Agreement and Plan of Merger - NetScreen Technologies Inc. and OneSecure Inc.
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AGREEMENT AND PLAN OF MERGER
AMONG
NETSCREEN TECHNOLOGIES, INC.
TANGO ACQUISITION CORP.
AND
ONESECURE, INC.
AUGUST 22, 2002
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August 22, 2002 (the "Agreement Date") by and among NetScreen
Technologies, Inc., a Delaware corporation ("Acquirer"), Tango Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Acquirer ("Merger
Sub"), and OneSecure, Inc., a Delaware corporation (the "Company").
RECITALS
A. The Boards of Directors of Acquirer, Merger Sub and the Company have
determined that the Merger is advisable and in the best interests of their
respective companies and stockholders, have approved and declared advisable this
Agreement and, accordingly, have agreed to effect the Merger provided for herein
upon the terms and conditions of this Agreement.
B. Concurrently with the execution and delivery of this Agreement, and as a
condition and inducement to Acquirer's willingness to enter into this Agreement,
(i) the Company and each Company Stockholder listed in Exhibit A is executing
and delivering to Acquirer a voting agreement in the form of Exhibit B (the
"Voting Agreement") and an investment representation letter in the form of
Exhibit C-1 (together with the investment representation letters in the forms
attached as Exhibit C-2 and Exhibit C-3, the "Investment Representation
Letter"), (ii) each of the employees of the Company listed in Exhibit D is
executing and delivering to Acquirer (A) a noncompetition agreement with
Acquirer (each, a "Noncompetition Agreement"), which agreement shall be
effective subject to the occurrence of and as of the Effective Time, and (B) an
Investment Representation Letter in the form of Exhibit C-1, (iii) each of the
employees of the Company listed in Exhibit E is executing and delivering to
Acquirer (A) an offer letter for employment with Acquirer (each, an "Offer
Letter"), which Offer Letter shall be effective subject to the occurrence of and
as of the Effective Time, (B) Acquirer's standard employee invention assignment
and confidentiality agreement to be effective subject to the occurrence of and
as of the Effective Time (the "Confidentiality Agreements"), and (C) if such
employee is a Company Stockholder, an Investment Representation Letter in the
form of Exhibit C-2 or Exhibit C-3, and (iv) each of the employees of the
Company listed in Exhibit F is executing and delivering to Acquirer an Option
Vesting Waiver Agreement (each, a "Waiver"), which Waiver shall be effective
subject to the occurrence of and as of the Effective Time.
C. Acquirer, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants and conditions contained herein, the parties hereby agree as follows:
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ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
1.1 "Acquirer Ancillary Agreements" means, collectively, each certificate
to be delivered by Acquirer or an officer or officers of Acquirer at the Closing
pursuant to Article 8 and each other agreement or document (other than this
Agreement) to which Acquirer is required to become a party pursuant to this
Agreement.
1.2 "Acquirer Average Price Per Share" means $12.57; provided, however,
that if the average of the closing prices per share of Acquirer Common Stock (in
U.S. dollars) as quoted on the Nasdaq National Market (or such other exchange or
quotation system on which shares of Acquirer Common Stock are then primarily
traded or quoted) and reported on the official website of the Nasdaq Stock
Market (www.nasdaq.com) over the ten consecutive trading days ending with (and
including) the trading day that is two trading days prior to the Closing Date is
greater or less than $12.57 by more than 10% of $12.57, then the Acquirer
Average Price Per Share shall mean $12.57 increased or decreased, as the case
may be, by exactly 10% of $12.57; provided, further, that if the average of the
closing prices per share of Acquirer Common Stock (in U.S. dollars) as quoted on
the Nasdaq National Market (or such other exchange or quotation system on which
shares of Acquirer Common Stock are then primarily traded or quoted) and
reported on the official website of the Nasdaq Stock Market (www.nasdaq.com)
over the ten consecutive trading days ending with (and including) the trading
day that is two trading days prior to the Closing Date is equal to or no greater
than 10% of $12.57, then the Acquirer Average Price Per Share shall be $12.57.
1.3 "Acquirer Common Stock" means the common stock, par value $0.001 per
share, of Acquirer.
1.4 "Acquirer Preferred Stock" means the preferred stock, par value $0.001
per share, of Acquirer.
1.5 "Applicable Laws" means all federal, state or local laws, statutes,
ordinances, regulations, and rules, and all orders, writs, injunctions, awards,
judgments and decrees, and to the Company's knowledge, all foreign laws,
statutes, ordinances, regulations and rules, applicable to a person or any of
its assets, properties and business (and any regulations promulgated
thereunder).
1.6 "California Law" means the California General Corporation Law.
1.7 "Cash Adjusted Common Conversion Number" means the quotient (calculated
to the fourth decimal place) obtained by dividing (a) the Common Stock
Consideration Per Share less the Common Cash Consideration Per Share by (b) the
Acquirer Average Price Per Share.
1.8 "Cash Adjusted Series A Preferred Conversion Number" means the quotient
(calculated to the fourth decimal place) obtained by dividing (a) the Series A
Preferred Stock Consideration Per Share less the Series A Preferred Cash
Consideration Per Share by (b) the Acquirer Average Price Per Share.
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1.9 "Cash Adjusted Series B Preferred Conversion Number" means the quotient
(calculated to the fourth decimal place) obtained by dividing (a) the Series B
Preferred Stock Consideration Per Share less the Series B Preferred Cash
Consideration Per Share by (b) the Acquirer Average Price Per Share.
1.10 "Certificate of Merger" means a certificate of merger, in such
appropriate form as determined by the parties and in conformity with the
requirements of the Delaware Law.
1.11 "Code" means the Internal Revenue Code of 1986, as amended.
1.12 "Common Cash Consideration" means the product (calculated to the
fourth decimal place) obtained by multiplying (a) 0.1173 by (b) the Cash
Consideration.
1.13 "Common Cash Consideration Per Share" means the quotient (calculated
to the fourth decimal place) obtained by dividing (a) Common Cash Consideration
by (b) the Common Share Number.
1.14 "Common Consideration" means the product (calculated to the fourth
decimal place) obtained by multiplying (a) 0.1173 by (b) the Stockholder
Consideration.
1.15 "Common Conversion Number" means the quotient (calculated to the
fourth decimal place) obtained by dividing (a) the Common Stock Consideration
Per Share by (b) the Acquirer Average Price Per Share.
1.16 "Common Share Number" means the aggregate number of shares of Company
Common Stock and any option, warrant or other security exercisable or
exchangeable for, or convertible into, shares of Company Common Stock (other
than Company Preferred Stock and Company Options), in each case, whether vested
or unvested (each, on a fully exercised and converted to Company Common Stock
basis), that are (or are deemed to be) issued and outstanding immediately prior
to the Effective Time.
1.17 "Common Stock Consideration Per Share" means the quotient (calculated
to the fourth decimal place) obtained by dividing (a) the Common Consideration
by (b) the Common Share Number.
1.18 "Company Ancillary Agreements" means, collectively, each certificate
to be delivered by the Company or an officer or officers of the Company at the
Closing pursuant to Article 9 and each other agreement or document (other than
this Agreement) to which the Company is required to become a party pursuant to
this Agreement; provided, however, that the term "Company Ancillary Agreements"
shall not include the Investment Representation Letters.
1.19 "Company Business" means the business of the Company as presently
conducted and presently proposed to be conducted.
1.20 "Company Capital Stock" means the outstanding shares of Company Common
Stock, Company Preferred Stock and any other classes and series of common and
preferred stock of the Company, in each case on a fully exercised and converted
to Company Common Stock basis and as of the Effective Time, including all shares
of such stock that are issuable upon the
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exercise of any outstanding convertible stock, options, warrants and other
rights thereto (whether or not such rights are vested or exercisable as of the
Effective Time).
1.21 "Company Common Stock" means the common stock, par value $0.0001 per
share, of the Company.
1.22 "Company Preferred Stock" means the Company Series A Preferred Stock,
the Company Series B Preferred Stock, the Company Series B-1 Preferred Stock and
the Company Series B-2 Preferred Stock.
1.23 "Company Series A Preferred Stock" means the Series A Preferred Stock,
par value $0.0001 per share, of the Company.
1.24 "Company Series B Preferred Stock" means the Series B Preferred Stock,
par value $0.0001 per share, of the Company.
1.25 "Company Series B-1 Preferred Stock" means the Series B-1 Preferred
Stock, par value $0.0001 per share, of the Company.
1.26 "Company Series B-2 Preferred Stock" means the Series B-2 Preferred
Stock, par value $0.0001 per share, of the Company.
1.27 "Company Stock" means the Company Common Stock and the Company
Preferred Stock.
1.28 "Company Stockholders" means the record holders of issued and
outstanding shares of Company Common Stock and Company Preferred Stock.
1.29 "Company Stockholder's Pro Rata Share" means the quotient obtained by
dividing (a) the number of shares of Company Stock held by a Company Stockholder
at the Effective Time, by (b) the issued and outstanding shares of Company Stock
at the Effective Time.
1.30 "Company Warrants" means each outstanding warrant to purchase shares
of Company Common Stock as set forth in Schedule 3.4.2(b) of the Company
Disclosure Letter.
1.31 "Delaware Law" means the Delaware General Corporation Law.
1.32 "Effective Time" means the time that the parties hereto cause the
Reverse Merger to be consummated by filing the Certificate of Merger with the
Delaware Secretary of State in accordance with the Delaware Law or such later
time as may be agreed in writing by the Company and Acquirer and specified in
the Certificate of Merger.
1.33 "Encumbrance" means, with respect to any asset, any mortgage, deed of
trust, lien, pledge, charge, security interest, title retention device,
collateral assignment, claim, restriction or other encumbrance of any kind in
respect of such asset (including any restriction on the voting of any security,
any restriction on the transfer of any security or other asset, any restriction
on the receipt of any income derived from any asset, any restriction on the use
of any
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asset and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset); provided, however, that the term
"Encumbrance" shall not include any lien, pledge or security interest held by
the Company on one or more outstanding shares of Company Common Stock or any
right of first refusal or repurchase option held by the Company on one or more
outstanding shares of Company Common Stock.
1.34 "Escrow Fund" means the Escrow Shares and any shares of Acquirer
Common Stock or other equity securities issued or distributed by Acquirer
(including shares issued upon a stock split, stock dividend, recapitalization or
other similar event) in respect of Escrow Shares.
1.35 "Escrow Release Date" means the business day after the two-year
anniversary of the Effective Time.
1.36 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.37 "GAAP" means United States generally accepted accounting principles.
1.38 "knowledge" means, with respect to any party hereto, with respect to
any fact, circumstance, event or other matter in question, that any of the
officers or legal or financial personnel of such party (and, with respect to
Section 3.13, that any of the persons engaged in technology development activity
for the Company) has knowledge of such fact, circumstance, event or other matter
after reasonable inquiry of such fact, circumstance, event or other matter. An
individual shall be deemed to have knowledge of a particular fact, circumstance,
event or other matter if (i) such fact, circumstance, event or other matter is
reflected in one or more documents, written or electronic, that are or have been
in such individual's possession or that would reasonably be expected to be
reviewed by an individual who has the duties and responsibilities of such
individual in the customary performance of such duties and responsibilities or
(ii) such knowledge could be obtained from reasonable inquiry of those persons
employed by the Company or Acquirer (as the case may be) charged with
administrative or operational responsibility for such matter for such party.
1.39 "Material Adverse Change" or "Material Adverse Effect," when used with
reference to any entity or group of related entities, means any event, change,
violation, inaccuracy, circumstance or effect (regardless of whether or not such
events, changes, violations, inaccuracies, circumstances or effects are
inconsistent with the representations or warranties made by such party in this
Agreement) that is or is reasonably likely to be, individually or in the
aggregate, materially adverse to the condition (financial or otherwise),
capitalization, properties, assets (including intangible assets), business,
operations or results of operations of such entity, taken as a whole with its
Subsidiaries; provided, however, that none of the following shall constitute, in
and of itself, individually or aggregated solely with others of the following, a
Material Adverse Change in, or Material Adverse Effect on, Acquirer: (a) an
adverse event, change, violation, inaccuracy, circumstance or effect resulting
from conditions affecting the industries in which Acquirer participates, the
U.S. economy as a whole or foreign economies in any locations where Acquirer has
material operations, sales, suppliers or customers; or (b) a change in the price
of the publicly traded stock of Acquirer; provided, further, that none of the
following shall constitute, in and of itself, individually or aggregated solely
with others of the following, a Material Adverse Change in, or Material Adverse
Effect on, the Company:
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(a) attrition with respect to those Company employees who are not listed in
Exhibit E or who are not Specified Employees or attrition with respect to up to
10% of the Specified Employees; (b) an adverse event, change, violation,
inaccuracy, circumstance or effect resulting from conditions affecting the
industries in which the Company participates, the U.S. economy as a whole or
foreign economies in any locations where the Company has material operations,
sales, suppliers or customers; or (c) only to the extent that such payments or
provisions of benefits are reflected in the Closing TNW Calculations, the
payment of amounts due, or the provision of other benefits, to the Company's
officers or employees under employment contracts, noncompetition agreements,
employee benefits plans, severance arrangements or other agreements in existence
as of the Agreement Date.
1.40 "Merger Sub Ancillary Agreements" means, collectively, each
certificate to be delivered by Merger Sub or an officer or officers of Merger
Sub at the Closing pursuant to Article 8 and each other agreement or document
(other than this Agreement) to which Merger Sub is required to become a party
pursuant to this Agreement.
1.41 "Merger Sub Common Stock" means the common stock, par value $0.001 per
share, of Merger Sub.
1.42 "Option Consideration Per Share" means the quotient (calculated to the
fourth decimal place) obtained by dividing (a) the Optionholder Consideration by
(b) the Option Share Number.
1.43 "Option Conversion Number" means the quotient (calculated to the
fourth decimal place) obtained by dividing (a) the Option Consideration Per
Share by (b) the Acquirer Average Price Per Share.
1.44 "Optionholder Consideration" means the product (calculated to the
fourth decimal place) obtained by multiplying (a) 0.0990 by (b) the Total
Consideration.
1.45 "Option Share Number" means the aggregate number of shares of Company
Common Stock subject to Company Options, whether vested or unvested (each, on a
fully exercised and converted to Company Common Stock basis), that are (or are
deemed to be) issued and outstanding immediately prior to the Effective Time,
including in such amount all New Company Options but excluding unvested Company
Options of the employees subject to the Employee Terminations except to the
extent such Company Options accelerate in connection with such terminations.
1.46 "person" means any individual, corporation (including any
not-for-profit corporation), partnership, limited liability partnership, joint
venture, estate, trust, firm, company (including any limited liability company
or joint stock company), association, organization, entity or Governmental
Authority.
1.47 "Preferred Consideration" means the product (calculated to the fourth
decimal place) obtained by multiplying (a) 0.8827 by (b) the Stockholder
Consideration.
1.48 "Restated Certificate" means the Company's Restated Certificate of
Incorporation in the form of Exhibit G.
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1.49 "SEC" means the Securities and Exchange Commission.
1.50 "Securities Act" means the Securities Act of 1933, as amended.
1.51 "Series A Preferred Cash Consideration" means the product (calculated
to the fourth decimal place) obtained by multiplying (a) 0.3706 by (b) the Cash
Consideration.
1.52 "Series A Preferred Cash Consideration Per Share" means the quotient
(calculated to the fourth decimal place) obtained by dividing (a) Series A
Preferred Cash Consideration by (b) the Series A Preferred Share Number.
1.53 "Series A Preferred Consideration" means the product (calculated to
the fourth decimal place) obtained by multiplying (a) 0.4199 by (b) the
Preferred Consideration.
1.54 "Series A Preferred Conversion Number" means the quotient (calculated
to the fourth decimal place) obtained by dividing (a) the Series A Preferred
Stock Consideration Per Share by (b) the Acquirer Average Price Per Share.
1.55 "Series A Preferred Share Number" means the aggregate number of shares
of Company Series A Preferred Stock and any option, warrant or other security
exercisable or exchangeable for, or convertible into, shares of Company Series A
Preferred Stock, in each case, whether vested or unvested (each, on a fully
exercised and converted to Company Series A Preferred Stock basis), that are (or
are deemed to be) issued and outstanding immediately prior to the Effective
Time.
1.56 "Series A Preferred Stock Consideration Per Share" means the quotient
(calculated to the fourth decimal place) obtained by dividing (a) the Series A
Preferred Consideration by (b) the Series A Preferred Share Number.
1.57 "Series B Preferred Cash Consideration" means the product (calculated
to the fourth decimal place) obtained by multiplying (a) 0.5120 by (b) the Cash
Consideration.
1.58 "Series B Preferred Cash Consideration Per Share" means the quotient
(calculated to the fourth decimal place) obtained by dividing (a) Series B
Preferred Cash Consideration by (b) the Series B Preferred Share Number.
1.59 "Series B Preferred Consideration" means the product (calculated to
the fourth decimal place) obtained by multiplying (a) 0.5801 by (b) the
Preferred Consideration.
1.60 "Series B Preferred Conversion Number" means the quotient (calculated
to the fourth decimal place) obtained by dividing (a) the Series B Preferred
Stock Consideration Per Share by (b) the Acquirer Average Price Per Share.
1.61 "Series B Preferred Share Number" means the aggregate number of shares
of Company Series B Preferred Stock, Company Series B-1 Preferred Stock, Company
Series B-2 Preferred Stock and any option, warrant or other security exercisable
or exchangeable for, or convertible into, shares of Company Series B Preferred
Stock, Company Series B-1 Preferred Stock or Company Series B-2 Preferred Stock,
in each case, whether vested or unvested (each,
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on a fully exercised and converted to Company Series B Preferred Stock basis,
Company Series B-1 Preferred Stock basis or Company Series B-2 Preferred Stock
basis, as the case may be), that are (or are deemed to be) issued and
outstanding immediately prior to the Effective Time.
1.62 "Series B Preferred Stock Consideration Per Share" means the quotient
(calculated to the fourth decimal place) obtained by dividing (a) the Series B
Preferred Consideration by (b) the Series B Preferred Share Number.
1.63 "Stockholder Consideration" means the product (calculated to the
fourth decimal place) obtained by multiplying (a) 0.9010 by (b) the Total
Consideration.
1.64 "Subsidiary" of an entity means a corporation or other business entity
in which such entity owns, directly or indirectly, at least a 50% interest or
that is otherwise, directly or indirectly, controlled by such entity.
1.65 "Tangible Net Worth" means the Company's total assets less its total
liabilities, calculated in accordance with GAAP; provided, however, that, for
purposes of such calculation, (a) total assets shall be reduced by the amount of
all leasehold improvements, prepaid insurance (including D&O insurance, workers
compensation and property liability insurance), "prepaid other" as such line
item appears in the Company's May 31, 2002 balance sheet previously delivered to
Acquirer (excluding prepayments to Gartner Group for ITX PO in October 2002) and
prepaid rent and (b) total liabilities shall include (i) all real property lease
commitments at full value notwithstanding that GAAP may require such commitments
to be stated at present value and (ii) all severance payments (contractual or
otherwise) in excess of $50,000 in the aggregate that are payable to officers or
employees of the Company on or after the Agreement Date in connection with the
non-continuation of such officers' or employees' employment with the Company,
the Surviving Corporation, Acquirer or any Subsidiary of Acquirer following the
Closing, but such calculation in any event shall exclude (i) up to $750,000 of
any obligations of the Company to Acquirer existing as of the Agreement Date and
(ii) the Acquisition Bonus Pool Amount paid or payable to the Acquisition Bonus
Recipients immediately prior to the Closing pursuant to Section 5.21. For
purposes of clause (b) above, if the Company and the lessor of any of its
existing real property leases have executed a binding agreement ("Lease
Agreement") whereby such lessor has (i) reduced the Company's outstanding
liabilities to the lessor under the applicable lease, (ii) given the Company a
release of all claims by the lessor under the applicable lease, and (iii) not
increased any obligation of the Company, Acquirer or the Surviving Corporation
to the lessor under the applicable lease or otherwise adversely affected the
Company, Acquirer or the Surviving Corporation, then the full value of the
applicable real property lease commitment for purposes of calculating Tangible
Net Worth shall be the total settlement amount at full value as set forth in the
applicable Lease Agreement.
1.66 "Termination Date" means September 30, 2002.
1.67 "Total Consideration" means $44,700,000; provided, however, that the
Total Consideration shall be subject to reduction as provided in Section 2.2.7.
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Other capitalized terms defined elsewhere in this Agreement and not defined
in this Article 1 shall have the meanings assigned to such terms in the
referenced Sections of this Agreement:
<TABLE>
<CAPTION>
Defined Term Referenced Section
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AAA 11.8(c)
Acquirer Disclosure Letter Article 4
Acquirer Indemnified Person 11.2.1
Acquisition Bonus Plan 5.21
Acquisition Bonus Pool Amount 5.21
Acquisition Bonus Recipients 5.21
Affidavit 7.2.2
Alternative Transaction 5.7
August 31 TNW 2.2.7(d)
Balance Sheet 3.8
Balance Sheet Date 3.8
Basket 11.3.2
Capital Change 2.3
Cash Bonus Plan 6.4
Cash Bonus Recipients 6.4
Cash Consideration 2.2.2(c)
Cash Election 2.2.2(c)
Claim 11.5
Closing 7.1
Closing Acceptance 2.2.7(a)
Closing Certificate 9.1
Closing Date 7.1
Closing Reductions 2.2.7(b)
Closing TNW 2.2.7(c)
Closing TNW Calculations 2.2.7(a)
Company Benefit Arrangements 3.16.4(a)
Company Certificates 7.2.2
Company Disclosure Letter Article 3
Company Financial Statements 3.8
Company IP Rights 3.13.1
Company IP Rights Agreements 3.13.2
Company-Licensed IP Rights 3.13.1
Company Material Agreements 3.11
Company Options 2.4
Company-Owned IP Rights 3.13.1
Company Plan 2.4
Company Source Code 3.13.9
Company Stockholder Approval 5.12.1
Company Websites 3.27
Confidentiality Agreements 5.20
</TABLE>
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<TABLE>
<CAPTION>
Defined Term Referenced Section
------------ ------------------
<S> <C>
Contested Claim 11.8(b)
Continuing Employee 5.10.2
Damages 11.2.1
Dissenting Shares 7.3
Noncompetition Agreements Recital B
Eldridge Agreement 5.16
Environmental Law 3.21.2
ERISA 3.16.3
ERISA Affiliate 3.16.4(a)
Escrow Shares 2.6
ESPP 5.10.2
Excess Dissenters' Amounts 11.2.1
Exchange Agent 7.2.2
Final Award 11.8(c)(iii)
Final Reductions 2.2.7(b)
Firm 2.2.7(b)
Firm Calculations 2.2.7(b)
Governmental Authority 3.3.2
Governmental Permits 3.14.3
Historical Audits 9.21
Information Statement 5.11
Intellectual Property 3.13.1
International Employee Plan 3.16.9
Investment Representation Letter Recital B
IP Post-Release Claim 11.10
IP Post-Release Claim Limit 11.10
J.A.M.S. 11.8(c)
Loonkar Agreement 5.16
Merger 2.1.3
Material of Environmental Concern 3.21.2
New Audits 9.21
New Company Options 5.14
New Optionees 5.14
Nondisclosure Agreement 5.8
Notice of Claim 11.5
Notice of Superior Offer 5.12.3
Offer Letter Recital B
One-Year Anniversary 6.4
Other Employees 5.20
Post-Closing Reductions 2.2.7(b)
Post-Closing TNW Calculations 2.2.7(b)
Preferred Rights 2.5
Previous Payments 11.10
Public Software 3.13.13
</TABLE>
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<TABLE>
<CAPTION>
Defined Term Referenced Section
------------ ------------------
<S> <C>
Refusal Agreement 5.16
Registration Rights Agreement 2.8
Regulations 3.7.1
Release Date 11.1
Representative 11.4.1
Representative's Objection 2.2.7(b)
Restricted Stock Agreements 5.16
Reverse Merger 2.1.1
Rights Agreement 5.16
SAS 71 Review 9.21
Second-Step Forward Merger 2.1.2
Second-Step Sub 2.1.2
Series A Preferred Rights 2.5
Series B Preferred Rights 2.5
Significant Customer 3.25
Significant Supplier 3.26
Specified Employees 5.20
Statement No. 5 3.8
Stockholders' Agreement 5.16
Superior Offer 5.12.3
Surviving Corporation 2.1.1
Tendering Holder 7.2.2
Terminating Party 10.2.5
Third-Party Claim 11.5(b)
Threshold 2.2.7(e)
TNW Adjustments 11.2.1
TNW Certificate 2.2.7(a)
Transaction Expenses 12.7
Two-Year Anniversary 6.4
Unpaid Transaction Expenses 12.7
Unvested Company Shares 2.2.6
Vested Company Shares 2.6
Voting Agreement Recital B
Waiver Recital B
WARN Act 3.16.10
Zuk Agreement 5.16
</TABLE>
ARTICLE 2
THE MERGER
2.1 The Merger.
2.1.1 Reverse Merger. At the Effective Time and subject to and upon
the terms and conditions of this Agreement and the applicable provisions of the
Delaware Law, Merger
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Sub shall be merged with and into the Company (the "Reverse Merger"), the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation. Subject to Sections 2.1.2 and 2.1.3, the
Company as the surviving corporation after the Merger is referred herein as the
"Surviving Corporation."
2.1.2 Two-Step Merger. If Acquirer makes a Cash Election, then as soon
as reasonably practicable following the consummation of the Reverse Merger, the
Company shall be merged (the "Second-Step Forward Merger") with and into another
direct wholly owned subsidiary of Acquirer (the "Second-Step Sub"). Following
the Second-Step Forward Merger, the separate corporate existence of the Company
shall cease and Second-Step Sub shall continue as the Surviving Corporation.
2.1.3 Definition of Merger. The Reverse Merger is referred to herein
as the "Merger." If the Second-Step Forward Merger is consummated, then "Merger"
shall refer to the Reverse Merger and the Second-Step Forward Merger,
collectively or seriatim, as appropriate.
2.2 Conversion of Shares.
2.2.1 Conversion of Merger Sub Common Stock. At the Effective Time,
each share of Merger Sub Common Stock that is issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued, fully
paid and nonassessable share of common stock, $0.001 par value per share, of the
Surviving Corporation and shall be the only shares of capital stock of the
Surviving Corporation that are issued and outstanding immediately after the
Effective Time.
2.2.2 Conversion of Company Common Stock and Company Preferred Stock.
(a) Company Common Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, each share of Company Common Stock that is
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without the need for any further action on the part of the
holder thereof (except as expressly provided herein), be converted into and
represent the right to receive the number of shares of Acquirer Common Stock
that is equal to the Common Conversion Number. The preceding provisions of this
Section 2.2.2(a) are subject to the provisions of Section 2.2.2(c) (regarding
the Cash Election), Section 2.2.3 (regarding rights of holders of Dissenting
Shares), Section 2.2.4 (regarding cancellation of Company-owned stock), Section
2.2.5 (regarding the elimination of fractional shares of Acquirer Common Stock),
Section 2.2.6 (regarding the continuation of vesting and repurchase rights),
Section 2.3 (regarding adjustments for Capital Changes) and Section 2.6
(regarding the withholding of the Escrow Fund).
(b) Company Preferred Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, (i) each share of Company Series A
Preferred Stock that is issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without the need for any
further action on the part of the holder thereof (except as expressly provided
herein), be converted into and represent the right to receive the number of
shares of Acquirer Common Stock that is equal to the Series A Preferred
Conversion Number and (ii) each
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share of Company Series B Preferred Stock, Company Series B-1 Preferred Stock
and Company Series B-2 Preferred Stock that is issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without the need for any further action on the part of the holder thereof
(except as expressly provided herein), be converted into and represent the right
to receive the number of shares of Acquirer Common Stock that is equal to the
Series B Preferred Conversion Number. The preceding provisions of this Section
2.2.2(b) are subject to the provisions of Section 2.2.2(c) (regarding the Cash
Election), Section 2.2.3 (regarding rights of holders of Dissenting Shares),
Section 2.2.4 (regarding cancellation of Company-owned stock), Section 2.2.5
(regarding the elimination of fractional shares of Acquirer Common Stock),
Section 2.2.6 (regarding the continuation of vesting and repurchase rights),
Section 2.3 (regarding adjustments for Capital Changes) and Section 2.6
(regarding the withholding of the Escrow Fund).
