Agreement and Plan of Merger - Stockpoint Inc. and ScreamingMedia Inc.
AGREEMENT AND PLAN OF MERGER
AMONG STOCKPOINT, INC.,
SCREAMINGMEDIA INC.
AND
SCRM MERGER CORP.
Dated as of July 23, 2001
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.........................................................1
1.1 Definitions.......................................................1
1.2 Accounting Terms.................................................10
1.3 Singular and Plural Forms........................................11
1.4 Gender Forms.....................................................11
ARTICLE II THE MERGER........................................................11
2.1 The Merger.......................................................11
2.2 Closing..........................................................11
2.3 Effective Time of the Merger.....................................11
2.4 Certificate of Incorporation.....................................11
2.5 By-Laws..........................................................12
2.6 Directors........................................................12
2.7 Officers.........................................................12
ARTICLE III CONVERSION OF SHARES.............................................12
3.1 Effect on Capital Stock..........................................12
3.2 Surrender of Certificates Representing Shares....................15
3.3 Dividends; Transfer Taxes........................................16
3.4 No Fractional Shares.............................................16
3.5 Closing of Company Transfer Books................................17
3.6 Intentionally Omitted............................................17
3.7 Warrants.........................................................17
3.8 Purchase Price Adjustment........................................18
3.9 Holdback.........................................................19
3.10 Reallocation of Consideration....................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................21
4.1 Organization and Good Standing...................................21
4.2 Corporate Records................................................21
4.3 Corporate Power and Authority....................................21
4.4 Intentionally Omitted............................................22
4.5 Capitalization...................................................22
4.6 Subsidiaries.....................................................23
4.7 No Violation.....................................................23
4.8 Approvals........................................................23
4.9 Financial Statements; No Undisclosed Liabilities.................24
4.10 Absence of Certain Changes.......................................24
4.11 Leases of Personal Property; Material Contracts; No Default......26
4.12 Intellectual Property Matters....................................27
4.13 Litigation.......................................................30
4.14 Compliance with Laws.............................................30
4.15 Taxes............................................................30
4.16 Insurance........................................................33
4.17 Employee Benefit Plans...........................................33
4.18 Environmental Matters............................................35
4.19 Labor Matters....................................................35
4.20 Intentionally Omitted............................................36
4.21 Personal Property................................................36
4.22 Real Property....................................................36
4.23 Sales Representatives and Customers..............................36
4.24 Accounts Receivable..............................................37
4.25 Inventory........................................................37
4.26 Finders' or Advisors' Fees.......................................37
4.27 Related-Party Transactions.......................................37
4.28 Intentionally Omitted............................................38
4.29 Disclosure.......................................................38
ARTICLE V INTENTIONALLY OMITTED..............................................38
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND
ACQUISITION SUB...................................................38
6.1 Organization and Good Standing...................................38
6.2 Corporate Records................................................38
6.3 Corporate Power and Authority....................................39
6.4 SEC Documents....................................................39
6.5 Finders' or Advisors' Fees.......................................40
6.6 No Violation.....................................................40
6.7 Acquisition Sub..................................................40
6.8 Approvals........................................................40
ARTICLE VII COVENANTS OF THE COMPANY.........................................40
7.1 Conduct of the Company...........................................41
7.2 Consents and Approvals...........................................42
7.3 Stockholder Approval.............................................43
7.4 No Solicitation of Transaction...................................43
7.5 Audited Financials...............................................44
7.6 Safe Deposit Boxes and Bank Accounts.............................44
ARTICLE VIII INTENTIONALLY OMITTED...........................................44
ARTICLE IX COVENANTS OF THE PURCHASER AND ACQUISITION SUB PENDING
THE CLOSING.......................................................44
9.1 Consents and Approvals...........................................44
9.2 Proxy Assistance.................................................44
9.3 Tender Offer Terms...............................................44
9.4 Payments to Option Holders.......................................45
ARTICLE X CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER
AND ACQUISITION SUB................................................45
10.1 Representations and Warranties True..............................45
10.2 Performance of Covenants.........................................45
10.3 No Governmental Proceeding.......................................46
10.4 Approval of Stockholders.........................................46
10.5 Intentionally Omitted............................................46
10.6 Certificates.....................................................46
10.7 Consents.........................................................46
10.8 Employment Agreements............................................46
10.9 Intentionally Omitted............................................46
10.10 Payment of Company Indebtedness..................................46
10.11 No Material Adverse Effect.......................................47
10.12 Delivery of Good Standing Certificates and Corporate
Resolutions......................................................47
10.13 Notes Receivable.................................................48
10.14 Intentionally Omitted............................................48
10.15 Intentionally Omitted............................................48
10.16 Deloitte & Touche Audit Opinion..................................48
10.17 Certificate of Financial Condition...............................48
10.18 Intentionally Omitted............................................49
10.19 Options/Warrants.................................................49
10.20 Dissenting Shares................................................49
10.21 Regulation D.....................................................50
10.22 Company Debentures...............................................50
10.23 Software Licenses................................................50
10.24 Settlement Agreement.............................................50
10.25 Termination of Registration Rights Agreements....................50
10.26 Voting Agreements................................................51
10.27 Termination of Certain Arrangements..............................51
10.28 Director Resignations............................................51
ARTICLE XI CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY............51
11.1 Representations and Warranties True..............................51
11.2 Performance of Covenants.........................................51
11.3 No Governmental Proceeding.......................................51
11.4 Certificates.....................................................52
11.5 Delivery of Good Standing Certificates and Corporate
Resolutions......................................................52
11.6 Payment of Company Indebtedness..................................52
11.7 Consents.........................................................53
11.8 Settlement Agreement.............................................53
ARTICLE XII INDEMNITY........................................................53
12.1 Indemnification..................................................53
12.2 Notice of Claims.................................................55
12.3 Matters Involving Third Parties..................................55
12.4 Release..........................................................56
12.5 Stockholder Agent................................................56
12.6 Sole Remedy......................................................58
ARTICLE XIII TERMINATION, AMENDMENT AND WAIVER...............................58
13.1 Termination......................................................58
13.2 Effect of Termination............................................59
13.3 Amendment........................................................59
13.4 Extension; Waiver................................................60
ARTICLE XIV OTHER AGREEMENTS.................................................60
14.1 Best Efforts.....................................................60
14.2 Access to Information............................................60
14.3 Public Announcements.............................................61
14.4 Notices of Certain Events........................................61
14.5 Expenses.........................................................62
14.6 Specific Performance; Injunctive Relief..........................62
14.7 Director and Officer Liability...................................62
14.8 Tender Offer Terms and Consummation of Tender Offer..............64
14.9 June 2001 Company Financials.....................................64
ARTICLE XV MISCELLANEOUS.....................................................64
15.1 Entire Agreement.................................................64
15.2 Assignment.......................................................64
15.3 Governing Law....................................................64
15.4 Arbitration......................................................65
15.5 Headings and Exhibits............................................66
15.6 Survival of Representations, Warranties and Covenants............66
15.7 Notices..........................................................67
15.8 Counterparts.....................................................68
15.9 Severability.....................................................68
SCHEDULES
Schedule 1.1 Stock Options
Schedule 3.7 Warrants
Schedule 4.1 Foreign Jurisdictions of the Company
Schedule 4.5 Registration Rights
Schedule 4.6 Subsidiaries
Schedule 4.7 Violations
Schedule 4.9(a) Financial Statements
Schedule 4.9(b) Liabilities
Schedule 4.10(a) Absence of Certain Changes since December 31, 2000
Schedule 4.10(b) Absence of Certain Changes since June 30, 2001
Schedule 4.11(a) Personal Property Leases
Schedule 4.11(b) Contracts
Schedule 4.11(c) Breaches of Contracts
Schedule 4.12(a) Intellectual Property
Schedule 4.12(b) Proprietary Software
Schedule 4.12(c) License Agreements
Schedule 4.12(d) Violations of Intellectual Property
Schedule 4.12(e) Trademark Policing
Schedule 4.12(f) Intellectual Property Agreements
Schedule 4.15 Taxes
Schedule 4.16 Insurance
Schedule 4.17(a) Employee Plans
Schedule 4.17(e) Accelerated Benefits
Schedule 4.19 Labor Matters
Schedule 4.21 Personal Property
Schedule 4.22(b) Real Property Leases
Schedule 4.23 Customers
Schedule 4.24 Accounts Receivables
Schedule 4.26 Finders' or Advisors' Fees
Schedule 4.27 Related Parties Transactions
Schedule 6.1 Foreign Jurisdictions of the Purchaser and Acquisition Sub
Schedule 10.8(a) Employees Subject to Employment Agreements
Schedule 10.8(b) Employees Subject to Offer Letters
Schedule 12.1(a) Company Indemnification
Schedule 14.7(a) Indemnification Agreements
EXHIBITS
Exhibit A Deferred Payables
Exhibit B Form of Purchaser Warrant
Exhibit C Form of Employment Agreements
Exhibit D Form of Offer Letters
Exhibit E Form of Voting Agreement
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 23, 2001, is
made and entered into among SCREAMINGMEDIA INC., a Delaware corporation
(the "Purchaser"), SCRM MERGER CORP., a Delaware corporation ("Acquisition
Sub") and STOCKPOINT, INC., a Delaware corporation (the "Company").
WHEREAS, the parties desire that on the terms and subject to the
conditions contained in this Agreement, Acquisition Sub merge with and into
the Company, with the Company surviving and becoming a wholly owned
Subsidiary of the Purchaser; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger will be a reorganization described in Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter contained, and intending to be legally bound, the
parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, shall have
the following meanings:
(a) "AAA" has the meaning assigned to it in Section
15.4(a).
(b) "Acquisition Sub Common Stock" means the common
stock, par value $0.01 per share, of the Acquisition Sub.
(c) "Action" means any action, claim, dispute,
proceeding, suit or investigation (whether civil, criminal, administrative
or investigative), or any appeal therefrom.
(d) "Affiliate" means any Person, a spouse of such
Person, any child or parent sharing the same household with such Person,
any director or officer of such Person, and any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person.
(e) "Aggregate Consideration" means the sum of the
Stock Consideration, the Cash Consideration, the Purchaser Warrants and the
Retained Debt.
(f) "Agreement" means this Agreement and Plan of
Merger and shall include all of the Schedules and Exhibits attached hereto.
(g) "Alternative Transaction" has the meaning
assigned to it in Section 7.4.
(h) "Annual Financial Statements" has the meaning
assigned to it in Section 4.9(a).
(i) "Approval" means any approval, authorization,
consent, license, franchise, order, registration, permit or other
confirmation of or by, or filing with, a Person.
(j) "Approval Payments" means any amounts paid or
payable by the Company on account of any third party consent or the
occurrence of the change in control of the Company under any agreement.
(k) "Audits" has the meaning assigned to it in
Section 4.15(e).
(l) "Bridge Financing" means any indebtedness
incurred by the Company after the date of this Agreement and prior to the
Closing Date that is not included in the Company Indebtedness.
(m) "Bridge Warrant" means one of those certain
Warrants dated as of December 3, 1999 or March 31, 2000 to purchase an
aggregate of 900,000 shares of the Company Common Stock issued in
consideration of a guarantee of the Company Indebtedness, all of which are
set forth on Schedule 3.7.
(n) "Business Day" means any day other than a
Saturday, a Sunday, a legal holiday in the State of New York or a day on
which commercial banks in the State of New York are permitted or authorized
to close.
(o) "Cash Consideration" means the sum of (A) the
aggregate cash payments made by the Purchaser pursuant to Sections 3.1(a)
and 3.7, (B) the Company Indebtedness, (C) any payments to eliminate the
Company Debentures and (D) payments made by the Purchaser or Acquisition
Sub to repay the Bridge Financing.
(p) "Certificate of Merger" has the meaning assigned
to it in Section 2.3.
(q) "Closing" and "Closing Date" have the meanings
assigned to them in Section 2.2.
(r) "Closing Date Balance Sheet" has the meaning
assigned to it in Section 10.17.
(s) "Code" means the Internal Revenue Code of 1986,
as amended, and the regulations thereunder.
(t) "Company Common Stock" means the common stock,
par value $0.01 per share, of the Company.
(u) "Company Debentures " means the Company's 8.75%
Senior Secured Debentures due 2002.
(v) "Company Employee Plans" has the meaning assigned
to it in Section 4.17(a).
(w) "Company Indebtedness" means all indebtedness and
other amounts owing by the Company as set forth in Section 10.10 (but not
the Company Debentures).
(x) "Company Preferred Stock" means the Company
Series A Preferred Stock, the Company Series B Preferred Stock and the
Company Series C Preferred Stock.
(y) "Company Series A Preferred Stock" means the
Series A Voting Preferred Stock, par value $0.01 per share, of the Company.
(z) "Company Series B Preferred Stock" means the
Convertible Series B Voting Preferred Stock, par value $0.01 per share, of
the Company.
(aa) "Company Series C Preferred Stock" means the
Convertible Series C Voting Preferred Stock, par value $0.01 per share, of
the Company.
(bb) "Condition" means, with respect to a Person, the
business, liabilities, properties, prospects, assets, operations, results
of operations and/or condition (financial or otherwise) of such Person.
(cc) "Constituent Corporations" has the meaning
assigned to it in Section 2.1.
(dd) "Contracts" has the meaning assigned to it in
Section 4.11(b).
(ee) "Damages" means any claim, loss, deficiency
(financial or otherwise), Liability, cost or expense (including, without
limitation, reasonable attorneys' fees, costs and expenses) or damage of
any kind or nature whatsoever.
(ff) "Deferred Payables" means those payables of the
Company owed to the vendors as shown on Exhibit A and in an amount equal to
the value of such payables on the Company's balance sheet as of the Closing
Date less "Discounts" achieved as of the Closing Date. Discounts shall be
computed in a manner consistent with the Discounts column of Exhibit A.
(gg) "DGCL" means the General Corporation Law of the
State of Delaware.
(hh) "Dissenting Shares" means a share of Company
Common Stock or Company Preferred Stock held by any Person who properly
exercises (including timely perfection and timely compliance with all other
requirements under Section 262 of the DGCL) any appraisal rights under the
DGCL with respect to such share.
(ii) "Effective Time" has the meaning assigned to it
in Section 2.3.
(jj) "Employment Agreements" has the meaning assigned
to it in Section 10.8(a).
(kk) "Environmental Laws" means all currently
existing foreign, federal, state and local laws, regulations, rules and
ordinances relating to pollution or protection of the environment or human
health and safety, including, without limitation, laws relating to releases
or threatened releases of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
release, transport or handling of Hazardous Materials and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials, and all laws
relating to endangered or threatened species of fish, wildlife and plants
and the management or use of natural resources.
(ll) "ERISA" has the meaning assigned to it in
Section 4.17(a).
(mm) "Fees" means the legal, accounting and financial
advisory fees, strategic transaction incentives, remaining 2000 incentives,
past due directors' and officers' liability insurance premiums, if any, and
severance obligations incurred by the Company arising in connection with
the Merger, including, without limitation, those identified on Schedule
4.17(e), those under any employment agreement and any payments made
pursuant to the resolution adopted on December 1, 2000 by the Company's
board of directors regarding severance for certain employees.
(nn) "Financial Statements" has the meaning assigned
to it in Section 4.9(a).
(oo) "GAAP" means United States generally accepted
accounting principles.
(pp) "Governmental Authority" means any United States
federal, state, local, foreign or other governmental, administrative or
regulatory authority, body, agency, court, tribunal or similar entity.
(qq) "Hazardous Materials" means any substance: (i)
the presence of which requires or may require investigation or remediation
of any kind under any Environmental Laws; (ii) which is defined as
"hazardous waste," "hazardous material," "residual waste," "hazardous
substance," "pollutant" or "contaminant" under any federal, state or local
statute, regulation, rule or ordinance or amendments thereto including,
without limitation, CERCLA and/or the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 et seq.) or (iii) which is otherwise regulated
pursuant to any applicable Environmental Law.
(rr) "Holdback Amount" has the meaning assigned to it
in Section 3.9.
(ss) "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
thereto.
(tt) "In-The-Money Options" has the meaning assigned
to it in Section 4.5(a).
(uu) "Indemnified Party" means any party entitled to
indemnification pursuant to Section 12.1 hereof.
(vv) "Indemnifying Party" means any party required to
indemnify an Indemnified Party pursuant to Section 12.1 hereof.
(ww) "Indemnitees" has the meaning assigned to it in
Section 14.7(a).
(xx) "Indemnity Basket" has the meaning assigned to
it in Section 12.1(d).
(yy) "Intellectual Property" means trademarks,
service marks, trade names, Internet domain names, designs, logos, slogans,
and general intangibles of like nature, together with all goodwill,
registrations and applications related to the foregoing (collectively,
"Trademarks"); patents and industrial designs (including any continuations,
divisionals, continuations-in-part, renewals, reissues, and applications
for any of the foregoing); copyrights (including any registrations and
applications for any of the foregoing); Software; content contained on any
Company Website; "mask works" (as defined under 17 USC ss. 901) and any
registrations and applications for "mask works"; Trade Secrets; rights of
publicity and privacy relating to the use of the names, likenesses, voices,
signatures and biographical information of real persons.
(zz) "Interim Balance Sheet" means the unaudited
balance sheet of the Company as of June 30, 2001, previously delivered to
the Purchaser.
(aaa) "Interim Financial Statements" means the
Interim Balance Sheet together with the unaudited statement of income of
the Company for the six-month period ended June 30, 2001, previously
delivered to the Purchaser.
(bbb) "Law" means any federal, state, local or
foreign law, statute, rule, regulation, ordinance, standard, requirement,
administrative ruling, order or process (including, without limitation, any
zoning or land use law or ordinance, building code, Environmental Law,
securities, blue sky, civil rights or occupational health and safety law or
regulation) or administrative interpretation thereof, and any court, or
arbitrator's order or process.
(ccc) "Leased Real Property" has the meaning assigned
to it in Section 4.22(b).
