Agreement and Plan of Merger - ValueClick Inc. and Bach Systems Inc.
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VALUECLICK, INC.,
BACH SYSTEMS, INC.,
BACH ACQUISITION CORP.
AND
THE OTHER PARTIES SIGNATORY TO THIS AGREEMENT
DATED AS OF NOVEMBER 17, 2000
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 17, 2000, by and
among ValueClick, Inc., a Delaware corporation ("Acquiror"), Bach Systems, Inc.,
a Florida corporation (the "Company"), Bach Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Acquiror ("Merger Sub"), Scott
Averbach, as Stockholder Agent; Joseph Averbach and Scott Averbach, who are the
owners of all of Company's outstanding stock on the date of the Merger
Acquisition, and, with respect to Section 8.2 only, ChaseMellon Shareholder
Services, L.L.C., as Depositary Agent.
RECITALS
A. The boards of directors of each of Acquiror and the Company believe
it is in the best interests of Acquiror, Merger Sub and the Company (as
applicable) and their respective stockholders that Company be merged with and
into Merger Sub (the "Merger") in a transaction in which Company's stockholders
receive merger consideration in exchange for their shares and, in furtherance
thereof, have approved the Merger, this Agreement and the transactions
contemplated hereby.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the shares of capital stock of the
Company which are issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive shares of common stock, par value
$.001 per share, of Acquiror ("Acquiror Common Stock").
C. As a condition and an inducement to the willingness of Acquiror to
enter into this Agreement, all stockholders of the Company have concurrently
herewith entered into Support Agreements with Acquiror in substantially the form
attached hereto as EXHIBIT A ("Support Agreements") pursuant to which, among
other things and also under the terms of this Agreement, such stockholders have
agreed to vote the shares of Company Common Stock owned by them in favor of the
Merger, which at the time of this Agreement, constitute all of Company's
outstanding shares.
D. Acquiror and the Company intend that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, and in furtherance thereof intend that this Agreement shall be a "Plan of
Reorganization" within the meaning of Sections 354(a) and 361(a) of the Internal
Revenue Code.
NOW, THEREFORE, in consideration of the covenants, agreements,
representations and warranties set forth herein, intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Acquiror" has the meaning ascribed to it in the forepart of
this Agreement.
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"Acquiror Common Stock" has the meaning ascribed to it in
Recital B to this Agreement.
"Acquiror Disclosure Schedule" has the meaning ascribed to it
in the forepart of Article 4.
"Acquiror Financial Statements" has the meaning ascribed to it
in Section 4.4.
"Acquiror Indemnitee" has the meaning ascribed to it in
Section 8.2(b).
"Affiliate" means, as applied to any Person, (a) any other
Person directly or indirectly controlling, controlled by or under common control
with, that Person, (b) any other Person that owns or controls ten percent or
more of any class of equity securities (including any equity securities issuable
upon the exercise of any option or convertible security) of that Person or any
of its Affiliates, or (c) as to a corporation, each director and officer
thereof, and as to a partnership, each general partner thereof, and as to a
limited liability company, each managing member or similarly authorized person
thereof. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by," and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through ownership of voting securities or
by contract or otherwise.
"Aggregate Common Number" means the aggregate number of shares
of Company Common Stock outstanding immediately prior to the Effective Time.
"Agreement" means this Agreement and Plan of Merger, including
(unless the context otherwise requires) the Exhibits and the Disclosure
Schedules and the certificates and instruments delivered in connection herewith,
or incorporated by reference, as the same may be amended or supplemented from
time to time in accordance with the terms hereof.
"Ancillary Agreements" has the meaning ascribed to it in
Section 3.3.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned, licensed or leased by such Person, including
cash, cash equivalents, Investment Assets, accounts and notes receivable,
chattel paper, documents, instruments, general intangibles, real estate,
equipment, inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation
or other business organization of which such Person is an officer or partner or
is the beneficial owner, directly or indirectly, of ten percent or more of any
class of equity securities (including any equity securities
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issuable upon the exercise of any option or convertible security), any trust or
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as a trustee or in a similar capacity and any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of the Company,
including financial statements, internal reports, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs (including data processing files and records), retrieval programs,
operating data and plans and environmental studies and plans.
"Business Combination" means, with respect to any Person, (a)
any merger, consolidation, share exchange, reorganization or other business
combination transaction to which such Person is a party, (b) any sale, dividend,
split or other disposition of any capital stock or other equity interests of
such Person, (c) any tender offer (including a self tender), exchange offer,
recapitalization, restructuring, liquidation, dissolution or similar or
extraordinary transaction, (d) any sale, dividend or other disposition of all or
a material or significant portion of the Assets and Properties of such Person
(including by way of exclusive license or joint venture formation) or (e) the
entering into of any agreement or understanding, the granting of any rights or
options, or the acquiescence of such Person, with respect to any of the
foregoing.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or obligated
to close.
"Business or Condition of Acquiror" means the business,
condition (financial or otherwise), results of operations, prospects or Assets
and Properties of the Acquiror and its Subsidiaries, in the aggregate.
"Business or Condition of the Company" means the business,
condition (financial or otherwise), results of operations, prospects or Assets
and Properties of the Company.
"Certificates" has the meaning ascribed to it in Section
2.10(b).
"Certificate of Merger" has the meaning ascribed to it in
Section 2.2.
"Closing" means the closing of the transactions contemplated
by Section 2.2.
"Closing Date" has the meaning ascribed to it in Section 2.2.
"Closing Price" means the average closing sales price of
Acquiror Common Stock as traded on the NNM and reported in THE WALL STREET
JOURNAL (WESTERN EDITION), for the ten consecutive marketing trading days
commencing on the eleventh market trading day prior to the Closing Date and
ending on (inclusive) the market trading day prior to the Closing Date.
"COBRA" has the meaning ascribed to it in Section 3.15(f).
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"Common Share Number" means 750,000 shares of Acquiror Common
Stock as appropriately adjusted to reflect the effect of any stock split, stock
dividend, stock combination, reorganization, reclassification or similar change
occurring after the date of this Agreement and prior to the Effective Time.
"Company" has the meaning ascribed to it in the forepart of
this Agreement.
"Company Common Stock" has the meaning ascribed to it in
Section 3.3.
"Company Disclosure Schedule" means the schedules delivered to
Acquiror by or on behalf of the Company, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein in connection with the representations and warranties made by the
Company in Article 3 of this Agreement or otherwise.
"Company Financials" means the Year-End Financial Statements
and Interim Financial Statements.
"Company Indemnified Party" has the meaning ascribed to it in
Section 6.10.
"Company Intellectual Property" shall mean any Intellectual
Property that (a) is owned by the Company; (b) is licensed to the Company; (c)
was developed or created by or for the Company or (d) is used in or necessary
for the conduct of the business of the Company as presently or heretofore
conducted or as proposed to be conducted, including any Intellectual Property
created by any of the Company's founders, employees or consultants and including
any Intellectual Property created by any of the Company's founders prior to the
creation of the Company.
"Company Option(s)" means any Option to purchase any shares of
Company Common Stock.
"Company Registered Intellectual Property" means all
Registered Intellectual Property owned by, filed in the name of, assigned to or
applied for by, the Company.
"Company Stockholder Action" has the meaning ascribed to it in
Section 6.2.
"Competing Proposed Transaction" has the meaning ascribed to
it in Section 5.2.
"Contract" means any contract, agreement or other business
arrangement (whether oral or written) including:
(a) any distributor, sales, advertising
(involving the advertisement of the Company), agency or manufacturer's
representative contract;
(b) any continuing contract for the purchase
of materials, supplies, equipment or services involving in the case of
any such contract more than $25,000 over the life of the contract;
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(c) any contract that expires or may be
renewed at the option of any person other than the Company so as to
expire more than one year after the date of this Agreement;
(d) any trust indenture, mortgage,
promissory note, loan agreement or other contract for the borrowing of
money, any currency exchange, commodities or other hedging arrangement
or any leasing transaction of the type required to be capitalized in
accordance with generally accepted accounting principles;
(e) any contract for capital expenditures in
excess of $25,000 in the aggregate;
(f) any contract limiting the freedom of the
Company to engage in any line of business or to compete with any other
Person or any confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which the
Company is a lessor of any machinery, equipment, motor vehicles, office
furniture, fixtures or other personal property;
(h) any contract with any person with whom
the Company does not deal at arm's length;
(i) any contract that is not terminable by
the Company upon thirty days (or less) notice by the Company without
penalty or obligation to make payments based on such termination; or
(j) any agreement of guarantee, support,
indemnification, assumption or endorsement of, or any similar
commitment with respect to, the obligations, liabilities (whether
accrued, absolute, contingent or otherwise) or indebtedness of any
other Person.
"Delaware Law" means the Delaware General Corporation Act and
all amendments and additions thereto.
"Depositary Agent" means ChaseMellon Shareholder Services,
L.L.C. (or other institution acceptable to Acquiror and the Stockholder Agent).
"Disclosure Schedules" means the Company Disclosure Schedule
and the Acquiror Disclosure Schedule.
"Effective Time" has the meaning ascribed to it in Section
2.2.
"Environmental and Safety Laws" shall mean any applicable
federal, state or local or any foreign laws, ordinances, codes, regulations,
rules, policies and orders that are intended to assure the protection of the
environment, or that classify, regulate, call for the remediation of, require
reporting with respect to, or list or define air, water, groundwater, solid
waste, hazardous
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or toxic substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons, including
the public.
"Equity Equivalents" means securities (including Options to
purchase any shares of Company Common Stock) which, by their terms, are or may
be exercisable, convertible or exchangeable for or into common stock, preferred
stock or other securities at the election of the holder thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is under "common control" with the Company (within the
meaning of Section 4001 of ERISA) or with respect to which the Company could
otherwise incur liability under Title IV of ERISA.
"Escrow Amount" means the number of shares of Acquiror Common
Stock obtained by multiplying (a) the Common Share Number by (b) 0.40.
"Escrow Fund" has the meaning ascribed to it in Section
8.2(a).
"Escrow Period" has the meaning ascribed to it in Section
8.2(c).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Exchange Agent" means ChaseMellon Shareholder Services,
L.L.C.
"Expiration Date" has the meaning ascribed to it in Section
8.1.
"Facilities" shall mean all buildings and improvements on the
Site of the Company.
"Florida Law" means the Florida Business Corporation Act and
all amendments and additions thereto.
"GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, bureau, board, commission, department,
official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, those
substances, materials and wastes defined in or regulated under any Environmental
and Safety Laws.
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"Indebtedness" of any Person means all obligations of such
Person (a) for borrowed money, (b) evidenced by notes, bonds, debentures or
similar instruments, (c) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (d) under capital leases and (e) in the nature of guarantees of the
obligations described in clauses (a) through (d) above of any other Person.
"Intellectual Property" means all trademarks and trademark
rights, trade names and trade name rights, service marks and service mark
rights, service names and service name rights, patents and patent rights,
utility models and utility model rights, copyrights, mask work rights, brand
names, trade dress, product designs, product packaging, business and product
names, logos, slogans, rights of publicity, trade secrets, inventions (whether
patentable or not), invention disclosures, improvements, processes, formulae,
industrial models, processes, designs, specifications, technology,
methodologies, computer software (including all source code and object code),
firmware, development tools, flow charts, annotations, all Web addresses, sites
and domain names, all data bases and data collections and all rights therein,
any other confidential and proprietary right or information, whether or not
subject to statutory registration, and all related technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, utility models, trademarks,
service marks and copyrights, and the right to sue for past infringement, if
any, in connection with any of the foregoing, and all documents, disks, records,
files and other media on which any of the foregoing is stored.
"Interim Financial Statements" means the unaudited balance
sheet of the Company as of September 30, 2000, and the related unaudited
statement of operations, statement of stockholders' equity and statement of cash
flows for the nine month period ended on such date.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
"IRS" means the United States Internal Revenue Service or any
successor entity.
"IT" has the meaning ascribed to it in Section 6.16.
"Law" or "Laws" means any law, statute, order, decree, consent
decree, judgment, rule, regulation, ordinance or other pronouncement having the
effect of law whether in the United States, any foreign country, or any domestic
or foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or based upon
any contingency), known or unknown, fixed or otherwise, or whether due or to
become due.
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"License" means any Contract that grants a Person the right to
use or otherwise enjoy the benefits of any Intellectual Property (including
without limitation any covenants not to sue with respect to any Intellectual
Property).
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, easement, license, covenant, condition, restriction,
adverse claim, levy, charge, option, equity, adverse claim or restriction or
other encumbrance of any kind, or any conditional sale Contract, title retention
Contract or other Contract to give any of the foregoing, except for any
restrictions on transfer generally arising under any applicable federal or state
securities law.
"Loss(es)" means any and all damages, fines, fees, Taxes,
penalties, deficiencies, losses (including lost profits or diminution in value)
and expenses, including interest, reasonable expenses of investigation, court
costs, reasonable fees and expenses of attorneys, accountants and other experts
or other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include all fees and expenses, including
fees and expenses of attorneys, incurred in connection with (a) the
investigation or defense of any Third Party Claims or (b) asserting or disputing
any rights under this Agreement against any party hereto or otherwise), net of
any insurance proceeds actually received (without any adverse effect on the
premiums paid for such insurance) or proceeds received by virtue of third party
indemnification.
"Merger" has the meaning ascribed to it in Recital A to this
Agreement.
"Merger Sub Common Stock" means the shares of common stock,
par value $0.001 per share, of Merger Sub.
"NASD" means the National Association of Securities Dealers,
Inc.
"New Shares" has the meaning ascribed to it in Section
8.2(d)(ii).
"NNM" means the tier of The Nasdaq Stock Market referred to as
the Nasdaq National Market.
"Non-Prevailing Party" has the meaning ascribed to it in
Section 8.2(g)(iii).
"Officer's Certificate" has the meaning ascribed to it in
Section 8.2(e)(i).
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (a) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (b) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
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"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" means any employee benefit fund, plan, program, policy,
arrangement and contract (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of ERISA and any plan, program, policy,
arrangement or contract providing for severance; medical, dental or vision
benefits; life insurance or death benefits; disability benefits, sick pay or
other wage replacement; vacation, holiday or sabbatical pay; pension or
profit-sharing benefits; deferred compensation; stock options or other equity
compensation; bonus or incentive pay or other material fringe benefits), whether
written or not, maintained, sponsored or contributed to or required to be
contributed to by the Company or any Subsidiary.
"PTO" means the United States Patent and Trademark Office.
"Registered Intellectual Property" shall mean all United
States, international and foreign: (a) patents and patent applications
(including provisional applications); (b) registered trademarks and
servicemarks, applications to register trademarks and servicemarks,
intent-to-use applications, other registrations or applications to trademarks or
servicemarks, or trademarks or servicemarks in which common law rights are owned
or otherwise controlled; (c) registered copyrights and applications for
copyright registration; (d) any mask work registrations and applications to
register mask works; and (e) any other Intellectual Property that is the subject
of an application, certificate, filing, registration or other document issued
by, filed with, or recorded by, any state, government or other public legal
authority.
"Registration Rights Agreement" has the meaning ascribed to it
in Section 6.1.
"Representatives" has the meaning ascribed to it in Section
5.2.
"SEC" means the Securities and Exchange Commission or any
successor entity.
"SEC Documents" means, with respect to any Person, each
report, schedule, form, statement or other document filed or required to be
filed with the SEC by such Person pursuant to Section 13(a) of the Exchange Act.
"Securities Act" has the meaning ascribed to it in Section
2.14.
"Site" means any of the real properties currently or
previously owned, leased, occupied, used or operated by the Company, any
predecessors of the Company, or any entities previously owned by the Company,
including all soil, subsoil, surface waters and groundwater.
"Stockholder Agent" has the meaning ascribed to it in Section
8.2(h)(i).
"Stockholder Certificate" has the meaning ascribed to it in
Section 6.1.
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"Subsidiary" means any Person in which the Company or
Acquiror, as the context requires, directly or indirectly through Subsidiaries
or otherwise, beneficially owns at least 50% of either the equity interest in,
or the voting control of, such Person, whether or not existing on the date
hereof.
"Support Agreements" has the meaning ascribed to it in Recital
C.
"Surviving Corporation" has the meaning ascribed to it in
Section 2.1.
"Takeover Statute" means a "fair price," "moratorium,"
"control share acquisition" or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States.
"Tax" or "Taxes" has the meaning ascribed to it in Section
3.14(a).
"Tax Returns" has the meaning ascribed to it in Section
3.14(a).
"Tax Authority" has the meaning ascribed to it in Section
3.14(a).
"Third Party Claim" has the meaning ascribed to it in Section
8.2(j).
"Third Party Expenses" has the meaning ascribed to it in
Section 6.5.
"Warranty Obligations" has the meaning ascribed to it in
Section 3.34.
"Year-End Financial Statement" means the unaudited
consolidated balance sheets of the Company as of the fiscal year ended December
31, 1999 and the related consolidated statements of operations, stockholders'
equity and cash flows for the fiscal year then ended, including the notes
thereto.
"Year-End Financial Statement Date" means December 31, 1999.
ARTICLE 2
THE MERGER
2.1 THE MERGER. At the Effective Time and upon the terms and subject to
the conditions of this Agreement and the applicable provisions of Delaware Law
and Florida Law, Company shall be merged with and into the Merger Sub, the
separate corporate existence of Company shall cease, and the Merger Sub shall
continue as the surviving corporation. The Merger Sub is sometimes referred to
herein as the "Surviving Corporation."
2.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 9.1, the closing of the Merger (the "Closing") will take
place as soon as practicable following satisfaction or waiver of the conditions
set forth in Article 7 at the offices of Brobeck, Phleger & Harrison LLP, 550
South Hope Street, Los Angeles, California 90071, unless another place or time
is agreed to by Acquiror and the Company. The date upon which the Closing
actually occurs is herein referred to as the "Closing Date." On the Closing
Date, the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger (or like instrument) in
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substantially the form attached hereto as EXHIBIT B (the "Florida Certificate of
Merger") with the Secretary of State of the State of Florida in accordance with
the relevant provisions of applicable law, and the filing of the Certificate of
Merger (or like instrument), in substantially the form attached hereto as
EXHIBIT C (the "Certificate of Merger"), with the Secretary of State of the
State of Delaware in accordance with the relevant provisions of applicable law
(the time of acceptance by the Secretary of State of the State of Delaware of
such filing or such later time as may be agreed to by the parties and set forth
in the Certificate of Merger being referred to herein as the "Effective Time").
2.3 EFFECT OF THE MERGER ON CONSTITUENT CORPORATIONS. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of Merger Sub and the Company shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of Merger Sub and the Company shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.
2.4 ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING CORPORATION.
(a) At the Effective Time, the articles of incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Surviving Corporation until thereafter amended
as provided by law and such articles of incorporation and bylaws of the
Surviving Corporation.
(b) The bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by such bylaws, the articles of incorporation and
applicable law.
2.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the articles of
incorporation and bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the bylaws of the
Surviving Corporation.
2.6 MAXIMUM NUMBER OF SHARES OF ACQUIROR COMMON STOCK TO BE ISSUED;
EFFECT ON OUTSTANDING SECURITIES OF THE COMPANY. The maximum number of shares of
Acquiror Common Stock to be issued at the Closing Date in exchange for all
shares of Company Common Stock which are then outstanding shall not exceed the
Common Share Number (the "Merger Shares"). The maximum amount of cash to be paid
at the Closing Date in consideration for the acquisition by Acquiror of the
Company Common Stock which is then outstanding shall be $825,000 (less the
amount of any Excess Costs, as defined in Section 6.5 below), subject to
adjustment pursuant to Section 2.6(e) below (as so adjusted, the "Merger Cash"
and together with the Merger Shares, the "Merger Consideration"). On the terms
and subject to the conditions of this Agreement, at the Effective Time, by
virtue of the Merger and without any action on the part of Acquiror, the Company
or the holder of any shares of Company Common Stock, the following shall occur:
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(a) CONVERSION OF COMPANY COMMON STOCK. At the Effective Time,
each share of Company Common Stock (after giving effect to the conversion,
exchange or exercise, as the case may be, of all securities convertible into, or
exercisable or exchangeable for, Company Common Stock, if any) issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares) shall be converted and exchanged for the right to receive (a) such
number of Merger Shares as shall be determined by dividing the total number of
Merger Shares by the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time and (b) an amount of Merger Cash as
shall be determined by dividing the total amount of Merger Cash by the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time.