(c) Cash Election. In the event Acquirer elects, in its sole
discretion, which election may be made at any time on or after the Agreement
Date up to the second full business day prior to the Closing Date by delivery of
written notice thereof to the Company (the "Cash Election"), to pay up to 35% of
the Stockholder Consideration in cash (which cash amount shall be referred to
herein as the "Cash Consideration"), and, in the event of such election, subject
to the terms and conditions of this Agreement, at the Effective Time, (i) each
share of Company Common Stock that is issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without the need for
any further action on the part of the holder thereof (except as expressly
provided herein), be converted into and represent the right to receive (A) cash
equal to the Common Cash Consideration Per Share and (B) the number of shares of
Acquirer Common Stock that is equal to the Cash Adjusted Common Conversion
Number, (ii) each share of Company Series A Preferred Stock that is issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without the need for any further action on the part of the holder
thereof (except as expressly provided herein), be converted into and represent
the right to receive (A) cash equal to the Series A Preferred Cash Consideration
Per Share and (B) the number of shares of Acquirer Common Stock that is equal to
the Cash Adjusted Series A Preferred Conversion Number, and (iii) each share of
Company Series B Preferred Stock, Company Series B-1 Preferred Stock and Company
Series B-2 Preferred Stock that is issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without the need for any
further action on the part of the holder thereof (except as expressly provided
herein), be converted into and represent the right to receive (A) cash equal to
the Series B Preferred Cash Consideration Per Share and (B) the number of shares
of Acquirer Common Stock that is equal to the Cash Adjusted Series B Preferred
Conversion Number. The preceding provisions of this Section 2.2.2(c) are subject
to the provisions of Section 2.2.3 (regarding rights of holders of Dissenting
Shares), Section 2.2.4 (regarding cancellation of Company-owned stock), Section
2.2.5 (regarding the elimination of fractional shares of Acquirer Common Stock),
Section 2.2.6 (regarding the continuation of vesting and repurchase rights),
Section 2.3 (regarding adjustments for Capital Changes) and Section 2.6
(regarding the withholding of the Escrow Fund). For the avoidance of doubt, in
the event Acquirer makes the Cash Election, then the provisions of Sections
2.2.2(a) and 2.2.2(b) shall not apply and each share of Company Common Stock,
Company Series A Preferred Stock, Company Series B Preferred Stock, Company
Series B-1 Preferred Stock and Company Series B-2 Preferred Stock that is issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without the need for any further action on the part of the holder
thereof (except as
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expressly provided herein), be converted into and represent the right to receive
the cash and number of shares of Acquirer Common Stock specified in this Section
2.2.2(c).
2.2.3 Dissenting Shares. As more fully set forth in Section 7.3,
holders of shares of Company Stock who have complied with all requirements for
perfecting stockholders' appraisal rights, as set forth in Section 262 of the
Delaware Law, and to the extent applicable to the Company, with all requirements
for perfecting stockholders' dissenters' rights as set forth in Section 1300 et.
seq. under the California Law, shall be entitled to their rights under the
Delaware Law and, if applicable, the California Law, with respect to such
shares.
2.2.4 Cancellation of Company-Owned Stock. Notwithstanding Section
2.2.2, each share of Company Stock held by the Company or any Subsidiary of the
Company immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof.
2.2.5 Fractional Shares. No fractional shares of Acquirer Common Stock
shall be issued in connection with the Merger. In lieu thereof, each holder of
Company Stock who would otherwise be entitled to receive a fraction of a share
of Acquirer Common Stock pursuant to Section 2.2.2, computed after aggregating
all shares of Acquirer Common Stock to be received by such holder pursuant to
Section 2.2.2, shall instead receive from Acquirer, upon surrender of such
holder's Company Certificates pursuant to Article 7, an amount of cash (rounded
to the nearest cent) equal to the product obtained by multiplying (a) the
Acquirer Average Price Per Share by (b) the fraction of a share of Acquirer
Common Stock that such holder would otherwise have been entitled to receive.
2.2.6 Continuation of Vesting and Repurchase Rights. If any shares of
Company Stock outstanding immediately prior to the Effective Time are unvested
or subject to a repurchase option, vesting schedule or any other condition
providing that such shares may be forfeited to or repurchased by the Company
upon any termination of the relevant relationship (including employment or
directorship) of the Company with the holder (or prior holder thereof) under the
terms of any restricted stock purchase agreement, stock option agreement
(including any stock option agreement under the Company Plan) or other agreement
with the Company (such shares being referred to herein as "Unvested Company
Shares"), then such repurchase option, vesting schedule or other condition shall
be assigned to Acquirer and the shares of Acquirer Common Stock issued upon the
conversion of such Unvested Company Shares in the Merger shall continue to be
unvested and shall continue to be subject to the same repurchase options,
vesting schedules or other conditions, as applicable, immediately following the
Effective Time as they were subject to immediately prior to the Effective Time.
The cash payable upon conversion of Unvested Company Shares shall be withheld by
Acquirer and paid to each such holder upon the vesting of the shares of Acquirer
Common Stock issued upon conversion of such Unvested Company Shares. The
certificates representing such shares of Acquirer Common Stock shall accordingly
be marked with appropriate legends noting such repurchase options, vesting
schedules or other conditions. The Company shall take all actions that are
reasonably necessary to ensure that, from and after the Effective Time, Acquirer
(or its assignee) shall be entitled to exercise any such repurchase option,
vesting schedule or other right set forth in any such restricted stock purchase
agreement, vesting schedule or other agreement.
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2.2.7 Adjustment of Total Consideration.
(a) At least two business days prior to the Closing (as scheduled in
accordance with Section 7.1), the Company shall deliver to Acquirer its
calculation of the Company's Tangible Net Worth as of the Closing and, if the
Closing is scheduled to occur after August 31, 2002, the Company's Tangible Net
Worth as of August 31, 2002 (collectively, the "Closing TNW Calculations"). The
Closing TNW Calculations shall be in accordance with GAAP and shall include all
of the line items specified in the definition of Tangible Net Worth. The Closing
TNW Calculations shall be accompanied by a certificate of the Company's Chief
Executive Officer representing and warranting to Acquirer that the Closing TNW
Calculations are true, correct and complete in all material respects, have been
prepared in accordance with GAAP and fairly present the financial position of
the Company as of the Closing and as of August 31, 2002, as applicable (the "TNW
Certificate"). The representations in the Closing TNW Calculations and the
accompanying TNW Certificate shall be deemed representations of the Company for
purposes of Article 11. Unless, in Acquirer's reasonable judgment after good
faith negotiation with the Company, the Closing TNW Calculations contain a
manifest error, Acquirer shall accept the Closing TNW Calculations (the "Closing
Acceptance") for purposes of determining the Total Consideration as of the
Closing.
(b) Within 45 days after the Closing and notwithstanding the Closing
Acceptance, Acquirer may object to the Closing TNW Calculations by written
notice to the Representative. If Acquirer does not object to the Closing TNW
Calculations within such 45-day period, then Acquirer shall be deemed to have
agreed with the Closing TNW Calculations for purposes of this Section 2.2.7.
Acquirer's objection to the Closing TNW Calculations, if any, shall include
Acquirer's revised calculations of the Company's Tangible Net Worth as of the
Closing and, if the Closing occurred after August 31, 2002, the Company's
Tangible Net Worth as of August 31, 2002 (collectively, the "Post-Closing TNW
Calculations"). Within 15 days after the Representative's receipt of the
Post-Closing TNW Calculations, the Representative may object to the Post-Closing
TNW Calculations by written notice to Acquirer setting forth the basis for the
Representative's rejection of some or all of the calculations set forth in the
Post-Closing TNW Calculations (the "Representative's Objection"). If the
Representative does not object to the Post-Closing TNW Calculations within such
15-day period or if the Representative agrees with the Post-Closing TNW
Calculations by delivering a written confirmation thereof to Acquirer within the
specified 15-day period, then the Representative shall be deemed to have
conclusively agreed with and shall be bound by the Post-Closing TNW Calculations
for purposes of this Section 2.2.7 and Acquirer shall have the right to recover
the difference between the reductions to the Total Consideration pursuant to
Sections 2.2.7(c) and 2.2.7(d) using the Post-Closing TNW Calculations (the
"Post-Closing Reductions") and the Closing Reductions (as defined below) in
accordance with Article 11, including the forfeiture of all or a portion of the
Escrow Fund. Acquirer and the Representative shall confer in good faith for a
period of up to 15 days following Acquirer's receipt of the Representative's
Objection, if any, concerning the subject matter of the Representative's
Objection in an attempt to resolve it. If, after such 15-day period, Acquirer
and the Representative cannot agree, then the parties shall attempt to agree
upon a mutually satisfactory nationally recognized auditing firm (the "Firm");
provided, however, that if the parties cannot agree on a mutually satisfactory
nationally recognized auditing firm, then each of Acquirer and the
Representative shall select a nationally recognized auditing firm and the two
firms so
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selected by Acquirer and the Representative shall select the Firm. The Firm
shall review the Closing TNW Calculations and the Post-Closing TNW Calculations
and make a final written determination of the Company's Tangible Net Worth as of
the Closing and, if the Closing occurred after August 31, 2002, the Company's
Tangible Net Worth as of August 31, 2002 (the "Firm Calculations"), which
determination shall be conclusive and binding on Acquirer, the Representative,
the Company and the Company Stockholders. The Firm's engagement pursuant to this
Section 2.2.7(b) shall be limited solely to determining the Company's Tangible
Net Worth as of the Closing and, if the Closing occurred after August 31, 2002,
the Company's Tangible Net Worth as of August 31, 2002. If the reductions to the
Total Consideration pursuant to Sections 2.2.7(c) and 2.2.7(d) using the Firm
Calculations (the "Final Reductions") are greater than the reductions to the
Total Consideration pursuant to Sections 2.2.7(c) and 2.2.7(d) using the Closing
TNW Calculations (the "Closing Reductions"), then Acquirer shall have the right
to recover the difference between the Final Reductions and the Closing
Reductions in accordance with Article 11, including the forfeiture of all or a
portion of the Escrow Fund. Acquirer and the Company Stockholders (in proportion
to each Company Stockholder's Pro Rata Share) shall initially bear the fees and
expenses, in equal proportions, of the Firm in connection with its engagement
pursuant to this Section 2.2.7(b). If the Final Reductions are greater than the
Closing Reductions, then Acquirer shall be deemed to be the prevailing party and
the Company Stockholders (in proportion to each Company Stockholder's Pro Rata
Share) shall be deemed to be the non-prevailing party. If the Final Reductions
are less than or equal to the Closing Reductions, then the Company Stockholders
shall be deemed to be the prevailing party and Acquirer shall be deemed to be
the non-prevailing party. The non-prevailing party shall pay all reasonable
costs, fees and expenses related to the Firm's engagement pursuant to this
Section 2.2.7(b), including reasonable fees and expenses of attorneys,
accountants and other professionals incurred by the prevailing party; provided,
however, that if the Company Stockholders are deemed to be the non-prevailing
party then the Company Stockholders shall satisfy their obligation under this
sentence by forfeiture of all or a portion of the Escrow Fund as provided in
Article 11.
(c) If (i) the Company's Tangible Net Worth as of the Closing (the
"Closing TNW") is a more negative amount than negative $2,000,000 and (ii) the
Closing occurs on or before August 31, 2002, then the Total Consideration shall
be reduced by $1.00 for each $1.00 by which the Closing TNW is more negative
than negative $2,000,000.
(d) If (i) the Closing TNW is a more negative amount than negative
$2,000,000 and (ii) the Closing occurs after August 31, 2002, then the Total
Consideration shall be reduced as provided in this Section 2.2.7(d). If the
Company's Tangible Net Worth as of August 31, 2002 (the "August 31 TNW") is a
more negative amount than negative $2,000,000, then the Total Consideration
shall be reduced by (A) $1.00 for each $1.00 by which the August 31 TNW is more
negative than negative $2,000,000 and by (B) $0.50 for each $1.00 by which the
Closing TNW is more negative than the August 31 TNW; provided, however, that,
for purposes of clause (B), if the amount by which the Closing TNW is more
negative than the August 31 TNW exceeds the Threshold, then the Total
Consideration shall be reduced by $0.50 for each dollar in reduction until the
Threshold is reached and by $1.00 for each dollar in reduction in excess of the
Threshold. If the August 31 TNW is a less negative amount than (or a positive
amount) or equal to negative $2,000,000, then the Total Consideration shall be
reduced by $0.50 for each $1.00 by which the Closing TNW is more negative than
negative $2,000,000;
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provided, however, that if the amount by which the Closing TNW is more negative
than the August 31 TNW exceeds the Threshold, then the Total Consideration shall
be reduced by $0.50 for each dollar in reduction until the Threshold is reached
and by $1.00 for each dollar in reduction in excess of the Threshold.
(e) "Threshold" means, (i) if the Closing occurs on September 30,
2002, $1,470,705, and (ii) if the Closing occurs before September 30, 2002, the
product of (A) $1,470,705 multiplied by (B) the quotient obtained by dividing
(x) the number of days that have elapsed between August 31, 2002 and the Closing
Date by (y) 30.
2.3 Adjustments for Capital Changes. Notwithstanding the provisions of this
Article 2, if Acquirer effects a subdivision (or stock split) of any of the
outstanding shares of Acquirer Common Stock into a greater number of such
shares, or a combination (or reverse stock split) of any of the outstanding
shares of Acquirer Common Stock into a lesser number of such shares, or
reorganizes, reclassifies or otherwise changes its outstanding shares of
Acquirer Common Stock into the same or a different number of shares of other
classes or series of Acquirer stock (other than through a subdivision or
combination of shares provided for in the preceding clause), or declares a
dividend or other distribution on the outstanding shares of Acquirer Common
Stock payable in shares of Acquirer Common Stock, in shares or securities
convertible into shares of Acquirer Common Stock and/or other Acquirer equity
securities, or is a party to a merger or consolidation with or into another
corporation in which Acquirer is not the surviving entity (or is a party to a
reverse triangular merger is which Acquirer is the surviving entity) and the
shares of Acquirer's capital stock outstanding immediately prior to the merger
or consolidation are converted into such other corporation's securities, cash or
other property (each, a "Capital Change"), at any time after the Agreement Date
and prior to the Effective Time, then the Common Conversion Number, the Series A
Preferred Conversion Number, the Series B Preferred Conversion Number, the Cash
Adjusted Common Conversion Number, the Cash Adjusted Series A Preferred
Conversion Number, the Cash Adjusted Series B Preferred Conversion Number and
the Option Conversion Number shall be equitably adjusted.
2.4 Company Options. At the Effective Time, all outstanding options to
purchase shares of Company Common Stock (collectively, "Company Options"),
including all Company Options granted under the Company's 2000 Stock
Option/Stock Issuance Plan (the "Company Plan"), shall be assumed by Acquirer
and the Company's repurchase right with respect to any unvested shares of
Company Common Stock acquired upon the exercise of Company Options shall be
assigned to Acquirer. Each Company Option so assumed by Acquirer shall be
entitled, in accordance with the terms of such option, to purchase after the
Effective Time that number of shares of Acquirer Common Stock determined by
multiplying (a) the number of shares of Company Common Stock subject to such
Company Option at the Effective Time by (b) the Option Conversion Number. After
the Effective Time, the exercise price per share for each such assumed Company
Option shall equal the exercise price per share of the Company Option
immediately prior to the Effective Time divided by the Option Conversion Number.
If the foregoing calculations result in an assumed Company Option being
exercisable for a fraction of a share or a fraction of a cent, then the number
of shares of Acquirer Common Stock subject to such option shall be rounded down
to the nearest whole number and the exercise price of such option shall be
rounded up to the nearest cent. Except as specifically set forth in Schedule
3.4.2(a)(vi) of the Company Disclosure Letter, no Company Options shall become
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vested or exercisable solely as a result of the Merger. To the extent permitted
by Applicable Laws and otherwise consistent with the terms of this Agreement,
the term, exercisability, vesting schedule, status as an "incentive stock
option" under Section 422 of the Code, if applicable, and all other terms of the
assumed Company Options as in effect immediately prior to the Effective Time
shall otherwise be unchanged.
2.5 Company Warrants; Preferred Rights. As of the Effective Time, all
outstanding Company Warrants and all outstanding options, warrants and other
rights to purchase shares of Company Series A Preferred Stock (collectively,
"Series A Preferred Rights") and all outstanding options, warrants and other
rights to purchase shares of Company Series B Preferred Stock, Company Series
B-1 Preferred Stock and Company Series B-2 Preferred Stock (collectively,
"Series B Preferred Rights" and together with the Series A Preferred Rights, the
"Preferred Rights") shall have been terminated in accordance with their terms or
shall have been exercised.
2.6 Escrow. At the Effective Time, Acquirer shall withhold from the shares
of Acquirer Common Stock to be issued to the Company Stockholders in the Merger
upon conversion of their Company Stock pursuant to Section 2.2.2, each Company
Stockholder's Pro Rata Share of that aggregate number of shares of Acquirer
Common Stock having an aggregate value (based on the Acquirer Average Price Per
Share) equal to 11.25% of the Total Consideration (such withheld shares of
Acquirer Common Stock, the "Escrow Shares"). If a Company Stockholder holds
Unvested Company Shares, then the shares of Acquirer Common Stock to be issued
upon conversion hereunder of shares of Company Stock held by such Company
Stockholder which are not Unvested Company Shares ("Vested Company Shares")
shall be withheld and placed in escrow first and, thereafter, the Unvested
Company Shares shall be withheld and placed in escrow (with the understanding
that any Unvested Company Shares so placed in escrow shall vest prior to any
such Unvested Company Shares not placed in escrow) to the extent necessary to
satisfy such Company Stockholders' escrow obligations as set forth in the first
sentence of this Section 2.6. The payment of any Escrow Shares in satisfaction
of any indemnification obligations under Article 11 shall be made, with respect
to each Company Stockholder, first with Vested Company Shares and then, if such
shares are insufficient to satisfy such indemnification obligation and only to
the extent of such insufficiency, shall such payment be made with Unvested
Company Shares. Any shares of Acquirer Common Stock or other equity securities
issued or distributed by Acquirer (including shares issued upon a stock split,
stock dividend, recapitalization or other similar event) in respect of Escrow
Shares shall also be withheld in the Escrow Fund. Cash dividends on the Escrow
Fund shall not be added to the Escrow Fund but shall be distributed to the
record holders of the Escrow Fund. Acquirer shall hold the Escrow Shares as
security for the Company Stockholders' indemnification obligations for Damages
under Article 11.
2.7 Effects of the Merger. At and upon the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable provisions
of the Delaware Law. Without limiting the generality of the foregoing, at the
Effective Time:
(a) the Certificate of Incorporation of Merger Sub immediately prior
to the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation immediately after the Effective Time until thereafter amended in
accordance with the provisions
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thereof or as provided by law; provided, however, that Article I of the
Certificate of Incorporation of the Surviving Corporation shall be amended at
the Effective Time to read: "The name of the corporation is OneSecure, Inc.";
(b) the Bylaws of Merger Sub immediately prior to the Effective Time
shall continue unchanged and be the Bylaws of the Surviving Corporation
immediately after the Effective Time until thereafter amended in accordance with
the provisions thereof or as provided by law;
(c) the directors of Merger Sub immediately prior to the Effective
Time shall become the initial directors of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified; and
(d) the corporate officers of Merger Sub immediately prior to the
Effective Time shall become the initial corporate officers of the Surviving
Corporation until their respective successors are duly appointed.
2.8 Securities Law Issues; Registration Rights. Based in part upon the
representations of the Company Stockholders in their Investment Representation
Letters, Acquirer shall issue the shares of Acquirer Common Stock to be issued
to the Company Stockholders in the Merger under Section 2.2.2 pursuant to an
exemption or exemptions from registration under Section 4(2) of the Securities
Act and/or Regulation D promulgated under the Securities Act and the exemption
from qualification under the laws of the State of California and other
applicable state securities laws. Acquirer and the Company Stockholders will
enter into a registration rights agreement in the form attached hereto as
Exhibit H (the "Registration Rights Agreement") with respect to 70% of the
shares of Acquirer Common Stock issued to the Company Stockholders (excluding
the Escrow Shares) in exchange for shares of Company Stock. Subject to
compliance by Acquirer with its obligations under the Registration Rights
Agreement, holders of shares of Acquirer Common Stock to be issued in the Merger
will be wholly responsible for compliance with all federal and state securities
laws regarding the sale, transfer or other disposition of such shares.
2.9 Tax Matters. The parties acknowledge their respective desire to
structure the Merger to constitute a "reorganization" within the meaning of
Section 368(a) of the Code; provided, however, that such tax treatment shall not
be a condition to either party's obligation to close the transactions
contemplated herein. Subject to the qualifications set forth in the preceding
sentence, (a) Acquirer and the Company shall use their reasonable good faith
efforts to achieve such tax treatment and (b) the parties hereto adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations. Acquirer
makes no representations or warranties to the Company or to any Company
Stockholder or other holder of Company securities regarding the tax treatment of
the Merger, whether the Merger shall qualify as a tax-free plan of
reorganization under the Code, or any of the tax consequences to any Company
Stockholder or other holder of Company securities of this Agreement, the Merger
or any of the other transactions or agreements contemplated hereby, and the
Company and the Company Stockholders acknowledge that the Company and the
Company Stockholders are relying solely on their own tax advisors in
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connection with this Agreement, the Merger and the other transactions
contemplated by this Agreement.
2.10 Further Assurances. If, at any time before or after the Effective
Time, Acquirer believes or is advised that any further instruments, deeds,
assignments or assurances are reasonably necessary or desirable to consummate
the Merger or to carry out the purposes and intent of this Agreement at or after
the Effective Time, then the Company, Acquirer, the Surviving Corporation and
their respective officers and directors shall execute and deliver all such
proper deeds, assignments, instruments and assurances and do all other things
necessary or desirable to consummate the Merger and to carry out the purposes
and intent of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Acquirer that, except as set forth
in a numbered or lettered section of the letter addressed to Acquirer from the
Company and dated as of the Agreement Date (including all Schedules thereto)
that has been delivered by the Company to Acquirer concurrently herewith (the
"Company Disclosure Letter") referencing a representation, warranty or statement
herein, each of the representations, warranties and statements contained in the
following Sections of this Article 3 is true and correct as of the Agreement
Date and shall be true and correct on and as of the Closing Date. For all
purposes of this Agreement, the statements contained in the Company Disclosure
Letter and its Schedules shall also be deemed to be representations and
warranties made and given by the Company under this Article 3.
3.1 Organization and Good Standing. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. The Company has the corporate power and authority to own, operate
and lease its properties and to carry on the Company Business. The Company is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed would not
individually or in the aggregate have a Material Adverse Effect on the Company.
The Company has delivered to Acquirer's legal counsel true and complete copies
of the currently effective Certificate of Incorporation and Bylaws of the
Company, each as amended to date. The Company is not in violation of its
Certificate of Incorporation or Bylaws, each as currently in effect, or the
Restated Certificate (upon its approval and adoption by the Board of Directors
of the Company and the Company Stockholders and filing with and acceptance by
the Delaware Secretary of State as contemplated by this Agreement).
3.2 Subsidiaries. The Company does not have any Subsidiary or any equity or
ownership interest, whether direct or indirect, in any corporation, partnership,
limited liability company, joint venture or other business entity. The Company
is not obligated to make nor is it bound by any agreement or obligation to make
any investment in or capital contribution in or on behalf of any other entity.
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3.3 Power, Authorization and Validity.
3.3.1 Power and Authority. The Company has all requisite corporate
power and authority to enter into, execute, deliver and perform its obligations
under this Agreement and each of the Company Ancillary Agreements and, subject
to approval of the Merger and the adoption of this Agreement and the Company
Ancillary Agreements by holders of at least a majority of the outstanding shares
of Company Common Stock and at least 85% of the outstanding shares of Company
Preferred Stock, to consummate the Merger. The Merger and the execution,
delivery and performance by the Company of this Agreement, each of the Company
Ancillary Agreements and all other agreements, transactions and actions
contemplated hereby or thereby, have been duly and validly approved and
authorized by the Company's Board of Directors. The Company and the Company
Stockholders listed in Exhibit A have executed and delivered to Acquirer the
Voting Agreement pursuant to which such Company Stockholders have agreed to vote
their shares of Company Stock in favor of the Merger and the execution, delivery
and performance by the Company of this Agreement, each of the Company Ancillary
Agreements and all other agreements, transactions and actions contemplated
hereby or thereby, which votes are sufficient to obtain the Company Stockholder
Approval.
3.3.2 No Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative or other
agency, commission or other governmental entity, department, division, unit,
branch or authority (each, a "Governmental Authority"), or any other person,
governmental or otherwise, is necessary or required to be made or obtained by
the Company to enable the Company to lawfully execute and deliver, enter into,
and perform its obligations under this Agreement and each of the Company
Ancillary Agreements or to consummate the Merger, except for: (a) the filing of
the Certificate of Merger with the Delaware Secretary of State; (b) the Company
Stockholder Approval; (c) the filing of the Restated Certificate with the
Delaware Secretary of State; (d) the consents set forth in Schedule 3.5 of the
Company Disclosure Letter; and (e) such other filings, if any, as may be
required in order for the Company to comply with applicable federal and state
securities laws.
3.3.3 Enforceability. This Agreement has been duly executed and
delivered by the Company. This Agreement and each of the Company Ancillary
Agreements are, or when executed by the Company shall be, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to the effect of (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to rights of creditors generally and (b) rules of law and equity
governing specific performance, injunctive relief and other equitable remedies.
3.4 Capitalization of the Company.
3.4.1 Authorized and Outstanding Capital Stock of the Company. As of
the Agreement Date, the authorized capital stock of the Company consists solely
of: (a) 70,000,000 shares of Company Common Stock, of which a total of
11,380,610 shares are issued and outstanding as of the Agreement Date; and (b)
72,528,566 shares of Company Preferred Stock, of which (i) 14,028,566 shares are
designated as Company Series A Preferred Stock, 14,022,852 of which are issued
and outstanding as of the Agreement Date and shall be issued and outstanding as
of the Closing Date, (ii) 19,500,000 shares are designated as Company Series B
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Preferred Stock, 9,417,496 (such amount includes 34,506 shares of Company Series
B Preferred Stock subject to currently outstanding warrants to purchase shares
of Company Series B Preferred Stock) of which are issued and outstanding as of
the Agreement Date and shall be issued and outstanding as of the Closing Date,
(iii) 19,500,000 shares are designated as Company Series B-1 Preferred Stock,
none of which are issued and outstanding as of the Agreement Date and shall be
issued and outstanding as of the Closing Date, and (iv) 19,500,000 shares are
designated as Company Series B-2 Preferred Stock, none of which are issued and
outstanding as of the Agreement Date and shall be issued and outstanding as of
the Closing Date. As of the Agreement Date and as of the Effective Time, each
share of Company Preferred Stock is convertible into one share of Company Common
Stock. The numbers of issued and outstanding shares of Company Stock held of
record by each Company Stockholder as of the Agreement Date are set forth in
Schedule 3.4.1(a) of the Company Disclosure Letter, no shares of Company Stock
are issued or outstanding as of the Agreement Date that are not set forth in
Schedule 3.4.1(a) of the Company Disclosure Letter and no such shares shall be
issued or outstanding as of the Closing Date that are not set forth in Schedule
3.4.1(a) of the Company Disclosure Letter except for shares of Company Common
Stock issued pursuant to the exercise of outstanding Company Options listed in
Schedule 3.4.2(a) of the Company Disclosure Letter or Company Warrants listed in
Schedule 3.4.2(b) of the Company Disclosure Letter or pursuant to the conversion
of outstanding shares of Company Preferred Stock. As of the Closing Date and
subject to necessary approval of the Company Stockholders, upon the filing of
the Restated Certificate with the Delaware Secretary of State, the authorized
capital stock of the Company shall be as set forth in the Restated Certificate.
The Company holds no treasury shares. All issued and outstanding shares of
Company Stock have been duly authorized and validly issued, are fully paid and
nonassessable, are not subject to any right of rescission, right of first
refusal (other than in favor of the Company) or preemptive right created by
Applicable Law, the Certificate of Incorporation or Bylaws of the Company or any
agreement to which the Company is a party or by which it is bound, and have been
offered, issued, sold and delivered by the Company in compliance with all
requirements of Applicable Laws and all requirements set forth in applicable
agreements or instruments. There is no liability for dividends accrued and
unpaid by the Company. Schedule 3.4.1(a) of the Company Disclosure Letter sets
forth (i) all rights of rescission, rights of first refusal and preemptive
rights created by Applicable Law, the Certificate of Incorporation or Bylaws of
the Company or any agreement to which the Company is a party or by which it is
bound to which outstanding securities of the Company are subject and (ii) all
voting agreements, registration rights, co-sale rights and other restrictions to
which outstanding securities of the Company are subject.
3.4.2 Options, Warrants, Unvested Company Shares and Rights. The
Company has reserved an aggregate of 11,250,000 shares of Company Common Stock
for issuance pursuant to the Company Plan (including shares subject to
outstanding Company Options). A total of 6,673,445 shares of Company Common
Stock are subject to outstanding Company Options as of the Agreement Date and as
of the Closing Date, except for Company Options that are exercised after the
Agreement Date and before the Closing Date in accordance with their terms.
