\n SECTION 11.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES . . . . . . .53
\n SECTION 11.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . .53
\n SECTION 11.7 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . .53
\n SECTION 11.8 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . .53
\n SECTION 11.9 EXTENSION; WAIVER. . . . . . . . . . . . . . . . . . . . . .53
\n SECTION 11.10 SPECIFIC PERFORMANCE. . . . . . . . . . . . . . . . . . . .53
\n<\/c><\/s><\/caption>\n<\/table>\n -iv-<\/p>\n
TABLE OF CONTENTS<\/p>\n
EXHIBITS<\/p>\n
EXHIBIT A – VOTING AGREEMENT
\nEXHIBIT B – NONCOMPETITION AGREEMENT
\nEXHIBIT C – SHAREHOLDERS AGREEMENT
\nEXHIBIT D INVESTOR REPRESENTATION STATEMENT
\nEXHIBIT E – ESCROW AGREEMENT
\nEXHIBIT F – SUBJECT MATTER OF OPINION OF COUNSEL TO TARGET
\nEXHIBIT G – SUBJECT MATTER OF OPINION OF COUNSEL TO ACQUIROR<\/p>\n
-v-<\/p>\n
AGREEMENT AND PLAN OF MERGER<\/p>\n
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 19, 1999 (this
\n“AGREEMENT”), is entered into by and among Yahoo! Inc., a Delaware corporation
\n(“ACQUIROR”), Scarlett Acquisition Corporation, a Delaware corporation and a
\nwholly-owned subsidiary of Acquiror (“SUB”), and Encompass, Inc., a Georgia
\ncorporation (“TARGET”).<\/p>\n
RECITALS<\/p>\n
A. The Boards of Directors of Acquiror, Sub and Target deem it
\nadvisable and in the best interests of each corporation and their respective
\nshareholders that Acquiror and Target combine in order to advance the long-term
\nbusiness interests of Acquiror and Target;<\/p>\n
B. The combination of Acquiror and Target shall be effected by the
\nterms of this Agreement through a transaction in which Sub will merge with and
\ninto Target, Target will become a wholly-owned subsidiary of Acquiror and the
\nshareholders of Target will become shareholders of Acquiror (the “MERGER”);<\/p>\n
C. For Federal income tax purposes, it is intended that the Merger
\nshall qualify as a reorganization within the meaning of Section 368(a) of the
\nInternal Revenue Code of 1986, as amended (the “CODE”);<\/p>\n
D. For accounting purposes, it is intended that the Merger shall be
\naccounted for as a pooling of interests transaction;<\/p>\n
E. As a condition and inducement to Acquiror’s willingness to enter
\ninto this Agreement, certain Target shareholders holding no less than 86% of the
\nissued and outstanding Preferred Stock and no less than 60% of the issued and
\noutstanding Common Stock of Target, have, concurrently with the execution of
\nthis Agreement, executed and delivered Voting Agreements in the form attached
\nhereto as EXHIBIT A (the “VOTING AGREEMENTS”), pursuant to which such
\nshareholders have, among other things, agreed to vote their shares of Target
\ncapital stock in favor of the Merger and to grant Acquiror irrevocable proxies
\nto vote such shares;<\/p>\n
F. As a further condition and inducement to Acquiror’s willingness to
\nenter into this Agreement, certain employees of Target who are also shareholders
\nof Target have, concurrently with the execution of this Agreement, executed and
\ndelivered Noncompetition Agreements in the form attached hereto as EXHIBIT B
\n(the “NONCOMPETITION AGREEMENTS”), which agreements shall only become effective
\nat the Effective Time (as defined in Section 1.1 below).<\/p>\n
G. As a further condition and inducement to Acquiror’s willingness to
\nenter into this Agreement, certain shareholders of Target have executed and
\ndelivered to Acquiror Shareholders Agreements in the form attached hereto as
\nEXHIBIT C (the “SHAREHOLDERS AGREEMENTS”).<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the respective
\nrepresentations, warranties, covenants and agreements set forth below, the
\nparties agree as follows:<\/p>\n
ARTICLE I<\/p>\n
THE MERGER<\/p>\n
Section 1.1 EFFECTIVE TIME OF THE MERGER.<\/p>\n
(a) Subject to the provisions of this Agreement, articles of
\nmerger (the “ARTICLES OF MERGER”) in such mutually acceptable form as is
\nrequired by the relevant provisions of the Georgia Business Corporation Code
\n(“GEORGIA LAW”) shall be duly executed and delivered by the parties hereto and
\nthereafter delivered to the Secretary of State of the State of Georgia for
\nfiling on the Closing Date (as defined in Section 1.2).<\/p>\n
(b) Subject to the provisions of this Agreement, a certificate
\nof merger (the “CERTIFICATE OF MERGER”) in such mutually acceptable form as is
\nrequired by the relevant provisions of the Delaware General Corporation Law
\n(“DELAWARE LAW”) shall be duly executed and delivered by the parties hereto and
\nthereafter delivered to the Secretary of State of the State of Delaware for
\nfiling on the Closing Date (as defined in Section 1.2).<\/p>\n
(c) The Merger shall become effective upon the due and valid
\nfiling of the Articles of Merger with the Secretary of State of the State of
\nGeorgia or at such time thereafter as is provided in the Articles of Merger (the
\n“EFFECTIVE TIME”).<\/p>\n
Section 1.2 CLOSING. The closing of the Merger (the “CLOSING”) will
\ntake place at 10:00 a.m., California time, on a date (the “CLOSING DATE”) to be
\nspecified by Acquiror and Target, which shall be no later than the second
\nbusiness day after satisfaction or waiver of the latest to occur of the
\nconditions set forth in Article VIII, at the offices of Venture Law Group, A
\nProfessional Corporation, 2775 Sand Hill Road, Menlo Park, California unless
\nanother date, time or place is agreed to in writing by Acquiror and Target.<\/p>\n
Section 1.3 EFFECTS OF THE MERGER.<\/p>\n
(a) At the Effective Time (i) the separate existence of Sub
\nshall cease and Sub shall be merged with and into Target (Sub and Target are
\nsometimes referred to herein as the “CONSTITUENT CORPORATIONS” and Target
\nfollowing consummation of the Merger is sometimes referred to herein as the
\n“SURVIVING CORPORATION”), (ii) the Articles of Incorporation of Target shall be
\nthe Articles of Incorporation of the Surviving Corporation and (iii) the Bylaws
\nof Target as in effect immediately prior to the Effective Time shall become the
\nBylaws of the Surviving Corporation.<\/p>\n
(b) At the Effective Time, the effect of the Merger shall be as
\nprovided in the applicable provisions of Georgia Law and Delaware Law. Without
\nlimiting the generality of the foregoing, at and after the Effective Time, the
\nSurviving Corporation shall possess all the rights,<\/p>\n
-2-<\/p>\n
privileges, powers and franchises, and be subject to all the restrictions,
\ndisabilities and duties of each of the Constituent Corporations.<\/p>\n
Section 1.4 DIRECTORS AND OFFICERS. The directors of Sub immediately
\nprior to the Effective Time shall become the directors of the Surviving
\nCorporation, each to hold office in accordance with the Articles of
\nIncorporation and Bylaws of the Surviving Corporation, and the officers of Sub
\nimmediately prior to the Effective Time shall become the officers of the
\nSurviving Corporation, in each case until their respective successors are duly
\nelected or appointed and qualified.<\/p>\n
ARTICLE II<\/p>\n
CONVERSION OF SECURITIES<\/p>\n
Section 2.1 CONVERSION OF CAPITAL STOCK. At the Effective Time, by
\nvirtue of the Merger and without any action on the part of the holder of any
\nshares of Series A Preferred Stock, $1.00 par value and Series B Preferred
\nStock, $1.00 par value, of Target (the “TARGET PREFERRED STOCK”), or shares of
\nCommon Stock, $0.01 par value, of Target (“TARGET COMMON STOCK”), or capital
\nstock of Sub:<\/p>\n
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of
\nthe capital stock of Sub shall be converted into and become one fully paid and
\nnonassessable share of Common Stock, $0.01 par value, of the Surviving
\nCorporation.<\/p>\n
(b) CANCELLATION OF ACQUIROR-OWNED AND TARGET-OWNED STOCK. Any
\nshares of Target Common Stock or Target Preferred Stock that are owned by
\nAcquiror, Sub, Target or any other direct or indirect wholly-owned Subsidiary
\n(as defined below) of Acquiror or Target shall be canceled and retired and shall
\ncease to exist and no stock of Acquiror or other consideration shall be
\ndelivered in exchange. As used in this Agreement, the word “SUBSIDIARY” means,
\nwith respect to any other party, any corporation or other organization, whether
\nincorporated or unincorporated, of which (i) such party or any other Subsidiary
\nof such party is a general partner (excluding partnerships, the general
\npartnership interests of which held by such party or any Subsidiary of such
\nparty do not have a majority of the voting interest in such partnership) or
\n(ii) at least a majority of the securities or other interests having by their
\nterms ordinary voting power to elect a majority of the Board of Directors or
\nothers performing similar functions with respect to such corporation or other
\norganization or a majority of the profit interests in such other organization is
\ndirectly or indirectly owned or controlled by such party or by any one or more
\nof its Subsidiaries, or by such party and one or more of its Subsidiaries.<\/p>\n
(c) EXCHANGE RATIO.<\/p>\n
(i) Subject to Sections 2.2 and 2.4, each issued and
\noutstanding share of Target Common Stock and Target Preferred Stock (other than
\nshares to be canceled in accordance with Section 2.1(b) and any Dissenting
\nShares as defined in and to the extent provided in Section 2.3) shall, by virtue
\nof the Merger and without any action on the part of the holder thereof, be
\nconverted into the right to receive a fraction of a fully paid and nonassessable<\/p>\n
-3-<\/p>\n
share of Acquiror Common Stock (as defined in Section 4.2) equal to the “COMMON
\nEXCHANGE RATIO” or the “PREFERRED EXCHANGE RATIO”, as the case may be, as
\ndefined in and determined in accordance with the provisions of this Section
\n2.1(c). All such shares of Target Common Stock and Target Preferred Stock, when
\nso converted, shall no longer be outstanding and shall automatically be canceled
\nand retired and shall cease to exist, and each holder of a certificate
\nrepresenting any such shares shall cease to have any rights with respect
\nthereto, except the right to receive the shares of Acquiror Common Stock and any
\ncash in lieu of fractional shares of Acquiror Common Stock to be issued or paid
\nin consideration therefor upon the surrender of such certificate in accordance
\nwith Section 2.4, without interest.<\/p>\n
(ii) The “TOTAL CONSIDERATION SHARES” shall be equal to
\n821,485 shares of Acquiror Common Stock. The “PREFERRED EXCHANGE RATIO” shall
\nbe equal to (i) the number of the Total Consideration Shares required to be
\ndistributed to the holders of Target Preferred Stock pursuant to Target’s
\nArticles of Incorporation, divided by (ii) the number of shares of Target
\nPreferred Stock outstanding as of the Effective Time. The “COMMON EXCHANGE
\nRATIO” shall be equal to (i) the number of the Total Consideration Shares
\nrequired to be distributed to the holders of Target Common Stock (assuming prior
\nexercise for cash of all Target Options and Target Warrants) pursuant to
\nTarget’s Articles of Incorporation, divided by (ii) the number of shares of
\nTarget Common Stock outstanding or subject to issuance upon exercise of Target
\nOptions and Target Warrants as of the Effective Time. The Preferred Exchange
\nRatio and the Common Exchange Ratio are referred to collectively as the
\n“EXCHANGE RATIOS”. In no event will the total number of shares of Acquiror
\nCommon Stock issuable by Acquiror pursuant to the Merger (including shares of
\nAcquiror Common Stock issuable upon exercise of Target Options or Target
\nWarrants assumed by Acquiror in the Merger) exceed the Total Consideration
\nShares. The allocation of the Total Consideration Shares among each holder of
\nTarget capital stock, warrants and options based upon the capitalization of
\nTarget as of the date of this Agreement is set forth in the Target Disclosure
\nSchedule. An updated version of such Schedule reflecting the capitalization of
\nTarget on the Closing Date shall be delivered to Acquiror on the Closing Date.<\/p>\n
(iii) If, on or after the date of this Agreement and prior
\nto the Effective Time, the outstanding shares of Acquiror Common Stock or Target
\ncapital stock shall have been changed into a different number of shares or a
\ndifferent class by reason of any reclassification, split-up, stock dividend or
\nstock combination, then the Exchange Ratios shall be correspondingly adjusted.
\nThe Exchange Ratios shall not change as a result of fluctuations in the market
\nprice of Acquiror Common Stock between the date of this Agreement and the
\nEffective Time.<\/p>\n
(d) TARGET STOCK OPTIONS AND WARRANTS. At the Effective Time,
\nall then outstanding options, whether vested or unvested (“TARGET OPTIONS”), to
\npurchase Target Common Stock issued under Target’s Stock Option Plan (the
\n“TARGET OPTION PLAN”) and all outstanding warrants to purchase Target capital
\nstock (“TARGET WARRANTS”) that by their terms survive the Closing will be
\nassumed by Acquiror in accordance with Section 6.5. All of the Target Options
\nand all of the Target Warrants issued and outstanding as of the date of this
\nAgreement are listed on Schedule 2.1(d) attached hereto. An updated Schedule
\n2.1(d) of Target Options and Target Warrants shall be delivered by Target to
\nAcquiror on the Closing Date.<\/p>\n
-4-<\/p>\n
(e) RESTRICTED SHARES. Any shares of Target Common Stock which
\nare subject to repurchase by Target in the event the holder thereof ceases to be
\nemployed by Target (“TARGET RESTRICTED SHARES”) shall be converted into Acquiror
\nCommon Stock on the same basis as provided in subsection (c) above and shall be
\nregistered in such holder’s name, but shall be held by the Surviving Corporation
\nor Acquiror pursuant to the existing agreements in effect on the date of this
\nAgreement. Holders of the Target Restricted Shares are identified on Schedule
\n2.1(e) of the Target Disclosure Schedule.<\/p>\n
Section 2.2 ESCROW AGREEMENT. At the Effective Time or such later time
\nas determined in accordance with Section 2.3(b), Acquiror will, on behalf of the
\nholders of Target Common Stock and Target Preferred Stock deposit in escrow
\ncertificates representing ten percent (10%) of the Total Consideration Shares
\nallocable to Target Common Stock and Target Preferred Stock in the Merger. Such
\nshares shall be held in escrow on behalf of the persons who are the holders of
\nTarget Common Stock or Target Preferred Stock in the Merger immediately prior to
\nthe Effective Time (the “FORMER TARGET SHAREHOLDERS”), in accordance with the
\nportion of Total Consideration Shares allocable to each such Former Target
\nShareholder based upon the Exchange Ratios (“PRO RATA PORTION”). Such shares
\n(collectively, the “ESCROW SHARES”) shall be held and applied pursuant to the
\nprovisions of an escrow agreement (the “ESCROW AGREEMENT”) to be executed
\npursuant to Section 7.6. All calculations to determine the number of Escrow
\nShares to be delivered by each shareholder of the Company into escrow as
\naforesaid shall be rounded down to the nearest whole share.<\/p>\n
Section 2.3 DISSENTING SHARES.<\/p>\n
(a) Notwithstanding any provision of this Agreement to the
\ncontrary, any shares of Target Common Stock or Target Preferred Stock held by a
\nholder who has exercised such holder’s appraisal rights in accordance with
\nArticle 13 of Georgia Law, and who, as of the Effective Time, has not
\neffectively withdrawn or lost such appraisal rights (“DISSENTING SHARES”), shall
\nnot be converted into or represent a right to receive Acquiror Common Stock
\npursuant to Section 2.1, but the holder of the Dissenting Shares shall only be
\nentitled to such rights as are granted by Georgia Law.<\/p>\n
(b) Notwithstanding the provisions of Section 2.3(a), if any
\nholder of shares of Target Common Stock or Target Preferred Stock who demands
\nhis appraisal rights with respect to such shares under Section 2.1 shall
\neffectively withdraw or lose (through failure to perfect or otherwise) his
\nrights to receive payment for the fair market value of such shares under Georgia
\nLaw, then, as of the later of the Effective Time or the occurrence of such
\nevent, such holder’s shares shall automatically be converted into and represent
\nonly the right to receive Acquiror Common Stock and payment for fractional
\nshares as provided in Section 2.1(c), without interest, upon surrender of the
\ncertificate or certificates representing such shares; PROVIDED that if such
\nholder effectively withdraws or loses his right to receive payment for the fair
\nmarket value of such shares after the Effective Time, then, at such time
\nAcquiror will deposit in the escrow created pursuant to the Escrow Agreement
\nadditional certificates representing such holder’s Pro Rata Portion of the
\nEscrow Shares.<\/p>\n
-5-<\/p>\n
(c) Target shall give Acquiror (i) prompt notice of any written
\ndemands for payment with respect to any shares of capital stock of Target
\npursuant to Article 13 of Georgia Law, withdrawals of such demands, and any
\nother instruments served pursuant to Georgia Law and received by the Target and
\n(ii) the opportunity to participate at its own expense in all negotiations and
\nproceedings with respect to demands for appraisal rights under Georgia Law.
\nTarget shall not, except with the prior written consent of Acquiror, voluntarily
\nmake any payment with respect to any demands for appraisal rights with respect
\nto Target Common Stock or Target Preferred Stock or offer to settle or
\ncompromise any such demands.<\/p>\n
Section 2.4 EXCHANGE OF CERTIFICATES.<\/p>\n
(a) From and after the Effective Time, each holder of an
\noutstanding certificate or certificates (“CERTIFICATES”) which represented
\nshares of Target Common Stock or Target Preferred Stock immediately prior to the
\nEffective Time shall have the right to surrender each Certificate to Acquiror
\n(or at Acquiror’s option, an exchange agent to be appointed by Acquiror), and
\nreceive promptly in exchange for all Certificates held by such holder a
\ncertificate representing the number of whole shares of Acquiror Common Stock
\n(other than the Escrow Shares) into which the Target Common Stock or Target
\nPreferred Stock evidenced by the Certificates so surrendered shall have been
\nconverted pursuant to the provisions of Article II of this Agreement. The
\nsurrender of Certificates shall be accompanied by duly completed and executed
\nLetters of Transmittal in such form as may be reasonably specified by Acquiror.