(b) CANCELLATION OF ACQUIROR-OWNED AND COMPANY-OWNED STOCK.
Each share of Company Common Stock owned by Acquiror or the Company or any
Subsidiary of Acquiror or the Company immediately prior to the Effective Time
shall be automatically canceled and extinguished without any conversion thereof
and without any further action on the part of Acquiror or the Company.
(c) CAPITAL STOCK OF MERGER SUB. Each share of Merger Sub
Common Stock which is issued and outstanding immediately prior to the Effective
Time shall remain outstanding as one validly issued, fully paid and
nonassessable share of common stock, no par value, of the Surviving Corporation,
with identical rights and privileges. From and after the Effective Time, each
share certificate of Merger Sub theretofore evidencing ownership of any such
shares shall continue to evidence ownership of such shares of capital stock of
the Surviving Corporation.
(d) RESERVED
(e) No certificate or scrip or shares of Acquiror Common Stock
representing fractional shares of Acquiror Common Stock shall be issued upon the
surrender for exchange of Certificates and such fractional share interests will
not entitle the owner thereof to vote or to have any rights of a stockholder of
the Company or a holder of shares of Acquiror Common Stock. Notwithstanding any
other provision of this Agreement, each holder of shares of Company Common Stock
who would otherwise have been entitled to receive a fraction of a share of
Company Common Stock (determined after taking into account all shares of Company
Common Stock held by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to the product of (i) such fractional part of a
share of Acquiror Common Stock multiplied by (ii) the Closing Price. As promptly
as practicable after the determination of the amount of cash, if any, to be paid
to holders of fractional interest, the Exchange Agent shall so notify Acquiror,
and Acquiror shall deposit such amount with the Exchange Agent and shall cause
the Exchange Agent to forward payments to such holders of fractional interest
subject to and in accordance with the terms of this Agreement.
2.7 RESERVATION OF SHARES. Acquiror will reserve sufficient shares of
Acquiror Common Stock for issuance pursuant to Section 2.14.
2.8 ADJUSTMENTS TO MERGER SHARES. The number of Merger Shares shall be
equitably adjusted to reflect fully the effect of any stock split, reverse
split, stock combination, stock
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dividend (including any dividend or distribution of securities convertible into
Acquiror Common Stock or Company Common Stock), reorganization,
reclassification, recapitalization or other like change with respect to Acquiror
Common Stock or Company Common Stock, the effective date of which occurs after
the date hereof and prior to the Effective Time.
2.9 Reserved.
2.10 EXCHANGE PROCEDURES.
(a) MERGER CONSIDERATION. On the Closing Date, Acquiror shall
deliver to the Exchange Agent the aggregate number of Merger Shares issuable in
exchange for outstanding shares of Company Common Stock and cash in an amount
sufficient to permit the payment of cash pursuant to Section 2.6; PROVIDED,
HOWEVER, that, on behalf of the holders of Company Common Stock, Acquiror shall
deposit into an escrow account a number of shares of Merger Shares equal to the
Escrow Amount. The portion of the Escrow Amount contributed on behalf of each
holder of Company Common Stock shall be in proportion to the aggregate number of
Merger Shares which such holder would otherwise be entitled to receive by virtue
of ownership of outstanding shares of Company Common Stock. As promptly as
reasonably practicable following the final determination of the amount (if any)
of each Earn-Out, Acquiror shall deposit with the Exchange Agent, for
distribution in accordance with Section 2.14, the aggregate number of additional
shares of Acquiror Common Stock then issuable pursuant to Section 2.14, together
with cash in an amount sufficient to permit the payment of cash in lieu of
fractional shares pursuant to Section 2.6(e).
(b) EXCHANGE PROCEDURES. At the Closing, each holder of record
of a certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock and
which shares were converted into the right to receive shares of Acquiror Common
Stock pursuant to Section 2.6, shall deliver the Certificates to the Acquiror.
Upon surrender of a Certificate for cancellation and a stock power endorsed in
blank with respect to the shares held pursuant to Article 8, Acquiror shall
deliver to the holder of such Certificate in exchange therefor (i) a certificate
representing the number of whole Merger Shares (less the number of Merger Shares
to be deposited in the Escrow Fund on such holder's behalf pursuant to Article
8), to which such holder is entitled pursuant to Section 2.6, and the
Certificate so surrendered shall be canceled and (ii) cash to which such holder
is entitled pursuant to Section 2.6. Promptly (but not later than 5 business
days) following the final determination of the amount (if any) of any Earn-Out,
the Person who immediately prior to the Effective Time was the holder of a
Certificate shall be entitled to receive a certificate representing the number
of additional whole shares of Acquiror Common Stock (if any) to which such
holder is entitled pursuant to Section 2.14, plus the amount of cash in lieu of
fractional shares to which such holder is entitled pursuant to Section 2.6((e).
As soon as practicable after the Effective Time, and subject to and in
accordance with the provisions of Article 8, the Acquiror shall cause to be
distributed to the Depositary Agent a certificate or certificates (in such
denominations as may be requested by the Depositary Agent), registered in the
name of each former stockholder of the Company, representing that number of
shares of Acquiror Common Stock equal to the Escrow Amount. Such shares shall be
beneficially owned by the holders on whose behalf such shares were deposited in
the Escrow Fund and shall be available to compensate the Acquiror as provided in
Article 8. Until surrendered, each
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outstanding Certificate will be deemed, from and after the Effective Time, for
all corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Acquiror Common Stock into which such
shares of Company Common Stock shall have been so converted.
2.11 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All Merger
Shares issued and Merger Cash paid upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof (including any cash in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the records of the
Company of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article 2.
2.12 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue certificates representing
such shares of Acquiror Common Stock in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that fact by the
holder thereof; PROVIDED, HOWEVER, that Acquiror or the Exchange Agent may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to provide an indemnity or
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Acquiror or the Exchange Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
2.13 EXEMPTION FROM REGISTRATION. The shares of Acquiror Common Stock
to be issued pursuant to Section 2.6, and if applicable, Section 2.14, in
connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (including the rules
and regulations promulgated thereunder, the "Securities Act") by reason of
Section 4(2) of the Securities Act and SEC rules and regulations promulgated
thereunder.
2.14 EARN-OUT.
(a) EARN-OUTS; EARN-OUT TARGETS. Schedule 2.14 sets forth
eight (8) additional distributions (each an "Earn-Out" and collectively, the
"Earn-Outs") payable, in Acquiror Common Stock as additional consideration and
the applicable milestones (each, an "Earn-Out Milestone" and collectively the
"Earn-Out Milestones") that must be satisfied by the Company in order to earn
each such possible Earn-Out. No Earn-Out is subject to increase to make up for
any reduction or forfeiture of any other Earn-Out. The Earn-Out amount shall be
paid by issuing additional shares of Acquiror Common Stock, and the Aggregate
Share Number shall be increased by the relevant Earn-Out Share Number and such
Earn-Out Shares, if any, shall be distributed in accordance with Section 2.6(a)
to the Persons who immediately prior to the Effective Time were holders of
Company Common Stock.
(b) RESERVED.
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(c) PROCEDURE. Within 45 days of each Earn-Out Record Date (as
defined in Schedule 2.14), Acquiror shall provide to the Stockholder Agent
either (i) a statement that the relevant Earn-Out Milestone set forth in
Schedule 2.14 has been satisfied (in whole or in part) and appropriate
supporting documentation regarding such Earn-Out Milestone or (ii) a statement
that the relevant Earn-Out Milestone set forth in Schedule 2.14 has not been
satisfied and appropriate supporting documentation regarding such Earn-Out
Milestone (each, in case of either clause (i) or (ii), an "Earn-Out
Determination"). If the Earn-Out Determination indicates that the applicable
Earn-Out Milestone has been satisfied in full and that the applicable Earn-Out
Amount pursuant to such Earn-Out Milestone will be issued or paid, as the case
may be, then no action on the part of the Stockholder Agent shall be necessary
and such Earn-Out Determination shall be deemed final (a "Final Earn-Out
Amount"). In any other case, the Stockholder Agent will notify Acquiror in
writing within fifteen (15) Business Days of receipt of such Earn-Out
Determination whether the Stockholder Agent disputes any such determination,
setting forth in reasonable detail the basis for the dispute (each an "Earn-Out
Dispute Notice"). If the Stockholder Agent does not deliver an Earn-Out Dispute
Notice within fifteen (15) Business Days of receipt of an Earn-Out Determination
or if the Stockholder Agent accepts such amount in writing, such Earn-Out
Determination shall be deemed a Final Earn-Out Amount. In the event an Earn-Out
Dispute Notice is delivered, Acquiror and the Stockholder Agent shall meet
within ten (10) Business Days of the delivery of such Earn-Out Dispute Notice to
attempt to resolve such dispute in good faith. If a final resolution of such
dispute is reached, the agreed upon amount shall be deemed to be the Final
Earn-Out Amount. If no final resolution is determined within fifteen (15)
Business Days of the delivery of such Earn-Out Dispute Notice after good faith
negotiation, the final determination of the a Final Earn-Out Amount shall be
submitted to arbitration in accordance with the procedures set forth in Section
8.2(g)(ii) and (iii). The determination of the arbitrators shall be final,
binding and conclusive upon each Company Stockholder, the Stockholder Agent and
Acquiror.
(d) STOCKHOLDER AGENT. The provisions of SECTIONS 8.2(h), (i)
and (k) shall apply to any acts taken by the Stockholder Agent pursuant to this
SECTION 2.14. Any decision, act, consent or instruction of the Stockholder Agent
in connection with this SECTION 2.14 shall constitute a decision of all the
Company stockholders and shall be final, binding and conclusive upon each of
such stockholders and Acquiror may rely upon any such decision, act, consent or
instruction of the Stockholder Agent as being the decision, act, consent or
instruction of every such holder. Acquiror is hereby relieved from any liability
to any Person for any acts done by it in accordance with such decision, act,
consent or instruction of the Stockholder Agent.
(e) RESERVED.
(f) NO ASSIGNMENT OF EARN-OUT RIGHTS. No interest in any
Earn-Out or any portion thereof, no right to participate, in whole or in part,
in any Earn-Out pursuant to SECTION 2.14, and no right to receive any
distribution of cash or securities in connection therewith pursuant to SECTION
2.11 may be assigned or transferred to any Person (whether by operation of law,
or in connection with any sale, assignment or other transfer of any shares of
Company Common Stock), and any attempt to do so will be null and void. Joseph
Averbach and Scott Averbach agree that the earn-out consideration shall be
divided between them on the basis of 63.33% being distributed to Scott and
36.67% being distributed to Joseph and that such allocation shall not constitute
a transfer of any rights. The Earn-Outs and the provisions of
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SECTION 2.11 and SECTION 2.14 relating to such Earn-Outs are intended solely for
the benefit of the Persons who immediately prior to the Effective Time were
holders of Company Common Stock. The right (if any) to receive distributions in
connection with any Earn-Out shall be personal to the Persons who immediately
prior to the Effective Time were holders of Company Common Stock, and such right
shall not (x) attach to or run with such stock or any Acquiror securities issued
in exchange therefor or (y) inure to the benefit of any purchaser, assignee or
other transferee either of such stock or options or such Acquiror securities.
Notwithstanding the foregoing, an interest in an Earn-Out may be assigned or
transferred involuntarily pursuant to will, the laws of intestate succession, or
the order of a Court in connection with a settlement of property rights incident
to divorce. In no event shall the right to receive contingent shares be
evidenced by a negotiable instrument or be readily marketable.
(g) NO INTEREST. No interest shall accrue or be paid on any
portion of any Earn-Out or any payment or distribution pursuant to SECTION 2.14
or the provisions of Section 1.11 relating to the Earn-Outs.
(h) FORM OF PAYMENT. The Earn-Out Amount shall be paid in the
form of Acquiror Common Stock, provided that, Acquiror shall pay cash in lieu of
issuing fractional shares in the manner established by the provisions of SECTION
2.6(e) hereof. The price per share of Acquiror Common Stock for purposes of
payment of the said Earn-Out Amount, shall be determined as the greater of (1)
the average closing sales price per share of Acquiror Common Stock as traded on
the NNM and reported by The Wall Street Journal, for the five (5) consecutive
market trading days prior to and including the Earn-Out Record Date or (2) $4.00
per share.
(i) ACCESS TO INFORMATION. Acquiror agrees to provide promptly
all information as reasonably requested by the Stockholder Agent to the
Stockholder Agent or its designated accountants, and to make available for
inspection and review to the Stockholder Agent or its designated accountants,
during regular business hours upon reasonable prior notice, the books and
records of Acquiror relating to the Company Business (as defined in Schedule
2.14) relevant to the determination of whether a Earn-Out Milestone has been
achieved, including but not limited to, relevant production reports, purchase
orders, worksheets for the period under review and the computations underlying
the determination of whether the Earn-Out Milestones have been achieved. Access
to such information will be conditioned upon execution by the Stockholder Agent
and its designated accountants of a confidentiality agreement acceptable to
Acquiror.
2.15 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company, or to effect the assignment to the Company
of any and all Company Intellectual Property created by a founder, employee or
consultant of the Company (including Intellectual Property created by any of the
Company's founders prior to the creation of the Company), or to complete and
prosecute all domestic and foreign patent filings related to such Company
Intellectual Property, the officers and directors of the Surviving Corporation
are fully authorized to take, and will use their reasonable efforts to take, all
such lawful and necessary action.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations or prospects of such
entity or group of entities. In this Agreement, any reference to a "material
adverse effect" with respect to any entity or group of entities means any event,
change or effect that is materially adverse to the condition (financial or
otherwise), properties, assets, liabilities, business, operations, results of
operations or prospects of such entity and its subsidiaries, taken as a whole.
Except as disclosed in a document of even date herewith delivered by
the Company to Acquiror prior to the execution and delivery of this Agreement
and referring to the representations and warranties in this Agreement (the
"Company Disclosure Schedule"), the Company represents and warrants to Acquiror
as follows:
3.1 ORGANIZATION, STANDING AND POWER; SUBSIDIARIES. The Company is a
corporation duly organized and validly existing and, to the extent applicable in
such jurisdiction, in good standing under the laws of its jurisdiction of
organization. The Company has the corporate power to own its properties and to
carry on its business as now being conducted and as currently proposed to be
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which it is required to be so qualified. The Company has
delivered a true and correct copy of the articles of incorporation, bylaws or
other charter or organizational documents, as applicable, of the Company, each
as amended to date, to Acquiror. The Company is not in violation of any of the
provisions of its articles of incorporation, bylaws or equivalent charter or
organizational documents. The Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity. Section 3.1
of the Company Disclosure Schedule sets forth each jurisdiction where the
Company is so qualified, licensed or admitted to do business and separately
lists each other jurisdiction in which the Company owns, uses, licenses or
leases its Assets and Properties, or conducts business or has employees or
engages independent contractors.
3.2 CAPITAL STOCK.
(a) The authorized capital stock of the Company consists of
five hundred (500) shares of Common Stock, $1.00 par value per share (the
"Company Common Stock"), of which seventy-five (75) shares are outstanding as of
the date hereof. All of the issued and outstanding shares of Company Common
Stock are validly issued, fully paid and nonassessable, have not been issued in
violation of any preemptive rights and have been issued in compliance with all
applicable federal, state and foreign securities Laws. Except as set forth in
Section 3.2(a) of the Company Disclosure Schedule, no shares of Company Common
Stock are held in treasury or are authorized or reserved for issuance.
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(b) Section 3.2(b) of the Company Disclosure Schedule lists
each holder of Company Common Stock, including the state of residence of each
holder and the number of Company Common Stock owned by each such holder. On the
Closing Date, the Company shall deliver to Acquiror an updated Section 3.2(b) of
the Company Disclosure Schedule current as of such date.
(c) Reserved.
(d) There are no outstanding Company Options or agreements,
arrangements or understandings to which the Company is a party (written or oral)
to issue any Options with respect to the Company.
(e) There are no preemptive rights or agreements, arrangements
or understandings to issue preemptive rights with respect to the issuance or
sale of Company Common Stock created by statute, the articles of incorporation
or bylaws of the Company, or any agreement or other arrangement to which the
Company is a party or to which it is bound and there are no agreements,
arrangements or understandings to which the Company is a party (written or oral)
pursuant to which the Company has the right to elect to satisfy any Liability by
issuing Company Common Stock or Equity Equivalents.
(f) The Company is not a party or subject to any agreement or
understanding, and, to the Company's knowledge, there is no agreement,
arrangement or understanding between or among any Persons which affects,
restricts or relates to voting, giving of written consents, dividend rights or
transferability of shares with respect to the Company Common Stock, including
without limitation, any voting trust agreement or proxy. No debt securities of
the Company are issued and outstanding.
3.3 AUTHORITY. Subject only to the requisite approval of the Merger and
this Agreement by the stockholders of the Company, the Company has full
corporate power and authority to execute and deliver this Agreement and the
other agreements which are attached (or forms of which are attached) as exhibits
hereto (the "Ancillary Agreements") to which the Company is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Company of
this Agreement and Ancillary Agreements to which the Company is a party and the
consummation by the Company of the transactions contemplated hereby and thereby,
and the performance by the Company of its obligations hereunder and thereunder,
have been duly and validly authorized by all necessary action by the board of
directors of the Company, and no other action on the part of the board of
directors of the Company is required to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which the Company
is a party and the consummation by the Company of the transactions contemplated
hereby and thereby. This Agreement and the Ancillary Agreements to which the
Company is a party have been or will be, as applicable, duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof by Acquiror, each constitutes or will constitute,
as applicable, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance,
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reorganization, moratorium or other similar Laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
3.4 TITLE; LIENS AND ENCUMBRANCES. The Company, by virtue of the
deliveries made at the Closing, will sell, convey, assign, transfer and deliver
to Acquiror good and valid title to all of its assets, free and clear of any and
all Liens, except (i) for statutory Liens for taxes not yet due and payable and
(ii) as set forth on Section 3.4 of the Company Disclosure Schedule. The Company
has good, valid and marketable title to all of its properties, interests in
properties and assets, real and personal, or with respect to leased properties
and assets, valid leasehold interests in such properties and assets, free and
clear of all Liens, except (i) the statutory Liens of taxes not yet due and
payable, (ii) such imperfections of title, liens and easements as do not and
will not materially detract from or interfere with the use of the properties
subject thereto or affected thereby, or otherwise materially impair business
operations involving such properties and (iii) the Liens set forth on Section
3.4 of the Company Disclosure Schedule. The Assets and Properties are not
subject to any preemptive right, right of first refusal or other right or
restriction, are in good operating condition and repair, reasonable wear and
tear excepted, and are suitable and adequate for use in the ordinary course of
business and conform in all material respects to all applicable laws. The Assets
and Properties, taken as a whole, constitute all the assets and the properties
relating to or used or held for use in connection with the Business or Condition
of the Company during the past twelve months (except inventory sold, cash
disposed of, accounts receivable collected, prepaid expenses realized, contracts
fully performed, properties or assets replaced by equivalent or superior
properties or assets, in each case in the ordinary course of business, and
employees not hired by Acquiror) and comprise all the assets required for the
continued conduct of the Business or Condition of the Company as now being
conducted. All leases are in good standing and are binding, valid, effective and
enforceable on the Company in accordance with their terms, and, to the knowledge
of the Company, are enforceable against the other party or parties thereto in
accordance with their terms, in each case subject to the effect, if any, of (i)
applicable bankruptcy and other similar laws affecting the rights of creditors
generally, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies. The Company is not in default under any
lease and there has not occurred any event that, with the giving of notice or
lapse of time or both, would constitute a material default under any lease. To
the knowledge of the Company, there are no current defaults by any other party
to any lease or events that have occurred that, with the giving of notice or
lapse of time or both, would constitute a material default by such party under
any lease. After the Closing Date, Acquiror will be entitled to the continued
possession and use of the personal property leased by the Company, for the terms
specified in such leases and for the purposes consistent with the past practices
of the Company.