Schedule 3.4.2(a) of the Company Disclosure Letter sets forth, for each Company
Option, (i) the name of the holder of such Company Option, (ii) the exercise
price per share of such Company Option, (iii) the number of shares covered by
such Company Option, (iv) the vesting schedule for such Company Option, (v) the
extent such Company Option is vested as of the Agreement Date, and (vi) whether
the exercisability of such Company Option shall be
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accelerated in any manner by any of the transactions contemplated by this
Agreement or any Company Ancillary Agreement or upon any other event or
condition and the extent of acceleration, if any. Schedule 3.4.2(b) of the
Company Disclosure Letter sets forth, for each Company Warrant, (i) the name of
the holder of such Company Warrant, (ii) the exercise price per share of such
Company Warrant, and (iii) the number of shares covered by such Company Warrant.
Schedule 3.4.2(c) of the Company Disclosure Letter sets forth all holders of
Unvested Company Shares, and for each such Company Stockholder, the number of
Unvested Company Shares held, the terms of the Company's rights to repurchase
such Unvested Company Shares, the schedule on which such rights lapse and
whether such repurchase rights lapse in full or in part as a result of any of
the transactions contemplated by this Agreement or any Company Ancillary
Agreement or upon any other event or condition. Schedule 3.4.2(d) of the Company
Disclosure Letter sets forth, for each Preferred Right, (i) the name of the
holder of such Preferred Right, (ii) the exercise price per share of such
Preferred Right, (iii) the number of shares covered by such Preferred Right,
(iv) the vesting schedule for such Preferred Right, (v) the extent such
Preferred Right is vested as of the Agreement Date, and (vi) whether the
exercisability of such Preferred Right shall be accelerated in any manner by any
of the transactions contemplated by this Agreement or any Company Ancillary
Agreement or upon any other event or condition and the extent of acceleration,
if any. Pursuant to their terms, as of the Effective Time, all Company Warrants
and all Preferred Rights shall have been terminated in accordance with their
terms or shall have been exercised. True and correct copies of the Company Plan,
the standard agreement under the Company Plan and each agreement for each
Company Option that does not conform, in all substantive respects, to the
standard agreement under the Company Plan have been delivered by the Company to
Acquirer's legal counsel. All outstanding Company Options, Company Warrants and
Preferred Rights have been issued and granted in compliance with all
requirements of Applicable Laws and all requirements set forth in applicable
agreements or instruments. Except for Company Options, Company Warrants,
Preferred Rights and the conversion rights of the Company Preferred Stock, there
are no stock appreciation rights, options, warrants, calls, rights, commitments,
conversion privileges or preemptive or other rights or agreements outstanding to
purchase or otherwise acquire any shares of Company Capital Stock or any
securities or debt convertible into or exchangeable for Company Capital Stock or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right, commitment, conversion privilege or preemptive or other right or
agreement. There are no voting agreements, registration rights, rights of first
refusal, preemptive rights, co-sale rights or other restrictions applicable to
any outstanding securities of the Company, except rights of first refusal and
repurchase options in favor of the Company with respect to shares of Company
Common Stock. The Company is not under any obligation to register under the
Securities Act any of its presently outstanding shares of stock or other
securities or any stock or other securities that may be subsequently issued.
3.5 No Conflict. Neither the execution and delivery of this Agreement or
any of the Company Ancillary Agreements by the Company, nor the consummation of
the Merger or any other transaction contemplated hereby or thereby, shall
conflict with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, or constitute a default under:
(a) any provision of the Certificate of Incorporation or Bylaws of the Company,
each as currently in effect, or the Restated Certificate (upon its approval and
adoption by the Board of Directors of the Company and the Company Stockholders
and filing with and acceptance by the Delaware Secretary of State as
contemplated by this Agreement); (b) any
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federal, state, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to the Company or any of its assets or properties; or (c)
any contract, agreement, arrangement, commitment or undertaking, including any
instrument, permit, mortgage, lease, license, understanding, letter of intent or
memorandum of understanding (whether written or oral), to which the Company is a
party or by which the Company or any of its assets or properties are bound.
Neither the Company's entering into this Agreement nor the consummation of the
Merger or the transactions contemplated thereby shall give rise to, or trigger
the application of, any rights of any third party that would come into effect
upon the consummation of the Merger. The consummation of the Merger by the
Company shall not require the consent, release, waiver or approval of any third
party (including the consent of any party required to be obtained in order to
keep any agreement between such party and the Company in effect following the
Merger or to provide that the Company is not in breach or violation of any such
agreement following the Merger), other than the Company Stockholder Approval.
3.6 Litigation. There is no action, suit, arbitration, mediation,
proceeding, claim or, to the Company's knowledge, investigation pending against
the Company (or against any officer, director, employee or agent of the Company
in their capacity as such or relating to their employment, services or
relationship with the Company) before any court, Governmental Authority,
arbitrator or mediator, nor, to the Company's knowledge, has any such action,
suit, arbitration, mediation, proceeding, claim or investigation been
threatened. There is no judgment, decree, injunction, rule or order of any
court, Governmental Authority or arbitrator outstanding against the Company. To
the Company's knowledge, there is no basis for any person to assert a claim
against the Company based upon: (a) the Company's entering into this Agreement
or any Company Ancillary Agreement or consummating the Merger or any of the
transactions contemplated by this Agreement or any Company Ancillary Agreement;
or (b) a claim of ownership of, or options, warrants or other rights to acquire
ownership of, any shares of the Company's capital stock or any rights as a
Company stockholder, including any option, warrant, preemptive right or right to
notice or to vote, other than the rights of the Company Stockholders with
respect to the Company Common Stock shown as being owned by such persons on
Schedule 3.4.1(a) of the Company Disclosure Letter, the rights of holders of
Company Options shown as being owned by such persons on Schedule 3.4.2(a) of the
Company Disclosure Letter, the rights of holders of Company Warrants shown as
being owned by such persons on Schedule 3.4.2(b) of the Company Disclosure
Letter, and the rights of holders of Preferred Rights shown as being owned by
such persons on Schedule 3.4.2(d) of the Company Disclosure Letter.
3.7 Taxes.
3.7.1 The Company has timely filed all federal, state, local and
foreign tax and information returns required to be filed by it, has timely paid
all taxes required to be paid by it for which payment is due, except to the
extent that an accrual or reserve for such taxes has been reflected in
accordance with GAAP on the Balance Sheet, has established an adequate accrual
or reserve for the payment of all taxes payable in respect of the periods
subsequent to the periods covered by its most recent applicable tax returns
(which accrual or reserve as of the Balance Sheet Date is fully reflected on the
Balance Sheet), has made all necessary estimated tax payments, and has no
liability for taxes in excess of the amount so paid or accruals or reserves so
established. All such returns and reports are true, correct and complete, and
the Company has
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provided Acquirer with true and correct copies of such returns and reports. The
Company is not delinquent in the payment of any tax or in the filing of any tax
returns, and no deficiencies for any tax have been threatened, claimed, proposed
or assessed against the Company or any of the officers, employees or agents of
the Company in their capacity as such. The Company has not received any
notification from the Internal Revenue Service or any other taxing authority
regarding any material issues that: (a) are currently pending before the
Internal Revenue Service or any other taxing authority (including any sales or
use taxing authority) regarding the Company; or (b) have been raised by the
Internal Revenue Service or other taxing authority and not yet finally resolved.
No tax return of the Company is under audit by the Internal Revenue Service or
any state or local taxing agency or authority and any such past audits (if any)
have been completed and fully resolved to the satisfaction of the applicable
taxing authority conducting such audit and all taxes determined by such audit to
be due from the Company have been paid in full to the applicable taxing
authorities. No tax liens are currently in effect against any of the Company's
assets other than liens that arise by operation of law for taxes not yet due and
payable. There is not in effect any waiver by the Company of any statute of
limitations with respect to any taxes nor has the Company agreed to any
extension of time for filing any tax return that has not been filed; and the
Company has not consented to extend to a date later than the Agreement Date the
period in which any tax may be assessed or collected by any taxing authority.
The Company is not a "personal holding company" within the meaning of the Code.
The Company has not filed any election under Section 341(f) of the Code. The
Company has withheld all taxes, including federal and state income taxes, FICA,
Medicare, FUTA and other taxes, required to be withheld, and paid such withheld
amounts to the appropriate taxing authority within the time prescribed by law.
Since its inception, the Company has not been a "United States real property
holding corporation," as defined in Section 897(c)(2) of the Code and in Section
1.897-2(b) of the Treasury Regulations issued thereunder (the "Regulations"),
and the Company has filed with the Internal Revenue Service all statements, if
any, with its United States income tax returns which are required under Section
1.897-2(h) of the Regulations. The Company is not a party to nor has any
obligation under any tax-sharing, tax indemnity or tax allocation agreement or
arrangement. The Company has never been distributed in a transaction qualifying
under Section 355 of the Code, and the Company has never distributed any
corporation in a transaction qualifying under Section 355 of the Code.
3.7.2 For the purposes of this Section 3.7, the terms "tax" and
"taxes" include all federal, state, local and foreign income, alternative or
add-on minimum income, gains, franchise, excise, property, property transfer,
sales, use, employment, license, payroll, ad valorem, documentary, stamp,
withholding, occupation, recording, value added or transfer taxes, governmental
charges, fees, customs duties, levies or assessments (whether payable directly
or by withholding), and, with respect to any such taxes, any estimated tax,
interest, fines and penalties or additions to tax and interest on such fines,
penalties and additions to tax.
3.8 Company Financial Statements. The Company has delivered to Acquirer as
attachments to Schedule 3.8 of the Company Disclosure Letter (i) audited
consolidated balance sheets of the Company dated December 31, 2000 and December
31, 2001, (ii) an audited consolidated balance sheet of the Company dated June
30, 2002, (iii) the Company's audited consolidated statements of operations,
statements of cash flows and statements of changes in stockholders' equity for
the years ended December 31, 2000 and December 31, 2001, and (iv) the Company's
audited consolidated statements of operations, statements of cash flows and
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statements of changes in stockholders' equity for the six-month period ended
June 30, 2002 (all such financial statements of the Company and any notes
thereto, together with the financial statements of the Company delivered to
Acquirer pursuant to Section 9.21, are hereinafter collectively referred to as
the "Company Financial Statements"). In addition, the Company has delivered to
Acquirer as attachments to Schedule 3.8 of the Company Disclosure Letter true,
correct and complete copies of all material accounting policies used in
preparing the Company Financial Statements. Frank, Rimerman & Co. is currently
auditing the Company's financial statements for the fiscal years ended December
31, 2000 and December 31, 2001. Notwithstanding such audit by Frank, Rimerman &
Co., the Company Financial Statements: (a) are derived from and are in
accordance with the books and records of the Company; (b) fairly present the
financial condition of the Company at the dates therein indicated and the
results of operations for the periods therein specified; (c) have been prepared
in accordance with GAAP applied on a basis consistent with prior periods except
for any absence of notes to any of the unaudited Company Financial Statements;
and (d) are true, correct and complete in all material respects. The Company has
no debt, liability, obligation or commitment of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, except for
those (a) shown on the Company's unaudited balance sheet as of June 30, 2002
included in the Company Financial Statements (the "Balance Sheet") and (b) that
may have been incurred after June 30, 2002 (the "Balance Sheet Date") in the
ordinary course of the Company's business consistent with its past practices and
that are, individually or in the aggregate, not material to the business results
of operations or financial condition of the Company. All reserves established by
the Company that are set forth in or reflected in the Balance Sheet are
adequate. At the Balance Sheet Date, there were no material loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5
("Statement No. 5") issued by the Financial Accounting Standards Board in March
1975) that are not adequately provided for in the Balance Sheet as required by
Statement No. 5. The Company Financial Statements comply in all material
respects with the American Institute of Certified Public Accountants' Statement
of Position 97-2. The Company has not had any dispute with any of its auditors
regarding accounting matters or policies.
3.9 Title to Properties. The Company has good and marketable title to, or
valid leasehold interests in or other valid rights to use, all of the assets and
properties (including those shown on the Balance Sheet) used in the Company
Business, free and clear of all Encumbrances, other than liens for current taxes
that are not yet due and payable and as shown in the Company Financial
Statements. Such assets are sufficient for the continued operation of the
Company Business. All machinery, vehicles, equipment and other tangible personal
property owned or leased by the Company or used in the Company Business are in
good condition and repair, normal wear and tear excepted, and all leases of real
or personal property to which the Company is a party are fully effective and
afford the Company peaceful and undisturbed leasehold possession of the real or
personal property that is the subject of the lease. The Company is not in
violation, in any material respect, of any zoning, building, safety or
environmental ordinance, regulation or requirement or other law or regulation
applicable to the operation of its owned or leased properties, nor has the
Company received any notice of violation of law with which it has not complied.
The Company does not own any real property. Schedule 3.9 of the Company
Disclosure Letter sets forth a complete and accurate list and a brief
description of all personal property, including capital equipment, owned or
leased by the Company with an individual value of $1,000 or greater.
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3.10 Absence of Certain Changes. Since the Balance Sheet Date, the Company
has operated its business in the ordinary course consistent with its past
practices, and since such date there has not been with respect to the Company
any:
(a) Material Adverse Change;
(b) amendment or change in its Certificate of Incorporation or Bylaws,
except as contemplated by the Restated Certificate;
(c) incurrence, creation or assumption of (i) any Encumbrance on any
of its assets or properties, (ii) any obligation or liability or any
indebtedness for borrowed money, or (iii) any contingent liability as a
guarantor or surety with respect to the obligations of others;
(d) except as described in Section 3.4.1, any acceleration or release
of any vesting condition to the right to exercise any option, warrant or other
right to purchase or otherwise acquire any shares of its capital stock, or any
acceleration or release of any right to repurchase shares of its capital stock
upon the stockholder's termination of employment or services with it or pursuant
to any right of first refusal;
(e) payment or discharge of any Encumbrance on any of its assets or
properties, or payment or discharge of any of its liabilities, in each case that
was not either shown on the Balance Sheet or incurred in the ordinary course of
its business consistent with its past practices after the Balance Sheet Date in
an amount not in excess of $10,000 for any single liability to a particular
creditor;
(f) purchase, license, sale, grant, assignment or other disposition or
transfer, or any agreement or other arrangement for the purchase, license, sale,
assignment or other disposition or transfer, of any of its assets (including
Company IP Rights and other intangible assets), properties or goodwill other
than the sale of its hardware products or nonexclusive object code license of
the its software products to its customers in the ordinary course of its
business consistent with its past practices;
(g) damage, destruction or loss of any material property or material
asset, whether or not covered by insurance;
(h) declaration, setting aside or payment of any dividend on, or the
making of any other distribution in respect of, its capital stock, or any split,
combination or recapitalization of its capital stock or any redemption, purchase
or other acquisition of any of its capital stock or any change in any rights,
preferences, privileges or restrictions of any of its outstanding securities,
except for the repurchase of Company Stock from the Company's employees,
directors, consultants or contractors in connection with the termination of
their services at the original purchase price paid per share;
(i) change or increase in the compensation payable or to become
payable to any of its officers, directors, employees or agents, or in any bonus,
pension, severance, retention, insurance or other benefit payment or arrangement
(including stock awards, stock option grants, stock appreciation rights or stock
option grants) made to or with any of such officers, directors, employees or
agents except as contemplated by this Agreement;
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(j) change with respect to its management, supervisory or other key
personnel;
(k) obligation or liability incurred by it to any of its officers,
directors or stockholders, except for normal and customary compensation and
expense allowances payable to officers in the ordinary course of its business
consistent with its past practices;
(l) making by it of any loan, advance or capital contribution to, or
any investment in, any of its officers, directors or stockholders or any firm or
business enterprise in which any such person had a direct or indirect material
interest at the time of such loan, advance, capital contribution or investment;
(m) entering into, amendment of, relinquishment, termination or
nonrenewal by it of any contract, agreement, arrangement, commitment or
undertaking (or any other right or obligation) other than in the ordinary course
of its business consistent with its past practices or any written or, to the
Company's knowledge, oral indication or assertion by the other party thereto of
any material problems with its services or performance under such contract,
agreement, arrangement, commitment or undertaking (or other right or obligation)
or such other party's desire to so amend, relinquish, terminate or not renew any
such contract, agreement, arrangement, commitment or undertaking (or other right
or obligation);
(n) material change in the manner in which it extends discounts,
credits or warranties to customers or otherwise deals with its customers;
(o) entering into by it of any transaction, contract, agreement,
arrangement, commitment or undertaking that by its terms requires or
contemplates a current and/or future financial commitment, expense (inclusive of
overhead expense) or obligation on its part that involves in excess of $10,000
or that is not entered into in the ordinary course of its business consistent
with its past practices, or the conduct of any business or operations other than
in the ordinary course of its business consistent with its past practices;
(p) license or transfer or grant of a right under any Company IP
Rights, except in the ordinary course of its business consistent with its past
practices; or
(q) change in accounting methods or practices or revaluation of any of
its assets.
3.11 Contracts and Commitments/Licenses and Permits. Schedules 3.11(a)
through (n) of the Company Disclosure Letter set forth a list of each of the
following written or oral contracts, agreements, arrangements, commitments and
undertakings, including leases, licenses, permits, assignments, mortgages,
transactions, obligations or other instruments to which the Company is a party
or to which the Company or any of its assets or properties is bound:
(a) any contract, agreement, arrangement, commitment or undertaking
providing for payments (whether fixed, contingent or otherwise) by or to it in
an aggregate amount of $10,000 or more;
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(b) any dealer, distributor, OEM (original equipment manufacturer),
VAR (value added reseller), sales representative or similar contract, agreement,
arrangement, commitment or undertaking under which any third party is authorized
to sell, sublicense, lease, distribute, market or take orders for any of its
products, services or technologies;
(c) any contract, agreement, arrangement, commitment or undertaking
providing for the development of any software, content, technology or
intellectual property for (or for the benefit or use of) it, or providing for
the purchase by or license to (or for the benefit or use of) it of any software,
content (including textual content and visual, photographic or graphics
content), technology or intellectual property, which software, content,
technology or intellectual property is in any manner used or incorporated (or is
contemplated by it to be used or incorporated) in connection with any aspect or
element of any product, service or technology of it (other than software
generally available to the public at a per copy license fee of less than $500
per copy);
(d) any joint venture or partnership contract, agreement, arrangement,
commitment or undertaking that has involved, or is reasonably expected to
involve, a sharing of profits, expenses or losses with any other party;
(e) any contract, agreement, arrangement, commitment or undertaking
for or relating to the employment by it of any officer, employee or consultant
or any other type of contract, agreement, arrangement, commitment or undertaking
with any of its officers, employees or consultants that is not immediately
terminable by it without cost or other liability;
(f) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other contract, agreement,
arrangement, commitment or undertaking for or with respect to the borrowing of
money, a line of credit or a leasing transaction of a type required to be
capitalized in accordance with Statement of Financial Accounting Standards No.
13 of the Financial Accounting Standards Board;
(g) any lease or other contract, agreement, arrangement, commitment or
undertaking under which it is lessee of or holds or operates any items of
tangible personal property or real property owned by any third party;
(h) any contract, agreement, arrangement, commitment or undertaking
that restricts it from engaging in any aspect of its business; from
participating or competing in any line of business or market; from freely
setting prices for its products, services or technologies (including most
favored customer pricing provisions); from engaging in any business in any
market or geographic area or that grants any exclusive rights to any party; or
from soliciting potential employees, consultants, contractors or other suppliers
or customers;
(i) any Company IP Rights Agreement;
(j) any contract, agreement, arrangement, commitment or undertaking
providing for the sale, issuance, grant, exercise, award, purchase, repurchase
or redemption of any shares of its capital stock or other securities or any
options, warrants or other rights to purchase or otherwise acquire any such
shares of capital stock, other securities or options,
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warrants or other rights therefor, except for those contracts, agreements,
arrangements, commitments or undertakings conforming to the standard agreement
under the Company Plan;
(k) any contract, agreement, arrangement or undertaking with or
commitment to any labor union;
(l) any contract, agreement, arrangement, commitment or undertaking
with any Governmental Authority;
(m) any contract, agreement, arrangement, commitment or undertaking
relating to the Company's managed security service provider business; and
(n) any Governmental Permit.
A true and complete copy of each agreement or document required by these
subsections (a) through (m) of this Section 3.11 to be listed in Schedule 3.11
of the Company Disclosure Letter (such agreements and documents being
hereinafter collectively referred to as the "Company Material Agreements") and a
copy of each Governmental Permit required by subsection (n) of this Section 3.11
to be listed in Schedule 3.11 of the Company Disclosure Letter has been
delivered to Acquirer. Notwithstanding the disclosure required by the specific
subsections of this Section 3.11, any contract, agreement, arrangement,
commitment or undertaking relating to the Company's managed security service
provider business shall only be listed in Schedule 3.11(m) of the Company
Disclosure Letter and, if applicable, Schedule 3.11(h) of the Company Disclosure
Letter and shall not be listed in any other schedule of Section 3.11 of the
Company Disclosure Letter.
3.12 No Default; No Restrictions.
3.12.1 The Company is not, nor to the Company's knowledge is any other
party, in material breach or default under any Company Material Agreement. No
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time, or both) shall or would reasonably be expected
to (i) result in a violation or breach of any of the provisions of any Company
Material Agreement or (ii) give any third party, to the Company's knowledge, (A)
the right to declare a default or exercise any remedy under any Company Material
Agreement, (B) the right to a rebate, refund, chargeback, penalty or change in
delivery schedule under any Company Material Agreement, (C) the right to
accelerate the maturity or performance of any obligation of the Company under
any Company Material Agreement, or (D) the right to cancel, terminate or modify
any Company Material Agreement or require the Company to repay or refund any
amounts. The Company has not received any written, or, to the Company's
knowledge, oral notice or other communication regarding any actual or possible
violation or breach of, or default under, any Company Material Agreement.
Without limiting the foregoing, the Company does not have any liability or
obligation for renegotiation of any contracts or subcontracts with any
Governmental Authority or for the refund or other repayment of any amounts
previously awarded, advanced or paid to the Company by any Governmental
Authority.
3.12.2 Except as listed in Schedule 3.11(h) of the Company Disclosure
Letter, the Company is not a party to, and no asset or property of the Company
is bound or affected by, any
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judgment, injunction, order, decree, contract, covenant, agreement, arrangement,
commitment or undertaking (noncompete or otherwise) that restricts or prohibits,
or purports to restrict or prohibit, the Company or, following the Effective
Time, the Surviving Corporation or Acquirer, from freely engaging in the Company
Business or from competing anywhere in the world (including any judgments,
injunctions, orders, decrees, contracts, covenants, agreements, arrangements,
commitments or undertakings restricting the geographic area in which the Company
may sell, license, market, distribute or support any products or technology or
provide services or restricting the markets, customers or industries that the
Company may address in operating the Company Business or restricting the prices
which the Company may charge for its products, technology or services), or
includes any grants by the Company of exclusive rights or licenses.
3.12.3 Except as specifically described in Schedule 3.12.3 of the
Company Disclosure Letter, there are no present or contingent rights or
obligations for payment of any amount or performance of any material duty by or
to the Company or any other person under any contract, agreement, arrangement,
commitment or undertaking listed in Schedule 3.11(m) of the Company Disclosure
Letter. For the avoidance of doubt, the required expenditure of any amount or
the required performance of any material obligation, except as specifically
described in Schedule 3.12.3 of the Company Disclosure Letter, under any such
contract, agreement, arrangement, commitment or undertaking listed in Schedule
3.11(m) of the Company Disclosure Letter shall constitute a breach of the
representation in this Section 3.12.3.
3.13 Intellectual Property.
3.13.1 The Company (i) owns and has independently developed or (ii)
has the valid right or license to use, possess, develop, sell, license, copy,
distribute, market, advertise and/or dispose of all Intellectual Property (as
defined below) used in the conduct of the Company Business (such Intellectual
Property being hereinafter collectively referred to as the "Company IP Rights").
Such Company IP Rights are sufficient for such conduct of the Company Business.
As used herein, the term "Intellectual Property" means, collectively, all
worldwide industrial and intellectual property rights, including patents, patent
applications, patent rights, trademarks, trademark registrations and
applications therefor, trade dress rights, trade names, service marks, service
mark registrations and applications therefor, Internet domain names, Internet
and World Wide Web URLs or addresses, copyrights, copyright registrations and
applications therefor, mask work rights, mask work registrations and
applications therefor, franchises, licenses, inventions, trade secrets,
know-how, customer lists, supplier lists, proprietary processes and formulae,
technology, software source code and object code, algorithms, net lists,
architectures, structures, screen displays, photographs, images, layouts,
development tools, designs, blueprints, specifications, technical drawings (or
similar information in electronic format) and all documentation and media
constituting, describing or relating to the foregoing, including manuals,
programmers' notes, memoranda and records. As used in this Section 3.13,
"Company-Owned IP Rights" means Company IP Rights that are owned by or
exclusively licensed to the Company; and "Company-Licensed IP Rights" means
Company IP Rights that are not Company-Owned IP Rights.
3.13.2 Neither the execution, delivery and performance of this
Agreement or the Certificate of Merger nor the consummation of the Merger and
the other transactions
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contemplated by this Agreement and/or by the Company Ancillary Agreements shall,
in accordance with their terms: (a) constitute a material breach of or default
under any instrument, license or other contract, agreement, arrangement,
commitment or undertaking governing any Company IP Right (collectively, the
"Company IP Rights Agreements"); (b) cause the forfeiture or termination of, or
give rise to a right of forfeiture or termination of, any Company IP Right; or
(c) materially impair the right of the Company or the Surviving Corporation to
use, possess, sell or license any Company IP Right or portion thereof. There are
no royalties, honoraria, fees or other payments payable by the Company to any
third person (other than salaries payable to employees and independent
contractors not contingent on or related to use of their work product) as a
result of the ownership, use, possession, license-in, sale, marketing,
advertising or disposition of any Company IP Rights by the Company to the extent
necessary for the conduct of the Company Business and none shall become payable
as a result of the consummation of the transactions contemplated by this
Agreement.
3.13.3 Neither the use, development, manufacture, marketing, license,
sale, furnishing or intended use of any product or service currently licensed,
utilized, sold, provided or furnished by the Company or currently under
development by the Company violates any license or contract, agreement,
arrangement, commitment or undertaking between the Company and any third party
or infringes or misappropriates any Intellectual Property right of any other
party; and there is no pending or, to the Company's knowledge, threatened claim
or litigation contesting the validity, ownership or right of the Company to
exercise any Company IP Right, nor to the Company's knowledge, is there any
legitimate basis for any such claim, nor has the Company received any notice
asserting that any Company IP Right or the proposed use, sale, license or
disposition thereof conflicts or shall conflict with the rights of any other
party, nor, to the Company's knowledge, is there any legitimate basis for any
such assertion.
3.13.4 No current or former employee, consultant or independent
contractor of the Company: (a) is (or, in the case of a former employee, was
during the time that such employee was employed by the Company) in material
violation of any term or covenant of any employment contract, patent disclosure
agreement, invention assignment agreement, nondisclosure agreement,
noncompetition agreement or any other contract, agreement, arrangement,
commitment or undertaking with any other party by virtue of such employee's,
consultant's or independent contractor's being employed by, or performing
services for, the Company or using trade secrets or proprietary information of
others without permission; or (b) has developed any technology, software or
other copyrightable, patentable or otherwise proprietary work for the Company
that is subject to any agreement under which such employee, consultant or
independent contractor has assigned or otherwise granted to any third party any
rights (including Intellectual Property) in or to such technology, software or
other copyrightable, patentable or otherwise proprietary work. The employment of
any employee of the Company or the use by the Company of the services of any
consultant or independent contractor does not subject the Company to any
liability to any third party for improperly soliciting such employee, consultant
or independent contractor to work for the Company, whether such liability is
based on contractual or other legal obligations to such third party.
3.13.5 The Company has taken all necessary steps to protect, preserve
and maintain the secrecy and confidentiality of the Company IP Rights and to
preserve and maintain all the Company's interests and proprietary rights in the
Company IP Rights. All current and
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former officers, employees and consultants of the Company having access to
proprietary information of the Company, its customers or business partners and
inventions owned by the Company have executed and delivered to the Company an
agreement regarding the protection of such proprietary information and the
assignment of inventions to the Company (in the case of proprietary information
of the Company's customers and business partners, to the extent required by such
customers and business partners); and copies of all such agreements have been
made available to Acquirer's legal counsel. The Company has secured valid
written assignments from all of the Company's current and former consultants,
contractors and employees who were involved in, or who contributed to, the
creation or development of any Company-Owned IP Rights, of the rights to such
contributions that may be owned by such persons or that the Company does not
already own by operation of law. No current or former employee, officer,
director, consultant or independent contractor of the Company has any right,
license, claim or interest whatsoever in or with respect to any Company-Owned IP
Rights or any Company IP Right that the Company purports to own.