\nUntil surrendered, each outstanding Certificate which prior to the Effective
\nTime represented shares of Target Common Stock or Target Preferred Stock shall
\nbe deemed for all corporate purposes to evidence ownership of the number of
\nwhole shares of Acquiror Common Stock into which the shares of Target Common
\nStock have been converted but shall, subject to applicable appraisal rights
\nunder Georgia Law and Section 2.3, have no other rights. Subject to applicable
\nappraisal rights under Georgia Law and Section 2.3, from and after the Effective
\nTime, the holders of shares of Target Common Stock and Target Preferred Stock
\nshall cease to have any rights in respect of such shares and their rights shall
\nbe solely in respect of the Acquiror Common Stock into which such shares of
\nTarget Common Stock or Target Preferred Stock have been converted. From and
\nafter the Effective Time, there shall be no further registration of transfers on
\nthe records of Target of shares of Target Common Stock and Target Preferred
\nStock outstanding immediately prior to the Effective Time.<\/p>\n
(b) If any shares of Acquiror Common Stock are to be issued in
\nthe name of a person other than the person in whose name the Certificate(s)
\nsurrendered in exchange therefor is registered, it shall be a condition to the
\nissuance of such shares that (i) the Certificate(s) so surrendered shall be
\ntransferable, and shall be properly assigned, endorsed or accompanied by
\nappropriate stock powers, (ii) such transfer shall otherwise be proper and
\n(iii) the person requesting such transfer shall pay Acquiror, or its exchange
\nagent, any transfer or other taxes payable by reason of the foregoing or
\nestablish to the satisfaction of Acquiror that such taxes have been paid or are
\nnot required to be paid. Notwithstanding the foregoing, neither Acquiror nor
\nTarget shall be liable to a holder of shares of Target Common Stock or Target
\nPreferred Stock for shares of Acquiror Common Stock issuable to such holder
\npursuant to the provisions of<\/p>\n
-6-<\/p>\n
Article II of this Agreement that are delivered to a public official pursuant to
\napplicable abandoned property, escheat or similar laws.<\/p>\n
(c) In the event any Certificate shall have been lost, stolen or
\ndestroyed, upon the making of an affidavit of that fact by the person claiming
\nsuch Certificate to be lost, stolen or destroyed, Acquiror shall issue in
\nexchange for such lost, stolen or destroyed Certificate the shares of Acquiror
\nCommon Stock issuable in exchange therefor pursuant to the provisions of
\nArticle II of the Agreement. The Board of Directors of Acquiror may in its
\ndiscretion and as a condition precedent to the issuance thereof, require the
\nowner of such lost, stolen or destroyed Certificate to provide to Acquiror an
\nindemnity agreement or bond against any claim that may be made against Acquiror
\nwith respect to the Certificate alleged to have been lost, stolen or destroyed.<\/p>\n
Section 2.5 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
\ndividends or other distributions declared or made after the Effective Time with
\nrespect to Acquiror Common Stock with a record date after the Effective Time
\nshall be paid to the holder of any unsurrendered Certificate with respect to the
\nshares of Acquiror Common Stock represented thereby and no cash payment in lieu
\nof fractional shares shall be paid to any such holder pursuant to Section 2.6
\nbelow until the holder of record of such Certificate shall surrender such
\nCertificate. Subject to the effect of applicable laws, following surrender of
\nany such Certificate, there shall be paid to the record holder of the
\ncertificates representing whole shares of Acquiror Common Stock issued in
\nexchange therefor, without interest, (i) at the time of such surrender, the
\namount of any cash payable in lieu of a fractional share of Acquiror Common
\nStock to which such holder is entitled pursuant to Section 2.6 below and the
\namount of any dividends or other distributions with a record date after the
\nEffective Time previously paid with respect to such whole shares of Acquiror
\nCommon Stock, and (ii) at the appropriate payment date, the amount of dividends
\nor other distributions with a record date after the Effective Time but prior to
\nsurrender and a payment date subsequent to surrender payable with respect to
\nsuch whole shares of Acquiror Common Stock.<\/p>\n
Section 2.6 NO FRACTIONAL SHARES. No certificate or scrip representing
\nfractional shares of Acquiror Common Stock shall be issued upon the surrender
\nfor exchange of Certificates, and such fractional share interests will not
\nentitle the owner thereof to vote or to any rights of a shareholder of Acquiror.
\nNotwithstanding any other provision of this Agreement, each holder of shares of
\nTarget Common Stock or Target Preferred Stock exchanged pursuant to the Merger
\nwho would otherwise have been entitled to receive a fraction of a share of
\nAcquiror Common Stock (after taking into account all Certificates delivered by
\nsuch holder) shall receive, in lieu thereof, cash (without interest) in an
\namount equal to such fractional part of a share of Acquiror Common Stock
\nmultiplied by $158.25.<\/p>\n
Section 2.7 TAX AND ACCOUNTING CONSEQUENCES.<\/p>\n
(a) It is intended by the parties hereto that the Merger shall
\nconstitute a “reorganization” within the meaning of Section 368 of the Code.
\nThe parties hereto adopt this<\/p>\n
-7-<\/p>\n
Agreement as a “plan of reorganization” within the meaning of Sections
\n1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.<\/p>\n
(b) It is intended by the parties hereto that the Merger shall
\nqualify for financial accounting treatment as a pooling of interests.<\/p>\n
ARTICLE III<\/p>\n
REPRESENTATIONS AND WARRANTIES OF TARGET<\/p>\n
Target represents and warrants to Acquiror and Sub that the statements
\ncontained in this Article III are true and correct, except as expressly set
\nforth in the disclosure schedule delivered by Target to Acquiror on or before
\nthe date of this Agreement (the “TARGET DISCLOSURE SCHEDULE”). The Target
\nDisclosure Schedule shall be arranged in paragraphs corresponding to the
\nnumbered and lettered paragraphs contained in this Article III.<\/p>\n
Section 3.1 ORGANIZATION OF TARGET. Target is a corporation duly
\norganized, validly existing and in good standing under the laws of the State of
\nGeorgia, has all requisite corporate power to own, lease and operate its
\nproperty and to carry on its business as now being conducted, and is duly
\nqualified or licensed to do business and is in good standing as a foreign
\ncorporation in each jurisdiction in which the nature of its business or
\nownership or leasing of properties makes such qualification or licensing
\nnecessary and where the failure to be so qualified or licensed could reasonably
\nbe expected to result in a material adverse effect on the business, assets
\n(including intangible assets), liabilities, condition (financial or otherwise),
\nproperty or results of operations (a “MATERIAL ADVERSE EFFECT”) of Target. The
\nTarget Disclosure Schedule contains a true and complete listing of the locations
\nof all sales offices, manufacturing facilities, and any other offices or
\nfacilities of Target and a true and complete list of all states in which Target
\nmaintains any employees. The Target Disclosure Schedule contains a true and
\ncomplete list of all states in which Target is duly qualified or licensed to
\ntransact business as a foreign corporation.<\/p>\n
Section 3.2 TARGET CAPITAL STRUCTURE.<\/p>\n
(a) The authorized capital stock of Target consists of
\n25,000,000 shares of Target Common Stock and 10,000,000 shares of Preferred
\nStock, of which 2,000,000 shares are designated as Series A Preferred Stock and
\n1,125,000 shares are designated as Series B Preferred Stock. As of the date of
\nthis Agreement, there are (i) 2,592,769 shares of Target Common Stock issued and
\noutstanding, all of which are validly issued, fully paid and nonassessable and
\nnone of which are subject to repurchase rights, (ii) 2,000,000 shares of Series
\nA Preferred Stock issued and outstanding, all of which are validly issued, fully
\npaid and nonassessable, and each share of which is convertible into one share of
\nTarget Common Stock, (iii) 1,125,000 shares of Series B Preferred Stock issued
\nand outstanding, all of which are validly issued, fully paid and nonassessable,
\nand each share of which is convertible into one share of Target Common Stock,
\n(iii) warrants to purchase up to 125,000 shares of Target Common Stock
\n(collectively, the “TARGET WARRANTS”); (iv) 3,125,000 shares of Target Common
\nStock reserved for future issuance upon conversion of the Target Preferred
\nStock; (v) 914,101 shares of Target Common<\/p>\n
-8-<\/p>\n
Stock reserved for future issuance pursuant to Target Options granted and
\noutstanding under the Target Option Plan; and (vi) 227,416 shares of Target
\nCommon Stock reserved for issuance upon exercise of options available to be
\ngranted in the future under the Target Option Plan. The issued and outstanding
\nshares of Target Common Stock and of Target Preferred Stock are held of record
\nby the shareholders of Target as set forth and identified on Schedule 3.2(a) of
\nthe Target Disclosure Schedule. The issued and outstanding Target Options are
\nheld of record by the option holders identified on, in the amounts and subject
\nto the vesting schedules set forth on, Schedule 3.2(a) of the Target Disclosure
\nSchedule. The issued and outstanding Target Warrants are held of record by the
\nwarrantholders as set forth and identified on Schedule 3.2(a) of the Target
\nDisclosure Schedule. All shares of Target Common Stock and Target Preferred
\nStock subject to issuance as specified above, upon issuance on the terms and
\nconditions (including payment) specified in the instruments pursuant to which
\nthey are issuable, shall be duly authorized, validly issued, fully paid and
\nnonassessable. All shares of Target Common Stock subject to issuance upon the
\nexercise of Target Options and Target Warrants, upon issuance on the terms and
\nconditions (including payment) specified in the instrument pursuant to which
\nthey are issuable, will be duly authorized, validly issued, fully paid and
\nnonassessable. All outstanding shares of Target Common Stock, Target Preferred
\nStock and outstanding Target Options and Target Warrants (collectively “TARGET
\nSECURITIES”) were issued in compliance with applicable federal and state
\nsecurities laws. Except as set forth in the Target Disclosure Schedule, there
\nare no obligations, contingent or otherwise, of Target to repurchase, redeem or
\notherwise acquire any shares of Target Common Stock or Target Preferred Stock or
\nmake any investment (in the form of a loan, capital contribution or otherwise)
\nin any other entity. An updated Schedule 3.2(a) reflecting changes permitted by
\nthis Agreement in the capitalization of Target between the date hereof and the
\nEffective Time shall be delivered by Target to Acquiror on the Closing Date.<\/p>\n
(b) Except as set forth in this Section 3.2, there are no equity
\nsecurities of any class or series of Target, or any security exchangeable into
\nor exercisable for such equity securities, issued, reserved for issuance or
\noutstanding. Except as set forth in this Section 3.2, there are no options,
\nwarrants, equity securities, calls, rights, commitments or agreements of any
\ncharacter to which Target is a party or by which it is bound obligating Target
\nto issue, deliver or sell, or cause to be issued, delivered or sold, additional
\nshares of capital stock of Target or obligating Target to grant, extend,
\naccelerate the vesting of or enter into any such option, warrant, equity
\nsecurity, call, right, commitment or agreement. Except as set forth in the
\nTarget Disclosure Schedule, Target is not in active discussion, formal or
\ninformal, with any person or entity regarding the issuance of any form of
\nadditional Target equity that has not been issued or committed to prior to the
\ndate of this Agreement. Except as provided in this Agreement and the other
\nTransaction Documents (as defined in Section 3.3(a)) or any transaction
\ncontemplated hereby or thereby, there are no voting trusts, proxies or other
\nagreements or understandings with respect to the voting of the shares of capital
\nstock of Target.<\/p>\n
(c) All Target Options have been issued in accordance with the
\nterms of the Target Option Plan and pursuant to the standard forms of option
\nagreement previously provided to Acquiror or its representatives. No Target
\nOption will by its terms require an adjustment in connection with the Merger.
\nNeither the consummation of transactions contemplated by this Agreement or the
\nother Transaction Documents, nor any action taken or to be taken by Target in<\/p>\n
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connection with such transactions will result in (i) any acceleration of vesting
\nin favor of any optionee under any Target Option; (ii) any additional benefits
\nfor any optionee under any Target Option; or (iii) the inability of Acquiror
\nafter the Effective Time to exercise any right or benefit held by Target prior
\nto the Effective Time with respect to any Target Option assumed by Acquiror,
\nincluding, without limitation, the right to repurchase an optionee’s unvested
\nshares on termination of such optionee’s employment. The assumption by Acquiror
\nof Target Options in accordance with Section 6.5 hereunder will not (i) give the
\noptionees additional benefits which they did not have under their options prior
\nto such assumption (after taking into account the existing provisions of the
\noptions, such as their respective exercise prices and vesting schedules) and
\n(ii) constitute a breach of the Target Plan or any agreement entered into
\npursuant to such plan.<\/p>\n
Section 3.3 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.<\/p>\n
(a) Target has all requisite corporate power and authority to
\nenter into this Agreement and all Transaction Documents to which it is or will
\nbecome a party and to consummate the transactions contemplated by this Agreement
\nand such Transaction Documents. The execution and delivery of this Agreement
\nand such Transaction Documents and the consummation of the transactions
\ncontemplated by this Agreement and such Transaction Documents have been duly
\nauthorized by all necessary corporate action on the part of Target, subject only
\nto the approval of the Merger by Target’s shareholders under the provisions of
\nGeorgia Law and Target’s Articles of Incorporation. This Agreement has been and
\nsuch Transaction Documents have been or, to the extent not executed by Target as
\nof the date hereof, will be duly executed and delivered by Target. This
\nAgreement and each of the Transaction Documents to which Target is a party
\nconstitutes, and each of the Transaction Documents to which Target will become a
\nparty, when executed and delivered by Target, will constitute, assuming the due
\nauthorization, execution and delivery by the other parties hereto and thereto,
\nthe valid and binding obligation of Target, enforceable by Acquiror against
\nTarget in accordance with their respective terms, except to the extent that
\nenforceability may be limited by applicable bankruptcy, reorganization,
\ninsolvency, moratorium or other laws affecting the enforcement of creditors’
\nrights generally and by general principles of equity, regardless of whether such
\nenforceability is considered in a proceeding at law or in equity. For purposes
\nof this Agreement, “TRANSACTION DOCUMENTS” means all documents or agreements
\nrequired to be delivered by any party under this Agreement including the
\nArticles of Merger, the Certificate of Merger, the Escrow Agreement, the Voting
\nAgreements, the Shareholders Agreements and the Noncompetition Agreements.<\/p>\n
(b) The execution and delivery by Target of this Agreement and
\nthe Transaction Documents to which it is or will become a party does not, and
\nthe consummation of the transactions contemplated by this Agreement and the
\nTransaction Documents to which it is or will become a party will not, (i)
\nconflict with, or result in any violation or breach of any provision of the
\nArticles of Incorporation or Bylaws of Target, (ii) result in any violation or
\nbreach of, or constitute (with or without notice or lapse of time, or both) a
\ndefault (or give rise to a right of termination, cancellation or acceleration of
\nany obligation or loss of any benefit) under any of the terms, conditions or
\nprovisions of any note, bond, mortgage, indenture, lease, contract<\/p>\n
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or other agreement, instrument or obligation to which Target is a party or by
\nwhich it or any of its properties or assets may be bound, or (iii) conflict or
\nviolate any permit, concession, franchise, license, judgment, order, decree,
\nstatute, law, ordinance, rule or regulation applicable to Target or any of its
\nproperties or assets, except in the case of (ii) and (iii) for any such
\nconflicts, violations, defaults, terminations, cancellations or accelerations
\nwhich would not reasonably be expected to have a Material Adverse Effect on
\nTarget.<\/p>\n
(c) None of the execution and delivery by Target of this
\nAgreement or of any other Transaction Document to which Target is or will become
\na party or the consummation of the transactions contemplated by this Agreement
\nor such Transaction Document will require any consent, approval, order or
\nauthorization of, or registration, declaration or filing with, any court,
\nadministrative agency or commission or other governmental authority or
\ninstrumentality (“GOVERNMENTAL ENTITY”), except for (i) the filing of the
\nCertificate of Merger with the Delaware Secretary of State, (ii) the filing of
\nthe Articles of Merger with the Georgia Secretary of State, (iii) such consents,
\napprovals, orders, authorizations, registrations, declarations and filings as
\nmay be required under applicable federal and state securities laws and (iii)
\nsuch other consents, authorizations, filings, approvals and registrations which
\nare listed on the Target Disclosure Schedule or which, if not obtained or made,
\ncould be expected to have a Material Adverse Effect on Target.<\/p>\n
Section 3.4 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES.<\/p>\n
(a) Target has delivered to Acquiror copies of a draft form of
\nTarget’s unaudited balance sheet as of March 31, 1999 (the “MOST RECENT BALANCE
\nSHEET”) and statements of operations for the three-month period then-ended
\n(together with the Most Recent Balance Sheet, the “TARGET INTERIM FINANCIALS”)
\nand a draft form of Target’s proposed audited balance sheets as of December 31,
\n1998, and the related audited statements of operations, shareholders’ equity and
\ncash flows for the year ended December 31, 1998, respectively (collectively, the
\n“TARGET FINANCIAL STATEMENTS”).<\/p>\n
(b) Other than as set forth on the Target Disclosure Schedule,
\nthe Target Financial Statements are in accordance with the books and records of
\nTarget and present fairly in all material respects, subject to adjustments
\napproved by both Acquiror and Target, the financial position, results of
\noperations and cash flows of Target as of their historical dates and for the
\nperiods indicated. The Target Financial Statements have been prepared in
\naccordance with generally accepted accounting principles applied on a basis
\nconsistent with prior periods. The reserves, if any, reflected on the Target
\nFinancial Statements are adequate in light of the contingencies with respect to
\nwhich they were made.<\/p>\n
(c) Target has no material debt, liability, or obligation of any
\nnature, whether accrued, absolute, contingent, or otherwise, and whether due or
\nto become due, that is not reflected or reserved against in the Most Recent
\nBalance Sheet, except for those that may have been incurred after the date of
\nthe Most Recent Balance Sheet or that would not reasonably be required, in
\naccordance with generally accepted accounting principles applied on a basis
\nconsistent with prior periods, to be included in a balance sheet or the notes
\nthereto. All material<\/p>\n
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debts, liabilities, and obligations incurred after the date of the Most Recent
\nBalance Sheet were incurred in the ordinary course of business and are not
\nmaterial both individually and in the aggregate to Target or its business.<\/p>\n
Section 3.5 TAX MATTERS.<\/p>\n
(a) For purposes of this Section 3.5 and other provisions of
\nthis Agreement relating to Taxes, the following definitions shall apply:<\/p>\n
(i) The term “TAXES” shall mean all taxes, however
\ndenominated, including any interest, penalties or other additions to tax that
\nmay become payable in respect thereof, (A) imposed by any federal, territorial,
\nstate, local or foreign government or any agency or political subdivision of any
\nsuch government, which taxes shall include, without limiting the generality of
\nthe foregoing, all income or profits taxes (including but not limited to,
\nfederal income taxes and state income taxes), payroll and employee withholding
\ntaxes, unemployment insurance, social security taxes, sales and use taxes, ad
\nvalorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
\nlicense taxes, occupation taxes, real and personal property taxes, stamp taxes,
\nenvironmental taxes, ozone depleting chemicals taxes, transfer taxes, workers’
\ncompensation, Pension Benefit Guaranty Corporation premiums and other
\ngovernmental charges, and other obligations of the same or of a similar nature
\nto any of the foregoing, which are required to be paid, withheld or collected,
\n(B) any liability for the payment of amounts referred to in (A) as a result of
\nbeing a member of any affiliated, consolidated, combined or unitary group, or
\n(C) any liability for amounts referred to in (A) or (B) as a result of any
\nobligations to indemnify another person.<\/p>\n
(ii) The term “RETURNS” shall mean all reports,
\nestimates, declarations of estimated tax, information statements and returns
\nrelating to, or required to be filed in connection with, any Taxes, including
\ninformation returns or reports with respect to backup withholding and other
\npayments to third parties.<\/p>\n
(b) All Returns required to be filed prior to the date hereof by
\nor on behalf of Target have been duly filed on a timely basis, and such Returns
\nare true, complete and correct in all material respects. All Taxes shown to be
\npayable on such Returns or on subsequent assessments with respect thereto, and
\nall payments of estimated Taxes required to be made prior to the date hereof by
\nor on behalf of Target under Section 6655 of the Code or comparable provisions
\nof state, local or foreign law, have been paid in full on a timely basis or have
\nbeen accrued on the Most Recent Balance Sheet, and no other Taxes are payable by
\nTarget with respect to items or periods covered by such Returns (whether or not
\nshown on or reportable on such Returns). Target has withheld and paid over all
\nTaxes required to have been withheld and paid over prior to the date hereof ,
\nand complied with all information reporting and backup withholding requirements,
\nincluding maintenance of required records with respect thereto, in connection
\nwith amounts paid or owing to any employee, creditor, independent contractor, or
\nother third party. There are no liens on any of the assets of Target with
\nrespect to Taxes, other than liens for Taxes not yet due and payable or for
\nTaxes that Target is contesting in good faith through appropriate proceedings
\nand for which appropriate reserves have been established on the<\/p>\n
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Most Recent Balance Sheet. Target has not at any time been (i) a member of an
\naffiliated group of corporations filing consolidated, combined or unitary income
\nor franchise tax returns, or (ii) a member of any partnership or joint venture
\nfor a period for which the statue of limitations for any Tax potentially
\napplicable as a result of such membership has not expired.<\/p>\n
(c) The amount of Target’s liability for unpaid Taxes (whether
\nactual or contingent) for all periods through the date of the Most Recent
\nBalance Sheet does not, in the aggregate, exceed the amount of the current
\nliability accruals for Taxes reflected on the Most Recent Balance Sheet, and the
\nMost Recent Balance Sheet reflects proper accrual in accordance with generally
\naccepted accounting principles applied on a basis consistent with prior periods
\nof all liabilities for Taxes payable after the date of the Most Recent Balance
\nSheet attributable to transactions and events occurring prior to such date. No
\nliability for Taxes has been incurred (or prior to Closing will be incurred)
\nsince such date other than in the ordinary course of business.<\/p>\n
(d) Acquiror has been furnished by Target with true and complete
\ncopies of (i) relevant portions of income tax audit reports, statements of
\ndeficiencies, closing or other agreements received by or on behalf of Target
\nrelating to Taxes, and (ii) all federal and state income or franchise tax
\nReturns and state sales and use tax Returns for or including Target for all
\nperiods since the inception of Target. Target does not do business in or derive
\nincome from any state other than states for which Returns have been duly filed
\nand furnished to Acquiror.<\/p>\n
(e) The Returns of or including Target have never been audited
\nby a government or taxing authority, nor is any such audit in process, pending
\nor, to Target’s knowledge, threatened (either in writing or verbally, formally
\nor informally). No deficiencies exist or have been asserted (either in writing
\nor verbally, formally or informally), and Target has not received notice (either
\nin writing or verbally, formally or informally) that it has not filed a Return
\nor paid Taxes required to be filed or paid. Target is neither a party to any
\naction or proceeding for assessment or collection of Taxes, nor has such event
\nbeen asserted or threatened (either in writing or orally, formally or
\ninformally) against Target or any of its assets. No waiver or extension of any
\nstatute of limitations is in effect with respect to Taxes or Returns of Target.