3.5 FINANCIAL STATEMENTS. Section 3.5 of the Company Disclosure
Schedule sets forth the Company Financials. The Company Financials delivered to
Acquiror are correct and complete in all material respects and, to the Company's
knowledge, have been prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto as delivered to Acquiror prior
to the date hereof, and, in the case of the Interim Financial Statements,
subject to normal year-end adjustments, which adjustments will not be material
in amount or significance). The Company Financials present fairly and accurately
the financial condition and operating results of the Company as of the dates and
during the periods indicated therein. Since the date of
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Company's incorporation, there has been no change in any accounting policies,
principles, methods or practices, including any change with respect to reserves
(whether for bad debts, contingent liabilities or otherwise), of the Company.
3.6 ABSENCE OF CERTAIN CHANGES. Since the Interim Financial Statement
Date, and except as disclosed in this Agreement and/or the Company Disclosure
Schedule, the Company has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
could reasonably be expected to result in, a material adverse effect on the
Company; (ii) any acquisition, sale or transfer of any material Asset or
Property of the Company; (iii) any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by the
Company or any revaluation by the Company of any of its assets; (iv) any
declaration, setting aside, or payment of a dividend or other distribution with
respect to the shares of the Company, or any direct or indirect redemption,
purchase or other acquisition by the Company of any of its share capital; (v)
any material contract entered into by the Company, or any material amendment or
termination of, or default under, any material contract to which the Company is
a party or by which any of them is bound; (vi) any amendment or change to the
articles of incorporation or bylaws or other charter or organizational documents
of the Company; (vii) any increase in or modification of the compensation or
benefits payable or to become payable by the Company to any of its respective
directors or employees, (viii) any change of any Tax election or settlement or
compromise of any material state, local or foreign Tax liability, (ix) any
negotiation or agreement by the Company to do any of the things described in the
preceding clauses (i) through (viii) (other than negotiations with Acquiror and
its representatives regarding the transactions contemplated by this Agreement)
or (x) any other event or condition of any character which has resulted in, or
might reasonably be expected to result in, a material adverse effect on the
Company. Since September 30, 2000, the Company has operated its business in
accordance with its Business Plan (a copy of which has been provided to and
approved by Acquiror), and any material deviations therefrom or modifications to
the Business Plan shall require the prior approval by Acquiror.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Company Financials, (ii) those incurred in the ordinary course of business and
not required to be set forth in the Company Financials, (iii) those incurred in
the ordinary course of business since the Interim Financial Statement Date and
consistent with past practice; and (iv) those incurred in connection with the
execution of this Agreement.
3.8 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic by or against the Company or, to the knowledge
of the Company, threatened by or against the Company, or relating to any of its
respective properties or any of its respective officers or directors (in their
capacities as such). There is no judgment, decree or order against the Company
or any of its respective directors or officers (in their capacities as such),
that could prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
material adverse effect on the Company.
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3.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon the Company or any of the
Subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or impairing any current or currently proposed business practice of
the Company or any of the Subsidiaries, any acquisition of property by the
Company or any of the Subsidiaries or the conduct of business by the Company or
any of the Subsidiaries as currently conducted or as currently proposed to be
conducted by the Company or any of the Subsidiaries.
3.10 GOVERNMENTAL AUTHORIZATION. Section 3.10 of the Company Disclosure
Schedule contains a list of all material Approvals of Governmental or Regulatory
Authorities relating to the business conducted by the Company which are required
to be given to or obtained by the Company from any and all Governmental or
Regulatory Authorities in connection with the consummation of the transactions
contemplated by this Agreement (other than filing of the Certificate of Merger,
together with the required officers' certificates, and such consents, approvals,
orders, authorizations, registration declarations and filings as may be required
under state or federal securities laws). The Company has obtained each federal,
local or foreign governmental consent, license, permit, grant, or other
authorization of a Governmental or Regulatory Authority (i) pursuant to which
the Company currently operates or holds any interest in any of properties or
(ii) that is required for the operation of the Company's business or the holding
of any such interest, and all Approvals from Governmental or Regulatory
Authorities are in full force and effect, except where the failure to obtain or
have any of the Approvals could not reasonably be expected to have a material
adverse effect on the Company. Each of the Approvals from Governmental or
Regulatory Authorities are assignable or otherwise transferable to Acquiror in
connection with the transactions contemplated hereby without the consent or
approval of any Governmental or Regulatory Authorities or other third party.
3.11 REAL PROPERTY. Section 3.11 of the Company Disclosure Schedule
identifies each parcel of real property owned or leased by the Company or used
in the operation of its businesses or where any Assets and Properties are
located, the name of the lessor, the date of the lease and each amendment
thereto and the aggregate annual rental and other fees payable under such lease.
3.12 INTELLECTUAL PROPERTY.
(a) Section 3.12(a) of the Company Disclosure Schedule lists
all Company Registered Intellectual Property (including all trademarks and
service marks that the Company has used with the intent of creating or
benefitting from any common law rights relating to such marks) and lists any
proceedings or actions pending as of the date hereof before any court or
tribunal (including the PTO or equivalent authority anywhere in the world)
related to any of the Company's Registered Intellectual Property.
(b) The Company has all requisite right, title and interest in
or valid and enforceable rights under Contracts or Licenses to use all Company's
Intellectual Property necessary to the conduct of its business as presently
conducted. Each item of Company's Intellectual Property, including all of the
Company's Registered Intellectual Property listed in Section 3.12(a) of the
Company Disclosure Schedule, is owned exclusively by the Company (excluding
Intellectual Property licensed to the Company under any License and is free and
clear of any Liens. The Company (i) owns exclusively all trademarks, service
marks and trade names
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used by the Company in connection with the operation or conduct of the business
of the Company, including the sale of any products or technology or the
provision of any services by the Company and (ii) owns exclusively, and has good
title to, all copyrighted works that are Company products or other works of
authorship that the Company otherwise purports to own; PROVIDED, HOWEVER, that
such works may incorporate copyrighted works or works of authorship, trademarks
or trade names of third parties which are licensed to the Company or are in the
public domain.
(c) To the extent that any of the Company's Intellectual
Property has been developed or created by any Person other than the Company, the
Company has a written agreement with such Person with respect thereto and the
Company has either (i) obtained ownership of, and is the exclusive owner of, all
such Intellectual Property by operation of law or by valid assignment of any
such rights or (ii) has obtained a License under or to such Intellectual
Property.
(d) Except pursuant to agreements described in Section 3.12(d)
of the Company Disclosure Schedule, the Company has not transferred ownership of
or granted any License of or other right to use or authorized the retention of
any rights to use any Intellectual Property that is or was Company Intellectual
Property, to any other Person.
(e) The Company Intellectual Property constitutes all the
Intellectual Property used in and/or necessary to the conduct of the Company's
business as it currently is conducted or as reasonably contemplated to be
conducted, including, without limitation, the design, development, distribution,
marketing, manufacture, use, import, license, and sale of the products,
technology and services of the Company (including products, technology, or
services currently under development).
(f) Section 3.12(f) of the Company Disclosure Schedule lists
all Contracts and Licenses (including all inbound Licenses) to which the Company
is a party with respect to any Intellectual Property (other than in connection
with commercially available "shrink wrap" software). No Person other than the
Company has ownership rights to improvements made by the Company in Intellectual
Property which has been licensed to the Company.
(g) Section 3.12(g) of the Company Disclosure Schedule lists
all Contracts, Licenses and agreements between the Company and any other Person
wherein or whereby the Company has agreed to, or assumed, any obligation or duty
to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or Liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other Person of
the Intellectual Property of any Person other than the Company.
(h) The operation of the business of the Company as currently
conducted or as presently proposed to be conducted, including the Company's
design, development, use, import, manufacture and sale of the products,
technology or services (including products, technology or services currently
under development) of the Company does not infringe or misappropriate the
Intellectual Property of any Person, violate the rights of any Person (including
rights to privacy or publicity), or constitute unfair competition or an unfair
trade practice under any Law, and the Company has not received notice from any
Person claiming that such operation or any act,
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product, technology or service (including products, technology or services
currently under development) of the Company infringes or misappropriates the
Intellectual Property of any Person or constitutes unfair competition or trade
practices under any Law, including notice of third party patent or other
Intellectual Property rights from a potential licensor of such rights.
(i) Each item of Company Registered Intellectual Property is
valid and subsisting, and all necessary registration, maintenance, renewal fees,
annuity fees and taxes in connection with such Registered Intellectual Property
have been paid and all necessary documents and certificates in connection with
such Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. Section 3.12(i)(1) of the Company Disclosure
Schedule lists all actions that must be taken by the Company within 180 days
from the date hereof, including the payment of any registration, maintenance,
renewal fees, annuity fees and taxes or the filing of any documents,
applications or certificates for the purposes of maintaining, perfecting or
preserving or renewing any Company Registered Intellectual Property. Except as
set forth in Section 3.12(i)(2) of the Company Disclosure Schedule, the Company
has registered the copyright with the U.S. Copyright Office for the latest
version of each product or technology of the Company that constitutes or
includes a copyrightable work. In each case in which the Company has acquired
ownership of any Intellectual Property rights from any Person, the Company has
obtained a valid and enforceable assignment sufficient to irrevocably transfer
all rights in such Intellectual Property (including the right to seek past and
future damages with respect to such Intellectual Property) to the Company and,
to the maximum extent provided for by, and in accordance with, applicable Laws,
the Company has recorded each such assignment of Registered Intellectual
Property with the relevant Governmental or Regulatory Authority, including the
PTO, the U.S. Copyright Office, or their respective equivalents in any relevant
foreign jurisdiction, as the case may be.
(j) There are no Contracts or Licenses between the Company and
any other Person with respect to Company Intellectual Property under which there
is any dispute (or facts that may reasonably lead to a dispute) known to the
Company regarding the scope of such Contract or License, or performance under
such Contract or License, including with respect to any payments to be made or
received by the Company thereunder.
(k) To the knowledge of the Company, no Person is infringing
or misappropriating any Company Intellectual Property.
(l) The Company has taken all commercially reasonable steps to
protect the Company's rights in confidential information and trade secrets of
the Company or provided by any other Person to the Company subject to a duty of
confidentiality. A description of the steps taken by the Company is described on
Section 3.12(l) of the Company Disclosure Schedule.
(m) No Company Intellectual Property or product, technology or
service of the Company is subject to any Order or Action or Proceeding that
restricts, or that is reasonably expected to restrict in any manner, the use,
transfer or licensing of any Company Intellectual Property by the Company or
that may affect the validity, use or enforceability of such Company Intellectual
Property.
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(n) No (i) product, technology, service or publication of the
Company, (ii) material published or distributed by the Company or (iii) conduct
or statement of Company constitutes obscene material, a defamatory statement or
material, false advertising or otherwise violates any Law.
(o) Neither this Agreement nor any transactions contemplated
by this Agreement will result in Acquiror's granting any rights or licenses with
respect to the Intellectual Property of Acquiror to any Person pursuant to any
Contract to which the Company is a party or by which any of its Assets and
Properties are bound.
(p) Section 3.12(p) of the Company Disclosure Schedule sets
forth a list of (x) all software which the Company has licensed from any third
party which is used by the Company in its products or otherwise in its business
(other than commercially available "shrink wrap" software) and (y) a list of all
"freeware" and "shareware" incorporated into any product now or heretofore
shipped by the Company. The Company has all rights necessary to the use of such
software, "freeware" and "shareware."
(q) The Company's products comply in all material respects
with all applicable industry standards and with the feature specifications and
performance standards set forth in the Company's product data sheets. There are
no outstanding claims (or facts that may reasonably lead to a claim) for breach
of warrants by the Company in connection with the foregoing.
(r) All product performance comparisons heretofore furnished
by the Company to customers or Acquiror are accurate in all material respects as
of the dates so furnished (except that, in the case of product performance
comparisons made as of a specified earlier date, such comparisons shall be
accurate as of such specified earlier date, and, in the case of product
performance comparisons superseded by a subsequent product performance
comparison furnished to the customer before the customer's acquisition of a
license on the product covered by the superseded comparison, the superseding
comparison shall be accurate in all material respects and the superseded
comparison shall be disregarded).
(s) The Company has taken all necessary and appropriate steps
to protect and preserve ownership of Company Intellectual Property. The Company
has secured valid written assignments from all consultants and employees who
contributed to the creation or development of the Company Intellectual Property
necessary for the Company to protect and preserve its ownership of Company
Intellectual Property.
3.13 ENVIRONMENTAL MATTERS.
To the best knowledge of the Company and Stockholders: (i) no
methylene chloride or asbestos is contained in or has been used at or released
from the Facilities; (ii) all Hazardous Materials and wastes have been disposed
of in accordance with all Environmental and Safety Laws; and (iii) the Company
has not received any notice (verbal or written) of any noncompliance of the
Facilities or its past or present operations with Environmental and Safety Laws;
(iv) no notices, administrative actions or suits are pending or threatened
relating to a violation of any Environmental and Safety Laws; (v) the Company is
not a potentially
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responsible party under the Federal Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), or state analog statute, arising out of
events occurring prior to the Closing Date; (vi) for so long as the Company
shall have leased or owned the Facilities or Sites, there have not been, and
there are not now, any Hazardous Materials on, under or migrating to or from the
Facilities or Sites; (vii) for so long as the Company shall have leased or owned
the Sites, there have not been, and there are not now, any underground tanks or
underground improvements at, on or under the Sites including without limitation,
treatment or storage tanks, sumps, or water, gas or oil wells; (viii) there are
no polychlorinated biphenyls (PCBs) deposited, stored, disposed of or located on
the Sites or Facilities or any equipment on the Sites containing PCBs at levels
in excess of 50 parts per million; (ix) there is no formaldehyde on the Sites or
in the Facilities, nor any insulating material containing urea formaldehyde in
the Facilities; (x) the Facilities and the Company's uses and activities therein
have at all times complied in all material respects with all Environmental and
Safety Laws; and (xi) the Company has all the permits and licenses required to
be issued under federal, state or local or any foreign laws regarding
Environmental and Safety Laws and is in compliance in all material respects with
the terms and conditions of those permits.
3.14 TAXES.
(a) Except as set forth in the Company Disclosure Schedule,
the Company, and any consolidated, combined, unitary or aggregate group for Tax
purposes of which the Company is or has been a member, have properly completed
and timely filed all Tax Returns required to be filed by them and have paid all
Taxes shown thereon to be due. The Company Financials reflect any unpaid Taxes
of the Company for periods (or portions of periods) through the Year-End
Financial Statement Date. Except as set forth in Section 3.14 of the Company
Disclosure Schedule, the Company has no liability for unpaid Taxes for any
period prior to the Year-End Financial Statement Date. The Company has no
liability for unpaid Taxes accruing after the Year-End Financial Statement Date
except for Taxes incurred in the ordinary course of business subsequent to the
Year-End Financial Statement Date. There is (i) no material claim for Taxes that
is a Lien against the property of the Company or is being asserted against the
Company other than Liens for Taxes not yet due and payable, (ii) no audit of any
Tax Return of the Company being conducted by any governmental entity responsible
for the imposition of any such tax (domestic or foreign) (a "Tax Authority") and
(iii) no extension of any statute of limitations on the assessment of any Taxes
granted by the Company and currently in effect. The Company is not a party to
any Tax sharing or Tax allocation agreement nor does the Company have any
liability or potential liability to another party under any such agreement. The
Company has not filed any disclosures under Section 6662 or comparable
provisions of state, local federal or foreign law to prevent the imposition of
penalties with respect to any Tax reporting position taken on any Tax Return.
The Company has never been a member of a consolidated, combined, unitary or
aggregate group of which the Company was not the ultimate parent corporation.
The Company has in its possession receipts for any Taxes paid to foreign Tax
Authorities. "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means
(i) any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Tax Authority, (ii) any liability for
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the payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined, unitary or aggregate group for
any Taxable period, and (iii) any liability for the payment of any amounts of
the type described in (i) or (ii) as a result of being a transferee of or
successor to any person or as a result of any express or implied obligation to
indemnify any other person. "Tax Return" shall mean any return, statement,
report or form (including, without limitation, estimated tax returns and
reports, withholding tax returns and reports and information returns and
reports) required to be filed with respect to Taxes.
(b) The Company has withheld all amounts required to be
withheld by law in connection with compensation paid or deemed paid to its
employees. The Company has timely paid to the appropriate tax authorities all
amounts so withheld or otherwise due in connection with the employment by the
Company of employees, and has timely filed all requisite returns with the tax
authorities with respect to said taxes. The Company is not a party to any tax
proceedings with respect to the withholding of taxes from its employees and/or
payment to the tax authorities of withholding taxes or other dues with respect
to their employment with the Company. To the best knowledge of the Company, no
investigation is being conducted against the Company by any tax authority with
respect to any of the above withholding, payment, filing or any other
obligations in connection with the above. The Company shall not recover or
attempt to recover from any of its employees any taxes asserted against the
Company and/or collected from it whether prior, upon or after the Closing. For
the purpose of this Section 3.14(b), (1) "tax" shall include, without
limitation, income taxes, levies, social security dues, health insurance
premiums, compulsory loans and any other compulsory payments with respect to the
employment of the employees of the Company under the laws of the United States,
and the term "tax authority" shall be construed accordingly, and (2) the Company
shall also include, where applicable, the existing trustee or trustees of the
Company Stock Plan.
(c) Notwithstanding the foregoing, the representations
contained in this Section 3.14 shall not apply to any Taxes resulting from the
Merger.
3.15 EMPLOYEE BENEFIT PLANS.
(a) Section 3.15 of the Company Disclosure Schedule lists each
Plan. With respect to each Plan, the Company has delivered or made available to
Acquiror a true, complete and correct copy of (i) such Plan (or, if not written,
a written summary of its material terms) and the most recent summary plan
description, if any, related to such Plan, (ii) each trust agreement or other
funding arrangement relating to such Plan, (iii) the most recent annual report
(Form 5500) filed with the IRS with respect to such Plan (and, if the most
recent annual report is a Form 5500-R, the most recent Form 5500-C filed with
respect to such Plan), (iv) the most recent actuarial report or financial
statement relating to such Plan and (v) the most recent determination letter, if
any, issued by the IRS with respect to such Plan and any pending request for
such a determination letter. The Company is not and, to the Company's knowledge,
no other person or entity, has any express or implied commitment, whether
legally enforceable or not, to modify, change or terminate any Plan, other than
with respect to a modification, change or termination required by ERISA or the
Internal Revenue Code.
(b) Each Plan has been administered in all material respects
in accordance with its terms and all applicable laws, including ERISA and the
Internal Revenue Code, and
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contributions required to be made under the terms of any of the Plans as of the
date of this Agreement have been timely made or, if not yet due, have been
properly reflected on the Interim Financial Statements. With respect to the
Plans, no event has occurred and there exists no condition or set of
circumstances in connection with which Company could be subject to any material
liability (other than for routine benefit liabilities) under the terms of, or
with respect to, such Plans, ERISA, the Internal Revenue Code or any other
applicable Law.
(c) (i) Each Plan which is intended to qualify under Section
401(a), 401(k), 401(m) or 4975(e)(6) of the Internal Revenue Code has received a
favorable determination letter, opinion, notification or advisory letter from
the IRS as to its qualified status, and no fact or event has occurred that could
adversely affect the qualified status of any such Plan; (ii) there has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Internal Revenue Code and other than a transaction that is exempt
under a statutory or administrative exemption) with respect to any Plan that
could result in liability to the Company and (iii) each Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without liability (other than (A) liability for ordinary
administrative expenses typically incurred in a termination event or (B) if the
Plan is pension benefit plan subject to Part 2 of Title I of ERISA, liability
for the accrued benefits as of the date of such termination (if and to the
extent required by ERISA) to the extent that either there are sufficient assets
set aside in a trust or insurance contract to satisfy such liability or such
liability is reflected on the Interim Financial Statements). No suit,
administrative proceeding, action or other litigation has been brought, or to
the Company's knowledge is threatened, against or with respect to any such Plan,
including any audit or inquiry by the IRS or United States Department of Labor
(other than routine benefits claims).
(d) No Plan is a multiemployer pension plan (as defined in
Section 3(37) of ERISA) or other pension plan subject to Title IV or Part 3 of
Title I of ERISA or Section 412 of the Internal Revenue Code and neither the
Company nor any ERISA Affiliate has sponsored or contributed to or been required
to contribute to a multiemployer pension plan or other pension plan subject to
Title IV of ERISA. No material liability under Title IV of ERISA has been
incurred by Company or any ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to Company of incurring or
being subject (whether primarily, jointly or secondarily) to a material
liability thereunder. None of the Company's assets is, or may reasonably be
expected to become, the subject of any lien arising under ERISA or Section
412(n) of the Internal Revenue Code.