3.13.6 Schedule 3.13.6 of the Company Disclosure Letter contains a
true and complete list of (i) all worldwide registrations made by or on behalf
of the Company of any patents, copyrights, mask works, trademarks, service
marks, Internet domain names or Internet or World Wide Web URLs or addresses
with any Governmental Authority or quasi-governmental authority, including
Internet domain name registries, and (ii) all applications, registrations,
filings and other formal written governmental actions made, taken or that must
be made or taken within 90 days of the Closing Date pursuant to federal, state
and foreign laws by the Company to secure, perfect or protect its interest in
the Company IP Rights, including all patent applications, copyright applications
and applications for registration of trademarks and service marks. All
registered patents, trademarks, service marks, Internet domain names, Internet
or World Wide Web URLs or addresses, and copyrights held by the Company are
valid, enforceable and subsisting, and the Company is the record owner thereof.
3.13.7 The Company owns all right, title and interest in and to all
Company-Owned IP Rights free and clear of all Encumbrances and licenses (other
than licenses and rights listed in Schedule 3.13.8 of the Company Disclosure
Letter). The right, license and interest of the Company in and to all
Company-Licensed IP Rights (subject to the right, title and interest of the
third party that owns such underlying Company-Licensed IP Rights and has granted
a license to the Company in any such Company-Licensed IP Rights) are free and
clear of all Encumbrances, licenses and rights (other than licenses and rights
listed in Schedule 3.13.8 of the Company Disclosure Letter).
3.13.8 Schedule 3.13.8 of the Company Disclosure Letter contains a
true and complete list of (i) all licenses, sublicenses and other contracts,
agreements, arrangements, commitments and undertakings as to which the Company
is a party and pursuant to which any person is authorized to use any Company IP
Rights, (ii) all licenses, sublicenses and other contracts, agreements,
arrangements, commitments and undertakings as to which the Company is a party
and pursuant to which the Company is authorized to use any third party
Intellectual Property, and (iii) all rights of any Governmental Authority in or
to any Company IP Rights, including rights to distribute, sublicense, acquire,
modify, develop software or services incorporating, or otherwise use any Company
IP Right.
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3.13.9 Neither the Company nor any other party acting on its behalf
has disclosed or delivered to any party, or permitted the disclosure or delivery
to any escrow agent or other party of, any Company Source Code (as defined
below). Except as disclosed in Schedule 3.13.9 of the Company Disclosure Letter,
no event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time, or both) shall, or would reasonably be expected
to, result in the disclosure or delivery by the Company or any other party
acting on its behalf to any party of any Company Source Code. Schedule 3.13.9 of
the Company Disclosure Letter identifies each contract, agreement, arrangement,
commitment or undertaking (whether written or oral) pursuant to which the
Company has deposited, or is or may be required to deposit, with an escrow agent
or other party, any Company Source Code and further describes whether the
execution of this Agreement or the consummation of the Merger or any of the
other transactions contemplated by this Agreement, in and of itself, would
reasonably be expected to result in the release from escrow of any Company
Source Code. As used in this Section 3.13.9, "Company Source Code" means,
collectively, any software source code, or any material portion or aspect of the
software source code, or any material proprietary information or algorithm
contained in or relating to any software source code, of any Company-Owned IP
Rights or any other product or service marketed or currently proposed to be
marketed by the Company.
3.13.10 To the Company's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Company IP Rights by any
third party, including any employee or former employee of the Company. Except as
disclosed in Schedule 3.13.8 of the Company Disclosure Letter, the Company has
not agreed to indemnify any person for any infringement of any Intellectual
Property of any third party by any product or service that has been sold,
licensed to third parties, leased to third parties, supplied, marketed,
distributed or provided by the Company.
3.13.11 All products developed and licensed by the Company to
customers and all services provided by or through the Company to customers on or
prior to the Closing Date conform in all material respects (to the extent
required in contracts, agreements, arrangements, commitments and undertakings
with such customers) to applicable contractual commitments, express and implied
warranties, product specifications and product documentation and to any
representations provided to customers, and the Company has no material liability
(and, to the Company's knowledge, there is no legitimate basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against the Company giving rise to any material liability
relating to the foregoing contracts, agreements, arrangements, commitments and
undertakings) for replacement or repair thereof or other damages in connection
therewith in excess of any reserves therefor reflected on the Balance Sheet. The
Company has not received any written notice of any malfunctions with respect to
any of the Company's products or any other customer complaints related thereto
and, to the Company knowledge, there are no such malfunctions or complaints. The
Company has made available to Acquirer all material documentation and notes
relating to the testing of the Company's software products and plans and
specifications for software products currently under development by the Company.
3.13.12 No government funding, facilities of a university, college,
other educational institution or research center, or funding from third parties
(other than funds received in consideration for the Company's capital stock) was
used in the development of the computer software programs or applications owned
by the Company. No current or former employee,
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consultant or independent contractor of the Company who was involved in, or who
contributed to, the creation or development of any Company IP Rights has
performed services for the government, for a university, college or other
educational institution or for a research center during a period of time during
which such employee, consultant or independent contractor was also performing
services for the Company.
3.13.13 No Public Software (as defined below) forms part of the
Company IP Rights or was or is used in connection with the development of any
Company IP Right, incorporated in whole or in part, or has been distributed, in
whole or in part, in conjunction with any Company IP Right. As used in this
Section 3.13.13, "Public Software" means any software that contains, or is
derived in any manner (in whole or in part) from, any software that is
distributed as free software, open source software (e.g., Linux) or similar
licensing or distribution models, including software licensed or distributed
under any of the following licenses or distribution models, or licenses or
distribution models similar to any of the following: (i) GNU's General Public
License (GPL) or Lesser/Library GPL (LGPL); (ii) the Artistic License (e.g.,
PERL); (iii) the Mozilla Public License; (iv) the Netscape Public License; (v)
the Sun Community Source License (SCSL); (vi) the Sun Industry Standards License
(SISL); (vii) the BSD License; and (viii) the Apache License.
3.14 Compliance with Laws.
3.14.1 The Company has materially complied, and is now and at the
Closing Date shall be in material compliance with all Applicable Laws.
3.14.2 All materials, products and services distributed or marketed by
the Company have at all times made all material disclosures to users or
customers required by Applicable Laws, and none of such disclosures made or
contained in any such materials have been inaccurate, misleading or deceptive in
any material respect.
3.14.3 The Company holds all material permits, licenses and approvals
from, and has made all material filings with, government (and
quasi-governmental) agencies and authorities, that are necessary and/or legally
required to be held by to conduct the Company Business, including with respect
to the export of any of the Company's products, without any violation of any
Applicable Law ("Governmental Permits"), and all such Governmental Permits are
valid and in full force and effect. The Company has not received any notice or
other communication from any Governmental Authority regarding (a) any actual or
possible violation of law or any Governmental Permit or any failure to comply
with any term or requirement of any Governmental Permit or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Permit.
3.14.4 Neither the Company nor any director, officer, agent or
employee of the Company has, for or on behalf of the Company, (a) used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, (b) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (c) made any other payment in violation of any
Applicable Law.
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3.15 Certain Transactions and Agreements. None of the officers and
directors of the Company and, to the Company's knowledge, none of the employees
or stockholders of the Company, nor any family member of an officer, director,
employee or stockholder of the Company, has any direct ownership interest in any
firm or corporation that competes with, or does business with, or has any
contractual arrangement with, the Company (except with respect to any interest
in less than 2% of the stock of any corporation whose stock is publicly traded).
To the Company's knowledge, none of the officers, directors, employees or
stockholders of the Company, nor any member of their immediate families, has any
indirect ownership interest in any firm or corporation that competes with, or
does business with, or has any contractual arrangement with, the Company (except
with respect to any interest in less than 2% of the stock of any corporation
whose stock is publicly traded). None of said officers or directors or, to the
Company's knowledge, employees or stockholders or any member of their immediate
families, is a party to, or otherwise directly or indirectly interested in, any
contract, agreement, arrangement, commitment or undertaking with the Company,
except for normal compensation for services as an officer, director or employee
thereof that have been disclosed to Acquirer. None of said officers or directors
or, to the Company's knowledge, employees, stockholders or family members has
any interest in any property, real or personal, tangible or intangible
(including any Company IP Rights or any other Intellectual Property), that is
used in, or that pertains to, the Company Business, except for the rights of a
stockholder under Applicable Laws.
3.16 Employees, ERISA and Other Compliance.
3.16.1 The Company is in compliance in all material respects with all
Applicable Laws, contracts, agreements, arrangements, commitments and
undertakings relating to employment, employment practices, immigration, wages,
hours, and terms and conditions of employment, including employee compensation
matters, and has correctly classified employees as exempt employees and
nonexempt employees under the Fair Labor Standards Act. A list of all employees,
officers and consultants of the Company and their current title and/or job
description and compensation is set forth in Schedule 3.16.1 of the Company
Disclosure Letter. The Company does not have any employment or consulting
contracts, agreements, arrangements, commitments or undertakings currently in
effect that are not terminable at will (other than agreements with the sole
purpose of providing for the confidentiality of proprietary information or
assignment of inventions).
3.16.2 The Company (a) is not now, nor has ever been, subject to a
union organizing effort, (b) is not subject to any collective bargaining
agreement with respect to any of its employees, (c) is not subject to any other
contract, agreement, arrangement, commitment or undertaking, written or oral,
with any trade or labor union, employees' association or similar organization,
and (d) has no current labor disputes. The Company has good labor relations, and
has no knowledge of any facts indicating that the consummation of the Merger or
any of the other transactions contemplated hereby shall have a material adverse
effect on such labor relations, and has no knowledge that any of its key
employees intends to leave their employ. All of the employees of the Company are
legally permitted to be employed by the Company in the United States of America
in their current job capacities for the maximum period allowed under Applicable
Laws.
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3.16.3 The Company has no pension plan which constitutes, or has since
the enactment of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), constituted, a "multiemployer plan" as defined in Section 3(37) of
ERISA. No pension plan of the Company is subject to Title IV of ERISA.
3.16.4 (a) Schedule 3.16.4 of the Company Disclosure Letter lists each
employment, severance or other similar contract, agreement, arrangement,
commitment or undertaking, each "employee benefit plan" as defined in Section
3(3) of ERISA and each plan or arrangement (written or oral) providing for
insurance coverage (including any self-insured arrangements), workers' benefits,
vacation benefits, severance benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits for employees, consultants or directors that
is entered into, maintained or contributed to by the Company or any ERISA
Affiliate (as defined below) and covers any employee or former employee of the
Company. Such contracts, agreements, arrangements, commitments, undertakings,
plans and arrangements as are described in this Section 3.16.4 are hereinafter
collectively referred to as "Company Benefit Arrangements." For purposes of this
Section 3.16, "ERISA Affiliate" means any entity which is a member of: (i) a
"controlled group of corporations", as defined in Section 414(b) of the Code;
(ii) a group of entities under "common control", as defined in Section 414(c) of
the Code; or (iii) an "affiliated service group", as defined in Section 414(m)
of the Code, or treasury regulations promulgated under Section 414(o) of the
Code, any of which includes the Company.
(b) Each Company Benefit Arrangement has been maintained in
compliance in all material respects with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations that are
applicable to such Company Benefit Arrangement and, unless otherwise indicated
in Schedule 3.16.4 of the Company Disclosure Letter, each such Company Benefit
Arrangement that is an "employee pension benefit plan" as defined in Section
3(2) of ERISA that is intended to qualify under Section 401(a) of the Code has
received a favorable opinion, advisory, notification and/or determination
letter, as applicable, that such plan satisfied the requirements of the Uruguay
Round Agreements Act, the Uniformed Services Employment and Reemployment Rights
Act of 1994, the Small Business Job Protection Act of 1996 and the Taxpayer
Relief Act of 1997 (collectively referred to as "GUST"), the Tax Reform Act of
1986, the IRS Restructuring and Reform Act of 1998 and the Community Renewal Tax
Relief Act of 2000 (a copy of which letter(s) have been delivered to Acquirer
and its legal counsel) or applied timely to the Internal Revenue Service for
such letter. No Company Benefit Arrangement shall be subject to any surrender
fees or services fees upon termination other than the normal and reasonable
administrative fees associated with the termination of benefit plans. No
employee of the Company and no person subject to any health plan of the Company
has made medical claims through any such health plan during the 12 months
preceding the Agreement Date for more than $100,000 in the aggregate for which
the Company is responsible. For purposes of the foregoing sentence, any
exception to such representation and warranty set forth in the Company
Disclosure Letter shall be stated generally and shall not identify any employee
of the Company or person subject to any health plan of the Company who has made
medical claims.
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(c) The Company has delivered to Acquirer and its legal counsel a
complete and correct copy and description of each Company Benefit Arrangement,
including trust documents, insurance policies and contracts, employee booklets,
summary plan descriptions, summary of material modifications and other
authorizing documents, and any material employee communications relating
thereto.
(d) The Company has timely filed and delivered to Acquirer and
its legal counsel the three most recent annual reports (Form 5500) for each
Company Benefit Arrangement that is subject to ERISA and Code reporting
requirements.
(e) The Company has not ever been a participant in any
"prohibited transaction" within the meaning of Section 406 of ERISA with respect
to any employee pension benefit plan (as defined in Section 3(2) of ERISA) that
the Company sponsors as employer or in which the Company participates as an
employer which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a) of ERISA) or
that could result in an excise tax under the Code.
(f) All contributions due from the Company with respect to any of
the Company Benefit Arrangements have been made or have been accrued on the
Company's financial statements (including the Company Financial Statements), and
no further contributions shall be due or shall have accrued thereunder as of the
Closing Date.
(g) All individuals who, pursuant to the terms of any Company
Benefit Arrangement, are entitled to participate in any Company Benefit
Arrangement, are currently participating in such Company Benefit Arrangement or
have been offered an opportunity to do so and have declined in writing.
(h) The Company shall not have any liability to any employee or
to any organization or any other entity as a result of the termination of any
employee leasing arrangement.
3.16.5 There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company relating to, or change in
employee participation or coverage under, any Company Benefit Arrangement that
would increase materially the expense of maintaining such Company Benefit
Arrangement above the level of the expense incurred in respect thereof during
the calendar year 2002.
3.16.6 The group health plans (as defined in Section 4980B(g) of the
Code) that benefit employees of the Company are in compliance, in all material
respects, with the continuation coverage requirements of Section 4980B of the
Code, Sections 601 through 608 of ERISA, the Americans with Disabilities Act of
1990, as amended, and the regulations thereunder, the Health Insurance
Portability and Accountability Act of 1996, as amended, the Women's Health and
Cancer Rights Act of 1998, and the Family Medical Leave Act of 1993, as amended,
and the regulations thereunder, as such requirements affect the Company and its
employees. As of the Closing Date, there shall be no material outstanding,
uncorrected violations under the Consolidation Omnibus Budget Reconciliation Act
of 1985, as amended,
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with respect to any of the Company Benefit Arrangements, covered employees or
qualified beneficiaries.
3.16.7 Unless otherwise indicated in Schedule 3.16.7 of the Company
Disclosure Letter, no benefit payable or that may become payable by the Company
pursuant to any Company Benefit Arrangement or as a result of or arising under
this Agreement or the Certificate of Merger shall constitute an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code) that is
subject to the imposition of an excise tax under Section 4999 of the Code or
that would not be deductible by reason of Section 280G of the Code. Unless
otherwise indicated in Schedule 3.16.7 of the Company Disclosure Letter, the
Company is not a party to any: (a) contract, agreement, arrangement, commitment
or undertaking with any executive officer or other key employee thereof (i) the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company in the nature of the
Merger or any of the other transactions contemplated by this Agreement or any
Company Ancillary Agreement, (ii) providing any term of employment or
compensation guarantee, or (iii) providing severance benefits or other benefits
after the termination of employment of such employee regardless of the reason
for such termination of employment; or (b) contract, agreement, arrangement,
commitment, undertaking or plan, including any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of which
shall be increased, or the vesting of benefits of which shall be accelerated, by
the occurrence of the Merger or any of the other transactions contemplated by
this Agreement or any Company Ancillary Agreement, or any event subsequent to
the Merger such as the termination of employment of any person, or the value of
any of the benefits of which shall be calculated on the basis of any of the
transactions contemplated by this Agreement or any Company Ancillary Agreement.
3.16.8 No employee or consultant of the Company is in material
violation of (a) any term of any employment or consulting contract, agreement,
arrangement, commitment or undertaking or (b) any term of any other contract,
agreement, arrangement, commitment or undertaking or any restrictive covenant
relating to the right of any such employee or consultant to be employed by the
Company or to use trade secrets or proprietary information of others. The
employment of any employee or consultant by the Company does not subject it to
any liability to any third party.
3.16.9 Each International Employee Plan (as defined below) 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 International Employee Plan. No
International Employee Plan has material unfunded liabilities that, as of the
Closing Date, will not be offset by insurance or that are not fully accrued on
the Balance Sheet. Except as required by law, no condition exists that would
prevent the Company from terminating or amending any International Employee Plan
at any time for any reason in accordance with the terms of each such
International Employee Plan (other than expenses typically incurred in a
termination event). "International Employee Plan" means each Company Benefit
Arrangement that has been adopted or maintained by the Company, whether
informally or formally, for the benefit of Company's employees outside the
United States.
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3.16.10 In the past two years, (a) the Company has not effectuated a
"plant closing" (as defined in the Workers Adjustment and Retraining
Notification Act (the "WARN Act")) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
its business; (b) there has not occurred a "mass layoff" (as defined in the WARN
Act) affecting any site of employment or facility of the Company Business; (c)
the Company has not been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state, local or foreign law or regulation; and (d) the Company has not
caused any of its employees to suffer an "employment loss" (as defined in the
WARN Act) during the ninety 90-day period prior to the Agreement Date.
3.17 Corporate Documents. The Company has delivered to Acquirer all
documents and information listed in the Company Disclosure Letter or in any
Schedule thereto or in any other Exhibit or Schedule called for by this
Agreement, including the following: (a) the minute books containing all records
of all proceedings, consents, actions and meetings of the Board of Directors and
any committees thereof and stockholders of the Company; (b) the stock ledger,
option ledger and warrant ledger and journal reflecting all stock issuances and
transfers and all grants of options and warrants relating to the Company; and
(c) all permits, orders and consents issued by, and filings by the Company with,
any regulatory agency with respect to the Company, or any securities of the
Company, and all applications for such permits, orders and consents.
3.18 No Brokers. Neither the Company nor any affiliate of the Company is
obligated for the payment of any fees or expenses of any investment banker,
broker, finder or similar party in connection with the origin, negotiation or
execution of this Agreement or in connection with the Merger or any other
transaction contemplated by this Agreement. Neither Acquirer nor the Surviving
Corporation shall incur any liability, either directly or indirectly, to any
such investment banker, broker, finder or similar party as a result of this
Agreement, the Merger or any act or omission of the Company or any of its
employees, officers, directors, stockholders, agents or affiliates.
3.19 Books and Records.
3.19.1 The books, records and accounts of the Company (a) are in all
material respects true, complete and correct, (b) have been maintained in
accordance with good business practices on a basis consistent with prior years,
(c) are stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets and properties of the Company, and
(d) accurately and fairly reflect the basis for the Company Financial
Statements.
3.19.2 The Company has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that: (a)
transactions are executed in accordance with management's general or specific
authorization; (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with GAAP or any other
criteria applicable to such statements and (ii) to maintain accountability for
assets; and (c) the amount recorded for assets on the Company's books and
records is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
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3.20 Insurance. The Company maintains policies of insurance of the type and
in amounts reasonably and customarily carried by persons conducting businesses
or owning assets similar in type and size and in similar industries to those of
the Company, including all legally required workers' compensation insurance and
errors and omissions, casualty, fire and general liability insurance. There is
no material claim pending under any of such policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies. All
premiums due and payable under all such policies have been timely paid, and the
Company is otherwise in material compliance with the terms of such policies. The
Company has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies. All policies of insurance now
held by the Company are set forth in Schedule 3.20 of the Company Disclosure
Letter, together with the name of the insurer under each policy, the type of
policy, the coverage amount and any applicable deductible.
3.21 Environmental Matters.
3.21.1 The Company and its predecessors and affiliates are in material
compliance with all applicable Environmental Laws (as defined below), which
compliance includes the possession by the Company of all permits and other
governmental authorizations required under applicable Environmental Laws and
compliance with the terms and conditions thereof. The Company has not received
any notice or other communication (in writing or otherwise), whether from a
governmental body, citizens groups, employee or otherwise, that alleges that the
Company is not in compliance with any Environmental Law, and there are no
circumstances that could reasonably be expected to cause the Company not to be
materially in compliance with any current Environmental Law in the future. To
the Company's knowledge, no current or prior owner of any property leased or
possessed by the Company has received any notice or other communication (in
writing or otherwise), whether from a government body, citizens group, employee
or otherwise, that alleges that such current or prior owner or the Company is
not in compliance with any Environmental Law. All governmental authorizations
currently held by the Company pursuant to any Environmental Law (if any) are
identified in Schedule 3.21 of the Company Disclosure Letter.
3.21.2 For purposes of this Section 3.21: (a) "Environmental Law"
means any federal, state or local statute, law, regulation or other legal
requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (b) "Material of Environmental Concern" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substances that are currently regulated by an
Environmental Law.
3.22 Board Actions. The Company's Board of Directors, (a) has unanimously
determined that the Merger is advisable and in the best interests of the Company
Stockholders and is on terms that are fair to such Company Stockholders and has
recommended the Merger to the Company Stockholders and (b) shall submit the
Merger, this Agreement, each of the Company Ancillary Agreements and all other
agreements, transactions and actions contemplated
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hereby and thereby (including the Restated Certificate), to the extent that
stockholder approval is required thereof under Applicable Laws and the Company's
Certificate of Incorporation and Bylaws, each as currently in effect, to the
vote and approval of the Company Stockholders.
3.23 No Existing Discussions. Neither the Company nor any director,
officer, stockholder, employee or agent (or any investment banker, broker,
finder or similar party) of the Company is, or since July 22, 2002 has been,
engaged, directly or indirectly, in any discussions or negotiations with any
third party relating to any Alternative Transaction.
3.24 Accounts Receivable. The accounts receivable shown on the Balance
Sheet arose in the Company's ordinary course of business, consistent with its
past practices, and have been collected or are believed by the Company,
reasonably and in good faith, to be collectible in the book amounts thereof,
less an amount not in excess of the allowance for doubtful accounts provided for
in the Balance Sheet. Allowances for doubtful accounts and warranty returns are
adequate and have been prepared in accordance with GAAP consistently applied and
in accordance with Company's past practices. The Company's receivables arising
after the Balance Sheet Date and before the Closing Date arose or will arise in
the Company's ordinary course of business based on bona fide sales, consistent
with its past practices, and have been collected or are collectible in the book
amounts thereof, less allowances for doubtful accounts and warranty returns
determined in accordance with GAAP consistently applied and the Company's past
practices. None of the Company's receivables is subject to any material claim of
offset, recoupment, setoff or counter-claim, and the Company has no knowledge of
any specific facts or circumstances (whether asserted or unasserted) that could
give rise to any such claim. No material amount of receivables is contingent
upon the performance by the Company of any obligation or contract other than
normal warranty repair and replacement. No person has any lien on any of such
receivables, and no agreement for deduction or discount has been made with
respect to any of such receivables. Schedule 3.24 of the Company Disclosure
Letter sets forth a true, correct and complete aging of the Company's accounts
receivable in the aggregate and by customer, and indicates the amounts of
allowances for doubtful accounts and warranty returns and the amounts of
accounts receivable which are subject to asserted warranty claims. Schedule 3.24
of the Company Disclosure Letter sets forth such amounts of the Company's
accounts receivable which are subject to asserted warranty claims by customers
and reasonably detailed information regarding asserted warranty claims made
within the last year, including the type and amounts of such claims.
3.25 Customers. Schedule 3.25(a) of the Company Disclosure Letter lists the
customers who, in the year ended December 31, 2001 or the six-month period ended
June 30, 2002, were the 20 largest sources of revenues for the Company, based on
amounts paid (each, a "Significant Customer"). The Company has no outstanding
material disputes concerning its products and/or services with any Significant
Customer, and the Company has no knowledge of any material dissatisfaction on
the part of any Significant Customer with respect to the Company's products or
services. The Company has not received any information from any Significant
Customer that such customer will not continue as a customer of the Company (or
the Surviving Corporation) after the Closing or that such customer intends to
terminate or materially modify existing contracts, agreements, arrangements,
commitments or undertakings with the Company (or the Surviving Corporation). No
contract, agreement or arrangement between the Company and any of its
Significant Customers contains any provision that would or is
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reasonably likely to (i) adversely affect the Company's ability to collect any
accounts receivable related to the sale of the Company's products to such
Significant Customer, (ii) adversely affect the Company's ability to recognize
revenue on the Company's financial statements from the sale of the Company's
products to such Significant Customer, or (iii) adversely affect such
Significant Customer's obligation to accept the Company's products. The Company
has not had any of its products returned by a purchaser thereof except for
normal warranty returns consistent with past history and those returns that
would not result in a reversal of any revenue by the Company. Schedule 3.25(b)
of the Company Disclosure Letter sets forth, for each customer service complaint
or report received by the Company within the 60-day period prior to the Closing,
the name of such customer, the date of such complaint and a brief description of
the nature of such complaint.
3.26 Suppliers. Schedule 3.26(a) of the Company Disclosure Letter lists the
suppliers who, in the year ended December 31, 2001 or the six-month period ended
June 30, 2002, were the 20 largest suppliers of goods and services to the
Company, based on amounts paid (each, a "Significant Supplier"). The Company has
no outstanding material disputes concerning goods or services provided by any
Significant Supplier, and the Company has no knowledge of any quality issue with
respect to any of the goods or services provided to the Company by any
Significant Supplier. The Company has not received any written notice of
termination or interruption of any existing contracts, agreements, arrangements,
commitments or undertakings with any Significant Supplier. The Company has
access, on commercially reasonable terms, to all goods and services reasonably
necessary to it to carry on its business as currently conducted, and the Company
has no knowledge of any reason why it will not continue to have such access on
commercially reasonable terms.
3.27 Privacy. The Company has not collected any personally identifiable
information from any third parties. The Company has provided adequate notice of
its privacy practices in its privacy policy or policies, which policy or
policies (and the periods such policy or policies have been in effect) are set
forth in Schedule 3.27 of the Company Disclosure Letter. The Company's privacy
policy is and has been available on the Company Websites (as defined below) at
all times during the periods indicated on Schedule 3.27 of the Company
Disclosure Letter. The Company's privacy practices conform, and at all times
have conformed, in all material respects to its privacy policy. The Company has
complied with all Applicable Laws relating to (a) the privacy of users of the
Company's products and services and all Internet websites owned, maintained or
operated by the Company (the "Company Websites"), and (b) the collection,
storage and transfer of any personally identifiable information collected by the
Company or by third parties having authorized access to the Company's records.
The Company's privacy policy conforms, and at all times has conformed, in all
material respects with all of the Company's contractual commitments to its
customers and the viewers of the Company Websites. Each of the Company Websites
and all materials distributed or marketed by the Company have at all times made
all disclosures to users or customers required by Applicable Laws, and none of
such disclosures made or contained in any Company Website or in any such
materials have been inaccurate, misleading or deceptive or in violation of any
Applicable Law.
3.28 Information Statement. None of the information to be delivered to the
Company Stockholders in connection with this Agreement (other than information
regarding Acquirer which was delivered by Acquirer to the Company in connection
with this Agreement) contains
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any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which such statements were made, not misleading.
3.29 Disclosure. Neither this Agreement (including its Exhibits and
Schedules and the Company Disclosure Letter) nor any of the Company Ancillary
Agreements delivered by the Company to Acquirer under this Agreement, taken
together, contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances under which such statements were made,
not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIRER AND MERGER SUB
Acquirer and Merger Sub represent and warrant to the Company that, except
as set forth in a numbered or lettered section of the letter addressed to the
Company from Acquirer and dated as of the Agreement Date (including all
Schedules thereto) that has been delivered by Acquirer to the Company
concurrently herewith (the "Acquirer Disclosure Letter") referencing a
representation, warranty or statement herein, each of the representations,
warranties and statements contained in the following Sections of this Article 4
is true and correct as of the Agreement Date and shall be true and correct on
and as of the Closing Date. For all purposes of this Agreement, the statements
contained in the Acquirer Disclosure Letter and its Schedules shall also be
deemed to be representations and warranties made and given by Acquirer and
Merger Sub under Article 4.
4.1 Organization and Good Standing. Acquirer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and as proposed to
be conducted. Merger Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. Acquirer owns all
of the issued and outstanding capital stock of Merger Sub. Each of Acquirer and
Merger Sub is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not individually or in the aggregate have a Material
Adverse Effect on Acquirer or Merger Sub. Acquirer has made available to the
Company true and complete copies of the currently effective Certificate of
Incorporation and Bylaws of Acquirer, each as amended to date, and the currently
effective Certificate of Incorporation and Bylaws of Merger Sub. Neither
Acquirer nor Merger Sub is in violation of its Certificate of Incorporation or
Bylaws.