(ddd) "Liability" means any debt, liability,
commitment or obligation of any kind, character or nature whatsoever,
whether known or unknown, secured or unsecured, accrued, fixed, absolute,
contingent or otherwise, and whether due or to become due.
(eee) "License Agreements" has the meaning assigned
to it in Section 4.12(c).
(fff) "Lien" means any lien, statutory lien, pledge,
mortgage, security interest, charge, encumbrance, easement, right of way,
covenant, claim, restriction, right, option, conditional sale or other
title retention agreement of any kind or nature.
(ggg) "Major Stockholder" means any and all of the
following individuals: William E. Staib, Harry Hefter and John Pappajohn.
(hhh) "Material Adverse Effect" means, with respect
to a Person, any change or effect that is materially adverse to the
Condition of such Person.
(iii) "Merger" has the meaning assigned to it in
Section 2.1.
(jjj) "Non-Disclosure Agreement" has the meaning
assigned to it in Section 14.2.
(kkk) "NT Notes" has the meaning assigned to it in
Section 10.10(d).
(lll) "Offer Letters" has the meaning assigned to it
in Section 10.8(b).
(mmm) "Option Shares" has the meaning assigned to it
in Section 4.5(a).
(nnn) "Outstanding Shares" has the meaning assigned
to it in Section 4.5(a)
(ooo) "Person" means any individual, partnership,
corporation, limited liability company, association, business trust, joint
venture, governmental entity, business entity or other entity of any kind
or nature, including any business unit of such Person.
(ppp) "Personal Property Leases" has the meaning
assigned to it in Section 4.11(a).
(qqq) "Potential Acquirer" has the meaning assigned
to it in Section 7.4.
(rrr) "Proprietary Software" has the meaning assigned
to it in Section 4.12(b).
(sss) "Purchase Price Adjustment" has the meaning
assigned to it in Section 3.8(b).
(ttt) "Purchaser Common Stock" means the common
stock, par value $0.01 per share, of the Purchaser.
(uuu) "Purchaser Warrant" means a warrant to acquire
shares of Purchaser Common Stock at an exercise price of $6.00 per share,
exercisable at any time within five years of the Closing in the form
attached hereto as Exhibit B.
(vvv) "Real Property Leases" has the meaning assigned
to it in Section 4.22(b).
(www) "Representatives" means with respect to any
Person, its stockholders, employees, officers, directors, investment
bankers, attorneys, agents, representatives or Affiliates.
(xxx) "Retained Debt" means the sum of the
indebtedness of the Company set forth on Schedule 4.9(b).
(yyy) "SEC" has the meaning assigned to it in Section
6.4.
(zzz) "SEC Reports" has the meaning assigned to it in
Section 6.4.
(aaaa) "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations thereto.
(bbbb) "Securities Exchange Act" means the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereto.
(cccc) "Seller Party" and "Seller Parties" have the
meanings assigned to them in Section 12.1(b).
(dddd) "Software" means any and all (a) computer
programs, including any and all software implementation of algorithms,
models and methodologies, whether in source code or object code form, (b)
databases and compilations, including any and all data and collections of
data, and (c) all documentation, including user manuals and training
materials, relating to any of the foregoing, in each case used in or
necessary for the conduct of the Company's or its Subsidiaries' business as
currently conducted or contemplated to be conducted.
(eeee) "Stock Consideration" means the sum of the
aggregate number of shares of Purchaser Common Stock issued pursuant to
Sections 3.1(a) and 3.7.
(ffff) "Stock Option" means any or each of those
options to purchase shares of Company Common Stock outstanding on the date
of this Agreement, all of which are included in the number represented in
Section 4.5(a)(ii) and shown on Schedule 1.1.
(gggg) "Stock Value" means $3.50 (as appropriately
adjusted for any stock split, combination, reorganization,
recapitalization, reclassification, stock dividend, stock distribution or
similar event).
(hhhh) "Stockholder Agent" has the meaning assigned
to it in Section 12.5(a).
(iiii) "Stockholder Approvals" means the approval of
the holders of the Company Series A Preferred Stock, Company Series B
Preferred Stock, Company Series C Preferred Stock, each voting as a
separate class, and all shares of Company Preferred Stock and Company
Common Stock together voting as a single class, at a meeting duly called
and held in accordance with the DGCL.
(jjjj) "Stockholders" means a holder of Company
Common Stock or Company Preferred Stock.
(kkkk) "Subsidiary" when used with respect to any
Person means any other Person, whether incorporated or unincorporated, of
which (i) more than fifty percent of the securities or other ownership
interests or (ii) securities or other interests having by their terms
ordinary voting power to elect more than fifty percent of the board of
directors or others performing similar functions with respect to such
corporation or other organization, is directly owned or controlled by such
Person or by any one or more of its Subsidiaries.
(llll) "Superior Offer" has the meaning assigned to
it in Section 7.4.
(mmmm) "Surviving Corporation" has the meaning
assigned to it in Section 2.1.
(nnnn) "Tax" means any United States federal, state
or local or foreign income, gross receipts, license, severance, occupation,
premium, environmental (including taxes under Code Section 59A), customs,
duties, profits, disability, registration, alternative or add-on minimum,
estimated, withholding, payroll, employment, unemployment insurance, social
security (or similar), excise, sales, use, value-added, occupancy,
franchise, real property, personal property, business and occupation,
windfall profits, capital stock, stamp, transfer, workmen's compensation or
other tax, fee or imposition of any kind whatsoever, including any
interest, penalties, additions, assessments or deferred liability with
respect thereto, whether disputed or not.
(oooo) "Tax Indemnification Agreements" has the
meaning assigned to it in Section 4.15(m).
(pppp) "Tax Law" means the Law (including any
applicable regulations or any administrative pronouncement) of any
Governmental Authority relating to any Tax.
(qqqq) "Tax Period" means with respect to any Tax,
the period for which the Tax is reported as provided under the applicable
Tax Law.
(rrrr) "Tax Return" means any federal, state, local
or foreign return, declaration, report, claim for refund, amended return,
declaration of estimated Tax or information return or statement relating to
Taxes, and any schedule, exhibit, attachment or other materials submitted
with any of the foregoing, and any amendment thereto.
(ssss) "Third Party Claim" has the meaning assigned
to it in Section 12.3(a).
(tttt) "Trade Secrets" means any and all technology,
trade secrets and other confidential information, know-how, inventions,
proprietary processes, formulae, algorithms, models, and methodologies held
for use or used in or necessary for the conduct of the Company's or its
Subsidiaries' business as currently conducted or contemplated to be
conducted.
(uuuu) "Treasury Regulations" has the meaning
assigned to it in Section 4.15(o).
(vvvv) "Voting Agreement" means the agreement by a
Major Stockholder to, among other things, vote in favor of the Merger,
waive appraisal rights, agree to the provisions of Section 3.2 or 3.7, as
applicable, consent to the appointment of the Stockholder Agent, and the
release in Section 12.4 in the form attached hereto as Exhibit E.
(wwww) "Warrant" means a warrant to purchase shares
of the Company's Common Stock pursuant to a written warrant agreement and
set forth on Schedule 3.7.
(xxxx) "Warrant Shares" has the meaning assigned to
it in Section 4.5.
(yyyy) "Wells Fargo" has the meaning assigned to it
in Section 10.10(a).
1.2 Accounting Terms. All accounting terms not specifically
defined in this Agreement shall be construed in accordance with GAAP
consistently applied.
1.3 Singular and Plural Forms. The use herein of the singular form
also denotes the plural form, and the use of the plural form herein also
denotes the singular form, as in each case the context may require.
1.4 Gender Forms. The use herein of any gender word (such as "he"
or "his") includes both the male and female genders.
ARTICLE II
THE MERGER
2.1 The Merger. Subject to the terms and conditions set forth in
this Agreement and in accordance with the DGCL, at the Effective Time,
Acquisition Sub shall be merged with and into the Company (together with
Acquisition Sub, the "Constituent Corporations") in accordance with this
Agreement and the separate existence of Acquisition Sub shall cease (the
"Merger"). The Company shall survive the Merger and the Company shall
become a wholly owned Subsidiary of the Purchaser and shall continue to be
governed by the laws of the State of Delaware (as such, the "Surviving
Corporation"). The Merger shall have the effects set forth in Section 259
of the DGCL.
2.2 Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four
Times Square, New York, New York, as soon as practicable, but in any event
within three Business Days after the day on which the last to be fulfilled
or waived of the conditions set forth in Articles X and XI (other than
those conditions that by their nature are to be fulfilled at the Closing,
but subject to the fulfillment or waiver of such conditions) shall be
fulfilled or waived in accordance with this Agreement or (ii) at such other
place and time or on such other date as the parties may agree in writing
(the "Closing Date").
2.3 Effective Time of the Merger. The Merger shall become
effective on the date and at the time at which a properly executed
certificate of merger (the "Certificate of Merger") is duly filed with the
Secretary of State of the State of Delaware, or at such later date and time
as may be specified therein. The Certificate of Merger filing shall be made
as soon as practicable on or after the Closing Date. When used in this
Agreement, the term "Effective Time" means the date and time on which such
Certificate of Merger is so filed or such later time as the parties shall
designate therein.
2.4 Certificate of Incorporation. The Certificate of Incorporation
of Acquisition Sub as in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation
unless and until amended as provided by Law and the Certificate of
Incorporation, except that Article One thereof shall provide that the name
of the Surviving Corporation shall be: "Stockpoint, Inc."
2.5 By-Laws. The by-laws of Acquisition Sub as in effect
immediately prior to the Effective Time shall be the by-laws of the
Surviving Corporation unless and until amended in accordance with their
terms and the Certificate of Incorporation of the Surviving Corporation.
2.6 Directors. The directors of Acquisition Sub at the Effective
Time shall be the initial directors of the Surviving Corporation and shall
hold office from the Effective Time until their respective successors are
duly elected or appointed and qualify in the manner provided in the
Certificate of Incorporation and by-laws of the Surviving Corporation or as
otherwise provided by Law.
2.7 Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate
of Incorporation and by-laws of the Surviving Corporation, or as otherwise
provided by Law.
ARTICLE III
CONVERSION OF SHARES
3.1 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any stockholder of either
of the Constituent Corporations:
(a) Conversion of Company Common Stock and Company
Preferred Stock.
(i) Each share of Company Series A Preferred
Stock issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares or Company Series A Preferred
Stock to be cancelled in accordance with Section 3.1(b) hereof)
shall, subject to a Purchase Price Adjustment, be converted into
the right to receive 1.756903125 (or 1.785715625 if Section 3.10
applies) shares of Purchaser Common Stock and $0.10084375 (or
$0.00 if Section 3.10 applies) in cash by good check; provided,
however, that, subject to a Purchase Price Adjustment, in no event
will the aggregate consideration issued upon conversion of all
shares of Company Series A Preferred Stock exceed 562,209 (or
571,429 if Section 3.10 applies) shares of Purchaser Common Stock
and $32,270 (or $0.00 if Section 3.10 applies) in cash. In each
case, as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, reclassification, stock
dividend, stock distribution or similar event.
(ii) Each share of Company Series B Preferred
Stock issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares or Company Series B Preferred
Stock to be cancelled in accordance with Section 3.1(b) hereof)
shall, subject to a Purchase Price Adjustment, be converted into
the right to receive 1.7569000821 (or 1.78571378 if Section 3.10
applies) shares of Purchaser Common Stock and $0.100841822 (or
$0.00 if Section 3.10 applies) in cash by good check; provided,
however, that, subject to a Purchase Price Adjustment, in no event
will the aggregate consideration issued upon conversion of all
shares of Company Series B Preferred Stock exceed 496,711 (or
504,857 if Section 3.10 applies) shares of Purchaser Common Stock
and $28,510 (or $0.00 if Section 3.10 applies) in cash. In each
case, as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, reclassification, stock
dividend, stock distribution or similar event.
(iii) Each share of Company Series C Preferred
Stock issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares or Company Series C Preferred
Stock to be cancelled in accordance with Section 3.1(b) hereof)
shall, subject to a Purchase Price Adjustment, be converted into
the right to receive 1.85300192 shares of Purchaser Common Stock
and $1.144500844 in cash by good check; provided, however, that,
subject to a Purchase Price Adjustment, in no event will the
aggregate consideration issued upon conversion of all shares of
Company Series C Preferred Stock exceed 1,432,843 shares of
Purchaser Common Stock and $884,991 in cash. In each case, as
appropriately adjusted for any stock split, combination,
reorganization, recapitalization, reclassification, stock
dividend, stock distribution or similar event.
(iv) Each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other
than Dissenting Shares or Company Common Stock to be cancelled in
accordance with Section 3.1(b) hereof) shall, subject to the
Purchase Price Adjustment, be converted into the right to receive
0.2921318109 (or 0.298124802 if Section 3.10 applies) shares of
Purchaser Common Stock, a Purchaser Warrant to acquire 0.097460622
shares of Purchaser Common Stock and $0.020975197 (or $0.00 if
Section 3.10 applies) in cash by good check; provided, however,
that, subject to a Purchase Price Adjustment, in no event will the
aggregate consideration issued upon conversion of all shares of
Company Common Stock exceed 1,049,102 (or 1,070,624 if Section
3.10 applies) shares of Purchaser Common Stock, Purchaser Warrants
to acquire 350,000 shares of Purchaser Common Stock and $75,326
(or $0.00 if Section 3.10 applies) in cash, plus the number of
shares of Purchaser Common Stock and Purchaser Warrants as shall
be issuable at the above exchange rate for any Option Shares
issued after the date hereof and prior to the Closing Date upon
exercise of the In-The-Money Options. In each case, as
appropriately adjusted for any stock split, combination,
reorganization, recapitalization, reclassification, stock
dividend, stock distribution or similar event.
(v) Each of the shares of Company Common Stock
or Company Preferred Stock converted in accordance with this
Section 3.1(a) shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist,
and each holder of a certificate representing any such shares of
Company Common Stock or Company Preferred Stock shall cease to
have any rights with respect thereto, except the right to receive
the consideration set forth in Section 3.1(a), upon the surrender
of such certificate in accordance with Section 3.2 hereof.
(b) Cancellation of Treasury Stock. Each share of
Company Common Stock or Company Preferred Stock held by any Subsidiary of
the Company or in the treasury of the Company, if any, immediately prior to
the Effective Time shall be cancelled and retired and cease to exist.
(c) Conversion of Acquisition Sub Common Stock. Each
share of Acquisition Sub Common Stock issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully
paid and nonassessable share of common stock, par value $0.01 per share, of
the Surviving Corporation with the same rights, powers and privileges as
the shares so converted and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
(d) Appraisal Rights. Notwithstanding anything in
this Agreement to the contrary, Dissenting Shares shall not be converted
into or be exchangeable for the right to receive the consideration
otherwise payable pursuant to this Section 3.1, unless and until holders of
Dissenting Shares shall have failed to perfect or shall have effectively
withdrawn or lost their rights to appraisal under the DGCL. The Company
shall give the Purchaser (i) immediate oral notice followed by prompt
written notice of any written demands for appraisal of any shares of
Company Common Stock or Company Preferred Stock, attempted withdrawals of
any such demands and any other instruments served pursuant to the DGCL and
received by or on behalf of the Company relating to rights of appraisal and
(ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal of shares of Company Common Stock or
Company Preferred Stock under the DGCL. Neither the Company nor the
Surviving Corporation shall, except with the prior written consent of the
Purchaser in each instance, voluntarily make any payment with respect to,
or settle or offer to settle, any such demand for payment. If any holder of
Dissenting Shares shall fail to perfect or shall have effectively withdrawn
or lost the right to appraisal, the shares of Company Common Stock or
Company Preferred Stock held by such Stockholder shall thereupon be treated
as though such shares had been converted into the right to receive the
consideration pursuant to Section 3.1(a) hereof.
3.2 Surrender of Certificates Representing Shares. At the
Effective Time, each Stockholder, upon surrender to the Purchaser of one or
more certificates in valid form representing the shares of Company Common
Stock or Company Preferred Stock, as the case may be, duly endorsed in
blank or accompanied by duly executed stock powers, with all required stock
transfer tax stamps affixed, shall be entitled to receive the consideration
set forth in Section 3.1(a) in respect of the shares of capital stock
represented by such certificates, subject to the arrangements described in
Section 3.9. Until so surrendered, each such certificate shall, after the
Effective Time, represent for all purposes only the right to receive such
consideration as set forth in Section 3.1 or to receive payment for the
Dissenting Shares in accordance with Section 262 of the DGCL. By tendering
their shares of Company Common Stock or Company Preferred Stock, as the
case may be, and by accepting the consideration set forth in Section 3.1,
each Stockholder agrees (a) that, in accordance with Section 3.9, the
Purchaser shall retain 10% of the consideration otherwise deliverable to
such Stockholder, (b) to the indemnification provisions of Article XII, and
(c) that the shares of Purchaser Common Stock and the Purchaser Warrants
that such Stockholder shall receive (whether in the Merger or upon exercise
of the Purchaser Warrants) shall not be sold, transferred, pledged,
disposed of or encumbered for the period beginning on the Closing Date and
ending (i) as to 50% of such securities, twelve months from the Closing
Date, and (ii) as to the remaining 50% of such securities, in equal amounts
on a monthly basis beginning thirteen months from the Closing Date and
ending eighteen months from the Closing Date. Each certificate representing
such shares of Purchaser Common Stock and the Purchaser Warrants shall bear
a legend stating:
"THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS AND THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SALE
OR TRANSFER IS EFFECTIVE UNDER THE ACT OR (II) THE TRANSACTION IS EXEMPT
FROM REGISTRATION UNDER THE ACT, AND IF THE ISSUER REQUESTS, AN OPINION
SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY
COUNSEL."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
CONTRACTUAL HOLDING PERIOD SET FORTH IN THAT CERTAIN AGREEMENT AND PLAN OF
MERGER AMONG STOCKPOINT, INC., THE ISSUER AND SCRM MERGER CORP., DATED AS
OF JULY 23, 2001. PRIOR TO THE EXPIRATION OF SUCH HOLDING PERIOD, SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR
ASSIGNMENT. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED
WITH ITS TRANSFER AGENT) WHEN THE HOLDING PERIOD HAS EXPIRED."