(e) With respect to each Plan that is subject to Title IV or
Part 3 of Title I of ERISA or Section 412 of the Internal Revenue Code, (i) no
reportable event (within the meaning of Section 4043 of ERISA, other than an
event that is not required to be reported before or within thirty days of such
event) has occurred or is expected to occur, (ii) there was not an accumulated
funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of
the Internal Revenue Code), whether or not waived, as of the most recently ended
plan year of such Benefit Plan; and (iii) there is no "unfunded benefit
liability" (within the meaning of Section 4001(a)(18) of ERISA).
(f) Except as required by Law, no Plan provides any of the
following retiree or post-employment benefits to any person: medical, disability
or life insurance benefits. The
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Company and any ERISA Affiliates are in material compliance with (i) the
applicable requirements of the health care continuation and notice provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA")
and the regulations (including proposed regulations) thereunder and (ii) the
applicable requirements of the Health Insurance Portability and Accountability
Act of 1996, as amended, and the regulations (including the proposed
regulations) thereunder.
(g) PARACHUTE PAYMENTS. There is no contract, agreement or
benefit arrangement covering any current or former employee or consultant of the
Company which, individually or collectively, could give rise to the payment of
any amount which would constitute an "excess parachute payment" (as defined in
Section 280G of the Internal Revenue Code). Neither the execution of this
Agreement nor the consummation of any of the transactions contemplated hereby
(whether alone or upon the occurrence of any additional or further acts or
events) will (i) result in any obligation or liability (with respect to accrued
benefits or otherwise) on the part of the Company, Acquiror, the Surviving
Corporation, or any of their respective Subsidiaries to the PBGC, to any Plan,
or to any present or former employee, director, officer, stockholder, contractor
or consultant of Acquiror, the Surviving Corporation, or any their respective
Subsidiaries or any of their dependents, (ii) be a trigger event under any Plan
that will result in any payment (whether of severance pay or otherwise) becoming
due to any such present or former employee, officer, director, stockholder,
contractor, or consultant, or any of their dependents or (iii) accelerate the
time of payment or vesting, or increase the amount, of any compensation
theretofore or thereafter due or granted to any employee, officer, director,
stockholder, contractor, or consultant of the Company or any of their
dependents. By executing this Agreement, Stockholders confirm that immediately
prior to the completion of the Merger contemplated by this Agreement, they will
be the owner of more than 75% of the voting power of all of the outstanding
stock of Company; that there was adequate disclosure to them of all material
facts concerning the Agreement to pay cash to Robert DeCuir in exchange for
stock that was issued to him as compensation, some of which was subject to a
risk of forfeiture; and that by executing this Agreement they verify that they
voted their shares in favor of the Agreement to make such payment.
(h) With respect to any insurance policy which provides, or
has provided, funding for benefits under any Plan, (i) there is and will be no
liability of the Company, Acquiror or any of their respective Subsidiaries in
the nature of a retroactive or retrospective rate adjustment, loss sharing
arrangement, or actual or contingent liability as of the Closing Date, nor would
there be any such liability if such insurance policy were terminated as of the
Closing Date, and (ii) no insurance company issuing any such policy is in
receivership, conservatorship, bankruptcy, liquidation, or similar proceeding,
and, to the knowledge of the Company, no such proceedings with respect to any
insurer are imminent.
3.16 EMPLOYEES; LABOR RELATIONS.
(a) The Company is not a party to any collective bargaining
agreement and there is no unfair labor practice or labor arbitration proceedings
pending with respect to the Company, or, to the knowledge of the Company,
threatened, and there are no facts or circumstances known to the Company that
could reasonably be expected to give rise to such complaint or claim. To the
knowledge of the Company, there are no organizational efforts
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presently underway or threatened involving any employees of the Company or any
of the employees performing work for the Company but provided by an outside
employment agency, if any. There has been no work stoppage, strike or other
concerted action by employees of the Company.
(b) All employees of the Company are employed at will, and no
employees of the Company are represented by a union. Section 3.16(i) of the
Company Disclosure Schedule sets forth, individually and by category, the name
of each officer, employee and consultant, together with such person's position
or function, annual base salary or wage and any incentive, severance or bonus
arrangements with respect to such person. Except as described in Section
3.16(b)(ii) of the Company Disclosure Schedule, the completion of the
transactions contemplated by this Agreement will not result in any payment or
increased payment becoming due from the Company to any current or former
officer, director, or employee of, or consultant to, the Company, and to the
knowledge of the Company no employee of the Company has made any threat, or
otherwise revealed an intent, to terminate such employee's relationship with the
Company, for any reason, including because of the consummation of the
transactions contemplated by this Agreement. The Company is not a party to any
agreement for the provision of labor from any outside agency. Since the
Company's date of incorporation, there have been no claims by employees of such
outside agencies, if any, with regard to employees assigned to work for the
Company, and no claims by any governmental agency with regard to such employees.
(c) Since the Company's date of incorporation, there have been
no federal or state claims based on sex, sexual or other harassment, age,
disability, race or other discrimination or common law claims, including claims
of wrongful termination, by any employees of the Company or by any of the
employees performing work for the Company but provided by an outside employment
agency, and there are no facts or circumstances known to the Company that could
reasonably be expected to give rise to such complaint or claim. The Company has
complied with all laws related to the employment of employees and, except as set
forth in Section 3.16(c) of the Company Disclosure Schedule, since the Company's
date of incorporation, the Company has not received any notice of any claim that
it has not complied in any material respect with any Laws relating to the
employment of employees, including without limitation, any provisions thereof
relating to wages, hours, collective bargaining, the payment of Social Security
and similar taxes, equal employment opportunity, employment discrimination, the
WARN Act, employee safety, or that it is liable for any arrearages of wages or
any taxes or penalties for failure to comply with any of the foregoing.
(d) The Company has no written policies and/or employee
handbooks or manuals except as described in Section 3.16(d) of the Company
Disclosure Schedule.
(e) To the knowledge of the Company, no officer, employee or
consultant of the Company is obligated under any Contract or other agreement or
subject to any Order or Law that would interfere with the Company's business as
currently conducted. Neither the execution nor delivery of this Agreement, nor
the carrying on of the Company's business as presently conducted nor any
activity of such officers, employees or consultants in connection with the
carrying on of the Company's business as presently conducted, will conflict with
or result in a breach of the terms, conditions or provisions of, constitute a
default under, or trigger a condition
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precedent to any rights under any Contract or other agreement under which any of
such officer's, employees or consultants is now bound.
3.17 INTERESTED PARTY TRANSACTIONS. The Company is not indebted to any
director, officer, employee or agent of the Company (except for amounts due as
normal salaries and bonuses, the payments described in Sections 6.18 and 6.19
below and in reimbursement of ordinary expenses), and no such person is indebted
to the Company.
3.18 INSURANCE. The Company has policies of insurance listed on Section
3.18 of the Company Disclosure Schedule, which are of the type and in amounts
customarily carried by persons conducting businesses or owning assets similar to
those of the Company in the same geographic area. There is no material claim
pending under any such policies as to which coverage has been questioned, denied
or disputed by the underwriters of such policies. All premiums due and payable
under all such policies have been paid and the Company is otherwise in
compliance with the terms of such policies. The Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies.
3.19 COMPLIANCE WITH LAWS AND ORDERS. Neither the Company nor any of
its directors, officers, Affiliates, agents or employees has, since the
incorporation of the Company, violated or is currently in default or violation
in any material respect under, any Law or Order applicable to the Company or any
of its Assets and Properties, and the Company is not aware of any claim of
violation, or of any actual violation, of any such Laws and Orders by the
Company since the incorporation of the Company.
3.20 OTHER NEGOTIATIONS; BROKERS; THIRD PARTY EXPENSES. Neither the
Company nor any of its officers, directors, employees, agents, or, to the
knowledge of the Company, any of its stockholders or Affiliates (nor any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of the Company or any such Affiliate) (a)
has entered into any Contract that conflicts with any of the transactions
contemplated by this Agreement or (b) has entered into any Contract or had any
discussions with any Person regarding any transaction involving the Company
which could result in Acquiror, the Company or any general partner, limited
partner, manager, officer, director, employee, agent or Affiliate of any of them
being subject to any claim for liability to said Person as a result of entering
into this Agreement or consummating the transactions contemplated hereby. No
broker, investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or similar fee or commission in
connection with this Agreement and the transactions contemplated hereby based on
arrangements made by or on behalf of the Company. Section 3.20 of the Company
Disclosure Schedule sets forth the principal terms and conditions of any
Contract with respect to, and a reasonable estimate of, all Third Party Expenses
expected to be incurred by the Company in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby. Any Third Party Expenses incurred by the Company that are
not approved by Acquiror in accordance with Section 6.5 shall be deemed to
constitute a Loss indemnifiable under Section 8.2(b).
3.21 FOREIGN CORRUPT PRACTICES ACT. Neither the Company, nor to the
knowledge of the Company, any agent, employee or other Person associated with or
acting on behalf of the Company has, directly or indirectly, used any corporate
funds for unlawful contributions, gifts,
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entertainment or other unlawful expenses relating to political activity, made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds,
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended,
or made any bribe, rebate, payoff, influence payment, kickback or other similar
unlawful payment.
3.22 NO SUBSIDIARIES. The Company has no (and prior to the Closing will
have no) Subsidiaries and does not (and prior to the Closing will not) otherwise
hold any equity, membership, partnership, joint venture or other ownership
interest in any Person.
3.23 DIRECTORS AND OFFICERS. The name of each director and officer of
the Company on the date hereof, and his or her position with the Company, are
listed in Section 3.23 of the Company Disclosure Schedule.
3.24 NO CONFLICTS. The execution and delivery by the Company of this
Agreement and the Ancillary Agreements to which the Company is a party does not,
and the performance by the Company of its obligations under this Agreement and
the Ancillary Agreements to which the Company is a party and the consummation of
the transactions contemplated hereby and thereby do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the articles of incorporation or bylaws
of the Company;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 3.24(c) of the
Company Disclosure Schedule, if any, conflict with or result in a violation or
breach of any Law or Order applicable to the Company or any of its Assets and
Properties, except as could not reasonably be expected to have a material
adverse effect on the Business or Condition of the Company, or
(c) except as set forth in Section 3.24(c) of the Company
Disclosure Schedule or as could not reasonably be expected to have a material
adverse effect on the Business or Condition of the Company, (i) conflict with or
result in a violation or breach of, (ii) constitute a default (or an event that,
with or without notice or lapse of time or both, would constitute a default)
under, (iii) require the Company to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or under the
terms of (except for (A) the filing of the Certificate of Merger, together with
the required officer's certificate; and (B) such consents approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state or federal securities laws, (iv) result in or give to any
Person any right of termination, cancellation, acceleration or modification in
or with respect to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments or
performance, (vi) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon the Company or any of its Assets and Properties
or (vii) result in the loss of a material benefit under any of the terms,
conditions or provisions of any Contract or License to which the Company is a
party or by which any of the Company's Assets and Properties is bound.
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3.25 MINUTE BOOKS. The minute books of the Company made available to
Acquiror contain a complete and accurate summary of all meetings of directors
and stockholders or actions by written consent since the time of incorporation
of the Company through the date of this Agreement, and reflect all transactions
referred to in such minutes accurately in all material respects.
3.26 COMPLETE COPIES OF MATERIALS. To the best of the Company's
knowledge, the Company has delivered or made available true and complete copies
of each document that has been requested by Acquiror or its counsel in
connection with their legal and accounting review of the Company.
3.27 BOARD APPROVAL. The board of directors of the Company has (i)
approved this Agreement and the Ancillary Agreements, (ii) determined that this
Agreement and the Ancillary Agreements are in the best interests of the
stockholders of the Company and are on terms that are fair to such stockholders
and (iii) recommended that the stockholders of the Company approve this
Agreement and the Ancillary Agreements.
3.28 INVENTORY. The Company does not maintain accounts reflecting
inventories.
3.29 ACCOUNTS RECEIVABLE. Subject to any reserves set forth in the
Company Financials, the accounts receivable shown on the Company Financials
represent bona fide claims against debtors for sales and other charges, and are
not subject to discount except for normal cash and immaterial trade discounts.
Except as set forth in Section 3.29 of the Company Disclosure Schedule, the
amount carried for doubtful accounts and allowances disclosed in the Company
Financials is sufficient to provide for any losses which may be sustained on
realization of the receivables.
3.30 CUSTOMERS AND SUPPLIERS. Except as set forth in Section 3.30 of
the Company Disclosure Schedule, no customer which individually accounted for
more than 1% of the Company's consolidated gross revenues during the 12-month
period preceding the date hereof, and no supplier of the Company has canceled or
otherwise terminated, or made any written threat to the Company to cancel or
otherwise terminate its relationship with the Company, or has decreased
materially its services or supplies to the Company, in the case of any such
supplier, or its usage of the services or products of the Company, in the case
of such customer, and no such supplier or customer intends to cancel or
otherwise terminate its relationship with the Company or to decrease materially
its services or supplies to the Company or its usage of the services or products
of the Company, as the case may be. The Company has not knowingly breached, so
as to provide a benefit to the Company that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer or supplier of the Company.
3.31 CONTRACTS.
(a) Section 3.31(a)(1) of the Company Disclosure Schedule
contains a true and complete list of each of the Contracts or other arrangements
(true and complete copies or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been made available to Acquiror prior to
the execution of this Agreement), to which the Company is a party
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or by which any of its Assets and Properties is bound. Section 3.31(a)(2) of the
Company Disclosure Schedule contains a true and complete list of each Contract
of the Company (i) not terminable by the Company upon thirty days (or less)
notice by the Company without penalty or obligation to make payments based on
such termination or (ii) which provides for continuing design or other services
by the Surviving Corporation after the Closing Date.
(b) Each Contract required to be disclosed in Section 3.31(a)
of the Company Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its terms
against the Company and to the knowledge of the Company, each other party
thereto; and except as disclosed in Section 3.31(b) of the Company Disclosure
Schedule, to the knowledge of the Company, no other party to such Contract is,
nor has the Company received notice that it is, in violation or breach of or
default under any such Contract (or with notice or lapse of time or both, would
be in violation or breach of or default under any such Contract).
(c) Except as disclosed in Section 3.31(c) of the Company
Disclosure Schedule, the Company is not a party to or bound by any Contract that
has been or could reasonably be expected to be, individually or in the aggregate
with any other similar Contracts, materially adverse to the Business or
Condition of the Company or that has been or could reasonably be expected to
result, individually or in the aggregate with any such other Contracts, in
Losses to the Company or be materially adverse to the Business or Condition of
the Company.
(d) Except as disclosed in Section 3.31(d) of the Company
Disclosure Schedule, the Company is not a party to or bound by any Contract that
(i) automatically terminates or allows termination by the other party thereto
upon consummation of the transactions contemplated by this Agreement or (ii)
contains any covenant or other provision which limits the Company's ability to
compete with any Person in any line of business or in any area or territory.
3.32 EXPORT CONTROL LAWS. The Company has conducted its export
transactions in accordance with applicable provisions of all export control laws
and regulations, including but not limited to the Export Administration Act and
implementing Export Administration Regulations. Without limiting the foregoing,
the Company represents and warrants that:
(a) the Company has obtained all export licenses and other
approvals required for its exports of products, software and technologies from
the United States;
(b) the Company is in compliance with the terms of all
applicable export licenses or other approvals;
(c) there are no pending or, to the Company's knowledge,
threatened claims against the Company with respect to such export licenses or
other approvals;
(d) to the Company's knowledge, there are no actions,
conditions or circumstances pertaining to the Company's export transactions that
may give rise to any future claims; and
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(e) no consents or approvals for the transfer of export
licenses to Acquiror are required, or such consents and approvals can be
obtained expeditiously without material cost.
3.33 BANKS AND BROKERAGE ACCOUNTS. Section 3.33 of the Company
Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship, (b) a
true and complete list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
respective officers, employees, agents or other similar representatives of the
Company having signatory power with respect thereto and (c) a list of each
Investment Asset, the name of the record and beneficial owner thereof, the
location of the certificates, if any, therefor, the maturity date, if any, and
any stock or bond powers or other authority for transfer granted with respect
thereto.
3.34 WARRANTY OBLIGATIONS.
(a) Section 3.34(a) of the Company Disclosure Schedule sets
forth (i) a list of all forms of written warranties, guarantees and written
warranty policies of the Company in respect of any of the Company's products and
services, which are currently in effect (the "Warranty Obligations"), and the
duration of each such Warranty Obligation, (ii) each of the Warranty Obligations
which is subject to any dispute or, to the knowledge of the Company, threatened
dispute and (iii) the experience of the Company with respect to warranties,
guarantees and warranty policies of or relating to the Company's products and
services. True and correct copies of the Warranty Obligations have been
delivered to Acquiror prior to the execution of this Agreement.
(b) Except as disclosed in Section 3.34(b) of the Company
Disclosure Schedule, (i) there have not been any material deviations from the
Warranty Obligations, and salespersons, employees and agents of the Company are
not authorized to undertake obligations to any customer or other Person in
excess of such Warranty Obligations and (ii) the balance sheet included in the
Interim Financial Statements reflects adequate reserves for Warranty
Obligations. All products manufactured, designed, licensed, leased, rented or
sold by the Company (A) are and were free from material defects in construction
and design and (B) satisfy any and all Contract or other specifications related
thereto to the extent stated in writing in such Contracts or specifications, in
each case, in all material respects.
3.35 TAX-FREE REORGANIZATION. Neither the Company nor any of its
directors, officers or stockholders has taken any action which could reasonably
be expected to jeopardize the status of the Merger as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code.
3.36 FINANCIAL PROJECTIONS/BUSINESS PLAN.
(a) The Company has made available to Acquiror certain
financial projections with respect to the Company's business which projections
were prepared for internal use only. The Company makes no representation or
warranty regarding the accuracy of such projections or as to whether such
projections will be achieved, except that the Company represents and
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warrants that such projections were prepared in good faith and are based on
assumptions believed by the Company to be reasonable.
(b) The Company has made available to Acquiror the 2000
Business Plan. The Company makes no representation or warranty regarding its
ability to successfully execute the 2000 Business Plan, except that the Company
represents and warrants that the 2000 Business Plan was prepared in good faith
and is based on assumptions believed by it to be reasonable as of the date of
this Agreement.
3.37 TAKEOVER STATUTES. No Takeover Statute applicable to the Company
is applicable to the Merger or the transactions contemplated hereby.
3.38 DISCLOSURE. No representation or warranty contained in this
Agreement, and no statement contained in the Company Disclosure Schedule or in
any certificate, list or other writing furnished to Acquiror pursuant to any
provision of this Agreement (including the Company Financials and the notes
thereto) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Except as disclosed in a document of even date herewith and
delivered by Acquiror to the Company and the Selling Shareholders prior to the
execution and delivery of this Agreement and referring to the representations
and warranties in this Agreement (the "Acquiror Disclosure Schedule"), Acquiror
represents and warrants to the Company as follows:
4.1 ORGANIZATION, STANDING AND POWER. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Acquiror has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
could reasonably be expected to have a material adverse effect on Acquiror.
Acquiror is not in violation of any of the provisions of its articles of
incorporation or bylaws or equivalent organizational documents.
4.2 AUTHORITY. Acquiror has full corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Acquiror of this Agreement and the Ancillary Agreements to which it is a party
and the consummation by Acquiror of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action by the
Board of Directors of Acquiror, and no other action on the part of the Board of
Directors of Acquiror is required to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which it is a
party and the consummation by Acquiror of the transactions contemplated hereby
and thereby. This Agreement and the Ancillary Agreements to which Acquiror is a
party have been or will be, as applicable, duly and validly executed and
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delivered by Acquiror and, assuming the due authorization, execution and
delivery hereof by the Company, constitutes or will constitute, as applicable, a
legal, valid and binding obligation of Acquiror enforceable against Acquiror in
accordance with its respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar Laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
4.3 ISSUANCE OF ACQUIROR COMMON STOCK. The shares of Acquiror Common
Stock to be issued pursuant to the Merger, when issued, will be duly authorized,
validly issued, fully paid, non-assessable and, subject to the truth and
accuracy of the representations made by the Company in Section 3.2, issued in
compliance with applicable federal and state securities laws.