4.2 Power, Authorization and Validity.
4.2.1 Power and Authority. Acquirer has all requisite corporate power
and authority to enter into, execute, deliver and perform its obligations under
this Agreement and each of the Acquirer Ancillary Agreements and to consummate
the Merger. The Merger and the
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execution, delivery and performance by Acquirer of this Agreement, each of the
Acquirer Ancillary Agreements and all other agreements, transactions and actions
contemplated hereby or thereby have been duly and validly approved and
authorized by all necessary corporate action on the part of Acquirer. Merger Sub
has all requisite corporate power and authority to enter into, execute, deliver
and perform its obligations under this Agreement and each of the Merger Sub
Ancillary Agreements and to consummate the Merger. The Merger and the execution,
delivery and performance by Merger Sub of this Agreement, each of the Merger Sub
Ancillary Agreements and all other agreements, transactions and actions
contemplated hereby or thereby have been duly and validly approved and
authorized by all necessary corporate action on the part of Merger Sub. The
Board of Directors of each of Acquirer and Merger Sub has unanimously determined
that the Merger is advisable and in the best interests of the stockholders of
Acquirer and Merger Sub, respectively. No vote of the stockholders of Acquirer
is necessary or required in connection with the consummation of the Merger.
4.2.2 No Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority, or any
other person, governmental or otherwise, is necessary or required to be made or
obtained by Acquirer or Merger Sub to enable Acquirer and Merger Sub to lawfully
execute and deliver, enter into, and perform its obligations under this
Agreement, each of the Acquirer Ancillary Agreements and each of the Merger Sub
Ancillary Agreements or to consummate the Merger, except for: (a) the filing of
the Certificate of Merger with the Delaware Secretary of State; (b) the approval
of the Registration Rights Agreement as required by the terms of that certain
Fifth Amended and Restated Investors' Rights Agreement dated October 3, 2001 by
and among Acquirer and the Investors (as defined therein); (c) the filing by
Acquirer of such reports and information with the SEC under the Exchange Act,
and the rules and regulations promulgated by the SEC thereunder, as may be
required in connection with this Agreement, the Merger and the other
transactions contemplated by this Agreement; (d) the filing with the SEC and the
effectiveness of any registration statement under the Securities Act that is
required to be filed by Acquirer after the Effective Time pursuant to the terms
and conditions of the Registration Rights Agreement; (e) such other filings as
may be required by the Nasdaq Stock Market with respect to the Merger and the
other transactions contemplated by this Agreement, and the assumption of Company
Options by Acquirer in the Merger; and (f) such other filings, if any, as may be
required in order for Acquirer to comply with applicable federal and state
securities laws.
4.2.3 Enforceability. This Agreement has been duly executed and
delivered by Acquirer and Merger Sub. This Agreement and each of the Acquirer
Ancillary Agreements are, or when executed by Acquirer shall be, valid and
binding obligations of Acquirer, enforceable against Acquirer in accordance with
their respective terms, subject to the effect of (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to rights of creditors generally and (b) rules of law and equity
governing specific performance, injunctive relief and other equitable remedies.
This Agreement and each of the Merger Sub Ancillary Agreements are, or when
executed by Merger Sub shall be, valid and binding obligations of Merger Sub,
enforceable against Merger Sub in accordance with their respective terms,
subject to the effect of (a) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to rights
of creditors generally and (b) rules of law and equity governing specific
performance, injunctive relief and other equitable remedies.
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4.3 No Conflict. Neither the execution and delivery of this Agreement, any
of the Acquirer Ancillary Agreements or any of the Merger Sub Ancillary
Agreements by Acquirer or Merger Sub, nor the consummation of the Merger or any
other transaction contemplated hereby or thereby, shall conflict with, or (with
or without notice or lapse of time, or both) result in a termination, breach,
impairment or violation of, or constitute a default under: (a) any provision of
the Certificate of Incorporation or Bylaws of Acquirer or Merger Sub, each as
currently in effect; (b) any federal, state, local or foreign judgment, writ,
decree, order, statute, rule or regulation applicable to Acquirer, Merger Sub or
any of their respective material assets or properties; or (c) any contract,
agreement, arrangement, commitment or undertaking, including any instrument,
permit, mortgage, lease, license, understanding, letter of intent or memorandum
of understanding (whether written or oral), to which Acquirer or any of its
Subsidiaries is a party or by which Acquirer or any of its Subsidiaries or any
of its material assets or properties are bound, except in the cases of clauses
(b) and (c) where such conflict, termination, breach, impairment, violation or
default would not have a Material Adverse Effect on Acquirer or Merger Sub.
4.4 Capital Structure. The authorized capital stock of Acquirer consists of
500,000,000 shares of Acquirer Common Stock and 10,000,000 shares of Acquirer
Preferred Stock, of which 74,371,719 shares of Acquirer Common Stock and no
shares of Acquirer Preferred Stock were issued and outstanding as of the close
of business on August 12, 2002. All outstanding shares of capital stock of
Acquirer have been duly authorized and validly issued, are fully paid and
nonassessable. The Acquirer Common Stock constitutes the only class of equity
securities of Acquirer or any of its Subsidiaries registered or required to be
registered under the Exchange Act. The shares of Acquirer Common Stock to be
issued in the Merger have been duly authorized and reserved for issuance and,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid, nonassessable and free of any preemptive right created by
statute, the Certificate of Incorporation or Bylaws of Acquirer or any agreement
to which Acquirer is a party or by which it is bound. The authorized capital
stock of Merger Sub consists solely of 1,000 shares of Merger Sub Common Stock,
of which 1,000 shares are issued and outstanding. All of the outstanding shares
of Merger Sub Common Stock are owned by Acquirer and are not subject to any
preemptive rights.
4.5 SEC Documents; Acquirer Financial Statements. Acquirer has made
available to the Company each statement, report, registration statement (with
the prospectus in the form filed pursuant to Rule 424(b) of the Securities Act),
definitive proxy statement and other filing filed with the SEC by Acquirer since
December 10, 2001 (collectively, the "Acquirer SEC Documents"). In addition,
Acquirer has made available to the Company all exhibits (subject to redaction)
to the Acquirer SEC Documents filed prior to the Agreement Date and, upon the
Company's request, will promptly make available to the Company all exhibits
(subject to redaction) to any additional Acquirer SEC Documents filed prior to
the Effective Time. As of their respective filing dates (or if amended or
supplemented by a filing, then on the date of such subsequent filing), the
Acquirer SEC Documents complied in all material respects with the requirements
of the Exchange Act and the Securities Act, and none of the Acquirer SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, except to the extent corrected by a subsequently filed
Acquirer SEC Document. The financial statements of Acquirer, including the
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related notes thereto, included in the Acquirer SEC Documents (the "Acquirer
Financial Statements") complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto as of their
respective dates and were prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by the SEC
on Form 10-Q, 8-K or any successor form under the Exchange Act). The Acquirer
Financial Statements fairly present in all material respects the consolidated
financial condition and operating results of Acquirer and its Subsidiaries at
the dates and during the periods indicated therein (except that unaudited
statements may not contain footnotes and were or are subject to normal and
recurring year-end adjustments). Except for obligations and liabilities
reflected in the Acquirer Financial Statements, Acquirer has no material
off-balance sheet obligation or liability of any nature (matured or unmatured,
fixed or contingent) to, or any financial interest in, any third party or
entities, the purpose or effect of which is to defer, postpone, reduce or
otherwise avoid or adjust the recording of debt expenses incurred by Acquirer.
Since June 30, 2002, there has not occurred any Material Adverse Change in
Acquirer.
4.6 Litigation. There is no action, suit, arbitration, proceeding, claim
or, to Acquirer's knowledge, investigation pending, or, to Acquirer's knowledge,
threatened against Acquirer or any of its Subsidiaries or any of their
respective officers of directors (in their capacities as such) before any
agency, court or tribunal that is reasonably likely to succeed on its merits and
if determined adversely to Acquirer or any of its Subsidiaries or any of their
respective officers of directors (in their capacities as such) would have a
Material Adverse Effect on Acquirer. There is no judgment, decree or order
outstanding against Acquirer or any of its Subsidiaries that would reasonably be
expected to prevent, enjoin or materially alter or delay any of the transactions
contemplated by this Agreement or that would reasonably be expected to have a
Material Adverse Effect on Acquirer.
4.7 Information Statement. None of the information regarding Acquirer which
was delivered by Acquirer to the Company for inclusion in the Information
Statement contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 5
COMPANY COVENANTS
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10, the Company covenants and agrees with
Acquirer as follows:
5.1 Advice of Changes. The Company shall promptly advise Acquirer in
writing of (a) any event occurring subsequent to the Agreement Date that would
render any representation or warranty of the Company contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate, (b) any breach of any covenant or obligation of the
Company pursuant to this Agreement or any Company Ancillary Agreement, and (c)
any Material Adverse Change in the Company.
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5.2 Conduct of Business. The Company shall use commercially reasonable
efforts to conduct the Company Business and maintain its business relationships
in the ordinary and usual course consistent with its past practices. The Company
shall use commercially reasonable efforts to carry on and preserve the Company
Business and its relationships with customers, advertisers, suppliers, employees
and others with whom the Company has contractual relations in substantially the
same manner as it has prior to the Agreement Date consistent with its past
practices. If the Company becomes aware of a material deterioration in the
relationship with any key customer, key advertiser, key supplier or key
employee, it shall promptly bring such information to Acquirer's attention in
writing and, if requested by Acquirer, shall exert reasonable commercial efforts
to promptly restore the relationship.
5.3 Prohibited Actions. The Company shall not, without Acquirer's prior
written consent:
(a) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person;
(b) lend any money, other than reasonable and normal advances to
employees for bona fide expenses that are incurred in the ordinary course of the
Company's business consistent with its past practices, or prepay any
indebtedness;
(c) enter into any material transaction or any contract, agreement,
arrangement, commitment or undertaking or take any other action not in the
ordinary course of the Company's business consistent with its past practices;
(d) grant any Encumbrance on any of its assets;
(e) sell, transfer or dispose of any of its assets except for the sale
of its hardware products and nonexclusive object code license of its software
products in the ordinary course of the Company's business consistent with its
past practices;
(f) acquire any material assets;
(g) enter into any material lease or other contract, agreement,
arrangement, commitment or undertaking for the purchase or sale of any property,
whether real or personal, tangible or intangible; provided, however, that this
Section 5.3(g) shall not prohibit the Company from entering into any amendment
of any of its existing real property leases so long as any such amendment (i)
reduces the Company's outstanding liabilities to the lessor under such lease,
(ii) includes a release of all claims by the lessor under such lease, and (iii)
does not increase any obligation of the Company, Acquirer or the Surviving
Corporation to the lessor under such lease or otherwise adversely affect the
Company, Acquirer or the Surviving Corporation;
(h) except as required by Applicable Laws, pay any bonus, increased
salary, severance or special remuneration to any officer, director, employee or
consultant (except pursuant to arrangements disclosed in writing to Acquirer
prior to the Agreement Date or disclosed in writing subsequent to the Agreement
Date and approved in writing by Acquirer) or amend or enter into any employment
or consulting contract, agreement, arrangement, commitment or undertaking with
any such person;
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(i) hire any employees or consultants;
(j) change any of its accounting methods except as required by changes
in GAAP or by Applicable Laws;
(k) declare, set aside or pay any cash or stock dividend or other
distribution in respect of its capital stock, or redeem, repurchase or otherwise
acquire any of its capital stock or other securities (except for the repurchase
of stock from its employees, directors, consultants or contractors in connection
with the termination of their services at the original purchase price of such
stock), or pay or distribute any cash or property to any of its stockholders or
security holders or make any other cash payment to any of its stockholders or
security holders;
(l) amend or terminate any contract, agreement, arrangement,
commitment or undertaking, including any license, to which it is a party;
(m) waive or release any material right or claim;
(n) issue, sell, create or authorize any shares of its capital stock
of any class or series or any other of its securities (other than pursuant to
the exercise of any outstanding Company Options, Company Warrants or Preferred
Rights);
(o) issue, grant or create any warrants, obligations, subscriptions,
options, convertible securities, or other commitments to issue shares of its
capital stock or any securities that are potentially exchangeable for, or
convertible into, shares of its capital stock;
(p) subdivide, split, combine or reverse split the outstanding shares
of its capital stock of any class or series or enter into any recapitalization
affecting the number of outstanding shares of its capital stock of any class or
series or affecting any other of its securities;
(q) merge, consolidate or reorganize with, acquire, or enter into any
other business combination with any corporation, partnership, limited liability
company or any other entity (other than Acquirer or Merger Sub) or enter into
any negotiations, discussions or agreement for such purpose;
(r) amend its Certificate of Incorporation or Bylaws, except as
contemplated by the Restated Certificate;
(s) license any of its technology or Intellectual Property except
nonexclusive object code licenses of its software products in the ordinary
course of the Company's business consistent with the its past practices, or
acquire any Intellectual Property (or any license thereto) from any third party;
(t) materially change any insurance coverage;
(u) agree to any audit assessment by any taxing authority or file any
federal or state income or franchise tax return unless copies of such returns
have first been delivered to Acquirer for its review at a reasonable time prior
to filing;
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(v) modify or change the exercise or conversion rights or exercise or
purchase prices of any of its capital stock, any of its stock options, warrants
or other securities, or accelerate or otherwise modify (except as contemplated
by the Waivers) (i) the right to exercise any option, warrant or other right to
purchase any of its capital stock or other securities or (ii) the vesting or
release of any shares of its capital stock or other securities from any
repurchase options or rights of refusal held by it or any other party or any
other restrictions;
(w) initiate or settle any litigation, action, suit, proceeding, claim
or arbitration; provided, however, that this Section 5.3(w) shall not prohibit
the Company from settling any litigation, action, suit, proceeding, claim or
arbitration with respect to any of its existing real property leases so long as
any such settlement (i) reduces the Company's outstanding liabilities to the
lessor under such lease, (ii) includes a release of all claims by the lessor
under such lease, and (iii) does not increase any obligation of the Company,
Acquirer or the Surviving Corporation to the lessor under such lease or
otherwise adversely affect the Company, Acquirer or the Surviving Corporation;
or
(x) agree to do any of the things described in the preceding clauses
5.3(a) through 5.3(w).
5.4 Regulatory Approvals. The Company shall promptly execute and file, or
join in the execution and filing of, any application, notification or other
document that may be necessary in order to obtain the authorization, approval or
consent of any Governmental Authority, whether federal, state, local or foreign,
which may be reasonably required, or which Acquirer may reasonably request, in
connection with the consummation of the Merger and the other transactions
contemplated by this Agreement or any Company Ancillary Agreement. The Company
shall use all commercially reasonable efforts to obtain, and to cooperate with
Acquirer to promptly obtain, all such authorizations, approvals and consents.
5.5 Necessary Consents. The Company shall use all commercially reasonable
efforts to promptly obtain such written consents and authorizations of third
parties, give notices to third parties and take such other actions as may be
necessary or appropriate in order to effect the consummation of the Merger and
the other transactions contemplated by this Agreement, to enable the Surviving
Corporation to carry on the Company Business immediately after the Effective
Time and to keep in effect and avoid the breach, violation of, termination of,
or adverse change to any contract, agreement, arrangement, commitment or
undertaking to which the Company is a party or is bound or by which any of its
assets is bound.
5.6 Litigation. The Company shall notify Acquirer in writing promptly after
learning of any claim, action, suit, arbitration, mediation, proceeding or
investigation by or before any court, arbitrator or arbitration panel, board or
governmental agency, initiated by or against it, or known by the Company to be
threatened against the Company or any of its officers, directors, employees or
stockholders in their capacity as such.
5.7 No Other Negotiations. The Company shall not, and shall not authorize,
encourage or permit any of its officers, directors, employees, stockholders,
affiliates or agents or any attorney, investment banker or other person on its
behalf to, directly or indirectly: (i) solicit, initiate, encourage or induce
the making, submission or announcement of any offer or proposal
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from any person (other than Acquirer) concerning any Alternative Transaction or
take any other action that could reasonably be expected to lead to an
Alternative Transaction with any person (other than Acquirer) or a proposal
therefor; (ii) furnish any information regarding the Company to any person
(other than Acquirer) in connection with or in response to any inquiry, offer or
proposal for or regarding any Alternative Transaction; (iii) participate in any
discussions or negotiations with any person (other than Acquirer) with respect
to any Alternative Transaction (other than to state that the Company is subject
to a "no-shop" provision which does not permit it to respond further); (iv)
otherwise cooperate with, facilitate or encourage any effort or attempt by any
person (other than Acquirer) to effect any Alternative Transaction; or (v)
execute, enter into or become bound by any letter of intent, memorandum of
understanding, contract, agreement, arrangement, commitment, undertaking or
understanding between the Company and any person (other than Acquirer) that is
related to, provides for or concerns any Alternative Transaction. The Company
shall promptly notify Acquirer orally and in writing of any inquiries or
proposals received by the Company or any of its directors, officers,
stockholders, employees or agents (or any attorneys, investment bankers or other
persons on its behalf) regarding any Alternative Transaction and shall identify
the person making the inquiry or proposal and the nature and terms of any
inquiry or proposal. Any violation of the restrictions set forth in this Section
5.7 by any director, officer, employee or agent of the Company or any attorney,
investment banker or other similar representative of the Company shall be deemed
a breach of this Section 5.7 by the Company. "Alternative Transaction" means any
commitment, agreement or transaction involving or providing for (a) the possible
disposition of all or any substantial portion of the business, assets or capital
stock of the Company, whether by way of merger, consolidation, sale of assets,
sale of stock, stock exchange, tender offer and/or any other form of business
combination, or (b) any initial public offering of capital stock or other
securities of the Company pursuant to a registration statement filed under the
Securities Act.
5.8 Access to Information. The Company shall allow Acquirer and its agents
access at reasonable times to the files, books, records, technology, contracts,
personnel and offices of the Company, including any and all information relating
to the Company's taxes, contracts, agreements, arrangements, commitments,
undertakings, leases, licenses, liabilities, financial condition and real,
personal and intangible property, subject to the terms of the nondisclosure
agreement between Acquirer and the Company (the "Nondisclosure Agreement"). The
Company shall direct its accountants to cooperate with Acquirer and Acquirer's
agents in making available all financial information reasonably requested by
Acquirer, and the Company shall ask its accountants to grant Acquirer the right
to examine all working papers pertaining to all financial statements prepared or
audited by such accountants.
5.9 Satisfaction of Conditions Precedent. The Company shall use all
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent set forth in Article 9, and the Company shall use all
commercially reasonable efforts to cause the Merger and the other transactions
contemplated by this Agreement to be consummated in accordance with the terms of
this Agreement.
5.10 Company Benefit Arrangements.
5.10.1 Upon Acquirer's request, the Company shall terminate (a) any
Company Benefit Arrangement and any employee leasing arrangement or professional
employee
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organization immediately prior to, but conditioned upon, the Effective Time and
(b) any and all group severance, separation, retention and salary continuation
plans, programs or arrangements (other than agreements entered into by certain
individuals to effect transactions contemplated by this Agreement) prior to, but
conditioned upon, the Closing.
5.10.2 Following the Effective Time, those Company employees who
continue as employees of Acquirer after the Closing (each, a "Continuing
Employee") will be entitled to participate in Acquirer's employee benefit plans
commensurate with his or her position with Acquirer in accordance with
Acquirer's standard policies in effect from time to time and on terms no less
favorable than those offered by Acquirer to employees of Acquirer in accordance
with the eligibility criteria thereof. To the extent permitted by Applicable
Law, each Continuing Employee shall receive full credit for years of service
with the Company prior to the Effective Time for purposes of determining
eligibility to participate and vesting under any applicable Acquirer employee
benefit plan; provided, however, that, except for the amount of vacation pay
accruable by any such Continuing Employee for periods from and after the
Effective Time, such service with the Company shall not be used in calculating
the amount of any such benefit. All pre-existing health condition limitations,
exclusions and eligibility waiting periods under any group health plans shall be
waived with respect to such Continuing Employees, except limitations or waiting
periods already in effect with respect to one or more Continuing Employees which
had not been satisfied as of the Effective Time under any welfare plan
maintained for such Continuing Employee immediately prior to the Effective Time.
To the extent permitted by Acquirer's welfare benefit carriers and with respect
to each welfare benefit plan of Acquirer in which a Continuing Employee is
entitled to participate, (a) the outstanding claims and expenses incurred by
such Continuing Employee under the corresponding welfare benefit plan of the
Company for the portion of the plan year preceding the Effective Time shall be
recognized and (b) such Continuing Employee shall be given credit for amounts
paid by him or her under the corresponding welfare benefit plan of the Company
for the portion of the plan year preceding the Effective Time for purposes of
applying deductibles, co-payments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of the
corresponding welfare benefit plan of Acquirer. Subject to compliance with the
requirements of Acquirer's 2001 Employee Stock Purchase Plan (the "ESPP"), the
Continuing Employees shall be permitted to participate in the ESPP commencing on
the first enrollment date following the Effective Time.
5.11 Information Statement. The Company shall deliver to Acquirer's legal
counsel a draft of an information statement, in the form requested and provided
by Acquirer (the "Information Statement"), on the Agreement Date and shall,
within two business days following the resolution of all comments thereon, send
to each Company Stockholder such Information Statement for the purpose of
considering and approving the Merger, this Agreement, the Company Ancillary
Agreements and the transactions contemplated hereby and thereby.
5.12 Approval of the Company Stockholders.
5.12.1 Promptly after the Agreement Date, the Company shall take all
action necessary in accordance with this Agreement, the Delaware Law, the
California Law, if applicable, and the Certificate of Incorporation and Bylaws
of the Company to obtain the written consent of the Company Stockholders for the
approval and adoption of this Agreement and the
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Company Ancillary Agreements and approval of the Merger and the other
transactions contemplated by this Agreement, including the approval of the
Restated Certificate (the "Company Stockholder Approval"). The commencement,
disclosure, announcement or submission to the Company of any Alternative
Transaction or Superior Offer (as defined below) shall not limit the Company's
obligation to call a meeting of the Company Stockholders or solicit the written
consent of the Company Stockholders to obtain the Company Stockholder Approval.
5.12.2 The Company's Board of Directors shall unanimously recommend
that the Company Stockholders vote in favor of and approve and adopt this
Agreement and the Company Ancillary Agreements and approve the Merger in
connection with obtaining the Company Stockholder Approval. The Information
Statement shall include a statement to the effect that the Board of Directors of
the Company has unanimously recommended that the Company Stockholders vote in
favor of and approve and adopt this Agreement and the Company Ancillary
Agreements and approve the Merger. Except as otherwise provided in Section
5.12.3, neither the Company's Board of Directors nor any committee thereof shall
withdraw, amend or modify, or propose or resolve to withdraw, amend or modify,
in a manner adverse to Acquirer, the recommendation of the Company's Board of
Directors that the Company Stockholders vote in favor of and approve and adopt
this Agreement and the Company Ancillary Agreements and approve the Merger.
5.12.3 Nothing herein shall prevent the Company's Board of Directors
from withdrawing, amending or modifying its recommendation in favor of the
Merger if (i) a Superior Offer is made to the Company and is not withdrawn, (ii)
the Company shall have provided written notice to Acquirer (a "Notice of
Superior Offer") advising Acquirer that the Company has received a Superior
Offer, specifying all of the material terms and conditions of such Superior
Offer and identifying the person making such Superior Offer, (iii) the Company's
Board of Directors concludes in good faith, after consultation with its outside
legal counsel, that in light of such Superior Offer the withdrawal, amendment or
modification of such recommendation is required in order for the Company's Board
of Directors to comply with its fiduciary obligations to the Company
Stockholders under Applicable Laws, and (iv) the Company shall not have violated
any of the restrictions set forth in Section 5.7. The Company shall provide
Acquirer with at least two business days prior notice of any meeting of the
Company's Board of Directors at which the Company's Board of Directors is
reasonably expected to consider any Alternative Transaction to determine whether
such Alternative Transaction is a Superior Offer. Nothing contained in this
Section 5.12.3 shall limit the Company's obligation to call a meeting of the
Company Stockholders or solicit the written consent of the Company Stockholders
to obtain the Company Stockholder Approval, regardless of whether the
recommendation of the Company's Board of Directors shall have been withdrawn,
amended or modified. "Superior Offer" means an unsolicited, bona fide written
offer made by a third party to consummate any of the following transactions: (i)
a merger or consolidation involving the Company pursuant to which the
stockholders of the Company immediately preceding such transaction hold less
than 50% of the equity interests in the surviving or resulting entity of such
transaction; or (ii) the acquisition by any person (including by way of a tender
offer or an exchange offer or a two-step transaction involving a tender offer
followed with reasonable promptness by a merger involving the Company), directly
or indirectly, of ownership of 100% of the then outstanding shares of Company
Capital Stock, on terms that
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the Company's Board of Directors determines, in its reasonable judgment (based
on the written advice of a financial advisor of national standing), to be more
favorable to the Company Stockholders than the terms of the Merger; provided,
however, that any such offer shall not be deemed to be a "Superior Offer" if any
financing required to consummate the transaction contemplated by such offer is
not committed or is not otherwise likely in the reasonable judgment of the
Company's Board of Directors (based on the advice of a financial advisor of
national standing) to be obtained by such third party on a timely basis.
5.12.4 The Company shall submit any payments or benefits which would
otherwise constitute parachute payments under Section 280G of the Code to
approval by such percentage of the Company's outstanding voting securities as is
required by the terms of Section 280G(b)(5)(B) of the Code to avoid such
parachute payment treatment. Any stockholder approval so obtained by the Company
shall have been obtained in a manner which satisfies all applicable requirements
of Section 280G(b)(5)(B) of the Code and the proposed Treasury Regulations
thereunder, including Q-7 of Section 1.280G-1 of such proposed regulations. In
the absence of such stockholder approval, those payments and benefits shall be
reduced to the maximum dollar amount which would not otherwise result in their
treatment as parachute payments under Section 280G of the Code.
5.13 Company Plan. Upon Acquirer's request, the Company shall make such
amendments to the Company Plan and the form option agreement and option exercise
agreement under the Company Plan as is requested by Acquirer; provided, however,
that any such amendments shall not have adversely affected the rights of any
holder of outstanding Company Options.
5.14 New Company Options. The Company shall grant Company Options (the "New
Company Options") to the employees of the Company listed in Schedule 5.14 of the
Company Disclosure Letter (the "New Optionees") in the amounts, having a per
share exercise price and with such vesting schedules and other terms as
specified on Schedule 5.14 of the Company Disclosure Letter. The New Company
Options shall be subject to, and effective immediately prior to, the Effective
Time.
5.15 Company Warrants and Preferred Rights. The Company shall timely
provide to holders of the Company Warrants and Preferred Rights, in accordance
with the terms thereof, all required notices of the Merger and the transactions
contemplated by this Agreement. The Company shall use its reasonable best
efforts to terminate effective as of the Closing each Company Warrant and each
Preferred Right which has not been exercised.
5.16 Termination of Investor Documents. The Company shall use its
reasonable best efforts to cause each of (a) the Amended and Restated Voting
Agreement dated January 18, 2001, as amended March 21, 2002, by and among the
Company and certain Company Stockholders (the "Existing Voting Agreement"), (b)
the Amended and Restated Investors' Rights Agreement dated January 18, 2001 by
and among the Company and certain Company Stockholders (the "Rights Agreement"),
(c) the Amended and Restated Right of First Refusal and Co-Sale Agreement dated
January 18, 2001 by and among the Company and certain Company Stockholders (the
"Refusal Agreement"), (d) the Restricted Common Stock Purchase Agreement dated
February 18, 2000 by and between the Company and Rakesh Loonkar (the
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"Loonkar Agreement"), (e) the Restricted Common Stock Purchase Agreement dated
February 18, 2000 by and between the Company and Barrett Eldridge II (the
"Eldridge Agreement"), and (f) the Restricted Common Stock Purchase Agreement
dated February 18, 2000 by and between the Company and Nir Zuk (the "Zuk
Agreement" and together with the Loonkar Agreement and the Eldridge Agreement,
the "Restricted Stock Agreements") to be terminated, effective as of the
Closing, in accordance with their respective terms, and the Company shall use
its reasonable best efforts to cause the parties to the Existing Voting
Agreement, the Rights Agreement, the Refusal Agreement and the Restricted Stock
Agreements to waive all of their respective rights thereunder, effective as of,
and contingent upon, the Closing. The Company shall use its reasonable best
efforts to cause the Company Series B Preferred Stock capital call requirement
set forth in the Series B Preferred Stock Purchase Agreement dated January 18,
2001 by and among the Company and the purchasers defined therein to be
terminated, effective as of the Closing.
5.17 Restated Certificate. Prior to the Closing, (a) the Board of Directors
of the Company and the Company Stockholders shall approve and adopt the Restated
Certificate, and (b) the Company shall file the Restated Certificate with the
Delaware Secretary of State.