3.3 Dividends; Transfer Taxes. No dividends that are declared on
Purchaser Common Stock will be paid to Persons entitled to receive
certificates representing shares of Purchaser Common Stock until such
Persons surrender their certificates representing shares of Company Common
Stock or Company Preferred Stock. Upon such surrender, there shall be paid
to the Person in whose name the certificates representing such shares of
Purchaser Common Stock shall be issued, any dividends which shall have
become payable with respect to such shares of Purchaser Common Stock
between the Effective Time and the time of such surrender. In no event
shall the Person entitled to receive such dividends be entitled to receive
interest on such dividends. If any certificates for any shares of Purchaser
Common Stock are to be issued in a name other than that in which the
certificate representing shares of Company Common Stock or Company
Preferred Stock surrendered in exchange therefor is registered, it shall be
a condition to such exchange that the Person requesting such exchange shall
pay to the Purchaser any transfer or other Taxes required by reason of the
issuance of certificates for such shares of Purchaser Common Stock in a
name other than that of the registered holder of the certificate
surrendered or shall establish to the satisfaction of the Purchaser that
such Tax has been paid or is not applicable. Notwithstanding the foregoing,
(i) neither the Purchaser nor any party hereto shall be liable to a holder
of shares of Company Common Stock or Company Preferred Stock for any shares
of Purchaser Common Stock or dividends thereon, in each case, delivered to
a public official pursuant to applicable escheat Laws, and (ii) any shares
of Purchaser Common Stock held by the Purchaser prior to surrender of
certificates representing shares of Company Common Stock or Company
Preferred Stock shall not be deemed issued.
3.4 No Fractional Shares. No certificates or scrip representing
fractional shares of Purchaser Common Stock shall be issued upon the
surrender for exchange of certificates representing shares of Company
Common Stock or Company Preferred Stock pursuant to this Article III and no
dividend, stock split or other change in the capital structure of Purchaser
shall relate to any fractional security, and such fractional interests
shall not entitle the owner thereof to vote or to any rights of a security
holder. In lieu of any such fractional shares of Purchaser Common Stock,
each holder of shares of Company Common Stock or Company Preferred Stock
who would otherwise have been entitled to a fraction of a share of
Purchaser Common Stock upon surrender of stock certificates for exchange
pursuant to this Article III will be paid cash upon such surrender in an
amount equal to the product of such fraction multiplied by the Stock Value.
For purposes of this Section 3.4, shares of Company Common Stock or Company
Preferred Stock of any holder represented by two or more certificates may
be aggregated, and in no event shall any holder be paid an amount of cash
in respect of more than one share of Purchaser Common Stock.
3.5 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock or Company Preferred Stock shall thereafter
be made. If, after the Effective Time, certificates representing shares of
Company Common Stock or Company Preferred Stock (other than Dissenting
Shares) are presented to the Surviving Corporation, they shall be cancelled
and exchanged for the consideration set forth in Section 3.1(a).
3.6 Intentionally Omitted.
3.7 Warrants.
(a) At the Effective Time and subject to a Purchase
Price Adjustment, each Bridge Warrant set forth on Schedule 3.7 which is
outstanding and unexercised at the Effective Time shall be converted, for
each share of Company Common Stock into which the Bridge Warrant is
exercisable, into the right to receive 0.624676667 (or 0.581467777 if
Section 3.10 applies) shares of Purchaser Common Stock and $0.035855556 (or
$0.187084444 if Section 3.10 applies) in cash by good check; provided,
however, that, subject to a Purchase Price Adjustment, in no event will the
aggregate consideration issued upon conversion of all Bridge Warrants
exceed 562,209 (or 523,321 if Section 3.10 applies) shares of Purchaser
Common Stock and $32,270 (or $168,376 if Section 3.10 applies) in cash. In
each case, as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, reclassification, stock dividend, stock
distribution or similar event.
(b) By tendering their Bridge Warrants and by
accepting the consideration set forth in Section 3.7, each holder of a
Bridge Warrant agrees (x) that, in accordance with Section 3.9, the
Purchaser shall retain 10% of the consideration otherwise deliverable to
such holder of a Bridge Warrant, (y) to the indemnification provisions of
Article XII, and (z) that the shares of Purchaser Common Stock that such
holder of a Bridge Warrant shall receive shall not be sold, transferred,
pledged, disposed of or encumbered for the period beginning on the Closing
Date and ending (i) as to 50% of such securities, twelve months from the
Closing Date, and (ii) as to the remaining 50% of such securities, in equal
amounts on a monthly basis beginning thirteen months from the Closing Date
and ending eighteen months from the Closing Date. Each certificate
representing such shares of Purchaser Common Stock shall bear a legend
stating:
"THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS AND THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SALE
OR TRANSFER IS EFFECTIVE UNDER THE ACT OR (II) THE TRANSACTION IS EXEMPT
FROM REGISTRATION UNDER THE ACT, AND IF THE ISSUER REQUESTS, AN OPINION
SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY
COUNSEL."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
CONTRACTUAL HOLDING PERIOD SET FORTH IN THAT CERTAIN AGREEMENT AND PLAN OF
MERGER AMONG STOCKPOINT, INC., THE ISSUER AND SCRM MERGER CORP., DATED AS
OF JULY 23, 2001. PRIOR TO THE EXPIRATION OF SUCH HOLDING PERIOD, SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR
ASSIGNMENT. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED
WITH ITS TRANSFER AGENT) WHEN THE HOLDING PERIOD HAS EXPIRED."
3.8 Purchase Price Adjustment.
(a) The Aggregate Consideration has been calculated
based upon several factors, including the assumptions (i) that the
Company's net current liabilities (calculated in accordance with Section
10.17(a) and applying the financial accounting policies and practices of
the Company, which policies and practices comply with GAAP) will not, on
the Closing Date, exceed $7,700,000, (ii) that the Company's debt
(calculated in accordance with Section 10.17(b) and applying the financial
accounting policies and practices of the Company, which policies and
practices comply with GAAP) will not, on the Closing Date, exceed
$13,172,000, (iii) that the Fees will not, on the Closing Date, exceed
$1,500,000, (iv) that any repayment of the Bridge Financing will not
increase the Aggregate Consideration and (v) that the "Discounts" to the
Deferred Payables will, on the Closing Date, equal or exceed $339,574.
Discounts shall be computed in a manner consistent with the Discounts
column of Exhibit A.
(b) Based on the procedures set forth in Section
10.17, in the event that the Company does not meet one or more financial
conditions set forth in Sections 3.8(a)(i), (ii), (iii) or (iv), the
Aggregate Consideration shall be reduced, on a dollar-for-dollar basis, in
an amount equal to the difference between the actual amount of such
liabilities, debt, Fees or repayments of Bridge Financing, as the case may
be, and the agreed upon amount set forth in Section 3.8(a)(i), (ii), (iii)
or (iv) respectively. In the event that the "Discounts" to the Deferred
Payables exceed $339,574, the Aggregate Consideration shall be increased at
the rate of $0.50 for each $1.00 (up to $100,000 in the aggregate) that the
"Discounts" to the Deferred Payables exceed $339,574 (up to $539,574). In
the event that the "Discounts" to the Deferred Payables are less than
$339,574, the Aggregate Consideration shall be reduced on a
dollar-for-dollar basis in an amount equal to such difference. Any such
adjustment described in this Section 3.8(b) shall be a "Purchase Price
Adjustment.
(c) The Purchase Price Adjustment shall be cumulative
to reflect each of the differences in financial condition described in
Section 3.8(a); provided, however, that the Purchase Price Adjustment shall
not be cumulative or duplicative of any claim against the Holdback Amount.
The Purchase Price Adjustment (x) in excess of $200,000 (the first $200,000
being a claim against, and satisfied from, the Holdback Amount as set forth
in Section 3.9(x)) resulting from the failure to meet the financial
conditions set forth in Section 3.8(a)(i), or (y) resulting from the
failure to meet the financial conditions set forth in Sections 3.8(a)(ii),
(iii), (iv) or (v), shall reduce the Aggregate Consideration as follows:
first, by reducing the amount of Cash Consideration paid pursuant to
Sections 3.1(a)(i), (ii) or (iv) and Section 3.7 on a pro rata basis;
second, by reducing the Stock Consideration (valued at the Stock Value) on
a pro rata basis; third, by reducing the Purchaser Warrants on a pro rata
basis; and, fourth by reducing the amount of Cash Consideration paid
pursuant to Section 3.1(a)(iii) on a pro rata basis. Prior to a reduction
of the Purchaser Warrants, the Purchaser and the Stockholder Agent shall
negotiate, for twenty Business Days, in good faith to determine the value
of each Purchaser Warrant. In the event that agreement is not reached
within twenty Business Days, either the Purchaser or the Stockholder Agent
may avail itself or himself of the procedure set forth in Section 15.4.
3.9 Holdback. Notwithstanding anything contained in this Agreement
to the contrary, the Purchaser shall retain (i) such number of shares of
Purchaser Common Stock as equals 10% of the number otherwise issuable
pursuant to Section 3.1(a) and Section 3.7, (ii) 10% of the Purchaser
Warrants otherwise issuable pursuant to Section 3.1(a)(iv) and (iii) 10% of
the cash otherwise deliverable pursuant to Section 3.1(a) and Section 3.7
(collectively, the "Holdback Amount") for collateral payment of any
post-Closing Purchase Price Adjustment or any indemnification obligations
under Section 12.1. Each holder of Company Common Stock, Company Preferred
Stock or a Bridge Warrant shall be deemed to have contributed their pro
rata share of the Holdback Amount. The Holdback Amount, less any amounts,
if any, deducted as a Purchase Price Adjustment or due to the Purchaser
pursuant to Article XII, shall be delivered pro rata to each holder of
Company Common Stock, Company Preferred Stock or a Warrant on the later of
(i) the one year anniversary of the Closing Date or (ii) if a claim is made
by Buyer Party on or prior to the one year anniversary of the Closing Date,
upon the final, non-appealable resolution of all such claims. The Holdback
Amount shall be applied to (x) a Purchase Price Adjustment for up to
$200,000 resulting from the failure to meet the financial conditions set
forth in Section 3.8(a)(i), with the amount in excess of $200,000 satisfied
in accordance with Section 3.8(c)(x), or (y) any claims of the Purchaser
pursuant to Article XII as follows: first, by applying the amount of Cash
Consideration paid pursuant to Sections 3.1(a)(i), (ii) or (iv) and Section
3.7 on a pro rata basis; second, by applying the Stock Consideration on a
pro rata basis; third, by applying the Purchaser Warrants on a pro rata
basis; and, fourth, by applying the amount of Cash Consideration paid
pursuant to Section 3.1(a)(iii) on a pro rata basis. The shares of
Purchaser Common Stock shall be valued at the Stock Value for purposes of
set off against amounts due to the Purchaser. Prior to applying the
Purchaser Warrants, the Purchaser and the Stockholder Agent shall
negotiate, for twenty Business Days, in good faith to determine the value
of each Purchase Warrant. In the event that agreement is not reached within
twenty Business Days, either the Purchaser or the Stockholder Agent may
avail itself or himself of the procedure set forth in Section 15.4.
3.10 Reallocation of Consideration. In the event that the price of
Purchaser Common Stock at the Effective Time is less than or equal to $1.35
(as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, reclassification, stock dividend, stock
distribution or similar event) and as a result the Company reasonably
believes, solely due to such price being less than or equal to $1.35 (as
appropriately adjusted for any stock split, combination, reorganization,
recapitalization, reclassification, stock dividend, stock distribution or
similar event), that the Merger will not satisfy the requirements of
Section 368(a)(E)(2)(ii) of the Code, then, with the intent that the Merger
will be a reorganization described in Section 368(a) of the Code, the
exchange ratios for the Stock Consideration and the Cash Consideration
shall be adjusted as set forth in Section 3.1(a) and Section 3.7. In the
event that following such adjustment the Company continues to reasonably
believe, solely due to such price being less than or equal to $1.18 (as
appropriately adjusted for any stock split, combination, reorganization,
recapitalization, reclassification, stock dividend, stock distribution or
similar event), that the Merger will not satisfy the requirements of
Section 368(a)(E)(2)(ii) of the Code, then, with the intent that the Merger
will be a reorganization described in Section 368(a) of the Code:
(a) the Purchaser, at its sole option, can increase
the Stock Consideration, either in addition to or in lieu of the Purchaser
Warrants (valuing the Purchaser Warrants using the Black-Scholes model and
assuming 80% volatility), and the exchange ratios set forth in Sections
3(a) shall be appropriately adjusted; or
(b) the Purchaser, at its sole option, can elect to
"gross up" the Stockholders for the tax impact resulting from the Merger
not qualifying as a reorganization described in Section 368(a) of the Code;
or
(c) either the Purchaser or the Company can terminate
this Agreement pursuant to Section 13.1(g).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company hereby represents and warrants to the Purchaser and
Acquisition Sub, as of the date hereof and as of the Closing Date, as
follows:
4.1 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 and has the requisite power and authority and all
governmental licenses, authorizations, consents and approvals required to
own, operate and lease its properties and assets and to conduct its
business as it is now being owned, operated, leased and conducted. The
Company is duly qualified or licensed to do business as a foreign
corporation, and is in good standing as a foreign corporation, in every
jurisdiction in which the failure to be so qualified or licensed or in good
standing would have a Material Adverse Effect on the Company's business or
operations or the Company's ability to consummate the transactions provided
for or contemplated by this Agreement. Schedule 4.1 hereto sets forth a
true and complete list of all foreign jurisdictions in which the Company is
so qualified or licensed and in good standing.
4.2 Corporate Records. Copies of the certificate of incorporation
of the Company, certified by the Secretary of State of the State of
Delaware, and of the by-laws of the Company, certified by the Secretary of
such corporation, heretofore delivered to the Purchaser are true and
complete copies of such instruments as amended to the date of this
Agreement. Such certificate of incorporation and by-laws of the Company are
in full force and effect. The Company is not in violation of any provision
of its certificate of incorporation or by-laws.
4.3 Corporate Power and Authority. The Company has the requisite
corporate power and authority to execute and deliver this Agreement,
perform its obligations hereunder and consummate the transactions
contemplated hereby. Except for the Stockholder Approvals, the execution
and delivery of this Agreement by the Company, the performance by it of its
obligations hereunder and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate
actions on the part of the Company. This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar Laws now or hereafter in
effect relating to creditors' rights generally and subject to general
principles of equity.
4.4 Intentionally Omitted.
4.5 Capitalization.
(a) The authorized capital stock of the Company
consists solely of (x) 75,000,000 shares of Company Common Stock and (y)
5,000,000 shares of Company Preferred Stock of which (a) 320,000 have been
designated Company Series A Preferred Stock, (b) 320,000 have been
designated Company Series B Preferred Stock and (c) 1,179,540 have been
designated as Company Series C Preferred Stock. There are (i) 3,591,194
shares of Company Common Stock, 320,000 shares of Company Series A
Preferred Stock, 282,720 shares of Company Series B Preferred Stock and
773,255 shares of Company Series C Preferred Stock issued and outstanding
(the "Outstanding Shares"); (ii) 3,035,312 shares of Company Common Stock
issuable upon exercise of Stock Options (the "Option Shares") of which
776,469 have an exercise price equal to or less than $1.00 per share of
Company Common Stock (the "In-The-Money Options"); and (iii) 1,645,712
shares of Company Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares"). No shares of Company Common Stock are held as treasury
shares, and no shares of Company Preferred Stock are held as treasury
shares.
(b) All of the issued and outstanding shares of
Company Common Stock and Company Preferred Stock are validly issued, fully
paid and nonassessable and free of preemptive rights and were issued in
compliance with all applicable Laws concerning the issuance of securities.
Except as set forth in Section 4.5(a) above, there are not any shares of
capital stock of the Company issued or outstanding or any options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Company to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock or
securities. There are not any notes, bonds, debentures or other
indebtedness of the Company having the right to vote (or convertible into
or exchangeable for securities having the right to vote) on any matters
upon which Stockholders may vote. Except as provided in the certificates of
designations of the Company Preferred Stock, there are no outstanding
contractual obligations, commitments, understandings or arrangements of the
Company to repurchase, redeem or otherwise acquire or make any payment in
respect of or measured or determined based on the value or market price of
any shares of capital stock of the Company, and there are no irrevocable
proxies with respect to shares of capital stock of the Company. Except as
set forth on Schedule 4.5, there are no agreements or arrangements pursuant
to which the Company is or could be required to register shares of Company
Common Stock or other securities under the Securities Act.
4.6 Subsidiaries. Except as set forth on Schedule 4.6, the Company
does not own, directly or indirectly, any capital stock or other ownership
interest in any corporation, partnership, limited liability company, joint
venture or other business association or entity.
4.7 No Violation. Except for the filing of the Certificate of
Merger and except as set forth on Schedule 4.7, neither the execution and
delivery of this Agreement by the Company, the performance by it of its
obligations hereunder, nor the consummation by it of the transactions
contemplated hereby, will (a) assuming receipt of the Stockholder
Approvals, contravene any provision of the certificate of incorporation or
bylaws of the Company; (b) violate, be in conflict with, constitute a
default under, permit the termination of, cause the acceleration (whether
after the giving of notice or the lapse of time or both) of the maturity
of, any debt or obligation of the Company or binding on the Surviving
Corporation after the Closing, require the consent of any other party to,
constitute a breach of, create a loss of a benefit under, or result in the
creation or imposition of any Lien upon any of the properties or assets of
the Company under, any note, bond, license, mortgage, indenture, lease,
contract, agreement, instrument or commitment relating to the Company to
which it is a party or by which it or any of its assets or properties
constituting part of the business of the Company are bound. Except as set
forth on Schedule 4.7, the Company will not incur any Approval Payments as
a result of this Agreement, the Merger or the transactions contemplated
hereby.
