the Company
Disclosure Letter contains an accurate and complete list of all loans and
advances made by the Company or any Company ERISA Affiliate to any employee,
director, consultant or independent contractor outstanding as of the date of
this Agreement, other than routine travel and expense advances made to employees
in the ordinary course of business. Neither the Company nor any Company ERISA
Affiliate has, since July 30, 2002, extended credit, arranged for the extension
of credit, or renewed an extension of credit, in the form of a personal loan to
or for any director or executive officer (or equivalent thereof) of the Company.
(h) Effect of Transaction.
(i) The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Company Employee Agreement, trust or loan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Company Employee.
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(ii) No payment or benefit which will or may be
made by the Company or its Company ERISA Affiliates with respect to any Company
Employee will be characterized as a "parachute payment," within the meaning of
Section 280G(b)(2) of the Code. There is no contract, agreement, plan or
arrangement to which Company or any of its Company ERISA Affiliates is a party
or by which it is bound to compensate any Company Employee for excise taxes paid
pursuant to Section 4999 of the Code.
(i) Employment Matters. The Company: (i) is in compliance
in all material respects with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Employees; and (ii) is not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any governmental authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending, threatened or reasonably anticipated claims or actions against the
Company under any workers' compensation policy or long-term disability policy.
Neither the Company nor any Company ERISA Affiliate has or reasonably
anticipates any direct or indirect material liability with respect to any
misclassification of any person as an independent contractor rather than as an
employee, or with respect to any employee leased from another employer.
(j) Labor. No work stoppage or labor strike against the
Company or any Company ERISA Affiliate is pending, or to the Company's
Knowledge, threatened or reasonably anticipated. The Company does not know of
any activities or proceedings of any labor union to organize any Company
Employees. There are no actions, suits, claims, labor disputes or grievances
pending, or, to the Knowledge of the Company, threatened or reasonably
anticipated relating to any labor, safety or discrimination matters involving
any Company Employee, including charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in any material liability to the Company. Neither
the Company nor any of its Subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act. The Company is
not presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to Company
Employees and no collective bargaining agreement is being negotiated with
respect to Company Employees. Neither the Company nor any of its Subsidiaries
have incurred any material liability or material obligation under the Worker
Adjustment and Retraining Notification Act or any similar state or local law
which remains unsatisfied.
(k) International Employee Plan. Each Company Employee
Plan that has been adopted or maintained by the Company or any Company ERISA
Affiliate, whether informally or formally, or with respect to which the Company
or any Company ERISA Affiliate will or may have any material liability, for the
benefit of Company Employees who perform services outside the United States
(each a "COMPANY INTERNATIONAL EMPLOYEE PLAN") has been established, maintained
and administered in material compliance with its terms and conditions and with
the requirements prescribed by any and all statutory or regulatory laws that are
applicable to such Company International Employee Plan. Furthermore, no Company
International Employee Plan has material unfunded liabilities, that as of the
Effective Time of the Company Merger, will not be offset by insurance or fully
accrued. Except as required by law, no condition exists that would prevent the
Company or Parent from terminating or amending any Company International
Employee Plan at any time for any reason without liability to the
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Company or its Company ERISA Affiliates (other than ordinary administration
expenses or routine claims for benefits).
2.13 Title to Properties.
(a) Properties. Neither Company nor any of its
Subsidiaries owns any real property. Section 2.13 of the Company Disclosure
Letter sets forth a list, as of the date hereof, of all real property currently
leased, subleased, licensed or otherwise occupied by the Company or any of its
Subsidiaries, the name of the lessor, the date of the lease and each amendment
thereto and the aggregate annual rental fees payable under any such lease. All
such current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing material default or material event of default (or event
which with notice or lapse of time, or both, would constitute a material
default). The Company has provided or made available to Parent true, correct and
complete copies of all such real property leases, lease guaranties, licenses,
subleases and occupancy agreements, including all amendments, terminations and
modifications thereof. The Company or its Subsidiaries currently occupies all of
such real property for the operation of its business, and there are no other
parties occupying, or with a right to occupy, such real property. Such real
property is in good operating condition and repair in all material respects.
(b) Lease Restructures. The "CLOSE OF ESCROW", as defined
in that certain Property Purchase and Lease Modification Agreement dated January
16, 2003 (the "LEASE MODIFICATION AGREEMENT") executed by the Company, HFC and
M-F Downtown Sunnyvale, LLC, a Delaware limited liability company ("M-F
DOWNTOWN"), has occurred and all of the conditions to the Close of Escrow were
satisfied or waived in accordance with the terms of the Lease Modification
Agreement, other than the conditions to the Close of Escrow set forth in
Sections 11(c)(iv), 11(e), 11(f), 11(g), 12(d) and 12(e), which were satisfied
in accordance with the terms of the Lease Modification Agreement. The Company
did not use the services of a broker, and no broker is entitled to, or has made
a claim for, any compensation from the Company, in connection with the Lease
Modification Agreement or any efforts to sublet the subject premises. No
"OCCUPANCY" or "REINSTATEMENT" has occurred, as such terms are defined in that
certain Amended and Restated Lease Agreement (Building 3) dated January 29, 2003
between M-F Downtown and HFC. The Company is the sole member of HFC. As of the
date hereof, Domenic Borriello of CT Corporation Staffing is the "Independent
Manager" of HFC. EOP-Industrial Portfolio, L.L.C. ("EOP"), has drawn in full on
the letter of credit provided by the Company under its lease of 380 North
Bernardo Avenue, Mountain View, California as contemplated under the First
Amendment dated January 31, 2003 between EOP and the Company.
(c) Valid Title. The Company and each of its Subsidiaries
has good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its material tangible properties and
assets, real, personal and mixed, used or held for use in its business
(including for the manufacture of the Company Products), free and clear of any
Liens except (i) as reflected in the Company Financials, (ii) Liens in
connection with the Loan Agreement, (iii) Liens imposed by law in respect of
obligations not yet delinquent, including in respect of taxes, or (iv) Liens
which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby (the Liens referred to in
subparagraphs (iii) and (iv) above being collectively referred to as the
"PERMITTED LIENS").
2.14 Environmental Matters.
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(a) Hazardous Material. Except as would not result in a
material liability to the Company, no underground storage tanks and no amount of
any substance that has been designated by any Governmental Entity or by
applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies properly and safely maintained, (a "HAZARDOUS MATERIAL") are
present in violation of any rule, regulation, treaty or statute promulgated by
any Governmental Entity in effect as of the date hereof, as a result of the
actions of the Company or any of its Subsidiaries or any affiliate of the
Company, or, to the Knowledge of the Company, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Company or
any of its Subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not
result in a material liability to the Company, neither the Company nor any of
its Subsidiaries has transported, stored, used, manufactured, disposed of,
released or exposed any Company Employees or others to Hazardous Materials in
violation of any Legal Requirement in effect on or before the Closing Date.
Except as would not result in a material liability to the Company, neither the
Company nor any of its Subsidiaries has disposed of, transported, sold, used,
released, exposed any Company Employees or others to or manufactured any product
containing a Hazardous Material (collectively, "HAZARDOUS MATERIALS ACTIVITIES")
in violation of any Legal Requirement promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company and its subsidiaries currently
hold all environmental Permits materially necessary for the conduct of the
Company's and its Subsidiaries' Hazardous Material Activities (the "COMPANY
ENVIRONMENTAL PERMITS") and other businesses of the Company and its Subsidiaries
as such activities and businesses are currently being conducted.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ or injunction is pending, or to
the Company's Knowledge, has been threatened in writing by any Governmental
Entity against the Company or any of its Subsidiaries concerning any Company
Environmental Permit, Hazardous Material or any Hazardous Materials Activity of
the Company or any of its Subsidiaries.
2.15 Contracts.
(a) Material Contracts. For purposes of this Agreement,
"COMPANY MATERIAL CONTRACT" shall mean any of the following Contracts of the
Company or its Subsidiaries:
(i) any "material contracts" (as such term is
defined in Item 601(b)(10) of Regulation S-K of the SEC) with respect to the
Company and its Subsidiaries (including any agreement that is required to be
filed in a future filing);
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(ii) any employment or consulting Contract with
any executive officer or other employee of the Company earning an annual base
salary in excess of $125,000 or a member of the Company's Board of Directors
other than those that are terminable by the Company or any of its Subsidiaries
on no more than thirty (30) days notice without liability or financial
obligation to the Company;
(iii) any joint venture Contract or similar
arrangement or any other agreement which has involved or is expected to involve
a sharing of revenues of $250,000 per annum or more with other Persons;
(iv) any Contract, including any stock option
plan, stock appreciation right plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement, or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement, or which
may, by its terms, have any of the obligations of such Contract terminated or
adjusted as a result of the execution of this Agreement or the Voting
Agreements, the Company Transfer Agreements or the consummation of the Company
Merger;
(v) any agreement of indemnification or any
guaranty by the Company or any of its Subsidiaries other than any agreement of
indemnification entered into in connection with the sale or license of Company
Products in the ordinary course of business;
(vi) any Contract containing any covenant (a)
limiting in any material respect the right of the Company or any of its
Subsidiaries to engage in any line of business, to make use of any Intellectual
Property, develop market or distribute products or services or compete with any
Person, (b) granting any exclusive rights, or (c) otherwise limiting the right
of the Company or any of its Subsidiaries to sell, distribute or manufacture any
products or services or to purchase or otherwise obtain any Software,
components, parts, subassemblies or services;
(vii) any Contract relating to the disposition or
acquisition by the Company or any of its Subsidiaries after the date of this
Agreement of a material amount of assets not in the ordinary course of business,
or pursuant to which the Company or any of its Subsidiaries has any material
ownership interest in any other Person or other business enterprise other than
the Company's Subsidiaries;
(viii) any dealer, distributor, joint marketing or
development agreement, under which the Company or any of its Subsidiaries have
continuing obligations or costs in excess of $250,000 per year, which may not be
canceled without penalty upon notice of ninety (90) days or less;
(ix) any agreement pursuant to which the Company
or any of its Subsidiaries have continuing obligations to jointly develop any
material item of Intellectual Property;
(x) any Contract to provide source code to any
third party for any product or technology of the Company;
(xi) any Contract containing any support, service
or maintenance obligation on the part of the Company or any of its Subsidiaries
outside of the ordinary course of business consistent with past practice;
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(xii) any Contract to license any third party to
manufacture or reproduce any of the products, services or technology of the
Company or any of its Subsidiaries or any Contract to sell or distribute any of
the products, services or technology of the Company or any of its Subsidiaries;
(xiii) any mortgages, indentures, guarantees, loans
or credit agreements, security agreements or other Contracts relating to the
borrowing of money or extension of credit, other than accounts receivables and
payables in the ordinary course of business;
(xiv) any settlement agreement entered into within
three (3) years prior to the date of this Agreement;
(xv) any lease for (a) real property in which the
amount of payments which the Company or any of its Subsidiaries is required to
make on an annual basis exceeds $100,000 or (b) personal property in which the
amount of payments which the Company or any of its Subsidiaries is required to
make on an annual basis exceeds $100,000;
(xvi) any agreement, contract or commitment
pursuant to which the Company or any of its Subsidiaries is obligated to pay in
the future in excess of $250,000 in any one year period which is not terminable
by the Company or its Subsidiaries without penalty in excess of $10,000 upon
notice of ninety (90) days or less, other than any agreement, contract or
commitment to purchase inventory in the ordinary course of business consistent
with past practice;
(xvii) any other agreement, contract or commitment
that has a value of $375,000 or more in any individual case not described in
clauses (i) through (xv) above; or
(xviii) any Contract, or group of Contracts with a
Person (or group of affiliated Persons), not described in clauses (i) through
(xvii) above the termination or breach of which would be reasonably expected to
have a material adverse effect on any material product or service offerings of
the Company or its Subsidiaries or otherwise have a Material Adverse Effect on
the Company.
(b) Schedule. Section 2.15(b) of the Company Disclosure
Letter sets forth a list of all Company Material Contracts to which the Company
or any of its Subsidiaries is a party or is bound by as of the date hereof which
are described in Sections 2.15(a)(i) through 2.15(a)(xviii) hereof.
(c) No Breach. All Company Material Contracts and all
Contracts listed in Section 2.7(m) of the Company Disclosure Letter are valid
and in full force and effect except to the extent they have previously expired
in accordance with their terms or if the failure to be in full force and effect,
individually or in the aggregate, would not reasonably be expected to be
material to the Company. Neither the Company nor any of its Subsidiaries has
violated any provision of, or committed or failed to perform any act which, with
or without notice, lapse of time or both would constitute a default under the
provisions of, any Company Material Contract or any Contract listed in Section
2.7(m) of the Company Disclosure Letter, except in each case for those
violations and defaults which, individually or in the aggregate, would not
reasonably be expected to be material to the Company.
2.16 Disclosure. None of the information supplied or to be supplied
by or on behalf of the Company for inclusion or incorporation by reference in
the registration statement on Form S-4 (or similar successor form) to be filed
with the SEC by Parent in connection with the issuance of Parent Common Stock in
the Company Merger (including amendments or supplements thereto) (the
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"REGISTRATION STATEMENT") will, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the information
supplied or to be supplied by or on behalf of the Company for inclusion or
incorporation by reference in the Prospectus/Proxy Statement to be filed with
the SEC as part of the Registration Statement (the "PROSPECTUS/PROXY
STATEMENT"), will, at the time the Prospectus/Proxy Statement is mailed to the
stockholders of Parent and the Company, at the time of the Company Stockholders'
Meeting (as defined in Section 5.2(a)), at the time of the Parent Stockholders'
Meeting (as defined in Section 5.2(a)), as of the Effective Time of the Parent
Merger, or as of the Effective Time of the Company Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. The
Prospectus/Proxy Statement will comply as to form in all material respects with
the applicable provisions of the Securities Act, the Exchange Act and the rules
and regulations promulgated by the SEC thereunder. Notwithstanding the
foregoing, no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein about Parent, Separation
Sub or Merger Sub supplied by Parent, Separation Sub or Merger Sub for inclusion
or incorporation by reference in the Registration Statement or the
Prospectus/Proxy Statement.
2.17 Board Approval. The Board of Directors of the Company has, by
resolutions duly adopted by unanimous vote at a meeting of all Directors duly
called and held and not subsequently rescinded or modified on or prior to the
date hereof in any way (the "COMPANY BOARD APPROVAL") (i) determined that the
Company Merger is fair to, and in the best interests of, the Company and its
stockholders and declared the Company Merger to be advisable, (ii) approved this
Agreement and the transactions contemplated thereby, including the Company
Merger, and (iii) unanimously recommended that the stockholders of the Company
approve and adopt this Agreement and approve the Company Merger and directed
that such matter be submitted to the Company's stockholders at the Company
Stockholders' Meeting. The Board of the Directors the Company has, by
resolutions duly adopted by unanimous vote at a meeting of all Directors duly
called and held and not subsequently rescinded or modified on or prior to the
date hereof in any way, (i) approved the Company Rights Agreement (as defined in
Section 5.15); and (ii) authorized and directed the dividend of the Company
Rights (as defined in Section 5.15) with a record date of June 5, 2003 and a
payment date of not later than June 5, 2003.
2.18 Fairness Opinion. The Company's Board of Directors has
received an opinion from Credit Suisse First Boston Corporation, dated as of
June 3, 2003, to the effect that, as of such date, the Exchange Ratio is fair,
from a financial point of view, to the Company stockholders, and has delivered
to Parent a written copy of such opinion.
2.19 Takeover Statutes. The Board of Directors of the Company has
taken all actions so that the restrictions contained in Section 203 of the
Delaware General Corporation Law applicable to a "business combination" (as
defined in such Section 203), and any other similar Legal Requirement, will not
apply to Parent during the pendency of this Agreement, including the execution,
delivery or performance of this Agreement and the Voting Agreements and the
consummation of the Company Merger and the other transactions contemplated
hereby.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company, subject to the
exceptions specifically disclosed (subject to the last sentence of Section
8.3(a)) in writing in the disclosure letter supplied by Parent to the Company
dated as of the date hereof and certified by a duly authorized executive officer
of Parent (the "PARENT DISCLOSURE LETTER"), as follows; subject to the following
clause, it is understood and agreed that Parent makes no representations or
warranties in this Agreement, express or implied, with respect to Source or its
Subsidiaries, or the business, assets, capitalization, financial condition or
results of operations of Source or its Subsidiaries; however, to the extent a
representation or warranty in the Agreement refers to "Parent" or its
Subsidiaries, such reference shall be deemed to specifically exclude such
matters with respect to Source and its Subsidiaries except to the extent that
the failure of such representation or warranty to be true and correct with
respect to Source and its Subsidiaries would or would be reasonably likely to
adversely affect Parent following the Mergers (taking into account the terms of
the Separation Agreements (as defined in Section 3.21(a)):
3.1 Organization; Standing and Power; Charter Documents;
Subsidiaries.
(a) Organization; Standing and Power. Parent and each of
its Subsidiaries (i) is a corporation or other organization duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, (ii) has the requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted, and (iii) is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to so qualify or
to be in good standing, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on Parent.
(b) Charter Documents. Parent has delivered or made
available to the Company (i) a true and correct copy of the Certificate of
Incorporation (including any Certificate of Designations) and Bylaws of Parent,
each as amended to date (collectively, the "PARENT CHARTER DOCUMENTS") and (ii)
the Subsidiary Charter Documents of each of its Significant Subsidiaries (as
defined Rule 1.02 of Regulation of S-X of the SEC), and each such instrument is
in full force and effect. Parent is not in violation of any of the provisions of
the Parent Charter Documents and each Significant Subsidiary of Parent is not in
violation of its respective Subsidiary Charter Documents.