\nTarget has disclosed on its federal and state income and franchise tax Returns
\nall positions taken therein that could give rise to a substantial understatement
\npenalty within the meaning of Code Section 6662 or comparable provisions of
\napplicable state, local, foreign or other tax laws.<\/p>\n
(f) Except as may be required as a result of the Merger, Target
\nand its subsidiaries have not been and will not be required to include any
\nmaterial adjustment in Taxable income for any Tax period (or portion thereof)
\npursuant to Section 481 or Section 263A of the Code or any comparable provision
\nunder state or foreign Tax laws as a result of transactions, events or
\naccounting methods employed prior to the Closing.<\/p>\n
(g) Target is not, nor has it ever been, a party to any tax
\nsharing agreement.<\/p>\n
(h) Target is not, nor has it been, a United States real
\nproperty holding corporation within the meaning of Section 897(c)(2) of the Code
\nduring the applicable period specified in Section 897(c)(1)(A)(ii) of the Code,
\nand Acquiror is not required to withhold tax by reason of Section 1445 of the
\nCode. Target is not a “consenting corporation” under Section<\/p>\n
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341(f) of the Code. Target has not entered into any compensatory agreements
\nwith respect to the performance of services which payment thereunder would
\nresult in a nondeductible expense to Target pursuant to Section 280G of the Code
\nor an excise tax to the recipient of such payment pursuant to Section 4999 of
\nthe Code. Target has not agreed to, nor is it required to make any adjustment
\nunder Code Section 481(a) by reason of, a change in accounting method. Target
\nis not, nor has it been, a “reporting corporation” subject to the information
\nreporting and record maintenance requirements of Section 6038A and the
\nregulations thereunder. Target is in compliance with the terms and conditions
\nof any applicable tax exemptions, agreements or orders of any foreign government
\nto which it may be subject or which it may have claimed, and the transactions
\ncontemplated by this Agreement will not have any adverse effect on such
\ncompliance.<\/p>\n
(i) The Target Disclosure Schedule sets forth accurate and
\ncomplete information regarding Target’s net operating losses for federal and
\neach applicable state income tax purposes. Except as a result of the
\ntransactions contemplated hereby, Target has no net operating losses and credit
\ncarryovers or other tax attributes currently subject to limitation under
\nSections 382, 383, or 384 of the Code.<\/p>\n
Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1999,
\nother than as set forth on the Target Disclosure Schedule, Target has not:<\/p>\n
(a) suffered any material adverse change in its business, assets
\n(including intangible assets), liabilities, condition (financial or otherwise)
\nor results of operations (“MATERIAL ADVERSE CHANGE”);<\/p>\n
(b) suffered any damage, destruction or loss, whether covered by
\ninsurance or not, that has resulted, or could be reasonably expected to result,
\nin a Material Adverse Effect on Target;<\/p>\n
(c) granted or agreed to make any increase in the compensation
\npayable or to become payable by Target to its officers or employees;<\/p>\n
(d) declared, set aside or paid any dividend or made any other
\ndistribution on or in respect of the shares of the capital stock of Target or
\ndeclared any direct or indirect redemption, retirement, purchase or other
\nacquisition by Target of such shares;<\/p>\n
(e) issued any shares of capital stock of Target or any
\nwarrants, rights, options or entered into any commitment relating to the shares
\nof Target, except for the issuance of shares of Target capital stock pursuant to
\nthe exercise of Target Options and Target Warrants listed in the Target
\nDisclosure Schedule and the conversion of outstanding Target Preferred Stock;<\/p>\n
(f) made any change in the accounting methods or practices it
\nfollows, whether for general financial or tax purposes, or any change in
\ndepreciation or amortization policies or rates adopted therein;<\/p>\n
-14-<\/p>\n
(g) sold, leased, abandoned or otherwise disposed of any real
\nproperty or any machinery, equipment or other operating property with an
\nindividual net book value in excess of $5,000;<\/p>\n
(h) sold, assigned, transferred, licensed or otherwise disposed
\nof any patent, trademark, trade name, brand name, copyright (or pending
\napplication for any patent, trademark or copyright) invention, work of
\nauthorship, process, know-how, formula or trade secret or interest thereunder or
\nother intangible asset;<\/p>\n
(i) permitted or allowed any of its property or assets to be
\nsubjected to any mortgage, deed of trust, pledge, lien, security interest or
\nother encumbrance of any kind (except those permitted under Section 3.7);<\/p>\n
(j) made any capital expenditure or commitment individually in
\nexcess of $10,000 or in the aggregate in excess of $50,000;<\/p>\n
(k) paid, loaned or advanced any amount to, or sold, transferred
\nor leased any properties or assets to, or entered into any agreement or
\narrangement with, any of its Affiliates (as defined in Section 3.16), officers,
\ndirectors or shareholders or any affiliate of any of the foregoing;<\/p>\n
(l) made any amendment to or terminated any agreement which, if
\nnot so amended or terminated, would be required to be disclosed on the Target
\nDisclosure Schedule; or<\/p>\n
(m) agreed to take any action described in this Section 3.6 or
\noutside of its ordinary course of business or which would constitute a breach of
\nany of the representations of Target contained in this Agreement.<\/p>\n
Section 3.7 TITLE AND RELATED MATTERS. Target has good and valid title
\nto all its properties, interests in properties and assets, real and personal,
\nfree and clear of all mortgages, liens, pledges, charges or encumbrances of any
\nkind or character, except the lien of current taxes not yet due and payable and
\nminor imperfections of and encumbrances on title, if any, as do not materially
\ndetract from the value of or interfere with the present use of the property
\naffected thereby. The equipment of Target used in the operation of its business
\nis, taken as a whole, (i) adequate for the business conducted by Target and
\n(ii) in good operating condition and repair, ordinary wear and tear excepted.
\nAll personal property leases to which Target is a party are valid, binding,
\nenforceable against the parties thereto and in effect in accordance with their
\nrespective terms, except to the extent that enforceability may be limited by
\napplicable bankruptcy, reorganization, insolvency, moratorium, or other laws
\naffecting the enforcement of creditors’ rights generally and by principles of
\nequity, regardless of whether such enforceability is considered in a proceeding
\nat law or in equity. To the knowledge of Target, there is not under any of such
\nleases any existing default or event of default or event which, with notice or
\nlapse of time or both, would constitute a default. The Target Disclosure
\nSchedule contains a description of all items of personal property with an
\nindividual net book value in excess of $2,000 and real property leased or owned
\nby Target, describing its interest in said property. True and correct<\/p>\n
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copies of Target’s real property and personal property leases have been provided
\nto Acquiror or its representatives.<\/p>\n
Section 3.8 PROPRIETARY RIGHTS.<\/p>\n
(a) Target owns all right, title and interest in and to, or
\notherwise possesses legally enforceable rights, or is licensed to use, all
\npatents, copyrights, technology, software, software tools, know-how, processes,
\ntrade secrets, trademarks, service marks, trade names, Internet domain names and
\nother proprietary rights used in the conduct of Target’s business as conducted
\nto the date of this Agreement, including, without limitation, the technology,
\ninformation, databases, data lists, data compilations, and all proprietary
\nrights developed or discovered or used in connection with or contained in all
\nversions and implementations of Target’s World Wide Web sites (including
\nwww.encompass.com and the other domain names listed in the Target Disclosure
\nSchedule) or any product which has been or is being distributed or sold by
\nTarget or currently is under development by Target or has previously been under
\ndevelopment by Target (collectively, including such Web sites, the “TARGET
\nPRODUCTS”), free and clear of all liens, claims and encumbrances (including
\nwithout limitation licensing and distribution rights) (all of which are referred
\nto as “TARGET PROPRIETARY RIGHTS”). The Target Disclosure Schedule contains an
\naccurate and complete (i) description of all patents, trademarks (with separate
\nlistings of registered and unregistered trademarks), trade names, Internet
\ndomain names and registered copyrights in or related to the Target Products or
\notherwise included in the Target Proprietary Rights and all applications and
\nregistration statements therefor, including the jurisdictions in which each such
\nTarget Proprietary Right has been issued or registered or in which any such
\napplication of such issuance and registration has been filed, (ii) list of all
\nlicenses and other agreements with third parties (the “THIRD PARTY LICENSES”)
\nrelating to any material patents, copyrights, trade secrets, software,
\ninventions, technology, know-how, processes or other proprietary rights that
\nTarget is licensed or otherwise authorized by such third parties to use, market,
\ndistribute or incorporate in Target Products (such patents, copyrights, trade
\nsecrets, software, inventions, technology, know-how, processes or other
\nproprietary rights are collectively referred to as the “THIRD PARTY TECHNOLOGY”)
\nand (iii) list of all licenses and other agreements with third parties relating
\nto any material information, compilations, data lists or databases that Target
\nis licensed or otherwise authorized by such third parties to use, market,
\ndisseminate distribute or incorporate in Target Products. All of Target’s
\npatents, copyrights, trademarks, trade names or Internet domain name
\nregistrations related to or in the Target Products are valid and in full force
\nand effect, and except as set forth on the Target Disclosure Schedule,
\nconsummation of the transactions contemplated by this Agreement will not alter
\nor impair any such rights. Except as set forth on the Target Disclosure
\nSchedule, no claims have been asserted or threatened against Target (and Target
\nis not aware of any claims which are likely to be asserted or threatened against
\nTarget or which have been asserted or threatened against others relating to
\nTarget Proprietary Rights or Target Products) by any person challenging Target’s
\nuse, possession, manufacture, sale or distribution of Target Products under any
\nTarget Proprietary Rights (including, without limitation, the Third Party
\nTechnology) or challenging or questioning the validity or effectiveness of any
\nmaterial license or agreement relating thereto (including, without limitation,
\nthe Third Party Licenses) or alleging a violation of any person’s or entity’s
\nprivacy, personal or confidentiality rights. Target knows of no valid basis for
\nany claim<\/p>\n
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of the type specified in the immediately preceding sentence which could in any
\nmaterial way relate to or interfere with the continued enhancement and
\nexploitation by Target of any of the Target Products. None of the Target
\nProducts nor the use or exploitation of any Target Proprietary Rights in
\nTarget’s current business infringes on the rights of or constitutes
\nmisappropriation of any proprietary information or intangible property right of
\nany third person or entity, including without limitation any patent, trade
\nsecret, copyright, trademark or trade name, and except as set forth on the
\nTarget Disclosure Schedule, Target has not been sued or named in any suit,
\naction or proceeding which involves a claim of such infringement,
\nmisappropriation or unfair competition.<\/p>\n
(b) Except as set forth in Schedule 3.11(a) to the Target
\nDisclosure Schedule, Target has not granted any third party any right to
\nreproduce, distribute, market or exploit any of the Target Products or any
\nadaptations, translations, or derivative works based on the Target Products or
\nany portion thereof. Except with respect to the rights of third parties to the
\nThird Party Technology and except as set forth in Schedule 3.11(a) to the Target
\nDisclosure Schedule, no third party has any express right to reproduce,
\ndistribute, market or exploit any works or materials of which any of the Target
\nProducts are a “derivative work” as that term is defined in the United States
\nCopyright Act, Title 17, U.S.C. Section 101.<\/p>\n
(c) All material designs, drawings, specifications, source code,
\nobject code, scripts, documentation, flow charts, diagrams, data lists,
\ndatabases, compilations and information incorporating, embodying or reflecting
\nany of the Target Products at any stage of their development (the “TARGET
\nCOMPONENTS”) were written, developed and created solely and exclusively by
\nemployees of Target without the assistance of any third party or entity or were
\ncreated by third parties who assigned ownership of their rights to Target by
\nmeans of valid and enforceable confidentiality and invention assignment
\nagreements, copies of which have been delivered to Acquiror. Target has at all
\ntimes used commercially reasonable efforts customary in its industry to treat
\nthe Target Proprietary Rights related to Target Products and Target Components
\nas containing trade secrets and, other than as provided in Schedule 3.11(a) to
\nthe Target Disclosure Schedule, has not disclosed or otherwise dealt with such
\nitems in a manner intended or reasonably likely to cause the loss of such trade
\nsecrets by release into the public domain; provided, that the Target has
\ndistributed executable object code of its products through OEM’s to end users.<\/p>\n
(d) To Target’s knowledge, after due investigation, no employee,
\ncontractor or consultant of Target is in violation in any material respect of
\nany term of any written employment contract, patent disclosure agreement or any
\nother written contract or agreement relating to the relationship of any such
\nemployee, consultant or contractor with Target or, to Target’s knowledge, any
\nother party because of the nature of the business conducted by Target or
\nproposed to be conducted by Target. The Target Disclosure Schedule lists all
\nemployees, contractors and consultants who have participated in any way in the
\ndevelopment of any material portion of the Target Products or the Target
\nProprietary Rights.<\/p>\n
(e) Each person presently or previously employed by Target
\n(including independent contractors, if any) with access authorized by Target to
\nconfidential information of<\/p>\n
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Target has executed a confidentiality and non-disclosure agreement pursuant to
\nthe form of agreement previously provided to Acquiror or its representatives.<\/p>\n
(f) No product liability or warranty claims have been
\ncommunicated in writing to or threatened against Target.<\/p>\n
(g) To Target’s knowledge, there is no material unauthorized
\nuse, disclosure, infringement or misappropriation of any Target Proprietary
\nRights, or any Third Party Technology to the extent licensed by or through
\nTarget, by any third party, including any employee or former employee of Target.
\nExcept as set forth in in Schedule 3.11(a) to the Target Disclosure Schedule,
\nTarget has not entered into any agreement to indemnify any other person against
\nany charge of infringement of any Target Proprietary Rights.<\/p>\n
(h) Target has taken all steps customary and reasonable in the
\nindustry to protect and preserve the confidentiality and proprietary nature of
\nall Intellectual Property and other confidential information not otherwise
\nprotected by patents, patent applications or copyright (“CONFIDENTIAL
\nINFORMATION”). All use, disclosure or appropriation by Target or, to the best
\nknowledge of Target, by another party pursuant to rights granted to it by
\nTarget, of Confidential Information owned by Target to a third party has been
\npursuant to the terms of a written agreement between Target and such third
\nparty. All use, disclosure or appropriation by Target of Confidential
\nInformation not owned by Target has been pursuant to the terms of a written
\nagreement between Target and the owner of such Confidential Information, or is
\notherwise lawful.<\/p>\n
Section 3.9 EMPLOYEE BENEFIT PLANS.<\/p>\n
(a) The Target Disclosure Schedule lists, with respect to Target
\nand any trade or business (whether or not incorporated) which is treated as a
\nsingle employer with Target (an “ERISA AFFILIATE”) within the meaning of
\nSection 414(b), (c), (m) or (o) of the Code, (i) all employee benefit plans (as
\ndefined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
\nas amended (“ERISA”), (ii) each loan to a non-officer employee, loans to
\nofficers and directors and any stock option, stock purchase, phantom stock,
\nstock appreciation right, supplemental retirement, severance, sabbatical,
\nmedical, dental, vision care, disability, employee relocation, cafeteria benefit
\n(Code Section 125) or dependent care (Code Section 129), life insurance or
\naccident insurance plans, programs or arrangements, (iii) all bonus, pension,
\nprofit sharing, savings, deferred compensation or incentive plans, programs or
\narrangements, (iv) other fringe or employee benefit plans, programs or
\narrangements that apply to senior management of Target and that do not generally
\napply to all employees, and (v) any current or former employment or executive
\ncompensation or severance agreements, written or otherwise, for the benefit of,
\nor relating to, any present or former employee, consultant or director of Target
\nas to which (with respect to any of items (i) through (v) above) any potential
\nliability is borne by Target (together, the “TARGET EMPLOYEE PLANS”).<\/p>\n
(b) Target has delivered to Acquiror or its representatives a
\ncopy of each of the Target Employee Plans and related plan documents (including
\ntrust documents, insurance policies or contracts, employee booklets, summary
\nplan descriptions and other authorizing<\/p>\n
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documents, and, to the extent still in its possession, any material employee
\ncommunications relating thereto) and has, with respect to each Target Employee
\nPlan which is subject to ERISA reporting requirements, provided copies of any
\nForm 5500 reports filed for the last three plan years. Any Target Employee Plan
\nintended to be qualified under Section 401(a) of the Code has either obtained
\nfrom the Internal Revenue Service a favorable determination letter as to its
\nqualified status under the Code, including all amendments to the Code effected
\nby the Tax Reform Act of 1986 and subsequent legislation, or has applied to the
\nInternal Revenue Service for such a determination letter prior to the expiration
\nof the requisite period under applicable Treasury Regulations or Internal
\nRevenue Service pronouncements in which to apply for such determination letter
\nand to make any amendments necessary to obtain a favorable determination.