4.8 Approvals.
(a) Except for the filing of the Certificate of
Merger, no declaration, filing or registration with, notice to, nor
Approval of, any Governmental Authority is required to be made, obtained or
given by or with respect to the Company in connection with the execution,
delivery or performance by the Company of this Agreement, the performance
by it of its obligations hereunder or the consummation by it of the
transactions contemplated hereby.
(b) The Company has all material Approvals required
for its operation and the use and ownership or leasing of its properties
and assets that constitute part of the business, as currently operated,
used, owned or leased. All of such Approvals are valid, in full force and
effect and in good standing, except where the failure to be so would not,
individually or in the aggregate, have a Material Adverse Effect on the
Condition of the Company. There is no proceeding pending or, to the
knowledge of the Company, threatened, that disputes the validity of any
such Approval or that is likely to result in the revocation, cancellation
or suspension, or any adverse modification of any such Approval.
4.9 Financial Statements; No Undisclosed Liabilities.
(a) Schedule 4.9(a) includes true, correct and
complete copies of the Company's consolidated balance sheets as of December
31, 1999 and 2000, and the consolidated statements of income for the years
ended December 31, 1999 and 2000 (the "Annual Financial Statements"), and
the Interim Financial Statements (collectively, the "Financial
Statements"). The Financial Statements are based upon the information
contained in the books and records of the Company and fairly present, in
all material respects, the financial condition of the Company as of the
dates thereof and results of operations for the periods referred to
therein. The Annual Financial Statements have been prepared in accordance
with GAAP, consistently applied throughout the periods indicated. The
Interim Financial Statements have been prepared in accordance with GAAP
applicable to unaudited interim financial statements (and thus may not
contain all notes and may not contain prior period comparative data which
are required to be prepared in accordance with GAAP) consistent with the
Annual Financial Statements and reflect all adjustments necessary to a fair
statement of the results for the interim period(s) presented.
(b) Except for the Company Indebtedness, the
indebtedness set forth on Schedule 4.9(b) or as reflected in the Interim
Balance Sheet, the Company does not have, and as a result of the
transactions contemplated by this Agreement, will not have, any Liabilities
(whether absolute, accrued, contingent or otherwise, and whether due or to
become due), except for Liabilities (i) incurred in the ordinary course of
business consistent with past practice since the date of the Interim
Balance Sheet, or (ii) which, individually or in the aggregate, will not
have a Material Adverse Effect on the Condition of the Company.
(c) The minute books and stock record books of the
Company, all of which have been made available by the Company, have been
maintained in accordance with sound business practices. The minute books of
the Company contain accurate and complete records of all meetings held of,
and corporate action taken by, the Stockholders, the Board of Directors,
and committees of the Board of Directors of the Company.
4.10 Absence of Certain Changes.
(a) Except as set forth on Schedule 4.10(a), since
December 31, 2000 and, prior to the date hereof, the Company has conducted
its business in the ordinary course, consistent with past practice, and
there has not been:
(i) any event, occurrence or development which,
individually or in the aggregate, would have a Material Adverse
Effect on the Company, other than as shown on the Interim
Financial Statements;
(ii) except as set forth on Schedule 4.17(e),
any (w) grant of any severance or termination pay to (or amendment
to any such existing arrangement with) any director, officer or
employee of the Company, (x) entering into of any employment,
deferred compensation, supplemental retirement or other similar
agreement (or any amendment to any such existing agreement) with
any director, officer or employee of the Company, (y) increase in,
or accelerated vesting and/or payment of, benefits under any
existing severance or termination pay policies or employment
agreements or (z) increase in or enhancement of any rights or
features related to compensation, bonus or other benefits payable
to directors, officers or senior employees of the Company, in each
case, other than in the ordinary course of business consistent
with past practice.
(b) Except as set forth on Schedule 4.10(b), since
June 30, 2001 and prior to the date hereof, the Company has conducted its
business in the ordinary course, consistent with past practice, and there
has not been:
(i) any declaration, setting aside or payment of
any dividend or other distribution with respect to any shares of
capital stock of the Company or any repurchase, redemption or
other acquisition by the Company of any outstanding shares of
their capital stock or any options, warrants, subscriptions,
calls, rights, convertible securities or other agreements or
commitments which obligate the Company to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital
stock or securities;
(ii) any amendment of any term of any
outstanding security of the Company;
(iii) any transaction or commitment made, or any
contract, agreement or settlement entered into, by (or judgment,
order or decree affecting) the Company relating to its assets or
business (including the acquisition or disposition of any material
amount of assets) or any relinquishment by the Company of any
contract or other right, other than transactions, commitments,
contracts, agreements, settlements or relinquishments in the
ordinary course of business consistent with past practice and
those contemplated by this Agreement;
(iv) any change in any method of accounting or
accounting practice by the Company, except for any such change
which is not material or which is required by reason of a
concurrent change in GAAP; or
(v) any material Tax election made or changed,
any material audit settled or any material amended Tax Returns
filed.
4.11 Leases of Personal Property; Material Contracts; No Default.
(a) Schedule 4.11(a) hereto sets forth a true and
complete list of each lease of personal property to which the Company is a
party or by which it or its properties or assets are bound which provides
for payments in excess of $10,000 per annum and which has a remaining term
in excess of one year (collectively, the "Personal Property Leases"). The
Company has delivered or made available to the Purchaser a true and
complete copy of each of the Personal Property Leases.
(b) Schedule 4.11(b) hereto sets forth a true and
complete list of all agreements to which the Company is a party or by which
it or any of its properties or assets are bound (collectively, the
"Contracts"), of the following types: (i) employment agreements providing
for annual compensation in excess of $50,000 with respect to any employee;
(ii) agreements which limit or restrict the Company or any Affiliate
(including, after the Closing, the Purchaser, the Surviving Corporation and
any Affiliate) from competing in any line of business included in the
business of the Company or otherwise in any other business, or from
carrying on or expanding the nature or geographical scope of the business
of the Company anywhere in the world, or agreements which restrict the
products, product lines or distribution channels in which the Company or
any Affiliate (including, after the Closing, the Purchaser, the Surviving
Corporation or any Affiliate) can compete, other than limitations and
restrictions relating to the use of patents, trademarks, trade names and
copyrights and intellectual property licenses currently used by the
Company; (iii) agreements which limit or restrict the Company and any
Affiliate (including, after the Closing, the Purchaser, the Surviving
Corporation and any Affiliate) from purchasing any raw materials, goods,
supplies, services or products from any Person, including its Subsidiaries
and Affiliates, (iv) sales agency, distribution or manufacturers
representatives' agreements which provide for compensation on a commission
basis which compensation is expected to exceed $50,000 in the twelve month
period ending December 31, 2001; (v) collective bargaining agreements or
other Contracts with any labor union or other labor organization relating
to wages, hours and other conditions of employment in effect as of the date
hereof; (vi) loan agreements, notes, mortgages, indentures, security
agreements and other agreements and instruments relating to the borrowing
of money, in each case pursuant to which the outstanding indebtedness is in
excess of $50,000; (vii) material franchise and broker agreements between
the Company and any other Person; (viii) license agreements between the
Company, as licensee, and each licensor to which the Company has a payment
obligation of more than $50,000 in the aggregate of guaranteed royalties
during the respective remaining terms of such license agreements between
the Company and such licensor; (ix) powers of attorney (other than agency
agreements and powers of attorney entered into in the ordinary course of
business); (x) partnership or joint venture agreements; (xi) agreements
with any Affiliate; and (xii) any other agreement (other than purchase
orders, agreements with third party service providers, "off-the-shelf"
software licenses or arrangements and agreements with vendors and customers
entered into on an arms-length basis in the ordinary course of business)
requiring payments in excess of $100,000 during the remainder of its term.
The Company has delivered or made available to the Purchaser a true and
complete copy of each of the Contracts or other agreements listed on
Schedule 4.11(b) hereto.
(c) Except as set forth on Schedule 4.11(c) hereto,
the Company has performed in all material respects, or is now performing in
all material respects, its obligations under, and is not in default (and
would not by the lapse of time or the giving of notice or both be in
default) under, or in breach or violation of, nor has it received notice of
any asserted claim of a material default by the Company under, or a
material breach or violation by the Company of, any of the Personal
Property Leases or Contracts and, to the knowledge of the Company, the
other party or parties thereto are performing in all material respects and
are not in violation thereunder.
4.12 Intellectual Property Matters.
(a) Schedule 4.12(a) sets forth, for all Intellectual
Property owned by the Company, a complete and accurate list, of all U.S.
and foreign: (i) patents and patent applications; (ii) registered
Trademarks and material unregistered Trademarks; and (iii) copyright
registrations, copyright applications and material unregistered copyrights.
(b) Schedule 4.12(b) lists all contracts for material
Software which is licensed, leased or otherwise used by the Company, and
all Software which is owned by the Company ("Proprietary Software"), and
identifies which Software is owned, licensed, leased, or otherwise used, as
the case may be.
(c) Schedule 4.12(c) sets forth a complete and
accurate list of all agreements granting or obtaining any right to use or
practice any rights under any Intellectual Property, or right to
compensation from the Company by reason of the use, exploitation, or sale
of any Intellectual Property, to which the Company is a party or otherwise
bound, as licensee or licensor thereunder, including, without limitation,
license agreements, settlement agreements and covenants not to sue
(collectively, the "License Agreements").
(d) Except as set forth on Schedule 4.12(d):
(i) the Company owns or has the right to use all
Intellectual Property, free and clear of all liens or other
encumbrances;
(ii) any Intellectual Property owned or used by
the Company has been duly maintained, is valid and subsisting, in
full force and effect and has not been cancelled, expired or
abandoned, and, to the knowledge of the Company, the Company has
not, by any of its acts or omissions, or by acts or omissions of
its affiliates, directors, officers, employees, agents, or
Representatives caused any of its proprietary rights in the
Intellectual Property owned by the Company to be transferred,
diminished, or adversely affected to any material extent;
(iii) the Company has no knowledge that any of
its operations constitute infringement or misappropriation, on any
Intellectual Property right of another Person nor has it received
notice from any third party regarding any actual or potential
infringement or misappropriation by the Company of any
Intellectual Property of such third party, and the Company does
not have any knowledge of any basis for such a claim against the
Company;
(iv) the Company has not received notice from
any third party regarding any assertion or claim challenging the
validity of any Intellectual Property owned or used by the Company
and the Company does not have any knowledge of any basis for such
a claim;
(v) the Company has not licensed or sublicensed
its rights in any Intellectual Property, or received or been
granted any such rights, other than pursuant to the License
Agreements;
(vi) the Company has no knowledge that any third
party is misappropriating, infringing, diluting or violating any
Intellectual Property owned by the Company;
(vii) the License Agreements are valid and
binding obligations of the Company, enforceable in accordance with
their terms, and there exists no event or condition which will
result in a violation or breach of, or constitute a default by the
Company or, to the knowledge of the Company, the other party
thereto, under any such License Agreement;
(viii) the Company takes reasonable measures to
protect the confidentiality of Trade Secrets. To the Company's
knowledge, all of the Trade Secrets owned by the Company are
presently valid and protectable, are not part of the public domain
(except insofar as they are pursuant to written agreements that
adequately protect the Company's proprietary interests in and to
such Trade Secrets), and have not been, nor have been authorized
to be, used, divulged, or appropriated for the benefit of any
third parties or to the detriment of the Company;
(ix) the consummation of the transactions
contemplated hereby will not result in the loss or impairment of
the Company's rights to own, use, or to bring any action for the
infringement of, any of the Intellectual Property, nor will such
consummation require the consent of any third party in respect of
any Intellectual Property; and
(x) all Proprietary Software set forth in
Schedule 4.12(b), was either developed (a) by employees of the
Company within the scope of their employment; or (b) by
independent contractors who have assigned all of their rights to
the Company pursuant to written agreement.
(e) All Trademarks have been in continuous use by the
Company, and the Trademarks listed in Schedule 4.12(a) for which the
Company has obtained or applied for a registration have been continuously
used in the form appearing in, and in connection with the goods and
services listed in, their respective registration certificates. To the
knowledge of the Company, there has been no prior use of such Trademarks by
any third party which would confer upon said third party superior rights in
such Trademarks. Other then as set forth on Schedule 4.12(e), the Company
has adequately policed the material Trademarks against third party
infringement so as to maintain the validity of such Trademarks.
(f) Except as set forth in Schedule 4.12(f), the
Company:
(i) has not granted to any third party any
exclusive rights of any kind (including, without limitation,
exclusivity with regard to categories of advertisers on any World
Wide Web site, territorial exclusivity or exclusivity with respect
to particular versions, implementations or translations of any of
the Intellectual Property), nor has the Company granted any third
party any right to market any of the Intellectual Property under
any private label or "OEM" arrangements;
(ii) does not have any outstanding sales or
advertising contract, commitment or proposal (including, without
limitation, insertion orders, slotting agreements or other
agreements under which the Company has allowed third parties to
advertise on or otherwise be included in a World Wide Web site)
that the Company currently expects to result in any loss to the
Company upon completion or performance thereof;
(iii) does not have any oral contracts or
arrangements for the sale of advertising or any other product or
service; or
(iv) does not employ any employee, contractor or
consultant who is in violation of any term of any written
employment contract, patent disclosure agreement or any other
written contract or agreement relating to the relationship of any
such employee, consultant or contractor with the Company or, to
the knowledge of the Company, any other party because of the
nature of the business conducted by the Company.
4.13 Litigation. There is no Action pending against or affecting
or, to the knowledge of the Company, threatened against or affecting, the
Company or any of its assets, properties or rights before any court or
arbitrator or any other Governmental Authority. To the knowledge of the
Company, there are no facts that would likely result in any such Action.
4.14 Compliance with Laws. The Company is in compliance in all
material respects with all Laws applicable thereto. The Company is not at
present charged with or, to the knowledge of the Company, threatened with
any charge concerning or under any investigation with respect to, any
violation, in any material respect, of any provision of any Law, and the
Company is not in violation of or in default under, and to the knowledge of
the Company, no event has occurred which, with the lapse of time or the
giving of notice or both, would result in the violation of or default
under, the terms of any judgment, decree, order, injunction or writ of any
court or other Governmental Authority.
4.15 Taxes. Except as set forth on Schedule 4.15:
(a) The Company has (x) duly and timely filed (or
there has been filed on its behalf) with the appropriate Governmental
Authorities all Tax Returns required to be filed by it, and all such Tax
Returns are true, correct and complete and (y) timely paid (or properly
accrued on the Company's books) or there has been paid on its behalf all
Taxes due from it or claimed to be due from it by any Governmental
Authority (whether or not set forth on any Tax Return);
(b) The Company has complied in all material respects
with all applicable Tax Laws relating to the payment and withholding of
Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code and employment withholding Taxes) and
has, within the time and manner prescribed by law, withheld and paid over
to the proper Governmental Authority all amounts required to be withheld
and paid over under all applicable Tax Laws;
(c) There are no Liens for Taxes upon the assets or
properties of the Company except for statutory Liens for current Taxes not
yet due;
(d) The Company has not requested any extension of
time within which to file any Tax Return in respect of any taxable year
which has not since been filed, and no outstanding waivers or comparable
consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns has been given by or on behalf of the
Company;
(e) No federal, state, local or foreign audits,
review, or other Actions ("Audits") exist or have been initiated with
regard to any Taxes or Tax Returns of the Company, and the Company has not
received any notice of such an Audit;
(f) All Tax deficiencies which have been claimed,
proposed or asserted against the Company by any taxing authority have been
fully paid, and there are no other Audits by any taxing authority in
progress relating to the Company or the business of the Company, nor has
the Company or to the Company's knowledge, any of its Stockholders,
directors or officers received any notice from any taxing authority that it
intends to conduct such an audit or investigation. No issue has been raised
by any taxing authority in any current or prior examination which, by
application of the same principles, would reasonably be expected to result
in a proposed deficiency for any subsequent Tax Period. The Company is not
subject to any private letter ruling of the Internal Revenue Service or any
comparable ruling of any other taxing authority;
(g) The Company is not required to include in income
any adjustment pursuant to Section 481(a) of the Code, by reason of any
voluntary or involuntary change in accounting method (nor has any
Governmental Authority proposed any such adjustment or change of accounting
method);
(h) No power of attorney has been granted by or with
respect to the Company with respect to any matter relating to Taxes;
(i) The Company has not filed a consent pursuant to
Section 341(f) of the Code (or any predecessor provision) or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code);
(j) The reserves for Taxes (determined in accordance
with GAAP consistently applied) reflected in the Company's books and
records are adequate for the payment of all Taxes incurred by the Company
through the date hereof. Since the date of the Interim Balance Sheet, the
Company has not incurred any liability for Taxes other than in the ordinary
course of business;
(k) The Company is not a party to any agreement,
contract or arrangement that could result, separately or in the aggregate,
in the payment of any "excess parachute payments" within the meaning of
Section 280G of the Code, or in payments that will not be deductible by
operation of Section 162(m) of the Code;
(l) The Company has not requested or received a
ruling or determination from any Governmental Authority or signed a closing
or other agreement with any Governmental Authority, in either case with
respect to Taxes, which would be reasonably likely to result in a Material
Adverse Effect on the Company;
(m) The Company is not a party to, is bound by, or
has any obligation under, any Tax sharing agreement, Tax indemnification
agreement or similar contract or arrangement (collectively, "Tax
Indemnification Agreements"). As of the date of this Agreement, the Company
is not aware of any potential Liability to any Person as a result of, or
pursuant to, any such Tax Indemnification Agreement;
(n) The Company has previously delivered or made
available to the Purchaser complete and accurate copies of each of (a) all
audit reports, letter rulings, technical advice memoranda and similar
documents issued by a Governmental Authority relating to the United States
federal, state, local or foreign Taxes due from or with respect to the
Company, (b) the United States federal income Tax Returns, and those state,
local and foreign income Tax Returns filed by the Company (or on its
behalf) and (c) any closing agreements entered into by the Company with any
Governmental Authority with respect to Taxes. The Company will deliver to
the Purchaser all materials with respect to the foregoing for all matters
arising after the date hereof;
(o) The Company does not have or could have any
Liability for Taxes of another person under Section 1.1502-6 of the
treasury regulations promulgated under the Code (the "Treasury
Regulations") (or any similar provision under state, local or foreign law),
by contract or otherwise;
(p) The Company does not have any deferred
intercompany gain or loss arising as a result of a deferred intercompany
transaction within the meaning of Section 1.1502-13 of the Treasury
Regulations (or similar provision under state, local or foreign law);
(q) The Company has not taken any position on any Tax
Return that could give rise to an understatement of United States federal
income Tax liability within the meaning of Section 6662(d) of the Code;
(r) No claim has been made by a Taxing authority in a
jurisdiction where the Company does not file Tax Returns to the effect that
the Company is or may be subject to taxation by that jurisdiction;
(s) The Company is not a "United States real property
holding corporation" within the meaning of Section 897 of the Code; and
(t) Each person granted a Stock Option by the Company
is an employee of the Company for Federal income tax purposes.