(c) Significant Subsidiaries. Exhibit 21 to Parent's
Annual Report on Form 10-K for the fiscal year ended May 31, 2002 includes all
the Subsidiaries of Parent which are Significant Subsidiaries. All the
outstanding shares of capital stock of, or other equity or voting interests in,
each such Significant Subsidiary have been duly authorized, validly issued and
are fully paid and nonassessable and are owned by Parent, a Subsidiary of
Parent, or Parent and another Subsidiary or Parent, or, in the case of foreign
Significant Subsidiaries, Parent, another Subsidiary of Parent or solely to the
extent required to comply with local laws regarding ownership, a nominee of
Parent or a Subsidiary of Parent, free and clear of all Liens, including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests, except for restrictions imposed by
applicable securities laws, except as would not reasonably be expected to have a
Material Adverse Effect on Parent or a Material Adverse Effect on such
Subsidiary.
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3.2 Capital Structure.
(a) Capital Stock. The authorized capital stock of Parent
consists of: (i) 2,000,000,000 shares of Parent Common Stock, par value $0.001
per share and (ii) 125,000,000 shares of preferred stock, par value $0.001 per
share (the "PARENT PREFERRED STOCK"), of which 2,000,000 shares have been
designated as Series A Participating Preferred Stock, all of which will be
reserved for issuance upon exercise of preferred stock purchase rights (the
"PARENT RIGHTS") issuable pursuant to the Preferred Stock Rights Agreement dated
as of September 25, 2000 by and between Parent and EquiServe Trust Company, N.A.
(formerly Fleet National Bank) (the "PARENT RIGHTS AGREEMENT"), a true and
complete copy of which is filed as Exhibit 4.1 to the Company's Current Report
on Form 8-K filed with the Commission on November 22, 2000. At the close of
business on May 28, 2003: (i) 29,230,405 shares of Parent Common Stock were
issued and outstanding, excluding shares of Parent Common Stock held by Parent
in its treasury, (ii) no shares of Parent Common Stock were issued and held by
Parent in its treasury, and (iii) no shares of Parent Preferred Stock were
issued and outstanding. From May 28, 2003 and through date hereof, there has
been no material change in the capitalization of Parent. All of the outstanding
shares of capital stock of Parent are, and all shares of capital stock of Parent
which may be issued as contemplated by this Agreement will be, when issued, duly
authorized and validly issued, fully paid and nonassessable and not subject to
any preemptive rights. All shares of capital stock of Parent which may be issued
as contemplated by this Agreement will be free of all Liens and will be
registered in compliance with the Securities Act and registered or exempt from
registration or qualification under applicable blue sky laws.
(b) Stock Options. As of the close of business on May 28,
2003: (i) 4,028,209 shares of Parent Common Stock are subject to issuance
pursuant to outstanding options to purchase Parent Common Stock (such options,
whether or not outstanding, "PARENT OPTIONS") under the stock option, stock
award, stock appreciation or phantom stock plans of Parent (the "PARENT STOCK
OPTION PLANS") other than the Parent Purchase Plan, an aggregate of 2,146,206 of
which were unvested, (ii) 1,376,303 shares of Parent Common Stock are reserved
for future issuance under the Parent Purchase Plan, and (iii) 1,091,435 shares
of Parent Common Stock are reserved for future issuance under the Parent Stock
Option Plans. All Parent Options granted since May 28, 2003 have been granted in
the ordinary course of business. All shares of Parent Common Stock subject to
issuance pursuant to the exercise of Parent Options and the Parent Purchase
Plans, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable. There are no commitments or agreements of any
character to which Parent is bound obligating Parent to accelerate the vesting
of any Parent Option as a result of the Parent Merger or the Company Merger
(whether alone or upon the occurrence of any additional or subsequent events).
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation or other similar rights with respect to Parent. There will be no
acceleration of the vesting of any Parent Options held by any employee, director
or consultant of Peace, Source or any other Subsidiary of Peace, pursuant to the
Parent Stock Option Plans or otherwise, as a result of the Parent Merger or the
Company Merger. Upon closing of the Parent Merger, the employees of Source shall
be considered as having terminated their employment with Parent or its
Subsidiaries effective as of such closing under the terms of the Parent Stock
Option Plans and shall have a period of time from such date of termination
within which to exercise any vested Parent Options following which such Parent
Options shall expire in accordance with the terms of the applicable Option
agreements. At the Effective Time of Parent Merger, each Parent Option will be
adjusted so that it will be exercisable (or will become exercisable in
accordance with its terms) for a number of share of Parent Common Stock equal in
fair market value to the consideration
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received by holders of Parent Common Stock pursuant to Section 1.8(a) hereof
pursuant to the formula described in Section 3.2(b) of the Parent Disclosure
Letter.
(c) Voting Debt. No Voting Debt of Parent is issued or
outstanding as of the date hereof.
(d) Other Securities. Except as otherwise set forth in
this Agreement, the Parent Rights Plan or Section 3.2(d) of the Parent
Disclosure Letter, as of the date hereof, there are no securities, options,
warrants, calls, rights, Contracts, commitments, agreements, instruments,
arrangements, understandings, obligations or undertakings of any kind to which
Parent or any of its Subsidiaries is a party or by which any of them is bound
obligating Parent or any of its Subsidiaries to (including on a deferred basis)
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock, Voting Debt or other voting securities of Parent or any
of its Subsidiaries, or obligating Parent or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
Contract, commitment, agreement, instrument, arrangement, understanding,
obligation or undertaking. All outstanding shares of Parent Common Stock, all
outstanding Parent Options, and all outstanding shares of capital stock of each
Subsidiary of Parent have been issued and granted in compliance in all material
respects with (i) all applicable securities laws and all other applicable Legal
Requirements and (ii) all requirements set forth in applicable Contracts. Parent
is not a party to any voting agreement with respect to shares of the capital
stock of, or other equity or voting interests in, Parent or any of its
Subsidiaries with respect to this Agreement or the transactions contemplated
hereby (including the Parent Merger and the Company Merger and, to the Knowledge
of Parent, other than the Parent Voting Agreements and the irrevocable proxies
granted pursuant to the Parent Voting Agreements, there are no irrevocable
proxies and no voting agreements or voting trusts with respect to any shares of
the capital stock of, or other equity or voting interests in, Parent or any of
its Subsidiaries, in each case with respect to this Agreement or the
transactions contemplated hereby (including the Parent Merger and the Company
Merger).
(e) Separation Sub Capital Stock. The authorized capital
stock of Separation Sub consists of 1,000 shares of common stock, par value
$0.001 per share, of which 1,000 shares are issued and outstanding. Parent is
the sole stockholder of Separation Sub and is the legal and beneficial owner of
all 1,000 issued and outstanding shares. Separation Sub was formed by counsel to
Parent at the direction of Parent on May 30, 2003, solely for purposes of
effecting the Parent Merger and the other transactions contemplated hereby.
Except as contemplated by this Agreement, Separation Sub does not hold, nor has
it held, any material assets or incurred any material liabilities nor has
Separation Sub carried on any business activities other than in connection with
the Parent Merger and the transactions contemplated by this Agreement. All of
the outstanding shares of capital stock of Separation Sub have been duly
authorized and validly issued, and are fully paid and nonassessable and not
subject to any preemptive rights.
(f) Merger Sub Capital Stock. The authorized capital
stock of Merger Sub consists of 1,000 shares of common stock, par value $0.001
per share, of which 1,000 shares are issued and outstanding. Parent is the sole
stockholder of Merger Sub and is the legal and beneficial owner of all 1,000
issued and outstanding shares. Merger Sub was formed by counsel to Parent at the
direction of Parent on May 30, 2003, solely for purposes of effecting the
Company Merger and the other transactions contemplated hereby. Except as
contemplated by this Agreement, Merger Sub does not hold, nor has it held, any
material assets or incurred any material liabilities nor has Merger Sub carried
on any business
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activities other than in connection with the Company Merger and the transactions
contemplated by this Agreement. All of the outstanding shares of capital stock
of Merger Sub have been duly authorized and validly issued, and are fully paid
and nonassessable and not subject to any preemptive rights.
3.3 Authority; Non-Contravention; Necessary Consents.
(a) Authority. Each of Parent, Separation Sub and Merger
Sub has all requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate and stockholder
action on the part of Parent, Separation Sub and Merger Sub and no other
corporate proceedings on the part of Parent, Separation Sub or Merger Sub are
necessary to authorize the execution and delivery of this Agreement or to
consummate the Mergers and the other transactions contemplated hereby, subject
only to (i) the adoption and approval of this Agreement and approval of the
Parent Merger by Parent's stockholders and approval of the issuance of Parent
Common Stock in connection with the Company Merger, as required under Delaware
Law and the rules of Nasdaq, and (ii) the filing of the Parent Certificate of
Merger pursuant to Delaware Law. The affirmative vote of the holders of (i) a
majority of the outstanding shares of Parent Common Stock to approve and adopt
this Agreement and approve the Parent Merger and (ii) a majority in interest of
the Parent Common Stock present or represented by proxy at the Parent
Stockholders' Meeting to approve the issuance of Parent Common Stock in
connection with the Company Merger is the only vote of the holders of any class
or series of Parent capital stock necessary to approve and adopt this Agreement,
approve the Parent Merger, approve the Company Merger, and consummate the Parent
Merger and the Company Merger and the other transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent, Separation Sub
and Merger Sub and, assuming due execution and delivery by the Company,
constitutes the valid and binding obligation of each of Parent, Separation Sub
and Merger Sub, enforceable against each of Parent, Separation Sub and Merger
Sub in accordance with its terms.
(b) Non-Contravention. The execution and delivery of this
Agreement by Parent, Separation Sub and Merger Sub does not, and performance of
this Agreement by Parent, Separation Sub and Merger Sub and the consummation of
the Mergers and the transactions contemplated hereby will not: (i) conflict with
or violate the Parent Charter Documents, the certificate of incorporation or
bylaws of Separation Sub, the certificate of incorporation or bylaws of Merger
Sub or any other Subsidiary Charter Documents of any other Subsidiary of Parent;
(ii) subject to compliance with the requirements set forth in Section 3.3(c),
conflict with or violate any material Legal Requirement applicable to Parent,
Separation Sub, Merger Sub or any of Parent's other Subsidiaries or by which
Parent, Separation Sub, Merger Sub or any of Parent's other Subsidiaries or any
of their respective material properties is bound or affected; or (iii) result in
any material breach of or constitute a material default (or an event that with
notice or lapse of time or both would become a material default) under, or
materially impair Parent's or any of its Subsidiaries' rights or materially
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a material Lien on any of the material properties or assets of
Parent or any of its Subsidiaries pursuant to, any Parent Material Contract (as
defined in Section 3.15).
(c) Necessary Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with any Governmental
Entity or any other Person is required to be obtained or made by Parent or any
of its Subsidiaries in connection with the execution and delivery of
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this Agreement or the consummation of the Mergers and other transactions
contemplated hereby and thereby, except for (i) the Necessary Consents, (ii)
those consents, approvals, orders, authorizations, registrations, declarations
or filings that have already been made or obtained, and (iii) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Parent or the Company or materially
adversely affect the ability of the parties hereto to consummate the Mergers
within the time frame in which the Mergers would otherwise be consummated in the
absence of the need for such consent, approval, order, authorization,
registration, declaration or filings.
3.4 SEC Filings; Financial Statements; Internal Controls.
(a) SEC Filings. Parent has filed all required
registration statements, prospectuses, reports, schedules, forms, statements and
other documents (including exhibits and all other information incorporated by
reference) required to be filed by it with the SEC since March 31, 2000. Parent
has made available to the Company all such registration statements,
prospectuses, reports, schedules, forms, statements and other documents in the
form filed with the SEC. All such required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
(including those that Parent may file subsequent to the date hereof) are
referred to herein as the "PARENT SEC REPORTS." As of their respective dates,
the Parent SEC Reports (i) were prepared in accordance and complied in all
material respects with the requirements of the Securities Act, or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Parent SEC Reports and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Parent's
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Financial Statements. Each of the consolidated
financial statements (including, in each case, any related notes thereto)
contained in the Parent SEC Reports (the "PARENT FINANCIALS"), including each
Parent SEC Report filed after the date hereof until the Closing: (i) complied as
to form in all material respects with the published rules and regulations of the
SEC with respect thereto, (ii) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q, 8-K or any successor form under the
Exchange Act), and (iii) fairly presented in all material respects the
consolidated financial position of Parent and its consolidated Subsidiaries as
at the respective dates thereof and the consolidated results of Parent's
operations and cash flows for the periods indicated. The balance sheet of Parent
contained in the Parent SEC Reports as of February 28, 2003 is hereinafter
referred to as the "PARENT BALANCE SHEET." Except as disclosed in the Parent
Financials, since the date of the Parent Balance Sheet, neither Parent nor any
of its Subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise) of a nature required to be disclosed on a consolidated balance sheet
or in the related notes to the consolidated financial statement prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of Parent and its
Subsidiaries taken as a whole, except those liabilities incurred in the ordinary
course of business, consistent with past practice, and liabilities incurred in
connection with this Agreement and the transactions contemplated hereby.
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(c) Internal Controls. Parent has established and
maintains disclosure controls and procedures (as defined in Rules 13a-14 and
15d-14 promulgated under the Exchange Act) designed to ensure that material
information relating to Parent, including its consolidated subsidiaries, is made
known to the Chief Executive Officer and Chief Financial Officer. There are no
significant deficiencies or material weaknesses in the design or operation of
Parent's internal controls which could adversely affect Parent's ability to
record, process, summarize and report financial data. To Parent's Knowledge,
there is no fraud, whether or not material, that involves management or other
employees who have a significant role in Parent's internal controls.
3.5 Absence of Certain Changes or Events. Since the date of the
Parent Balance Sheet through the date hereof there has not been: (i) any
Material Adverse Effect on Parent; (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of Parent's or any of its Subsidiaries' capital
stock, or any purchase, redemption or other acquisition by Parent or any of its
Subsidiaries of any of Parent's capital stock or any other securities of Parent
or its Subsidiaries or any options, warrants, calls or rights to acquire any
such shares or other securities except for repurchases from employees following
their termination pursuant to the terms of their pre-existing stock option or
purchase agreements; (iii) any split, combination or reclassification of any of
Parent's or any of its Subsidiaries' capital stock, (iv) any material change by
Parent in its accounting methods, principles or practices, except as required by
concurrent changes in GAAP; (v) any material revaluation by Parent of any of its
assets, including writing down the value of capitalized inventory or writing off
notes or accounts receivable other than in the ordinary course of business
consistent with past practice; (vi) any written communication from Nasdaq with
respect to the delisting of the Parent Common Stock; or (vii) any agreement,
whether in writing or otherwise, to take any action described in this section by
Parent or any of its Subsidiaries.
3.6 Taxes.
(a) Tax Returns and Audits.
(i) Parent and each of its Subsidiaries have
filed all required Tax Returns relating to any and all Taxes concerning or
attributable to Parent, its Subsidiaries or their respective operations. Such
Tax Returns are true and correct, have been completed in accordance with
applicable law and were timely filed, except, in each case, as would not be
material to Parent.
(ii) Parent and each of its Subsidiaries have
paid all Taxes to be paid and withheld with respect to their employees or other
third parties and paid over to the appropriate Taxing authority all Taxes and
any other amounts required to be paid or withheld. Such Taxes were timely paid
except as would not be material to Parent.
(iii) Neither Parent nor any of its Subsidiaries
is currently delinquent in the payment of any Tax, nor is there any material Tax
deficiency outstanding, assessed or, to the Knowledge of Parent, proposed
against Parent or any of its Subsidiaries, nor has Parent or any of its
Subsidiaries executed any outstanding waiver of any statute of limitations on or
extension of the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Tax
Return of Parent or any of its Subsidiaries is presently in progress, nor has
Parent or any of its Subsidiaries been notified of any
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request for such an audit or other examination. No outstanding adjustment
relating to any Tax Return filed by Parent or any of its Subsidiaries has been
proposed formally or, to the Knowledge of Parent or any of its Subsidiaries,
informally by any tax authority to Parent, any of its Subsidiaries or any
representative thereof.
(v) Neither Parent nor any of its Subsidiaries
has any liabilities for unpaid Taxes as of the date of the Parent Balance Sheet
which have not been accrued or reserved on the Parent Balance Sheet in
accordance with GAAP, whether asserted or unasserted, contingent or otherwise
and neither Parent nor any of its Subsidiaries has incurred any liability for
Taxes since the date of the Parent Balance Sheet other than in the ordinary
course of business, consistent with past practice.
(vi) There are no Liens on the assets of Parent
or any of its Subsidiaries relating to or attributable to Taxes, other than
Liens for Taxes not yet due and payable. To the Knowledge of Parent, there is no
basis for the assertion of any material claim relating or attributable to Taxes,
which, if adversely determined, would result in any Lien for Taxes on the assets
of Parent or any of its Subsidiaries.
(vii) Neither Parent nor any of its Subsidiaries
has filed any consent agreement under Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as defined in Section 341(f)(4) of the Code) owned by Parent or any of
its Subsidiaries.
(viii) Neither Parent nor any of its Subsidiaries
is, nor has been at any time, a "United States Real Property Holding
Corporation" within the meaning of Section 897(c)(2) of the Code.
(ix) Neither Parent nor any of its Subsidiaries
(a) has ever been a member of an affiliated group (within the meaning of Code
ss.1504(a)) filing a consolidated federal income Tax Return (other than a group
the common parent of which was Parent), (b) is a party to any Tax sharing,
indemnification or allocation agreement (other than between Parent and any of
its Subsidiaries), nor does Parent or any of its Subsidiaries owe any amount
under any such agreement, (c) has any material liability for the Taxes of any
person (other than Parent or any of its Subsidiaries) under Treas. Reg. ss.
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise, or (d) is a party to any
joint venture, partnership or other agreement that could be treated as a
partnership for Tax purposes.