4.4 SEC DOCUMENTS; ACQUIROR FINANCIAL STATEMENTS. Acquiror has
furnished or made available to the Company true and complete copies of all SEC
Documents filed by it with the SEC since March 30, 2000, all in the form so
filed. As of their respective filing dates, such SEC Documents filed by Acquiror
and all SEC Documents filed after the date hereof but before the Closing
complied or, if filed after the date hereof, will comply in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the SEC thereunder, as the case may be, and none of
the SEC Documents contained or will contain any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, except to the extent such SEC Documents
have been corrected, updated or superseded by a document subsequently filed with
the SEC. The financial statements of Acquiror, including the notes thereto,
included in the SEC Documents (the "Acquiror Financial Statements") comply as to
form in all material respects with the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto or, in the
case of unaudited financial statements, as permitted by Form 10-Q under the
Exchange Act) and present fairly the consolidated financial position of Acquiror
at the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited financial
statements, to normal year-end adjustments). There has been no change in
Acquiror's accounting policies except as described in the notes to the Acquiror
Financial Statements. Except as reflected or reserved against in the Acquiror
Financial Statements, Acquiror has no material Liabilities, except for
Liabilities and obligations (i) incurred in the ordinary course of business or
(ii) that would not be required to be reflected or reserved against in the
balance sheet of Acquiror prepared in accordance with GAAP.
4.5 NO CONFLICTS. The execution and delivery by Acquiror of this
Agreement and the Ancillary Agreements to which it is a party does not, and the
performance by Acquiror of its obligations under this Agreement and the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the articles of incorporation or bylaws
of Acquiror;
(b) conflict with or result in a violation or breach of any
Law or Order applicable to Acquiror or its Assets or Properties; or
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(c) except as would not have a material adverse effect on the
Business or Condition of Acquiror, (i) conflict with or result in a violation or
breach of, (ii) constitute a default (or an event that, with or without notice
or lapse of time or both, would constitute a default) under, (iii) require
Acquiror to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result of the terms of (except for (A) the
filing of the Certificate of Merger and Florida Certificate of Merger, together
with the required officer's certificate; (B) such consents approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state or federal securities laws; and (C) such filings as may be
required under the HSR Act), (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments or performance under,
(vi) result in the creation or imposition of (or the obligation to create or
impose) any Lien upon Acquiror or any of its Assets or Properties, or (vii)
result in the loss of a material benefit under, any of the terms, conditions or
provisions of any Contract or License to which Acquiror is a party or by which
any of its Assets and Properties are bound.
4.6 INVESTMENT ADVISORS. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
advisor's or similar fee or commission in connection with this Agreement and the
transactions contemplated hereby based on arrangements made by or on behalf of
Acquiror.
4.7 TAX-FREE REORGANIZATION. To the knowledge of Acquiror, neither
Acquiror nor any of its directors, officers or shareholders has taken any action
which could reasonably be expected to jeopardize the status of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code. Following the closing of the transaction, Merger Sub will not issue any
additional shares of its stock that will result in Acquiror losing control of
Merger Sub within the meaning of Section 368(c) of the Internal Revenue Code.
Acquiror has no plan or intention to: liquidate Merger Sub; merge Merger Sub
with and into another Corporation; sell or otherwise dispose of the stock of
Merger Sub; or cause Merger Sub to sell or otherwise dispose of any of the
assets of Company acquired in the transaction except for dispositions made in
the ordinary course of business or transfers described in Section 368(a)(2)(C)
of the Internal Revenue Code.
ARTICLE 5
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (unless the Company is
required to take such action pursuant to this Agreement or Acquiror shall give
its prior consent in writing which consent shall not be unreasonably withheld)
to carry on its business in the usual, regular and ordinary course consistent
with past practice and in any event consistent with the Company's 2000 Business
Plan provided prior to the date of this Agreement to Acquiror, to pay its
Liabilities and Taxes consistent with the Company's past practices (and in any
event when due, unless subject to a good faith dispute), to pay or perform other
obligations when due consistent with the Company's past practices (other than
Liabilities, Taxes and other obligations, if any, contested in good faith
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through appropriate proceedings), and, to the extent consistent with such
business, to use reasonable efforts and institute all policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, independent
contractors and other Persons having business dealings with it, all with the
express purpose and intent of preserving unimpaired its goodwill and ongoing
businesses at the Effective Time. Except as expressly contemplated by this
Agreement, the Company shall not, without the prior written consent of Acquiror,
take or agree in writing or otherwise to take, any action that would result in
the occurrence of any of the changes described in Section 3.6 of this Agreement.
Without limiting the generality of the foregoing, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, except as set forth in the Company
Disclosure Schedule or as required or expressly permitted by this Agreement, the
Company shall not do, cause or permit any of the following, without the prior
written consent of Acquiror:
(a) CHARTER DOCUMENTS: cause or permit any amendments to its
articles of incorporation or bylaws;
(b) DIVIDENDS; CHANGES IN CAPITAL STOCK: declare or pay any
dividend on or make any other distribution (whether in cash, stock or property)
in respect of any of its capital stock, or split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
repurchase or otherwise acquire, directly or indirectly, any shares of its
capital stock except from former employees, directors and consultants in
accordance with agreements providing for the repurchase of shares in connection
with any termination of service to it;
(c) Reserved.
(d) CONTRACTS: enter into any Contract or commitment, or
violate, amend or otherwise modify or waive any of the terms of any of its
Contracts, other than Contracts in the ordinary course of business consistent
with past practice which involve total obligations of less than $50,000 and
which are not otherwise material to the business of the Company; and agreements
relating to the acquisition of stock issued as compensation as described in
Section 6.19 of this Agreement;
(e) ISSUANCE OF SECURITIES: issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, any shares of Company
Common Stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities;
(f) INTELLECTUAL PROPERTY: transfer to any person or entity
any rights to any Intellectual Property other than non-exclusive licenses in
connection with the sale of Company products in the ordinary course of business
consistent with past practice;
(g) EXCLUSIVE RIGHTS: enter into or amend any agreement
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of the Company's
products or technology;
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(h) DISPOSITIONS: sell, lease, license or otherwise dispose of
or encumber any of the Company's properties or assets, except for sales of
products (and related nonexclusive licenses) in the ordinary course consistent
with past practice;
(i) INDEBTEDNESS: incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(j) LEASES: enter into any operating lease;
(k) PAYMENT OF OBLIGATIONS: pay, discharge or satisfy any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of business,
other than the payment, discharge or satisfaction of liabilities reflected or
reserved against in the Company Financials and reasonable expenses incurred in
connection with the transactions contemplated by this Agreement;
(l) CAPITAL EXPENDITURES: make any capital expenditures,
capital additions or capital improvements except in accordance with the
Company's 2000 Business Plan;
(m) INSURANCE: reduce the amount of any insurance coverage
provided by existing insurance policies;
(n) TERMINATION OR WAIVER: terminate or waive any right of
substantial value;
(o) EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES: adopt or
amend any employee benefit or stock purchase or option plan, or hire any new
director level or officer level, consultant, employee, pay any special bonus or
special remuneration to any employee, consultant or director or increase the
salaries, wage rates or compensation of any employee or consultant;
(p) SEVERANCE ARRANGEMENTS: grant any severance or termination
pay (i) to any director, officer or consultant or (ii) to any other employee or
consultant except payments made pursuant to standard written agreements
outstanding on the date hereof;
(q) LAWSUITS: commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, PROVIDED that it consults with Acquiror
prior to the filing of such a suit, or (iii) for a breach of this Agreement or
any Ancillary Agreements;
(r) ACQUISITIONS: acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof;
(s) TAXES: make or change any election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, file any Tax Return
or any amendment to a Tax Return, enter into any closing agreement, settle any
claim or assessment in respect of Taxes, or consent to any extension or waiver
of the limitation period applicable to any claim or assessment in respect of
Taxes;
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(t) REVALUATION: revalue any of its assets, including writing
down the value of inventory or writing off notes or accounts receivable;
(u) ISSUANCE OF COMPANY OPTIONS: issue any Company Options; or
(v) OTHER: take or agree in writing or otherwise to take, any
of the actions described in Sections 5.1(a) through (u) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect in any material respect or prevent it from
performing or cause it not to perform its covenants and agreements in this
Agreement in any material respect or cause any condition to Acquiror's closing
obligations in Section 7.1 or Section 7.3 not to be satisfied.
5.2 NO SOLICITATION. Until the earlier of the Effective Time or the
date of termination of this Agreement pursuant to the provisions of Section 9.1
hereof, the Company will not take, nor will the Company permit any of the
Company's officers, directors, employees, stockholders, attorneys, investment
advisors, agents, representatives, Affiliates or Associates (collectively,
"Representatives") to (directly or indirectly) take any of the following actions
with any Person other than Acquiror, Merger Sub and their designees: (a)
solicit, encourage, initiate, entertain, accept receipt of, review or encourage
any proposals or offers from, or participate in or conduct discussions with or
engage in negotiations with, any Person relating to any offer or proposal, oral,
written or otherwise, formal or informal (a "Competing Proposed Transaction"),
with respect to any possible Business Combination with the Company or any of its
Subsidiaries, (b) provide information with respect to the Company to any Person,
other than Acquiror or Merger Sub, relating to (or which the Company believes
would be used for the purpose of formulating an offer or proposal with respect
to), or otherwise assist, cooperate with, facilitate or encourage any effort or
attempt by any such Person with regard to, any possible Business Combination
with the Company or any Subsidiary of the Company (whether such Subsidiaries are
in existence on the date hereof or are hereafter organized), (c) agree to, enter
into a Contract with any Person, other than Acquiror or Merger Sub, providing
for, or approve a Business Combination with the Company or any Subsidiary
(whether such Subsidiaries are in existence on the date hereof or are hereafter
organized), (d) make or authorize any statement, recommendation, solicitation or
endorsement in support of any possible Business Combination with the Company or
any Subsidiary (whether such Subsidiary is in existence on the date hereof or
are hereafter organized) other than by Acquiror or Merger Sub, or (e) authorize
or permit any of the Company's Representatives to take any such action. The
Company shall immediately cease and cause to be terminated any such contacts or
negotiations with any Person relating to any such transaction or Business
Combination. In addition to the foregoing, if the Company receives prior to the
Effective Time or the termination of this Agreement any offer or proposal
(formal or informal, oral, written or otherwise) relating to, or any inquiry or
contact from any Person with respect to, a Competing Proposed Transaction, the
Company shall immediately notify Acquiror thereof and provide Acquiror with the
details thereof, including the identity of the Person or Persons making such
offer or proposal, and will keep Acquiror fully informed on a current basis of
the status and details of any such offer or proposal and of any modifications to
the terms thereof; PROVIDED, HOWEVER, that this provision shall not in any way
be deemed to limit the obligations of the Company and its Representatives set
forth in the previous sentence. Each of the Company and Acquiror acknowledge
that this Section 5.2 was a significant inducement for Acquiror to enter into
this Agreement and the absence of such provision would have resulted
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in either (i) a material reduction in the merger consideration to be paid to the
stockholders of the Company or (ii) a failure to induce Acquiror to enter into
this Agreement.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 REGISTRATION EXEMPTION AND RESALE.
Acquiror and the Company shall use commercially reasonable
efforts to effect the issuance of the shares of Acquiror Common Stock to be
issued pursuant to Section 2.6 in a private placement pursuant to Section 4(2)
of the Securities Act on terms and conditions that are reasonably satisfactory
to Acquiror and the Company. The parties hereto acknowledge and agree that: (i)
as a condition to effecting such issuance as a private placement pursuant to
Section 4(2) of the Securities Act, Acquiror shall be entitled to obtain from
each stockholder of the Company a Stockholder Certificate in the form attached
hereto as EXHIBIT D (or such other form as shall be reasonably satisfactory to
Acquiror) (the "Stockholder Certificate") and that Acquiror will be relying upon
the representations made by each stockholder of the Company in the applicable
Stockholder Certificate in connection with the issuance of Acquiror Common Stock
to such stockholder, (ii) at the Closing, Acquiror shall execute and deliver a
registration rights agreement (the "Registration Rights Agreement") in
substantially the form attached hereto as EXHIBIT E; (iii) the shares of
Acquiror Common Stock so issued pursuant to Section 2.6 will not be registered
under the Securities Act and will constitute "restricted securities" within the
meaning of the Securities Act; and (iv) the certificates representing the shares
of Acquiror Common Stock shall bear appropriate legends to identify such
privately placed shares as being restricted under the Securities Act to comply
with applicable state securities laws and, if applicable, to notice any
applicable restrictions on transfer of such shares.
6.2 STOCKHOLDER APPROVAL. By executing this Agreement, the owners of
all of Company's capital stock at the Effective Time have approved Company's
execution of this Agreement of Merger. The Stockholders acknowledge that they
have been engaged in the business of the Company and in control of its
operations; have all information they require regarding the Company, the terms
of the Merger and this Agreement; that they, as directors of the Company,
recommend that the Company's Stockholders adopt this Agreement and the
transactions contemplated hereby; and that they, as the persons who will own all
of Company's outstanding shares at the Effective Time, do adopt this Agreement
and the transaction contemplated hereby and approve and direct the Company's
officers to approve and execute this Agreement and such other documents as may
be require to complete the transaction contemplated hereby. As soon as
practicable following the execution and delivery of this Agreement, the Company
shall give written notice of this Agreement and the proposed Merger to all
Company stockholders and shall use commercially reasonable efforts to take all
other action necessary in accordance with Florida Law and its articles of
incorporation and bylaws to convene a meeting of the stockholders of the Company
or to secure the written consent of its stockholders ("Company Stockholder
Action") before the Closing Date. The Company shall submit this Agreement to its
stockholders for adoption whether or not the Company's board of directors
determines at any time subsequent to declaring its advisability that this
Agreement is no longer advisable and recommends that its stockholders reject it.
The Company shall consult with Acquiror regarding the date of the Company
Stockholder Action and shall not postpone or
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adjourn (other than for the absence of a quorum) any meeting of the stockholders
of the Company without the consent of Acquiror, which consent shall not be
unreasonably withheld. The Company shall use all commercially reasonable efforts
required to solicit and obtain from stockholders of the Company proxies or
written covenants in favor of the Merger and shall take all other action
necessary or advisable to secure the vote or consent of stockholders required to
effect the Merger. The materials submitted to the stockholders of the Company in
respect of the Merger shall have been subject to prior review and comment by
Acquiror and shall include (a) information regarding the Company, the terms of
the Merger and this Agreement, (b) the unanimous recommendation of the board of
directors of the Company that the Company's stockholders adopt this Agreement
and the transactions contemplated hereby and approve and execute such other
documents as may be required to satisfy the applicable requirements of the
Securities Act in connection with the issuance and sale of Acquiror Common Stock
in the Merger, (c) the conclusion of the board of directors of the Company that
the terms and conditions of the Merger are advisable, fair and reasonable to,
and in the best interests of, the Company's stockholders and (d) such other
documents as may be required to satisfy the applicable requirements of the
Securities Act in connection with the issuance and sale of Acquiror Common Stock
in connection with the Merger.
6.3 ACCESS TO INFORMATION. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice, the Company shall (a) give Acquiror and its officers,
employees, accountants, counsel, financing sources and other agents and
representatives full access to all buildings, offices, and other facilities and
to all Books and Records of the Company, whether located on the premises of the
Company or at another location; (b) permit Acquiror to make such inspections as
they may require; (c) cause its officers to furnish Acquiror such financial,
operating, technical and product data and other information with respect to the
business and Assets and Properties of the Company as Acquiror from time to time
may request, including without limitation financial statements and schedules;
(d) allow Acquiror the opportunity to interview such employees and other
personnel and Affiliates of the Company with the Company's prior written
consent, which consent shall not be unreasonably withheld or delayed; and (e)
assist and cooperate with Acquiror in the development of integration plans for
implementation by Acquiror and the Surviving Corporation following the Effective
Time; PROVIDED, HOWEVER, that no investigation pursuant to this Section 6.3
shall affect or be deemed to modify any representation or warranty made by the
Company herein. Materials furnished to Acquiror pursuant to this Section 6.3 may
be used by Acquiror for strategic and integration planning purposes relating to
accomplishing the transactions contemplated hereby.
6.4 CONFIDENTIALITY. Each of the parties hereto hereby agrees to keep
the existence and terms of this Agreement (except to the extent contemplated
hereby) and such information or knowledge obtained in any investigation pursuant
to Section 6.3, or pursuant to the negotiation and execution of this Agreement
or the effectuation of the transactions contemplated hereby, confidential;
PROVIDED, HOWEVER, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is generally
known to the public and did not become so known through any violation of Law, or
a confidentiality agreement or other contractual, legal or fiduciary obligation
of confidentiality of the disclosing party or any other party with respect to
such information, (c) became known to the public through no fault of such party,
(d) is later lawfully acquired by such party without confidentiality
restrictions from other sources not bound
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by applicable confidentiality restrictions, (e) is required to be disclosed by
order of court or Governmental or Regulatory Authority with subpoena powers
(PROVIDED that such party shall have provided the other party with prior notice
of such order and an opportunity to object or seek a protective order and take
any other available action) or (f) is disclosed in the course of any Action or
Proceeding between any of the parties hereto.
6.5 EXPENSES. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger, including all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties ("Third Party Expenses") incurred by a party in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby, shall be the obligation of the
respective party incurring such fees and expenses. The Company shall pay for all
Third Party Expenses to be incurred by the Company between the date hereof and
the Closing, including necessary fees and expenses of legal counsel, auditors
and tax advisors, which do not, in the aggregate, exceed $93,500. To the extent
that such Third Party Expenses exceed $93,500 ("Excess Costs") and are not
deducted from the Merger Cash as set forth in Section 2.6, shares of Acquiror
Common Stock shall be distributed to Acquiror from the Escrow Fund to compensate
the Acquiror for Excess Costs in the manner set forth in Section 8.2.
6.6 PUBLIC DISCLOSURE. Unless otherwise required by Law (including
federal and state securities laws) or, as to Acquiror, by the rules and
regulations of the NASD, no public disclosure (whether or not in response to any
inquiry) of the existence of any subject matter of, or the terms and conditions
of, this Agreement shall be made by any party hereto unless approved by Acquiror
and the Company prior to release; PROVIDED, HOWEVER, that such approval shall
not be unreasonably withheld or delayed.
6.7 APPROVALS. The Company shall use commercially reasonable efforts to
obtain all Approvals from Governmental or Regulatory Authorities or under any of
the Contracts or other agreements as may be required in connection with the
Merger (all of such Approvals are set forth in the Company Disclosure Schedule)
so as to preserve all rights of and benefits to the Company thereunder and
Acquiror shall provide the Company with such assistance and information as is
reasonably required to obtain such Approvals.
6.8 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Acquiror, and Acquiror shall give prompt notice to the Company, of (a)
the occurrence or non-occurrence of any event, the occurrence or non-occurrence
of which is likely to cause any representation or warranty of the Company or
Acquiror, respectively, contained in this Agreement to be untrue or inaccurate
at or prior to the Closing Date and (b) any failure of the Company or Acquiror,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER,
that the delivery of any notice pursuant to this Section 6.8 shall not limit or
otherwise affect any remedies available to the party receiving such notice.
6.9 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party agrees to
use commercially reasonable efforts to cause the conditions to its obligations
to consummate the Merger to be satisfied. Each party hereto, at the request of
the other party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things (including, but
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not limited to, all action reasonably necessary to seek and obtain any and all
consents and approvals of any Government or Regulatory Authority or Person
required in connection with the Merger; PROVIDED, HOWEVER, that Acquiror shall
not be obligated to consent to any divestitures or operational limitations or
activities in connection therewith and no party shall be obligated to make a
payment of money as a condition to obtaining any such condition or approval) as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
6.10 INDEMNIFICATION. The Company has no rights of indemnification in
favor of employees, agents, directors or officers.
6.11 Reserved.
6.12 TAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, the board of directors of
the Company will grant such approvals and take such actions as are necessary so
that the transactions contemplated by this Agreement and the Ancillary
Agreements may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate the effects of any Takeover
Statute on any of the transactions contemplated hereby.