4.16 Insurance. Schedule 4.16 hereto sets forth a true and
complete list of all insurance policies or binders maintained by or for the
benefit of the Company and its directors, officers, employees or agents.
The Company has delivered or made available to the Purchaser true and
complete copies of such policies and binders. Except as set forth on
Schedule 4.16 hereto, (a) all such policies or binders are in full force
and effect and no premiums due and payable thereon are delinquent, (b)
there are no pending material claims against such insurance policies or
binders by the Company as to which the insurers have denied liability, (c)
the Company has complied in all material respects with the provisions of
such policies and (d) there exist no material claims under such insurance
policies or binders that have not been properly and timely submitted by the
Company to its insurers.
4.17 Employee Benefit Plans.
(a) For purposes of this Agreement, the term "Company
Employee Plans" shall mean and include: each management, consulting,
non-compete, employment, severance or similar contract, plan, including,
without limitation, all Company Stock Plans, arrangement or policy
applicable to any director, former director, employee or former employee of
the Company and each plan, program, policy, agreement or arrangement
(written or oral), providing for compensation, bonuses, profit-sharing,
stock option or other stock related rights or other forms of incentive or
deferred compensation, vacation benefits, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability
benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) or other
employee benefits of any kind, whether funded or unfunded, which is
maintained, administered or contributed to by the Company and covers any
employee or director or former employee or director of the Company, or
under which the Company has any Liability contingent or otherwise
(including but not limited to each material "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), but excluding any such plan that is a
"multiemployer plan," as defined in Section 3(37) of ERISA). Neither the
Company nor any of its Affiliates contributes to, or is required to
contribute to, any "multiemployer plan" as defined in Section 3(37) of
ERISA. Schedule 4.17(a) sets forth a true, accurate and complete list of
all Company Employee Plans.
(b) Each Company Employee Plan has been established
and maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations
(including but not limited to ERISA and the Code) which are applicable to
such Plan, except where failure to so comply would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(c) Neither the Company nor any Affiliate of the
Company has incurred a liability under Title IV of ERISA that has not been
satisfied in full, and no condition exists that presents a material risk to
the Company or any Affiliate of the Company of incurring any such
liability. All contributions required to be made under the terms of any
Company Employee Plan have been made, and, where applicable to a Company
Employee Plan, the Company and its Affiliates have complied with the
minimum funding requirements under Section 412 of the Code and Section 302
of ERISA with respect to each such Company Employee Plan.
(d) Each Company Employee Plan which is intended to
be qualified under Section 401(a) of the Code is so qualified and has been
so qualified during the period from its adoption to date, and each trust
forming a part thereof is exempt from federal income tax pursuant to
Section 501(a) of the Code and, to the knowledge of the Company, no
circumstances exist which would adversely affect such qualification or
exemption.
(e) Except as set forth on Schedule 4.17(e), no
director or officer or other employee of the Company will become entitled
to any retirement, severance or similar benefit or enhanced or accelerated
benefit (including any acceleration of vesting or lapse of repurchase
rights or obligations with respect to any Company Employee Plan or other
benefit under any compensation plan or arrangement of the Company) solely
as a result of the transactions contemplated hereby; and (ii) no payment
made or to be made to any current or former employee or director of the
Company or any of its Affiliates by reason of the transactions contemplated
hereby (whether alone or in connection with any other event, including, but
not limited to, a termination of employment) will constitute an "excess
parachute payment" within the meaning of Section 280G of the Code.
(f) No Company Employee Plan provides material
post-retirement health and medical, life or other insurance benefits for
retired employees of the Company nor has the Company represented or
promised to provide such benefits.
(g) There has been no amendment to, or change in
employee participation or coverage under, any Company Employee Plan which
would increase materially the expense of maintaining such Company Employee
Plan above the level of the expense incurred in respect thereof for the 12
months ended on December 31, 2000.
(h) The Company is in compliance with all applicable
federal, state, local and foreign statutes, laws (including, without
limitation, common law), judicial decisions, regulations, ordinances,
rules, judgments, orders and codes respecting employment, employment
practices, labor, terms and conditions of employment and wages and hours,
and no work stoppage or labor strike against the Company is pending or
threatened, nor is the Company involved in or threatened with any labor
dispute, grievance, or litigation relating to labor matters involving any
employees, in each case except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. There are no
suits, Actions, disputes, claims (other than routine claims for benefits),
investigations or audits pending or, to the knowledge of the Company,
threatened in connection with any Company Employee Plan, but excluding any
of the foregoing which would not have a Material Adverse Effect on the
Company.
4.18 Environmental Matters. No written notice, notification,
demand, request for information, citation, summons, complaint or order has
been received by, and no investigation, Action, claim, suit, proceeding or
review is pending or, to the knowledge of the Company, threatened by any
Person against, the Company, and no penalty has been assessed against the
Company, in each case, with respect to any matters relating to or arising
out of any Environmental Law; the Company is in compliance with all
Environmental Laws; and there are no Liabilities of or relating to the
Company relating to or arising out of any Environmental Law and there is no
existing condition, situation or set of circumstances which could
reasonably be expected to result in such a Liability.
4.19 Labor Matters. There is no unfair labor practice charge or
complaint against the Company pending before the National Labor Relations
Board, any state labor relations board or any court or tribunal and, to the
knowledge of the Company, none is or has been threatened; there is no labor
strike, dispute, request for representation, organizing activity, slowdown
or stoppage actually pending against or affecting the Company and, to the
knowledge of the Company, none is or has been threatened. Except as set
forth on Schedule 4.19, all Persons treated by the Company as independent
contractors for any purpose do satisfy and have satisfied the requirements
of Law to be so treated, and the Company has fully and accurately reported
the amounts paid by the Company to or on behalf of such Persons on IRS
Forms 1099 when required to do so. No individual who has performed services
for or on behalf of the Company, and who has been treated by the Company as
an independent contractor, is classifiable as a "leased employee," within
the meaning of Section 414(n)(2) of the Code, with respect to the Company
or with respect to any customer of the Company.
4.20 Intentionally Omitted.
4.21 Personal Property. Schedule 4.21 hereto sets forth a true and
complete list of all equipment and fixtures having an acquisition cost of
$50,000 or more owned by the Company. Except as set forth on Schedule 4.21
hereto, all such assets are in substantially good condition and repair,
normal wear and tear excepted, and are adequate for the uses to which they
are being put in the ordinary course of the business. All of the assets
listed on Schedule 4.21 hereto, together with all other personal property
owned by the Company constitute, in the reasonable business judgment of the
Company, all of the tangible personal property necessary for the operation
of the business as it is currently operated (other than such personal
property as may be leased or licensed by the Company and other than those
items, if any, the failure to own or lease which would not, individually or
in the aggregate, have a Material Adverse Effect on the Condition of the
Company).
4.22 Real Property.
(a) The Company has never owned any real property.
(b) Set forth on Schedule 4.22(b) hereto is a list of
all leases, subleases, licenses and other agreements (collectively, the
"Real Property Leases") under which the Company uses or occupies or has the
right to use or occupy any real property used by the Company (the land,
buildings and other improvements covered by the Real Property Leases being
herein called the "Leased Real Property").
(c) The Company has performed in all material
respects, or is now performing in all material respects, its obligations
under, and is not in default (and would not by the lapse of time or the
giving of notice or both be in default) under, or in breach or violation
of, nor has it received notice of any asserted claim of a material default
by the Company under, or a material breach or violation by the Company of,
any of the Real Property Leases and, to the knowledge of the Company, the
other party or parties thereto are performing in all material respects and
are not in violation thereunder.
(d) The Company is not obligated under or a party to,
any option, right of first refusal or other contractual right to purchase
any Leased Real Property or any portion thereof or interest therein.
4.23 Sales Representatives and Customers. Schedule 4.23 hereto
sets forth a list of the top ten customers of the Company based on contract
value for the six months ended June 30, 2001. Except as set forth on
Schedule 4.23 hereto, to the knowledge of the Company, the Company enjoys
good working relationships under all of its sales representative and
similar agreements necessary to the normal operation of its businesses.
4.24 Accounts Receivable. The accounts receivable of the Company
(i) arose from bona fide transactions in the ordinary course of business,
are payable on ordinary trade terms and are, to the knowledge of the
Company, not subject to any valid setoff, counterclaims or defense, (ii)
are legal, valid and binding obligations of the respective debtors, (iii)
do not represent obligations for goods sold on consignment or approval,
(iv) do not represent obligations for goods sold on a sale-or-return basis
for which no reserve has been recorded in the ordinary course in accordance
with GAAP and the Company has no knowledge of any facts that would cause it
to believe that the amount of such reserve is inappropriate, and (v) are
subject to reserves established on the Interim Balance Sheet or, with
respect to accounts receivable arising subsequent to the date thereof, to
reserves established in the ordinary course consistent with past practice
and in accordance with GAAP. Schedule 4.24 hereto sets forth a description
of any security arrangements and collateral (other than guarantees and
letters of credit taken in the ordinary course of business and purchase
money security interests) securing the repayment or other satisfaction of
receivables of the Company.
4.25 Inventory. The Company does not maintain any inventory.
4.26 Finders' or Advisors' Fees. Except as set forth on Schedule
4.26, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of the Company
or the Stockholders who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement. The only
Fees incurred and payable by the Company are those identified on Schedule
4.26.
4.27 Related-Party Transactions. Except as set forth on Schedule
4.27, no employee, officer, or director of the Company or member of his or
her immediate family is currently indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit)
to any of such individuals. Except as set forth on Schedule 4.27, to the
knowledge of the Company, as of the date hereof none of such persons has
any direct or indirect ownership interest in any firm or corporation with
which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company,
except that employees, officers, or directors of the Company and members of
their immediate families may own stock in an amount not to exceed 1% of the
outstanding capital stock of publicly traded companies that may compete
with the Company. Except as set forth on Schedule 4.27, no employee,
director, or officer of the Company and no member of the immediate family
of any employee, officer, or director of the Company is directly or
indirectly interested in any material contract with the Company.
4.28 Intentionally Omitted.
4.29 Disclosure. Neither this Agreement, nor any of the Exhibits
or Schedules hereto nor any list, certificate, schedule or other
instrument, document, agreement or writing furnished or to be furnished to,
or made with, Purchaser or Acquisition Sub pursuant hereto or in connection
with the negotiation, execution or performance hereof, contains any untrue
statement by the Company of a material fact or omits to state any material
fact necessary to make any statement herein or therein not misleading.
ARTICLE V
INTENTIONALLY OMITTED
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER AND ACQUISITION SUB
The Purchaser and Acquisition Sub hereby represent and warrant to
the Company as follows:
6.1 Organization and Good Standing. The Purchaser and Acquisition
Sub are corporations duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and each has the requisite
power and authority and all governmental licenses, authorizations, consents
and approvals required to own, operate and lease its properties and assets
and to conduct its business as they are now being owned, operated, leased
and conducted. Each of the Purchaser and Acquisition Sub is duly qualified
or licensed to do business as a foreign corporation, and is in good
standing as a foreign corporation, in every jurisdiction in which the
failure to be so qualified or licensed or in good standing would have a
Material Adverse Effect on either the Purchaser's or Acquisition Sub's
respective business or operations or would adversely affect its ability to
consummate the transactions provided for or contemplated by this Agreement.
Schedule 6.1 hereto sets forth a true and complete list of all foreign
jurisdictions in which the Purchaser and Acquisition Sub are so qualified
or licensed and in good standing.
6.2 Corporate Records. Copies of the certificate of incorporation
of the Purchaser and Acquisition Sub, certified by the Secretary of State
of the State of Delaware, and of the by-laws of the Purchaser and
Acquisition Sub, certified by the Secretary of each such corporation,
heretofore delivered to the Company are true and complete copies of such
instruments as amended to the date of this Agreement. Such certificates of
incorporation and by-laws of the Purchaser and Acquisition Sub are in full
force and effect. Neither the Purchaser nor Acquisition Sub is in violation
of any provision of its certificate of incorporation or by-laws.
6.3 Corporate Power and Authority. The Purchaser and Acquisition
Sub have the requisite corporate power and authority to execute and deliver
this Agreement, perform their obligations hereunder and consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by the Purchaser and Acquisition Sub, the performance by them of
their obligations hereunder and the consummation by them of the
transactions contemplated hereby have been duly authorized by all necessary
corporate actions on the part of the Purchaser and Acquisition Sub. This
Agreement constitutes the legal, valid and binding obligation of each of
the Purchaser and Acquisition Sub, enforceable against them in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar Laws now or hereafter in
effect relating to creditors' rights generally and subject to general
principles of equity.
6.4 SEC Documents. The Purchaser has filed all required
registration statements, prospectuses, reports, schedules, forms,
statements and other documents (including exhibits and all other
information incorporated therein) with the Securities and Exchange
Commission (the "SEC") since August 2, 2000 (the "SEC Reports"). As of
their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act or the Securities Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Reports, and none of the SEC Reports when
filed contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Purchaser included in
the SEC Reports complied as to form, as of their respective dates of filing
with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the
case of unaudited statements, as permitted by Form 10-Q) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the
consolidated financial position of the Purchaser and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).
6.5 Finders' or Advisors' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of the Purchaser or Acquisition Sub who might
be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
6.6 No Violation. Except for the filing of the Certificate of
Merger and any filings required pursuant to federal or state securities
laws, neither the execution and delivery of this Agreement by the Purchaser
or Acquisition Sub, the performance by either of them of their respective
obligations hereunder, nor the consummation by either of them of the
transactions contemplated hereby, will (a) contravene any provision of the
certificate of incorporation or bylaws of the Purchaser or Acquisition Sub;
(b) violate, be in conflict with, constitute a default under, permit the
termination of, cause the acceleration (whether after the giving of notice
or the lapse of time or both) of the maturity of, any debt or obligation of
the Purchaser or Acquisition Sub, require the consent of any other party
to, constitute a breach of, create a loss of a benefit under, or result in
the creation or imposition of any Lien upon any of the properties or assets
of the Purchaser or Acquisition Sub under, any note, bond, license,
mortgage, indenture, lease, contract, agreement, instrument or commitment
relating to the Purchaser or Acquisition Sub to which either of them is a
party or by which either of them or any of their respective assets or
properties constituting part of their respective businesses are bound.
6.7 Acquisition Sub. All of the outstanding capital stock of
Acquisition Sub is owned by Purchaser free and clear of any Lien or any
agreement with respect thereto. Since the date of its incorporation,
Acquisition Sub has not engaged in any activity of any nature except in
connection with or as contemplated by this Agreement.
6.8 Approvals. Except for the filing of the Certificate of Merger,
and any filings required pursuant to federal or state securities laws, no
declaration, filing or registration with, notice to, nor Approval of, any
Governmental Authority is required to be made, obtained or given by or with
respect to the Purchaser or the Acquisition Sub in connection with the
execution, delivery or performance by the Purchaser or the Acquisition Sub
of this Agreement, the performance by them of their respective obligations
hereunder or the consummation by them of the transactions contemplated
hereby.
ARTICLE VII
COVENANTS OF THE COMPANY
The Company covenants and agrees that from the date of this
Agreement until the Closing Date, except as otherwise consented to by the
Purchaser or Acquisition Sub in writing:
7.1 Conduct of the Company. From the date of this Agreement until
the Closing, the Company shall conduct its business in the ordinary course
consistent with past practice and shall use its commercially reasonable
best efforts to preserve intact its business organizations and
relationships with third parties. Without limiting the generality of the
foregoing and, without the prior written consent of the Purchaser, from the
date of this Agreement until the Closing:
(a) The Company will not adopt or propose any change
in its certificate of incorporation or by-laws;
(b) The Company will not adopt a plan or agreement of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company;
(c) Except for the issuance of Option Shares issuable
upon exercise of the Stock Options, the Company will not issue or sell any
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of capital stock of any class or series of the Company;
(d) The Company will not (i) split, combine,
subdivide or reclassify its outstanding shares of capital stock, or (ii)
declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock;
(e) The Company will not redeem, purchase or
otherwise acquire directly or indirectly any shares of capital stock of the
Company;
(f) The Company will not amend the terms (including
the terms relating to accelerating the vesting or lapse of repurchase
rights or obligations) of any employee or director stock options or other
stock based awards;
(g) The Company will not, except as set forth on
Schedule 4.17(e), (i) grant any severance or termination pay to (or amend
any such existing arrangement with) any director, officer or employee of
the Company, (ii) enter into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with
any director, officer or employee of the Company, (iii) increase any
benefits payable under any existing severance or termination pay policies
or employment agreements, (iv) increase (or amend the terms of) any
compensation, bonus or other benefits payable to directors, officers or
employees of the Company, (v) permit any director, officer or employee who
is not already a party to an agreement or a participant in a plan providing
benefits upon or following a "change in control" to become a party to any
such agreement or a participant in any such plan or (vi) amend any
provision of, or accelerate any payment under, the arrangements identified
in Section 10.27;
(h) The Company will not acquire any assets or
property of any other Person except in the ordinary course of business
consistent with past practice;
(i) The Company will not sell, lease, license or
otherwise dispose of any assets or property except pursuant to existing
contracts or commitments or except in the ordinary course of business
consistent with past practice;
(j) Except for any such change which is required by
reason of a concurrent change in GAAP, the Company will not, for periods
prior to or after the date of this Agreement, change any method of
accounting or accounting practice used by it, including, without
limitation, adjusting or reversing any accruals subsequent to the Interim
Financial Statements, modifying any reserves or modifying its reserve
policies;
(k) The Company will not enter into any joint
venture, partnership or other similar arrangement;
(l) The Company will not take any action that would
make any representation or warranty of the Company hereunder inaccurate in
any material respect at, or as of any time prior to, the Closing Date;
(m) The Company will not make or change any material
Tax election, settle any material audit or file any material amended Tax
Returns;
(n) The Company will not enter into, amend or waive
any provisions of any standstill agreement;
(o) The Company will not incur any indebtedness,
other than ordinary trade payables incurred in the ordinary course (it
being understood and agreed that the accrual of interest with respect to
indebtedness in existence on the date of this Agreement shall not be deemed
to be incurrence of indebtedness); and
(p) The Company will not agree or commit to do any of
the foregoing.