(x) Neither Parent nor any of its Subsidiaries
has constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock intended to qualify for tax-free
treatment under Section 355 of the Code (x) in the two years prior to the date
of this Agreement or (y) in a distribution which could otherwise constitute part
of a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with the Company Merger.
(xi) Neither Parent nor any of its Affiliates has
taken or agreed to take any action that would prevent the Company Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Parent has no Knowledge of any agreement, plan, fact or other
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circumstance that would prevent the Company Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(xii) Parent has obtained a ruling from the United
States Internal Revenue Service (the "IRS") that the distribution of Source
Common Stock to the stockholders of Parent (which will be effected through the
Parent Merger) will qualify as a tax-free distribution under Section 355 of the
Code. The information, representations and statements submitted to the IRS by
Parent in obtaining such ruling were at the time of submission and, as of the
date hereof, are, materially true and correct, and neither Parent nor any of its
Affiliates has taken, or agreed to take, or will knowingly take any action that
would make any material representation given to the IRS for such IRS ruling
materially untrue.
3.7 Intellectual Property.
(a) To the Knowledge of Parent, (i) the operation of the
Solutions Group Business (as defined below) of Parent and each of its
Subsidiaries, including their products and services, does not infringe or
misappropriate in any material respect the Intellectual Property of any third
party or constitute unfair competition or unfair trade practices under the laws
of any jurisdiction, and (ii) Parent and its Subsidiaries (after giving effect
to the Separation Agreements) own or possess sufficient rights to all material
Intellectual Property used in or necessary for the operation of the Solutions
Group Business. "SOLUTIONS GROUP BUSINESS" shall mean the business of Parent
contemplated to be conducted by Parent (after giving effect to the Separation
Agreements) following the distribution of the Source Common Stock to each holder
of Parent Stock and shall not include the business of Source (after giving
effect to the Separation Agreements), including the development, licensing or
provision of the Palm operating system.
(b) Neither Parent nor any of its Subsidiaries have
received any written notice from any third party as of the date hereof, and, to
the Knowledge of Parent, there is no other assertion or pending threat from any
third party, that the operation of the Solutions Group Business by Parent or any
of its Subsidiaries, or any of the products or services of the Solutions Group
Business, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or unfair trade practices under the laws
of any jurisdiction. Neither Parent nor any its Subsidiaries have brought or
have been a party to any suits, arbitrations or other adversarial proceedings
with respect to a third party's Intellectual Property that remain unresolved.
(c) To the Knowledge of Parent, as of the date hereof, no
person is infringing or misappropriating any material Intellectual Property
owned or exclusively licensed by Parent or any of its Subsidiaries relating to
the Solutions Group Business. Neither Parent nor any its Subsidiaries have
brought or have been a party to any suits, arbitrations or other adversarial
proceedings with respect to the Intellectual Property of the Solutions Group
Business against any third party that remain unresolved.
(d) Parent and its Subsidiaries are not subject to any
judgment, order, writ, injunction or decree of any court or any Federal, state,
local, foreign or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any arbitrator, which
restricts or impairs the use of any Parent Intellectual Property used in the
Solutions Group Business. The Intellectual Property of the Solutions Group
Business owned or exclusively licensed by Parent and its Subsidiaries is free
and clear of any material Liens.
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(e) Parent and each of its Subsidiaries are in material
compliance with, and have not materially breached any term of any contracts,
licenses or other agreements in which Parent and its Subsidiaries have granted
or received any Intellectual Property of the Solutions Group Business ("PARENT
IP AGREEMENTS").
(f) The Mergers will not result in the termination or
breach of any Parent IP Agreements, or any material loss or change in the rights
or obligations of Parent or its Subsidiaries or any third party to such Parent
IP Agreements. The Mergers will not result in the obligation of Parent or its
Subsidiaries to pay any consideration, royalties or other amounts to any third
party in excess of those amounts otherwise owed by Parent or its Subsidiaries
immediately prior to the Mergers.
(g) Parent and each of its Subsidiaries has complied in
all material respects with all Legal Requirements relating to the collection and
use of user information gathered in the course of its respective operations, and
Parent and each of its Subsidiaries has complied with the rules, policies and
procedures established by Parent from time to time with respect to the foregoing
in each case, in the aggregate, except as would not result in a Material Adverse
Effect on Parent.
3.8 Compliance; Permits.
(a) Compliance. Neither Parent nor any of its
Subsidiaries is in conflict with, or in default or in violation of any material
Legal Requirement applicable to Parent or any of its Subsidiaries or by which
Parent or any of its Subsidiaries or any of their respective businesses or
properties is, or Parent believes is reasonably likely to be, bound or affected,
except, in each case, or in the aggregate, for conflicts, violations and
defaults that would not cause Parent to lose any material benefit or incur any
material liability. To Parent's Knowledge, no investigation or review by any
Governmental Entity is pending or has been threatened in writing against Parent
or any of its Subsidiaries. There is no judgment, injunction, order or decree
binding upon Parent or any of its Subsidiaries which has or would reasonably be
expected to have the effect of prohibiting or impairing any business practice of
Parent or any of its Subsidiaries, any acquisition of property by Parent or any
of its Subsidiaries or the conduct of business by Parent and its Subsidiaries as
currently conducted.
(b) Permits. Parent and its Subsidiaries hold, to the
extent legally required, all Permits that are required for the operation of the
Solutions Group business of Parent (collectively, "PARENT PERMITS") except where
the failure to hold such Permits would not be material to Parent. As of the date
hereof, no suspension or cancellation of any of the Parent Permits is pending
or, to the Knowledge of Parent, threatened. Parent and its Subsidiaries are in
compliance in all material respects with the terms of the Parent Permits.
3.9 Litigation. There are no material claims, suits, actions or
proceedings (i) pending or, to the Knowledge of Parent, threatened against
Parent or any of its Subsidiaries, or (ii) pending or, to the Knowledge of
Parent, threatened against Source or any of its Subsidiaries for which Parent or
any of its Subsidiaries has or may have any indemnity obligation pursuant to any
Separation Agreement required to be listed in Section 3.21(a) of the Parent
Disclosure Letter to indemnify Source or any of its Subsidiaries, in each case
before any court, governmental department, commission, agency, instrumentality
or authority, or any arbitrator.
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3.10 Brokers' and Finders' Fees. The Company shall not be liable
for any brokerage or finders' fees or agents' commissions or any similar charges
incurred by Parent in connection with this Agreement or any transaction
contemplated hereby.
3.11 Transactions with Affiliates. Except as set forth in the
Parent SEC Reports, since the date of Parent's last proxy statement filed with
the SEC until the date hereof, no event or transaction has occurred of the type
that would be reportable by Parent pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
3.12 Parent Employee Benefit Plans.
(a) Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(i) "PARENT EMPLOYEE AGREEMENT" shall mean each
employment, severance or consulting agreement between Parent or any Parent ERISA
Affiliate and any current Parent Employee or former Parent Employee, to the
extent Parent or any Parent ERISA Affiliate has or may have any liability or
obligation, except to the extent a Parent Employee Agreement provides for
"at-will" employment and does not provide for severance payments or benefits.
(ii) "PARENT EMPLOYEE PLAN" shall mean each plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been, within the past three years,
maintained, contributed to, or required to be contributed to, by Parent or any
Subsidiary of Parent or any Parent ERISA Affiliate for the benefit of any
current or former or retired employee, consultant or director of Parent or any
Parent ERISA Affiliate (each a "PARENT EMPLOYEE"), or with respect to which
Parent or any Parent ERISA Affiliate has or may have any liability or
obligation.
(iii) "PARENT ERISA AFFILIATE" shall mean any
person or entity under common control with Parent or any Subsidiary within the
meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations
issued thereunder.
(b) Parent Employee Plan Compliance. Parent and its
Parent ERISA Affiliates have performed in all material respects all obligations
required to be performed by them under each Parent Employee Plan, and each
Parent Employee Plan has been established and maintained in all material
respects in accordance with its terms and in material compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code. Any Parent Employee Plan intended to be qualified
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code (i) has either applied for, prior to the expiration
of the requisite period under applicable Treasury Regulations or IRS
pronouncements, or obtained a favorable determination, notification, advisory
and/or opinion letter, as applicable, as to its qualified status from the IRS or
still has a remaining period of time under applicable Treasury Regulations or
IRS pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination, and (ii) incorporates or has been
amended to incorporate all provisions required to comply with the Tax
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Reform Act of 1986 and subsequent legislation. For each Parent Employee Plan
that is intended to be qualified under Section 401(a) of the Code there has been
no event, condition or circumstance that has adversely affected or is likely to
adversely affect such qualified status, except as would not result in material
liability to Parent or its Subsidiaries. No "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Parent Employee Plan. There are no actions, suits or claims pending, or, to the
Knowledge of Parent, threatened or reasonably anticipated (other than routine
claims for benefits) against any Parent Employee Plan or against the assets of
any Parent Employee Plan. Each Parent Employee Plan can be amended, terminated
or otherwise discontinued after the Effective Time of the Company Merger in
accordance with its terms, without material liability to the Company, Parent or
any of its Parent ERISA Affiliates (other than ordinary administration
expenses). There are no audits, inquiries or proceedings pending or, to the
Knowledge of Parent or any Parent ERISA Affiliates, threatened by the IRS or
DOL, or any other Governmental Entity with respect to any Parent Employee Plan.
Neither Parent nor any Parent ERISA Affiliate is subject to any penalty or tax
with respect to any Parent Employee Plan under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code. Parent and each Parent ERISA Affiliate
have timely made all contributions and other payments required by and due under
the terms of each Parent Employee Plan, except as would not result in material
liability to Parent or its Subsidiaries.
(c) No Pension or Welfare Plans. Neither Parent nor any
Parent ERISA Affiliate has ever maintained, established, sponsored, participated
in, or contributed to, any (i) Parent Employee Plan which is a Pension Plan and
is subject to Title IV of ERISA or Section 412 of the Code, (ii) Pension Plan
which is a "multiemployer plan," as defined in Section 3(37) of ERISA, (iii)
"multiple employer plan" as defined in ERISA or the Code, or (iv) a "funded
welfare plan" within the meaning of Section 419 of the Code. Neither the Parent
nor any ERISA Affiliate has maintained, established, sponsored, participated in
or contributed to any self-insured Parent Employee Plan or created any such
similar obligation under any Parent Employee Agreement nor has Parent or any
ERISA Affiliate established a policy or practice that would give rise to the
creation of a self-insured Parent Employee Plan or obligation under any Parent
Employee Agreement (including any such plan or practice pursuant to which a
stop-loss policy or contract applies).
(d) No Post-Employment Obligations. No Parent Employee
Plan provides, or reflects or represents any liability to provide
post-termination or retiree welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and neither
Parent nor any Parent ERISA Affiliate has ever represented, promised or
contracted (other than in written form) to any Parent Employee (either
individually or to Parent Employees as a group) or any other person that such
Parent Employee(s) or other person would be provided with post-termination or
retiree welfare benefits, except to the extent required by statute.
(e) Health Care Compliance. Neither Parent nor any Parent
ERISA Affiliate has, prior to the Effective Time of the Company Merger and in
any material respect, violated any of the health care continuation requirements
of COBRA, the requirements of the Family Medical Leave Act of 1993, as amended,
the requirements of the Health Insurance Portability and Accountability Act of
1996, the requirements of the Women's Health and Cancer Rights Act of 1998, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of state law applicable to
its Parent Employees.
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(f) Loans and Advances. Neither Parent nor any Parent
ERISA Affiliate has, since July 30, 2002, extended credit, arranged for the
extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer (or equivalent
thereof) of Parent.
(g) Employment Matters. Parent: (i) is in compliance in
all material respects with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Parent Employees; (ii) is not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any governmental authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Parent Employees (other than routine payments to be made in
the normal course of business and consistent with past practice). There are no
pending, threatened or reasonably anticipated claims or actions against Parent
under any workers' compensation policy or long-term disability policy. Neither
Parent nor any Parent ERISA Affiliate has or reasonably anticipates any direct
or indirect material liability with respect to any misclassification of any
person as an independent contractor rather than as an employee, or with respect
to any employee leased from another employer.
(h) Labor. No work stoppage or labor strike against
Parent or any Parent ERISA Affiliate is pending, or to the Knowledge of Parent,
threatened or reasonably anticipated. Parent does not know of any activities or
proceedings of any labor union to organize any Parent Employees. There are no
actions, suits, claims, labor disputes or grievances pending, or, to the
Knowledge of Parent, threatened or reasonably anticipated relating to any labor,
safety or discrimination matters involving any Parent Employee, including
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to Parent. Neither Parent nor any of its Subsidiaries has
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act. Parent is not presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Parent Employees and no collective bargaining agreement is being negotiated
with respect to Parent Employees. Neither Parent nor any of its Subsidiaries
have incurred any material liability or material obligation under the Worker
Adjustment and Retraining Notification Act or any similar state or local law
which remains unsatisfied.
(i) Parent International Employee Plan. Each Parent
Employee Plan that has been adopted or maintained by Parent or any Parent ERISA
Affiliate, whether informally or formally, or with respect to which Parent or
any Parent ERISA Affiliate will or may have any material liability, for the
benefit of Parent Employees who perform services outside the United States (each
a "PARENT INTERNATIONAL EMPLOYEE PLAN") has been established, maintained and
administered in material compliance with its terms and conditions and with the
requirements prescribed by any and all statutory or regulatory laws that are
applicable to such Parent International Employee Plan. Furthermore, no Parent
International Employee Plan has material unfunded liabilities, that as of the
Effective Time of the Company Merger, will not be offset by insurance or fully
accrued.
(j) Effect of Transactions. The execution of this
Agreement and the consummation of the transactions contemplated hereby will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Parent Employee Plan, Parent Employee Agreement,
trust or loan that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund
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benefits with respect to any Parent Employee. No payment or benefit which will
or may be made by Parent or any Parent ERISA Affiliates with respect to any
Parent Employee will be characterized as a "parachute payment," within the
meaning of Section 280G(b)(2) of the Code. There is no contract, agreement, plan
or arrangement to which Parent or any of Parent ERISA Affiliates is a party or
by which it is bound to compensate any Parent Employee for excise taxes paid
pursuant to Section 4999 of the Code.
3.13 Title to Properties.
(a) Properties. Section 3.13 of the Parent Disclosure
Letter lists, as of the date hereof, the real property owned by Parent or any of
its Subsidiaries. All current leases of real property of Parent or any of its
Subsidiaries are in full force and effect, are valid and effective in accordance
with their respective terms, and there is not, under any of such leases, any
existing material default or material event of default by Parent nor any of its
Subsidiaries (or event which with notice or lapse of time, or both, would
constitute a material default).
(b) Valid Title. Parent and each of its Subsidiaries has
good and valid title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of its material tangible properties and assets,
real, personal and mixed, used or held for use in the Solutions Group Business,
free and clear of any Liens except (i) as reflected in the Parent Financials or
(ii) Permitted Liens.
3.14 Environmental Matters.
(a) Hazardous Material. Except as would not result in a
material liability to Parent, no underground storage tanks and no amount of any
Hazardous Material are present in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity in effect as of the date hereof,
as a result of the actions of Parent or any of its Subsidiaries or any affiliate
of Parent, or, to the Knowledge of Parent, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that Parent or any of
its Subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not
result in a material liability to Parent, neither Parent nor any of its
Subsidiaries has transported, stored, used, manufactured or, disposed of,
released or exposed its employees or others to Hazardous Materials in violation
of any Legal Requirement in effect on or before the Closing Date. Except as
would not result in a material liability to Parent, neither Parent nor any of
its Subsidiaries has conducted any Hazardous Material Activities in violation of
any Legal Requirement promulgated by any Governmental Entity in effect prior to
or as of the date hereof to prohibit, regulate or control Hazardous Materials or
any Hazardous Material Activity.
3.15 Contracts.
(a) Material Contracts. For purposes of this Agreement,
"PARENT MATERIAL CONTRACT" shall mean any "material contracts" (as such term is
defined in Item 601(b)(10) of Regulation S-K of the SEC) with respect to Parent
and its Significant Subsidiaries (including any agreement that is required to be
filed in a future filing) of the Solutions Group Business and any Contract, or
group of Contracts of the Solutions Group Business with a Person (or group of
affiliated Persons), the termination or breach of which would be reasonably
expected to have a material adverse effect on any material
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product or service offerings of the Solutions Group Business of Parent or
otherwise have a Material Adverse Effect on Parent.
(b) No Breach. All Parent Material Contracts are valid
and in full force and effect except to the extent they have previously expired
in accordance with their terms or if the failure to be in full force and effect,
individually or in the aggregate, would not reasonably be expected to be
material to Parent. Neither Parent nor any of its Subsidiaries has violated any
provision of, or committed or failed to perform any act which, with or without
notice, lapse of time or both would constitute a default under the provisions
of, any Parent Material Contract, except in each case for those violations and
defaults which, individually or in the aggregate, would not reasonably be
expected to be material to Parent.
3.16 Disclosure. None of the information supplied or to be supplied
by or on behalf of Parent, Separation Sub or Merger Sub for inclusion or
incorporation by reference in the Registration Statement or the Source
Registration Statement (as defined in Section 5.1(b)) will, at the time the
Registration Statement or the Source Registration Statement becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. None of the information supplied or to be
supplied by or on behalf of Parent, Separation Sub and Merger Sub for inclusion
or incorporation by reference in the Prospectus/Proxy Statement, will, at the
time it is mailed to the stockholders of Parent and the Company, at the time of
the Parent Stockholders' Meeting, at the time of the Company Stockholders'
Meeting, as of the Effective Time of the Parent Merger, or as of the Effective
Time of the Company Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. None of the information supplied or to be
supplied by or on behalf of Parent, Separation Sub and Merger Sub for inclusion
or incorporation by reference in the Source Prospectus (as defined in Section
5.1(b)), will, at the time it is mailed to the stockholders of Parent, at the
time of the Parent Stockholders' Meeting or as of the Effective Time of the
Parent Merger contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. The Prospectus/Proxy Statement and the Source Prospectus
will comply as to form in all material respects with the applicable provisions
of the Securities Act and the Exchange Act and the rules and regulations
promulgated by the SEC thereunder. Notwithstanding the foregoing, no
representation or warranty is made by Parent, Separation Sub or Merger Sub with
respect to statements made or incorporated by reference therein about the
Company supplied by the Company for inclusion or incorporation by reference in
the Registration Statement or the Prospectus/Proxy Statement.