6.13 TREATMENT AS REORGANIZATION. Neither Acquiror, Merger Sub nor the
Company shall take any action prior to or following the Closing that would cause
the Merger to fail to qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code.
6.14 Reserved.
6.15 INFORMATION TECHNOLOGY ACCESS. In furtherance of the Company's
agreement in Section 6.3 and to facilitate prompt integration following the
Closing of the Company's information technology ("IT") inventory (E.G., voice
and data network services and software and hardware, licenses,
financial/accounting software, IT budgets, etc.) with Acquiror's, the Company
will provide Acquiror and its Representatives with access to the Company's IT
inventory, as well as the Company's personnel responsible for such IT inventory.
Because of the substantial lead time that may be required to order and install
new software and hardware to integrate the Company's IT systems with Acquiror's,
and the importance of a smooth integration of such IT systems promptly after the
Closing, the Company agrees that Acquiror may order, either in Acquiror's name
or the Company's name, any new IT services, hardware and software that Acquiror
believes will be needed at the Company's facilities in order to integrate
Acquiror's and the Company's respective operations following the Closing. The
Company will cooperate with Acquiror in the installation of such IT systems,
hardware and software prior to and in anticipation of the Closing, including,
but not limited to, providing Acquiror with reasonable access to and use of the
Company's appropriate personnel. If necessary, at Acquiror's request, the
Company will place IT systems, hardware and software orders in the Company's
name. For clarity, it is the parties' intent not to connect any of the ordered
services or systems prior to the Closing. Acquiror and the Company agree to
cooperate with each other to minimize any potential disruption to the Company's
business from the IT integration efforts; PROVIDED, HOWEVER, that Acquiror will
not have any liability to the Company for any such disruption or as may
otherwise result from the IT integration efforts, except as may be directly
caused by
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Acquiror's gross negligence or willful misconduct; and, PROVIDED, FURTHER, that
in no event will Acquiror have any liability to the Company for any indirect,
incidental, consequential, special or speculative damages, including, but not
limited to, damages for loss of profits or use, business interruption or loss of
goodwill, irrespective of whether such damages arise under contract, tort,
statute or otherwise and whether or not the Company has given Acquiror advance
notice of the possibility of such damages. If the Closing does not occur, other
than because of the Company's breach of this Agreement, Acquiror will reimburse
the Company for its reasonable and documented out-of-pocket costs incurred by it
in connection with the ordering and installation of IT services, hardware and
software. If Acquiror is so required to reimburse the Company, Acquiror will own
any such hardware and software and will pay for its removal from Company
premises. Acquiror and the Company will cooperate in the removal of any such
hardware or software so as to minimize any disruption to the Company's business.
In addition, if the Closing does not occur, the Company will cooperate with
Acquiror in canceling any orders for IT services, hardware or software and will
otherwise act to minimize the costs which might be incurred in connection with
the IT integration efforts.
6.16 INTELLECTUAL PROPERTY. The Company shall give Acquiror prompt
notice if any Person shall have (a) commenced, or shall have notified the
Company that it intends to commence, an Action or Proceeding or (b) provided the
Company with notice, in either case which allege(s) that any of the Intellectual
Property, including the Company Intellectual Property, presently embodied, or
proposed to be embodied, in the Company's products or utilized in
Company-designed or modified development tools (including standard cells) or
design environments infringes or otherwise violates the intellectual property
rights of such Person, is available for licensing from a potential licensor
providing the notice or otherwise alleges that the Company does not otherwise
own or have the right to exploit such Intellectual Property, including the
Company Intellectual Property. The Company shall cooperate with Acquiror in
making arrangements, prior to the Closing Date, satisfactory to Acquiror in its
sole discretion to effect the assignment to the Company of all Intellectual
Property created by the Company's founders, employees and consultants, including
certain Intellectual Property created by the Company's founders prior to the
Company's incorporation, and to obtain the cooperation of such Persons to
complete all appropriate patent filings related thereto at the Company's or the
Surviving Corporation's expense. The Company shall take commercially reasonable
actions to maintain, perfect, preserve or renew the Company Registered
Intellectual Property, including, without limitation, the payment of any
registration, maintenance, renewal fees, annuity fees and taxes or the filing of
any documents, applications or certificates related thereto, and to promptly
respond and prepare to respond to all requests, related to the Company
Registered Intellectual Property, received from Governmental or Regulatory
Authorities. At the Closing, the Company will notify Acquiror of all material
actions which must be taken within the 180 days following the Closing Date and
which are necessary to maintain, perfect, preserve or renew the Company
Registered Intellectual Property, including the payment of any registration,
maintenance, renewal fees, annuity fees and taxes or the filing of any
documents, applications or certificates related thereto.
6.17 DELIVERY OF STOCK LEDGER AND MINUTE BOOK OF THE COMPANY. The
Company shall deliver its stock ledger and minute book to Acquiror at the
Closing.
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6.18 EMPLOYEE BONUS POOL. Acquiror shall make payments to the employees
of the Company in the amounts set forth next to their names in SCHEDULE 6.18
("Employee Bonus") within a reasonable time following the Closing, but no later
than sixty (60) days following the Closing. The aggregate amount of all Employee
Bonuses paid shall not exceed $225,000. These Employee Bonuses shall be accrued
by the Company at the date of Closing.
6.19 DECUIR AGREEMENT. Prior to the completion of the Merger
contemplated by this Agreement, the Company shall pay the amount of $500,000 in
cash and shall pay an additional $500,000 in cash to Robert DeCuir on April 10,
2001 pursuant to the Agreement between DeCuir and the Company dated November 17,
2000.
ARTICLE 7
CONDITIONS TO THE MERGER
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) GOVERNMENTAL AND REGULATORY APPROVALS. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated hereby shall have been timely obtained.
(b) NO INJUNCTIONS OR REGULATORY RESTRAINTS; ILLEGALITY. No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any action
taken, or any Law or Order enacted, entered, enforced or deemed applicable to
the Merger or the other transactions contemplated by the terms of this Agreement
that would prohibit the consummation of the Merger or which would permit
consummation of the Merger only if certain divestitures were made or if Acquiror
were to agree to limitations on its business activities or operations.
(c) LEGAL PROCEEDINGS. No Governmental or Regulatory Authority
shall have notified either party to this Agreement that such Governmental or
Regulatory Authority intends to commence proceedings to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
or Regulatory Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing Date.
(d) STOCKHOLDER APPROVAL. The Merger shall have been approved
by the requisite votes of the Company's stockholders in accordance with Florida
Law.
(e) PRIVATE PLACEMENT. Each of the stockholders of the Company
shall have delivered an executed copy of the Shareholder Certificate, and
Acquiror shall be reasonably satisfied that the shares of Acquiror Common Stock
to be issued in connection with the Merger
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pursuant to Section 2.6(a) are issuable without registration pursuant to Section
4(2) of the Securities Act and SEC rules and regulations promulgated thereunder.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by Acquiror and Merger Sub in this Agreement
shall be true and correct in all material respects (if not qualified by
materiality) and in all respects (if qualified by materiality) when made and on
and as of the Closing Date as though such representation or warranty was made on
and as of the Closing Date (other than representations and warranties which by
their express terms are made solely as of a specified earlier date), and any
representation or warranty made as of a specified date earlier than the Closing
Date shall also be true and correct in all material respects (if not qualified
by materiality) and in all respects (if qualified by materiality) on and as of
such earlier date.
(b) PERFORMANCE. Acquiror and Merger Sub shall have performed
and complied with in all material respects each agreement, covenant and
obligation required by this Agreement to be so performed or complied with by the
Acquiror and Merger Sub at or before the Closing.
(c) OFFICERS' CERTIFICATES. Acquiror shall have delivered to
the Company a certificate, dated the Closing Date and executed by an authorized
officer, substantially in the form set forth in EXHIBIT F hereto.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ACQUIROR. The
obligations of Acquiror and Merger Sub to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Acquiror and Merger Sub:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Company in this Agreement shall be
true and correct in all material respects (if not qualified by materiality) and
in all respects (if qualified by materiality) when made and on and as of the
Closing Date as though such representation or warranty was made on and as of the
Closing Date; PROVIDED, HOWEVER, that any representation or warranty made as of
a specified date earlier than the Closing Date shall also have been true and
correct in all material respects (if not qualified by materiality) and in all
respects (if qualified by materiality) on and as of such earlier date.
(b) PERFORMANCE. The Company shall have performed and complied
with in all material respects each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Company on or
before the Closing Date.
(c) OFFICERS' CERTIFICATES. The Company shall have delivered
to Acquiror a certificate, dated the Closing Date and executed by the President
and Chief Executive Officer of
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the Company, substantially in the form set forth in EXHIBIT G-1 hereto, and a
certificate, dated the Closing Date and executed by the Secretary of the
Company, substantially in the form set forth in EXHIBIT G-2 hereto.
(d) THIRD PARTY CONSENTS. Acquiror shall have been furnished
with evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers listed in Section 3.24 of the Company Disclosure Schedule
(except for such consents, approvals and waivers the failure of which to receive
could not reasonably be expected to have a material adverse effect on the
Company).
(e) LEGAL OPINION. Acquiror shall have received a legal
opinion from Rogers, Bowers, Dempsey and Paladino, legal counsel to the Company,
as to the matters set forth in EXHIBIT H.
(f) SUPPORT AGREEMENTS. Each of the Major Stockholders shall
have executed and delivered to Acquiror a Support Agreement, and no breach of
any Support Agreement shall have occurred or be continuing.
(g) LIMITATION ON DISSENT. Holders of no more than five
percent of the outstanding shares of Company Common Stock shall have exercised,
nor shall they have any continued right to exercise, appraisal, dissenters' or
similar rights under applicable law with respect to their shares by virtue of
the Merger.
(h) CONVERSION OF COMPANY INDEBTEDNESS. All outstanding
Indebtedness of the Company that is convertible or exchangeable into shares of
Company Common Stock shall have been converted or exchanged into shares of
Company Common Stock immediately prior to the Effective Time.
(i) EMPLOYEES. The employees of the Company listed in Section
7.3(i) of the Company Disclosure Schedule shall continue to be employed by the
Company at the Closing (and shall not have given any notice or other indication
that they are not willing to be employed by Acquiror or a Subsidiary of Acquiror
(as Acquiror shall designate), following the Merger).
(j) NO MATERIAL ADVERSE CHANGE. There shall have occurred no
material adverse change in the Business or Condition of the Company since
November 1, 2000.
(k) COMPANY INTELLECTUAL PROPERTY. No Person shall have (i)
commenced, in writing, or shall have notified either Acquiror or the Company
that it intends to commence, an Action or Proceeding or (ii) provided Acquiror
or the Company with notice, in either case which allege(s) that any of the
Intellectual Property, including the Company Intellectual Property, presently
embodied, or proposed to be embodied, in the Company's products or utilized in
Company-designed or modified development tools (including standard cells) or
design environments infringes or otherwise violates the intellectual property
rights of such Person, is available for licensing from a potential licensor
providing the notice or otherwise alleges that the Company does not otherwise
own or have the right to exploit such Intellectual Property, including the
Company Intellectual Property.
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(l) ASSIGNMENT OF INTELLECTUAL PROPERTY. Arrangements
satisfactory to Acquiror in its sole discretion shall have been made to effect
the assignment to the Company of all Intellectual Property created by the
Company's founders, employees and consultants, including any Intellectual
Property created by the Company's founders prior to the Company's incorporation,
and to obtain the cooperation of such Persons to complete all appropriate patent
filings related thereto.
(m) DUE DILIGENCE. Acquiror's legal counsel and accountants
shall have completed their due diligence of the Company to Acquiror's
satisfaction.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Except for Section 3.2, which shall survive indefinitely, and Sections 3.12,
3.13, 3.14 and 3.15 which shall survive until the termination of the applicable
statute of limitations, all of the representations, warranties, covenants and
agreements of the Company, Acquiror and Merger Sub contained in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Merger and continue until the first anniversary of the Closing Date (the
"Expiration Date").
8.2 ESCROW PROVISIONS.
(a) ESTABLISHMENT OF THE ESCROW FUND. As soon as practicable
after the Effective Time, the Escrow Amount, without any act of any stockholder,
will be deposited with the Depositary Agent (plus a proportionate share of any
additional shares of Acquiror Common Stock as may be issued upon any stock
splits, stock dividends or recapitalizations effected by Acquiror following the
Effective Time), such deposit to constitute the "Escrow Fund" to be governed by
the terms set forth herein. The portion of the Escrow Amount contributed on
behalf of each stockholder of the Company shall be in proportion to the
aggregate number of shares of Acquiror Common Stock which such holder would
otherwise be entitled under Section 2.6.
If the Escrow Amount deposited in the Escrow Fund has been
exhausted in accordance with subsection (b) below and Acquiror incurs any
additional Losses for which Acquiror believes it is entitled to indemnification
from the stockholders of the Company under Section 8.2(b) below, Acquiror may,
at its option and without prejudice to any other right of Acquiror, be entitled
to deposit with the Depositary Agent all or any portion of the Earn-Out Amount
payable by Acquiror under Section 2.14, not to exceed the reasonably anticipated
amount of such Losses ("Additional Escrow Funds"). The exercise of such right by
Acquiror hereunder shall be evidence by means of a notice to such effect given
by Acquiror to the Stockholder Agent. Upon Acquiror's deposit of the Additional
Escrow Funds with the Depositary Agent, the Additional Escrow Funds shall be
held by the Depositary Agent in trust for Acquiror, to the extent that Acquiror
is ultimately determined to be entitled to indemnification under Section 8.2(b)
below or for the Stockholders to the extent that Acquiror is not ultimately
determined to be entitled to indemnification under Section 8.2(b) below. After
the satisfaction of all of the requirements of Section 8.2(b) below, including
final arbitration of any claims contested by Stockholder Agent, (i) to the
extent that Acquiror is ultimately determined to
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be entitled to indemnification under Section 8.2(b) below, the Additional Escrow
Funds shall be released by Depositary Agent to Acquiror and (ii) to the extent
that Acquiror is ultimately not determined to be entitled to indemnification
under Section 8.2(b) below, the Additional Escrow Funds shall be released by
Depositary Agent to Stockholder Agent.
(b) RECOURSE TO THE ESCROW FUND. The Escrow Fund shall be
available to compensate Acquiror and its respective officers, directors,
employees, agents, Affiliates and Associates (collectively, the "Acquiror
Indemnitees") for any and all Losses (whether or not involving a Third Party
Claim), incurred or sustained by Acquiror or any other Acquiror Indemnitees,
directly or indirectly, as a result of any inaccuracy or breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in the Ancillary Agreements or in any instrument delivered pursuant to this
Agreement or as the result of the exercise by any of the Company's stockholders
of applicable appraisal, dissenters' or similar rights (in the amount of the
excess of the cost of the appraisal over the value, as of the Closing Date, of
the shares of Acquiror Common Stock otherwise issuable in respect of such
Dissenting Shares); PROVIDED, HOWEVER, that Acquiror may not make any claims
against the Escrow Fund unless the aggregate Losses incurred or sustained exceed
$100,000 (at which such time claims may be made for all Losses, including the
first $100,000 thereof). The dollar threshold set forth in the immediately
preceding proviso shall not apply to Losses resulting from any breach, violation
or inaccuracy in or omission from any of the representations and warranties of
the Company set forth in Section 3.14 or the covenants in Section 6.5 which
shall be recoverable without respect to any threshold amount. Notwithstanding
the establishment of an Escrow Fund, Acquiror shall have all remedies available
at law or in equity (including for tort); PROVIDED, HOWEVER, that,
notwithstanding anything to the contrary contained in this Agreement, in no
event shall any stockholder of the Company have any liability in excess of the
consideration received by such stockholder in connection with the Merger.
(c) ESCROW PERIOD; DISTRIBUTION OF ESCROW FUND UPON
TERMINATION OF ESCROW PERIOD. Subject to the following requirements, the Escrow
Fund shall be in existence immediately following the Effective Time and shall
terminate at 5:00 p.m., Pacific Time, on the Expiration Date (the period of time
from the Effective Time through and including the Expiration Date is referred to
herein as the "Escrow Period"); and all shares of Acquiror Common Stock
remaining in the Escrow Fund shall be distributed as set forth in this Section
8.2(c); PROVIDED, HOWEVER, that the Escrow Period shall not terminate with
respect to such amount (or some portion thereof) that is necessary in the
reasonable judgment of Acquiror, subject to the objection of the Stockholder
Agent and the subsequent arbitration of the matter in the manner as provided in
Section 8.2(g), to satisfy any unsatisfied claims under this Section 8.2
concerning facts and circumstances existing prior to the termination of such
Escrow Period which claims are specified in any Officer's Certificate delivered
to the Depositary Agent prior to termination of such Escrow Period. As soon as
all such claims, if any, have been resolved, the Depositary Agent shall deliver
to the stockholders of the Company the remaining portion of the Escrow Fund not
required to satisfy such claims. Deliveries of shares of Acquiror Common Stock
remaining in the Escrow Fund to the stockholders of the Company pursuant to this
Section 8.2(c) shall be made ratably in proportion to their respective
contributions to the Escrow Fund. Each stockholder of the Company who would
otherwise be entitled to a fraction of a share of Acquiror Common Stock (after
aggregating all fractional shares of Acquiror Common Stock to be received by
such holder) shall be entitled to receive from Acquiror an amount of cash
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(rounded to the nearest whole cent) equal to the product of (a) such fraction,
multiplied by (b) the Closing Price. Acquiror shall use its commercially
reasonable efforts to have such shares and cash delivered within five Business
Days after such resolution.
(d) PROTECTION OF ESCROW FUND.
(i) The Depositary Agent shall hold and safeguard the
Escrow Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Acquiror
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Acquiror Common Stock or other
securities issued or distributed by Acquiror ("New Shares") in respect of
Acquiror Common Stock in the Escrow Fund which have not been released from the
Escrow Fund shall be added to the Escrow Fund. New Shares issued in respect of
shares of Acquiror Common Stock which have been released from the Escrow Fund
shall not be added to the Escrow Fund but shall be distributed to the record
holders thereof. Cash dividends on Acquiror Common Stock shall not be added to
the Escrow Fund but shall be distributed to the record holders of the Acquiror
Common Stock on the record date set for any such dividend.
(iii) Each stockholder shall have voting rights with
respect to the shares of Acquiror Common Stock contributed to the Escrow Fund by
such stockholder (and on any voting securities added to the Escrow Fund in
respect of such shares of Acquiror Common Stock).
(e) CLAIMS UPON ESCROW FUND.
(i) Upon receipt by the Depositary Agent at any time
on or before the last day of the Escrow Period of a certificate signed by any
officer of Acquiror (an "Officer's Certificate"): (A) stating that Acquiror or
another Acquiror Indemnitee has paid or properly accrued or reasonably
anticipates that it will have to pay or accrue Losses, directly or indirectly,
as a result of any inaccuracy or breach of any representation, warranty,
covenant or agreement of the Company contained in this Agreement or in any of
the Ancillary Agreements or in any instrument or agreement delivered pursuant to
this Agreement, and (B) specifying in reasonable detail the individual items of
Losses included in the amount so stated, the date each such item was paid or
properly accrued, or the basis for such anticipated liability, and the nature of
the misrepresentation, breach of warranty, agreement or covenant to which such
item is related, the Depositary Agent shall, subject to the provisions of
Section 8.2(f) hereof, deliver to Acquiror out of the Escrow Fund, as promptly
as practicable, shares of Acquiror Common Stock held in the Escrow Fund in an
amount equal to such Losses. Where the basis for a claim upon the Escrow Fund by
Acquiror is that Acquiror reasonably anticipates that it will pay or accrue a
Loss, no payment will be made from the Escrow Fund for such Loss unless and
until such Loss is actually paid or accrued.
(ii) For the purposes of determining the number of
shares of Acquiror Common Stock to be delivered to Acquiror out of the Escrow
Fund pursuant to Section 8.2(e)(i), the shares of Acquiror Common Stock shall be
valued at the Closing Price.
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(iii) Whenever a claim is made upon the Escrow Fund,
each Stockholder shall have the right, with respect to the shares of Common
Stock contributed to the Escrow Fund by such Stockholder and then subject to
such claim, to substitute therefor an amount in cash equal to the Closing Price
MULTIPLIED BY the number of shares for which such substitution is sought.