7.2 Consents and Approvals. The Company shall use its best efforts
to obtain at the earliest practicable date, and in any event prior to
Closing, all Approvals from Government Authorities and, to the extent that
the rights of the Company under any material Contract would be impaired
upon consummation of the Merger, all Approvals, including, without
limitation, those set forth on Schedule 4.7, reasonably requested by the
Purchaser or Acquisition Sub with respect to such Contracts or to obtain
fulfillment of the conditions set forth in Article X hereof.
7.3 Stockholder Approval. The Company shall cause a special
meeting of its Stockholders to be duly called and held as soon as
practicable after the date hereof, or take action by written consent for
the purpose of approving the Merger, this Agreement and the transactions
contemplated hereby which require the Stockholder Approvals and shall, with
the assistance of Purchaser, prepare such informational documents to
solicit the proxies or written consents of such Stockholders as are
reasonably necessary to obtain the Stockholder Approvals necessary to cause
the issuance of the shares of Purchaser Common Stock and Purchaser Warrants
in the Merger to qualify for the exemption from registration provided by
Regulation D under the Securities Act. The Company will, through its Board
of Directors, recommend to its Stockholders approval of the transactions
contemplated by this Agreement and will not, unless it receives a Superior
Offer, rescind such recommendation; provided, however, that no officer or
director of the Company shall be required to violate any fiduciary duty in
connection therewith. The Company will provide to the Purchaser drafts of
any materials to be mailed to the Stockholders and, prior to mailing such
materials, shall accept reasonable comments from the Purchaser and its
Representatives.
7.4 No Solicitation of Transaction. The Company shall not, and
shall use its best efforts to cause its Representatives not to, directly or
indirectly, take any of the following actions with any Person other than
the Purchaser without the prior written consent of the Purchaser: (A)
solicit, initiate, facilitate or encourage, or furnish information with
respect to the Company, in connection with, any inquiry, proposal or offer
with respect to any merger, consolidation or other business combination
involving the Company or the acquisition of all or a substantial portion of
the assets of, or any securities of, the Company (an "Alternative
Transaction"); (B) negotiate, discuss, explore or otherwise communicate or
cooperate in any way with any third party with respect to any Alternative
Transaction; or (C) enter into any agreement, arrangement or understanding
with respect to an Alternative Transaction or requiring the Company to
abandon, terminate or refrain from consummating a transaction with the
Purchaser. Notwithstanding the foregoing provisions, the Company may, in
response to an unsolicited bona fide written offer or proposal with respect
to an Alternative Transaction from any Person, including, without
limitation, a Person the Company was in discussions with prior to the date
of this Agreement (a "Potential Acquirer") that the Company's Board of
Directors determines, in good faith and after consultation with its
independent financial advisor and legal counsel, would be more favorable to
the Stockholders than the proposed Merger (a "Superior Offer"), furnish
confidential or nonpublic information to, and engage in discussions and
negotiate with, such Potential Acquirer. The Company shall, and shall use
its best efforts to cause its Representatives to, notify the Purchaser
orally and in writing promptly upon receipt of any inquiry, offer or
proposal with respect to an Alternative Transaction, including the identity
of the party making such inquiry, offer or proposal and stating the terms
thereof. The Company shall immediately cease any discussions or
negotiations existing as of the date hereof with any third party relating
to any proposed Alternative Transaction.
7.5 Audited Financials. The Company shall conduct at its own
expense an audit under GAAP, consistently applied, of its financial
statements for 1999 and 2000, and shall have the financial statements as of
and for the period ended June 30, 2001 reviewed by its independent
accountants in a manner consistent with Rule 10-01(d) of Regulation S-X (17
C.F.R ss.210.10-1(d)).
7.6 Safe Deposit Boxes and Bank Accounts. Prior to the Closing,
the Company shall deliver to the Purchaser a list of the names and
locations of all banks, trust companies, savings and loan associations and
other financial institutions at which the Company maintains safe deposit
boxes or lock boxes or bank accounts and the names of all persons
authorized to have access to such boxes and accounts.
ARTICLE VIII
INTENTIONALLY OMITTED
ARTICLE IX
COVENANTS OF THE PURCHASER AND
ACQUISITION SUB PENDING THE CLOSING
The Purchaser and Acquisition Sub covenant and agree that, except
as otherwise consented to by the Company, prior to the Closing:
9.1 Consents and Approvals. The Purchaser and Acquisition Sub
shall use their best efforts to obtain at the earliest practicable date,
and in any event prior to Closing, all Approvals from Government
Authorities and, to the extent that the rights of the Purchaser and
Acquisition Sub under any material contract would be impaired upon
consummation of the Merger, all Approvals reasonably requested by the
Company with respect to such contracts or to obtain fulfillment of the
conditions set forth in Article XI hereof.
9.2 Proxy Assistance. The Purchaser shall provide the Company with
all necessary information reasonably requested with respect to itself and
its Affiliates solely for inclusion by the Company in the proxy statement
contemplated in Section 7.3.
9.3 Tender Offer Terms. The Purchaser shall tender to purchase all
outstanding Company Debentures for a price equal to their outstanding
principal amount plus all unpaid interest accrued to and through the
purchase date for such Company Debentures. Such tender offer shall be
described in the document to be prepared and mailed as contemplated by
Section 7.3 and 9.2. From and after the date of its mailing, the Purchaser
shall not modify the terms of such tender offer without the consent of the
Company. Such tender offer shall be conducted in compliance with all
applicable securities laws.
9.4 Payments to Option Holders. In order to meet the condition set
forth in Section 10.21, the Purchaser shall offer to purchase the shares of
Company Common Stock issued upon exercise of Stock Options, for cash at
$1.30 per share (as appropriately adjusted for any stock split,
combination, reorganization, recapitalization, reclassification, stock
dividend, stock distribution or similar event), held by Stockholders who
are not accredited investors (as such term is defined in Rule 501
promulgated under the Securities Act). Subject to performing this covenant
in good faith, the Purchaser shall have sole discretion in selecting the
Stockholders to receive such an offer and the Company shall not have the
right to direct the offer to any particular Stockholder. Any such purchases
shall be effective immediately prior to the Effective Time.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE PURCHASER AND ACQUISITION SUB
The obligations of the Purchaser and Acquisition Sub to effect the
Closing hereunder are subject to the satisfaction, at or prior to the
Closing, of all of the following conditions:
10.1 Representations and Warranties True. The representations and
warranties contained in Article IV hereof, in the Schedules to this
Agreement, and in all certificates delivered by the Company to the
Purchaser and Acquisition Sub pursuant hereto or in connection with the
transactions contemplated hereby shall be true and accurate as of the date
when made and shall be deemed to be made again at and as of the Closing
Date and shall then be true and accurate (except for changes contemplated
by this Agreement and except for representations and warranties that by
their terms speak as of the date of this Agreement or some other date which
shall be true and correct only as of such date).
10.2 Performance of Covenants. The Company shall have performed
and complied with each and every covenant, agreement and condition required
by this Agreement to be performed or complied with by it prior to or on the
Closing Date.
10.3 No Governmental Proceeding. No Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) that is in effect
and prohibits the consummation of the transactions contemplated by this
Agreement.
10.4 Approval of Stockholders. This Agreement and the Merger shall
have been approved by the Stockholder Approvals which are the requisite
vote or action of the Stockholders under the Company's certificate of
incorporation (including, without limitation, the certificates of
designations of the Company Preferred Stock), by-laws and the DGCL.
10.5 Intentionally Omitted.
10.6 Certificates. The Company shall have furnished the Purchaser
and Acquisition Sub with such certificates to evidence compliance with the
conditions set forth in this Article X as may be reasonably requested by
Purchaser.
10.7 Consents. The Company shall have obtained all consents set
forth on Schedule 4.7 and all other consents shall have been obtained the
failure of which to obtain would have a Material Adverse Effect on the
Condition of the Company.
10.8 Employment Agreements.
(a) The Purchaser or the Company shall have entered
into employment agreements with the employees of the Company identified on
Schedule 10.8(a) hereto, with said employment agreements to be in the form
attached hereto as Exhibit C (the "Employment Agreements") and any existing
employment agreements between any such employee and the Company shall have
been terminated.
(b) The Purchaser or the Company shall have entered
into employment offer letters with the employees of the Company identified
on Schedule 10.8(b) hereto, with said employment offer letters to be in the
form attached hereto as Exhibit D (the "Offer Letters").
10.9 Intentionally Omitted.
10.10 Payment of Company Indebtedness. The Company or the
Purchaser shall have entered into agreements providing for, or otherwise
providing accommodation acceptable to the creditors of the Company
providing for:
(a) the release at the Effective Time by Wells Fargo
Bank Iowa, National Association ("Wells Fargo") of the guarantees of
Company Indebtedness of each of the holders of Bridge Warrants outstanding
under that certain Credit Agreement and Revolving Note, dated December 3,
1999 and providing borrowing authority of not in excess of $2.5 million,
between the Company and Wells Fargo, as well as the repayment of the
Company Indebtedness outstanding thereunder;
(b) the release at the Effective Time by Wells Fargo
of the guarantees of the Company Indebtedness of each of the holders of
Bridge Warrants outstanding under that certain Credit Agreement and
Revolving Note, dated March 2000 and providing borrowing authority of not
in excess of $500,000, between the Company and Wells Fargo, as well as the
repayment of the Company Indebtedness outstanding thereunder;
(c) the repayment at the Effective Time of all
amounts outstanding under, or the replacement and substitution at the
Effective Time of the letter of credit of The Northern Trust Company with
respect to, all of the Company Debentures;
(d) the compromise at the Effective Time by The
Northern Trust Company of the aggregate amount of the Company's
Indebtedness and related expenses under that certain promissory note dated
as of November 28, 1997 to The Northern Trust Company in $3 million
principal amount, and that certain Promissory Note dated as of September
14, 1998 in $1,145,000 principal amount, each as amended by that certain
Restructuring Agreement dated as of December 3, 1999 (such Promissory Notes
being referred to herein as the "NT Notes"), to an aggregate principal
amount of Indebtedness under the NT Notes of $3.0 million and related
expenses of $100,000, and the repayment of the Company Indebtedness
outstanding thereunder; and
(e) the compromise of the SAI warranty obligation to
an amount not in excess of $85,000, and the discharge of such obligation.
10.11 No Material Adverse Effect. There shall have been, between
the date of this Agreement and the Closing Date, no Material Adverse Effect
on the Company.
10.12 Delivery of Good Standing Certificates and Corporate
Resolutions. The Purchaser shall have received certificates of good
standing with respect to the Company issued by the jurisdiction of its
incorporation and the jurisdictions listed on Schedule 4.1. The Purchaser
shall have received copies of the resolutions of the Company and its
Stockholders approving this Agreement, the Merger and the transactions
contemplated herein, certified by an appropriate officer.
10.13 Notes Receivable. All notes receivable from the Stockholders
or the employees of the Company shall have been repaid in full in
accordance with their terms.
10.14 Intentionally Omitted.
10.15 Intentionally Omitted.
10.16 Deloitte & Touche Audit Opinion. The Purchaser shall have
received an unqualified audit opinion of Deloitte & Touche with respect to
the Company's consolidated financial statements as of and for the years
ended December 31, 1999 and 2000 and such audited financial statements as
of and for the year ended December 31, 2000 shall not differ materially
from, or be materially inconsistent with, the December 31, 2000 financials
contained in the Annual Financial Statements.
10.17 Certificate of Financial Condition. The Purchaser shall have
received a balance sheet of the Company on and as of the last Business Day
immediately preceeding the Closing Date (the "Closing Date Balance Sheet").
The Closing Date Balance Sheet shall be prepared in accordance with the
application of the financial accounting policies and practices employed by
the Company in preparation of the Interim Balance Sheet, which policies and
practices comply with GAAP. The Purchaser shall have received, on the
Closing Date, a certificate from the Company, signed by the Company's Chief
Executive Officer and Chief Financial Officer, setting forth, based on the
Closing Date Balance Sheet prepared in accordance with the preceeding
sentence:
(a) As of the Closing Date, the Company's:
(i) accounts payable plus accrued expenses (it
being understood and agreed that the legal, accounting, advisory
and severance obligations included in the definition of "Fees"
shall not be included in the amount of accrued expenses for
purposes of this Section 10.17 or Section 3.8); plus
(ii) deferred service revenues and any other
accrued liabilities;
(iii) plus the current portion of capital
leases; less
(iv) Deferred Payables (prior to "Discounts"
computed in a manner consistent with the Discounts column on
Exhibit A), the remaining SAI warranty obligation, if any,
remaining 2000 unpaid incentives, strategic transaction
incentives; less
(v) cash (exclusive of amounts received upon
exercise of Stock Options between the date of this Agreement and
the Closing Date), accounts receivable, other receivables and
pre-paid expenses.
(b) As of the Closing Date, the sum of the Company's:
(i) line of credit;
(ii) Company Debentures;
(iii) notes payable;
(iv) Deferred Payables;
(v) SAI warranty;
(vi) long-term portions of capital leases; and
(vii) any other debt;
assuming that the obligations to Northern Trust and the SAI warranty
obligations are valued at their actual payoff amounts as negotiated
pursuant to Section 10.10.
(c) As of the Closing Date, the Fees.
(d) As of the Closing Date, the balance of the Bridge
Financing, if any.
(e) As of the Closing Date, the "Discounts" to the
Deferred Payables, computed in a manner consistent with the Discounts
column of Exhibit A.
10.18 Intentionally Omitted.
10.19 Options/Warrants. The Stock Options shall have been
exercised or terminated in accordance with their terms and there shall not
be any Stock Options (other than those expiring pursuant to their terms at
the Effective Time) outstanding. The Warrant Shares issuable upon exercise
of the Bridge Warrants shall not exceed 900,000. Each Warrant not a Bridge
Warrant, and all other options to acquire stock of the Company, shall have
been terminated without payment or obligation of any kind.
10.20 Dissenting Shares. The total number of Dissenting Shares
shall be no greater than 5% of the number of shares of Company Common Stock
and Company Preferred Stock on an as-converted basis.
10.21 Regulation D. Provided that the Purchaser has complied with
Section 9.4, the Purchaser shall be satisfied that there are not more than
35 non-accredited investors (as such term is defined in Rule 501
promulgated under the Securities Act) among the Stockholders (including
Persons who become Stockholders upon exercise of Stock Options after the
date of this Agreement and prior to the Closing) and the holders of Bridge
Warrants. In accordance with Rule 506(b)(2)(ii) promulgated under the
Securities Act, each Stockholder or holder of a Bridge Warrant who is not
accredited shall have delivered an executed purchaser questionnaire stating
that such Stockholder or holder of a Bridge Warrant either alone or with
his purchaser representative(s) (as such term is defined in Rule 501
promulgated under the Securities Act) has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits
and risks of the prospective investment in Purchaser Common Stock or
Purchaser Warrants, as the case may be.
10.22 Company Debentures. The requisite holders of the Company
Debentures, by outstanding principal amount, shall have agreed to (x) waive
the negative covenant set forth in Section 204 of the Trust Indenture dated
as of August 1, 1997 with respect to the Company Debentures, and (y) reduce
the requirement that the letter of credit be at all times 107% of the
outstanding principal balance to 100%. Seventy-five percent (75%) of the
holders of the Debentures, by outstanding principal amount, shall have
executed releases in favor of the Company in substance substantially
similar to Section 12.4.
10.23 Software Licenses. Other than payment obligations (including
obligations to purchase additional "shrinkwrap" licenses) not in excess of
$186,920, the Company shall be in material compliance with all terms of the
License Agreements and there shall exist no event or condition which would
result in a violation or breach of, or constitute a default by the Company,
including, without limitation, the timely payment of all fees and other
payments due and owing by the Company, in accordance with the terms of the
License Agreements.
10.24 Settlement Agreement. The Company, the Northern Trust
Company and Iowa State Bank and Trust shall have consummated, or such
consummation shall be occurring simultaneously, the transactions
contemplated in, and in substance substantially similar to, that draft
Settlement Agreement dated as of June 29, 2001.
10.25 Termination of Registration Rights Agreements. Any and all
agreements providing for the Company to register its securities pursuant to
the Securities Act, including, without limitation, the registration rights
identified on Schedule 4.5 shall have been terminated.