3.17 Board Approval; Subsidiary Stockholder Approval. The Board of
Directors of Parent has, by resolutions duly adopted by unanimous vote at a
meeting of all Directors duly called and held and not subsequently rescinded or
modified on or prior to the date hereof in any way (the "PARENT BOARD APPROVAL")
(i) determined that the Mergers are fair to, and in the best interests of,
Parent and its stockholders and declared the Mergers to be advisable, (ii)
approved this Agreement and the transactions contemplated hereby, including the
Mergers and the issuance of Parent Common Stock in the Company Merger, and (iii)
unanimously recommended that the stockholders of Parent adopt and approve this
Agreement and approve the Parent Merger and approve the issuance of Parent
Common Stock in connection with the Company Merger and directed that such matter
be submitted to Parent's stockholders at the Parent Stockholders' Meeting.
Parent has approved the Parent Merger as Separation
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Sub's sole stockholder and has approved the Company Merger as Merger Sub's sole
stockholder, which approvals have not been rescinded, withdrawn or modified.
3.18 Fairness Opinion. Parent's Board of Directors has received an
opinion from Morgan Stanley & Co., dated as of June 3, 2003, to the effect that,
as of such date, the Exchange Ratio is fair, from a financial point of view, to
Parent, and has delivered to the Company a written copy of such opinion.
3.19 Rights Plan. Parent has taken all action so that (i) the
Company shall not be an "Acquiring Person" under the Parent Rights Agreement and
(ii) the entering into of this Agreement and the Mergers and the other
transactions contemplated hereby will not result in the grant of any rights to
any Person under the Parent Rights Agreement or enable or require the Parent
Rights to be exercised, distributed or triggered.
3.20 Takeover Statutes. Neither Parent nor any Affiliate is, or has
been during the last three years, an "interested stockholder" (as defined in
Section 203 of the Delaware Law) of the Company, other than as contemplated
pursuant to this Agreement.
3.21 Separation Agreements.
(a) Schedule. Section 3.21(a) of the Parent Disclosure
Letter sets forth as of the date hereof a true and complete list of all
Separation Agreements entered, or currently contemplated to be entered, into.
True and complete copies of all Separation Agreements listed in Section 3.21(a)
of the Parent Disclosure Letter have been delivered or made available to the
Company. "SEPARATION AGREEMENT" shall mean any Contracts between or among Parent
and/or any of its Subsidiaries (other than Source and its Subsidiaries), on the
one part, and Source and/or any of Source's Subsidiaries, on the other part,
which Contracts would govern, following the Parent Merger, the commercial or
economic relationships between Parent and/or any of its Subsidiaries (other than
Source and its Subsidiaries), on the one part, and Source and/or any of Source's
Subsidiaries, on the other part, and/or define the allocation of assets and
liabilities between or among Parent and/or any of its Subsidiaries (other than
Source and its Subsidiaries), on the one part, and Source and/or any of Source's
Subsidiaries, on the other part, in all cases following the Parent Merger.
(b) No Conflict. The execution and delivery of the
Separation Agreements required to be listed in Section 3.21(a) of the Parent
Disclosure Letter by Parent does not, and the performance of such Separation
Agreements by Parent and its Subsidiaries and the consummation of the
transactions contemplated thereby by Parent will not: (i) conflict with or
violate the Parent Charter Documents or the Subsidiary Charter Documents of any
Subsidiary of Parent, (ii) conflict with or violate any material Legal
Requirement applicable to Parent or any of its Subsidiaries or by which Parent
or any of its Subsidiaries or any of their respective material properties is
bound or affected, or (iii) result in any material breach of or constitute a
material default (or an event that with notice or lapse of time or both would
become a material default) under, or materially impair the rights of Parent or
its Subsidiaries (after giving effect to the Parent Merger and the transactions
contemplated by the Separation Agreements) or materially alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a material Lien on any of the material properties or assets of
Parent or any of its Subsidiaries (after giving effect to the Parent Merger and
the transactions contemplated by the Separation Agreements) pursuant to, any
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Parent Contract, except as would not reasonably be expected to be material to
Parent. Section 3.21(b) of the Parent Disclosure Letter lists all consents,
waivers and approvals under any of the Contracts of Parent or any of its
Subsidiaries required to be obtained in connection with the consummation of the
transactions contemplated by the Separation Agreements, which, if individually
or in the aggregate are not obtained, would result in a material loss of
benefits to the Surviving Corporation in the Parent Merger (after giving effect
to the Parent Merger and the transactions contemplated by the Separation
Agreements) or would prevent or materially impair the consummation of the
transactions contemplated by the Parent Merger or the Separation Agreements.
(c) Nasdaq Requirements. As of February 28, 2003 and, to
the Knowledge of Parent, as of the date hereof, Source substantially met all of
the requirements under Rule 4420(b) of the National Association of Securities
Dealers, Inc. Manual (the "MANUAL") to be designated for Nasdaq. As of the date
hereof, Source substantially met all of the requirements under Rule 4350 of the
Manual required to be met by issuers prior to designation on Nasdaq.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company.
(a) Ordinary Course. During the period from the date
hereof and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time of the Company Merger, the Company
shall and shall cause each of its Subsidiaries to, except as otherwise expressly
contemplated by this Agreement or Section 4.1 of the Company Disclosure Letter
or to the extent that Parent shall otherwise consent in writing, (i) carry on
its business in the usual, regular and ordinary course, in all material respects
and in substantially the same manner as heretofore conducted and in material
compliance with all applicable laws and regulations, (ii) pay its debts and
taxes when due, pay or perform other material obligations when due (provided
that the Company shall not pre-pay or accelerate payment of obligations outside
the ordinary course of its business consistent with past practice) subject to
any good faith dispute of such debts, taxes or obligations, (iii) use
commercially reasonable efforts to collect accounts receivables when due and not
take any affirmative action to extend credit outside the ordinary course of
business consistent with past practice, and (iv) use commercially reasonable
efforts consistent with past practice and policies to (x) preserve intact its
present business organization, (y) keep available the services of its present
executive officers and Company Employees, and (z) preserve its relationships
with customers, suppliers, licensors, licensees, and others with which it has
business dealings In addition, the Company shall promptly notify in writing
Parent of any material adverse event involving its business or operations.
(b) Required Consent. In addition, without limiting the
generality of Section 4.1(a), except as permitted by the terms of this Agreement
or Section 4.1 of the Company Disclosure Letter, without the prior written
consent of Parent, during the period from the date hereof and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Effective Time of the Company Merger, the Company shall not do any of the
following, and shall not permit any of its Subsidiaries to do any of the
following:
(i) Enter into any new line of business;
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(ii) Declare, set aside or pay any dividends on
or make any other distributions (whether in cash, stock, equity securities or
property) in respect of any capital stock or split, combine or reclassify any
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any capital stock, other than any
such transaction by a wholly-owned Subsidiary of it that remains a wholly-owned
Subsidiary of it after consummation of such transaction, in the ordinary course
of business consistent with past practice;
(iii) Purchase, redeem or otherwise acquire,
directly or indirectly, any shares of its capital stock or the capital stock of
its Subsidiaries, except repurchases of unvested shares at cost in connection
with the termination of the employment relationship with any employee pursuant
to stock option or purchase agreements then in effect;
(iv) Issue, deliver, sell, authorize, pledge or
otherwise encumber any shares of capital stock, Voting Debt or any securities
convertible into shares of capital stock or Voting Debt, or subscriptions,
rights, warrants or options to acquire any shares of capital stock or Voting
Debt or any securities convertible into shares of capital stock or Voting Debt,
or enter into other agreements or commitments of any character obligating it to
issue any such securities or rights, other than (a) issuances of Company Common
Stock upon the exercise of Company Options, Company Warrants or other rights of
the Company existing on the date hereof in accordance with their present terms,
(b) issuance of shares of Company Common Stock to participants in the Company
Purchase Plan pursuant to the terms thereof, (c) the grant of stock options at
the then current fair market value of the Company Common Stock to newly hired
non-officer employees of the Company, in the ordinary course of business
consistent with past practice, (d) the grant of stock options at the then
current fair market value of the Company Common Stock to existing non-officer
employees of the Company in connection with the promotion of such employees, in
the ordinary course of business consistent with past practice, or (e) the grant
of stock options at the then current fair market value of the Company Common
Stock to existing non-officer employees of the Company in connection with the
retention of such employees, provided that in the case of (c), (d) and (e) that
the number of shares subject to issuance upon exercise of such stock option
grants shall not exceed 50,000 in total to any single individual or 2,000,000 in
the aggregate and have a vesting schedule no more favorable than one quarter of
the shares subject to such stock option vesting upon the first anniversary of
the date of grant and 1/48 of the shares subject to such stock option vesting on
each monthly anniversary of the date of grant thereafter and do not accelerate,
or become subject to acceleration, directly or indirectly, as a result of the
approval of or consummation of the Mergers and/or termination of employment
following the Mergers, other than acceleration of twenty-five percent (25%) of
the shares of Company Common Stock subject to such award following a
"Termination" (as such term is defined in the Company Stock Plans) without
"Cause" (as such term is defined in the Company Stock Plans) within one year
from the date a "Corporate Transaction" (as such term is defined in the Company
Stock Plans);
(v) Cause, permit or propose any amendments to
the Company Charter Documents or any of the Subsidiary Charter Documents of the
Company's Subsidiaries;
(vi) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity or voting interest in or a
portion of the assets of, or by any other manner, any business or any Person or
division thereof, or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the business of the Company;
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(vii) Enter into, amend or renew any Contract with
a telecommunications carrier relating to the provision or development of Company
Products for wireless communications (a "CARRIER CONTRACT"), provided that such
Parent consent will not be unreasonably withheld or delayed with respect to any
Carrier Contract substantially in the ordinary course of business consistent
with past practice (any such Carrier Contract, a "CARRIER TRANSACTION").
(viii) Enter into any binding agreement, agreement
in principle, letter of intent, memorandum of understanding or similar agreement
with respect to any joint venture, strategic partnership or alliance, other than
a Carrier Transaction;
(ix) Sell, lease, license, encumber or otherwise
dispose of any properties or assets except (a) sales of inventory in the
ordinary course of business consistent with past practice, (b) the sale, lease
or disposition (other than through licensing) of property or assets which are
not material, individually or in the aggregate, to the business of Company and
its Subsidiaries, including used material, equipment and furniture not material
to the business, or (c) the sale of Company Products in the ordinary course of
business consistent with past practice, other than a Carrier Transaction;
(x) Make any loans, advances or capital
contributions to, or investments in, any other Person, other than employee
advances for travel and entertainment expenses made in the ordinary course of
business consistent with past practice provided such employee loans are in
compliance with applicable law, other than ordinary course funding to
Subsidiaries exclusively in order to fund operations in amounts consistent with
prior periods;
(xi) Except as required by GAAP or the SEC as
concurred in by its independent auditors and following notice to Parent, make
any material change in its methods or principles of accounting since the date of
the Company Balance Sheet;
(xii) Make or change any material Tax election,
settle or compromise any claim or assessment in respect of Taxes or consent to
any extension or waiver of any limitation period with respect to any claim or
assessment for Taxes;
(xiii) Except as required by GAAP and following
notice to Parent, revalue any of its assets except in the ordinary course of
business in an amount that is not material to the Company and its Subsidiaries;
(xiv) (a) Pay, discharge, settle or satisfy any
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction for money of liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms, (b)
pay, discharge or settle any litigation (whether or not commenced prior to the
date of this Agreement), (c) pay, discharge, settle or satisfy any claims
(including any Tax claim), other than the payment, discharge, settlement or
satisfaction for money, of claims not material to the Company, or (d) waive the
benefits of, agree to modify in any manner, terminate, release any person from
or knowingly fail to enforce any confidentiality or similar agreement to which
Company or any of its Subsidiaries is a party or of which Company or any of its
Subsidiaries is a beneficiary;
(xv) (a) Increase in any manner the amount of
base compensation of any Employee of the Company or any Subsidiary of the
Company, except for increases in connection with
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ordinary course focal reviews and in an amount (the amount of any such increase
for an individual being determined to be the amount of any increase on an annual
basis) that does not exceed $600,000 in the aggregate, (b) materially increase
the amount of employee benefits of any Employee or director of the Company or
any Subsidiary of the Company, except pursuant to contractual arrangements or a
Company Employee Plan in effect as of the date hereof, except upon the
expiration by its terms of any such Company Employee Plan solely in connection
with the renewal of such Company Employee Plan for the period after December 31,
2003 for a renewal term consistent with past practices and that provides no
greater benefits than are currently provided under such Company Employee Plan,
(c) pay any bonus to any Employee or director of the Company or any Subsidiary
of the Company, except pursuant to contractual arrangements or a Company
Employee Plan in effect as of the date hereof, (d) grant severance or
termination pay to any Employee or director of the Company or any Subsidiary of
the Company, except pursuant to contractual arrangements or a Company Employee
Plan in effect as of the date hereof, (e) adopt or amend or make any commitment
to adopt or amend any Company Employee Plan, except in connection with the
renewal of any such Company Employee Plan, upon the natural expiration of such
Company Employee Plan, on terms substantially similar to those in effect as of
the date hereof, (f) waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of Company Options or Company Restricted
Stock, or reprice any Company Options or authorize cash payments in exchange for
any Company Options, (g) enter into any employment, severance, termination or
indemnification agreement with any Company Employee or enter into any collective
bargaining agreement (other than offer letters and letter agreements entered
into in the ordinary course of business consistent with past practice with
employees who are terminable "at will"), (h) make any material oral or written
representation or commitment with respect to any material aspect of any Company
Employee Plan that is not materially in accordance with the existing written
terms and provision of such Company Employee Plan, (i) grant any stock
appreciation right, phantom stock award, stock-related award or performance
award (whether payable in cash, shares or otherwise) to any Person (including
any Company Employee), other than as permitted pursuant to Section
4.1(b)(iv)(c), (d) and (e), (j) enter into any agreement with any Company
Employee the benefits of which are (in whole or in part) contingent or the terms
of which are materially altered in favor of the Company Employee upon the
occurrence of a transaction involving Company of the nature contemplated hereby;
(xvi) Grant any exclusive rights with respect to
any Company Intellectual Property, other than pursuant to a Carrier Transaction;
(xvii) Enter into, amend or renew any Contracts
containing any non-competition or exclusivity restrictions, or otherwise subject
the Surviving Corporation or Parent, or any of their respective businesses, to
any other material restrictions relating to the Company's business activities
following the Closing; other than a Carrier Transaction;
(xviii) Enter into any agreement or commitment the
effect of which would be to grant to a third party following the Company Merger
any actual or potential right of license to any Intellectual Property owned
prior to Closing by Parent or any of its Subsidiaries;
(xix) Engage in any action that could reasonably
be expected to cause the Company Merger to fail to qualify as a "reorganization"
under Section 368(a) of the Code;
(xx) Hire or offer to hire (a) any officer level
employees or (b) other employees with an annual base salary of more than
$125,000;
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(xxi) Incur any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another Person, enter into any "keep well" or other agreement to
maintain any financial statement condition of any other Person or enter into any
arrangement having the economic effect of any of the foregoing, other than
indebtedness incurred, or agreements or arrangements entered into, with respect
to (a) the incurrence of accounts payable in the ordinary course of business
consistent with past practice, (b) equipment financing in the ordinary course of
business consistent with past practice not to exceed the principal aggregate
amount of $750,000, and (c) pursuant to the Loan Agreement;
(xxii) Make or commit to make capital expenditures
beyond those contained in the Company's capital expenditure budget in effect on
the date hereof, a copy of which is attached hereto as Schedule 4.1(b)(xxii);
(xxiii) Modify or amend (including by entering into
a new Contract with such party or otherwise) in a manner adverse in any material
respect to the Company, or terminate, any existing real property lease, real
property sublease or Company Material Contract, or waive, release or assign any
material rights or claims thereunder, in each case, in a manner adverse in any
material respect to the Company, other than any modification, amendment or
termination of any such Company Material Contract in the ordinary course of
business, consistent with past practice, or enter into any new real property
lease or real property sublease or cause or permit a Reinstatement or Occupancy
to occur;
(xxiv) Enter into any Contract requiring the
Company or any of its Subsidiaries to pay to any Person in excess of an
aggregate of $375,000 as determinable or reasonably estimable on the face of
such Contract, except Contracts which are of the type or within the category of
Contracts specifically identified in (i) through (xxiii) above (whether or not
consent of Parent is required thereunder for such type or category of Contracts)
and purchases of inventory in the ordinary course of business consistent with
past practice;
(xxv) Enter into any Contract with any accountant,
broker, financial advisor, consultant, legal counsel or other Person retained by
the Company in connection with this Agreement or the transactions contemplated
hereby, other than Contracts for the provision of services on a "time and
materials" basis at reasonable and customary rates, provided that Parent shall
not unreasonably withhold consent with respect to any such Contract that is not
on a time and materials basis if such Contract is of the type and structure
customarily entered into for such services and is otherwise at reasonable and
customary rates; or
(xxvi) Agree in writing or otherwise to take any of
the actions described in (i) through (xxv) above.