\nTarget has also furnished Acquiror with the most recent Internal Revenue Service
\ndetermination letter issued with respect to each such Target Employee Plan, and
\nnothing has occurred since the issuance of each such letter which could
\nreasonably be expected to cause the loss of the tax-qualified status of any
\nTarget Employee Plan subject to Code Section 401(a).<\/p>\n
(c) (i) None of the Target Employee Plans promises or provides
\nretiree medical or other retiree welfare benefits to any person; (ii) there has
\nbeen no “prohibited transaction,” as such term is defined in Section 406 of
\nERISA and Section 4975 of the Code, with respect to any Target Employee Plan;
\n(iii) each Target Employee Plan has been administered in accordance with its
\nterms and in compliance with the requirements prescribed by any and all
\nstatutes, rules and regulations (including ERISA and the Code), and Target and
\neach subsidiary or ERISA Affiliate have performed all material obligations
\nrequired to be performed by them under, are not in any material respect in
\ndefault, under or violation of, and have no knowledge of any material default or
\nviolation by any other party to, any of the Target Employee Plans; (iv) neither
\nTarget nor any subsidiary or ERISA Affiliate is subject to any liability or
\npenalty under Sections 4976 through 4980 of the Code or Title I of ERISA with
\nrespect to any of the Target Employee Plans; (v) all contributions required to
\nbe made by Target or any subsidiary or ERISA Affiliate to any Target Employee
\nPlan have been made on or before their due dates and a reasonable amount has
\nbeen accrued for contributions to each Target Employee Plan for the current plan
\nyears; (vi) with respect to each Target Employee Plan, no “reportable event”
\nwithin the meaning of Section 4043 of ERISA (excluding any such event for which
\nthe thirty (30) day notice requirement has been waived under the regulations to
\nSection 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of
\nERISA has occurred; and (vii) no Target Employee Plan is covered by, and neither
\nTarget nor any subsidiary or ERISA Affiliate has incurred or expects to incur
\nany material liability under Title IV of ERISA or Section 412 of the Code. With
\nrespect to each Target Employee Plan subject to ERISA as either an employee
\npension plan within the meaning of Section 3(2) of ERISA or an employee welfare
\nbenefit plan within the meaning of Section 3(1) of ERISA, Target has prepared in
\ngood faith and timely filed all requisite governmental reports (which were true
\nand correct as of the date filed) and has properly and timely filed and
\ndistributed or posted all notices and reports to employees required to be filed,
\ndistributed or posted with respect to each such Target Employee Plan. No suit,
\nadministrative proceeding, action or other litigation has been brought, or to
\nthe knowledge of Target is threatened, against or with respect to any such
\nTarget Employee Plan, including any audit or inquiry by the IRS or United States
\nDepartment of Labor. Neither Target nor any<\/p>\n
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ERISA Affiliate is a party to, or has made any contribution to or otherwise
\nincurred any obligation under, any “multi-employer plan” as defined in
\nSection 3(37) of ERISA.<\/p>\n
(d) With respect to each Target Employee Plan, Target has
\ncomplied with (i) the applicable health care continuation and notice provisions
\nof the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the
\nproposed regulations thereunder, (ii) the applicable requirements of the Family
\nLeave Act of 1993 and the regulations thereunder, and (iii) the applicable
\nrequirements of the Health Insurance Portability and Accountability Act of 1996
\n(“HIPAA”) and the temporary regulations thereunder.<\/p>\n
(e) The consummation of the transactions contemplated by this
\nAgreement will not (i) entitle any current or former employee or other service
\nprovider of Target or any other ERISA Affiliate to severance benefits or any
\nother payment (including, without limitation, unemployment compensation, golden
\nparachute or bonus), except as expressly provided in this Agreement, or
\n(ii) accelerate the time of payment or vesting of any such benefits, or
\n(iii) increase or accelerate any benefits or the amount of compensation due any
\nsuch employee or service provider.<\/p>\n
(f) There has been no amendment to, written interpretation or
\nannouncement (whether or not written) by Target or other ERISA Affiliate
\nrelating to, or change in participation or coverage under, any Target Employee
\nPlan which would materially increase the expense of maintaining such Plan above
\nthe level of expense incurred with respect to that Plan for the most recent
\nfiscal year included in the Target Financial Statements.<\/p>\n
Section 3.10 BANK ACCOUNTS. The Target Disclosure Schedule sets forth
\nthe names and locations of all banks, trust companies, savings and loan
\nassociations, and other financial institutions at which Target maintains
\naccounts of any nature and the names of all persons authorized to draw thereon
\nor make withdrawals therefrom.<\/p>\n
Section 3.11 CONTRACTS.<\/p>\n
(a) A list of the Company’s Material Contracts (the “MATERIAL
\nCONTRACTS”) is attached as Schedule 3.11(a) to the Target Disclosure Schedule.
\nExcept as identified in such Schedule 3.11(a):<\/p>\n
(i) Target has no agreements, contracts or commitments
\nthat provide for the sale, licensing or distribution by Target of any Target
\nProducts or Target Proprietary Rights. Without limiting the foregoing, except
\nas set forth on the Target Disclosure Schedule, Target has not granted to any
\nthird party (including, without limitation, original equipment manufacturers
\n(“OEMS”) and site-license customers) any rights to reproduce, manufacture or
\ndistribute any of the Target Products, nor has Target granted to any third party
\nany exclusive rights of any kind (including, without limitation, exclusivity
\nwith regard to categories of advertisers on Target’s World Wide Web site,
\nterritorial exclusivity or exclusivity with respect to particular versions,
\nimplementations or translations of any of the Target Products), nor has Target
\ngranted any third party any right to market any of the Target Products under any
\nprivate<\/p>\n
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label or “OEM” arrangements, nor has Target granted any license of any Target
\ntrademarks or service marks.<\/p>\n
(ii) Target has no Third Party Licenses.<\/p>\n
(iii) Target has no agreements, contracts or commitments
\nthat call for fixed and\/or contingent payments or expenditures by or to Target
\n(including, without limitation, any advertising or revenue sharing arrangement).<\/p>\n
(iv) Target has no outstanding sales or advertising
\ncontract, commitment or proposal (including, without limitation, insertion
\norders, slotting agreements or other agreements under which Target has allowed
\nthird parties to advertise on or otherwise be included in Target’s World Wide
\nWeb sites) that Target currently expects to result in any loss to Target upon
\ncompletion or performance thereof.<\/p>\n
(v) Target has no outstanding agreements, contracts or
\ncommitments with officers, employees, agents, consultants, advisors, salesmen,
\nsales representatives, distributors or dealers that are not cancelable by Target
\n“at will” and without liability, penalty or premium.<\/p>\n
(vi) Target has no employment, independent contractor or
\nsimilar agreement, contract or commitment that is not terminable on thirty (30)
\ndays’ notice or less without penalty, liability or premium of any type,
\nincluding, without limitation, severance or termination pay.<\/p>\n
(vii) Target has no currently effective collective
\nbargaining or union agreements, contracts or commitments.<\/p>\n
(viii) Target is not restricted by agreement from competing
\nwith any person or from carrying on its business anywhere in the world.<\/p>\n
(ix) Target has not guaranteed any obligations of other
\npersons or made any agreements to acquire or guarantee any obligations of other
\npersons.<\/p>\n
(x) Target has no outstanding loan or advance to any
\nperson; nor is it party to any line of credit, standby financing, revolving
\ncredit or other similar financing arrangement of any sort which would permit the
\nborrowing by Target of any sum.<\/p>\n
(xi) Target has no agreements pursuant to which Target
\nhas agreed to manufacture for, supply to or distribute to any third party any
\nTarget Products or Target Components.<\/p>\n
True and correct copies of each document or instrument listed on the Target
\nDisclosure Schedule pursuant to this Section 3.11(a) have been provided to
\nAcquiror or its representatives.<\/p>\n
(b) All of the Material Contracts listed on the Target
\nDisclosure Schedule are valid, binding, in full force and effect, and
\nenforceable by Target in accordance with their<\/p>\n
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respective terms, except to the extent that enforceability may be limited by
\napplicable bankruptcy, reorganization, insolvency, moratorium or other laws
\naffecting the enforcement of creditors’ rights generally and by general
\nprinciples of equity, regardless of whether such enforceability is considered in
\na proceeding at law or in equity. Except as disclosed in the Target Disclosure
\nSchedule, no Material Contract contains any liquidated damages, penalty or
\nsimilar provision. To the knowledge of Target, except as disclosed in the
\nTarget Disclosure Schedule, no party to any such Material Contract intends to
\ncancel, withdraw, modify or amend such contract, agreement or arrangement.<\/p>\n
(c) Target is not in default under or in breach or violation of,
\nnor, to Target’s knowledge, is there any valid basis for any claim of default by
\nTarget under, or breach or violation by Target of, any material provision of any
\nMaterial Contract. To Target’s knowledge, no other party is in default under or
\nin breach or violation of, nor is there any valid basis for any claim of default
\nby any other party under or any breach or violation by any other party of, any
\nMaterial Contract.<\/p>\n
(d) Except as specifically indicated on the Target Disclosure
\nSchedule, none of the Material Contracts provides for indemnification by Target
\nof any third party. No claims have been made or threatened that would require
\nindemnification by Target, and Target has not paid any amounts to indemnify any
\nthird party as a result of indemnification requirements of any kind.<\/p>\n
Section 3.12 ORDERS, COMMITMENTS AND RETURNS. All accepted
\nadvertising arrangements entered into by Target, and all material agreements,
\ncontracts, or commitments for the purchase of supplies by Target, were made in
\nthe ordinary course of business. There are no oral contracts or arrangements
\nfor the sale of advertising or any other product or service by Target.<\/p>\n
Section 3.13 COMPLIANCE WITH LAW. Target and the operation of
\nits business are in compliance in all material respects with all applicable laws
\nand regulations material to the operation of its business. Neither Target nor,
\nto Target’s knowledge, any of its employees has directly or indirectly paid or
\ndelivered any fee, commission or other sum of money or item of property, however
\ncharacterized, to any finder, agent, government official or other party in the
\nUnited States or any other country, that was or is in violation of any federal,
\nstate, or local statute or law or of any statute or law of any other country
\nhaving jurisdiction. Target has not participated directly or indirectly in any
\nboycotts or other similar practices affecting any of its customers. Target has
\ncomplied in all material respects at all times with any and all applicable
\nfederal, state and foreign laws, rules, regulations, proclamations and orders
\nrelating to the importation or exportation of its products, except for such
\nnoncompliances as would not in the aggregate reasonably be expected to have a
\nMaterial Adverse Effect on Target.<\/p>\n
Section 3.14 LABOR DIFFICULTIES; NO DISCRIMINATION.<\/p>\n
(a) Target is not engaged in any unfair labor practice and is
\nnot in material violation of any applicable laws respecting employment and
\nemployment practices, terms and conditions of employment, and wages and hours.
\nThere is no unfair labor practice complaint<\/p>\n
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against Target actually pending or, to the knowledge of Target, threatened
\nbefore the National Labor Relations Board. There is no strike, labor dispute,
\nslowdown, or stoppage actually pending or, to the knowledge of Target,
\nthreatened against Target. To the knowledge of Target, no union organizing
\nactivities are taking place with respect to the business of Target. No
\ngrievance, nor any arbitration proceeding arising out of or under any collective
\nbargaining agreement is pending and, to the knowledge of Target, no claims
\ntherefor exist. No collective bargaining agreement that is binding on Target
\nrestricts it from relocating or closing any of its operations. Target has not
\nexperienced any material work stoppage or other material labor difficulty.<\/p>\n
(b) There is and has not been any claim against Target or its
\nofficers or employees, or to Target’s knowledge, threatened against Target or
\nits officers or employees, based on actual or alleged race, age, sex, disability
\nor other harassment or discrimination, or similar tortious conduct, or based on
\nactual or alleged breach of contract with respect to any person’s employment by
\nTarget, nor, to the knowledge of Target, is there any basis for any such claim.<\/p>\n
(c) There are no pending claims against Target or any of its
\nSubsidiaries under any workers compensation plan or policy or for long term
\ndisability. Neither Target nor any of its subsidiaries has any material
\nobligations under COBRA with respect to any former employees or qualifying
\nbeneficiaries thereunder. There are no proceedings pending or, to the knowledge
\nof Target, threatened, between Target and any of its employees, which
\nproceedings have or could reasonably be expected to have a Material Adverse
\nEffect on Target.<\/p>\n
Section 3.15 TRADE REGULATION. All of the prices charged by Target in
\nconnection with the marketing or sale of any products or services have been in
\ncompliance with all applicable laws and regulations. No claims have been
\ncommunicated or threatened in writing against Target with respect to wrongful
\ntermination of any dealer, distributor or any other marketing entity,
\ndiscriminatory pricing, price fixing, unfair competition, false advertising, or
\nany other violation of any laws or regulations relating to anti-competitive
\npractices or unfair trade practices of any kind, and to Target’s knowledge, no
\nspecific situation, set of facts, or occurrence provides any basis for any such
\nclaim against Target.<\/p>\n
Section 3.16 INSIDER TRANSACTIONS. To the knowledge of Target, no
\naffiliate (“AFFILIATE”) as defined in Rule 12b-2 under the Securities Exchange
\nAct of 1934, as amended (the “EXCHANGE ACT”) of Target has any interest in any
\nequipment or other property, real or personal, tangible or intangible of Target,
\nincluding, without limitation, any Target Proprietary Rights or any creditor,
\nsupplier, customer, manufacturer, agent, representative, or distributor of
\nTarget Products; PROVIDED, HOWEVER, that no such Affiliate or other person shall
\nbe deemed to have such an interest solely by virtue of the ownership of less
\nthan 1% of the outstanding stock or debt securities of any publicly-held
\ncompany, the stock or debt securities of which are traded on a recognized stock
\nexchange or quoted on the Nasdaq Stock Market.<\/p>\n
Section 3.17 EMPLOYEES, INDEPENDENT CONTRACTORS AND CONSULTANTS. The
\nTarget Disclosure Schedule lists all past and all currently effective written or
\noral consulting, independent contractor and\/or employment agreements and other
\nmaterial agreements concluded<\/p>\n
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with individual employees, independent contractors or consultants to which
\nTarget is a party. True and correct copies of all such written agreements have
\nbeen provided to Acquiror or its representatives. Other than as may be affected
\nby the Administaff employee leasing arrangements, all independent contractors
\nhave been properly classified as independent contractors for the purposes of
\nfederal and applicable state tax laws, laws applicable to employee benefits and
\nother applicable law. All salaries and wages paid by Target are in compliance
\nin all material respects with applicable federal, state and local laws. Also
\nshown on the Target Disclosure Schedule are the names, positions and salaries or
\nrates of pay, including bonuses, of all persons presently employed by Target.<\/p>\n
Section 3.18 INSURANCE. The Target Disclosure Schedule contains a list
\nof the principal policies of fire, liability and other forms of insurance
\ncurrently or previously held by Target, and all claims made by Target under such
\npolicies. To the knowledge of Target, Target has not done anything, either by
\nway of action or inaction, that might invalidate such policies in whole or in
\npart. There is no claim pending under any of such policies or bonds as to which
\ncoverage has been questioned, denied or disputed by the underwriters of such
\npolicies or bonds. All premiums due and payable under all such policies and
\nbonds have been paid and Target is otherwise in compliance with the terms of
\nsuch policies and bonds in all material respects. Target has no knowledge of
\nany threatened termination of, or material premium increase with respect to, any
\nof such policies.<\/p>\n
Section 3.19 ACCOUNTS RECEIVABLE. Subject to any reserves set forth in
\nthe Most Recent Balance Sheet, the accounts receivable shown on the Most Recent
\nBalance Sheet represent and will represent bona fide claims against debtors for
\nsales and other charges, and are not subject to discount except for normal cash
\nand immaterial trade discounts. The amount carried for doubtful accounts and
\nallowances disclosed in the Most Recent Balance Sheet is sufficient to provide
\nfor any losses which may be sustained on realization of the receivables.<\/p>\n
Section 3.20 LITIGATION. There is no private or governmental action,
\nsuit, proceeding, claim, arbitration or investigation pending before any agency,
\ncourt or tribunal, foreign or domestic, or, to the knowledge of Target,
\nthreatened against Target or any of its properties or any of its officers or
\ndirectors (in their capacities as such). There is no judgment, decree or order
\nagainst Target, or, to the knowledge of Target, any of its directors or officers
\n(in their capacities as such). To Target’s knowledge, no circumstances exist
\nthat could reasonably be expected to result in a claim against Target as a
\nresult of the conduct of Target’s business (including, without limitation, any
\nclaim of infringement of any intellectual property right). The matters
\ndescribed in this Section 3.20 include, but are not limited to, those arising
\nunder any applicable federal, state and local laws, regulations and agency
\ninterpretations of the same relating to the collection and use of user
\ninformation gathered in the course of the Company’s operations.<\/p>\n
Section 3.21 GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. Target has
\nobtained each federal, state, county, local or foreign governmental consent,
\nlicense, permit, grant, or other authorization of a Governmental Entity
\n(i) pursuant to which Target currently operates or holds any interest in any of
\nits properties or (ii) that is required for the operation of Target’s business
\nor the holding of any such interest, and all of such authorizations are in full
\nforce and effect, except<\/p>\n
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when the failure to obtain such authorization could not be reasonably expected
\nto have a Material Adverse Effect..<\/p>\n
Section 3.22 SUBSIDIARIES. Target has no Subsidiaries. Target does not
\nown or control (directly or indirectly) any capital stock, bonds or other
\nsecurities of, and does not have any proprietary interest in, any other