10.26 Voting Agreements. The holders of at least 75% of (x) the
issued and outstanding shares of (i) the Company Common Stock, (ii) the
Company Series A Preferred Stock, (iii) the Company Series B Preferred
Stock, and (iv) the Company Series C Preferred Stock, and (y) the issued
and outstanding Bridge Warrants, shall have executed and delivered Voting
Agreements (in the case of the Major Stockholders) or agreements containing
provisions substantially similar to Sections 3.3, 3.4, 3.6, 3.7, 3.8 and
3.9 of the Voting Agreement (in the case of the other Stockholders and
holders of Bridge Warrants).
10.27 Termination of Certain Arrangements. Effective as of the
Effective Time, the Consulting Agreement by and between the Company and
Equity Dynamics, Inc. dated as of October 23, 2000, and the consulting or
other fees or payments made to Harry Hefter shall have been terminated
without any continuing payment or other obligation of any kind.
10.28 Director Resignations. Effective as of the Effective Time,
each of the Company's directors shall have resigned.
ARTICLE XI
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Closing hereunder are
subject to the satisfaction, at or prior to the Closing, of all of the
following conditions:
11.1 Representations and Warranties True. The representations and
warranties contained in Article VI hereof and in all certificates delivered
by the Purchaser or Acquisition Sub to the Company pursuant hereto or in
connection with the transactions contemplated hereby shall be true and
accurate as of the date when made and shall be deemed to be made again at
and as of the Closing Date and shall then be true and accurate (except for
changes contemplated by this Agreement and except for representations and
warranties that by their terms speak as of the date of this Agreement or
such other date which shall be true and accurate only as of such date).
11.2 Performance of Covenants. The Purchaser and Acquisition Sub
shall have performed and complied with each and every covenant, agreement
and condition required by this Agreement to be performed or complied with
by them prior to or on the Closing Date.
11.3 No Governmental Proceeding. No Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered into any statute, rule, regulation, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) that is in effect
and prohibits the consummation of the transactions contemplated by this
Agreement.
11.4 Certificates. The Purchaser and Acquisition Sub shall have
furnished the Company with such certificates to evidence compliance with
the conditions set forth in this Article XI as may be reasonably requested
by the Company.
11.5 Delivery of Good Standing Certificates and Corporate
Resolutions. The Company shall have received certificates of good standing
with respect to each of the Purchaser and Acquisition Sub issued by the
jurisdiction of its incorporation and the jurisdictions listed on Schedule
6.1. The Company shall have received copies of the resolutions of the
Purchaser and the Acquisition Sub approving this Agreement, the Merger and
the transactions contemplated herein, certified by an appropriate officer.
11.6 Payment of Company Indebtedness. The Company or the Purchaser
shall have entered into agreements providing for, or otherwise providing
accommodation acceptable to the creditors of the Company providing for:
(a) the release at the Effective Time by Wells Fargo
of the guarantees of Company Indebtedness of each of the holders of Bridge
Warrants outstanding under that certain Credit Agreement and Revolving
Note, dated December 3, 1999 and providing borrowing authority of not in
excess of $2.5 million, between the Company and Wells Fargo, as well as the
repayment of the Company Indebtedness outstanding thereunder;
(b) the release at the Effective Time by Wells Fargo
of the guarantees of the Company Indebtedness of each of the holders of
Bridge Warrants outstanding under that certain Credit Agreement and
Revolving Note, dated March 2000 and providing borrowing authority of not
in excess of $500,000, between the Company and Wells Fargo, as well as the
repayment of the Company Indebtedness outstanding thereunder;
(c) the repayment at the Effective Time of all
amounts outstanding under, or the replacement and substitution at the
Effective Time of the letter of credit of The Northern Trust Company with
respect to, all of the Company Debentures;
(d) the compromise at the Effective Time by The
Northern Trust Company of the aggregate amount of the Company's
Indebtedness and related expenses under the NT Notes to an aggregate
principal amount of Indebtedness under the NT Notes of $3.0 million and
related expenses of $100,000, and the repayment of the Company Indebtedness
outstanding thereunder; and
(e) The compromise of the SAI warranty obligation to
an amount not in excess of $85,000, and the discharge of such obligations.
11.7 Consents. The Purchaser and the Acquisition Sub shall have
obtained all consents the failure of which to obtain would have a Material
Adverse Effect on the Condition of the Purchaser or the Acquisition Sub,
respectively.
11.8 Settlement Agreement. The Company, the Northern Trust Company
and Iowa State Bank and Trust shall have consummated, or such consummation
shall be occurring simultaneously, the transactions contemplated in, and in
substance substantially similar to, that draft Settlement Agreement dated
as of June 29, 2001.
ARTICLE XII
INDEMNITY
12.1 Indemnification.
(a) Each of the Company, the Stockholders and the
holders of Warrants, jointly and severally, covenants and agrees to
indemnify, defend, protect and hold harmless the Purchaser, Acquisition Sub
and their officers, directors, members, managers, employees, stockholders,
assigns, successors and Affiliates (individually, a "Buyer Party" and
collectively "Buyer Parties") from, against and in respect of all Damages,
Actions, and interest (including interest from the date of such Damages)
suffered, sustained, incurred or paid by any Buyer Party, in any Action (x)
between a Buyer Party and the Company or any Stockholder or (y) between a
Buyer Party and a third party, in connection with, resulting from or
arising out of, directly or indirectly: (i) the inaccuracy of any
representation or the breach of any warranty set forth in this Agreement or
certificates delivered on the part of the Company or any Stockholder in
connection with the Closing; (ii) the nonfulfillment of any covenant or
agreement on the part of the Company or any Stockholder set forth in this
Agreement or in any agreement or certificate executed and delivered by the
Company or any Stockholder pursuant to this Agreement or in the
transactions contemplated hereby; (iii) claims (whether based on contract,
tort, fiduciary or any other theory) of any actual or purported, beneficial
or record, current or past, holder of the Company's debt or equity
securities (or any interest or right therein) in connection with, resulting
from or arising out of, directly or indirectly, such debt or equity
securities (or any interest or right therein) that is based on any action
taken at or prior to the Effective Time other than claims with respect to
(A) the accuracy of the representations and warranties of Purchaser and
Acquisition Sub made pursuant to this Agreement, (B) the failure by
Purchaser or Acquisition Sub to perform any of their respective agreements
or covenants pursuant to this Agreement or (C) the information provided by
Purchaser or Acquisition Sub expressly for inclusion in the materials to be
provided to holders of the Company's debt and equity securities as
contemplated by Section 9.2 of this Agreement; and (iv) the items
identified on Schedule 12.1(a).
(b) Each of the Purchaser and Acquisition Sub,
jointly and severally, covenants and agrees to indemnify, defend, protect
and hold harmless (i) each Stockholder and holder of a Bridge Warrant and
his successors and assigns and (ii) the Company and its officers,
directors, members, managers, employees, Stockholders, assigns, successors
and Affiliates (individually, a "Seller Party" and collectively "Seller
Parties") from, against and in respect of all Damages, Actions, and
interest (including interest from the date of such Damages) suffered,
sustained, incurred or paid by any Seller Party, in any Action (x) between
the Purchaser or Acquisition Sub and a Seller Party or (y) between a Seller
Party and a third party, in connection with, resulting from or arising out
of, directly or indirectly: (i) the inaccuracy of any representation or the
breach of any warranty set forth in this Agreement or certificates
delivered on the part of the Purchaser or Acquisition Sub in connection
with the Closing; and (ii) the nonfulfillment of any covenant or agreement
on the part of the Purchaser or Acquisition Sub set forth in this Agreement
or in any agreement or certificate executed and delivered by the Purchaser
or Acquisition Sub pursuant to this Agreement or in the transactions
contemplated hereby.
(c) Notwithstanding the foregoing provisions of this
Section 12.1(a) and (b), if the Closing occurs, (i) each Stockholder hereby
waives any right of contribution, reimbursement or other rights of recovery
that they might otherwise have against the Company in connection with any
such indemnification or other obligations, (ii) the Company shall be deemed
to be a Buyer Party, and (iii) the representations and warranties made by
the Company shall terminate.
(d) Notwithstanding anything contained in Article XII
to the contrary, there shall be no liability for indemnification under this
Section 12.1, (i) unless the aggregate amount of Damages exceeds $100,000
(the "Indemnity Basket") at which time the Indemnifying Party shall be
liable for the entire amount of the Damages, including the Indemnity
Basket, (ii) unless the Indemnified Party delivers to the Indemnifying
Party written notice, setting forth in reasonable detail the identity,
nature and amount of Damages related to such claim or claims prior to the
first anniversary of the Effective Time, (iii) to the extent that a Seller
Party has suffered, incurred, sustained or become subject to, Damages by
reason of all such claims in excess of $1,300,000 and the Buyer Parties, in
the aggregate, shall not be obligated to pay anything other than or more
than $1,300,000, in the aggregate for all claims under Section 12.1(b), and
(iv) no Stockholder or holder of a Bridge Warrant shall be obligated to pay
anything other than or more than his, her or its respective pro rata share
of the Holdback Amount.
(e) Notwithstanding anything contained in Section
12.1(d) to the contrary, the Indemnity Basket shall not apply in the event
that liability of an Indemnifying Party arises out of or in connection with
the Purchase Price Adjustment, or a breach of the representations or
warranties in Section 4.1, 4.2, 4.3, 4.5 and 4.15.
12.2 Notice of Claims. An Indemnified Party shall notify the
Indemnifying Party within a reasonable period of time after becoming aware
of any Damages which the Indemnified Party shall have determined has given
or could give rise to a claim for indemnification under Section 12.1
hereof. Such notice shall include an estimate of the Damages that the
Indemnified Party has determined may be incurred. As soon as practicable
after the date of such notice, the Indemnified Party shall provide to the
Indemnifying Party all information and documentation necessary to support
and verify the Damages so claimed and the Indemnifying Party and its agents
shall be given access to all books and records in the possession or control
of the Indemnified Party which the Indemnifying Party reasonably determines
to be related to such claim. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the estimated
amount of Damages described in such notice, or fails to notify the
Indemnified Party within 30 days after delivery of such notice by the
Indemnified Party whether the Indemnifying Party disputes the claim or the
estimated amount of Damages described in such notice, the estimated Damages
in the amount specified in the Indemnified Party's notice will be
conclusively deemed a liability of the Indemnifying Party and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party. If the Indemnifying Party has timely disputed its liability with
respect to such claim or the estimated amount of Damages, the dispute shall
be resolved in accordance with Section 15.4 below.
12.3 Matters Involving Third Parties.
(a) If any third party shall commence an Action
against any Indemnified Party with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification under Section
12.1, the Indemnified Party shall notify the Indemnifying Party in writing
as soon as practicable.
(b) The Indemnifying Party shall have the right to
defend the Indemnified Party against the Third Party Claim with counsel of
its choice and reasonably acceptable to the Indemnified Party so long as
(i) the Indemnifying Party shall notify the Indemnified Party in writing
(within 30 days after its receipt of notice, in accordance with Section
15.7, of the Third Party Claim as provided in Section 12.2 or, if the
Indemnifying Party has disputed the claim for indemnification, then within
ten days of a final determination that such claim is a valid claim under
Section 12.1) that the Indemnified Party will be entitled to
indemnification under Section 12.1 hereof from and against any Damages the
Indemnified Party may suffer arising out of the Third Party Claim and (ii)
the Indemnifying Party diligently conducts the defense of the Third Party
Claim. It is agreed that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party of a claim (including any Third Party
Claim) will relieve the Indemnifying Party thereby unless said Indemnifying
Party is prejudiced by such failure to give notice.
(c) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with Section 12.3(b)
above, (i) the Indemnified Party may retain separate co-counsel, at its
sole cost and expense, and participate in the defense of the Third Party
Claim, (ii) the Indemnified Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed, (iii) the Indemnified Party
shall cooperate within reason with the Indemnifying Party's defense of such
Third Party Claim and (iv) the Indemnifying Party shall not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding any other provision of this Section 12.3, if an Indemnified
Party withholds its consent to a settlement or elects to defend any claim,
where but for such action the Indemnifying Party could have settled such
claim, the Indemnifying Party shall be required to indemnify the
Indemnified Party only up to a maximum of the bona fide settlement offer
for which the Indemnifying Party could have settled such claim.
12.4 Release. Effective as of the Closing and by tendering their
shares of Company Common Stock or Company Preferred Stock or Bridge
Warrants, as the case may be, and by accepting the consideration therefore,
each Stockholder and holder of Bridge Warrants hereby irrevocably waives
and releases the Company, its current and former officers, directors,
Affiliates, of, from and against any and all claims or causes of actions
for Damages that he has, may have, or has had at any time on or before the
Closing.
12.5 Stockholder Agent.
(a) In the event that the Merger is approved by the
Stockholders, effective upon such approval, and without any further act of
any Stockholder, Steve Morain (the "Stockholder Agent") shall be, and
hereby is, appointed as agent and attorney-in-fact for each Stockholder and
holder of a Bridge Warrant, for and on behalf of each such Stockholder and
holder of a Bridge Warrant to give and receive notices and communications,
to authorize delivery to any Indemnified Person of shares or cash from the
Holdback Amount in satisfaction of claims by an Indemnified Person, to
execute stock powers on behalf of such Stockholders and holders of Bridge
Warrants with respect to the Holdback Amount, to object to such deliveries,
to agree to, negotiate, enter into settlements and compromises of, and
demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary
or appropriate in the judgment of the Stockholder Agent for the
accomplishment of the foregoing.
(b) The Stockholder Agent may resign upon written
notice to the Stockholders and holders of Bridge Warrants. The Stockholder
Agent may be changed or replaced by vote of a majority of the Company
Stockholders and holders of Bridge Warrants (computed on the basis of their
respective interests in the Holdback Amount) from time to time upon not
less than thirty (30) days' prior written notice. Any vacancy in the
position of Stockholder Agent may be filled by approval of the holders of a
majority in interest of the Holdback Amount. No bond shall be required of
the Stockholder Agent, and the Stockholder Agent shall not receive
compensation for his services. Notices or communications to or from the
Stockholder Agent shall constitute notice to or from each of the
Stockholders and holders of Bridge Warrants.
(c) The Stockholder Agent shall not be liable for any
act done or omitted hereunder as Stockholder Agent while acting in good
faith and in the exercise of reasonable judgment.
(d) A decision, act, consent or instruction of the
Stockholder Agent with respect to the matters regarding the Holdback Amount
contemplated by this Section 12.5 shall constitute a decision of all the
Stockholders and holders of Bridge Warrants and shall be final, binding and
conclusive upon each of such Stockholders and holders of Bridge Warrants
and the Buyer Parties may rely upon any such decision, act, consent or
instruction of the Stockholder Agent as being the decision, act, consent or
instruction of each Stockholder and holder of a Bridge Warrant. The Buyer
Parties are hereby relieved from any liability to any Person for any acts
done by them in accordance with such decision, act, consent or instruction
of the Stockholder Agent.
(e) The Purchaser and Acquisition Sub, on behalf of
all Buyer Parties, hereby agree that any notice, right, or obligation
required to be delivered to, performed by, or asserted by the Stockholders
and holders of Bridge Warrants regarding the Holdback Amount shall be
delivered to, performed by or asserted by the Stockholder Agent.
12.6 Sole Remedy. Except for fraud or as set forth in Section
15.4(h), the indemnification provisions of this Article XII shall
constitute the sole and exclusive remedy of the parties hereto for any
inaccuracy, untruth, incompleteness or other breach of or failure to
perform any covenant made in this Agreement, and the parties each waive any
other remedy, which they or any other Person entitled to indemnification
hereunder may have at law or in equity with respect thereto.
Notwithstanding anything else to the contrary contained in this Agreement,
no Stockholder or holder of a Bridge Warrant shall be liable with respect
to the fraud of any other Person, unless such Stockholder or holder of a
Bridge Warrant had knowledge of such fraud, for anything other than or more
than his, her or its respective pro rata share of the Holdback Amount.
ARTICLE XIII
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual consent of the Purchaser and the
Company;
(b) by either the Purchaser or the Company if the
Closing has not occurred prior to September 15, 2001, provided that the
right to terminate this Agreement under this Section 13.1(b) shall not be
available to either party whose material misrepresentations, breach of
warranty or failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur on or
before such date;
(c) by either the Purchaser or the Company if there
has been a material misrepresentation or material breach on the part of the
other party in the representations, warranties or covenants set forth in
this Agreement which is not cured within ten Business Days after such other
party has been notified in writing of the intent to terminate this
Agreement pursuant to this clause (c);
(d) by either the Purchaser or the Company, if any
Approval of a Governmental Authority, the lack of which would result in the
failure to satisfy the conditions to Closing set forth in Article X or
Article XI hereof, shall have been denied by such Governmental Authority,
or such Governmental Authority shall have requested the withdrawal of any
application therefor or shall have indicated its intention to initiate a
proceeding to enjoin the Merger and the transactions contemplated by this
Agreement;
(e) by either the Purchaser or the Company, if any
permanent injunction or action by any court or other Governmental Authority
of competent jurisdiction enjoining, denying Approval of or otherwise
prohibiting consummation of any of the transactions contemplated by this
Agreement shall become final and nonappealable;
(f) by either the Company or the Purchaser, if the
Stockholder Approval shall not have been obtained by reason of the failure
to obtain the required vote at a duly held meeting of the Stockholders or
any adjournment thereof; or
(g) by the Purchaser or the Company pursuant to
Section 3.10(c).
13.2 Effect of Termination.
(a) In the event of termination of this Agreement as
expressly permitted under Section 13.1 hereof, this Agreement shall
forthwith become void (except for Sections 14.2, 14.3, 14.5 and 14.6 and
this Section 13.2) and there shall be no Action on the part of the Company,
Acquisition Sub, the Stockholders, the holders of the Bridge Warrants, the
Purchaser or their respective officers, directors or affiliates; provided,
that, if such termination shall result from a material misrepresentation by
a party or the willful breach by a party of the covenants of such party
contained in this Agreement, such party shall be fully liable for any and
all Damages sustained or incurred as a result of such breach. In the event
of termination hereunder prior to the Closing, the Purchaser and
Acquisition Sub shall return promptly to the Company all documents, work
papers and other material of the Company furnished or made available to the
Purchaser and Acquisition Sub or their representatives or agents and all
copies thereof, and no information received by the Purchaser or Acquisition
Sub shall be revealed to any third party nor used for the advantage of the
Purchaser or Acquisition Sub or any other party.