4.2 Certain Parent Actions. Except as permitted by the terms of
this Agreement, Parent shall not, and shall not permit any of its Subsidiaries
(other than Source and its Subsidiaries) to, without the prior written consent
of the Company, during the period from the date hereof and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time of the Company Merger, (i) acquire or agree to acquire by merging
or consolidating with, or by purchasing any equity or voting interest in or a
material portion of the assets of, or by any other manner, any business or any
Person or division thereof, (ii) declare, set aside or pay any dividends on or
make any other distributions
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(whether in cash, stock, equity securities or property) in respect of any
capital stock or split, combine or reclassify any capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock, other than (a) any such transaction by a
wholly-owned Subsidiary of it that remains a wholly-owned Subsidiary of it after
consummation of such transaction and (b) any such transaction by Source and its
Subsidiaries, (iii) purchase, redeem or otherwise acquire, directly or
indirectly, any shares of its capital stock or the capital stock of its
Subsidiaries (other than Source and its Subsidiaries), except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
then in effect, and (iv) cause, permit or propose any amendments to the Parent
Charter Documents or any of the Subsidiary Charter Documents of Parent's
Subsidiaries (other than Source and its Subsidiaries). Without the consent of
the Company, which consent shall not be unreasonably withheld, during the period
from the date hereof and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time of the Company Merger,
neither Parent nor any of its Subsidiaries shall materially amend or modify the
Separation Agreements required to be listed in Section 3.21(a) of the Parent
Disclosure Letter or enter into material new Separation Agreements following the
Company Merger.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Prospectus/Proxy Statement; Registration Statements.
(a) Prospectus/Proxy Statement; Registration Statement.
As promptly as practicable after the execution of this Agreement, Parent and the
Company will prepare and file with the SEC the Prospectus/Proxy Statement, and
Parent will prepare and file with the SEC the Registration Statement in which
the Prospectus/Proxy Statement is to be included as a prospectus. Parent and the
Company will provide each other with any information which may be required in
order to effectuate the preparation and filing of the Prospectus/Proxy Statement
and the Registration Statement pursuant to this Section 5.1. Each of Parent and
the Company will respond to any comments from the SEC, will use all reasonable
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as practicable after such filing and to keep the
Registration Statement effective as long as is necessary to consummate the
Mergers and the transactions contemplated hereby. Each of Parent and the Company
will notify the other promptly upon the receipt of any comments from the SEC or
its staff in connection with the filing of, or amendments or supplements to, the
Registration Statement and/or the Prospectus/Proxy Statement. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Prospectus/Proxy Statement and/or the Registration Statement, Parent or the
Company, as the case may be, will promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff, and/or mailing to
stockholders of Parent and/or the Company, such amendment or supplement. Each of
Parent and the Company shall cooperate and provide the other (and its counsel)
with a reasonable opportunity to review and comment on any amendment or
supplement to the Registration Statement and Prospect/Proxy Statement prior to
filing such with the SEC, and will provide each other with a copy of all such
filings made with the SEC. Each of Parent and the Company will cause the
Prospectus/Proxy Statement to be mailed to its respective stockholders at the
earliest practicable time after the Registration Statement and the Source
Registration Statement (as defined in Section 5.1(b) are declared effective by
the SEC. Parent shall also use all reasonable efforts to take any action
required to be taken by it under any applicable state securities laws in
connection with the issuance of Parent Common Stock in the Company Merger and
the conversion of Company Options into
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options to acquire Parent Common Stock, and the Company shall furnish any
information concerning the Company and the holders of the Company Common Stock
and the Company Options as may be reasonably requested in connection with any
such action.
(b) Source Registration Statement. As promptly as
practicable after the execution of this Agreement, Parent will cause Source to
prepare and file with the SEC a Registration Statement on Form S-4 (or similar
successor form) (the "SOURCE REGISTRATION STATEMENT"), and the prospectus
contained therein (the "SOURCE PROSPECTUS"), in connection with the distribution
of Source Common Stock in the Parent Merger. Parent will cause Source to respond
to any comments from the SEC, will use all reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as practicable after such filing and to keep the Registration Statement
effective as long as is necessary to consummate the Parent Merger. Parent will
promptly keep the Company reasonably informed on an ongoing basis regarding the
status of the Source Registration Statement. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Source Prospectus
and/or the Source Registration Statement, Parent will promptly inform the
Company of such occurrence and cause Source to file with the SEC or its staff,
and/or mailing to stockholders of Parent, such amendment or supplement. Parent
will cause the Source Prospectus to be mailed to its stockholders, concurrently
with the Proxy Statement/Prospectus at the earliest practicable time after the
Registration Statement and the Source Registration Statement are declared
effective by the SEC. Parent shall also use all reasonable efforts to take any
action required to be taken by it under any applicable state securities laws in
connection with the distribution of Source Common Stock in the Parent Merger.
5.2 Meetings of Stockholders; Board Recommendation.
(a) Meetings of Stockholders. Promptly after the
Registration Statement and the Source Registration Statement are declared
effective under the Securities Act, each of Parent and the Company will take all
action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to call, hold and convene a meeting of its stockholders
to consider, in the case of Parent, the adoption and approval of this Agreement
and approval of the Parent Merger and approval of the issuance of Parent Common
Stock in connection with the Company Merger, to the extent permissible, as a
single proposal (the "PARENT PROPOSAL"), and, in the case of the Company, the
adoption and approval of this Agreement and approval of the Company Merger (the
"COMPANY PROPOSAL") (each, a "STOCKHOLDERS' MEETING" and, in the case of Parent,
the "PARENT STOCKHOLDERS' MEETING" and, in the case of the Company, the "COMPANY
STOCKHOLDERS' MEETING") to be held as promptly as practicable (and within 45
days, if practicable) after the declaration of effectiveness of the Registration
Statement and the Source Registration Statement. Each of Parent and the Company
will use all reasonable efforts to hold their respective Stockholders' Meeting
on the same date. Subject to Section 5.3(d), each of Parent and the Company will
use all reasonable efforts to solicit from its stockholders proxies in favor of,
in the case of Parent, the Parent Proposal, and, in the case of the Company, the
Company Proposal, and will take all other action necessary or advisable to
secure the vote or consent of its stockholders required by the rules of Nasdaq
or Delaware Law to obtain such approvals. Notwithstanding anything to the
contrary contained in this Agreement, Parent or the Company, as the case may be,
may adjourn or postpone its Stockholders' Meeting to the extent necessary to
ensure that any necessary supplement or amendment to the Prospectus/Proxy
Statement is provided to its respective stockholders in advance of a vote on, in
the case of Parent, the Parent Proposal or, in the case of the Company, the
Company Proposal, or, if as of the time for which such Stockholders' Meeting is
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originally scheduled (as set forth in the Prospectus/Proxy Statement) there are
insufficient shares of Common Stock of Parent or the Company, as the case may
be, represented (either in person or by proxy) to constitute a quorum necessary
to conduct the business of such Stockholders' Meeting. Each of Parent and the
Company shall ensure that its Stockholders' Meeting is called, noticed,
convened, held and conducted, and that all proxies solicited by it in connection
with the Stockholders' Meeting are solicited in compliance with Delaware Law,
its Certificate of Incorporation and Bylaws, the rules of Nasdaq and all other
applicable Legal Requirements.
(b) Board Recommendation. Except to the extent expressly
permitted by Section 5.3(d), (i) the Board of Directors of each of Parent and
the Company shall recommend that its respective stockholders vote in favor of,
in the case of Parent, the Parent Proposal, and in the case of the Company, the
Company Proposal, (ii) the Prospectus/Proxy Statement shall include a statement
to the effect that the Board of Directors of Parent has recommended that the
stockholders of Parent vote in favor of the Parent Proposal at the Parent
Stockholders' Meeting and that the Board of Directors of the Company has
recommended that the stockholders of the Company vote in favor of the Company
Proposal at the Company Stockholders' Meeting, and (iii) neither the Board of
Directors of Parent or the Company, nor any committee thereof, shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or modify in a manner
adverse to the other party, its recommendation that the respective stockholders
of Parent or the Company, as the case may be, vote in favor of, in the case of
Parent, the Parent Proposal, and, in the case of the Company, the Company
Proposal, as applicable. Notwithstanding the foregoing, the Board of Directors
of each of Parent and the Company may withhold, withdraw, amend or modify its
recommendation in favor of, in the case of Parent, the Parent Proposal, and in
the case of the Company, the Company Proposal, to the extent it is expressly
permitted by Section 5.3(d).
5.3 Acquisition Proposals.
(a) No Solicitation. Each of the Company and Parent
agrees that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall use all reasonable
efforts to cause its and its Subsidiaries' Employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its Subsidiaries) not to (and shall not authorize any of them to) directly or
indirectly: (i) solicit, initiate, knowingly encourage, knowingly facilitate or
induce any inquiry with respect to, or the making, submission or announcement
of, any Acquisition Proposal (as defined in Section 5.3(g)(i)) with respect to
itself, (ii) participate in any discussions or negotiations regarding, or
furnish to any person any nonpublic information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, any Acquisition Proposal
with respect to itself, (iii) engage in discussions with any person with respect
to any Acquisition Proposal, except as to the existence of these provisions,
(iv) approve, endorse or recommend any Acquisition Proposal with respect to
itself (except to the extent specifically permitted pursuant to Section 5.3(d)),
or (v) enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to any Acquisition
Proposal or transaction contemplated thereby with respect to itself. Each of
Parent and the Company, and its respective Subsidiaries, will each immediately
cease any and all existing activities, discussions or negotiations with any
third parties conducted heretofore with respect to any Acquisition Proposal with
respect to itself.
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(b) Notification of Unsolicited Acquisition Proposals.
(i) As promptly as practicable after receipt of
any Acquisition Proposal or any request for nonpublic information or bona fide
inquiry which it reasonably believes would lead to an Acquisition Proposal with
respect to itself, Parent or the Company, as applicable, shall provide to the
other party oral and written notice of the material terms and conditions of such
Acquisition Proposal, request or inquiry, and the identity of the Person or
group making any such Acquisition Proposal, request or inquiry and a copy of all
written materials provided in connection with such Acquisition Proposal, request
or inquiry. The recipient of the Acquisition Proposal, request or inquiry shall
provide the other party as promptly as practicable with oral and written notice
setting forth all such information as is reasonably necessary to keep such party
informed in all material respects of the status and details (including material
amendments or proposed material amendments) of any such Acquisition Proposal,
request or inquiry and shall promptly provide to the other party a copy of all
written materials subsequently provided in connection with such Acquisition
Proposal, request or inquiry.
(ii) The Company or Parent, as applicable shall
provide the other party with forty-eight (48) hours prior notice (or such lesser
prior notice as is provided to the members Board of Directors of such notifying
party) of any meeting of Board of Directors of the Company or Parent, as
applicable, at which the Board of Directors of the Company or Parent, as
applicable, is reasonably expected to discuss any Acquisition Proposal with
respect to such company.
(c) Superior Offers. Notwithstanding anything to the
contrary contained in Section 5.3(a), in the event that the Company or Parent
receives an unsolicited, bona fide written Acquisition Proposal from a third
party that its Board of Directors has in good faith concluded (following the
receipt of the advice of its outside legal counsel and its financial advisor),
is, or is reasonably likely to result in, a Superior Offer (as defined in
Section 5.3(g)(ii)), it may then take the following actions (but only if and to
the extent that its Board of Directors concludes in good faith, following the
receipt of advice of its outside legal counsel, that the failure to do so would
result in a breach of its fiduciary obligations under applicable law):
(i) Furnish nonpublic information to the third
party making such Acquisition Proposal, provided that (a) (1) concurrently with
furnishing any such nonpublic information to such party, it gives the other
party written notice of its intention to furnish nonpublic information and (2)
it receives from the third party an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such third party on its behalf, the
terms of which are at least as restrictive as the terms contained in the
Confidentiality Agreement (as defined in Section 5.4), it being understood that
such confidentiality agreement and any related agreements shall not include any
provision calling for any exclusive right to negotiate with such third party or
having the purported effect of restricting it from satisfying its obligations
under this Agreement and (b) contemporaneously with furnishing any such
nonpublic information to such third party making an Acquisition Proposal, it
furnishes such nonpublic information to the other party (to the extent such
nonpublic information has not been previously so furnished), together with a
complete list identifying all nonpublic information furnished to the party
making the Acquisition Proposal; and
(ii) Engage in discussions and/or negotiations
with the third party with respect to the Acquisition Proposal, provided that
concurrently with entering into discussions and/or
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negotiations with such third party, it gives the other party hereto written
notice of its intention to enter into negotiations with such third party.
(d) Changes of Recommendation. In response to the receipt
of a Superior Offer, with respect to Parent or the Company, as the case may be,
the Board of Directors of such party may withhold, withdraw, amend or modify its
recommendation with respect to the Mergers, and, in the case of a Superior Offer
that is a tender or exchange offer made directly to its stockholders, may
recommend that its stockholders accept the tender or exchange offer (any of the
foregoing actions, whether by the Company Board of Directors, the Parent Board
of Directors, or a committee thereof, a "CHANGE OF RECOMMENDATION" with respect
to such party), if all of the following conditions in clauses (i) through (iv)
are met:
(i) A Superior Offer with respect to it has been
made and has not been withdrawn;
(ii) Its Stockholders' Meeting has not occurred;
(iii) It shall have (a) delivered to the other
party written notice (a "CHANGE OF RECOMMENDATION NOTICE") at least three (3)
business days prior to publicly effecting such Change of Recommendation, which
notice shall state expressly (A) that it has received an Acquisition Proposal
which may constitute a Superior Offer, (B) the material terms and conditions of
such Acquisition Proposal and the identity of the person or group making the
Acquisition Proposal, and (C) that it intends (or may intend) to effect a Change
of Recommendation and the manner and timing in which it intends (or may intend)
to do so,
(iv) In the case of the Company only, the Company
has (a) provided to Parent a copy of all written materials delivered to the
person or group making the Acquisition Proposal which may constitute a Superior
Proposal (described in clause (iii) of this Section 5.3(d)) in connection with
such Acquisition Proposal, and (b) made available to Parent all materials and
information made available to the person or group making the Acquisition
Proposal which may constitute a Superior Proposal (described in clause (iii) of
this Section 5.3(d)) in connection with such Acquisition Proposal, together with
a complete list identifying all such materials and information furnished to such
person or group; and
(v) Its Board of Directors has concluded in good
faith, after receipt of advice of its outside legal counsel, that, in light of
such Superior Offer, the failure of the Company Board of Directors or Parent
Board of Directors, as applicable, to effect a Change of Recommendation would
result in a breach of its fiduciary obligations to its stockholders under
applicable law.
In addition, in the case of the Company, after delivering the Change of
Recommendation Notice to Parent, the Company shall provide Parent a reasonable
opportunity (which opportunity shall begin no later than the delivery of the
Change of Recommendation Notice and shall continue until the occurrence of the
Change of Recommendation, but which opportunity shall not otherwise by itself
extend the amount of time after delivery of Change of Recommendation Notice upon
which the Company may effect of Change of Recommendation in accordance with this
Section 5.3(d)) to make such adjustments in the terms and conditions of this
Agreement, and negotiate in good faith with respect thereto, as would
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enable the Company to proceed with its recommendation to stockholders without
making a Change of Recommendation.
(e) Continuing Obligation to Call, Hold and Convene
Company Stockholders' Meeting and Parent Stockholders' Meeting; No Other Vote.
Notwithstanding anything to the contrary contained in this Agreement, the
obligations of Parent and the Company to call, give notice of, convene and hold
its respective Stockholders' Meeting shall not be limited or otherwise affected
by the commencement, disclosure, announcement or submission to it of any
Acquisition Proposal with respect to it, or by any Change of Recommendation with
respect to it. Prior to the termination of this Agreement by its terms, neither
Parent nor the Company shall submit to the vote of its stockholders any
Acquisition Proposal (other than, in the case of Parent, the Parent Proposal
and, in the case of the Company, the Company Proposal), or propose to do so.
(f) Compliance with Tender Offer Rules. Nothing contained
in this Agreement shall prohibit Parent or the Company, or its Board of
Directors, from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act;
provided that the content of any such disclosure thereunder shall be governed by
the terms of this Agreement. Without limiting the foregoing proviso, neither
Parent nor the Company shall effect a Change of Recommendation unless
specifically permitted pursuant to the terms of Section 5.3(d).
(g) Certain Definitions. For purposes of this Agreement,
the following terms shall have the following meanings:
(i) "ACQUISITION PROPOSAL," with respect to a
party, shall mean any offer or proposal, relating to any transaction or series
of related transactions involving: (a) any purchase from such party or
acquisition by any Person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a ten
percent (10%) interest in the total outstanding voting securities of such party
or any of its Subsidiaries or any tender offer or exchange offer that if
consummated would result in any person or group beneficially owning ten percent
(10%) or more of the total outstanding voting securities of such party or any of
its Subsidiaries or any merger, consolidation, business combination or similar
transaction involving the Company or Parent or any of its Subsidiaries, (b) any
sale, lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition or
disposition of assets of such party (including its Subsidiaries taken as a
whole) representing more than ten percent (10%) of the assets of such party
(including its Subsidiaries taken as a whole), or (c) any liquidation or
dissolution (or the adoption of a plan pertaining thereto) of such party or the
declaration or payment of an extraordinary dividend (whether in cash or other
property) other than the Source Distribution; provided, however, the Mergers and
the transactions contemplated hereby shall not be deemed an Acquisition Proposal
in any case; and
(ii) "SUPERIOR OFFER," with respect to a party,
shall mean an unsolicited, bona fide written offer made by a third party to
acquire, directly or indirectly, pursuant to a tender offer, exchange offer,
merger, consolidation or other business combination, all or substantially all of
the assets of such party or in excess of eighty percent (80%) of the outstanding
voting securities of such party and as a result of which the stockholders of
such party immediately preceding such transaction would cease to hold at least
eighty percent (80%) of the equity interests in the surviving or resulting
entity of such transaction or any direct or indirect parent or Subsidiary
thereof, on terms that the Board of Directors of
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such party, as applicable, has in good faith concluded (following the receipt of
advice of its outside legal counsel), taking into account, among other things,
all legal, financial, regulatory and other aspects of the offer and the Person
making the offer, to be more favorable, from a financial point of view, to such
party's stockholders (in their capacities as stockholders) than the terms of the
Company Merger and is reasonably capable of being consummated; provided, that in
the case of Parent only, such offer shall be conditioned upon the termination of
this Agreement.