5.18 Securities Laws. The Company shall use all commercially reasonable
efforts to assist Acquirer, to the extent necessary, to comply with the
securities and blue sky laws of all jurisdictions which are applicable in
connection with the Merger.
5.19 Reorganization. The Company shall cooperate with Acquirer and shall
take all commercially reasonable actions necessary to qualify the Merger as a
"reorganization" under Section 368(a) of the Code. Prior to the Closing, the
Company shall pay in full all of its debts that would prevent the Merger from
qualifying as a "reorganization" under Section 368(a) of the Code, including all
of its debts owing to any Company Stockholder.
5.20 Employees. The Company shall use all commercially reasonable efforts
to assist Acquirer in securing for employment by Acquirer after the Closing, (a)
at least 90% of the employees listed in Exhibit I (such employees listed in
Exhibit I, the "Specified Employees") and to cause such employees to execute and
deliver to Acquirer (i) an Offer Letter and (ii) a Confidentiality Agreement and
(b) those employees of the Company who are not Specified Employees but to whom
Acquirer has made an offer of employment (the "Other Employees") and to cause
such employees to execute and deliver to Acquirer (i) an Offer Letter and (ii) a
Confidentiality Agreement. The Company shall promptly notify Acquirer if the
Company becomes aware that any of the Specified Employees or Other Employees
intends to leave the employ of the Company. Effective immediately prior to the
Closing, the Company shall terminate the employment of its employees (the
"Employee Terminations"), except (i) the employees listed in Exhibit E, (ii) the
Specified Employees who accept Acquirer's offer of employment by executing and
delivering to Acquirer an Offer Letter and a Confidentiality Agreement, and
(iii) the Other Employees who accept Acquirer's offer of employment by executing
and delivering to Acquirer an Offer Letter and a Confidentiality Agreement, and
the Company shall pay (prior to the Closing) or accrue on the Closing TNW
Calculations all amounts related to such Employee Terminations, including any
severance payments (except for up to $50,000 of severance payments in the
aggregate), accrued vacation payments and other
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termination benefits. The Company shall use all commercially reasonable efforts
to assist Acquirer in securing an executed Waiver from each person listed in
Exhibit J.
5.21 Acquisition Bonus Pool. Prior to the Closing, the Company shall
implement a special acquisition bonus plan (the "Acquisition Bonus Plan") for
the benefit of the persons listed in Exhibit K (the "Acquisition Bonus
Recipients") in the aggregate amount listed in Exhibit K (such aggregate amount,
the "Acquisition Bonus Pool Amount"). The portion of the Acquisition Bonus Pool
Amount allocated to each Acquisition Bonus Recipient shall be in the dollar
amount specified for him or her in Exhibit K, and, with respect to each
Acquisition Bonus Recipient, 100% of his or her allocated bonus under the
Acquisition Bonus Plan will be paid to him or her by the Company immediately
prior to the Closing. All bonus payments made pursuant to this Section 5.21
shall be subject to the collection of all applicable federal and state income
and employment withholding taxes.
5.22 Investment Representation Letters. The Company shall use all
commercially reasonable best efforts to cause each Company Stockholder to
execute and deliver to Acquirer an Investment Representation Letter.
ARTICLE 6
ACQUIRER COVENANTS
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10, Acquirer covenants and agrees with the
Company as follows:
6.1 Advice of Changes. Acquirer shall promptly advise the Company in
writing of (a) any event occurring subsequent to the Agreement Date that would
render any representation or warranty of Acquirer or Merger Sub contained in
this Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate and (b) any breach of any covenant or obligation of
Acquirer or Merger Sub pursuant to this Agreement, any Acquirer Ancillary
Agreement or any Merger Sub Ancillary Agreement.
6.2 Regulatory Approvals. Acquirer shall promptly execute and file, or join
in the execution and filing of, any application, notification or other document
that may be necessary in order to obtain the authorization, approval or consent
of any Governmental Authority, whether federal, state, local or foreign, which
may be reasonably required in connection with the consummation of the Merger and
the other transactions contemplated by this Agreement, any Acquirer Ancillary
Agreement or any Merger Sub Ancillary Agreement. Acquirer shall use all
commercially reasonable efforts to obtain all such authorizations, approvals and
consents. Notwithstanding anything in this Agreement to the contrary, neither
Acquirer nor any of its affiliates shall be under any obligation to make
proposals, execute or carry out agreements or submit to orders providing for the
sale or other disposition or holding separate (through the establishment of a
trust or otherwise) of any assets or categories of assets of Acquirer, any of
its affiliates or the Company, or the holding separate of the shares of Company
Common Stock or imposing or seeking to impose any limitation on the ability of
Acquirer or any of its Subsidiaries or affiliates to conduct their business or
own such assets or to acquire, hold or exercise full rights of ownership of the
shares of Company Common Stock.
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6.3 Satisfaction of Conditions Precedent. Acquirer shall use all
commercially reasonable efforts to satisfy or cause to be satisfied all of the
conditions precedent that are set forth in Article 8, and Acquirer shall use all
commercially reasonable efforts to cause the Merger and the other transactions
contemplated by this Agreement to be consummated in accordance with the terms of
this Agreement.
6.4 Cash Bonus Awards. After the Closing, Acquirer shall implement a
special bonus plan (the "Cash Bonus Plan") for the persons and in the amounts
listed in Exhibit L (the "Cash Bonus Recipients") and shall pay all individual
bonuses under such Cash Bonus Plan promptly as they vest in accordance with the
following vesting schedule. Acquirer shall pay to each Cash Bonus Recipient: (a)
12 months after the Closing Date (the "One-Year Anniversary"), 50% of his or her
allocated bonus under the Cash Bonus Plan; provided, however, that such Cash
Bonus Recipient is employed by Acquirer, a Subsidiary of Acquirer or any other
affiliate of Acquirer on the One-Year Anniversary; and (b) 24 months after the
Closing Date (the "Two-Year Anniversary"), 50% of his or her allocated bonus
under the Cash Bonus Plan; provided, however, that such Cash Bonus Recipient is
employed by Acquirer, a Subsidiary of Acquirer or any other affiliate of
Acquirer on the Two-Year Anniversary. All bonus payments made pursuant to this
Section 6.4 shall be subject to the collection of all applicable federal and
state income and employment withholding taxes.
6.5 Securities Laws. Acquirer shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the Merger; provided, however, that Acquirer shall
not be required to qualify to do business or execute a general consent to
service of process in any jurisdiction.
6.6 Reorganization. Acquirer shall cooperate with the Company and shall
take all commercially reasonable actions as may be necessary to qualify the
Merger as a "reorganization" under Section 368(a) of the Code.
6.7 Information Statement. Acquirer shall cooperate with the Company in the
preparation of the Information Statement and shall provide information
pertaining to Acquirer necessary for inclusion therein.
6.8 Director and Officer Indemnification. During the three-year period
following the Closing, Acquirer shall indemnify the Company's directors and
officers as provided in the currently effective Certificate of Incorporation and
Bylaws of the Company. Acquirer's obligations as set forth in the preceding
sentence shall be subject to the following conditions: (a) prior to the Closing,
the Company shall have purchased and fully paid all premiums and fees for
director and officer insurance tail coverage (the "D&O Policy") covering, for a
period of three years after the Closing, claims made with respect any error,
misstatement, misleading misstatement, act, omission, neglect or breach of duty
committed, attempted or allegedly committed or attempted by any past or present
duly elected director or duly elected or appointed officer of the Company
occurring during the period prior to the Closing in an amount not less than the
amount set forth in Schedule 6.8 of the Company Disclosure Letter; and (b)
Acquirer shall have been named as an insured person under the D&O Policy with
sufficient rights to make claims thereunder.
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ARTICLE 7
CLOSING MATTERS
7.1 The Closing. Subject to termination of this Agreement as provided in
Article 10, the parties hereto shall cause the Merger to be consummated by
filing the Certificate of Merger with the Delaware Secretary of State in
accordance with the Delaware Law as soon as practicable on or after the Closing
Date. The closing of the Merger (the "Closing") shall take place at the offices
of Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California, 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
Articles 8 and 9, or at such other time, date and location as the parties hereto
agree in writing (the "Closing Date").
7.2 Exchange.
7.2.1 At the Effective Time, all outstanding shares of Company Stock
(other than Dissenting Shares for which appraisal rights or, if applicable,
dissenters' rights have been or shall be perfected in accordance with the
Delaware Law or, if applicable, the California Law), shall, by virtue of the
Merger and without further action, cease to exist, and all such shares shall be
converted into the right to receive from Acquirer the number of shares of
Acquirer Common Stock and the cash amount, if any, to which such holder is
entitled pursuant to Section 2.2.2, subject to the provisions of Section
2.2.2(c) (regarding the Cash Election), Section 2.2.3 (regarding rights of
holders of Dissenting Shares), Section 2.2.4 (regarding cancellation of
Company-owned stock), Section 2.2.5 (regarding the elimination of fractional
shares of Acquirer Common Stock), Section 2.2.6 (regarding the continuation of
vesting and repurchase rights), Section 2.3 (regarding adjustments for Capital
Changes) and Section 2.6 (regarding the withholding of the Escrow Fund).
7.2.2 Acquirer shall make available to EquiServe Trust Company, N.A.
(the "Exchange Agent") certificates representing shares of Acquirer Common Stock
and cash, if any, to be delivered in exchange for outstanding shares of Company
Stock. As soon as practicable after the Effective Time (and in any event no
later than seven business days after the Effective Time), the Surviving
Corporation shall cause to be mailed to each holder of record of a certificate
or certificates that immediately prior to the Effective Time represented
outstanding shares of Company Stock (the "Company Certificates") and which
shares were converted into the right to receive shares of Acquirer Common Stock
pursuant to Section 2.2.2 the following: (a) a letter of transmittal in the form
of Exhibit M; and (b) instructions for use in effecting the surrender of the
Company Certificates in exchange for certificates representing shares of
Acquirer Common Stock, cash consideration and cash in lieu of fractional shares.
Upon surrender of a Company Certificate for cancellation or upon delivery of an
affidavit of lost certificate and an indemnity in form and substance
satisfactory to Acquirer (the "Affidavit") to the Exchange Agent or to such
other agent or agents as may be appointed by Acquirer, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, Acquirer or its transfer agent shall promptly issue to
each tendering holder of a Company Certificate or an Affidavit (each, a
"Tendering Holder") (a) cash and certificates for the number of shares of
Acquirer Common Stock to which such Tendering Holder is entitled pursuant to
Section 2.2.2, subject to the provisions of Section 2.2.4 (regarding
cancellation of Company-owned stock), Section 2.2.5 (regarding the elimination
of fractional shares of Acquirer
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Common Stock), Section 2.2.6 (regarding the continuation of vesting and
repurchase rights) and Section 2.6 (regarding the withholding of the Escrow
Fund), and (b) cash in lieu of fractional shares of Acquirer Common Stock, if
any.
7.2.3 No dividends or distributions payable to holders of record of
shares of Acquirer Common Stock after the Effective Time shall be paid to the
holder of any unsurrendered Company Certificate unless and until the holder of
such unsurrendered Company Certificate surrenders such Company Certificate or an
Affidavit to the Exchange Agent as provided above. Subject to the effect, if
any, of applicable escheat and other laws, following surrender of any Company
Certificate or Affidavit, there shall be delivered to the person entitled
thereto, without interest, the amount of any dividends and distributions
theretofore paid with respect to shares of Acquirer Common Stock so withheld as
of any date subsequent to the Effective Time and prior to such date of delivery.
7.2.4 After the Effective Time, there shall be no further registration
of transfers on the stock transfer books of the Company or its transfer agent of
any shares of the Company's capital stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any Company
Certificates or Affidavits are presented for any reason, they shall be cancelled
and exchanged as provided in this Section 7.2.
7.2.5 Until Company Certificates or an Affidavit representing shares
of Company Stock that are outstanding immediately prior to the Effective Time
are surrendered pursuant to Section 7.2.2, such Company Certificates shall be
deemed, for all purposes, to evidence ownership of the number of shares of
Acquirer Common Stock and the cash amount, if any, into which such shares of
Company Stock shall have been converted pursuant to Section 2.2.2, subject to
the provisions of Section 2.2.4 (regarding cancellation of Company-owned stock),
Section 2.2.5 (regarding the elimination of fractional shares of Acquirer Common
Stock), Section 2.2.6 (regarding the continuation of vesting and repurchase
rights) and Section 2.6 (regarding the withholding of the Escrow Fund).
7.3 Dissenting Shares. If, in connection with the Merger, holders of
Company Stock are entitled to appraisal rights pursuant to the Delaware Law or,
if applicable, dissenters' rights pursuant to Section 1300 et seq. of the
California Law, any shares of Company Stock held by Company Stockholders who
exercise and perfect such appraisal rights or, if applicable, dissenters' rights
("Dissenting Shares") shall not be converted into a right to receive shares of
Acquirer Common Stock and cash as provided in Section 2.2.2, but shall be
converted into the right to receive such consideration as may be determined to
be due with respect to such Dissenting Shares pursuant to the Delaware Law or,
if applicable, the California Law. The Company shall give Acquirer prompt notice
(and in no event more than two business days) of any demand received by the
Company for appraisal of Company Stock or notice of exercise of a Company
Stockholder's dissenters' rights, and Acquirer shall have the right to control
all negotiations and proceedings with respect to any such demand. The Company
agrees that, except with Acquirer's prior written consent, it shall not
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for appraisal or exercise of dissenters' rights. In the event that
any Company Stockholder fails to make an effective demand for payment or fails
to perfect his appraisal rights or dissenters' rights or otherwise loses his
status as a holder of Dissenting Shares, Acquirer shall, as of the later of the
Effective Time or ten business
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days from the occurrence of such event, issue and deliver, upon surrender by
such Company Stockholder of its Company Certificate or Certificates, the cash
amount, if any, without interest thereon, and the shares of Acquirer Common
Stock which such Company Stockholder would have been entitled under Section
2.2.2, subject to the provisions of Section 2.2.4 (regarding cancellation of
Company-owned stock), Section 2.2.5 (regarding the elimination of fractional
shares of Acquirer Common Stock), Section 2.2.6 (regarding the continuation of
vesting and repurchase rights) and Section 2.6 (regarding the withholding of the
Escrow Fund).
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The Company's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by the Company, but only in a writing signed
by the Company):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Acquirer and Merger Sub set forth in this Agreement (a) that are
qualified as to materiality shall be true and correct and (b) that are not
qualified as to materiality shall be true and correct in all material respects,
in each case on and as of the Closing with the same force and effect as if they
had been made on the Closing Date (except for any such representations or
warranties that, by their terms, speak only as of a specific date or dates, in
which case such representations and warranties that are qualified as to
materiality shall be true and correct, and such representations and warranties
that are not qualified as to materiality shall be true and correct in all
material respects, on and as of such specified date or dates), and at the
Closing the Company shall have received a certificate to such effect executed by
an officer of Acquirer.
8.2 Covenants. Acquirer shall have performed and complied in all material
respects with all of its covenants contained in this Agreement on or before the
Closing (to the extent that such covenants require performance by Acquirer on or
before the Closing), and at the Closing the Company shall have received a
certificate to such effect executed by an officer of Acquirer.
8.3 No Material Adverse Change. There shall not have been any Material
Adverse Change in Acquirer and at the Closing the Company shall have received a
certificate to such effect executed by an officer of Acquirer.
8.4 Compliance with Law; No Legal Restraints; No Litigation. There shall
not be issued, enacted or adopted, or threatened in writing by any Governmental
Authority, any order, decree, temporary, preliminary or permanent injunction,
legislative enactment, statute, regulation, action or proceeding, or any
judgment or ruling by any Governmental Authority that prohibits or renders
illegal or imposes limitations on the Merger or any other material transaction
contemplated by this Agreement, any Acquirer Ancillary Agreement or any Merger
Sub Ancillary Agreement. No litigation or proceeding shall be threatened or
pending for the purpose or with the probable effect of enjoining or preventing
the consummation of the Merger or any of the other material transactions
contemplated by this Agreement.
8.5 Government Consents. There shall have been obtained at or prior to the
Closing Date such permits or authorizations, and there shall have been taken all
such other actions by any
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governmental or regulatory authority having jurisdiction over the parties and
the actions herein proposed to be taken, as may be required to lawfully
consummate the Merger, including requirements under applicable federal and state
securities laws.
8.6 Opinion of Acquirer's Legal Counsel. The Company shall have received
from Fenwick & West LLP, legal counsel to Acquirer, an opinion opining to the
matters set forth in Exhibit N.
8.7 Registration Rights Agreement. Acquirer shall have executed and
delivered to the Company Stockholders the Registration Rights Agreement, and the
Registration Rights Agreement shall be in full force and effect as of the
Effective Time.
8.8 Officer's Certificate. Acquirer shall have delivered to the Company a
certificate dated as of the Closing Date, executed by an officer of Acquirer and
attaching true and correct copies of (a) the Certificate of Incorporation and
Bylaws of Acquirer as in full force and effect on the Closing Date and (b)
resolutions of the Board of Directors of Acquirer, as amended to date, approving
this Agreement, the Acquirer Ancillary Agreements and the transactions
contemplated hereby and thereby. Merger Sub shall have delivered to the Company
a certificate dated as of the Closing Date, executed by an officer of Merger Sub
and attaching true and correct copies of (a) the Certificate of Incorporation
and Bylaws of Merger Sub as in full force and effect on the Closing Date, (b)
resolutions of the Board of Directors of Merger Sub, as amended to date,
approving and declaring advisable this Agreement, the Merger Sub Ancillary
Agreements and the transactions contemplated hereby and thereby, and (c)
resolutions of the sole stockholder of Merger Sub, as amended to date, approving
this Agreement, the Merger Sub Ancillary Agreements and the transactions
contemplated hereby and thereby.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ACQUIRER AND MERGER SUB
Acquirer's and Merger Sub's obligations hereunder are subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Acquirer and Merger Sub,
but only in a writing signed by Acquirer):
9.1 Accuracy of Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (a) that are qualified as
to materiality shall be true and correct and (b) that are not qualified as to
materiality shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been made on
the Closing Date (except for any such representations or warranties that, by
their terms, speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, on and as
of such specified date or dates), and at the Closing Acquirer shall have
received a certificate (the "Closing Certificate") to such effect executed by
the Company's Chief Executive Officer. The Closing Certificate shall (i) set
forth the total number of shares of Company Common Stock and Company Preferred
Stock that are issued and outstanding as of the Closing Date and (ii) attach
Schedule 3.4.1(a) of the Company Disclosure Letter, Schedule 3.4.2(a) of the
Company Disclosure Letter, Schedule 3.4.2(b) of the Company Disclosure Letter,
Schedule 3.4.2(c) of the
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Company Disclosure Letter and Schedule 3.4.2(d) of the Company Disclosure
Letter, each updated as of the Closing Date.
9.2 Covenants. The Company shall have performed and complied in all
material respects with all of its covenants contained in this Agreement at or
before the Closing (to the extent that such covenants require performance by the
Company at or before the Closing), and at the Closing Acquirer shall have
received a certificate to such effect executed by the Company's Chief Executive
Officer.
9.3 No Material Adverse Change. There shall not have been any Material
Adverse Change in the Company and at the Closing Acquirer shall have received a
certificate to such effect executed by the Company's President or Chief
Executive Officer.
9.4 Compliance with Law; No Legal Restraints; No Litigation. There shall
not be issued, enacted or adopted, or threatened in writing by any Governmental
Authority, any order, decree, temporary, preliminary or permanent injunction,
legislative enactment, statute, regulation, action, proceeding, or any judgment
or ruling by any Governmental Authority that prohibits or renders illegal or
imposes limitations on: (a) the Merger or any other material transaction
contemplated by this Agreement or any Company Ancillary Agreement; or (b)
Acquirer's right (or the right of any Subsidiary of Acquirer) to own, retain,
use or operate any of its products, services, properties or assets (including
equity, properties or assets of the Company) on or after consummation of the
Merger or seeking a disposition or divestiture of any such properties or assets.
No litigation or proceeding shall be threatened or pending for the purpose or
with the probable effect of enjoining or preventing the consummation of any of
the transactions contemplated by this Agreement.
9.5 Government Consents. There shall have been obtained at or prior to the
Closing Date such permits or authorizations, and there shall have been taken all
such other actions by any governmental or regulatory authority having
jurisdiction over the parties and the actions herein proposed to be taken, as
may be required to consummate the Merger, including requirements under
applicable federal and state securities laws.
9.6 Opinion of Company's Legal Counsel. Acquirer shall have received from
Brobeck, Phleger & Harrison LLP, legal counsel to the Company, an opinion
opining to the matters set forth in Exhibit O.
9.7 Officer's Certificate. The Company shall have delivered to Acquirer a
certificate dated as of the Closing Date, executed by an officer of the Company
and attaching true and correct copies of (a) the Certificate of Incorporation
and Bylaws of the Company as in full force and effect on the Closing Date, (b)
resolutions of the Board of Directors of the Company, as amended to date,
approving and declaring advisable this Agreement, the Company Ancillary
Agreements and the transactions contemplated hereby and thereby, and (c)
resolutions of Company Stockholders, as amended to date, approving this
Agreement, the Company Ancillary Agreements and the transactions contemplated
hereby and thereby.
9.8 Company Stockholder Approvals. This Agreement, the Company Ancillary
Agreements, the Restated Certificate and the Merger shall have been duly and
validly approved
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and adopted, as required by Applicable Laws and the Company's Certificate of
Incorporation and Bylaws, each as currently in effect, by the valid and
affirmative vote or written consent of at least (a) a majority of the
outstanding shares of Company Common Stock and (b) 85% of the outstanding shares
of Company Preferred Stock, each voting as a separate class.
9.9 Dissenting Shares. The number of Dissenting Shares which have not been
withdrawn or terminated prior to the Closing shall not exceed 4% of the total
number of outstanding shares of Company Stock.
9.10 Consents. Acquirer shall have received from the Company duly executed
copies of all third-party consents, approvals, assignments, notices, waivers,
authorizations or other certificates (including those set forth in Schedule 3.5
of the Company Disclosure Letter) requested by Acquirer to be provided to it, in
form and substance satisfactory to Acquirer.
9.11 Information Statement. The Information Statement shall have been
mailed or otherwise delivered to all Company Stockholders who were entitled to
vote on the proposal to approve and adopt this Agreement, the Company Ancillary
Agreements and the Restated Certificate and approve the Merger and the other
transactions contemplated by this Agreement.
9.12 Investment Representation Letters; Exemptions Available. Acquirer (a)
shall have received an executed counterpart of the Investment Representation
Letter completed and executed by each Company Stockholder other than Dissenting
Shareholders and each of the Investment Representation Letters executed by the
Company Stockholders shall be in full force and effect and (b) must be
reasonably satisfied that (i) there are not more than 35 Company Stockholders
who are not "accredited investors" within the meaning of Regulation D
promulgated under the Securities Act and (ii) that the issuance of shares of
Acquirer Common Stock in the Merger is exempt from registration under the
Securities Act pursuant to Regulation D thereof and from the qualification
requirements of applicable state securities laws.
9.13 Employment Matters. Each of the persons identified on Exhibit E
attached hereto shall be employed by the Company immediately prior to the
Effective Time and shall continue as employees of Acquirer after the Effective
Time in accordance with the Offer Letters. At least 90% of the Specified
Employees shall be employed by the Company immediately prior to the Effective
Time and shall have executed and delivered to Acquirer (a) an Offer Letter to
continue as an employee of Acquirer after the Effective Time and (b) a
Confidentiality Agreement. Each of the persons listed in Exhibit J shall have
executed and delivered to Acquirer a Waiver. The Employee Terminations,
effective by no later than immediately prior to the Closing, shall have
occurred.
9.14 New Company Options. The Company shall have granted all of the New
Company Options to the New Optionees in accordance with Section 5.14.
9.15 Company Warrants and Preferred Rights. All Company Warrants and
Preferred Rights shall have been exercised and converted into shares of Company
Common Stock or Company Preferred Stock, as applicable, or shall have been
terminated without further obligation of the Company, Acquirer or the Surviving
Corporation.
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9.16 Closing TNW Calculations. The Company shall have delivered to Acquirer
the Closing TNW Calculations and the accompanying TNW Certificate, and the
Closing Acceptance shall have occurred.
9.17 Delivery of Company Documents. The Company shall have delivered to
Acquirer: (a) the minute books containing records of all proceedings, consents,
actions and meetings of directors, committees of the Board of Directors and
stockholders of the Company; and (b) the stock ledger, option ledger, warrant
ledger and journal reflecting all stock issuances and transfers and all grants
of options and warrants relating to the Company.
9.18 Resignations of Directors and Officers. The persons holding the
positions of a director or officer (or comparable position) of the Company, in
office immediately prior to the Closing, shall have resigned from such positions
in writing conditioned and effective as of the Closing.
9.19 Restated Certificate. The Restated Certificate shall have been filed
with and accepted by the Delaware Secretary of State.
9.20 Termination of Investor Documents. Each of the Stockholders'
Agreement, the Rights Agreement, the Refusal Agreement and the Restricted Stock
Agreements shall have been terminated, effective as of the Closing, in
accordance with their respective terms, and the parties to the Stockholders'
Agreement, the Rights Agreement, the Refusal Agreement and the Restricted Stock
Agreements shall have waived all of their respective rights thereunder,
effective as of, and contingent upon, the Closing.
9.21 Audits. Audits of the Company's financial statements for the December
31, 2000 and December 31, 2001 fiscal years (the "Historical Audits") and for
the six months ended June 30, 2002 (the "New Audits"), together with SAS 71
review of the Company's financial statements for all periods subsequent thereto
through the Closing Date (the "SAS 71 Review"), shall have been completed, and
copies of the Historical Audits, the New Audits and the SAS 71 Review shall have
been delivered to Acquirer. In addition, the Company shall have delivered to
Acquirer signed copies of the audit reports, prepared by Arthur Andersen LLP,
for the Company's December 31, 2000 and December 31, 2001 fiscal years.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Termination by Mutual Consent. This Agreement may be terminated at any
time prior to the Effective Time by the mutual written consent of Acquirer and
the Company.
10.2 Unilateral Termination.
10.2.1 Either Acquirer or the Company, by giving written notice to the
other, may terminate this Agreement if a court of competent jurisdiction or
other Governmental Authority shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger.
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10.2.2 Either Acquirer or the Company, by giving written notice to the
other, may terminate this Agreement if the Merger shall not have been
consummated on the Termination Date; provided, however, that the right to
terminate this Agreement pursuant to this Section 10.2.2 shall not be available
to any party whose failure to perform in any material respect any of its
obligations or covenants under this Agreement results in the failure of any
condition set forth in Article 8 or Article 9 or if the failure of such
condition results from facts or circumstances that constitute a material breach
of a representation or warranty or covenant made under this Agreement by such
party.
10.2.3 Either Acquirer or the Company may terminate this Agreement at
any time prior to the Effective Time if the other has committed a material
breach of (a) any of its representations and warranties in this Agreement such
that the conditions in Article 8 and Article 9, as applicable, would not be
satisfied, or (b) any of its covenants in this Agreement such that the
conditions in Article 8 and Article 9, as applicable, would not be satisfied,
and has not cured such material breach within ten days after the party seeking
to terminate this Agreement has given the other party written notice of the
material breach and its intention to terminate this Agreement pursuant to this
Section 10.2.3.
10.2.4 Either Acquirer or the Company may terminate this Agreement at
any time prior to the Effective Time if the average of the closing prices per
share of Acquirer Common Stock (in U.S. dollars) as quoted on the Nasdaq
National Market (or such other exchange or quotation system on which shares of
Acquirer Common Stock are then traded or quoted) and reported on the official
website of the Nasdaq Stock Market (www.nasdaq.com) over any ten consecutive
trading days commencing on or after the Agreement Date is equal to or less than
$4.00.
10.2.5 No Liability for Termination. Termination of this Agreement by
a party (the "Terminating Party") in accordance with the provisions of this
Article 10 shall not give rise to any obligation or liability on the part of the
Terminating Party on account of such termination; provided, however, that
nothing herein shall relieve a party from liability for a willful breach of this
Agreement. The provisions of this Article 10 and Article 12 shall survive any
termination of this Agreement.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
AND REMEDIES, CONTINUING COVENANTS
11.1 Survival. All representations and warranties of the Company contained
in this Agreement and the other agreements and certificates required to be
delivered by the Company shall remain operative and in full force and effect,
regardless of any investigation or disclosure made by or on behalf of any of the
parties to this Agreement, until that date which is the earlier of (a) the
termination of this Agreement in accordance with Article 10 and (b) the one-year
anniversary of the Effective Time; provided, however, that (i) the
representations and warranties of the Company made in Section 3.13 (Intellectual
Property) shall remain operative and in full force and effect, regardless of any
investigation or disclosure made by or on behalf of any of the parties to this
Agreement, until the three-year anniversary of the Effective Time and (ii) the
representations and warranties of the Company referred to in Section 2.2.7(a)
(Closing TNW
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Calculations) and contained in Sections 3.4 (Capitalization), 3.7 (Taxes), 3.8
(Company Financial Statements) and the representations and warranties of the
Company Stockholders contained in their Investment Representation Letters shall
remain operative and in full force and effect, regardless of any investigation
or disclosure made by or on behalf of any of the parties to this Agreement,
until the expiration of the applicable statute of limitations for the claim
which seeks recovery of such Damages (the applicable expiration date of such
applicable representation or warranty, the "Release Date"). All representations
and warranties of Acquirer and Merger Sub contained in this Agreement and the
other agreements and certificates required to be delivered by Acquirer shall
remain operative and in full force and effect, regardless of any investigation
or disclosure made by or on behalf of any of the parties to this Agreement,
until that date which is the earlier of (a) the termination of this Agreement in
accordance with Article 10 and (b) the Closing. All covenants of the parties
shall survive according to their respective terms.