(b) If this Agreement is terminated (x) pursuant to
Section 13.1(f), if an Alternative Transaction has been proposed and
publicly announced or communicated to the Stockholders after the date of
this Agreement and prior to the meeting called or consents solicited for
Stockholder Approval and, within twelve (12) months after the date of
termination pursuant to Section 13.1(f), the Company enters into a binding
agreement with respect to such Alternative Transaction, or (y) by the
Purchaser in accordance with Section 13.1 due to a breach of Section 7.3 or
Section 7.4, then the Company shall pay to the Purchaser in immediately
available funds an amount equal to $1,000,000 and fees and expenses.
13.3 Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties hereto. The
Company, the Purchaser and Acquisition Sub may amend this Agreement at any
time prior to the filing of the Certificate of Merger with the Department
of State of the State of Delaware; provided that an amendment made
subsequent to the adoption of this Agreement by the stockholders of either
Constituent Corporation shall not (i) alter or change the amount or class
of shares, securities, cash, property and/or rights to be received in
exchange for or on conversion of all or any of the shares of any class or
series thereof of such Constituent Corporation, (ii) alter or change any
term of the certificate of incorporation of the Surviving Corporation to be
effected by the Merger, or (iii) alter or change any of the terms and
conditions of this Agreement if such alteration or change would adversely
affect the holders of any class of shares or series thereof of such
Constituent Corporation.
13.4 Extension; Waiver. At any time prior to the Closing, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto, and (iii) waive compliance with any
of the agreements or conditions contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set
forth in writing in an instrument signed by or on behalf of such party. The
waiver by any party hereto of a breach of this Agreement shall not operate
or be construed as a waiver of any subsequent breach.
ARTICLE XIV
OTHER AGREEMENTS
The parties hereto agree that:
14.1 Best Efforts. The Company and the Purchaser shall each
cooperate with the others and use (and shall cause their respective
Subsidiaries to use) their respective commercially reasonable best efforts
to promptly (i) take or cause to be taken all necessary actions, and do or
cause to be done all things, necessary, proper or advisable under this
Agreement and applicable laws to consummate and make effective the Merger
and the other transactions contemplated by this Agreement as soon as
practicable, including, without limitation, preparing and filing promptly
and fully all documentation to effect all necessary filings, notices,
petitions, statements, registrations, submissions of information,
applications and other documents and (ii) obtain all Approvals required to
be obtained from any third party necessary, proper or advisable to
consummate the Merger and other transactions contemplated by this
Agreement.
14.2 Access to Information. Subject to the terms set forth in that
certain Mutual Non-Disclosure Agreement, dated as of February 15, 2001, by
and between the Purchaser and the Company (the "Non-Disclosure Agreement"),
which is incorporated by reference herein, respecting due diligence
investigation and certain other matters, each of the parties hereto shall
afford each other's employees, auditors, legal counsel and other authorized
representatives, all reasonable opportunity and access during normal
business hours to inspect, investigate, audit and interview the respective
assets, liabilities, contracts, each of the other's operations, business,
employees and officers before the Closing. These activities shall be
conducted in a reasonable manner during regular business hours using
reasonable efforts to minimize interference with each party's respective
business operations. Each of the parties hereto shall promptly and
completely provide all disclosures requested by the other parties or their
agents.
14.3 Public Announcements. At the proper time, as determined by
the parties hereto in good faith consultation with each other, the parties
hereto shall issue a press release or make a public statement concerning
this Agreement and the related transactions containing disclosure which is
mutually agreeable to the parties; provided, that prior to the issuance of
a press release, none of the parties hereto shall make any announcement of
such transaction or disclose the existence of and/or particulars of any
negotiations related thereto, including, but not limited to, the terms,
conditions, consideration to be paid or other facts related to this
Agreement and the related transactions, except to the extent permitted by
the Non-Disclosure Agreement; and, provided, further, that the Company
shall not be permitted to issue a press release announcing (or make a
public announcement or other public disclosure of) the Agreement or the
related transactions until it has received all consents from its
Stockholders necessary to consummate the Merger, other than repeating or
referring to prior public statements of the Purchaser or statements made by
the Company which are reasonably necessary to obtain the Stockholder
Approvals or otherwise consummate the transactions contemplated hereunder.
Notwithstanding the foregoing, the Purchaser may make such disclosures as
may be required (based on the advice of counsel) due to its status as a
public company, after good faith consultation with the other parties
hereto.
14.4 Notices of Certain Events.
(a) Each of the parties hereto shall promptly notify
the other parties of: (i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement if the
failure of any of the parties hereto, as the case may be, to obtain such
consent would result in a Material Adverse Effect on any of the parties
hereto, as applicable; and (ii) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement.
(b) The parties hereto shall promptly notify the
other parties of any Actions, suits, claims, investigations or proceedings
commenced or, to the best of such party's knowledge threatened against,
relating to or involving or otherwise affecting such party or any of its
Subsidiaries which relate to the consummation of the transactions
contemplated by this Agreement.
14.5 Expenses. Except as provided in Section 13.2 or 15.4, the
Purchaser, Acquisition Sub and the Company shall each bear their own
expenses (including those of counsel, accountants and investment bankers,
and, in the case of the Company, the Fees) incurred by any of them in
connection with this Agreement and the transactions contemplated herein.
14.6 Specific Performance; Injunctive Relief. Each of the parties
hereto acknowledges, understands and agrees that any breach or threatened
breach by such party or such party's Affiliates of Sections 14.2 or 14.3
will cause irreparable injury to the other party and that money damages
will not provide an adequate remedy therefor. Accordingly, in the event of
any such breach or threatened breach, a non-breaching party shall have the
right and remedy (in addition to any other rights or remedies available at
law or in equity, including, money damages) to have the provisions of such
Sections 14.2 or 14.3 specifically enforced by, and to seek injunctive
relief and other equitable remedies in, any court having competent
jurisdiction. Each party further agrees to waive any requirement for the
securing or posting of any bond or other security in connection with
seeking such remedies.
14.7 Director and Officer Liability.
(a) The Purchaser shall cause the Surviving
Corporation to, and the Surviving Corporation shall, indemnify and hold
harmless, to the fullest extent permitted under applicable law, the
individuals who on or prior to the Effective Time were officers or
directors of the Company (collectively, the "Indemnitees") with respect to
all acts or omissions by them in their capacities as such or taken at the
request of the Company at any time on or prior to the Effective Time. In
the event the Surviving Corporation or the Purchaser or any of their
successors or assigns (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the
Surviving Corporation or the Purchaser shall assume the obligations of the
Surviving Corporation or the Purchaser, as the case may be, as set forth in
this Section 14.7. An Indemnitee shall have a right to participate in (but
not control) the defense of any such matter with its own counsel and at its
own expense. Notwithstanding the right of the Surviving Corporation to
assume and control the defense of such litigation, claim or proceeding,
such Indemnitee shall have the right to employ separate counsel and to
participate in the defense of such litigation, claim or proceeding, and the
Surviving Corporation shall bear the reasonable fees, costs and expenses of
such separate counsel and shall pay such fees, costs and expenses promptly
after receipt of an invoice from such Indemnitee if (x) the use of counsel
chosen by the Surviving Corporation to represent such Indemnitee would
present such counsel with a conflict of interest or (y) such Indemnitee
shall have legal defenses available to it or to other Indemnitees which are
different from or in addition to those available to the Surviving
Corporation; provided, however, that the Indemnitee may be required to
deliver an undertaking to the Company if contemplated by the certificate of
incorporation of the Company. The Surviving Corporation shall not settle
any matter unless the terms of the settlement provide that the Indemnitee
shall have no responsibility for the discharge of any settlement amount and
impose no other obligations or duties on the Indemnitee and the settlement
discharges all rights against Indemnitee with respect to such matter. The
Purchaser shall cause the Surviving Corporation to, and the Surviving
Corporation shall, honor all indemnification agreements with Indemnitees
(including under the Company's by-laws) in effect as of the date of this
Agreement in accordance with the terms thereof. All such indemnification
agreements are identified on Schedule 14.7(a).
(b) For two years after the Effective Time, the
Purchaser shall, or shall cause the Surviving Corporation to, procure the
provision of officers' and directors' liability insurance from reputable
insurers in respect of acts or omissions occurring prior to the Effective
Time covering each Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
in amounts no less favorable to such Person than those of such policy in
effect on the date hereof; provided, that if the aggregate annual premiums
for such insurance at any time during such period shall exceed 150% of the
per annum rate of premium paid by the Company as of the date hereof for
such insurance, then the Purchaser shall, or shall cause the Surviving
Corporation to, provide only such coverage as shall then be available at an
annual premium equal to 150% of such rate.
(c) The certificate of incorporation and by-laws of
the Surviving Corporation shall, from and after the Effective Time, contain
provisions no less favorable with respect to limitation of certain
liabilities of directors, indemnification and advancement of expenses than
are set forth as of the date of this Agreement in the certificate of
incorporation and by-laws of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in a manner that would adversely affect the rights
thereunder of individuals who at or prior to the Effective Time were
directors, officers or employees of the Company.
(d) The obligations of the Purchaser and the
Surviving Corporation under this Section 14.7 shall not be terminated or
modified in such a manner as to adversely affect any Indemnitee to whom
this Section 14.7 applies without the consent of the affected Indemnitee
(it being expressly agreed that the Indemnitees, and their respective
heirs, executors and administrators, to whom this Section 14.7 applies
shall be third party beneficiaries of this Section 14.7).
(e) The Purchaser's and the Surviving Corporation's
obligations under this Section 14.7 shall not be limited to the time period
or maximum liability limitations set forth in Section 12.1(d).
14.8 Tender Offer Terms and Consummation of Tender Offer. The
Purchaser shall consummate the tender offer contemplated by Section 9.3
upon the terms for such tender offer described in the last tender offer
documents mailed to the holders of the Company Debentures prior to the
Effective Time.
14.9 June 2001 Company Financials. The financial statements of the
Company as of and for the six-month period ending June 30, 2001 referenced
in Section 7.5, prepared in accordance with GAAP applicable to unaudited
interim financial statements consistent with the Annual Financial
Statements, along with a favorable review report of Deloitte & Touche,
shall be delivered to the Purchaser within one week of the Closing Date.
ARTICLE XV
MISCELLANEOUS
15.1 Entire Agreement. This Agreement (including the documents and
instruments referred to herein) and the Non-Disclosure Agreement embody the
entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supercede all other prior commitments,
arrangements or understandings, both oral and written, between the parties
with respect thereto, including, without limitation, that certain letter
dated as of June 8, 2001. There are no agreements, covenants,
representations or warranties with respect to the transactions contemplated
hereby other than those expressly set forth herein.
15.2 Assignment. Except as set forth in this Section 15.2, this
Agreement may not be assigned (whether by operation of law or otherwise) by
any party without the prior written consent of the other parties hereto.
The Purchaser and the Acquisition Sub may assign this Agreement to any of
their wholly owned Subsidiaries without the prior written consent of the
Company; provided, that such assignment shall not release the Purchaser or
Acquisition Sub from their respective obligations under this Agreement.
Subject to the foregoing, this Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective heirs,
personal representatives successors and assigns.
15.3 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New
York.
15.4 Arbitration. Each party stipulates and agrees that any
dispute under this Agreement that is not resolved within twenty (20) days
after assertion will be submitted to mandatory and binding arbitration at
the election of any party under the following terms and conditions:
(a) Selection of Arbitrator. The initiating party
will notify the American Arbitration Association (the "AAA") in writing and
will request that the AAA furnish to the both parties a list of five (5)
available arbitrators who, if possible, will have experience in the
substantive matters at hand. Each party will have fifteen (15) days to
reject two (2) of the proposed arbitrators. If only one possible arbitrator
remains not rejected by any party, he or she will serve as arbitrator; if
two or more individuals remain not rejected, the AAA will select the
arbitrator from those individuals.
(b) Conduct of Arbitration. Arbitration will be
conducted in Chicago, Illinois by the arbitrator selected under Section
15.4(a). The arbitrator will have no power or authority, under the rules of
the AAA or otherwise, to amend or disregard any provision of this Section
15.4.
(c) Replacement of Arbitrator. Should the arbitrator
refuse or be unable to proceed with arbitration proceedings under this
Section 15.4, such arbitrator will be replaced by an arbitrator selected
from the other four arbitrators originally proposed by the AAA and not
rejected by any party or if there is no such arbitrator remaining, by
repeating the process of selection. If an arbitrator is replaced pursuant
to this Section 15.4(c), then a rehearing will take place in accordance
with the rules of the AAA.
(d) Findings and Conclusions. The arbitrator
rendering judgment upon under this Section 15.4 will, after reaching
judgment and award, if any, prepare and distribute to the parties a writing
describing the findings of fact and conclusions of law relevant to such
judgment and award and containing an opinion setting forth the reasons for
the giving or denial of any award.
(e) Time is of the Essence. The arbitrator is hereby
instructed that time is of the essence in the arbitration proceeding, and
that the arbitrator will have the right and authority to issue monetary
sanctions against any party if, upon a showing of good cause therefor, said
party is unreasonably delaying the proceeding.
(f) Finding. The arbitrator will render his or her
judgment or award within twenty (20) days following the conclusion of the
arbitration proceeding.
(g) Discovery. Recognizing the express desire of the
parties for an expeditious means of dispute resolution, the arbitrator will
limit or allow the parties to expand the scope of discovery as may be
reasonable under the circumstances. In particular and without limitation,
the parties hereto hereby affirm and agree to comply with those rules of
the AAA which limit pre-hearing discovery.
(h) Injunctive Relief. Each party agrees that the
only circumstance in which disputes under this Agreement will not be
subject to the provisions of this Section 15.4 is where a party makes a
good faith determination that a breach of the terms of this Agreement by
another party is such that the damages to such party resulting therefrom
will be so immediate, so large or severe and so incapable of adequate
redress after the fact that a temporary restraining order and/or other
immediate injunctive relief is the only adequate remedy for such breach. If
a party making such a determination files a pleading with a court seeking
such immediate injunctive relief and this pleading is challenged by another
party to this Agreement and the challenging party succeeds in such
challenge, the party filing such pleading seeking immediate injunctive
relief will pay all of the reasonable costs and attorneys' fees of the
party successfully challenging such pleading.
(i) Costs and Attorneys' Fees. Notwithstanding any
rule of the AAA to the contrary, the arbitrator rendering judgment under
Section 15.4 will have the power to award all costs and attorneys' fees
between the parties. In any litigation of disputes, if and to the extent
such litigation does not concern the prayer for or challenge to immediate
injunctive relief under Section 15.4(h), the losing party will pay all
costs and attorneys' fees of such litigation accruing to the other party.
15.5 Headings and Exhibits. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof. Schedules and
documents referred to in this Agreement are an integral part of this
Agreement.
15.6 Survival of Representations, Warranties and Covenants. All
representations and warranties made by any party in or pursuant to this
Agreement or in any document delivered pursuant hereto shall survive for
one year after the Closing; provided, however, that in the event of fraud
by any party, the representations and warranties of the party shall survive
the Closing for an indefinite period of time. Notwithstanding the
foregoing, if a claim notice is sent pursuant to Section 12.2, the
representation or warranty with respect to which such claim notice is sent,
and the related indemnification obligations set forth in Article XII with
respect to the claim notice, shall survive until the resolution of the
claim for Damages to which such claim notice relates, or such longer period
as provided in the preceding sentence. All covenants made by any party
pursuant to this Agreement shall survive the Closing pursuant to their
terms.
15.7 Notices. Any notices or other communications required or
permitted hereunder shall be in writing and personally delivered at the
addresses designated below, by facsimile transmission to the respective
facsimile numbers designated below (with electronic confirmation of
delivery), or mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows, or to such other address
or addresses as may hereafter be furnished by one party to the other party
in compliance with the terms hereof:
If to the Purchaser, Acquisition Sub or the Surviving Corporation:
ScreamingMedia Inc.
601 West 26th Street
13th Floor
New York, New York 10001
Attention: Kevin C. Clark
(Facsimile No.: (212) 691-1483)
With a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Thomas H. Kennedy, Esquire
(Facsimile No.: (212) 735-2000)
If to the Company (pre-Closing):
c/o Stockpoint, Inc.
2600 Crosspark Road
Coralville, Iowa 52241
Attention: William E. Staib
(Facsimile No.: (319) 626-5001)
With a copy (which shall not constitute notice) to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Thomas O. Martin, Esquire
(Facsimile No.: (612) 340-8738)
If to the Stockholder Agent to:
Steve Morain
Iowa Farm Bureau Federation
5400 University Avenue
West Des Moines, Iowa 50266
(Facsimile No.: (515) 225-4686)
or to such other address as the Person to whom notice is to be given may
have specified in a notice duly given to the sender as provided herein.
Such notice, request, claim, demand, waiver, consent, approval, or other
communication shall be deemed to have been given as of the date personally
delivered or telefaxed, five Business Days after deposit with the U.S.
Postal Service if mailed, and, if given by any other means, shall be deemed
given only when actually received by the addressees.
15.8 Counterparts. This Agreement may be executed in any number of
counterparts (which may be by facsimile) each of which, when executed,
shall be deemed to be an original and all of which together shall be deemed
to be one and the same instrument.
15.9 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such a determination, the parties shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated
to the fullest extent possible.
[Execution Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
SCREAMINGMEDIA INC.
By: /s/ Kevin C. Clark
-------------------------------
Name: Kevin C. Clark
Title: Chief Executive Officer
SCRM MERGER CORP.
By: /s/ David Obstler
-------------------------------
Name: David Obstler
Title: President
STOCKPOINT, INC.
By: /s/ William E. Staib
-------------------------------
Name: William E. Staib
Title: Chief Executive Officer