5.4 Confidentiality; Access to Information; No Modification of
Representations, Warranties or Covenants.
(a) Confidentiality. The parties acknowledge that the
Company and Parent have previously executed a Mutual Nondisclosure Agreement
dated September 11, 2002 (the "CONFIDENTIALITY AGREEMENT"), which
Confidentiality Agreement will continue in full force and effect in accordance
with its terms and each of Parent and the Company will hold, and will cause its
respective directors, officers, Employees, agents and advisors (including
attorneys, accountants, consultants, bankers and financial advisors) to hold,
any Evaluation Material (as defined in the Confidentiality Agreement)
confidential in accordance with the terms of the Confidentiality Agreement.
(b) Access to Information. The Company will afford Parent
and Parent's accountants, counsel and other representatives reasonable access
during normal business hours to its properties, books, records and personnel
during the period prior to the Effective Time of the Company Merger to obtain
all information concerning its business, including the status of product
development efforts, properties, results of operations and personnel, as Parent
may reasonably request; provided, however, that the Company may restrict the
foregoing access to the extent that any law, treaty, rule or regulation of any
Governmental Entity applicable to the Company requires the Company or its
Subsidiaries to restrict or prohibit access to any such properties or
information.
(c) No Modification of Representations and Warranties or
Covenants. No information or knowledge obtained in any investigation or
notification pursuant to this Section 5.4, Section 5.6 or Section 5.7 shall
affect or be deemed to modify any representation or warranty contained herein,
the covenants or agreements of the parties hereto or the conditions to the
obligations of the parties hereto under this Agreement.
5.5 Public Disclosure. Without limiting any other provision of
this Agreement, Parent and the Company will consult with each other before
issuing, and provide each other the opportunity to review, comment upon and
concur with, and use all reasonable efforts to agree on any press release or
public statement with respect to this Agreement and the transactions
contemplated hereby, including the Mergers, and any Acquisition Proposal and
will not issue any such press release or make any such public statement prior to
such consultation and (to the extent practicable) agreement, except as may be
required by law or any listing agreement with Nasdaq or any other applicable
national or regional securities exchange; provided that following a Change in
Recommendation by Parent or the Company following the receipt by such party of a
Superior Offer, then if such party confirms in writing to the other party that a
Change in Recommendation has occurred, the foregoing shall not be applicable to
any press releases or public statements regarding the Superior Offer. The
parties have agreed to the text of the joint press release announcing the
signing of this Agreement.
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5.6 Regulatory Filings; Reasonable Efforts.
(a) Regulatory Filings. Each of Parent, Merger Sub and
the Company shall coordinate and cooperate with one another and shall each use
all reasonable efforts to comply with, and shall each refrain from taking any
action that would impede compliance with, all Legal Requirements, and as
promptly as practicable after the date hereof, each of Parent, Separation Sub,
Merger Sub and the Company shall make all filings, notices, petitions,
statements, registrations, submissions of information, application or submission
of other documents required by any Governmental Entity in connection with the
Mergers and the transactions contemplated hereby, including: (i) Notification
and Report Forms with the United States Federal Trade Commission (the "FTC") and
the Antitrust Division of the United States Department of Justice ("DOJ") as
required by the HSR Act, (ii) any other filing necessary to obtain any Necessary
Consent, (iii) filings under any other comparable pre-merger notification forms
required by the merger notification or control laws of any applicable
jurisdiction, as agreed by the parties hereto, and (iv) any filings required
under the Securities Act, the Exchange Act, any applicable state or securities
or "blue sky" laws and the securities laws of any foreign country, or any other
Legal Requirement relating to the Mergers. Each of Parent and the Company will
cause all documents that it is responsible for filing with any Governmental
Entity under this Section 5.6(a) to comply in all material respects with all
applicable Legal Requirements.
(b) Exchange of Information. Parent, Separation Sub,
Merger Sub and the Company each shall promptly supply the other party with any
information that may be required in order to effectuate any filings or
application pursuant to Section 5.6(a). Except where prohibited by applicable
Legal Requirements, and subject to the Confidentiality Agreement, each of the
Company and Parent shall consult with the other party prior to taking a position
with respect to any such filing, shall permit the other to review and discuss in
advance, and consider in good faith the views of the other in connection with
any analyses, appearances, presentations, memoranda, briefs, white papers,
arguments, opinions and proposals before making or submitting any of the
foregoing to any Governmental Entity by or on behalf of any party hereto in
connection with any investigations or proceedings in connection with this
Agreement or the transactions contemplated hereby (including under any antitrust
or fair trade Legal Requirement), coordinate with the other in preparing and
exchanging such information and promptly provide the other (and its counsel)
with copies of all filings, presentations or submissions (and a summary of any
oral presentations) made by such party with any Governmental Entity in
connection with this Agreement or the transactions contemplated hereby, provided
that with respect to any such filing, presentation or submission, each of Parent
and the Company need not supply the other (or its counsel) with copies (or in
case of oral presentations, a summary) to the extent that any law, treaty, rule
or regulation of any Governmental Entity applicable to such party requires such
party or its Subsidiaries to restrict or prohibit access to any such properties
or information.
(c) Notification. Each of Parent, Separation Sub, Merger
Sub and the Company will notify the other promptly upon the receipt of: (i) any
comments from any officials of any Governmental Entity in connection with any
filings made pursuant hereto and (ii) any request by any officials of any
Governmental Entity for amendments or supplements to any filings made pursuant
to, or information provided to comply in all material respects with, any Legal
Requirements. Whenever any event occurs that is required to be set forth in an
amendment or supplement to any filing made pursuant to Section 5.6(a), Parent,
Separation Sub, Merger Sub or the Company, as the case may be, will promptly
inform the others of such occurrence and cooperate in filing with the applicable
Governmental Entity such amendment or supplement.
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(d) Reasonable Efforts. Subject to the express provisions
of Section 5.2 and Section 5.3 hereof and upon the terms and subject to the
conditions set forth herein, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Mergers and the other transactions
contemplated by this Agreement, including using all reasonable efforts to
accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions precedent set forth in Article VI to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all necessary consents, approvals or waivers from third parties, including all
Necessary Consents, (iv) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, and (v) the execution or
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, the Company and its Board of
Directors shall, if any takeover statute or similar Legal Requirement is or
becomes applicable to the Company Merger, this Agreement or any of the
transactions contemplated by this Agreement, use all reasonable efforts to
ensure that the Company Merger and the other transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
Legal Requirement on the Company Merger, this Agreement and the transactions
contemplated hereby.
(e) Limitation on Divestiture. Notwithstanding anything
in this Agreement to the contrary, nothing contained in this Agreement shall be
deemed to require Parent or any Subsidiary or affiliate of Parent to agree to
any Action of Divestiture (as defined below). The Company shall not take or
agree to take any Action of Divestiture without the prior written consent of
Parent. For purposes of this Agreement, an "ACTION OF DIVESTITURE" shall mean
making proposals, executing or carrying out agreements (including consent
decrees) or submitting to Legal Requirements providing for the license, sale or
other disposition or holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets that are material to Parent,
the Company or any of their respective Subsidiaries or the holding separate of
the Company capital stock or imposing or seeking to impose any material
limitation on the ability of Parent, the Company or any of their respective
Subsidiaries, to conduct their respective businesses or own such assets or to
acquire, hold or exercise full rights of ownership of the Company's business.
5.7 Notification of Certain Matters.
(a) By the Company. The Company shall give prompt notice
to Parent, Separation Sub and Merger Sub of any representation or warranty made
by it contained in this Agreement becoming untrue or inaccurate, or any failure
of the Company to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, such that the conditions set forth in Section 6.3(a) or
6.3(b) would not be satisfied.
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(b) By Parent. Parent, Separation Sub and Merger Sub
shall give prompt notice to the Company of any representation or warranty made
by it contained in this Agreement becoming untrue or inaccurate, or any failure
of Parent to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, such that the conditions set forth in Section 6.2(a) or
6.2(b) would not be satisfied.
5.8 Third-Party Consents and Certificates.
(a) Company Efforts. As soon as practicable following the
date hereof, the Company will use all reasonable efforts to obtain any material
consents, waivers and approvals under any of its or its Subsidiaries' respective
Contracts required to be obtained in connection with the consummation of the
transactions contemplated hereby. The Company shall use all reasonable efforts
to obtain from M-F Downtown for the benefit of Parent an estoppel certificate
dated within two (2) weeks prior to the Closing Date certifying such information
as Parent may reasonably require (the "M-F DOWNTOWN ESTOPPEL CERTIFICATE"),
including that (i) the Close of Escrow has occurred and all of the conditions
thereto were satisfied or waived in accordance with the terms of the Lease
Modification Agreement, other than the conditions to the Close of Escrow set
forth in Sections 11(c)(iv), 11(e), 11(f), 11(g), 12(d) and 12(e), which were
satisfied in accordance with the terms of the Lease Modification Agreement, and
(ii) no Reinstatement or Occupancy has occurred.
(b) Parent Efforts. As soon as practicable following the
date hereof, Parent will use all reasonable efforts to obtain any material
consents, waivers and approvals under any of its or its Subsidiaries' respective
Contracts required to be obtained in connection with the consummation of the
transactions contemplated hereby.
5.9 Equity Awards; Warrants and Employee Benefits.
(a) Assumption of Parent Options. At the Effective Time
of the Parent Merger, each then outstanding Parent Option, whether or not
exercisable at the Effective Time of the Parent Merger and regardless of the
respective exercise prices thereof, shall either continue in effect at the
Surviving Corporation in the Parent Merger or be assumed by the Surviving
Corporation in the Parent Merger, as necessary. Each Parent Option so continued
or assumed under this Agreement will continue to have, and be subject to, the
same terms and conditions set forth in the applicable Parent Option (including
any applicable stock option agreement or other document evidencing such Parent
Option) immediately prior to the Effective Time of the Parent Merger (including
any repurchase rights or vesting provisions), except that each Parent Option
will be adjusted so that it will be exercisable (or will become exercisable in
accordance with its terms) for a number of share of Parent Common Stock equal in
fair market value to the consideration received by holders of Parent Common
Stock pursuant to Section 1.8(a) hereof.
(b) Assumption of Company Options and Warrants. At the
Effective Time of the Company Merger, each then outstanding Company Option and
each then outstanding Company Warrant, whether or not exercisable at the
Effective Time of the Company Merger and regardless of the respective exercise
prices thereof, will be assumed by the Surviving Corporation in the Parent
Merger. Each Company Option and each Company Warrant so assumed by Surviving
Corporation in the Parent Merger under this Agreement will continue to have, and
be subject to, the same terms and conditions set forth in the applicable Company
Option (including any applicable stock option agreement or other document
evidencing such Company Option) or Company Warrant immediately prior to the
Effective
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Time of the Company Merger (including any repurchase rights or vesting
provisions), except that (i) each Company Option or Company Warrant will be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole shares of Parent Common Stock equal to the product of the number
of shares of Company Common Stock that were issuable upon exercise of such
Company Option or Company Warrant immediately prior to the Effective Time of the
Company Merger multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed Company Option or Company Warrant will be equal to the quotient
determined by dividing the exercise price per share of the Company Common Stock
at which such Company Option or Company Warrant was exercisable immediately
prior to the Effective Time of the Company Merger by the Exchange Ratio, rounded
up to the nearest whole cent. Subject to the terms of such assumed Company
Option or Company Warrant, as the case may be, each assumed Company Option or
Company Warrant, as the case may be, shall be vested immediately following the
Effective Time of the Company Merger as to the same percentage of the total
number of shares subject thereto as it was vested as to immediately prior to the
Effective Time of the Company Merger. As soon as reasonably practicable after
the Effective Time of the Company Merger, Parent will issue to each Person who
holds an assumed Company Option a document evidencing the foregoing assumption
of such Company Option by Parent.
(c) Incentive Stock Options. The conversion of the
Company Options provided for in Section 5.9(a), with respect to any options
which qualify as "incentive stock options" (as defined in Section 422 of the
Code) prior to the Effective Time of the Company Merger shall be effected in a
manner such that, to the maximum extent permissible, such Company Options
continue to qualify as incentive stock options after the Effective Time of the
Company Merger consistent with Section 424(a) of the Code.
(d) Company Stock Purchase Plan. Prior to the Effective
Time of the Company Merger, the Company Purchase Plan shall be terminated. The
rights of participants in the Company Purchase Plan with respect to any offering
period then underway under such Company Purchase Plan shall be determined by
treating the last business day prior to, or if more administratively advisable,
the last payroll date of the Company immediately prior to, the Effective Time of
the Company Merger, as the last day of such offering period and by making such
other pro-rata adjustments as may be necessary to reflect the shortened offering
period but otherwise treating such shortened offering period as a fully
effective and completed offering period for all purposes under such Company
Purchase Plan. Prior to the Effective Time of the Company Merger, the Company
shall take all actions (including, if appropriate, amending the terms of such
Company Purchase Plan that are necessary to give effect to the transactions
contemplated by this Section 5.9(d)).
(e) Termination of 401(k) Plans. To the extent requested
in writing by Parent no later than five (5) business days prior to the Closing
Date, the Company shall take (or cause to be taken) all actions necessary or
appropriate to terminate, effective no later than the date immediately preceding
the Closing Date, any Company Employee Plan that contains a cash or deferred
arrangement intended to qualify under Section 401(k) of the Code (the "401(k)
PLANS"). If Parent provides such notice to the Company prior to such five (5)
business day period, Parent shall receive from the Company, prior to the
Effective Time of the Company Merger, evidence that the Company's Board of
Directors has adopted resolutions to terminate the 401(k) Plans (the form and
substance of which resolutions shall be subject to review and approval of
Parent, which approval shall not be unreasonably withheld), effective no later
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than the date immediately preceding the Closing Date. The Company shall also
take such other actions in furtherance of terminating the 401(k) Plans as Parent
may reasonably require.
(f) Certain Employee Benefits. As soon as practicable
after the execution of this Agreement, the Company and Parent shall confer and
work together in good faith to agree upon mutually acceptable employee benefit
and compensation arrangements for employees of the Company and its Subsidiaries
following the Effective Time of the Company Merger (and the termination of
Company Employee Plans immediately prior to the Effective Time if appropriate).
Employees of the Company and its Subsidiaries will be granted credit for all
service with the Company, its Subsidiaries or its Affiliates (except to the
extent such service credit will result in the duplication of benefits) under
each current employee benefit plan, program or arrangement of Parent or its
Affiliates in which such employees are eligible to participate for purposes of
eligibility and vesting, except for purposes of Parent's sabbatical plan and
benefit accrual under a Parent retirement plans. If employees become eligible to
participate in a medical, dental or vision plan of Parent or its Affiliates,
Parent shall use commercially reasonable efforts to cause such plan to (i) waive
any preexisting condition exclusions and waiting period limitations for
conditions covered under the applicable medical, dental or vision plans
maintained or contributed to by Company (but only to the extent corresponding
exclusions and limitations were satisfied by such employees under the applicable
medical, dental or health plans maintained or contributed to by Company); and
(ii) credit any deductible or out of pocket expenses incurred by the employees
and their beneficiaries under such plans during the portion of the calendar year
prior to such participation. Parent shall use all reasonable efforts to provide
to employees of the Company who continue their employment with the Company
following the Effective Time of the Company Merger the opportunity to enroll in
a special offering period under the Parent Employee Stock Purchase Plan, which
special offering period shall commence as soon as is administratively
practicable following the Effective Time of the Company Merger.
5.10 Form S-8. Parent agrees to file a registration statement on
Form S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Options to the extent Form S-8 is available as soon as is reasonably
practicable (within ten (10) calendar days, if practicable) after the Effective
Time of the Company Merger and shall maintain the effectiveness of such
registration statement thereafter for so long as any of such options or other
rights remain outstanding.
5.11 Indemnification.
(a) Indemnity. From and after the Effective Time of the
Company Merger, Parent will cause the Surviving Corporation in the Company
Merger to fulfill and honor in all respects the obligations of the Company
pursuant to any indemnification agreements between the Company and its directors
and officers immediately prior to the Effective Time of the Company Merger (the
"INDEMNIFIED PARTIES"), subject to applicable law. The Certificate of
Incorporation and Bylaws of the Surviving Corporation in the Company Merger will
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the
Certificate of Incorporation and Bylaws of the Company as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise modified for
a period of six (6) years from the Effective Time of the Company Merger in any
manner that would adversely affect the rights thereunder of individuals who,
immediately prior to the Effective Time of the Company Merger, were directors or
officers of the Company, unless such modification is required by law.
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(b) Insurance. For a period of six (6) years after the
Effective Time of the Company Merger, the Surviving Corporation in the Company
Merger will maintain directors' and officers' liability insurance covering those
persons who are covered by the Company's directors' and officers' liability
insurance policy as of the date hereof on terms comparable to those applicable
to the current directors and officers of the Company; provided, however, that in
no event will the Surviving Corporation in the Company Merger be required to
expend in excess of two hundred percent (200%) of the annual premium currently
paid by the Company for such coverage (and to the extent the annual premium
would exceed two hundred percent (200%) of the annual premium currently paid by
the Company for such coverage, the Surviving Corporation in the Company Merger
shall maintain the maximum amount of coverage, if any, as is available for two
hundred percent (200%) of such annual premium).
(c) Third-Party Beneficiaries. This Section 5.11 is
intended to be for the benefit of, and shall be enforceable by the Indemnified
Parties and their heirs and personal representatives and shall be binding on
Parent, the Surviving Corporation in the Company Merger and their successors and
assigns.