\ncorporation, general or limited partnership, firm, association or business
\norganization, entity or enterprise, and Target does not control (directly or
\nindirectly) the management or policies of any other corporation, partnership,
\nfirm, association or business organization, entity or enterprise.<\/p>\n
Section 3.23 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. Target has
\nobtained all permits, licenses and other authorizations which are required under
\nfederal, state and local laws applicable to Target and relating to pollution or
\nprotection of the environment, including laws or provisions relating to
\nemissions, discharges, releases or threatened releases of pollutants,
\ncontaminants, or hazardous or toxic materials, substances, or wastes into air,
\nsurface water, groundwater, or land, or otherwise relating to the manufacture,
\nprocessing, distribution, use, treatment, storage, disposal, transport, or
\nhandling of pollutants, contaminants or hazardous or toxic materials,
\nsubstances, or wastes or which are intended to assure the safety of employees,
\nworkers or other persons, except where the failure to obtain such authorizations
\ncould not be reasonably expected to have a Material Adverse Effect. Target is
\nin compliance in all material respects with all terms and conditions of all such
\npermits, licenses and authorizations. There are no conditions, circumstances,
\nactivities, practices, incidents, or actions known to Target which could
\nreasonably be expected to form the basis of any claim, action, suit, proceeding,
\nhearing, or investigation of, by, against or relating to Target, based on or
\nrelated to the manufacture, processing, distribution, use, treatment, storage,
\ndisposal, transport, or handling, or the emission, discharge, release or
\nthreatened release into the environment, of any pollutant, contaminant, or
\nhazardous or toxic substance, material or waste, or relating to the safety of
\nemployees, workers or other persons.<\/p>\n
Section 3.24 CORPORATE DOCUMENTS. Target has furnished to Acquiror or
\nits representatives: (a) copies of its Articles of Incorporation and Bylaws, as
\namended to date; (b) its minute book containing consents, actions, and meetings
\nof the shareholders, the board of directors and any committees thereof; (c) all
\nmaterial permits, orders, and consents issued by any regulatory agency with
\nrespect to Target, or any securities of Target, and all applications for such
\npermits, orders, and consents; and (d) the stock transfer books of Target
\nsetting forth all transfers of any capital stock. The corporate minute books,
\nstock certificate books, stock registers and other corporate records of Target
\nare complete and accurate, and the signatures appearing on all documents
\ncontained therein are the true or facsimile signatures of the persons purporting
\nto have signed the same.<\/p>\n
Section 3.25 NO BROKERS. Neither Target nor, to Target’s knowledge, any
\nTarget shareholder is obligated for the payment of fees or expenses of any
\nbroker or finder in connection with the origin, negotiation or execution of this
\nAgreement or the other Transaction Documents or in connection with any
\ntransaction contemplated hereby or thereby.<\/p>\n
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Section 3.26 POOLING OF INTERESTS. To Target’s knowledge, after
\nconsultation with its independent accountants, neither Target nor any of its
\nAffiliates has, through the date of this Agreement, taken or agreed to take any
\naction which would prevent Acquiror from accounting for the business combination
\nto be effected by the Merger as a pooling of interests.<\/p>\n
Section 3.27 ADVERTISERS, CUSTOMERS AND SUPPLIERS. As of the date hereof,
\nno advertiser or other customer which individually accounted for more than 2% of
\nTarget’s gross revenues during the 12-month period preceding the date hereof,
\nand no material supplier of Target, has canceled or otherwise terminated prior
\nto the expiration of the contract term, or, to the Target’s knowledge, made any
\nwritten threat to Target to cancel or otherwise terminate its relationship with
\nTarget, or has at any time on or after March 31, 1999 decreased materially its
\nservices or supplies to Target in the case of any such supplier, or its usage of
\nthe services or products of Target in the case of such customer, and to Target’s
\nknowledge, no such supplier or customer intends to cancel or otherwise terminate
\nits contractual relationship with Target or to decrease materially its services
\nor supplies to Target or its usage of the services or products of Target, as the
\ncase may be. Target has not knowingly (i) breached, so as to provide a benefit
\nto Target that was not intended by the parties, any agreement with, or (ii)
\nengaged in any fraudulent conduct with respect to, any customer or supplier or
\nTarget.<\/p>\n
Section 3.28 TARGET ACTION. The Board of Directors of Target, by
\nunanimous written consent or at a meeting duly called and held, has by the
\nunanimous vote of all directors (i) determined that the Merger is fair and in
\nthe best interests of Target and its shareholders, (ii) approved the Merger and
\nthis Agreement in accordance with the provisions of Georgia Law, and (iii)
\ndirected that this Agreement and the Merger be submitted to Target shareholders
\nfor their approval and resolved to recommend that Target shareholders vote in
\nfavor of the approval of this Agreement and the Merger.<\/p>\n
Section 3.29 OFFERS. Target has suspended or terminated, and has the
\nlegal right to terminate or suspend, all negotiations and discussions of
\nAcquisition Transactions (as defined in Section 5.6) with parties other than
\nAcquiror.<\/p>\n
Section 3.30 PRIVACY LAWS AND POLICIES COMPLIANCE. The Company has
\ncomplied with all applicable federal, state and local laws, and regulations
\nrelating to the collection and use of user information gathered in the course of
\nthe Company’s operations, and the Company has at all times complied with all
\nrules, policies and procedures established by the Company from time to time with
\nrespect to the foregoing.<\/p>\n
Section 3.31 DISCLOSURE. No statements by Target contained in this
\nAgreement, its exhibits and schedules nor in any of the certificates or
\ndocuments, including any of the Transaction Documents, delivered or required to
\nbe delivered by Target to Acquiror or Sub under this Agreement contains any
\nuntrue statement of a material fact or omits to state a material fact necessary
\nin order to make the statements contained herein or therein not misleading in
\nlight of the circumstances under which they were made. Target has disclosed to
\nAcquiror all material information of which it is aware relating specifically to
\nthe operations and business of Target as of the date of this Agreement or the
\ntransactions contemplated by this Agreement.<\/p>\n
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Section 3.32 DISCLOSURE TO SHAREHOLDERS. The information supplied by
\nTarget for inclusion in the information statement to be sent to the shareholders
\nof Target in connection with the meeting of Target shareholders to consider the
\nMerger (the “TARGET SHAREHOLDERS MEETING”) or in connection with any written
\nconsent of shareholders of Target (such information statement as amended or
\nsupplemented is referred to herein as the “INFORMATION STATEMENT”) shall not, on
\nthe date the Information Statement is first mailed to Target shareholders, at
\nthe time of the Target Shareholders Meeting, or written consent of shareholders
\nand at the Effective Time, contain any statement which is false or misleading
\nwith respect to any material fact, or omit to state any material fact necessary
\nin order to make the statements made therein, in light of the circumstances
\nunder which they are made, not false or misleading. Whenever any event occurs
\nwhich should be set forth in an amendment or supplement to the Information
\nStatement, Target or Acquiror, as the case may be, will promptly inform the
\nother of such occurrence and cooperate in making any appropriate amendment or
\nsupplement, and\/or mailing to shareholders of Target, such amendment or
\nsupplement. Notwithstanding the foregoing, Target makes no representation,
\nwarranty or covenant with respect to any information supplied by Acquiror or Sub
\nwhich is contained in any of the foregoing documents, whether such information
\nis incorporated directly into the foregoing documents or forms the basis for
\ninformation provided by Target.<\/p>\n
ARTICLE IV<\/p>\n
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB<\/p>\n
Acquiror and Sub jointly and severally represent and warrant to Target
\nthat, except as disclosed in a filing with the Securities and Exchange
\nCommission (the “COMMISSION”), the statements contained in this Article IV are
\ntrue and correct.<\/p>\n
Section 4.1 ORGANIZATION OF ACQUIROR AND SUB. Each of Acquiror and its
\nSubsidiaries, including Sub, is a corporation duly organized, validly existing
\nand in good standing under the laws of its respective jurisdiction of
\nincorporation and has all requisite corporate power to own, lease and operate
\nits property and to carry on its business as now being conducted and is duly
\nqualified or licensed to do business and is in good standing in each
\njurisdiction in which the failure to be so qualified or licensed would have a
\nMaterial Adverse Effect on Acquiror or Sub. The authorized capital stock of Sub
\nconsists of 1,000 shares of Common Stock, all of which are issued and
\noutstanding, duly paid and nonassessable and are owned by Acquiror free and
\nclear of all liens, charges and encumbrances.<\/p>\n
Section 4.2 VALID ISSUANCE OF ACQUIROR COMMON STOCK. The shares of
\nAcquiror’s Common Stock, par value of $0.001 per share (“ACQUIROR COMMON
\nSTOCK”), to be issued pursuant to the Merger will be duly authorized, validly
\nissued, fully paid, and non-assessable and issued in compliance with all
\napplicable federal or state securities laws.<\/p>\n
Section 4.3 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.<\/p>\n
(a) Each of Acquiror and Sub has all requisite corporate power
\nand authority to enter into this Agreement and the other Transaction Documents
\nto which it is or will become a party and to consummate the transactions
\ncontemplated by this Agreement and such Transaction<\/p>\n
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Documents. The execution and delivery of this Agreement and such Transaction
\nDocuments and the consummation of the transactions contemplated by this
\nAgreement and such Transaction Documents have been duly authorized by all
\nnecessary corporate action on the part of Acquiror and Sub. This Agreement has
\nbeen and such Transaction Documents have been or, to the extent not executed as
\nof the date hereof, will be duly executed and delivered by Acquiror and Sub.
\nThis Agreement and each of the Transaction Documents to which Acquiror or Sub is
\na party constitutes, and each of the Transaction Documents to which Acquiror or
\nSub will become a party when executed and delivered by Acquiror or Sub will
\nconstitute, a valid and binding obligation of Acquiror or Sub, enforceable by
\nTarget against Acquiror or Sub, as the case may be, in accordance with its
\nterms, except to the extent that enforceability may be limited by applicable
\nbankruptcy, reorganization, insolvency, moratorium or other laws affecting the
\nenforcement of creditors’ rights generally and by general principles of equity,
\nregardless of whether such enforceability is considered <\/p>\n
(b) The execution and delivery by Acquiror or Sub of this
\nAgreement and the Transaction Documents to which it is or will become a party
\ndoes not, and consummation of the transactions contemplated by this Agreement or
\nthe Transaction Documents to which it is or will become a party will not, (i)
\nconflict with, or result in any violation or breach of any provision of the
\nArticles of Incorporation or Bylaws of Acquiror or Sub, (ii) result in any
\nviolation or breach of, or constitute (with or without notice or lapse of time,
\nor both) a default (or give rise to a right of termination, cancellation or
\nacceleration of any obligation or loss of any material benefit) under any of the
\nterms, conditions or provisions of any note, bond, mortgage, indenture, lease,
\ncontract or other agreement, instrument or obligation to which Acquiror or Sub
\nis a party or by which either of them or any of their properties or assets may
\nbe bound, or (iii) conflict or violate any permit, concession, franchise,
\nlicense, judgment, order, decree, statute, law, ordinance, rule or regulation
\napplicable to Acquiror or Sub or any of their properties or assets, except in
\nthe case of (ii) and (iii) for any such conflicts, violations, defaults,
\nterminations, cancellations or accelerations which would not have a Material
\nAdverse Effect on Acquiror and its Subsidiaries, taken as a whole.<\/p>\n
(c) Neither the execution and delivery of this Agreement by
\nAcquiror or Sub or the Transaction Documents to which Acquiror or Sub is or will
\nbecome a party or the consummation of the transactions contemplated hereby or
\nthereby will require any consent, approval, order or authorization of, or
\nregistration, declaration or filing with, any Governmental Entity, except for
\n(i) the filing of the Certificate of Merger with the Delaware Secretary of State
\nand the filing of the Articles of Merger with the Georgia Secretary of State,
\n(ii) such consents, approvals, orders, authorizations, registrations,
\ndeclarations and filings as may be required under applicable federal and state
\nsecurities laws and the laws of any foreign country, and (iii) such other
\nconsents, authorizations, filings, approvals and registrations which, if not
\nobtained or made, could be expected to have a Material Adverse Effect on
\nAcquiror and its Subsidiaries, taken as a whole.<\/p>\n
Section 4.4 COMMISSION FILINGS; FINANCIAL STATEMENTS.<\/p>\n
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(a) Acquiror has filed with the Commission and made available to
\nTarget or its representatives all forms, reports and documents required to be
\nfiled by Acquiror with the Commission since January 1, 1998 (collectively, the
\n“ACQUIROR COMMISSION REPORTS”). The Acquiror Commission Reports (i) at the time
\nfiled, complied in all material respects with the applicable requirements of the
\nSecurities Act of 1933, as amended, (the “SECURITIES ACT”), and the Exchange
\nAct, as the case may be, and (ii) did not at the time they were filed (or if
\namended or superseded by a filing prior to the date of this Agreement, then on
\nthe date of such filing) contain any untrue statement of a material fact or omit
\nto state a material fact required to be stated in such Acquiror Commission
\nReports or necessary in order to make the statements in such Acquiror Commission
\nReports, in the light of the circumstances under which they were made, not
\nmisleading.<\/p>\n
(b) Each of the financial statements (including, in each case,
\nany related notes) contained in the Acquiror Commission Reports, including any
\nAcquiror Commission Reports filed after the date of this Agreement until the
\nClosing, complied or will comply as to form in all material respects with the
\napplicable published rules and regulations of the Commission with respect
\nthereto, was prepared in accordance with generally accepted accounting
\nprinciples applied on a consistent basis throughout the periods involved (except
\nas may be indicated in the notes to such financial statements or, in the case of
\nunaudited statements, as permitted by Form 10-Q of the Commission) and fairly
\npresented the consolidated financial position of Acquiror and its Subsidiaries
\nas at the respective dates and the consolidated results of its operations and
\ncash flows for the periods indicated, except that the unaudited interim
\nfinancial statements were or are subject to normal and recurring year-end
\nadjustments which were not or are not expected to be material in amount.<\/p>\n
Section 4.5 COMPLIANCE WITH LAWS. Acquiror has complied with, is not in
\nviolation of, and has not received any notices of violation with respect to, any
\nfederal, state or local statute, law or regulation with respect to the conduct
\nof its business, or the ownership or operation of its business, except for
\nfailures to comply or violations which would not have a Material Adverse Effect
\non Acquiror and its Subsidiaries, taken as a whole.<\/p>\n
Section 4.6 POOLING OF INTERESTS. To its knowledge after consultation
\nwith its independent accountants, neither Acquiror nor any of its affiliates has
\ntaken or agreed to take any action which would prevent Acquiror from accounting
\nfor the business combination to be effected by the Merger as a pooling of
\ninterests.<\/p>\n
Section 4.7 INTERIM OPERATIONS OF SUB. Sub was formed by Acquiror
\nsolely for the purpose of engaging in the transactions contemplated by this
\nAgreement, has engaged in no other business activities and has conducted its
\noperations only as contemplated by this Agreement. Sub has no liabilities and,
\nexcept for a subscription agreement pursuant to which all of its authorized
\ncapital stock was issued to Acquiror, is not a party to any agreement other than
\nthis Agreement.<\/p>\n
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Section 4.8 SHAREHOLDERS CONSENT. No consent or approval of the
\nshareholders of Acquiror is required or necessary for Acquiror to enter into
\nthis Agreement or the Transaction Documents or to consummate the transactions
\ncontemplated hereby and thereby.<\/p>\n
Section 4.9 DISCLOSURE. No statements by Acquiror contained in this
\nAgreement, its exhibits and schedules, or any of the certificates or documents,
\nincluding any of the Transaction Documents, required to be delivered by Acquiror
\nor Sub to Target under this Agreement contain any untrue statement of material
\nfact or omits to state a material fact necessary in order to make the statements
\ncontained herein or therein not misleading in light of the circumstances under
\nwhich they were made. The information supplied by Acquiror for inclusion in the
\nInformation Statement shall not, on the date the Information Statement is first
\nmailed to Target shareholders, at the time of the Target Shareholders Meeting or
\nat the time of execution of a written consent of shareholders in lieu of such
\nmeeting and at the Effective Time, contain any statement which is false or
\nmisleading with respect to any material fact, or admit to state any material
\nfact necessary in order to make the statement made therein, in light of the
\ncircumstances under which they were made, not false or misleading.<\/p>\n
Section 4.10 NO LITIGATION. There is no action, investigation or
\nproceeding pending against, and to the knowledge of Acquiror, threatened against
\nor effecting Acquiror or Sub before any court or government entity which in any
\nmanner challenges or seeks to prevent, join, alter or delay any of the
\ntransactions contemplated by this Agreement or which could reasonably be
\nexpected to have a Material Adverse Effect on Acquiror. <\/p>\n
ARTICLE V<\/p>\n
PRECLOSING COVENANTS OF TARGET<\/p>\n
Section 5.1 APPROVAL OF TARGET SHAREHOLDERS. Prior to the Closing Date
\nand at the earliest practicable date following the date hereof, Target will
\nsolicit written consents from its shareholders seeking, or hold a Target
\nShareholders Meeting for the purpose of seeking, approval of this Agreement, the
\nMerger and related matters. If Target holds a shareholders’ meeting, the Board
\nof Directors of Target will solicit proxies from Target’s shareholders to vote
\nsuch shareholders’ shares at the Target Shareholders’ Meeting. In soliciting
\nsuch written consent or proxies, the Board of Directors of Target will (subject
\nto satisfying its fiduciary obligations to the shareholders of Target) recommend
\nto the shareholders of Target that they approve this Agreement and the Merger
\nand shall use its reasonable efforts to obtain the approval of the shareholders
\nof Target entitled to vote on or consent to this Agreement and the Merger in
\naccordance with Georgia Law and Target’s Articles of Incorporation and Bylaws.