(f) OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Depositary Agent, a duplicate copy of such
certificate shall be delivered to the Stockholder Agent and for a period of
thirty days after such delivery, the Depositary Agent shall make no delivery to
Acquiror of any Escrow Amounts pursuant to Section 8.2(e) unless the Depositary
Agent shall have received written authorization from the Stockholder Agent to
make such delivery. After the expiration of such thirty day period, the
Depositary Agent shall make delivery of shares of Acquiror Common Stock or cash
deposited pursuant to Section 8.2(e)(iii) from the Escrow Fund in accordance
with Section 8.2(e); PROVIDED, that no such payment or delivery may be made if
the Stockholder Agent shall object in a written statement to the claim made in
the Officer's Certificate, and such statement shall have been delivered to the
Depositary Agent prior to the expiration of such thirty day period.
(g) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Stockholder Agent shall object in
writing to any claim or claims made in any Officer's Certificate, the
Stockholder Agent and Acquiror shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Stockholder Agent and Acquiror should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Depositary Agent. The Depositary Agent shall be entitled to rely on any such
memorandum and distribute shares of Acquiror Common Stock or cash deposited
pursuant to Section 8.2(e)(iii) from the Escrow Fund in accordance with the
terms thereof. The Depositary Agent shall be entitled to rely on any such
instructions and distribute shares of Acquiror Common Stock from the Escrow Fund
in accordance with the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Acquiror or the Stockholder Agent may demand
arbitration of the dispute unless the amount of the damage or loss is at issue
in a pending Action or Proceeding involving a Third Party Claim, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either event the matter shall be settled by
arbitration conducted by three arbitrators, one selected by Acquiror and one
selected by the Stockholder Agent, and the two arbitrators selected by Acquiror
and the Stockholder Agent shall select a third arbitrator. The arbitrators shall
set a limited time period and establish procedures designed to reduce the cost
and time for discovery of information relating to any dispute while allowing the
parties an opportunity, adequate as determined in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel, limit or allow discovery as they shall deem appropriate given the nature
and extent of the disputed claim. The arbitrators shall also have the authority
to impose sanctions, including attorneys' fees and other costs incurred by the
parties, to the same extent as a court of law or equity, should the arbitrators
determine that discovery was sought without substantial justification or that
discovery was refused or objected to by a party
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without substantial justification. The decision of a majority of the three
arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 8.2(f), the Depositary Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. Such decision shall be written
and shall be supported by written findings of fact and conclusions regarding the
dispute which shall set forth the award, judgment, decree or order awarded by
the arbitrators.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having competent jurisdiction. Any such
arbitration shall be held in Los Angeles, California under the commercial rules
of arbitration of the American Arbitration Association then in effect. For
purposes of this Section 8.2(g), in any arbitration hereunder in which any claim
or the amount thereof stated in the Officer's Certificate is at issue, Acquiror
shall not be deemed to be the prevailing party (the "Non-Prevailing Party") in
the event that the arbitrators award Acquiror less than the sum of one-half of
the disputed amount of any Losses plus any amounts not in dispute; otherwise,
the stockholders of the Company as represented by the Stockholder Agent shall be
deemed to be the Non-Prevailing Party. The Non-Prevailing Party to an
arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative costs of the arbitration and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the other party to
the arbitration.
(h) STOCKHOLDER AGENT OF THE STOCKHOLDERS; POWER OF ATTORNEY.
(i) Scott Averbach shall be appointed as agent and
attorney-in-fact (the "Stockholder Agent") for each stockholder of the Company
(except such stockholder, if any, as shall have perfected their appraisals and
dissenters' rights under Florida Law for and on behalf of the stockholders of
the Company, to give and receive notices and communications, to authorize
delivery to Acquiror of shares of Acquiror Common Stock from the Escrow Fund in
satisfaction of claims by Acquiror, 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. Such agency may be
changed by the stockholders of the Company from time to time upon not less than
thirty days prior written notice to Acquiror; PROVIDED, HOWEVER, that the
Stockholder Agent may not be removed unless holders of a two-thirds interest in
the Escrow Fund agree to such removal and to the identity of the substituted
stockholder agent. Any vacancy in the position of Stockholder Agent may be
filled by approval of the holders of a majority in interest of the Escrow Fund.
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 of the Company.
(ii) The Stockholder Agent shall not incur any
liability with respect to any action taken or suffered by him or omitted
hereunder as Stockholder Agent while acting in good faith and any act done or
suffered or omitted hereunder pursuant to the advice of counsel shall be
conclusive evidence of such good faith. The Stockholder Agent may, in all
questions arising hereunder, rely on the advice of counsel and for anything
done, omitted or suffered in good faith by the Stockholder Agent based on such
advice, the Stockholder Agent shall not be
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liable to anyone. The Stockholder Agent undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement or the Escrow
Agreement against the Stockholder Agent
(iii) The Stockholder Agent shall have reasonable
access to information about the Company and the reasonable assistance of the
Company's officers and employees for purposes of performing his duties and
exercising his rights hereunder, provided that the Stockholder Agent shall treat
confidentially and not disclose any nonpublic information from or about the
Company to anyone (except on a need to know basis to individuals who agree in
writing to treat such information confidentially).
(i) ACTIONS OF THE STOCKHOLDER AGENT. A decision, act, consent
or instruction of the Stockholder Agent shall constitute a decision of all the
stockholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such stockholders, and the Depositary Agent and Acquiror may rely upon
any such decision, act, consent or instruction of the Stockholder Agent as being
the decision, act, consent or instruction of every such stockholder of the
Company. The Depositary Agent and Acquiror 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.
(j) THIRD-PARTY CLAIMS. In the event Acquiror becomes aware of
a third-party claim (a "Third Party Claim") which Acquiror reasonably expects
may result in a demand against the Escrow Fund, Acquiror shall notify the
Stockholder Agent of such claim, and the Stockholder Agent, as representative
for the stockholders of the Company, shall be entitled, at their expense, to
participate in any defense of such claim. Acquiror shall have the right in its
sole discretion to settle any Third Party Claim; PROVIDED, HOWEVER, that if
Acquiror settles any Third Party Claim without the Stockholder Agent's consent
(which consent shall not be unreasonably withheld or delayed), Acquiror may not
make a claim against the Escrow Fund with respect to the amount of Losses
incurred by Acquiror in such settlement. In the event that the Stockholder Agent
has consented to any such settlement, the Stockholder Agent shall have no power
or authority to object under any provision of this Article 8 to the amount of
any claim by Acquiror against the Escrow Fund with respect to the amount of
Losses incurred by Acquiror in such settlement.
(k) INDEMNIFICATION FOR STOCKHOLDER AGENT. The stockholders of
the Company shall, severally and not jointly, on a pro rata basis based on their
proportionate ownership interest in the Company, indemnify, defend and hold the
Stockholder Agent harmless from and against any loss, damage, tax, liability and
expense that may be incurred by the Stockholder Agent arising out of or in
connection with the acceptance or administration of the Stockholder Agent's
duties, except as caused by the Stockholder Agent's gross negligence or willful
misconduct, including the legal costs and expenses of defending such Stockholder
Agent against any claim or liability in connection with the performance of the
Stockholder Agent's duties. The Stockholder Agent shall be entitled, but not
limited to, such indemnification from the Escrow prior to any distribution
thereof to the stockholders of the Company, but after any distributions
therefrom to Acquiror.
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(l) DEPOSITARY AGENT'S DUTIES.
(i) LIMITATION ON DUTIES OF DEPOSITARY AGENT. The
Depositary Agent shall be obligated only for the performance of such duties as
are specifically set forth herein, and as set forth in any additional written
escrow instructions which the Depositary Agent may receive after the date of
this Agreement which are signed by an officer of Acquiror and the Stockholder
Agent, and may rely and shall be protected in relying or refraining from acting
on any instrument reasonably believed to be genuine and to have been signed or
presented by the proper party or parties. The Depositary Agent shall not be
liable for any act done or omitted hereunder as Depositary Agent while acting in
good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith.
(ii) COMPLIANCE WITH ORDERS. The Depositary Agent is
hereby expressly authorized to comply with and obey Orders of any court of law
or Governmental or Regulatory Authority, notwithstanding any notices, warnings
or other communications from any party or any other person to the contrary. In
case the Depositary Agent obeys or complies with any such Order, the Depositary
Agent shall not be liable to any of the parties hereto or to any other person by
reason of such compliance, notwithstanding any such Order being subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered
without jurisdiction or proper authority.
(iii) LIMITATIONS ON LIABILITY OF DEPOSITARY AGENT.
The Depositary Agent shall not be liable in any respect on account of (A) the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder; or (B) the expiration of any rights under any
statute of limitations with respect to this Agreement or any documents deposited
with the Depositary Agent.
(iv) GOOD FAITH OF DEPOSITARY AGENT. In performing
any duties under the Agreement, the Depositary Agent shall not be liable to any
party for damages, losses, or expenses, except for gross negligence or willful
misconduct on the part of the Depositary Agent. The Depositary Agent shall not
incur any such liability for (A) any act or failure to act made or omitted in
good faith, or (B) any action taken or omitted in reliance upon any instrument,
including any written statement or affidavit provided for in this Agreement that
the Depositary Agent shall in good faith believe to be genuine, nor will the
Depositary Agent be liable or responsible for forgeries, fraud, impersonations
or determining the scope of any representative authority. In addition, the
Depositary Agent may consult with legal counsel in connection with the
Depositary Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel. The Depositary Agent is not responsible for
determining and verifying the authority of any person acting or purporting to
act on behalf of any party to this Agreement.
(v) NON-RESPONSIBILITY OF DEPOSITARY AGENT. If any
controversy arises between the parties to this Agreement, or with any other
party, concerning the subject matter of this Agreement, its terms or conditions,
the Depositary Agent will not be required to determine the controversy or to
take any action regarding it. The Depositary Agent may hold all documents
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and shares of Acquiror Common Stock and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Depositary Agent's discretion, the Depositary Agent may be required, despite
what may be set forth elsewhere in this Agreement. In such event, the Depositary
Agent will not be liable for any damages. Furthermore, the Depositary Agent may
at its option, file an action of interpleader requiring the parties to answer
and litigate any claims and rights among themselves. The Depositary Agent is
authorized to deposit with the clerk of the court all documents and shares of
Acquiror Common Stock held in escrow, except all costs, expenses, charges and
reasonable attorney fees incurred by the Depositary Agent due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, the Depositary Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vi) INDEMNIFICATION OF DEPOSITARY AGENT. Acquiror
and its successors and assigns agrees to indemnify and hold the Depositary Agent
harmless against any and all Losses incurred by the Depositary Agent in
connection with the performance of the Depositary Agent's duties under this
Agreement, including but not limited to any litigation arising from this
Agreement or involving its subject matter.
(vii) RESIGNATION OF DEPOSITARY AGENT. The Depositary
Agent may resign at any time upon giving at least thirty days written notice to
the parties; PROVIDED, HOWEVER, that no such resignation shall become effective
until the appointment of a successor depositary agent which shall be
accomplished as follows: the parties shall use their best efforts to mutually
agree on a successor depositary agent within thirty days after receiving such
notice. If the parties fail to agree upon a successor depositary agent within
such time, the Depositary Agent shall have the right to appoint a successor
depositary agent authorized to do business in the State of California. The
successor depositary agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor depositary
agent as if originally named as Depositary Agent. The Depositary Agent shall be
discharged from any further duties and liability under this Agreement.
(m) FEES. All fees of the Depositary Agent for performance of
its duties hereunder shall be paid by Acquiror. In the event that the conditions
of this Agreement are not promptly fulfilled, or if the Depositary Agent renders
any service not provided for in this Agreement, or if the parties request a
substantial modification of its terms, or if any controversy arises, or if the
Depositary Agent is made a party to, or intervenes in, any Action or Proceeding
pertaining to this escrow or its subject matter, the Depositary Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or Action or Proceeding. Acquiror agrees to pay these sums upon
demand.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. Except as provided in Section 9.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
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(a) by mutual agreement of the Company, Acquiror and Merger
Sub;
(b) by the Company, Acquiror or Merger Sub if: (i) the
Effective Time has not occurred before 5:00 p.m. (Pacific Time) on December 31,
2000 (PROVIDED, HOWEVER, that the right to terminate this Agreement under this
Section 9.1(b)(i) shall not be available to any party whose willful failure to
fulfill any obligation hereunder has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date); (ii) there shall
be a final nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any Governmental or Regulatory Authority that would make consummation
of the Merger illegal;
(c) by Acquiror and Merger Sub if there shall be any action
taken, or any Law or Order enacted, promulgated or issued or deemed applicable
to the Merger, by any Governmental or Regulatory Authority, which would: (i)
prohibit Acquiror's or Merger Sub's ownership or operation of all or any portion
of the business of the Company or (ii) compel Acquiror or Merger Sub to dispose
of or hold separate all or any portion of the Assets and Properties of the
Company as a result of the Merger;
(d) by Acquiror if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of the Company and (i) the Company is
not using its reasonable efforts to cure such breach, or has not cured such
breach within thirty days, after notice of such breach to the Company (PROVIDED,
HOWEVER, that, no cure period shall be required for a breach which by its nature
cannot be cured) and (ii) as a result of such breach any of the conditions set
forth in Section 7.1 or Section 7.3, as the case may be, would not be satisfied
prior to the Closing Date;
(e) by the Company if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Acquiror or Merger Sub and (i)
Acquiror or Merger Sub, as applicable, is not using its reasonable efforts to
cure such breach, or has not cured such breach within thirty days, after notice
of such breach to Acquiror or Merger Sub, as applicable, (PROVIDED, HOWEVER,
that no cure period shall be required for a breach which by its nature cannot be
cured), and (ii) as a result of such breach any of the conditions set forth in
Section 7.1 or Section 7.2, as the case may be, would not then be satisfied;
(f) by Acquiror if, at any time after five days following the
meeting at which the Company's stockholders take the Company Stockholder Action,
holders of more than five percent of the outstanding shares of Company Common
Stock shall have exercised, or have any continued right to exercise, appraisal,
dissenters' or similar rights under applicable law with respect to their shares
by virtue of the Merger;
(g) by Acquiror if the Merger shall not have been approved by
the requisite votes of the Company's stockholders in accordance with Florida
Law; or
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(h) by Acquiror and Merger Sub and if any of the individuals
listed on Schedule 7.3(i) cease to be employed by the Company; PROVIDED,
HOWEVER, that Acquiror may exercise this termination right with respect to a
particular individual named in Schedule 7.3(i) only if Acquiror gives the
Company written notice of termination of the Agreement within thirty days after
receipt of written notice from the Company that such individual has ceased to be
employed by the Company.
9.2 EFFECT OF TERMINATION. In the event of a valid termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquiror, Merger
Sub or the Company, or their respective officers, directors or stockholders or
Affiliates or Associates; PROVIDED, HOWEVER, that each party shall remain liable
for any breaches of this Agreement prior to its termination; and PROVIDED
FURTHER that, the provisions of Sections 6.4, 6.5, 9.2 and Article 10 and the
applicable definitions set forth in Article 1 of this Agreement shall remain in
full force and effect and survive any termination of this Agreement.
9.3 AMENDMENT. Except as is otherwise required by applicable law after
the stockholders of the Company approve the Merger and this Agreement, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto.
9.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
Acquiror, Merger Sub and the Company may, to the extent legally allowed, (a)
extend the time for the performance of any of the obligations of the other party
hereto, (b) waive any inaccuracies in the representations and warranties made to
such party contained herein or in any document delivered pursuant hereto, and
(c) waive compliance with any of the agreements, covenants or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or sent by internationally recognized overnight courier
prepaid, to the parties at the following addresses or facsimile numbers:
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If to Acquiror or Merger Sub to:
ValueClick, Inc.
4360 Park Terrace Drive, Suite 100
Westlake Village, CA 91361
Facsimile No.: (818) 575-4508
Attn: President and Chief Executive Officer
with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071
Facsimile No.: (213) 745-3345
Attn: Kenneth R. Bender
If to the Company to:
Bach Systems, Inc.
1280 East Congress Avenue
West Palm Beach, Florida 33401
Facsimile No.: (561) 683-8219
Attn: President and Chief Executive Officer
with a copy (which shall not constitute notice) to:
Rogers, Bowers, Dempsey & Paladino LLP
505 S. Flagler Drive, Suite 1330
West Palm Beach, Florida 33401
Facsimile No.: (561) 655-9480
Attn: David Bowers
All such notices, requests and other communications will (a) if
delivered personally or by internationally recognized courier service to the
address as provided in this Section 10.1, be deemed given upon delivery or, (b)
if delivered by facsimile transmission to the facsimile number as provided for
in this Section 10.1, be deemed given upon facsimile confirmation. Any party
from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such change
to the other party hereto.
10.2 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules
hereto, including the Company Disclosure Schedule and the Acquiror Disclosure
Schedule, constitute the entire Agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof.
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10.3 FURTHER ASSURANCES; POST-CLOSING COOPERATION. At any time or from
time to time after the Closing, the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied.
10.4 WAIVER. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
10.5 THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Section 6.10 or Article 8.
10.6 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
10.7 HEADINGS. The headings and table of contents used in this
Agreement have been inserted for convenience of reference only and do not define
or limit the provisions hereof.
10.8 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
10.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of New York, without giving
effect to any other choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York;
PROVIDED, HOWEVER, that the Merger shall be governed by Delaware Law.
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<PAGE>
10.10 WAIVER OF TRIAL BY JURY. IN ANY ACTION OR PROCEEDING ARISING
HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER OR
THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION OR PROCEEDING.
10.11 CONSTRUCTION. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
10.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
10.13 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Except where this Agreement specifically provides for arbitration, it
is agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.14 CONSTRUCTION.
(a) Unless the context of this Agreement otherwise requires,
(i) words of any gender include each other gender, (ii) words using the singular
or plural number also include the plural or singular number, respectively, (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement as a whole and not to any particular Article, Section or
other subdivision, (iv) the terms "Article" or "Section" or other subdivision
refer to the specified Article, Section or other subdivision of the body of this
Agreement, (v) the phrases "ordinary course of business" and "ordinary course of
business consistent with past practice" refer to the business and practice of
the Company, (vi) the words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation," and (vii) when a
reference is made in this Agreement to Exhibits, such reference shall be to an
Exhibit to this Agreement unless otherwise indicated. All accounting terms used
herein and not expressly defined herein shall have the meanings given to them
under GAAP. The term "party" or "parties" when used herein refer to Acquiror, on
the one hand, and the Company, on the other.
(b) When used herein, the phrase "to the knowledge of" any
Person, "to the best knowledge of" any Person, "known to" any Person or any
similar phrase, means (i) with respect to any Person who is an individual, the
actual knowledge of such Person, (ii) with respect to any other Person, the
actual knowledge of the directors and officers of such Person and other
individuals that have a similar position or have similar powers and duties as
the officers and
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<PAGE>
directors of such Person, and (iii) in the case of each of (i) and (ii), the
knowledge of facts that such individuals should have after due inquiry. For this
purpose, "due inquiry" with respect to any matter means inquiry of and
consultations with (A) the directors and officers of such Person and other
individuals that have a similar position or have similar powers and duties as
such officers and directors, (B) other employees of and the advisors to such
Person, including legal counsel and outside auditors who have principal
responsibility for the matter in question or are otherwise likely to have
information relevant to the matter, and (C) the stockholders owning more than
10% of the equity interests, by vote or value, of such Person.
-62-
<PAGE>
IN WITNESS WHEREOF, Acquiror, the Merger Sub, the Company, the
Stockholder Agent and with respect to Section 8.2 only, the Depositary Agent,
have caused this Agreement and Plan of Merger to be signed by their duly
authorized representatives, all as of the date first written above.
BACH SYSTEMS, INC. VALUECLICK, INC.
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
BACH ACQUISITION CORP. CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.,
AS DEPOSITARY AGENT
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
AS STOCKHOLDER AGENT: STOCKHOLDERS:
--------------------------------- ---------------------------------
Scott Averbach Scott Averbach
---------------------------------
Joseph Averbach
<PAGE>
SCHEDULE 2.14
EARN-OUT MILESTONES
This Schedule 2.14 sets forth the Earn-Out Milestones and the
associated Earn-Out Amounts. For purposes of this Schedule 2.14, the term
"Company" shall refer to the Surviving Corporation.