5.12 Nasdaq Listing. Prior to the Effective Time of the Company
Merger, Parent agrees to use all reasonable efforts to (i) to authorize for
listing on Nasdaq the shares of Parent Common Stock issuable, and those required
to be reserved for issuance, in connection with the Company Merger, subject to
official notice of issuance and (ii) authorize for listing on Nasdaq the shares
of Source Common Stock to be distributed to each holder of shares of Parent
Common Stock at the Effective Time of the Parent Merger.
5.13 Company Affiliates; Restrictive Legend. The Company will use
all reasonable efforts to deliver or cause to be delivered to Parent, as
promptly as practicable on or following the date hereof, from each person who
may reasonably be deemed to be an affiliate of the Company for purposes of Rule
145 promulgated under the Securities Act an executed affiliate agreement
pursuant to which such affiliate shall agree to be bound by the provision of
Rule 145 promulgated under the Securities Act in a form provided by Parent and
reasonably acceptable to the Company. Parent will give stop transfer
instructions to its transfer agent with respect to any Parent Common Stock
received pursuant to the Company Merger by any stockholder of the Company who
may reasonably be deemed to be an affiliate of the Company for purposes of Rule
145 promulgated under the Securities Act and there will be placed on the
certificates representing such Parent Common Stock, or any substitutions
therefor, a legend stating in substance that the shares were issued in a
transaction to which Rule 145 promulgated under the Securities Act applies and
may only be transferred (i) in conformity with Rule 145 or (ii) in accordance
with a written opinion of counsel, reasonably acceptable to Parent, in form and
substance that such transfer is exempt from registration under the Securities
Act.
5.14 Treatment as Tax Free Distribution; Treatment as
Reorganization. Parent will not knowingly take, and will not knowingly cause
Source, Separation Sub or Merger Sub to take, any action that would reasonably
be expected to cause the distribution of Source Common Stock to the stockholders
of Parent pursuant to Sections 1.8(a) and 1.10(b) to fail to qualify as a
tax-free distribution under Section 355 of the Code. None of Parent, Separation
Sub, Merger Sub or the Company shall, and they shall not permit any of their
respective Subsidiaries to, take any action prior to or following the Closing
that would reasonably be expected to cause the Company Merger to fail to qualify
as a reorganization with the meaning of Section 368(a) of the Code.
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5.15 Company Rights.
(a) Company Rights Plan. The Company shall, and shall
cause its transfer agent, as rights agent, to enter into a preferred stock
rights agreement in substantially the form of Exhibit F attached hereto (the
"COMPANY RIGHTS AGREEMENT") as promptly as practicable after the date hereof
(but in no event later than the earlier of (i) three (3) business days following
the date hereof and (ii) the date upon which the Company files its current
report on Form 8-K disclosing its entry into this Agreement), and shall reserve
shares of Company Preferred Stock for issuance upon exercise of preferred stock
purchase rights (the "COMPANY RIGHTS") issuable pursuant to the Company Rights
Agreement. The Company shall take all action necessary so that (i) Parent shall
not be an "Acquiring Person" under the Company Rights Plan and (ii) the entering
into of this Agreement and the Company Merger and the other transactions
contemplated hereby will not result in the grant of any rights to any Person
under the Company Rights Agreement or enable or require the Company Rights to be
exercised, distributed or triggered as a result thereof. The Company shall set
the record date for the Company Rights Dividend as June 5, 2003 and shall pay
the Company Rights Dividend not later than June 5, 2003. The Company shall not
redeem the Company Rights or amend or modify (including by delay of the
"Distribution Date" thereunder) or terminate the Company Rights Plan prior to
the Effective Time of the Company Merger unless, and only to the extent that:
(i) it is required to do so by order of a court of competent jurisdiction or
(ii) the Board of Directors of the Company has effected or is permitted to
effect, in compliance with the terms of this Agreement, a Change of
Recommendation.
5.16 Section 16 Matters.
(a) Company. The Board of Directors of the Company, or a
committee of two or more Non-Employee Directors thereof (as such term is defined
for purposes of Rule 16b-3 under the Exchange Act), shall adopt resolutions
prior to the Effective Time of the Company Merger, providing that the
disposition by the Company Insiders (as defined below) of Company Common Stock
and Company Options, in each case pursuant to the transactions contemplated
hereby, are intended to be, to the extent legally permissible, exempt from
liability under Section 16(b) of the Exchange Act. Such resolutions shall comply
with the approval conditions of Rule 16b-3 under the Exchange Act and no-action
letters issued thereunder for purposes of such Section 16(b) exemption,
including, but not limited to, specifying the name of the Company Insiders, the
number of securities to be disposed of for each such person, the material terms
of any derivative securities, and that the approval is intended to make the
disposition of such securities exempt pursuant to Rule 16b-3(e). "COMPANY
INSIDERS" shall mean those officers and directors of the Company who are subject
to the reporting requirement of Section 16(b) of the Exchange Act immediately
prior to the Effective Time of the Company Merger.
(b) Parent. The Board of Directors of Parent, or a
committee of two or more Non-Employee Directors thereof (as such term is defined
for purposes of Rule 16b-3 under the Exchange Act), and provided that the
Company delivers to Parent the Section 16 Information (as defined below) in a
timely fashion, shall adopt resolutions prior to the Effective Time of the
Parent Merger, providing that the acquisition by the Parent Insiders (as defined
below) of Parent Common Stock and Parent Options, in each case pursuant to the
transactions contemplated hereby, are intended to be, to the extent legally
permissible, exempt from liability under Section 16(b) of the Exchange Act. Such
resolutions shall comply with the approval conditions of Rule 16b-3 under the
Exchange Act and no-action letters issued thereunder for purposes of such
Section 16(b) exemption, including, but not limited to, specifying the name of
the Parent Insiders, the number of securities to be acquired by each such
person, the material
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terms of any derivative securities, and that the approval is intended to make
the acquisition of such securities exempt pursuant to Rule 16b-3(d). "PARENT
INSIDERS" shall mean those officers and directors of Company who will be subject
to the reporting requirement of Section 16(b) of the Exchange Act with respect
to Parent following the Effective Time of the Company Merger. "SECTION 16
INFORMATION" shall mean information regarding the Company Insiders, the number
of shares of Company capital stock held by each such Company Insider and
expected to be exchanged for Parent Common Stock in connection with the Company
Merger, and the number and description of the Company Options held by each such
Company Insider and expected to be converted into Parent Options in connection
with the Company Merger.
5.17 Merger Sub Compliance. Parent shall cause each of Separation
Sub and Merger Sub to comply with all of its obligations under or relating to
this Agreement. Separation Sub shall not engage in any business which is not in
connection with the Parent Merger Pursuant to this Agreement. Merger Sub shall
not engage in any business which is not in connection with the Company Merger
pursuant to this Agreement.
5.18 Board of Directors. The Board of Directors of Parent shall
take all actions necessary such that effective as of immediately following the
Effective Time of the Company Merger, the Board of Directors of Parent shall be
comprised of ten (10) directors, and shall include three (3) directors, Donna
Dubinsky, Bruce Dunlevie and John Doerr (collectively, the "COMPANY DESIGNATED
DIRECTORS"). If any of the above named Company Designated Directors is unable or
unavailable to serve as a director of Parent at the Effective Time of the
Company Merger, then the Company shall be entitled to designate another Person
to serve as a Company Designated Director, as long as such alternate Person
serves as a director on the Board of Directors of the Company on the date
hereof, is acceptable to Parent and at least two of the Company Designated
Directors are "independent directors" (as defined under Section 4200(a)(14) of
the rules of Nasdaq, or any successor rule then in effect) with respect to the
Company and Parent.
5.19 Comfort Letter. The Company shall use all commercially
reasonable efforts to cause its independent public accountants to deliver a
letter dated not more than five (5) days prior to the date on which the
Registration Statement shall become effective and addressed to itself and Parent
and their respective Boards of Directors in form and substance reasonably
satisfactory to Parent and customary in scope and substance for agreed-upon
procedures letters delivered by independent public accountants in connection
with registration statements and prospectus/proxy statements similar to the
Registration Statement and the Prospectus/Proxy Statement.
ARTICLE VI
CONDITIONS TO THE MERGERS
6.1 Conditions to the Obligations of Each Party to Effect the
Mergers. The respective obligations of each party to this Agreement to effect
the Mergers shall be subject to the satisfaction at or prior to the Closing Date
of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted, and the Company Merger shall have been duly approved, by
the requisite vote under applicable Legal Requirements, by the stockholders of
the Company and this Agreement shall have been approved and adopted, and the
Parent Merger shall have been duly approved, and the issuance of Parent Common
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Stock in connection with the Company Merger shall have been duly approved, by
the requisite vote under applicable Legal Requirements, by the stockholders of
Parent.
(b) No Order. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which (i) is in effect and (ii)
has the effect of making the Mergers illegal or otherwise prohibiting
consummation of the Mergers.
(c) Registration Statements Effective; Prospectus/Proxy
Statement. The SEC shall have declared the Registration Statement and the Source
Registration Statement effective. No stop order suspending the effectiveness of
the Registration Statement or the Source Registration Statement, or any part of
either the Registration Statement or the Source Registration Statement, shall
have been issued and no proceeding for that purpose, and no similar proceeding
in respect of the Prospectus/Proxy Statement or the Source Prospectus, shall
have been initiated or threatened in writing by the SEC.
(d) HSR Act. All waiting periods (and any extension
thereof) under the HSR Act relating to the transactions contemplated hereby will
have expired or terminated early. All other material foreign antitrust approvals
required to be obtained prior to the Company Merger in connection with the
transactions contemplated hereby shall have been obtained.
(e) Tax Opinions. Parent and the Company shall each have
received written opinions from Wilson Sonsini Goodrich & Rosati, Professional
Corporation and Fenwick & West LLP, respectively, in form and substance
reasonably satisfactory to them, to the effect that the Company Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code and
such opinions shall not have been withdrawn. Parent and the Company shall
deliver, and tax counsel shall be entitled to rely upon, such tax
representations as are reasonably requested by tax counsel in connection with
rendering such opinions.
(f) Nasdaq Listing. The shares of Parent Common Stock to
be issued in the Company Merger shall have been authorized for listing on
Nasdaq, subject to official notice of issuance.
(g) No Change in Tax Law. There shall not have occurred
any change in law (including for this purpose any statutory or regulatory change
or any issuance of an IRS Revenue Ruling or Notice) under which the distribution
of Source Common Stock to the stockholders of Parent pursuant to Sections 1.8(a)
and 1.10(b) would fail to qualify as a tax-free distribution under Section 355
of the Code.
6.2 Additional Conditions to the Obligations of the Company. The
obligation of the Company to consummate and effect the Mergers shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations
and warranties of Parent contained in this Agreement shall be true and correct
on the date hereof and as of the Closing Date (but disregarding as of the
Closing Date any qualifications or limitations regarding the "Knowledge of
Parent" or phrases of similar effect) with the same force and effect as if made
on the Closing Date (except that those representations and warranties which
address matters only as of a particular date shall have been true and correct
only on such date), except, in each case, or in the aggregate, as does not
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constitute a Material Adverse Effect on Parent at the Closing Date (it being
understood that, in each case, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Parent
Disclosure Letter made or purported to have been made after the execution of
this Agreement shall be disregarded). The Company shall have received a
certificate with respect to the foregoing signed on behalf of Parent by an
authorized executive officer of Parent.
(b) Agreements and Covenants. Parent shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date, and the Company shall have received a certificate with respect to
the foregoing signed on behalf of Parent by an authorized executive officer of
Parent.
(c) Material Adverse Effect. No Material Adverse Effect
on Parent shall have occurred since the date hereof and be continuing.
(d) Parent Board. Parent shall have taken all action
necessary such that the Company Designated Directors become directors of Parent
as of immediately following the Effective Time of the Company Merger in
accordance with Section 5.18.
6.3 Additional Conditions to the Obligations of Parent, Separation
Sub and Merger Sub. The obligations of Parent, Separation Sub and Merger Sub to
consummate and effect the Mergers shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations
and warranties of the Company contained in this Agreement shall be true and
correct on the date hereof and as of the Closing Date (but disregarding as of
the Closing Date any qualifications or limitations regarding the "Knowledge of
the Company" or phrases of similar effect) with the same force and effect as if
made on the Closing Date (except that those representations and warranties which
address matters only as of a particular date shall have been true and correct
only on such date), except, in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on the Company at the Closing Date (it
being understood that in each case, for purposes of determining the accuracy of
such representations and warranties, any update of or modification to the
Company Disclosure Letter made or purported to have been made after the
execution of this Agreement shall be disregarded). Parent, Separation Sub and
Merger Sub shall have received a certificate with respect to the foregoing
signed on behalf of the Company by an authorized executive officer of the
Company.
(b) Agreements and Covenants. The Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date, and Parent, Separation Sub and Merger Sub shall have received
a certificate to such effect signed on behalf of the Company by an authorized
executive officer of the Company.
(c) Material Adverse Effect. No Material Adverse Effect
on the Company shall have occurred since the date hereof and be continuing.
(d) No Governmental Restriction. There shall not be any
pending or overtly threatened suit, action or proceeding asserted by any
Governmental Authority (i) challenging or seeking to restrain or prohibit the
consummation of the Mergers or any of the other transactions contemplated by
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this Agreement, the effect of which restraint or prohibition if obtained would
cause the condition set forth in Section 6.1(b) to not be satisfied or (ii)
seeking to require Parent or the Company or any Subsidiary or affiliate of
either of them to effect an Action of Divestiture.
(e) Employment Offers. All of the Key Employees
identified on Schedule 6.3(e)(i) and at least eighty percent (80%) of the Key
Employees identified on Schedule 6.3(e)(ii) shall have accepted and not revoked
offers of employment from Parent on the terms previously agreed between Parent
and such Key Employees.
(f) Material Consents and Certificates; Real Estate
Matters. All third party consents, permits and approvals listed in Schedule
6.3(f) shall have been obtained. The Close of Escrow shall have occurred and no
Occupancy or Reinstatement shall have occurred.
(g) Nasdaq Listing. The shares of Source Common Stock to
be distributed to each holder of shares of Parent Common Stock at the Effective
Time of the Parent Merger shall have been authorized for listing on Nasdaq,
subject to official notice of the completion of such distribution.
6.4 Condition to the Company Merger. It shall be a condition to
the respective obligations of each party to this Agreement to effect the Company
Merger that the Parent Merger shall have been consummated.
6.5 Condition to the Parent Merger. It shall be a condition to
Parent's obligations to effect the Parent Merger that all conditions to the
respective obligations of each party to this Agreement to effect the Company
Merger (other than the condition in Section 6.4) shall have been satisfied or
duly waived.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time of the Company Merger, by action taken or authorized
by the Board of Directors of the terminating party or parties, and except as
provided below, whether before or after the requisite approvals of the
stockholders of the Company or Parent:
(a) by mutual written consent duly authorized by the
Boards of Directors of Parent and the Company;
(b) by either the Company or Parent if the Mergers shall
not have been consummated by January 31, 2004 (which date shall be extended to
April 30, 2004, if the Mergers shall not have been consummated as a result of a
failure to satisfy the conditions set forth in Section 6.1(b), Section 6.1(d) or
Section 6.3(d)) (as appropriate, the "END DATE"); provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Mergers to occur on or before such date and
such action or failure to act constitutes a material breach of this Agreement;
(c) by either the Company or Parent if a Governmental
Entity shall have issued an order, decree or ruling or taken any other action
(including the failure to have taken an action), in any
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case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Mergers, which order, decree, ruling or other action is final
and nonappealable;
(d) by either the Company or Parent if the required
approval of the stockholders of Parent contemplated by this Agreement shall not
have been obtained by reason of the failure to obtain the required vote at a
meeting of Parent stockholders duly convened therefor or at any adjournment
thereof; provided, however, that the right to terminate this Agreement under
this Section 7.1(d) shall not be available to Parent where the failure to obtain
Parent stockholder approval shall have been caused by the action or failure to
act of Parent and such action or failure to act constitutes a material breach by
Parent of this Agreement;
(e) by either the Company or Parent if the required
approval of the stockholders of the Company contemplated by this Agreement shall
not have been obtained by reason of the failure to obtain the required vote at a
meeting of the Company stockholders duly convened therefore or at any
adjournment thereof; provided, however, that the right to terminate this
Agreement under this Section 7.1(e) shall not be available to the Company where
the failure to obtain the Company stockholder approval shall have been caused by
the action or failure to act of the Company and such action or failure to act
constitutes a material breach by the Company of this Agreement;
(f) by Parent (at any time prior to the adoption and
approval of this Agreement and the Company Merger by the required vote of the
stockholders of the Company) if a Parent Triggering Event (as defined below)
shall have occurred;
(g) by the Company (at any time prior to the adoption and
approval of this Agreement and the approval the Parent Merger and approval of
the issuance of Parent Common Stock in connection with the Company Merger by the
required vote of the stockholders of the Parent) if a Company Triggering Event
(as defined below) shall have occurred;
(h) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided that,
other than in the case of a willful breach, if such inaccuracy in Parent's
representations and warranties or breach by Parent is curable by Parent, then
the Company may not terminate this Agreement under this Section 7.1(h) prior to
twenty (20) days following the receipt of written notice from the Company to
Parent of such breach (it being understood that the Company may not terminate
this Agreement pursuant to this paragraph 7.1(g) if such breach by Parent is
cured within such twenty (20) day period or if the Company shall be in material
breach of this Agreement);
(i) by Parent, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
untrue, in either case such that the conditions set forth in Section 6.3(a) or
Section 6.3(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided that,
other than in the case of a willful breach, that if such inaccuracy in the
Company's representations and warranties or breach by the Company is curable by
the Company, then Parent may not terminate this Agreement under this Section
7.1(i) prior to twenty
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(20) days following the receipt of written notice from Parent to the Company of
such breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph 7.1(i) if such breach by the Company is cured within
such twenty (20) day period or if Parent shall be in material breach of this
Agreement);
(j) by Parent, if a Material Adverse Effect on the
Company shall have occurred since the date hereof; and
(k) by the Company, if a Material Adverse Effect on
Parent shall have occurred since the date hereof.