11.2 Agreement to Indemnify.
11.2.1 Each Company Stockholder shall severally, and not jointly, but
only to the extent of each Company Stockholder's Pro Rata Share, indemnify and
hold harmless Acquirer and the Surviving Corporation and their respective
officers, directors, agents, representatives, stockholders and employees, and
each person, if any, who controls or may control Acquirer or the Surviving
Corporation within the meaning of the Securities Act or the Exchange Act (each
hereinafter referred to individually as an "Acquirer Indemnified Person" and
collectively as "Acquirer Indemnified Persons") from and against any and all
claims, demands, suits, actions, causes of actions, losses, reductions in value,
costs, damages, liabilities and expenses, including reasonable attorneys' fees,
other professionals' and experts' fees and court or arbitration costs
(hereinafter collectively referred to as "Damages"), directly or indirectly
incurred, paid or accrued in connection with, resulting from or arising out of:
(i) any inaccuracy, misrepresentation, breach of, or default in, any of the
representations, warranties or covenants given or made by the Company in this
Agreement, the Company Disclosure Letter, any Company Ancillary Agreement or any
certificate delivered by or on behalf of the Company or an officer of the
Company pursuant hereto; (ii) any inaccuracy, misrepresentation or untruth in
any representation or warranty of any Company Stockholder contained in such
Company Stockholder's Investment Representation Letter; provided, however, that,
in the case of any such inaccuracy, misrepresentation or untruth, the
indemnifying person shall be only the Company Stockholder whose Investment
Representation Letter contained the inaccuracy, misrepresentation or untruth;
(iii) any Unpaid Transaction Expenses to the extent that such Unpaid Transaction
Expenses were not included in the Closing TNW Calculations; (iv) any amounts
paid with respect to Dissenting Shares to the extent that such amounts exceed
the value of the shares of Acquirer Common Stock (valued at the Acquirer Average
Price Per Share) and cash amount, if any, that the holders of such Dissenting
Shares would have received in the Merger pursuant to Section 2.2.2 (such excess
amounts, the "Excess Dissenters' Amounts"); and (v) any increases to the Closing
Reductions as finally determined in accordance with Section 2.2.7 (such
increases, the "TNW Adjustments").
11.2.2 Any claim made by an Acquirer Indemnified Person under this
Section 11.2 must be raised in a writing delivered to the Representative by no
later than the
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applicable Release Date and, if raised by such date, such claim shall survive
the Release Date until final resolution thereof.
11.3 Limitations on Indemnification.
11.3.1 Each Company Stockholder shall severally, and not jointly, but
only to the extent of each Company Stockholder's Pro Rata Share, indemnify and
hold harmless the Acquirer Indemnified Persons. Except for fraud, willful
misrepresentation or willful misconduct or a claim based upon a breach of the
representations and warranties of the Company referred to in Section 2.2.7(a)
(Closing TNW Calculations) and contained in Section 3.4 (Capitalization),
Section 3.7 (Taxes) or Section 3.8 (Company Financial Statements) or a claim
related to title to Company securities as represented in a Company Stockholder's
Investment Representation Letter (for which the particular Company Stockholder
will be the indemnifying person for such claim), and subject to Section 11.10,
no Company Stockholder shall have any liability to an Acquirer Indemnified
Person under this Agreement or its Investment Representation Letter except to
the extent of such Company Stockholder's Pro Rata Share of the Escrow Shares and
any other assets deposited in escrow pursuant to the terms of Section 2.6 and
Article 11. Notwithstanding the foregoing sentence, the aggregate liability of
each Company Stockholder pursuant to Section 11.2 for a claim based upon a
breach of the representations and warranties contained in Section 3.13
(Intellectual Property) shall be limited to such Company Stockholder's Pro Rata
Share of the Escrow Shares and any other assets deposited in escrow pursuant to
the terms of Section 2.6 and Article 11 and such Company Stockholder's Pro Rata
Share of the IP Post-Release Claims in accordance with Section 11.10. The
aggregate liability of each Company Stockholder pursuant to Section 11.2 and
such Company Stockholder's Investment Representation Letter for a claim based
upon a breach of Section 2.2.7(a) (Closing TNW Calculations), Section 3.4
(Capitalization), Section 3.7 (Taxes) or Section 3.8 (Company Financial
Statements) or a claim related to title to Company securities (as represented in
such Company Stockholder's Investment Representation Letter) shall be limited to
the value of the shares of Acquirer Common Stock and cash amount, if any,
received by such Company Stockholder in the Merger. The value of each Escrow
Share shall, for such purposes of satisfying claims for Damages, be deemed to
equal the Acquirer Average Price Per Share, regardless of its actual fair market
value as of the time that a claim for indemnification may be made against such
share. In the event of a Capital Change after the Effective Time, the Acquirer
Average Price Per Share will, for purposes of this Section 11.3.2, be equitably
adjusted.
11.3.2 The indemnification provided for in Section 11.2 shall not
apply unless and until the aggregate Damages for which one or more Acquirer
Indemnified Persons seeks or has sought indemnification hereunder exceeds a
cumulative aggregate of $250,000 (the "Basket"), in which event the Company
Stockholders shall, subject to the other limitations herein, be liable to
indemnify the Acquirer Indemnified Persons for all Damages; provided, however,
that the Basket shall not apply to (a) any indemnification claim for fraud,
willful misrepresentation or willful misconduct on the part of the Company or a
Company Stockholder, (b) any inaccuracy, misrepresentation or untruth in any
representation or warranty of any Company Stockholder contained such Company
Stockholder's Investment Representation Letter, (c) any Unpaid Transaction
Expenses, (d) any claim based upon a breach of Section 3.8 (Company Financial
Statements), (e) any Excess Dissenters' Amounts, or (f) any TNW Adjustments.
Notwithstanding the foregoing, if Damages for which one or more Acquirer
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Indemnified Persons seeks or has sought indemnification hereunder prior to the
Escrow Release Date do not exceed the Basket, but such Damages, together with
Damages directly or indirectly incurred, paid or accrued in connection with,
resulting from or arising out of the IP Post-Release Claims, exceed the Basket,
then the Acquirer Indemnified Persons shall, subject to the applicable
limitations set forth in Sections 11.3.1 and 11.10, be entitled to recover from
the Company Stockholders, according to each Company Stockholder's Pro Rata
Share, all such Damages directly or indirectly incurred, paid or accrued in
connection with, resulting from or arising out of any of the items set forth in
Section 11.2.1; provided, however, that, with respect to clauses (i) and (ii) of
Section 11.2.1, the Acquirer Indemnified Persons shall only be entitled to
recover from the Company Stockholders, according to each Company Stockholder's
Pro Rata Share, Damages directly or indirectly incurred, paid or accrued in
connection with, resulting from or arising out of any inaccuracy,
misrepresentation, breach of, or default in, any of the representations,
warranties or covenants that remain operative and in full force and effect in
accordance with Section 11.1 as of the date that all Damages directly or
indirectly incurred, paid or accrued in connection with, resulting from or
arising out of any of the items set forth in Section 11.2.1 exceed the Basket.
11.4 Appointment of Representative.
11.4.1 David Spreng shall act as representative (the "Representative")
of the Company Stockholders and as the attorney-in-fact and agent for and on
behalf of each Company Stockholder with respect to claims for indemnification
under this Article 11 and the matters set forth in Section 2.2.7 and the taking
by the Representative of any and all actions and the making of any decisions
required or permitted to be taken by the Representative under this Agreement,
including the exercise of the power to: (a) authorize the release or delivery to
Acquirer of the Escrow Fund in satisfaction of indemnification claims by
Acquirer or any other Acquirer Indemnified Person pursuant to this Article 11;
(b) agree to, negotiate, enter into settlements and compromises of, demand
arbitration of, and comply with orders of courts and awards of arbitrators with
respect to, any claim for indemnification under this Article 11 or with respect
to the matters set forth in Section 2.2.7; (c) arbitrate, resolve, settle or
compromise any claim for indemnification made pursuant to this Article 11; and
(d) take all actions necessary in the judgment of the Representative for the
accomplishment of the foregoing. The Representative shall have authority and
power to act on behalf of each Company Stockholder with respect to the
disposition, settlement or other handling of all claims under this Article 11
and all rights or obligations arising under this Article 11. The Company
Stockholders shall be bound by all actions taken and documents executed by the
Representative in connection with this Article 11 and Section 2.2.7, and
Acquirer shall be entitled to rely on any action or decision of the
Representative. In performing the functions specified in this Agreement, the
Representative shall not be liable to any Company Stockholder in the absence of
gross negligence or willful misconduct on the part of the Representative. Each
Company Stockholder shall severally, and not jointly, pro rata in proportion to
each Company Stockholder's Pro Rata Share, indemnify and hold harmless the
Representative from and against any loss, liability or expense incurred without
gross negligence or willful misconduct on the part of the Representative and
arising out of or in connection with the acceptance or administration of his
duties hereunder. Any out-of-pocket costs and expenses reasonably incurred by
the Representative in connection with actions taken by the Representative
pursuant to the terms of this Article 11 (including the hiring of legal counsel
and the incurring of legal fees and costs) shall be paid directly by the Company
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Stockholders to the Representative based on each Company Stockholder's Pro Rata
Share; no such amounts shall be paid from the Escrow Fund.
11.4.2 At any time, former Company Stockholders holding at least a
majority of the Escrow Shares shall have the power to appoint a new
Representative by written consent; provided, however, that any such appointment
shall not be effective (a) unless a copy of the written consent appointing such
new Representative is signed by former Company Stockholders holding at least a
majority of the Escrow Shares and delivered to Acquirer and (b) until the later
of the date specified in such written consent or the date such written consent
is received by Acquirer.
11.5 Notice of Claim. As used herein, the term "Claim" means a claim for
indemnification of Acquirer or any other Acquirer Indemnified Person for Damages
under this Article 11. Subject to the following sentence, Acquirer shall give
notice of any Claim under this Agreement of which it is aware, whether for its
own Damages or for Damages incurred by any other Acquirer Indemnified Person,
and Acquirer shall give written notice of a Claim executed by an officer of
Acquirer (a "Notice of Claim") to the Representative promptly after Acquirer
becomes aware of the existence of any potential Claim by an Acquirer Indemnified
Person for indemnification from the Company Stockholders under this Article 11,
but in any event before the Release Date, arising from or relating to:
(a) Any item specified in Section 11.2; or
(b) the assertion, whether orally or in writing, against Acquirer or
any other Acquirer Indemnified Person of a claim, demand, suit, action,
arbitration, investigation, inquiry or proceeding brought by a third party
against Acquirer or such other Acquirer Indemnified Person (in each such case, a
"Third-Party Claim") that is based on, arises out of or relates to any item
specified in Section 11.2.
Until the Release Date, no delay on the part of Acquirer in giving the
Representative a Notice of Claim shall relieve the Representative or any Company
Stockholder from any of its obligations under this Article 11 unless (and then
only to the extent that) the Representative or the Company Stockholders are
materially prejudiced thereby.
11.6 Defense of Third-Party Claims.
11.6.1 Acquirer shall defend any Third-Party Claim, and the costs and
expenses incurred by Acquirer in connection with such defense (including
reasonable attorneys' fees, other professionals' and experts' fees and court or
arbitration costs) shall be included in the Damages for which Acquirer may seek
indemnification pursuant to a Claim made by any Acquirer Indemnified Person
hereunder.
11.6.2 The Representative shall have the right to receive copies of
all pleadings, notices and communications with respect to the Third-Party Claim
to the extent that receipt of such documents by the Representative does not
affect any privilege relating to the Acquirer Indemnified Person and may
participate in settlement negotiations with respect to the Third-Party Claim. No
Acquirer Indemnified Person shall enter into any settlement of a Third-Party
Claim without the prior written consent of the Representative (which consent
shall
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not be unreasonably withheld); provided, however, that if the Representative
shall have consented in writing to any such settlement, then the Representative
shall have been deemed to accept the related Claim by any Acquirer Indemnified
Person for indemnification under Section 11.2 for the amount of such settlement;
and the Company Stockholders shall remain responsible to indemnify the Acquirer
Indemnified Persons for all Damages they may incur arising out of, resulting
from or caused by the Third-Party Claim to the fullest extent provided in this
Article 11.
11.7 Contents of Notice of Claim. Each Notice of Claim by Acquirer given
pursuant to Section 11.5 shall contain the following information:
(a) that Acquirer or another Acquirer Indemnified Person has incurred,
paid or properly accrued (in accordance with GAAP) or, in good faith, believes
it shall have to incur, pay or accrue (in accordance with GAAP), Damages in an
aggregate stated amount arising from such Claim (which amount may be the amount
of damages claimed by a third party in an action brought against any Acquirer
Indemnified Person based on alleged facts, which if true, would give rise to
liability for Damages to such Acquirer Indemnified Person under this Article
11); and
(b) a brief description, in reasonable detail (to the extent
reasonably available to Acquirer), of the facts, circumstances or events giving
rise to the alleged Damages based on Acquirer's good faith belief thereof,
including the identity and address of any third-party claimant (to the extent
reasonably available to Acquirer) and copies of any formal demand or complaint,
the amount of Damages, the date each such item was incurred, paid or properly
accrued, or the basis for such anticipated liability, and the specific nature of
the breach to which such item is related.
11.8 Resolution of Notice of Claim. Each Notice of Claim given by Acquirer
shall be resolved as follows:
(a) Uncontested Claims. If, within 30 business days after a Notice of
Claim is received by the Representative, the Representative does not contest
such Notice of Claim in writing to Acquirer as provided in Section 11.8(b), the
Representative shall be conclusively deemed to have consented, on behalf of all
Company Stockholders, to the recovery by the Acquirer Indemnified Person of the
full amount of Damages specified in the Notice of Claim in accordance with this
Article 11, including the forfeiture of the Escrow Fund, and, without further
notice, to have stipulated to the entry of a final judgment for damages against
the Company Stockholders for such amount in any court having jurisdiction over
the matter where venue is proper.
(b) Contested Claims. If the Representative gives Acquirer written
notice contesting all or any portion of a Notice of Claim (a "Contested Claim")
within the 30 business day period specified in Section 11.8(a), then such
Contested Claim shall be resolved by either (i) a written settlement agreement
executed by Acquirer and the Representative or (ii) in the absence of such a
written settlement agreement, by binding arbitration between Acquirer and the
Representative in accordance with the terms and provisions of Section 11.8(c).
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(c) Arbitration of Contested Claims. Any Contested Claim shall be
submitted to mandatory, final and binding arbitration before J.A.M.S./ENDISPUTE
or its successor ("J.A.M.S.") pursuant to the United States Arbitration Act, 9
U.S.C., Section 1 et seq., and that any such arbitration shall be conducted in
Santa Clara County, California. If J.A.M.S. ceases to provide arbitration
service, then the term "J.A.M.S." shall thereafter mean and refer to the
American Arbitration Association ("AAA"). Either Acquirer or the Representative
may commence the arbitration process called for by this Agreement by filing a
written demand for arbitration with J.A.M.S. and giving a copy of such demand to
each of the other parties to this Agreement. The arbitration shall be conducted
in accordance with the provisions of J.A.M.S' Streamlined Arbitration Rules and
Procedures in effect at the time of filing of the demand for arbitration (or, if
J.A.M.S. then means the AAA, the commercial arbitration rules of the AAA then in
effect), subject to the provisions of this Section 11.8(c). The parties shall
cooperate with J.A.M.S. and with each other in promptly selecting an arbitrator
from J.A.M.S.' panel of neutrals and in scheduling the arbitration proceedings
in order to fulfill the provisions, purposes and intent of this Agreement. The
parties covenant that they shall participate in the arbitration in good faith
and that they shall share in its costs in accordance with this Agreement. The
provisions of this Section 11.8(c) may be enforced by any court of competent
jurisdiction, and the party seeking enforcement shall be entitled to an award of
all costs, fees and expenses, including attorneys' fees, to be paid by the party
against whom enforcement is ordered. Judgment upon the award rendered by the
arbitrator may be entered in any court having competent jurisdiction.
(i) Payment of Costs. Acquirer, on the one hand, and the Company
Stockholders (through the Representative), on the other hand, shall bear the
expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. The arbitrator shall determine the party who
is the prevailing party and the party who is the non-prevailing party. The
non-prevailing party shall pay all reasonable costs, fees and expenses related
to the arbitration, including reasonable fees and expenses of attorneys,
accountants and other professionals incurred by the prevailing party, the fees
of each arbitrator and the administrative fee of the arbitration proceedings.
(ii) Burden of Proof. Except as may be otherwise expressly
provided herein, for any Contested Claim submitted to arbitration, the burden of
proof shall be as it would be if the Claim were litigated in a judicial
proceeding governed exclusively by the internal laws of the State of California
applicable to contracts executed and entered into within the State of
California, without regard to the principles of choice of law or conflicts of
law of any jurisdiction.
(iii) Award. Upon the conclusion of any arbitration proceedings
hereunder, the arbitrator shall render findings of fact and conclusions of law
and a final written arbitration award setting forth the basis and reasons for
any decision reached (the "Final Award") and shall deliver such documents to the
Representative and Acquirer, together with a signed copy of the Final Award.
Subject to the provisions of this Agreement, the Final Award shall constitute a
conclusive determination of all issues in question, binding upon the Company
Stockholders, the Representative and Acquirer, and shall include an affirmative
statement to such effect.
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(iv) Timing. The Representative, Acquirer and the arbitrator
shall conclude each arbitration pursuant to this Section 11.8(c) as promptly as
possible for the Contested Claim being arbitrated.
(v) Terms of Arbitration. The arbitrator chosen in accordance
with these provisions shall not have the power to alter, amend or otherwise
affect the terms of these arbitration provisions or the provisions of this
Agreement.
(vi) Exclusive Remedy. Following the Effective Time, except as
specifically otherwise provided in this Agreement, arbitration conducted in
accordance with this Agreement shall be the sole and exclusive means of
resolving any dispute between the parties for any Claim made pursuant to this
Article 11.
11.9 Distribution of Escrow Fund. Within ten business days after the Escrow
Release Date, Acquirer shall deliver to the Company Stockholders the portion of
the Escrow Fund in excess of the amount of the Escrow Fund necessary to satisfy
any unsatisfied or disputed Claims for Damages specified in any Notice of Claim
delivered to the Representative before the Escrow Release Date. As soon as all
such Claims have been resolved in accordance with this Agreement, Acquirer shall
deliver to the Company Stockholders all remaining portions of the Escrow Fund
not required to satisfy such Claims.
11.10 Intellectual Property Claims. After the Escrow Release Date and prior
to the three-year anniversary of the Effective Time, the Acquired Indemnified
Persons may make Claims against the Company Stockholders, or any of them, under
Section 11.2 for Damages directly or indirectly incurred, paid or accrued in
connection with, resulting from or arising out of any inaccuracy,
misrepresentation, breach of, or default in, any of the representations,
warranties or covenants given or made by the Company in Section 3.13
(Intellectual Property) (each such Claim, an "IP Post-Release Claim") and,
during such period, each Company Stockholder shall be liable for such IP
Post-Release Claims to the extent of such Company Stockholder's Pro Rata Share
of the value of 7.5% of the Total Consideration (such value, the "IP
Post-Release Claim Limit"); provided, however, that if the amount previously
paid from the Escrow Shares to satisfy any Claims for Damages (collectively, the
"Previous Payments") is greater than the value of 3.75% of the Total
Consideration, then the IP Post-Release Claim Limit shall not be the value of
7.5% of the Total Consideration but instead shall be the difference between (a)
the value of 7.5% of the Total Consideration minus (b) the difference between
(i) the Previous Payments minus (ii) the value of 3.75% of the Total
Consideration. For purposes of this Section 11.10, the percentage value of the
Total Consideration shall be based on the Acquirer Average Price Per Share.
ARTICLE 12
MISCELLANEOUS
12.1 Governing Law. The internal laws of the State of California,
irrespective of its choice of law principles, shall govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto; provided, however, that issues
involving the consummation and effects of the Merger shall be governed by the
laws of the State of Delaware. Subject to the provisions of Section 11.8, all
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disputes arising out of this Agreement or the obligations of the parties
hereunder, including disputes that may arise following termination of this
Agreement, shall be subject to the exclusive jurisdiction and venue of the
California State courts of Santa Clara County, California (or, if there is
federal jurisdiction, then the exclusive jurisdiction of the United States
District Court for the Northern District of California with venue in the
division thereof in which Santa Clara County is located). EACH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO THE PERSONAL AND EXCLUSIVE
JURISDICTION AND VENUE OF SAID COURTS AND WAIVES TRIAL BY JURY AND ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME.
12.2 Assignment; Binding Upon Successors and Assigns. No party hereto may
assign any of its rights or obligations hereunder without the prior written
consent of the other parties hereto; provided, however, that Acquirer may assign
this Agreement and the rights and obligation hereunder without consent in
connection with any merger or sale of the portion of its business to which this
Agreement relates. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns. Any
assignment in violation of this provision shall be void.
12.3 Severability. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or unenforceable,
then the remainder of this Agreement and the application of such provision to
other persons or circumstances shall be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that shall achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original as regards any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all parties reflected hereon as signatories.
12.5 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party hereunder shall be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy shall not preclude the
exercise of any other. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction.
12.6 Amendment and Waivers. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be waived (either
generally or
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in a particular instance and either retroactively or prospectively), only by a
writing signed by the party to be bound thereby. The waiver by a party of any
breach hereof or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
This Agreement may be amended by the parties hereto as provided in this Section
12.6 at any time before or after approval of this Agreement by the Company
Stockholders, but, after such approval, no amendment shall be made which by any
Applicable Law requires the further approval of the Company Stockholders without
obtaining such further approval; provided, however, that the parties may not
amend Section 6.8 without the approval of a majority of the Company's Board of
Directors as of the Agreement Date. At any time prior to the Effective Time,
each of Company and Acquirer, by action taken by its 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, (ii) waive any inaccuracies in the
representations and warranties made to it contained herein or in any document
delivered pursuant hereto, and (iii) waive compliance with any of the agreements
or conditions for its benefit contained herein. No such waiver or extension
shall be effective unless signed in writing by the party against whom such
waiver or extension is asserted. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
12.7 Expenses. Each party shall bear its respective legal, auditors',
investment bankers', purchaser representatives' and financial advisors' fees and
other expenses incurred with respect to this Agreement, the Merger and the
transactions contemplated hereby ("Transaction Expenses"), and the Company's
Transaction Expenses shall be accrued and accounted for in the Closing TNW
Calculations. Notwithstanding the foregoing, if the Merger is successfully
consummated, then any of the Company's Transaction Expenses not paid on or prior
to the Closing by the Company may be paid by Acquirer and Acquirer shall
thereafter be entitled to indemnification from the Escrow Fund in accordance
with Section 11.2 for an amount equal to the amount of such unpaid Transaction
Expenses (such amount, the "Unpaid Transaction Expenses"), except to the extent
that such Unpaid Transaction Expenses were included in the Closing TNW
Calculations. Whether or not the Merger is consummated, Acquirer shall pay the
costs of the Historical Audits up to $65,000 and such costs up to $65,000 shall
not be included in the Company's Transaction Expenses.
12.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party shall be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including costs, expenses and fees on any appeal). The
prevailing party shall be entitled to recover its costs of suit, regardless of
whether such suit proceeds to final judgment.
12.9 Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be either hand delivered in
person, sent by facsimile, sent by certified or registered first-class mail,
postage pre-paid, or sent by nationally recognized express courier service. Such
notices and other communications shall be effective upon receipt if hand
delivered or sent by facsimile, five days after mailing if sent by mail, and one
day after dispatch if sent by express courier, to the following addresses, or
such other addresses as any party may notify the other parties in accordance
with this Section 12.9:
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If to Acquirer or Merger Sub:
NetScreen Technologies, Inc.
350 Oakmead Parkway
Sunnyvale, CA 94085
Attention: Tom Tovar, Legal Affairs
Fax Number: 408-730-6760
with a copy to:
Fenwick & West LLP
275 Battery Street, Suite 1500
San Francisco, CA 94105
Attention: Douglas N. Cogen
Fax Number: 415-875-2300
If to the Company:
OneSecure, Inc.
140 Kifer Court
Sunnyvale, CA 94086
Attention: Rakesh Loonkar
Fax Number: 408-992-8001
with a copy to:
Brobeck, Phleger & Harrison LLP
2000 University Avenue
East Palo Alto, CA 94303
Attention: Curtis L. Mo
Fax Number: 650-331-8108
If to the Representative:
David Spreng
3800 First Bank Place
Minneapolis, MN 55440-0357
Fax Number: 612-376-2824
with a copy to:
Kevin Spreng
3800 First Bank Place
Minneapolis, MN 55440-0357
Fax Number: 612-376-2824
12.10 Interpretation; Rules of Construction. When a reference is made in
this Agreement to Exhibits, such reference shall be to an Exhibit to this
Agreement unless otherwise
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indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Articles, such reference shall be
to an Article of this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When reference is made herein to
"the business of" an entity, such reference shall be deemed to include the
business of all direct and indirect Subsidiaries of such entity. Reference to
the Subsidiaries of an entity shall be deemed to include all direct and indirect
Subsidiaries of such entity. The parties hereto agree that they have been
represented by legal counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document shall be construed against the party drafting such agreement or
document.
12.11 No Joint Venture. Nothing contained in this Agreement shall be deemed
or construed as creating a joint venture or partnership between any of the
parties hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party shall have the
power to control the activities and operations of any other and their status is,
and at all times shall continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other party. No party shall hold itself out as having any authority
or relationship in contravention of this Section 12.11.
12.12 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
12.13 Third Party Beneficiary Rights. Other than the provisions of Section
6.8, which are intended to benefit the Company's directors and officers, and the
provisions of Section 2.2.7 and Article 11, which provide the Representative
with certain rights specified therein and are intended to benefit the
Representative, no provisions of this Agreement are intended, nor shall be
interpreted, to provide or create any third party beneficiary rights or any
other rights of any kind in any client, customer, employee, affiliate,
stockholder, partner of any party hereto or any other person, and all provisions
hereof shall be personal solely between the parties to this Agreement.
12.14 Public Announcement. Upon execution of this Agreement, Acquirer and
the Company shall issue a press release approved by both parties announcing the
Merger. Thereafter, Acquirer may issue such press releases, and make such other
disclosures regarding the Merger, as it determines are required under applicable
securities laws or regulatory rules or are otherwise appropriate; provided,
however, that Acquirer shall give the Company reasonable notice prior to issuing
any such press releases. Prior to the publication of such initial and mutually
agreed press release, neither party shall make any public announcement relating
to this Agreement or the transactions contemplated hereby (except as may be
required by law) and the
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Company shall use its reasonable efforts to prevent any trading in shares of
Acquirer Common Stock by its officers, directors, employees, stockholders and
agents.
12.15 Confidentiality. The Company and Acquirer each confirm that they have
entered into the Nondisclosure Agreement and that they are each bound by, and
shall abide by, the provisions of such Nondisclosure Agreement; provided,
however, that Acquirer shall not be bound by such Nondisclosure Agreement after
the Closing. If this Agreement is terminated, the Nondisclosure Agreement shall
remain in full force and effect, and all copies of documents containing
confidential information of a disclosing party shall be returned by the
receiving party to the disclosing party or be destroyed, as provided in the
Nondisclosure Agreement.
12.16 Entire Agreement. This Agreement, the Exhibits and Schedules hereto,
the Company Ancillary Agreements, the Acquirer Ancillary Agreements and the
Merger Sub Ancillary Agreements constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect hereto other than the Nondisclosure Agreement. The express
terms hereof control and supersede any course of performance or usage of the
trade inconsistent with any of the terms hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
NETSCREEN TECHNOLOGIES, INC. ONESECURE, INC.
By: /s/ Robert D. Thomas By: /s/ George W. Everhart
----------------------------------------- ---------------------------
Name: Robert D. Thomas Name: George W. Everhart
--------------------------------------- -------------------------
Title: President and Chief Executive Officer Title: President & CEO
-------------------------------------- ------------------------
TANGO ACQUISITION CORP.