1. EARN-OUT PAYMENT. Within forty five (45) days following the
last day of each successive calendar quarter for eight consecutive
quarters beginning with the quarter ended March 31, 2001 ("Earn-Out
Record Date"), Acquiror shall deposit with the Exchange Agent Acquiror
Common Stock (as determined in accordance with Section 2.14 of
the Agreement) in the manner set forth in Section 2.10(b) of the
Agreement equal to:
(a) the following amount if the Company Revenue (as
defined below) of the Company Business (as defined below) for the
applicable quarterly period reach the following percentages of the
Company Revenue Earn-Out Target for such period ("Revenue Milestone"):
<TABLE>
<CAPTION>
---------------------- ----------------- ----------------- ------------------- ---------------------- --------------------
Company Revenue as a Less than 75% 75% but less 100% but less 120% but less than 150% or more
Percentage of than 100% than 120% 150%
Earn-Out Target
---------------------- ----------------- ----------------- ------------------- ---------------------- --------------------
<S> <C> <C> <C> <C> <C>
Earn-Out Amount Due None $325,000 $681,250 $823,750 $1,037,500
---------------------- ----------------- ----------------- ------------------- ---------------------- --------------------
</TABLE>
(b) in addition to the amount in subsection (a)
above, the following amount (together with amounts due under subsection
(a) above, the "Earn-Out Amount") if the Company IBT (as defined below)
of the Company Business for the applicable quarterly period reaches the
following percentages of the Company IBT Earn-Out Target for such
period ("IBT Milestone"):
<TABLE>
<CAPTION>
---------------------- ----------------- ----------------- ------------------- ---------------------- --------------------
Company IBT as a Less than 75% 75% but less 100% but less 120% but less than 150% or more
Percentage of than 100% than 120% 150%
Earn-Out Target
---------------------- ----------------- ----------------- ------------------- ---------------------- --------------------
<S> <C> <C> <C> <C> <C>
Earn-Out Amount Due None $325,000 $681,250 $823,750 $1,037,500
---------------------- ----------------- ----------------- ------------------- ---------------------- --------------------
</TABLE>
<PAGE>
2. EARN-OUT TARGETS.
(a) The Company Revenue Earn-Out Target shall be:
<TABLE>
<CAPTION>
---------------- ------------ ------------- ------------ ------------- ------------ ------------- -------------- ------------
For the
calendar 3/31/01 6/30/01 9/30/01 12/31/01 3/31/02 6/31/02 9/30/02 12/31/02
quarter ended
---------------- ------------ ------------- ------------ ------------- ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Company
Revenue $3,462,000 $4,137,000 $4,946,000 $5,915,000 $7,078,000 $8,474,000 $10,152,000 $12,168,000
Earn-Out Target
---------------- ------------ ------------- ------------ ------------- ------------ ------------- -------------- ------------
</TABLE>
(b) The Company IBT Earn-Out Target shall be:
<TABLE>
<CAPTION>
----------------- ----------- ------------- ------------- ------------ ------------- ------------- -------------- ---------------
For the
calendar 3/31/01 6/30/01 9/30/01 12/31/01 3/31/02 6/31/02 9/30/02 12/31/02
quarter ended
----------------- ----------- ------------- ------------- ------------ ------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Company IBT
Earn-Out Target $253,000 $295,000 $455,000 $554,000 $791,000 $1,067,000 $1,400,000 $1,804,000
----------------- ----------- ------------- ------------- ------------ ------------- ------------- -------------- ---------------
</TABLE>
3. ADDITIONAL DEFINITIONS. Capitalized terms not otherwise
defined shall have the meaning set forth in the Agreement. For purposes of this
Schedule 2.14
"Company Business" shall mean the Company or, if the Company
is subsequently merged into Acquiror, the business unit which includes the
business and operations of the Company prior to the merger.
"Company IBT" shall mean income before taxes defined in
accordance with GAAP but excluding amortized expense related to the Merger for
the applicable calendar quarter period. In making this computation, the Company
shall be treated as a separate business unit and there shall be excluded any
charges or expenses of the Acquiror or other business units affiliated with the
Acquiror which are not directly related or reasonably necessary for the
operation of the Company Business.
"Company Revenue" shall mean the revenues of the Company
Business defined in accordance with GAAP.
"Earn-Out Milestone" shall mean either the Revenue Milestone
or the IBT Milestone.
<PAGE>
EXHIBIT E
TO
AGREEMENT AND PLAN OF MERGER
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
by and among
VALUECLICK, INC.
and
THE STOCKHOLDERS NAMED HEREIN
Dated as of November 20, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of November 20, 2000
(this "Agreement"), by and among ValueClick, Inc., a Delaware corporation (the
"Company"), and each of the Stockholders listed on EXHIBIT A to this Agreement.
In connection with an Agreement and Plan of Merger, dated as
of November 20, 2000 (the "Merger Agreement"), by and among the Company, Bach
Systems, Inc., a Florida corporation ("Bach"), Bach Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of the Company, and the other
parties signatory thereto, the shares of common stock of Bach (the "Bach Common
Stock") held by the Stockholders were converted into the right to receive shares
of the Company's common stock (the "Company Common Stock"). Pursuant to the
Merger Agreement, the Company and the Stockholders have entered into this
Agreement to grant to the Stockholders registration rights in respect of the
Company Common Stock held by them.
1. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings (capitalized terms
used but not defined in this Agreement shall have the respective meanings
ascribed to them in the Merger Agreement):
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
under the Exchange Act.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such similar
Federal statute.
"Holder" means any holder of Registrable Securities.
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
listing fees, all fees and expenses of complying with securities or blue sky
laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of "cold comfort"
letters required by or incident to such performance and compliance, and the
reasonable fees and expenses of one counsel to the selling Holders (selected by
Stockholders Agent); provided, however, that Registration Expenses shall
exclude, and the sellers of the Registrable Securities being registered shall
pay, transfer taxes, underwriting fees and brokerage commissions (if any) in
respect of the Registrable Securities being registered.
2
<PAGE>
"Registrable Securities" means (i) the 750,000 shares of Company Common
Stock issued to the Stockholders pursuant to Section 2.6(a) of the Merger
Agreement at the Closing and any shares of Company Common Stock issued to the
Stockholders pursuant to any Earn-Out (as defined in the Merger Agreement) and
(ii) any securities of the Company issuable or issued with respect to the
Company Common Stock and/or options or other securities referred to in clause
(i) by way of a merger, consolidation, stock split, stock dividend,
recapitalization of the Company or similar transaction. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with the registration
statement, (b) they shall have been sold as permitted by, and in compliance
with, Rule 144 (or successor provision) promulgated under the Securities Act,
(c) they shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer under the Securities Act shall
have been delivered by the Company and subsequent public distribution of them
shall not require registration of them under the Securities Act or (d) they
shall have ceased to be outstanding.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company filed pursuant to Section 2.1, on an appropriate form,
filed under Rule 415 under the Securities Act, or any similar rule that may be
adopted by the Commission, and all amendments and supplements to the
registration statement, including post-effective amendments, in each case
including the prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Stockholders" means those persons receiving shares of Company Common
Stock in exchange for shares of Bach Common Stock pursuant to the Merger
Agreement.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1. SHELF REGISTRATION STATEMENT.
(1) Within thirty days after the Company is eligible to file a
Form S-3 (or any successor form thereto) (the date upon which the Company is
eligible to file a Form S-3 shall be referred to as the "Form S-3 Eligibility
Date"), the Company, subject to Section 2.4, shall have filed with the
Commission and shall use its commercial reasonable efforts to cause to be
declared effective as soon as practicable after filing, a Shelf Registration
Statement, relating to the offer and sale of all Registrable Securities owned by
all the Holders.
(2) The Company will use its commercial reasonable efforts to
keep the Shelf Registration Statement continuously effective in order to permit
the prospectus forming part thereof to be usable by such Holders for a period of
three years from the date the Shelf Registration Statement is first declared
effective by the Commission, or for such shorter period that will terminate when
all Registrable Securities covered by such Shelf Registration Statement
3
<PAGE>
have been sold pursuant thereto or cease to be outstanding or otherwise to be
Registrable Securities.
(3) Registrations under this Section 2.1 shall be on Form S-3,
unless another appropriate registration form shall be required under the
Commission's rules.
(4) The Company will pay the Registration Expenses in
connection with any registration pursuant to this Section 2.1.
(5) A registration pursuant to this Section 2.1 shall not be
deemed to have been effected:
(a) unless a registration statement with respect
thereto has become effective, or
(b) if after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason not attributable to the selling Holders and such registration has not
thereafter become effective.
2.2. REGISTRATION PROCEDURES. The Company will as expeditiously as
possible:
(1) prepare and file with the Commission the registration
statement to effect such registration and thereafter use its commercial
reasonable efforts to cause the registration statement to become effective;
provided, that the Company may discontinue any registration of its securities
which are not Registrable Securities at any time prior to the effective date of
the registration statement relating thereto;
(2) prepare and file with the Commission such amendments and
supplements to the registration statement and the prospectus used in connection
therewith as may be necessary to keep the registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by the registration statement
for such period as shall be required for the disposition of all of such
Registrable Securities;
(3) furnish to each seller of Registrable Securities covered
by the registration statement, such number of conformed copies of the
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in the registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller may reasonably request;
(4) use its commercial reasonable efforts:
(a) to register or qualify all Registrable Securities
and other securities covered by the registration statement under such other
securities or blue sky laws of such states
4
<PAGE>
of the United States of America where an exemption is not available and as the
sellers of Registrable Securities covered by the registration statement shall
reasonably request;
(b) to keep such registration or qualification in
effect for so long as the registration statement remains in effect; and
(c) to take any other action which may be reasonably
necessary or advisable to enable such sellers to consummate the disposition in
such jurisdictions of the securities to be sold by such sellers, except that the
Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not, but
for the requirements of this subdivision (4), be obligated to be so qualified or
to consent to general service of process in any such jurisdiction;
(5) use its commercial reasonable efforts to cause all
Registrable Securities covered by the registration statement to be registered
with or approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the Company and
counsel to the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(6) notify each seller of Registrable Securities covered by
the registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, in the judgment of the Company,
the prospectus included in the registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, in the light of the circumstances under which they were made,
and at the request of any such seller promptly prepare and furnish to it a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, in the judgment of the Company, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made;
(7) otherwise use its commercial reasonable efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earning statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the effective date of
the registration statement, which earning statement shall satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder, and
promptly furnish to each such seller of Registrable Securities a copy of any
amendment or supplement to the registration statement or prospectus;
(8) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all Registrable
Securities covered by the registration statement from and after a date not later
than the effective date of such registration; and
5
<PAGE>
(9) use its commercial reasonable efforts to list all
Registrable Securities covered by the registration statement on any national
securities exchange or national quotations system on which Registrable
Securities of the same class covered by the registration statement are then
listed.
The Company may require each seller of Registrable Securities
as to which any registration is being effected to furnish the Company in writing
as promptly as reasonably practicable such information regarding such seller and
the distribution of such securities as the Company may from time to time
reasonably request in writing.
Each Holder agrees that upon receipt of any notice from the
Company of the happening of any event of the kind described in subdivision (6)
of this Section 2.2, such Holder will forthwith discontinue such Holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such Holder's receipt of the
copies of the supplemented or amended prospectus contemplated by subdivision (6)
of this Section 2.2 and, if so directed by the Company, will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
2.3. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of the registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Holders and their counsel
and accountants the opportunity to participate in the preparation of the
registration statement, each prospectus included therein or filed with the
Commission, and, to the extent practicable, each amendment thereof or supplement
thereto, and give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders' counsel, to conduct a
reasonable investigation within the meaning of the Securities Act; PROVIDED,
that such counsel and accountants shall enter into a customary non-disclosure
agreement prior to making such investigation.
2.4. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION COVENANTS. The obligation of the Company to use its commercial
reasonable efforts to cause the Registrable Securities to be registered under
the Securities Act is subject to the following limitations, conditions and
qualifications.
(1) The Company shall be entitled to postpone for a reasonable
period of time (but no more than 45 days) the filing of any registration
statement otherwise required to be prepared and filed by it pursuant to Section
2.1, if the Company determines, in its reasonable judgment, that such
registration and offering (i) would interfere with any financing, acquisition,
merger, consolidation, material joint venture, corporate reorganization or other
material transaction involving the Company or any of its Affiliates, or (ii)
would require premature disclosure of any of the foregoing transactions (or of
the existence of negotiations, discussions or pending proposals with respect
thereto) or of any pending or threatened litigation, claim, assessment or
governmental investigation which would be material to the Company, and promptly
gives the Holders entitled to registration pursuant to Section 2.1 written
notice of such delay.
6
<PAGE>
(2) The Company shall not be obligated to effect the
registration of Registrable Securities of any Holder pursuant to Section 2.1
unless such Holder consents to reasonable conditions imposed by the Company,
including without limitation:
(a) conditions prohibiting the sale of shares by such
Holder until the registration shall have been effective for a specified
reasonable period of time not to exceed ten (10) days;
(b) conditions requiring such Holder to comply with
all prospectus delivery requirements of the Securities Act and with all
anti-stabilization, anti-manipulation and similar provisions of Section 10 of
the Exchange Act and any rules issued thereunder by the Commission, and to
furnish to the Company information about sales made in such public offering;
(c) conditions prohibiting such Holder from effecting
the sale of shares upon receipt of email, facsimile or other notice from the
Company (until further notice) given to permit the Company to correct or update
a registration statement or prospectus; and
(d) conditions requiring that at the end of the
period during which the Company is obligated to keep the registration statement
effective under subdivision (2) of Section 2.1 or subdivision (2) of Section
2.2, such Holder shall discontinue sales of shares pursuant to the registration
statement upon receipt of notice from the Company of its intention to remove
from registration the shares covered by the registration statement that remain
unsold, and requiring such Holder to notify the Company of the number of
Registrable Securities registered that remain unsold promptly upon receipt of
notice from the Company.
2.5. INDEMNIFICATION.
(1) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any securities of the Company under the Securities Act pursuant
to this Agreement, the Company will, and hereby does, indemnify and hold
harmless, each seller of any Registrable Securities covered by the registration
statement, its directors, officers, partners, agents and Affiliates and each
other Person, if any, who controls such seller within the meaning of the
Securities Act (a "Controlling Person"), insofar as losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in which
they were made not misleading, and the Company will reimburse such seller and
each such director, officer, partner, agent or affiliate and Controlling Person
for any legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, liability, action or
proceeding; provided, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the registration statement, any such preliminary
7
<PAGE>
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company through an instrument executed by or on behalf of such seller, as the
case may be, specifically stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer,
partner, agent or affiliate or Controlling Person and shall survive the transfer
of such securities by such seller.
(2) INDEMNIFICATION BY THE SELLERS. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (1) of this
Section 2.5) the Company, and each director of the Company, each officer of the
Company and each other Person, if any, who controls the Company within the
meaning of the Securities Act (a "Company Controlling Person"), with respect to
any statement or alleged statement in or omission or alleged omission from the
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller specifically stating
that it is for use in the preparation of the registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, that the liability of such indemnifying party under this
subdivision (2) shall be limited to the amount of proceeds received by such
indemnifying party in the offering giving rise to such liability. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, officer or Company Controlling
Person and shall survive the transfer of such securities by such seller.
(3) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.5,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 2.5, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in the reasonable opinion of outside counsel for the indemnifying party
joint representation of the indemnified party and the indemnifying party would
be prohibited by the applicable rules of professional conduct in respect of such
claim, the indemnifying party shall be entitled to participate in and, to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect of such claim after the
assumption of the defense thereof and the indemnified party notifies the
indemnifying party of such indemnified
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party's judgment and the basis therefor. No indemnifying party shall be liable
for any settlement of any action or proceeding effected without its written
consent, which consent shall not be unreasonably withheld. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation.
(4) CONTRIBUTION. If the indemnification provided for in this
Section 2.5 shall for any reason be held by a court to be unavailable to an
indemnified party under subparagraph (1) or (2) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subparagraph (1) or (2) hereof, the indemnified
party and the indemnifying party under subparagraph (1) or (2) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
the Company and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claims, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by the registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective sellers' obligations to
contribute as provided in this subparagraph (4) are several in proportion to the
relative value of their respective Registrable Securities covered by the
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld.
(5) OTHER INDEMNIFICATION. Indemnification and contribution
similar to that specified in the preceding subdivisions of this Section 2.5
(with appropriate modifications) shall be given by the Company and each seller
of Registrable Securities with respect to any required registration or other
qualification of securities under any Federal or state law or regulation of any
governmental authority other than the Securities Act.
(6) INDEMNIFICATION PAYMENTS. The indemnification and
contribution required by this Section 2.5 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred. In
any case in which it shall be judicially determined that a party is not entitled
to indemnification or contribution, any payments previously received by such
party hereunder shall be promptly reimbursed.
3. RULE 144. For two (2) years from the date of the Closing (as defined
in the Merger Agreement), the Company shall take all actions reasonably
necessary to enable Holders to sell such securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such Rule may be amended
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from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission including, without limiting the generality of the foregoing,
filing on a timely basis all reports required to be filed by the Exchange Act.
Upon the request of any Holder, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
4. "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that, during
the period beginning from the date hereof and ending on the first anniversary of
this Agreement, he or she or it shall not directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale), grant
any option to purchase or otherwise transfer of dispose of 375,000 Registrable
Securities held by such Holder which were issued by the Company at the Closing
pursuant to Section 2.6(a) of the Merger Agreement. The Company may, at its
discretion, cause a restrictive legend to the foregoing effect to be placed on
the certificates representing the Registrable Securities and place a stock
transfer notice consistent with the foregoing with its transfer agent with
respect to the certificates.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended with the
consent of the Company and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the Stockholders Agent;
Each beneficial owner of any Registrable Securities at the
time or thereafter outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have been marked to
indicate such consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the Holder of such Registrable Securities for purposes of
any request or other action by any Holder or Holders pursuant to this Agreement
or any determination of any number or percentage of Registrable Securities held
by any Holder or Holders contemplated by this Agreement. If the beneficial owner
of any Registrable Securities so elects, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Securities.
7. NOTICES. All communications provided for hereunder shall be sent by
courier or other overnight delivery service, shall be effective upon receipt,
and shall be addressed as follows:
(1) if to a Stockholder, at such address as the Stockholder
shall have furnished to the Company in writing;
(2) if to any other Holder, at the address that such Holder
shall have furnished to the Company in writing, or, until any such other holder
so furnishes to the Company an address, then to and at the address of the last
Holder of such Registrable Securities who has furnished an address to the
Company; or
(3) if to the Company, addressed to it at ValueClick Inc.,
4360 Park Terrace Drive, Suite 100, Westlake Village, California 91361;
Attention: General Counsel, or at such
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other address as the Company shall have furnished to each Holder of Registrable
Securities at the time outstanding.
8. NO ASSIGNMENT; BINDING EFFECT. This Agreement shall be binding upon
and inure the benefit of and be enforceable by the parties hereto and, with
respect to the Company, its respective successors and assigns and, with respect
to the Stockholders, any beneficial owner of any Registrable Securities.
9. HEADINGS. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
10. INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York, including, without
limitation, Title 14, Section 5-1401 of New York General Obligations Law,
without giving effect to any other choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York.
12. NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement.
13. RECAPITALIZATIONS, ETC. In the event that any capital stock or
other securities are issued in respect of, in exchange for, or in substitution
of, any Registrable Securities by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
change in the Company's capital structure, appropriate adjustments shall be made
in this Agreement so as to fairly and equitably preserve, to the extent
practicable, the original rights and obligations of the parties hereto under
this Agreement.
14. ATTORNEYS' FEES. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party to such action or proceeding shall be
entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
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15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company and each Stockholder has
caused this Registration Rights Agreement to be executed and delivered as of the
date first above written.
VALUECLICK, INC.
By:---------------------------
Name:
Title:
STOCKHOLDERS:
------------------------------
Scott Averbach
------------------------------
Joseph Averbach
<PAGE>
EXHIBIT A
LIST OF STOCKHOLDERS
STOCKHOLDER
Scott Averbach
Joseph Averbach