\nTarget will prepare as soon as reasonably practicable the Information Statement
\nin form and substance reasonably acceptable to Acquiror, with respect to the
\nsolicitation of written consents and\/or proxies from the shareholders of Target
\nto approve this Agreement, the Merger and related matters. The Information
\nStatement shall be in such form and contain such information so as to permit
\ncompliance by Acquiror with the requirements of Regulation D under the
\nSecurities Act in connection with the issuance of shares of Acquiror Common
\nStock in the Merger and will<\/p>\n
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comply in all material respects with all applicable requirements of law and the
\nrules and regulations promulgated thereunder. The Information Statement shall
\ninclude as an attachment an Investor Representation Statement, in substantially
\nthe form attached hereto as Exhibit D (an “INVESTOR REPRESENTATION STATEMENT”),
\nto be completed by each shareholder of Target and delivered to Acquiror for
\npurposes of confirming the availability of an exemption from registration under
\nthe Securities Act for the issuance by Acquiror of shares of Acquiror Common
\nStock in the Merger. Within two business days after the execution of this
\nAgreement, Target will distribute the Information Statement to the shareholders
\nof Target. Whenever any event occurs which should be set forth in an amendment
\nor supplement to the Information Statement, Target or Acquiror, as the case may
\nbe, will promptly inform the other of such occurrence and cooperate in making
\nany appropriate amendment or supplement, and\/or mailing to shareholders of
\nTarget, such amendment or supplement. The Information Statement will include
\nthe recommendation of the Board of Directors of Target in favor of adoption and
\napproval of this Agreement and approval of the Merger.<\/p>\n
Section 5.2 ADVICE OF CHANGES. Target will promptly advise Acquiror in
\nwriting of any event known to Target occurring subsequent to the date of this
\nAgreement which would render any representation or warranty of Target contained
\nin this Agreement, if made on or as of the date of such event or the Closing
\nDate, untrue or inaccurate in any material respect.<\/p>\n
Section 5.3 OPERATION OF BUSINESS. During the period from the date of
\nthis Agreement and continuing until the earlier of the termination of the
\nAgreement or the Effective Time, Target agrees (except to the extent that
\nAcquiror shall otherwise consent in writing), to carry on its business in the
\nusual, regular and ordinary course in substantially the same manner as
\npreviously conducted, to pay its debts and taxes when due, subject to good faith
\ndisputes over such debts or taxes, to pay or perform other obligations when due,
\nand, to the extent consistent with such business, use all reasonable efforts
\nconsistent with past practices and policies to preserve intact its present
\nbusiness organization, keep available the services of its present officers and
\nkey employees and preserve its relationships with customers, suppliers,
\ndistributors, licensors, licensees, and others having business dealings with it,
\nto the end that its goodwill and ongoing businesses would be unimpaired at the
\nEffective Time. Target shall promptly notify Acquiror of any event or
\noccurrence not in the ordinary course of business of Target. Except as
\nexpressly contemplated by this Agreement, Target shall not, without the prior
\nwritten consent of Acquiror:<\/p>\n
(a) accelerate, amend or change the period of exercisability or
\nthe vesting schedule of restricted stock granted under any employee stock plan
\nor agreements or authorize cash payments in exchange for any options granted
\nunder any of such plans except as specifically required by the terms of such
\nplans or any related agreements or any such agreements in effect as of the date
\nof this Agreement and disclosed in the Target Disclosure Schedule;<\/p>\n
(b) declare or pay any dividends on or make any other
\ndistributions (whether in cash, stock or property) in respect of any of its
\ncapital stock, or split, combine or reclassify any of its capital stock or issue
\nor authorize the issuance of any other securities in respect of, in lieu of or
\nin substitution for shares of capital stock of such party, or purchase or
\notherwise acquire, directly or indirectly, any shares of its capital stock
\nexcept from former employees, directors and<\/p>\n
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consultants in accordance with agreements providing for the repurchase of shares
\nin connection with any termination of service by such party;<\/p>\n
(c) issue, deliver or sell or authorize or propose the issuance,
\ndelivery or sale of, or purchase or propose the purchase of, any shares of its
\ncapital stock or securities convertible into shares of its capital stock, or
\nsubscriptions, rights, warrants or options to acquire, or other agreements or
\ncommitments of any character obligating it to issue any such shares or other
\nconvertible securities, other than (i) the issuance of (A) shares of Target
\nCommon Stock issuable upon exercise of Target Options or Target Warrants, which
\nare outstanding on the date of this Agreement or (B) shares of Target Common
\nStock issuable upon conversion of shares of Target Preferred Stock or (ii) the
\nrepurchase of shares of Common Stock from terminated employees pursuant to the
\nterms of outstanding stock restriction or similar agreements;<\/p>\n
(d) acquire or agree to acquire by merging or consolidating
\nwith, or by purchasing a substantial equity interest in or substantial portion
\nof the assets of, or by any other manner, any business or any corporation,
\npartnership or other business organization or division, or otherwise acquire or
\nagree to acquire any assets;<\/p>\n
(e) sell, lease, license or otherwise dispose of any of its
\nproperties or assets which are material, individually or in the aggregate, to
\nthe business of Target, except in the ordinary course of business;<\/p>\n
(f) (i) except as set forth on the Target Disclosure Schedule,
\nincrease or agree to increase the compensation payable or to become payable to
\nits officers or employees, (ii) except as set forth on the Target Disclosure
\nSchedule, grant any additional severance or termination pay to, or enter into
\nany employment or severance agreements with, officers, (iii) grant any severance
\nor termination pay to, or enter into any employment or severance agreement, with
\nany non-officer employee, (iv) enter into any collective bargaining agreement,
\nor (v) establish, adopt, enter into or amend in any material respect any bonus,
\nprofit sharing, thrift, compensation, stock option, restricted stock, pension,
\nretirement, deferred compensation, employment, termination, severance or other
\nplan, trust, fund, policy or arrangement for the benefit of any directors,
\nofficers or employees;<\/p>\n
(g) revalue any of its assets, including writing down the value
\nof inventory or writing off notes or accounts receivable;<\/p>\n
(h) incur any indebtedness for borrowed money or guarantee any
\nsuch indebtedness or issue or sell any debt securities or warrants or rights to
\nacquire any debt securities or guarantee any debt securities of others;<\/p>\n
(i) amend or propose to amend its Articles of Incorporation or
\nBylaws;<\/p>\n
(j) incur or commit to incur any capital expenditures in excess
\nof $50,000 in the aggregate or in excess of $10,000 as to any individual matter;<\/p>\n
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(k) lease, license, sell, transfer or encumber or permit to be
\nencumbered any asset, Target Proprietary Right or other property associated with
\nthe business of Target (including sales or transfers to Affiliates of Target);<\/p>\n
(1) enter into any lease or contract for the purchase or sale of
\nany property, real or personal except in the ordinary course of business;<\/p>\n
(m) fail to maintain its equipment and other assets in good
\nworking condition and repair according to the standards it has maintained up to
\nthe date of this Agreement, subject only to ordinary wear and tear;<\/p>\n
(n) change accounting methods;<\/p>\n
(o) amend or terminate any material contract, agreement or
\nlicense to which it is a party except in the ordinary course of business;<\/p>\n
(p) loan any amount to any person or entity, or guaranty or act
\nas a surety for any obligation;<\/p>\n
(q) waive or release any material right or claim, except in the
\nordinary course of business;<\/p>\n
(r) make or change any Tax or accounting election, change any
\nannual accounting period, adopt or change any accounting method, file any
\namended Return, enter into any closing agreement, settle any Tax claim or
\nassessment relating to Target, surrender any right to claim refund of Taxes,
\nconsent to any extension or waiver of the limitation period applicable to any
\nTax claim or assessment relating to Target, or take any other action or omit to
\ntake any action that would have the effect of increasing the Tax liability of
\nTarget or Acquiror;<\/p>\n
(s) take any action or fail to take any action that would cause
\nthere to be a Material Adverse Change with respect to Target;<\/p>\n
(t) enter into any agreement outside of the ordinary course of
\nbusiness in which the obligation of Target exceeds $10,000 or shall not
\nterminate or be subject to termination for convenience within 30 days following
\nexecution;<\/p>\n
(u) enter into any agreement (including without limitation any
\nmaterial licenses to information or databases, any OEM agreements, any exclusive
\nagreements of any kind, or any agreements providing for obligations that would
\nextend beyond 180 days of the date of this Agreement) not in the ordinary course
\nof business; or<\/p>\n
(v) take, or agree in writing or otherwise to take, any of the
\nactions described in Sections (a) through (u) above, or any action which is
\nreasonably likely to make any of Target’s representations or warranties
\ncontained in this Agreement untrue or incorrect in any material respect on the
\ndate made (to the extent so limited) or as of the Effective Time.<\/p>\n
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Section 5.4 ACCESS TO INFORMATION. Until the Closing, Target shall
\nallow Acquiror and its agents reasonable free access during normal business
\nhours upon reasonable notice to its files, books, records, and offices,
\nincluding, without limitation, any and all information relating to taxes,
\ncommitments, contracts, leases, licenses, and personal property and financial
\ncondition. Until the Closing, Target shall cause its accountants to cooperate
\nwith Acquiror and its agents in making available all financial information
\nrequested, including without limitation the right to examine all working papers
\npertaining to all financial statements prepared or audited by such accountants.
\nNo information or knowledge obtained in any investigation pursuant to this
\nSection shall affect or be deemed to modify any representation or warranty
\ncontained in this Agreement or its exhibits and schedules. All such access
\nshall be subject to the terms of the Confidentiality Agreement (as defined in
\nSection 7.1).<\/p>\n
Section 5.5 SATISFACTION OF CONDITIONS PRECEDENT. Target will use its
\nreasonable best efforts to satisfy or cause to be satisfied all the conditions
\nprecedent which are set forth in Sections 8.1 and 8.2, and Target will use its
\nreasonable best efforts to cause the transactions contemplated by this Agreement
\nto be consummated, and, without limiting the generality of the foregoing, to
\nobtain all consents and authorizations of third parties and to make all filings
\nwith, and give all notices to, third parties which may be necessary or
\nreasonably required on its part in order to effect the transactions contemplated
\nby this Agreement. Target shall use its best efforts to obtain any and all
\nconsents necessary with respect to those Material Contracts listed on
\nSchedule 5.5 of the Target Disclosure Schedule required to consummate the Merger
\n(the “MATERIAL CONSENTS”).<\/p>\n
Section 5.6 OTHER NEGOTIATIONS. Following the date hereof and until
\ntermination of this Agreement pursuant to Section 9.1, Target will not (and it
\nwill not permit any of its officers, directors, employees, agents and Affiliates
\non its behalf to) take any action to solicit, initiate, seek, encourage or
\nsupport any inquiry, proposal or offer from, furnish any information to, or
\nparticipate in any negotiations with, any corporation, partnership, person or
\nother entity or group (other than Acquiror) regarding any acquisition of Target,
\nany merger or consolidation with or involving Target, or any acquisition of any
\nmaterial portion of the stock or assets of Target or any material license of
\nTarget Proprietary Rights (any of the foregoing being referred to in this
\nAgreement as an “ACQUISITION TRANSACTION”) or enter into an agreement concerning
\nany Acquisition Transaction with any party other than Acquiror. If between the
\ndate of this Agreement and the termination of this Agreement pursuant to Section
\n9.1, Target receives from a third party any offer or indication of interest
\nregarding any Acquisition Transaction, or any request for information regarding
\nany Acquisition Transaction, Target shall (i) notify Acquiror immediately
\n(orally and in writing) of such offer, indication of interest or request,
\nincluding the identity of such party and the full terms of any proposal therein,
\nand (ii) notify such third party of Target’s obligations under this Agreement.<\/p>\n
ARTICLE VI<\/p>\n
PRECLOSING AND OTHER COVENANTS OF ACQUIROR AND SUB<\/p>\n
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Section 6.1 ADVICE OF CHANGES. Acquiror and Sub will promptly advise
\nTarget in writing of any event occurring subsequent to the date of this
\nAgreement which would render any representation or warranty of Acquiror or Sub
\ncontained in this Agreement, if made on or as of the date of such event or the
\nClosing Date, untrue or inaccurate in any material respect.<\/p>\n
Section 6.2 RESERVATION OF ACQUIROR COMMON STOCK. Acquiror shall prior
\nto the Effective Time reserve for issuance, out of its authorized but unissued
\ncapital stock, the maximum number of shares of Acquiror Common Stock as may be
\nissuable upon consummation of the Merger.<\/p>\n
Section 6.3 SATISFACTION OF CONDITIONS PRECEDENT. Acquiror and Sub will
\nuse their reasonable best efforts to satisfy or cause to be satisfied all the
\nconditions precedent which are set forth in Sections 8.1 and 8.3, and Acquiror
\nand Sub will use their reasonable best efforts to cause the transactions
\ncontemplated by this Agreement to be consummated, and, without limiting the
\ngenerality of the foregoing, to obtain all consents and authorizations of third
\nparties and to make all filings with, and give all notices to, third parties
\nwhich may be necessary or reasonably required on its part in order to effect the
\ntransactions contemplated hereby.<\/p>\n
Section 6.4 NASDAQ NATIONAL MARKET LISTING. Acquiror shall prior to
\nthe Effective Time cause the shares of Acquiror Common Stock issuable to the
\nshareholders of Target in the Merger to be authorized for listing on the Nasdaq
\nNational Market.<\/p>\n
Section 6.5 STOCK OPTIONS AND WARRANTS.<\/p>\n
(a) At the Effective Time, each outstanding Target Option under
\nthe Target Option Plan, whether vested or unvested, shall be assumed by Acquiror
\nand deemed to constitute an option (a “ACQUIROR OPTION”) to acquire, on the same
\nterms and conditions as were applicable under the Target Option, the same number
\nof shares of Acquiror Common Stock as the holder of such Target Option would
\nhave been entitled to receive pursuant to the Merger had such holder exercised
\nsuch option in full immediately prior to the Effective Time (rounded down to the
\nnearest whole number), at a price per share (rounded up to the nearest whole
\ncent) equal to (i) the aggregate exercise price for the shares of Target Common
\nStock otherwise purchasable pursuant to such Target Option divided by (ii) the
\nnumber of full shares of Acquiror Common Stock deemed purchasable pursuant to
\nsuch Acquiror Option in accordance with the foregoing; PROVIDED, HOWEVER, that,
\nin the case of any Target Option to which Section 422 of the Code applies
\n(“INCENTIVE STOCK OPTIONS”), the option price, the number of shares purchasable
\npursuant to such option and the terms and conditions of exercise of such option
\nshall be determined in order to comply with Section 424(a) of the Code. In
\nconnection with the assumption by Acquiror of the Target Options pursuant to
\nthis Section 6.5(a), Target shall be deemed to have assigned to Acquiror,
\neffective at the Effective Time, Target’s right to repurchase unvested shares of
\nTarget Common Stock issuable upon the exercise of the Target Options or
\npreviously issued upon the exercise of options granted under the Target Option
\nPlan, in accordance with the terms of the Target Option Plan and the related
\nstock option agreements and stock purchase agreements entered into under the
\nTarget Option Plan.<\/p>\n
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(b) As soon as practicable after the Effective Time, Acquiror
\nshall deliver to the participants in the Target Option Plan appropriate notice
\nsetting forth such participants’ rights pursuant thereto and the grants pursuant
\nto the Target Option Plan shall continue in effect on the same terms and
\nconditions (subject to the adjustments required by this Section 6.5 after giving
\neffect to the Merger). Acquiror shall comply with the terms of the Target
\nOption Plan and the parties intend that, to the extent required by, and subject
\nto the provisions of, such Target Option Plan and Sections 422 and 424(a) of the
\nCode, that Target Options which qualified as incentive stock options prior the
\nEffective Time continue to qualify as incentive stock options after the
\nEffective Time, and this provision shall be interpreted consistent with that
\nintent.<\/p>\n
(c) Acquiror shall take all corporate action necessary to
\nreserve for issuance a sufficient number of shares of Acquiror Common Stock for
\ndelivery upon exercise of Target Options assumed in accordance with this Section
\n6.5. As soon as practicable after the Effective Time and in any event no later
\nthan 30 days after the Closing Date, Acquiror shall file a registration
\nstatement on Form S-8 (or any successor or other appropriate forms) under the
\nSecurities Act or another appropriate form with respect to the shares of
\nAcquiror Common Stock subject to such options and shall use its best efforts to
\nmaintain the effectiveness of such registration statement or registration
\nstatements (and maintain the current status of the prospectus or prospectuses
\ncontained therein) for so long as such options remain outstanding.<\/p>\n
(d) Each Target Warrant, to the extent outstanding at the
\nEffective Time, whether or not exercisable and whether or not vested at the
\nEffective Time, shall remain outstanding at the Effective Time. At the
\nEffective Time, Target Warrants shall, by virtue of the Merger and without any
\nfurther action on the part of Target or the holder of any of Target Warrants
\n(unless further action may be required by the terms of any of Target Warrants),
\nbe assumed by Acquiror pursuant to such documentation as is reasonably
\nacceptable to Target and each Target Warrant assumed by Acquiror shall be
\nexercisable upon the same terms and conditions as under the applicable warrant
\nagreements with respect to such Target Warrants, except that (A) each such
\nTarget Warrant shall be exercisable for that whole number of shares of Acquiror
\nCommon Stock (rounded down to the nearest whole share) into which the number of
\nshares of Target Common Stock subject to such Target Warrant would be converted
\nunder Section 2.1(c), and (B) the exercise price per share of Acquiror Common
\nStock shall be an amount equal to the exercise price per share of Target Common
\nStock subject to such Target Warrant in effect immediately prior to the
\nEffective Time divided by the applicable Exchange Ratio (the exercise price per
\nshare, so determined, being rounded to the nearest full cent). From and after
\nthe Effective Time, all references to Target in the warrant agreements
\nunderlying Target Warrants shall be deemed to refer to Acquiror. Acquiror
\nfurther agrees that, notwithstanding any other term of this Section 6.5(d) to
\nthe contrary, if required under the terms of Target Warrants or if otherwise
\nappropriate under the terms of Target Warrants, it will execute a supplemental
\nagreement with the holders of Target Warrants to effectuate the foregoing. No
\npayment shall be made for fractional shares. Acquiror shall (i) on or prior to
\nthe Effective Time, reserve for issuance the number of shares of Acquiror Common
\nStock that will become subject to warrants to purchase Acquiro Common Stock
\n(“ACQUIROR WARRANTS”) pursuant to this Section 6.5(d), (ii) from and after the
\nEffective Time, upon exercise of the Acquiror Warrants in accordance with the
\nterms thereof, make available for issuance all shares of Acquiror Common Stock
\ncovered<\/p>\n
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thereby and (iii) as promptly as practicable following the Effective Time, issue
\nto each holder of an outstanding Target Warrant a document evidencing the
\nforegoing assumption by Acquiror.<\/p>\n
Section 6.6 REGISTRATION OF SHARES ISSUED IN THE MERGER.<\/p>\n
(a) REGISTRABLE SHARES. For purposes of this Agreement,
\n“REGISTRABLE SHARES” shall mean the shares of Acquiror Common Stock issued in
\nthe Merger, including any and all Escrow Shares, and the shares of Acquiror
\nCommon Stock issuable upon the exercise of the Target Warrants assumed by
\nAcquiror pursuant to Section 6.5(d), but excluding shares of Acquiror Common
\nStock issued in the Merger or issuable upon the exercise of the Target Warrants
\nthat have been sold or otherwise transferred by the shareholders of Target who
\ninitially received such shares in the Merger or by the holder of the Target
\nWarrants prior to the effective date of the Registration Statement (as defined
\nbelow) (collectively, the “HOLDERS”); provided however, that a distribution of
\nshares of Acquiror Common Stock issued in the Merger without additional
\nconsideration, to underlying beneficial owners (such as the general and limited
\npartners, shareholders or trust beneficiaries of a Holder) shall not be deemed
\nsuch a sale or transfer for purposes of this Section 6.6 and such underlying