For the purposes of this Agreement, a "PARENT TRIGGERING EVENT" shall
be deemed to have occurred if: (i) the Company's Board of Directors or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent its recommendation in favor of, the
adoption and approval of the Agreement or the approval of the Company Merger,
(ii) the Company shall have failed to include in the Prospectus/Proxy Statement
the recommendation of the Company's Board of Directors in favor of the adoption
and approval of the Agreement and the approval of the Company Merger, (iii) the
Company's Board of Directors fails to reaffirm (publicly, if so requested) its
recommendation in favor of the adoption and approval of the Agreement and the
approval of the Company Merger within ten (10) business days after Parent
requests in writing that such recommendation be reaffirmed, (iv) the Company's
Board of Directors or any committee thereof shall have approved or recommended
any Acquisition Proposal, or (v) a tender or exchange offer relating to the
Company's securities shall have been commenced by a Person unaffiliated with
Parent and the Company shall not have sent to its securityholders pursuant to
Rule 14e-2 promulgated under the Exchange Act, within ten (10) business days
after such tender or exchange offer is first published, sent or given, a
statement disclosing that the Board of Directors of the Company recommends
rejection of such tender or exchange offer.
For purposes of this Agreement, a "COMPANY TRIGGERING EVENT" shall be
deemed to have occurred if: (i) Parent's Board of Directors or any committee
thereof shall for any reason have withdrawn or shall have amended or modified in
a manner adverse to the Company its recommendation in favor of, the adoption and
approval of the Agreement or the approval of the Parent Merger or the issuance
of Parent Common Stock in connection with the Company Merger, (ii) Parent shall
have failed to include in the Prospectus/Proxy Statement the recommendation of
Parent's Board of Directors in favor of the adoption and approval of the
Agreement and the approval of the Parent Merger and approval of the issuance of
Parent Common Stock in connection with the Company Merger, (iii) Parent's Board
of Directors fails to reaffirm (publicly, if so requested) its recommendation in
favor of the adoption and approval of the Agreement and the approval of the
Parent Merger and approval of the issuance of Parent Common Stock in connection
with the Company Merger within ten (10) business days after the Company requests
in writing that such recommendation be reaffirmed, (iv) Parent's Board of
Directors or any committee thereof shall have approved or recommended any
Acquisition Proposal, or (v) a tender or exchange offer relating to Parent's
securities shall have been commenced by a Person unaffiliated with the Company
and Parent shall not have sent to its security holders pursuant to Rule 14e-2
promulgated under the Exchange Act, within ten (10) business days after such
tender or exchange offer is first published, sent or given, a statement
disclosing that the Board of Directors of Parent recommends rejection of such
tender or exchange offer.
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7.2 Notice of Termination; Effect of Termination. Any termination
of this Agreement under Section 7.1 above will be effective immediately upon the
delivery of a valid written notice of the terminating party to the other party
hereto. In the event of the termination of this Agreement as provided in Section
7.1, this Agreement shall be of no further force or effect, except (i) as set
forth in Section 5.4(a), this Section 7.2, Section 7.3 and Article VIII, each of
which shall survive the termination of this Agreement and (ii) nothing herein
(including Section 8.1) shall relieve any party from liability for any willful
breach of this Agreement. No termination of this Agreement shall affect the
obligations of the parties contained in the Confidentiality Agreement, all of
which obligations shall survive termination of this Agreement in accordance with
their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Mergers are consummated; provided, however, that (i)
Parent and the Company shall share equally the registration fees with the SEC of
the Registration Statement (it being understood and agreed that Parent shall be
solely responsible for the registration fees with the SEC for the Source
Registration Statement), (ii) Parent shall pay seventy percent (70%) and the
Company shall pay thirty percent (30%) of all other fees and expenses incurred
in relation to the printing and filing (with the SEC) and mailing to
stockholders of the Prospectus/Proxy Statement (including any preliminary
materials related thereto) and the Registration Statement (including financial
statements and exhibits) and any amendments or supplements thereto and any other
soliciting material (it being understood and agreed that Parent shall be solely
responsible for the fees and expenses incurred to file (with the SEC) the Source
Prospectus and the Source Registration Statement (including financial statements
and exhibits) and any amendments or supplements thereto), other than (a)
attorneys' and accountants' fees and expenses which fees shall be paid for by
the party incurring such expense, (b) the direct costs of actually printing and
mailing the Prospectus/Proxy Statement and any amendments or supplements
thereto) to the stockholders of Parent which shall be solely paid by Parent, and
(c) any fees and expenses incurred in relation to the printing and filing (with
the SEC) of any amendments or supplements to the Registration Statement and
Prospectus/Proxy Statement required or requested by the Company or Parent, as
the case may be, and any other solicitation material filed by such party
following a Change of Recommendation by such party which fees shall be solely
paid by such party; and (iii) Parent and the Company shall share equally the
filing fee for the Notification and Report Forms filed with the FTC and DOJ
under the HSR Act, and premerger notification and reports forms under similar
applicable laws of other jurisdictions, in each case pursuant to Section 5.6(a).
Notwithstanding the foregoing, in the event that the lessor or licensor of any
real property described in Section 2.13 above conditions its grant of a required
consent (including by threatening to exercise a "recapture" or other termination
right) upon the payment of a consent fee, "profit sharing" payment or other
consideration, including increased rent payments, the Company shall be
responsible for making all payments required to obtain such consent and shall
indemnify, defend, protect and hold harmless Parent from all losses, costs,
claims, liabilities and damages arising from the same.
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(b) Payments.
(i) Payment by the Company.
(1) Stockholder Vote. In the event that
(i) this Agreement is terminated by either Parent or the Company pursuant to
Section 7.1(e), (ii) following the date hereof and prior to the termination of
this Agreement there has been public disclosure of an Acquisition Proposal with
respect to the Company, and (iii) either (A) within twelve (12) months following
such termination of this Agreement the Company enters into an agreement
providing for an Acquisition (as defined in Section 7.3(b)(iv) of the Company or
(B) within twelve (12) months following such termination of this Agreement an
Acquisition of the Company is consummated, then upon the earlier to occur of the
events described in clause (A) or (B) above, the Company shall promptly, but in
no event later than two (2) business days after the date of such event, pay
Parent a fee equal to Four Million Five Hundred Thousand Dollars ($4,500,000) in
immediately available funds
(2) Change of Recommendation. In the
event that this Agreement is terminated by Parent pursuant to Section 7.1(f),
(i) the Company shall promptly, but in no event later than two (2) business days
after the date of such termination, pay Parent a fee equal to One Million Five
Hundred Thousand ($1,500,000), and (ii) in the event either (A) within twelve
(12) months following such termination of this Agreement the Company enters into
an agreement providing for an Acquisition of the Company or (B) within twelve
(12) months following such termination of this Agreement an Acquisition of the
Company is consummated, , then upon the earlier to occur of the events described
in clause (A) or (B) above, the Company shall promptly, but in no event later
than two (2) business days after the date of such event, pay Parent a fee equal
to Three Million Dollars ($3,000,000) in immediately available funds.
(ii) Payment by Parent.
(1) Stockholder Vote. In the event that
(i) this Agreement is terminated by either Parent or the Company pursuant to
Section 7.1(d), (ii) following the date hereof and prior to the termination of
this Agreement there has been public disclosure of an Acquisition Proposal with
respect to the Parent, and (iii) either (A) within twelve (12) months following
such termination of this Agreement Parent enters into an agreement providing for
an Acquisition of Parent or (B) within twelve (12) months following such
termination of this Agreement an Acquisition of Parent is consummated, then upon
the earlier to occur of the events described in clause (A) or (B) above, Parent
shall promptly, but in no event later than two (2) business days after the date
of such event, pay the Company a fee equal to Four Million Five Hundred Thousand
Dollars ($4,500,000) in immediately available funds.
(2) Change of Recommendation. In the
event that this Agreement is terminated by the Company pursuant to Section
7.1(g), (i) Parent shall promptly, but in no event later than two (2) business
days after the date of such termination, pay the Company a fee equal to One
Million Five Hundred Thousand ($1,500,000), and (ii) in the event either (A)
within twelve (12) months following such termination of this Agreement Parent
enters into an agreement providing for an Acquisition of Parent or (B) within
twelve (12) months following such termination of this Agreement an Acquisition
of Parent is consummated, then upon the earlier to occur of the events described
in clause (A) or (B) above, Parent shall promptly, but in no event later than
two (2) business days after the date of
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such event, pay the Company a fee equal to Three Million Dollars ($3,000,000) in
immediately available funds.
(iii) Interest and Costs; Other Remedies. Each of
Parent and the Company acknowledges that the agreements contained in this
Section 7.3(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the other party hereto would not
enter into this Agreement; accordingly, if Parent or the Company, as the case
may be, fails to pay in a timely manner the amounts due pursuant to this Section
7.3(b), and, in order to obtain such payment, the other party hereto makes a
claim that results in a judgment against the party failing to pay for the
amounts set forth in this Section 7.3(b), the party so failing to pay shall pay
to the other party its reasonable costs and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts set forth in this Section 7.3(b) at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
Payment of the fees described in this Section 7.3(b) shall not be in lieu of
damages incurred in the event of breach of this Agreement.
(iv) Certain Definitions. For the purposes of
this Section 7.3(b) only, "ACQUISITION," with respect to a party hereto, shall
mean any of the following transactions (other than the transactions contemplated
by this Agreement): (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
party pursuant to which the stockholders of the party immediately preceding such
transaction hold less than fifty percent (50%) of the aggregate equity interests
in the surviving or resulting entity of such transaction or any direct or
indirect parent thereof, (ii) a sale or other disposition by the party of assets
representing in excess of fifty percent (50%) of the aggregate fair market value
of the party's business immediately prior to such sale, or (iii) the acquisition
by any Person or group (including by way of a tender offer or an exchange offer,
open market or block purchase from stockholders, or issuance by the party to
such Person or group), directly or indirectly, of beneficial ownership or a
right to acquire beneficial ownership of shares representing in excess of fifty
percent (50%) of the voting power of the then outstanding shares of capital
stock of the party.
7.4 Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval of the matters
presented in connection with the Mergers by the stockholders of Parent and the
Company, provided, after any such approval, no amendment shall be made which by
law or in accordance with the rules of any relevant stock exchange or market
requires further approval by such stockholders without such further stockholder
approval. This Agreement may not be amended except by execution of an instrument
in writing signed on behalf of each of Parent, Separation Sub, Merger Sub and
the Company.
7.5 Extension; Waiver. At any time prior to the Effective Time of
the Company Merger either party hereto, by action taken or authorized by their
respective Board of Directors, may, to the extent legally allowed: (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument
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in writing signed on behalf of such party. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The
representations and warranties of the Company, Parent, Separation Sub and Merger
Sub contained in this Agreement, or any instrument delivered pursuant to this
Agreement, shall terminate at the Effective Time of the Company Merger, and only
the covenants that by their terms survive the Effective Time of the Company
Merger and this Article VIII shall survive the Effective Time of the Company
Merger.
8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (i) on the date of delivery if
delivered personally, (ii) on the date of confirmation of receipt (or, the first
business day following such receipt if the date is not a business day) of
transmission by telecopy or telefacsimile, or (iii) on the date of confirmation
of receipt (or, the first business day following such receipt if the date is not
a business day) if delivered by a nationally recognized courier service. All
notices hereunder shall be delivered as set forth below, or pursuant to such
other instructions as may be designated in writing by the party to receive such
notice:
(a) if to Parent, Separation Sub or Merger Sub, to:
Palm, Inc.
400 N. McCarthy Blvd.
Milpitas, California 95035
Attention: General Counsel
Telephone No.: (408) 503-7000
Telecopy No.: (408) 503-2750
with copies to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Larry W. Sonsini
Katharine A. Martin
Martin W. Korman
Telephone No.: (650) 493-9300
Telecopy No.: (650) 493-6811
(b) if to the Company, to:
Handspring, Inc.
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189 Bernardo Avenue
Mountain View, CA 94043
Attention: General Counsel
Telephone No.: (650) 230-5000
Telecopy No.: (650) 230 5477
with a copies to:
Fenwick & West LLP
Silicon Valley Center
801 California Street
Mountain View, California 9404
Attention: Dennis R. Debroeck
Douglas N. Cogen
Lynda M. Twomey
Telephone No.: (650) 988-8500
Telecopy No.: (650) 938-5200
8.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to Sections,
such reference shall be to a section of this Agreement unless otherwise
indicated. For purposes of this Agreement, the words "INCLUDE," "INCLUDES" and
"INCLUDING," when used herein, shall be deemed in each case to be followed by
the words "WITHOUT LIMITATION." The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. When reference is made herein
to "THE BUSINESS OF" an entity, such reference shall be deemed to include the
business of all such entity and its Subsidiaries, taken as a whole. An exception
or disclosure made in the Company Disclosure Letter with regard to a
representation of the Company, or in the Parent Disclosure Letter with regard to
a representation of Parent or Merger Sub, shall be deemed made with respect to
any other representation by such party to which such exception or disclosure is
clearly relevant on its face.
(b) For purposes of this Agreement, the term "KNOWLEDGE"
means, with respect to a party hereto, with respect to any matter in question,
that any of the executive officers of such party, has actual knowledge of such
matter, after inquiry of their respective direct reports.
(c) For purposes of this Agreement, the term "MATERIAL
ADVERSE EFFECT," when used in connection with an entity, means any change,
event, violation, inaccuracy (but disregarding any qualifications or limitations
regarding the "Knowledge" of a party or words of similar effect), circumstance
or effect (any such item, an "EFFECT"), individually or when taken together with
all other Effects that have occurred prior to the date of determination of the
occurrence of the Material Adverse Effect, that is or is reasonably likely to
(i) be materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of such entity
taken as a whole with its Subsidiaries (or if such entity is the Company, the
Company taken as whole with its Subsidiaries or Parent taken as whole with its
Subsidiaries) or (ii) materially impede the authority of such entity to
consummate the transactions contemplated by this Agreement in accordance with
the
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terms hereof and applicable Legal Requirements; provided, however, that, for
purposes of clause (i) above, in no event shall any of the following be deemed
to constitute a Material Adverse Effect on any entity: (A) any Effect resulting
from the announcement or pendency of the Mergers, including stockholder
litigation arising out of the transactions contemplated by this Agreement
(provided that the exception in this clause (A) shall not apply to the use of
the term "Material Adverse Effect" in Sections 6.2(a) and 6.3(a) with respect to
the representations and warranties contained in Section 2.3, Section 2.7,
Section 2.17, Section 2.19, Section 3.3, Section 3.7, Section 3.17, Section 3.19
and Section 3.21(b)), (B) any Effect that results from changes affecting any of
the industries in which such entity operates generally or the United States
economy generally (to the extent that such changes in each case do not
disproportionately affect such entity in any material respect), (C) the failure
by such entity to meet published analyst revenue or earnings projections, in and
of itself; or (D) any change in such entity's stock price or trading volume, in
and of itself; provided, further, that for purposes of determining whether a
Material Adverse Effect with respect to Parent has occurred, subject to the
exception below, only Effects relating to the Solutions Group Business of Parent
shall be taken into account and no Effects relating to Source or its
Subsidiaries, or the business, assets, capitalization, financial condition or
results of operations of Source or its Subsidiaries, including the development,
licensing or provision of the Palm operating system, shall be taken into
account, except to the extent that such Effects would or would be reasonably
likely to adversely affect Parent following the Mergers (taking into account the
terms of the Separation Agreements).
(d) For purposes of this Agreement, the term "PERSON"
shall mean any individual, corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental Entity.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third-Party Beneficiaries. This Agreement
and the documents and instruments and other agreements among the parties hereto
as contemplated by or referred to herein, including the Company Disclosure
Letter and the Parent Disclosure Letter : (i) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement and (ii) are not
intended to confer upon any other Person any rights or remedies hereunder,
except as specifically provided, following the Effective Time of the Company
Merger, in Section 5.11. Without limiting the foregoing, it is expressly
understood and agreed that the provisions of Sections 5.9(f) and 5.10 are
statements of intent only no Company Employee or other Person (including any
party hereto) shall have any rights or remedies, including rights of
enforcement, with respect thereto and no Company Employee or other Person is or
is intended to be a third-party beneficiary thereof.
8.6 Severability. In the event that any provision of this
Agreement or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision
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to other Persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the greatest extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance.
(a) Other Remedies. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached.
(b) Specific Performance. It is accordingly agreed that
the parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.
8.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
8.10 Assignment. No party may assign either this Agreement or any
of its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Any purported assignment in violation of this
Section 8.10 shall be void. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
8.11 Waiver of Jury Trial. EACH OF PARENT, SEPARATION SUB, MERGER
SUB AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
PARENT, MERGER SUB OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
*****
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
PALM, INC.
By: /s/ R. Todd Bradley
------------------------------------------------
Name: R. Todd Bradley
Title: President and CEO, Palm, Inc.
PEACE SEPARATION CORPORATION
By: /s/ Philippe Morali
------------------------------------------------
Name: Philippe Morali
Title: President, Peace Separation Corporation
HARMONY ACQUISITION CORPORATION
By: /s/ Philippe Morali
------------------------------------------------
Name: Philippe Morali
Title: President, Harmony Acquisition
Corporation
HANDSPRING, INC.
By: /s/ Donna L. Dubinsky
------------------------------------------------
Name: Donna L. Dubinsky
Title: CEO, Handspring, Inc.
****AGREEMENT AND PLAN OF REORGANIZATION****