By: /s/ Robert D. Thomas
-----------------------------------------
Name: Robert D. Thomas
---------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
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LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A List of Specified Company Stockholders
Exhibit B Form of Voting Agreement
Exhibit C-1 Form of Investment Representation Letter
Exhibit C-2 Form of Investment Representation Letter (Accredited Investor)
Exhibit C-3 Form of Investment Representation Letter (Unaccredited Investor)
Exhibit D List of Signatories to Noncompetition Agreements
Exhibit E List of Signatories to Offer Letters to be delivered on the Agreement Date
Exhibit F List of Signatories to Waivers to be delivered on the Agreement Date
Exhibit G Form of Restated Certificate
Exhibit H Form of Registration Rights Agreement
Exhibit I List of Specified Employees
Exhibit J List of Signatories to Waivers
Exhibit K Acquisition Bonus
Exhibit L Cash Bonus
Exhibit M Form of Letter of Transmittal
Exhibit N Matters to be Covered in the Opinion of Fenwick & West LLP
Exhibit O Matters to be Covered in the Opinion of Brobeck, Phleger & Harrison LLP
</TABLE>
The Registrant will furnish supplementally a copy of any omitted exhibit to the
Commission upon request.
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EXHIBIT H
FORM OF
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of September 18, 2002 by and among NetScreen Technologies, Inc.
a Delaware corporation ("Acquirer"), and the individuals and entities listed on
Exhibit A attached hereto (each a "Company Holder" and collectively, the
"Company Holders").
Recitals
A. This Agreement is entered into pursuant to that certain Agreement
and Plan of Merger dated as of August 22, 2002 (the "Merger Agreement") by and
among Acquirer, Tango Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Acquirer ("Merger Sub"), and OneSecure, Inc., a Delaware
corporation (the "Company"). Capitalized terms used but not defined in this
Agreement shall have the meanings given to such terms in the Merger Agreement.
B. The Merger Agreement provides that, subject to the terms and
conditions of the Merger Agreement, Merger Sub will be merged with Company in a
transaction or series of transactions (the "Merger") in which all outstanding
shares of Company Capital Stock will be converted into the right to receive, and
will be exchangeable for, shares of Acquirer Common Stock, and, if the Cash
Election is made, cash.
C. As an inducement for the Company Holders to approve the Merger
Agreement, the Merger and the transactions contemplated by the Merger Agreement,
Acquirer desires to grant certain registration rights to the Company Holders as
contained herein.
Now, Therefore, in consideration of the foregoing recitals and the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
1. Registration Rights.
1.1 Definitions.
-----------
(a) Acquirer Registration Rights Agreement. The
----------------------------------------
term "Acquirer Registration Rights Agreement" means Acquirer's Fifth Amended and
Restated Registration Rights Agreement dated October 3, 2001 by and among
Acquirer and the Investors (as defined therein).
(b) Existing Registrable Securities. The term
-------------------------------
"Existing Registrable Securities" means the Registrable Securities under in the
Acquirer Registration Rights Agreement.
(c) Registration. The terms "register,"
------------
"registered," and
<PAGE>
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act of 1933, as amended
(the "1933 Act"), and the declaration or ordering of effectiveness of such
registration statement.
(d) Registrable Securities. The term
----------------------
"Registrable Securities" means: (a) shares of Acquirer Common Stock issued to
a Company Holder pursuant to Section 2.2 of the Merger Agreement; and (b) any
shares of Acquirer Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right, option or other convertible security which is
issued as) a dividend or other distribution with respect to, or in exchange for,
or in replacement of, such shares of Acquirer Common Stock. For purposes of this
Agreement, any Registrable Securities shall cease to be Registrable Securities
when (x) a registration statement covering such Registrable Securities has been
declared effective and such Registrable Securities have been disposed of
pursuant to such effective registration statement, or (y) such Registrable
Securities are sold by a person or entity in a transaction that is exempt from
registration pursuant to Rule 144 under the 1933 Act or a transaction in which
the Company Holders' rights under this Agreement are not assigned. In addition,
the Registrable Securities held by any Company Holder shall cease to be
Registrable Securities on such date on which all of the Registrable Securities
held by such Company Holder can be sold within a period of three months pursuant
to Rule 144 promulgated under the 1933 Act (or any similar provision then in
force).
(e) Form S-3. The term "Form S-3" means such date
--------
form under the 1933 Act as is in effect on the hereof or any successor
registration form under the 1933 Act subsequently adopted by the SEC that
permits inclusion or incorporation of substantial information by reference to
other documents filed by Acquirer with the SEC.
(f) SEC. The term "SEC" or "Commission" means the
---
U.S. Securities and Exchange Commission.
1.2 Piggyback Registrations. Acquirer shall notify all
Company Holders of Registrable Securities in writing at least 30 days prior to
filing any registration statement under the 1933 Act for purposes of effecting a
public offering of securities of Acquirer (including, but not limited to,
registration statements relating to secondary offerings of securities of
Acquirer, but excluding registration statements relating to any registration
under Section 1.3 of this Agreement, any registration under Section 2.2 or 2.4
of the Acquirer Registration Rights Agreement or any employee benefit plan or a
corporate reorganization), and will afford each such Company Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Company Holder. Each Company Holder
desiring to include in any such registration statement all or any part of the
Registrable Securities held by such Company Holder shall, within 20 days after
receipt of the above-described notice from Acquirer, so notify Acquirer in
writing, and in such notice shall inform Acquirer of the number of Registrable
Securities such Company Holder wishes to include in such registration statement.
Notwithstanding any other provision of this Agreement, if Acquirer determines in
good faith that a limitation of the number of shares to be registered is
required, then Acquirer may exclude shares (including Registrable Securities)
from the registration, and the number of shares that may be included in the
registration shall be allocated, first, to Acquirer, and second, to Holders (as
defined in the Acquirer Registration Rights Agreement) exercising rights under
the Acquirer Registration Rights Agreement and Company Holders requesting
inclusion of their Registrable
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Securities in such registration statement in such relative proportion as the
number of Existing Registrable Securities then held by the Holders (as defined
in the Acquirer Registration Rights Agreement) or the number of Registrable
Securities then held by the Company Holders, as the case may be, bears to the
total number of Existing Registrable Securities then held by the Holders (as
defined in the Acquirer Registration Rights Agreement) plus the total number of
Registrable Securities then held by the Company Holders provided, however, that
the right of Acquirer to exclude shares (including Registrable Securities) from
the registration as described above shall be restricted so that the aggregate
number of Registrable Securities and Existing Registrable Securities included in
any such registration is not reduced below 25% of the shares included in the
registration. If Acquirer excludes shares from the registration as described in
the preceding sentence, then with respect to the Registrable Securities then
held by any Company Holder who participates in such registration the number of
Registrable Securities to be included in the registration shall be in such
proportion as the number of Registrable Securities then held by such Company
Holder bears to the total number of Registrable Securities then held by all
Company Holders participating in the registration. If a Company Holder does not
include all of its Registrable Securities in any registration statement filed by
Acquirer, such Company Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by Acquirer with respect to offerings of
its securities, all upon the terms and conditions set forth herein.
(a) Underwriting. If a registration statement under which
------------
Acquirer gives notice under this Section 1.2 is for an underwritten offering,
then Acquirer shall so advise the Company Holders of Registrable Securities as a
part of the notice referred to in this Section 1.2. In such event, the right of
any such Company Holder's Registrable Securities to be included in a
registration pursuant to this Section 1.2 shall be conditioned upon such Company
Holder's participation in such underwriting and the inclusion of such Company
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Company Holders proposing to distribute their Registrable Securities
through such underwriting shall enter into an underwriting agreement in
customary form with the managing underwriter or underwriter(s) selected for such
underwriting. Notwithstanding any other provision of this Agreement, if Acquirer
or the managing underwriter(s) determines in good faith that a limitation of the
number of shares to be underwritten is required, then Acquirer or the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first, to Acquirer,
and second, to Holders (as defined in the Acquirer Registration Rights
Agreement) exercising rights under the Acquirer Registration Rights Agreement
and Company Holders requesting inclusion of their Registrable Securities in such
registration statement in such relative proportion as the number of Existing
Registrable Securities then held by the Holders (as defined in the Acquirer
Registration Rights Agreement) or the number of Registrable Securities then held
by the Company Holders, as the case may be, bears to the total number of
Existing Registrable Securities then held by the Holders (as defined in the
Acquirer Registration Rights Agreement) plus the total number of Registrable
Securities then held by the Company Holders; provided, however, that the right
of the underwriters to exclude shares (including Registrable Securities) from
the registration and underwriting as described above shall be restricted so that
the aggregate number of Registrable Securities and Existing Registrable
Securities included in any such registration is not reduced below 25% of the
shares included in the registration. If any Company
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Holder disapproves of the terms of any such underwriting, such Company Holder
may elect to withdraw therefrom by written notice to Acquirer and the managing
underwriter(s), delivered at least ten business days prior to the effective date
of the registration statement. Any Registrable Securities excluded or withdrawn
from such underwriting shall be excluded and withdrawn from the registration.
(b) Expenses. All expenses incurred in connection
--------
with the first three registrations pursuant to this Section 1.2 (excluding
underwriters' and brokers' discounts and commissions), including, without
limitation, all federal and "blue sky" registration and qualification fees,
printers' and accounting fees, and fees and disbursements of counsel for
Acquirer, shall be borne by Acquirer. All expenses incurred in connection with
subsequent registrations pursuant to this Section 1.2 shall be borne by the
Company Holders and Holders (as defined in the Acquirer Registration Rights
Agreement) who participate in such registration on a pro rata basis, and by
Acquirer on a pro rata basis if it includes shares in such registration,
according to the number of Registrable Securities or Existing Registrable
Securities then held by the Company Holders and Holders (as defined in the
Acquirer Registration Rights Agreement), respectively, who participate in such
registration and the number of shares offered by Acquirer that are included in
such registration at the time of its effectiveness.
1.3 Form S-3 Registration. If Acquirer receives from any
Company Holder or Company Holders of at least 10% of all Registrable Securities
then outstanding a written request or requests that Acquirer effect a
registration on Form S-3 and any related qualification or compliance, then
Acquirer will:
(a) Notice. Promptly give written notice of the
------
proposed registration and the Company Holder's or Company Holders' request
therefor, and any related qualification or compliance, to all other Company
Holders of Registrable Securities. Each Company Holder desiring to include in
any such registration statement all or any part of the Registrable Securities
held by such Company Holder shall, within 20 days after receipt of the
above-described notice from Acquirer, so notify Acquirer in writing, and in such
notice shall inform Acquirer of the maximum number of Registrable Securities
such Company Holder wishes to include in such registration statement.
(b) Registration. As soon as practicable, effect such
------------
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of up to 70%
(excluding any shares of Acquirer Common Stock in the Escrow Fund) of the
Registrable Securities originally issued pursuant to Section 2.2 of the Merger
Agreement. The number of Registrable Securities of each Company Holder included
in such registration shall be allocated on a pro rata basis based on the total
number of Registrable Securities requested to be included in such registration
by the requesting Company Holders and the Company Holders joining in such
request as specified in a written request given within 20 days after receipt of
such written notice from Acquirer; provided, however, that Acquirer shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this Section 1.3:
(i) if Form S-3 is not available for such
offering by the Company Holders;
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(ii) if the Company Holders, together with the
holders of any other securities of Acquirer entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of less than $1,000,000;
(iii) if Acquirer shall furnish to the Company
Holders a certificate signed by the President or Chief Executive Officer of
Acquirer stating that in the good faith judgment of the Board of Directors of
Acquirer, it would be seriously detrimental to Acquirer or its business for such
Form S-3 registration to be effected at such time or, if such Form S-3
registration has already been effected, for resales of Registrable Securities to
be made pursuant to such Form S-3 registration statement (provided that the
existence or filing of any other registration statement shall not, in and of
itself, cause the the effectiveness of the Company Holders' Form S-3
registration, or resales thereunder, to be determined to be seriously
detrimental to Acquirer or its business), in which event Acquirer shall have the
right to defer the filing of the Form S-3 registration statement no more than
once during any 12-month period for a period of not more than 120 days after
receipt of the request of the Company Holder or Company Holders under this
Section 1.3 or the use of the Form S-3 registration statement and the prospectus
related thereto will be deferred or suspended and will not recommence until (A)
the Company Holders receive from Acquirer copies of the supplemented or amended
prospectus related to the registration statement or (B) the Company Holders are
advised in writing by Acquirer that the prospectus related to the registration
statement may be used, as applicable; provided, however, that if Acquirer shall
so delay the filing of a registration statement, it shall promptly notify the
applicable Company Holders of such determination, and such Company Holders shall
have the right to withdraw the relevant request for registration, in which case
such registration shall not count towards the limit set forth in Section
1.3(b)(iv); provided, further, that if Acquirer shall so defer or suspend the
use of the Form S-3 registration statement and the prospectus related thereto,
it shall use its commercially reasonable efforts to ensure that the use of the
registration statement and the prospectus related thereto may be resumed as soon
as practicable;
(iv) if Acquirer has already effected one
registration on Form S-3 for the Company Holders pursuant to this Section 1.3;
(v) if Acquirer is acquired and shares of
Acquirer Common Stock cease to be publicly traded;
(vi) if the SEC refuses to declare such
registration statement effective due to the participation of any particular
Company Holder in such registration (unless such Company Holder withdraws all
such Company Holder's Registrable Securities from such registration) or if the
manner in which any Registrable Securities are disposed of pursuant to the Form
S-3 registration statement is not included within the plan of distribution set
forth in the prospectus for the Form S-3 registration statement; or
(vii) in any particular jurisdiction in which
Acquirer would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
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<PAGE>
Subject to the foregoing, Acquirer shall file a Form S-3 registration statement
covering the Registrable Securities and other securities so requested to be
registered pursuant to this Section 1.3 as soon as practicable, and in any event
no later than 90 days, after receipt of the request or requests of the Company
Holders for such registration. Pursuant to the terms of the Acquirer
Registration Rights Agreement, the Holders (as defined therein) are entitled to
receive 30 days notice of such S-3 registration and will be entitled to exercise
piggyback registrations rights to include shares of their Existing Registrable
Securities in such S-3 registration to the extent available under the Acquirer
Registration Rights Agreement.
(c) Expenses. Acquirer shall pay all expenses
--------
incurred in connection with the registration requested pursuant to this Section
1.3 (excluding underwriters' or brokers' discounts and commissions), including,
without limitation, all filing, registration and qualification, printers' and
accounting fees and the reasonable fees and disbursements of one (1) counsel for
selling Company Holder or Company Holders and counsel for Acquirer. Each Company
Holder participating in such registration shall bear such Company Holder's
proportionate share (based on the number of shares sold by such Company Holder
over the total number of shares included in such registration at the time it
goes effective) of all discounts, commissions or other amounts payable to
underwriters or brokers in connection with such offering.
(d) Manner of Sales. Any sale of Registrable
---------------
Securities pursuant to a registration effected pursuant to this Section 1.3 may
only be made in accordance with the method or methods of distribution of such
Registrable Securities that are described in the registration statement for the
registration and permitted by such form of registration statement.
(e) No Underwritings. No sale of Registrable
-----------------
Securities pursuant to any registration effected pursuant to this Section 1.3
may be effected pursuant to any underwritten offering without Acquirer's prior
written consent, which consent will not be unreasonably withheld.
1.4 Obligations of Acquirer. Whenever required to effect the
-----------------------
registration of any Registrable Securities under this Agreement, Acquirer shall,
as expeditiously possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective and keep such
registration statement effective until such Company Holders can sell all their
Registrable Securities within a three-month period without registration under
the 1933 Act pursuant to Rule 144.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Company Holders such number of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the
6
<PAGE>
disposition of the Registrable Securities owned by them that are included in
such registration.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
"blue sky" laws of such jurisdictions as shall be reasonably requested by the
Company Holders, provided that Acquirer shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. Each
Company Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(f) Notify each Company Holder of Registrable
Securities covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act of the happening
of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(g) Furnish, at the request of any Company Holder
requesting registration of Registrable Securities, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated as of
such date, of the counsel representing Acquirer for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering and reasonably satisfactory to a majority in
interest of the Company Holders requesting registration, addressed to the
underwriters, if any, and to the Company Holders requesting registration of
Registrable Securities and (ii) a "comfort" letter, dated as of such date, from
the independent certified public accountants of Acquirer, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Company Holders requesting registration, addressed
to the underwriters, if any, and to the Company Holders requesting registration
of Registrable Securities.
1.5 Furnish Information. It shall be a condition precedent to
the obligations of Acquirer to take any action pursuant to Section 1.2 or 1.3
that the selling Company Holders shall furnish to Acquirer such information
regarding themselves and the Registrable Securities held by them, and the
intended method of disposition of such securities, as shall be reasonably
required to timely effect the registration of their Registrable Securities.
1.6 Delay of Registration. No Company Holder shall have any
right to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
7
<PAGE>
1.7 Indemnification. In the event any Registrable Securities
are included in a registration statement under Section 1.2 or 1.3.
(a) By Acquirer. To the extent permitted by law,
-----------
Acquirer will indemnify and hold harmless each Company Holder, the partners,
members, managers, officers and directors of each Company Holder, any
underwriter (as defined in the 1933 Act) for such Company Holder, each of their
respective representatives and agents and such Company Holder's legal counsel
and independent accountants, and each person, if any, who controls such Company
Holder or underwriter within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended ("1934 Act"), against any and all losses,
claims, damages, or liabilities to which they may become subject under the 1933
Act, the l934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (each of the
following being a "Violation"):
(i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein, offering
circular, or other document or any amendments or supplements thereto incident to
any such registration, qualification or compliance;
(ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or
(iii) any violation or alleged violation by
Acquirer of the 1933 Act, the 1934 Act, any federal or state securities law
or any rule or regulation promulgated under the 1933 Act, the 1934 Act or any
federal or state securities law in connection with any action or inaction by
Acquirer in connection with the offering covered by such registration statement;
and Acquirer will reimburse each such Company Holder, partner, members,
managers, officer or director, each of their respective representatives and
agents and such Company Holder's legal counsel and independent accountants,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating, preparing or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this subsection 1.7(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of Acquirer (which
consent shall not be unreasonably withheld or delayed), nor shall Acquirer be
liable in any such case for any such loss, claim, damage, liability or action to
the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Company Holder, partner,
members, managers, officer, director, representative, agent, legal counsel,
independent accountant, underwriter or controlling person of such Company
Holder.
(b) By Selling Company Holders. To the extent
---------------------------
permitted by law, each selling Company Holder, severally but not jointly, if
Registrable Securities held by such Company Holder are included in the
securities as to which such registration, qualification or compliance is being
effected, will indemnify and hold harmless Acquirer, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls
8
<PAGE>
Acquirer within the meaning of the 1933 Act, any underwriter and any other
Company Holder selling securities under such registration statement or any of
such other Company Holder's partners, members, managers, directors or officers,
each of their respective representatives and agents and such Company Holder's
legal counsel and independent accountants, or any person who controls such
Company Holder within the meaning of the 1933 Act or the 1934 Act, against any
and all losses, claims, damages or liabilities (joint or several) to which they
may become subject under the 1933 Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any Violation under subsection
1.7(a)(i) or (ii), in each case to the extent (and only to the extent) that such
Violation under subsection 1.7(a)(i) or (ii) occurs in reliance upon and in
conformity with written information furnished by such Company Holder expressly
for use in connection with such registration; and each such Company Holder will
reimburse any legal or other expenses reasonably incurred by Acquirer or any
such director, officer, controlling person, underwriter or other Company Holder,
partner, members, managers, director, officer, representative, agent, legal
counsel, independent accountant or controlling person of such other Company
Holder in connection with investigating, preparing or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this subsection 1.7(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company Holder (which consent
shall not be unreasonably withheld); and provided further, that the total
amounts payable in indemnity by a Company Holder under this Section 1.7(b) in
respect of any Violation under subsection 1.7(a)(i) or (ii) shall not exceed the
net proceeds received by such Company Holder in the registered offering out of
which such Violation under subsection 1.7(a)(i) or (ii) arises.
(c) Notice. Promptly after receipt by an indemnified party under this
Section 1.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure of any
indemnified party to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, only if such failure is
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.7. No indemnifying party, in the defense of
any such claim or litigation, shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation.
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<PAGE>
(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of Acquirer and the Company Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
person or entity if a copy of the Final Prospectus was furnished to the
indemnified party and was not furnished to the person or entity asserting the
loss, claim, damage or liability at or prior to the time such action is required
by the 1933 Act.
(e) Contribution. In order to provide for just and equitable
contribution to joint liability under the 1933 Act in any case in which either
(i) any Company Holder exercising rights under this Agreement, or any
controlling person of any such Company Holder, makes a claim for indemnification
pursuant to this Section 1.7 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 1.7 provides for indemnification in such case, or (ii) contribution
may be required on the part of Acquirer and any such selling Company Holder or
any such controlling person in circumstances for which indemnification is
provided under this Section 1.7; then, and in each such case, such indemnifying
party will contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after contribution from others) (i) in such
proportion so that such Company Holder is responsible for the portion
represented by the percentage that the public offering price of its Registrable
Securities offered by and sold under the registration statement bears to the
public offering price of all securities offered by and sold under such
registration statement, and Acquirer and other selling Company Holders are
responsible for the remaining portion or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of Acquirer and the Company Holders in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of Acquirer and of the Company Holders shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by Acquirer or by the Company
Holders and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company
Holders' respective obligations to contribute pursuant to this Section 1.7(e)
are several in proportion to the respective number of Registrable Securities
they sell in the offering as to which such Violation relates, and not joint. No
such Company Holder will be required to contribute any amount in excess of the
public offering price of all such Registrable Securities offered and sold by
such Company Holder pursuant to such registration statement; and no person or
entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
(f) Survival. The obligations of Acquirer and the Company Holders
under this Section 1.7 shall survive the completion of any offering of
Registrable Securities in a
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<PAGE>
registration statement, and otherwise.
1.8 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
Acquirer, Acquirer agrees to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the 1933 Act, at all times
after the effective date of the first registration under the 1933 Act filed by
Acquirer for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of Acquirer under the
1933 Act and the 1934 Act; and
(c) So long as a Company Holder owns any Registrable
Securities, to furnish to the Company Holder forthwith upon request a written
statement by Acquirer as to its compliance with the reporting requirements of
said Rule 144, and of the 1933 Act and the 1934 Act, a copy of the most recent
annual or quarterly report of Acquirer, and such other reports and documents of
Acquirer as a Company Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Company Holder to sell any such
securities without registration.
1.9 Termination of Acquirer's Obligations. Acquirer shall have no
obligations pursuant to Section 1.2 or 1.3 with respect to any Registrable
Securities proposed to be sold by a Company Holder in a registration pursuant to
Section 1.2 or 1.3 if, in the opinion of counsel to Acquirer, all such
Registrable Securities proposed to be sold by a Company Holder may be sold in a
three-month period without registration under the 1933 Act pursuant to Rule 144.
2. Assignment and Amendment.
2.1 Assignment. Notwithstanding anything herein to the contrary:
(a) Registration Rights; Refusal Rights. The registration
rights of a Company Holder under Section 1 hereof may be assigned only to an
affiliate or a party who acquires at least 120,000 shares of Registrable
Securities; provided, however, that no party may be assigned any of the
foregoing rights unless Acquirer is given written notice by the assigning party
at the time of such assignment stating the name and address of the assignee and
identifying the securities of Acquirer as to which the rights in question are
being assigned; and provided further that any such assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement,
including, without limitation, the provisions of this Section 2.
(b) Aggregation. Shares of Acquirer Common Stock owned by
Company Holders which are partnerships, limited liability companies,
corporations and other entities having substantially common ownership interests
or managed by the same principals or investment advisors or owned by individual
investors affiliated with one another ("Affiliated Investors") shall be
aggregated for the purposes of this Agreement, and, notwithstanding
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<PAGE>
anything to the contrary contained in this Agreement, all rights granted to the
Company Holders pursuant to this Agreement may be assigned between Affiliated
Investors.
2.2 Amendment of Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of Acquirer and Company Holders (and/or any of their permitted
successors or assigns) holding shares of Acquirer Common Stock representing 66
2/3% of all the Registrable Securities; provided, however, that any amendment
that directly or indirectly (together with any transaction entered into in
connection therewith) treats any Company Holder or Company Holders in an adverse
manner that is different than any other Company Holder will require the approval
of the Company Holders of a majority of the Registrable Securities then held by
such adversely treated Company Holders. Any amendment or waiver effected in
accordance with this Section 2.2 shall be binding upon each Company Holder
and/or any of their permitted successors or assigns and Acquirer.
3. Miscellaneous.
3.1 Notices. Any and all notices required or permitted to be
given to a party pursuant to the provisions of this Agreement will be in writing
and will be effective and deemed to provide such party sufficient notice under
this Agreement on the earliest of the following: (i) at the time of personal
delivery, if delivery is in person; (ii) one business day after deposit with an
express overnight courier for United States deliveries, or three business days
after such deposit for deliveries outside of the United States, with proof of
delivery from the courier requested; or (iii) three business days after deposit
in the United States mail by certified mail (return receipt requested) for
United States deliveries.
All notices for delivery outside the United States will be
sent by express courier. All notices not delivered personally will be sent with
postage and/or other charges prepaid and properly addressed to the party to be
notified at the address as follows, or at such other address as such other party
may designate by one of the indicated means of notice herein to the other
parties hereto as follows:
(a) if to a Company Holder, at such Company Holder's
respective address as set forth on Exhibit A hereto; and
(b) if to Acquirer, marked "Attention: President", at
350 Oakmead Parkway, Sunnyvale, California 94085.
3.2 Entire Agreement. This Agreement, together with all the
Exhibits hereto, and the Merger Agreement, constitute and contain the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersede any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties respecting the subject
matter hereof.
3.3 Governing Law. This Agreement shall be governed by and
construed exclusively in accordance with the internal laws of the State of
California as applied to agreements among California residents entered into and
to be performed entirely within
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California, excluding that body of law relating to conflict of laws and choice
of law. All disputes arising out of this Agreement or the obligations of the
parties hereunder, including disputes that may arise following termination of
this Agreement, shall be subject to the exclusive jurisdiction and venue of the
California State courts of Santa Clara County, California (or, if there is
federal jurisdiction, then the exclusive jurisdiction of the United States
District Court for the Northern District of California with venue in the
division thereof in which Santa Clara County is located).
3.4 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, then such provision(s) shall
be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
3.5 Third Parties. Nothing in this Agreement, express or
implied, is intended to confer upon any person or entity, other than the parties
hereto and their successors and assigns, any rights or remedies under or by
reason of this Agreement.
3.6 Successors And Assigns. Subject to the provisions of
Section 2.1, the provisions of this Agreement shall inure to the benefit of, and
shall be binding upon, the successors and permitted assigns of the parties
hereto.
3.7 Captions. The captions to sections of this Agreement have
been inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.
3.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.9 Costs And Attorneys' Fees. In the event that any action,
suit or other proceeding is instituted concerning or arising out of this
Agreement or any transaction contemplated hereunder, the prevailing party shall
recover all of such party's costs and attorneys' fees incurred in each such
action, suit or other proceeding, including any and all appeals or petitions
therefrom.
3.10 Adjustments for Stock Splits, Etc. Wherever in this
Agreement there is a reference to a specific number of shares of Acquirer Common
Stock, then, upon the occurrence of any subdivision, combination or stock
dividend of such stock occurring after the date of this Agreement, the specific
number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the affect on the outstanding shares of such
stock by such subdivision, combination or stock dividend.
3.11 Waiver of Jury Trial. Each party hereto hereby waives its
rights to a jury trial of any claim or cause of action based upon or arising out
of this Agreement or the subject matter hereof. The scope of this waiver is
intended to be all-compassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including,
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. This Section 3.11 has been fully
discussed by each of the parties hereto and
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these provisions shall not be subject to any exceptions. Each party hereto
hereby further represents and warrants that such party has reviewed this waiver
with its legal counsel, and that such party knowingly and voluntarily waives its
jury trial rights following consultation with legal counsel. This waiver is
irrevocable, meaning that it may not be modified either orally or in writing,
and this waiver shall apply to any subsequent amendments, supplements or
modifications to (or assignments of) this Agreement. In the event of litigation,
this Agreement may be filed as a written consent to a trial (without a jury) by
the court.
[Remainder of Page Intentionally Left Blank]
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In Witness Whereof, the parties hereto have executed this Agreement as
of the date first above written.
NETSCREEN TECHNOLOGIES, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
COMPANY HOLDER
________________________________________________________
Print Stockholder Name
________________________________________________________
Signature of Stockholder (or Authorized Signatory)
________________________________________________________
Title of Authorized Signatory (if Applicable)
[Signature Page to Registration Rights Agreement]
<PAGE>
EXHIBIT A
Schedule of Company Holders