\nbeneficial owners shall be entitled to the same rights under this Section 6.6 as
\nthe initial Holder from which the Registrable Shares were received and shall be
\ndeemed a Holder for the purposes of this Section 6.6.<\/p>\n
(b) REQUIRED REGISTRATION. Acquiror shall use its reasonable
\nbest efforts (i) to prepare and file with the Commission a registration
\nstatement on Form S-3 (or such successor or other appropriate form) under the
\nSecurities Act with respect to the Registrable Shares (the “REGISTRATION
\nSTATEMENT”) within thirty (30) days following the Effective Time, and (ii) to
\ncause such Registration Statement to be declared effective by the Commission not
\nlater than one (1) day following the first date that financial results covering
\nat least thirty (30) days of the combined operations of Acquiror and Target
\nafter the Effective Time of the Merger shall have been, within the meaning of
\nAccounting Series Release No. 130, filed by Acquiror with the Commission or
\npublished by Acquiror in an Annual Report on Form 10-K, a Quarterly Report on
\nForm 10-Q, a Current Report on Form 8-K, a quarterly earnings report, a press
\nrelease or other public issuance that includes combined sales and income of
\nAcquiror and Target. Acquiror shall effect all such registrations,
\nqualifications and compliances (including, without limitation, obtaining
\nappropriate qualifications under applicable state securities or “blue sky” laws
\nand compliance with any other applicable governmental requirements or
\nregulations) as any selling Holder may reasonably request and that would permit
\nor facilitate the sale of all Registrable Shares (PROVIDED, HOWEVER, that
\nAcquiror shall not be required in connection therewith to qualify to do business
\nor to file a general consent to service of process in any such state or
\njurisdiction), and in each case Acquiror will use its best efforts to cause such
\nRegistration Statement and all other such registrations, qualifications and
\ncompliances to become effective as soon as practicable thereafter.<\/p>\n
(c) EFFECTIVENESS; SUSPENSION RIGHT.<\/p>\n
(i) Acquiror will use its best efforts to maintain the
\neffectiveness of the Registration Statement and other applicable registrations,
\nqualifications and compliances<\/p>\n
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until the first anniversary of the Closing Date (the “REGISTRATION EFFECTIVE
\nPERIOD”), and from time to time will amend or supplement the Registration
\nStatement and the prospectus contained therein as and to the extent necessary to
\ncomply with the Securities Act, the Exchange Act and any applicable state
\nsecurities statute or regulation, subject to the following limitations and
\nqualifications.<\/p>\n
(ii) Following the date on which the Registration
\nStatement is first declared effective, the Holders will be permitted (subject in
\nall cases to the terms of the Shareholders Agreements and to Section 6.7 below)
\nto offer and sell Registrable Shares during the Registration Effective Period in
\nthe manner described in the Registration Statement provided that the
\nRegistration Statement remains effective and has not been suspended.<\/p>\n
(iii) Notwithstanding any other provision of this Section
\n6.6 but subject to Section 6.7, Acquiror shall have the right at any time to
\nrequire that all Holders suspend further open market offers and sales of
\nRegistrable Shares whenever, and for so long as, in the reasonable judgment of
\nAcquiror after consultation with counsel there is or may be in existence
\nmaterial undisclosed information or events with respect to Acquiror (the
\n“SUSPENSION RIGHT”). In the event Acquiror exercises the Suspension Right, such
\nsuspension will continue for the period of time reasonably necessary for
\ndisclosure to occur at a time that is not detrimental to Acquiror and its
\nshareholders or until such time as the information or event is no longer
\nmaterial, each as determined in good faith by Acquiror after consultation with
\ncounsel. Acquiror will promptly give the Holders notice of any such suspension
\nand prompt notice of the cessation of such suspension. Acquiror will use all
\nreasonable efforts to minimize the length of the suspension.<\/p>\n
(d) EXPENSES. The costs and expenses to be borne by Acquiror
\nfor purposes of this Section 6.6 shall include, without limitation, printing
\nexpenses (including a reasonable number of prospectuses for circulation by the
\nselling Holders), legal fees and disbursements of counsel for Acquiror, “blue
\nsky” expenses, accounting fees and filing fees, but shall not include
\nunderwriting commissions or similar charges, or any legal fees and disbursements
\nof counsel for the selling Holders.<\/p>\n
(e) INDEMNIFICATION.<\/p>\n
(i) To the extent permitted by law, Acquiror will
\nindemnify and hold harmless each Holder, any underwriter (as defined in the
\nSecurities Act) for such Holder, its officers, directors, shareholders or
\npartners and each person, if any, who controls such Holder or underwriter within
\nthe meaning of the Securities Act or the Exchange Act, against any losses,
\nclaims, damages, or liabilities (joint or several) to which they may become
\nsubject under the Securities Act, the Exchange Act or other federal or state
\nlaw, insofar as such losses, claims, damages, or liabilities (or actions in
\nrespect thereof) arise out of or are based upon any of the following statements,
\nomissions or violations (collectively a “VIOLATION”): (A) any untrue statement
\nor alleged untrue statement of a material fact contained in the Registration
\nStatement, including any preliminary prospectus or final prospectus contained
\ntherein or any amendments or supplements thereto, (B) the omission or alleged
\nomission to state therein a material fact required<\/p>\n
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to be stated therein, or necessary to make the statements therein not
\nmisleading, or (C) any violation or alleged violation by Acquiror of the
\nSecurities Act, the Exchange Act, any state securities law or any rule or
\nregulation promulgated under the Securities Act, the Exchange Act or any state
\nsecurities law; and Acquiror will pay to each such Holder (and its officers,
\ndirectors, shareholders or partners), underwriter or controlling person, any
\nlegal or other expenses reasonably incurred by them in connection with
\ninvestigating or defending any such loss, claim, damage, liability, or action;
\nprovided, however, that the indemnity agreement contained in this
\nSection 6.6(e)(i) shall not apply to amounts paid in settlement of any such
\nloss, claim, damage, liability, or action if such settlement is effected without
\nthe consent of Acquiror; nor shall Acquiror be liable in any such case for any
\nsuch loss, claim, damage, liability, or action to the extent that it arises out
\nof or is based upon (a) a Violation which occurs in reliance upon and in
\nconformity with written information furnished expressly for use in the
\nRegistration Statement by any such Holder, or (b) a Violation that would not
\nhave occurred if such Holder had delivered to the purchaser the version of the
\nProspectus most recently provided by Acquiror to the Holder as of the date of
\nsuch sale.<\/p>\n
(ii) To the extent permitted by law, each selling Holder
\nwill indemnify and hold harmless Acquiror, each of its directors, each of its
\nofficers who has signed the Registration Statement, each person, if any, who
\ncontrols Acquiror within the meaning of the Securities Act, any underwriter, any
\nother Holder selling securities pursuant to the Registration Statement and any
\ncontrolling person of any such underwriter or other Holder, against any losses,
\nclaims, damages, or liabilities (joint or several) to which any of the foregoing
\npersons may become subject, under the Securities Act, the Exchange Act or other
\nfederal or state law, insofar as such losses, claims, damages, or liabilities
\n(or actions in respect thereto) arise out of or are based upon any Violation
\n(which includes without limitation the failure of the Holder to comply with the
\nprospectus delivery requirements under the Securities Act, and the failure of
\nthe Holder to deliver the most current prospectus provided by Acquiror prior to
\nsuch sale), in each case to the extent (and only to the extent) that such
\nViolation occurs in reliance upon and in conformity with written information
\nfurnished by such Holder expressly for use in the Registration Statement or such
\nViolation is caused by the Holder’s failure to deliver to the purchaser of the
\nHolder’s Registrable Shares a prospectus (or amendment or supplement thereto)
\nthat had been made available to the Holder by Acquiror; and each such Holder
\nwill pay any legal or other expenses reasonably incurred by any person intended
\nto be indemnified pursuant to this Section 6.6(e)(ii) in connection with
\ninvestigating or defending any such loss, claim, damage, liability, or action;
\nprovided, however, that the indemnity agreement contained in this Section
\n6.6(e)(ii) shall not apply to amounts paid in settlement of any such loss,
\nclaim, damage, liability or action if such settlement is effected without the
\nconsent of the Holder, which consent shall not be unreasonably withheld. The
\naggregate indemnification and contribution liability of each Holder under this
\nSection 6.6(e)(ii) shall not exceed the net proceeds received by such Holder in
\nconnection with sale of shares pursuant to the Registration Statement.<\/p>\n
(iii) Each person entitled to indemnification under this
\nSection 6.6(e) (the “INDEMNIFIED PARTY”) shall give notice to the party required
\nto provide indemnification (the “Indemnifying Party”) promptly after such
\nIndemnified Party has actual knowledge of any claim as to which indemnity may be
\nsought and shall permit the Indemnifying Party to assume the<\/p>\n
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defense of any such claim and any litigation resulting therefrom, PROVIDED that
\ncounsel for the Indemnifying Party who conducts the defense of such claim or any
\nlitigation resulting therefrom shall be approved by the Indemnified Party (whose
\napproval shall not unreasonably be withheld), and the Indemnified Party may
\nparticipate in such defense at such party’s expense, and PROVIDED FURTHER that
\nthe failure of any Indemnified Party to give notice as provided herein shall not
\nrelieve the Indemnifying Party of its obligations under this Section 6.6 unless
\nthe Indemnifying Party is materially prejudiced thereby. No Indemnifying Party,
\nin the defense of any such claim or litigation, shall (except with the consent
\nof each Indemnified Party) consent to entry of any judgment or enter into any
\nsettlement that does not include as an unconditional term thereof the giving by
\nthe claimant or plaintiff to such Indemnified Party of a release from all
\nliability in respect to such claim or litigation. Each Indemnified Party shall
\nfurnish such information regarding itself or the claim in question as an
\nIndemnifying Party may reasonably request in writing and as shall be reasonably
\nrequired in connection with the defense of such claim and litigation resulting
\ntherefrom.<\/p>\n
(iv) To the extent that the indemnification provided for
\nin this Section 6.6(e) is held by a court of competent jurisdiction to be
\nunavailable to an Indemnified Party with respect to any loss, liability, claim,
\ndamage or expense referred to herein, then the Indemnifying Party, in lieu of
\nindemnifying such Indemnified Party hereunder, shall contribute to the amount
\npaid or payable by such Indemnified Party as a result of such loss, liability,
\nclaim, damage or expense in such proportion as is appropriate to reflect the
\nrelative fault of the Indemnifying Party on the one hand and of the Indemnified
\nParty on the other in connection with the statements or omissions which resulted
\nin such loss, liability, claim, damage or expense, as well as any other relevant
\nequitable considerations. The relative fault of the Indemnifying Party and of
\nthe Indemnified Party shall be determined by reference to, among other things,
\nwhether the untrue or alleged untrue statement of a material fact or the
\nomission or alleged omission to state a material fact relates to information
\nsupplied by the Indemnifying Party or by the Indemnified Party and the parties’
\nrelative intent, knowledge, access to information and opportunity to correct or
\nprevent such statement or omission.<\/p>\n
Section 6.7 PROCEDURES FOR SALE OF SHARES UNDER REGISTRATION STATEMENT. <\/p>\n
(a) NOTICE AND APPROVAL. If any Holder shall propose to sell
\nany Registrable Shares pursuant to the Registration Statement, it shall notify
\nAcquiror of its intent to do so (including the proposed manner and timing of all
\nsales) at least two (2) full trading days prior to such sale, and the provision
\nof such notice to Acquiror shall conclusively be deemed to reestablish and
\nreconfirm an agreement by such Holder to comply with the registration provisions
\nset forth in this Agreement. Unless otherwise specified in such notice, such
\nnotice shall be deemed to constitute a representation that any information
\npreviously supplied by such Holder expressly for inclusion in the Registration
\nStatement (as the same may have been superseded by subsequent such information)
\nis accurate as of the date of such notice. At any time within such two (2)
\ntrading-day period, Acquiror may delay, consistent with Acquiror’s obligations
\nunder Section 6.6(c)(iii) to minimize any delay, the resale by such Holder of
\nany Registrable Shares pursuant to the Registration Statement only if a sale
\npursuant to the Registration Statement in its then current form without the
\naddition of material, non-public<\/p>\n
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information about Acquiror could reasonably constitute a violation of the
\nfederal securities laws; PROVIDED, HOWEVER, that in order to exercise this
\nright, Acquiror must deliver a certificate in writing to the Holder to such
\neffect not later than the close of business on the second trading day following
\nreceipt of any notice from any Holder indicating an intent to sell any
\nRegistrable Shares, provided that such notice from such Holder shall have
\nincluded a working facsimile number for purposes of delivery of such response
\nfrom Acquiror. Notwithstanding the foregoing, Acquiror will ensure that in any
\nevent the Holders shall have at least twenty (20) trading days (prorated for
\npartial quarters) available to sell Registrable Shares during each calendar
\nquarter (or portion thereof) during the Registration Effective Period and, upon
\nwritten request of any Holder, will notify such Holder of the commencement date
\nand ending date of each such 20-day period.<\/p>\n
(b) DELIVERY OF PROSPECTUS. For any offer or sale of any of the
\nRegistrable Shares by a Holder in a transaction that is not exempt under the
\nSecurities Act, the Holder, in addition to complying with any other federal
\nsecurities laws, shall deliver a copy of the final prospectus (or amendment of
\nor supplement to such prospectus) of Acquiror covering the Registrable Shares in
\nthe form furnished to the Holder by Acquiror to the purchaser of any of the
\nRegistrable Shares on or before the settlement date for the purchase of such
\nRegistrable Shares.<\/p>\n
(c) COPIES OF PROSPECTUSES. Subject to the provisions of this
\nSection 6.7, when a Holder is entitled to sell and gives notice of its intent to
\nsell Registrable Shares pursuant to the Registration Statement, Acquiror shall,
\nwithin two (2) trading days following the request, furnish to such Holder a
\nreasonable number of copies of a supplement to or an amendment of such
\nprospectus as may be necessary so that, as thereafter delivered to the
\npurchasers of such Registrable Shares, such prospectus shall not as of the date
\nof delivery to the Holder include an untrue statement of a material fact or omit
\nto state a material fact required to be stated therein or necessary to make the
\nstatements therein not misleading or incomplete in the light of the
\ncircumstances then existing.<\/p>\n
Section 6.8 CERTAIN EMPLOYEE BENEFIT MATTERS. From and after the
\nEffective Time, employees of Target at the Effective Time will be provided with
\nemployee benefits by the Surviving Corporation or Acquiror which in the
\naggregate are no less favorable to such employees than those provided from time
\nto time by Acquiror to its similarly situated employees. If any employee of
\nTarget becomes a participant in any employee benefit plan, program, policy or
\narrangement of Acquiror, such employee shall be given credit for all service
\nprior to the Effective Time with Target to the extent permissible under such
\nplan, program, policy or arrangement.<\/p>\n
ARTICLE VII<\/p>\n
OTHER AGREEMENTS<\/p>\n
Section 7.1 CONFIDENTIALITY. Each party acknowledges that Acquiror and
\nTarget have previously executed a Non-Disclosure Agreement (the “CONFIDENTIALITY
\nAGREEMENT”), which agreement shall continue in full force and effect in
\naccordance with its terms.<\/p>\n
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Section 7.2 NO PUBLIC ANNOUNCEMENT. The parties shall make no public
\nannouncement concerning this Agreement, their discussions or any other
\nmemoranda, letters or agreements between the parties relating to the Merger;
\nPROVIDED, HOWEVER, that either of the parties, but only after reasonable
\nconsultation with the other, may make disclosure if required under applicable
\nlaw; and PROVIDED FURTHER, HOWEVER, that following execution of this Agreement
\nor consummation of the Merger Acquiror may make a public announcement regarding
\nthe Merger and the integration of Target’s business into that of Acquiror.<\/p>\n
Section 7.3 REGULATORY FILINGS; CONSENTS; REASONABLE EFFORTS. Subject
\nto the terms and conditions of this Agreement, Target and Acquiror shall use
\ntheir respective reasonable good faith efforts to (i) make all necessary filings
\nwith respect to the Merger and this Agreement under the Exchange Act and
\napplicable blue sky or similar securities laws and obtain required approvals and
\nclearances with respect thereto and supply all additional information requested
\nin connection therewith; (ii) make merger notification or other appropriate
\nfilings with federal, state or local governmental bodies or applicable foreign
\ngovernmental agencies and obtain required approvals and clearances with respect
\nthereto and supply all additional information requested in connection therewith;
\n(iii) obtain all consents, waivers, approvals, authorizations and orders
\nrequired in connection with the authorization, execution and delivery of this
\nAgreement and the consummation of the Merger; and (iv) take, or cause to be
\ntaken, all appropriate action, and do, or cause to be done, all things
\nnecessary, proper or advisable to consummate and make effective the transactions
\ncontemplated by this Agreement as promptly as practicable.<\/p>\n
Section 7.4 POOLING ACCOUNTING. Target and Acquiror shall each use its
\nreasonable good faith efforts to cause the business combination to be effected
\nby the Merger to be accounted for as a pooling of interests. Neither Target nor
\nAcquiror shall take any action that would adversely affect the ability of
\nAcquiror to account for the business combination to be effected by the Merger as
\na pooling of interests.<\/p>\n
Section 7.5 FURTHER ASSURANCES. Prior to and following the Closing,
\neach party agrees to cooperate fully with the other parties and to execute such
\nfurther instruments, documents and agreements and to give such further written
\nassurances, as may be reasonably requested by any other party to better evidence
\nand reflect the transactions described herein and contemplated hereby and to
\ncarry into effect the intents and purposes of this Agreement.<\/p>\n
Section 7.6 ESCROW AGREEMENT. On or before the Effective Time, Acquiror
\nshall, and the parties hereto shall exercise their reasonable good faith efforts
\nto cause the Escrow Agent (as defined in Section 10.2) and the Shareholders’
\nAgents (as defined in Section 10.9), to enter into an Escrow Agreement in
\nsubstantially the form attached hereto as EXHIBIT E.<\/p>\n
Section 7.7 FIRPTA. Target shall, prior to the Closing Date, provide
\nAcquiror with a properly executed Foreign Investment and Real Property Tax Act
\nof 1980 (“FIRPTA”) FIRPTA Notification Letter which states that shares of
\ncapital stock of Target do not constitute “United States real property
\ninterests” under Section 897(c) of the Code, for purposes of satisfying
\nAcquiror’s obligations under Treasury Regulation Section 1.1445-2(c)(3). In
\naddition, simultaneously with delivery of such FIRPTA Notification Letter,
\nTarget shall provide to<\/p>\n
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Acquiror, as agent for Target, a form of notice to the Internal Revenue Service
\nin accordance with the requirements of Treasury Regulation Section
\n1.897-2(h)(2), along with written authorization for Acquiror to deliver such
\nnotice form to the Internal Revenue Service on behalf of Target upon the Closing
\nof the Merger.<\/p>\n
Section 7.8 BLUE SKY LAWS. Acquiror shall take such steps as may be
\nnecessary to comply with the securities and blue sky laws of all jurisdictions
\nwhich are applicable to the issuance of the Acquiror Common Stock in connection
\nwith the Merger. Target shall use its reasonable good faith efforts to assist
\nAcquiror as may be necessary to comply with the securities and blue sky laws of
\nall jurisdictions which are applicable in connection with the issuance of
\nAcquiror Common Stock in connection with the Merger.<\/p>\n
Section 7.9 OTHER FILINGS. As promptly as practicable after the date of
\nthis Agreement, Target and Acquiror will prepare and file any other filings
\nrequired under the Exchange Act, the Securities Act or any other Federal,
\nforeign or state securities or blue sky laws relating to the Merger and the
\ntransactions contemplated by this Agreement (the “OTHER FILINGS”). The Other
\nFilings will comply in all material respects with all applicable requirements of
\nlaw and the rules and regulations promulgated thereunder. Whenever any event
\noccurs which is required to be set forth in an amendment or supplement to the
\nOther Filings, Target or Acquiror, as the case may be, will promptly inform the
\nother of such occurrence and cooperate in making any appropriate amendment or
\nsupplement, and\/or mailing to shareholders of Target, such amendment or
\nsupplement.<\/p>\n
ARTICLE VIII<\/p>\n
CONDITIONS TO MERGER<\/p>\n
Section 8.1 CONDITIONS TO EACH PARTY’S OBLIGATION TO EFFECT THE MERGER.
\nThe respective obligations of each party to this Agreement to effect the Merger
\nshall be subject to the satisfaction prior to the Closing Date of the following
\nconditions:<\/p>\n
(a) SHAREHOLDER APPROVAL. The shareholders of Target entitled
\nto vote on or consent to this Agreement and the Merger in accordance with
\nGeorgia Law and Target’s Articles of Incorporation, and any Certificate of
\nIncorporation thereunder, shall have approved this Agreement and the Merger.<\/p>\n
(b) APPROVALS. Other than the filing provided for by Section
\n1.2, all authorizations, consents, orders or approvals of, or declarations or
\nfilings with, or expirations of waiting periods imposed by, any Governmental
\nEntity shall have been filed, occurred or been obtained.<\/p>\n
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
\nrestraining order, preliminary or permanent injunction or other order issued by
\nany court of competent jurisdiction or other legal or regulatory restraint or
\nprohibition preventing the consummation of the Merger or limiting or restricting
\nthe conduct or operation of the business of Target by Acquiror after the Merger
\nshall have been issued, nor shall any proceeding brought by a domestic
\nadministrative<\/p>\n
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agency or commission or other domestic Governmental Entity or other third party,
\nseeking any of the foregoing be pending; nor shall there be any action taken, or
\nany statute, rule, regulation or order enacted, entered, enforced or deemed
\napplicable to the Merger which makes the consummation of the Merger illegal.<\/p>\n
(d) NASDAQ. The shares of Acquiror Common Stock to be issued in
\nthe Merger shall have been approved for quotation on the Nasdaq National Market.<\/p>\n
(e) TAX OPINION. Target shall have received the opinion dated
\nthe Closing Date of Morris, Manning & Martin. L.L.P. to the effect that the
\nMerger will be treated for Federal income tax purposes as a tax-free
\nreorganization within the meaning of Section 368(a) of the Code. In rendering
\nsuch opinion, counsel shall be entitled to rely upon, among other things,
\nreasonable assumptions as well as representations of Acquiror, Sub and Target.<\/p>\n
Section 8.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND SUB.
\nThe obligations of Acquiror and Sub to effect the Merger are subject to the
\nsatisfaction of each of the following conditions, any of which may be waived in
\nwriting exclusively by Acquiror and Sub:<\/p>\n
(a) REPRESENTATIONS AND WARRANTIES. The representations and
\nwarranties of Target set forth in this Agreement shall be true and correct in
\nall material respects as of the date of this Agreement and (except to the extent
\nsuch representations and warranties speak as of an earlier date) as of the
\nClosing Date as though made on and as of the Closing Date, except for changes
\ncontemplated by this Agreement; and Acquiror shall have received a certificate
\nsigned on behalf of Target by the chief executive officer and the chief
\nfinancial officer of Target to such effect.<\/p>\n
(b) PERFORMANCE OF OBLIGATIONS OF TARGET. Target shall have
\nperformed in all material respects all obligations required to be performed by
\nit under this Agreement at or prior to the Closing Date; and Acquiror shall have
\nreceived a certificate signed on behalf of Target by the chief executive officer
\nof Target to such effect.<\/p>\n
(c) BLUE SKY LAWS. Acquiror shall have received all state
\nsecurities or “Blue Sky” permits and other authorizations necessary to issue
\nshares of Acquiror Common Stock pursuant to the Merger.<\/p>\n
(d) DISSENTING SHAREHOLDERS. Holders of not more than five
\npercent (5%) of Target’s issued and outstanding capital stock as of the Closing
\nshall have elected to, or continue to have contingent rights to, exercise
\nappraisal rights under Georgia Law as to such shares.<\/p>\n
(e) ESCROW AGREEMENT. The Escrow Agent and Shareholders’ Agents
\nshall have executed and delivered to Acquiror the Escrow Agreement and such
\nagreement shall remain in full force and effect.<\/p>\n
(g) ANCILLARY AGREEMENTS. Each of the Shareholders Agreements
\nand Noncompetition Agreements executed and delivered concurrently with the
\nexecution of this Agreement shall remain in full force and effect.<\/p>\n
-44-<\/p>\n
(h) OPINION OF TARGET’S COUNSEL. Acquiror shall have received
\nan opinion dated the Closing Date of Morris, Manning & Martin, L.L.P. counsel to
\nTarget, as to the matters in the form attached hereto as EXHIBIT F.<\/p>\n
(i) APPROVALS. All authorizations, consents (including the
\nMaterial Consents), or approvals of, or notifications to any third party,
\nrequired by Target’s contracts, agreements or other obligations in connection
\nwith the consummation of the Merger shall have occurred or been obtained.<\/p>\n
(j) AUDITED FINANCIAL STATEMENTS. Acquiror shall have received
\nTarget’s final, unaudited balance sheet as of March 31, 1999 and statements of
\noperations for the three-month period then-ended and Target’s final, audited
\nbalance sheets as of December 31, 1998, and the related audited statements of
\noperations, shareholders’ equity and cash flows for the year ended December 31,
\n1998, respectively.<\/p>\n
(k) BOARD RESIGNATIONS. Target shall have received written
\nletters of resignation from the Target Board of Directors from each of the
\ncurrent members of such Board, in each case effective at the Effective Time.<\/p>\n
(l) POOLING LETTER. Acquiror shall have received a letter from
\nPricewaterhouseCoopers LLP, and Target shall have received a letter from KPMG
\nLLP, each dated as of the Closing Date, regarding that firm’s unqualified
\nconcurrence with Acquiror’s management’s and Target’s management’s conclusion
\nthat the business combination to be effected by the Merger will qualify as a
\npooling of interests transaction under generally accepted accounting principles
\nif consummated in accordance with this Agreement.<\/p>\n
(m) SECURITIES EXEMPTION. Each shareholder of Target shall have
\nexecuted and delivered to Acquiror an Investor Representation Statement and,
\nbased upon the information supplied in such Investor Representation Statement,
\nAcquiror shall have reasonably concluded that the issuance of shares of Acquiror
\nCommon Stock shall be exempt from registration under the Securities Act pursuant
\nto Section 4(2) thereof and Regulation D promulgated thereunder.<\/p>\n
Section 8.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET. The
\nobligation of Target to effect the Merger is subject to the satisfaction of each
\nof the following conditions, any of which may be waived, in writing, exclusively
\nby Target:<\/p>\n
(a) REPRESENTATIONS AND WARRANTIES. The representations and
\nwarranties of Acquiror and Sub set forth in this Agreement shall be true and
\ncorrect in all material respects as of the date of this Agreement and (except to
\nthe extent such representations speak as of an earlier date) as of the Closing
\nDate as though made on and as of the Closing Date, and Target shall have
\nreceived a certificate signed on behalf of Acquiror by the chief financial
\nofficer of Acquiror to such effect.<\/p>\n
(b) PERFORMANCE OF OBLIGATIONS OF ACQUIROR AND SUB. Acquiror
\nand Sub shall have performed in all material respects all obligations required
\nto be performed by them under<\/p>\n
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this Agreement at or prior to the Closing Date; and Target shall have received a
\ncertificate signed on behalf of Acquiror by the chief financial officer of
\nAcquiror to such effect.<\/p>\n
(c) OPINION OF ACQUIROR’S COUNSEL. Target shall have received
\nan opinion dated the Closing Date of Venture Law Group, A Professional
\nCorporation, counsel to Acquiror, as to the matters attached hereto as
\nEXHIBIT G.<\/p>\n
ARTICLE IX<\/p>\n
TERMINATION AND AMENDMENT<\/p>\n
Section 9.1 TERMINATION. This Agreement may be terminated at any time
\nprior to the Effective Time:<\/p>\n
(a) by mutual written consent of Acquiror and Target;<\/p>\n
(b) by either Acquiror or Target, by giving written notice to
\nthe other party, if a court of competent jurisdiction or other Governmental
\nEntity shall have issued a nonappealable final order, decree or ruling or taken
\nany other action, in each case having the effect of permanently restraining,
\nenjoining or otherwise prohibiting the Merger, except, if such party relying on
\nsuch order, decree or ruling or other action shall not have complied with its
\nrespective obligations under Sections 5.5 or 6.3 of this Agreement, as the case
\nmay be;<\/p>\n
(c) by Acquiror or Target, by giving written notice to the other
\nparty, if the other party is in material breach of any representation, warranty,
\nor covenant of such other party contained in this Agreement, which breach shall
\nnot have been cured, if subject to cure, within 10 business days following
\nreceipt by the breaching party of written notice of such breach by the other
\nparty;<\/p>\n
(d) by Acquiror, by giving written notice to Target, if the
\nClosing shall not have occurred on or before July 31, 1999 by reason of the
\nfailure of any condition precedent under Section 8.1 or 8.2 (unless the failure
\nresults primarily from a breach by Acquiror of any representation, warranty, or
\ncovenant of Acquiror contained in this Agreement or Acquiror’s failure to
\nfulfill a condition precedent to closing or other default); <\/p>\n
(e) by Target, by giving written notice to Acquiror, if the
\nClosing shall not have occurred on or before July 31, 1999 by reason of the
\nfailure of any condition precedent under Section 8.1 or 8.3 (unless the failure
\nresults primarily from a breach by Target of any representation, warranty, or
\ncovenant of Target contained in this Agreement or Target’s failure to fulfill a
\ncondition precedent to closing or other default); <\/p>\n
(f) by Acquiror, by giving written notice to Target, if the
\nrequired approvals of the shareholders of Target contemplated by this Agreement
\nshall not have been obtained by reason of the failure to obtain the required
\nconsents or votes upon a vote taken by written consent or at a meeting of
\nshareholders, duly convened therefor or at any adjournment thereof; <\/p>\n
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Section 9.2 EFFECT OF TERMINATION. In the event of termination of this
\nAgreement as provided in Section 9.1, this Agreement shall immediately become
\nvoid and there shall be no liability or obligation on the part of Acquiror,
\nTarget, Sub or their respective officers, directors, shareholders or Affiliates,
\nexcept as set forth in Section 9.3 and further except to the extent that such
\ntermination results from the willful breach by any such party of any of its
\nrepresentations, warranties or covenants set forth in this Agreement.<\/p>\n
Section 9.3 FEES AND EXPENSES.<\/p>\n
(a) Except as set forth in this Section 9.3 or 6.6(d), all fees
\nand expenses incurred in connection with this Agreement and the transactions
\ncontemplated hereby shall be paid by the party incurring such expenses, whether
\nor not the Merger is consummated. Target has submitted a budget to Acquiror for
\ncompletion of the Merger. Target shall use its best efforts to consummate the
\nMerger within such budget and shall not enter into any agreement inconsistent
\nwith such budget.<\/p>\n
(b) If the Merger is consummated, all legal, accounting,
\ninvestment banking, broker’s and finder’s fees and expenses incurred by Target
\nor its shareholders in connection with the Merger shall be deemed expenses of
\nthe shareholders of Target to the extent such fees and expenses exceed $100,000,
\nand shall be borne by the shareholders of Target to such extent and will not
\nbecome obligations of Target. Target will make arrangements for the payments of
\nsuch fees acceptable to Acquiror. Any such fees and expenses in excess of
\n$100,000 incurred by Target shall be recoverable from the Escrow Fund (as
\ndefined in Section 10.2) as Damages (as defined in Section 10.1) without regard
\nto the damage threshold as contemplated by Section 10.3.<\/p>\n
ARTICLE X<\/p>\n
ESCROW AND INDEMNIFICATION<\/p>\n
Section 10.1 INDEMNIFICATION. From and after the Effective Time and
\nsubject to the limitations contained in Section 10.2, the Former Target
\nShareholders will, severally and pro rata, in accordance with their Pro Rata
\nPortion, indemnify and hold Acquiror harmless against any loss, expense,
\nliability or other damage, including attorneys’ fees, to the extent of the
\namount of such loss, expense, liability or other damage (collectively “DAMAGES”)
\nthat Acquiror has incurred by reason of the breach or alleged breach by Target
\nof any representation, warranty, covenant or agreement of Target contained in
\nthis Agreement that occurs or becomes known to Acquiror during the Escrow Period
\n(as defined in Section 10.4 below). Acquiror, Target and Sub acknowledge and
\nagree, and the Former Target Shareholders, by their approval of this Agreement,
\nagree that notwithstanding anything to the contrary contained in this Agreement
\nor any other Transaction Document, such indemnification under this Article X
\nshall be the sole and exclusive remedy for any such claim of breach by Target,
\nexcept for Damages based upon a claim of fraud.<\/p>\n
Section 10.2 ESCROW FUND. As security and the sole and exclusive
\nrecourse for the indemnities in Section 10.1, as soon as practicable after the
\nEffective Time, the Escrow Shares shall be deposited with U.S. Bank Trust,
\nNational Association (or such other institution selected<\/p>\n
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by Acquiror with the reasonable consent of Target) as escrow agent (the “ESCROW
\nAGENT”), such deposit to constitute the Escrow Fund (the “ESCROW FUND”) and to
\nbe governed by the terms set forth in this Article X and in the Escrow
\nAgreement. Notwithstanding the foregoing or anything to the contrary contained
\nin this Agreement or in any Transaction Document, the indemnification
\nobligations of the Former Target Shareholders pursuant to this Article X or
\notherwise shall be limited to the amount and assets deposited and present in the
\nEscrow Fund and Acquiror shall not be entitled to pursue any claims for
\nindemnification under this Article X or otherwise against the Former Target
\nShareholders directly or personally, and the sole recourse of Acquiror shall be
\nto make claims against the Escrow Fund in accordance with the terms of the
\nEscrow Agreement.<\/p>\n
Section 10.3 DAMAGE THRESHOLD. Notwithstanding the foregoing, the Former
\nTarget Shareholders shall have no liability under Section 10.1 and Acquiror may
\nnot receive any shares from the Escrow Fund unless and until an Officer’s
\nCertificate or Certificates (as defined in Section 10.5 below) for an aggregate
\namount of Acquiror’s Damages in excess of $50,000 has been delivered to the
\nShareholders’ Agents and to the Escrow Agent; PROVIDED, HOWEVER, that after an
\nOfficer’s Certificate or Certificates for an aggregate of $50,000 in Damages has
\nbeen delivered, Acquiror shall be entitled to receive Escrow Shares equal in
\nvalue to the full amount of Damages identified in such Officer’s Certificate or
\nCertificates.<\/p>\n
Section 10.4 ESCROW PERIODS. The Escrow Fund shall terminate upon the
\nearlier of (i) the first anniversary date of the Closing Date or (ii) the date
\non which Acquiror’s independent accountants shall deliver their audit report for
\nthe first audit of Acquiror’s financial statement to be completed following the
\nClosing Date (the period from the Closing Date to such date referred to as the
\n“Escrow Period”), PROVIDED, HOWEVER, that the number of Escrow Shares, which, in
\nthe reasonable judgment of Acquiror, subject to the objection of the
\nShareholders’ Agents and the subsequent resolution of the matter in the manner
\nprovided in Section 10.8, are necessary to satisfy any unsatisfied claims
\nspecified in any Officer’s Certificate theretofore delivered to the Escrow Agent
\nand the Shareholders’ Agents prior to termination of the Escrow Period with
\nrespect to Damages incurred or litigation pending prior to expiration of the
\nEscrow Period, shall remain in the Escrow Fund until such claims have been
\nfinally resolved.<\/p>\n
Section 10.5 CLAIMS UPON ESCROW FUND. Upon receipt by the Escrow Agent
\non or before the last day of the Escrow Period of a certificate signed by any
\nappropriately authorized officer of Acquiror (an “OFFICER’S CERTIFICATE”):<\/p>\n
(i) Stating the aggregate amount of Acquiror’s Damages or an
\nestimate thereof, in each case to the extent known or determinable at such time;
\nand<\/p>\n
(ii) Specifying in reasonable detail the individual items of such
\nDamages included in the amount so stated, the date each such item was paid or
\nproperly accrued or arose, and the nature of the misrepresentation, breach or
\nclaim to which such item is related, the Escrow Agent shall, subject to the
\nprovisions of Sections 10.3 and 10.8 hereof and of the Escrow Agreement, deliver
\nto Acquiror out of the Escrow Fund, as promptly as practicable, Escrow Shares
\nhaving a value equal to such Damages all in accordance with the Escrow Agreement
\nand Section 10.6 below. Amounts paid or distributed from the Escrow Fund shall
\nbe paid or<\/p>\n
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distributed pro rata among the Holders (as defined in the Escrow Agreement)
\nbased upon their respective percentage interests therein at the time.<\/p>\n
Section 10.6 VALUATION. For the purpose of compensating Acquiror for its
\nDamages pursuant to this Agreement, the value per share of the Escrow Shares
\nwhich shall be released to Acquiror in respect of a claim for Damages shall be
\n$158.25.<\/p>\n
Section 10.7 OBJECTIONS TO CLAIMS. At the time of delivery of any
\nOfficer’s Certificate to the Escrow Agent, a duplicate copy of such Officer’s
\nCertificate shall be delivered to the Shareholders’ Agents (as defined in
\nSection 10.9 below) and for a period of thirty (30) days after such delivery,
\nthe Escrow Agent shall make no delivery of Escrow Shares pursuant to
\nSection 10.4 unless the Escrow Agent shall have received written authorization
\nfrom the Shareholders’ Agents to make such delivery. After the expiration of
\nsuch thirty (30) day period, the Escrow Agent shall make delivery of the Escrow
\nShares in the Escrow Fund in accordance with Section 10.4, PROVIDED that no such
\ndelivery may be made if the Shareholders’ Agents shall object in a written
\nstatement to the claim made in the Officer’s Certificate, and such statement
\nshall have been delivered to the Escrow Agent and to Acquiror prior to the
\nexpiration of such thirty (30) day period.<\/p>\n
Section 10.8 RESOLUTION OF CONFLICTS.<\/p>\n
(a) In case the Shareholders’ Agents shall so object in writing
\nto any claim or claims by Acquiror made in any Officer’s Certificate, Acquiror
\nshall have thirty (30) days to respond in a written statement to the objection
\nof the Shareholders’ Agents. If after such thirty (30) day period there remains
\na dispute as to any claims, the Shareholders’ Agents and Acquiror shall attempt
\nin good faith for thirty (30) days to agree upon the rights of the respective
\nparties with respect to each of such claims. If the Shareholders’ Agents and
\nAcquiror should so agree, a memorandum setting forth such agreement shall be
\nprepared and signed by both parties and shall be furnished to the Escrow Agent.
\nThe Escrow Agent shall be entitled to rely on any such memorandum and shall
\ndistribute the Escrow Shares from the Escrow Fund in accordance with the terms
\nof the memorandum.<\/p>\n
(b) If no such agreement can be reached after good faith
\nnegotiation, either Acquiror or the Shareholders’ Agents may, by written notice
\nto the other, demand arbitration of the matter unless the amount of the damage
\nor loss is at issue in pending litigation with a third party, in which event
\narbitration shall not be commenced until such amount is ascertained or both
\nparties agree to arbitration; and in either such event the matter shall be
\nsettled by arbitration conducted by three arbitrators. Within fifteen (15) days
\nafter such written notice is sent, Acquiror (on the one hand) and the
\nShareholders’ Agents (on the other hand) shall each select one arbitrator, and
\nthe two arbitrators so selected shall select a third arbitrator. The decision
\nof the arbitrators as to the validity and amount of any claim in such Officer’s
\nCertificate shall be binding and conclusive upon the parties to this Agreement,
\nand notwithstanding anything in Section 10.4, the Escrow Agent shall be entitled
\nto act in accordance with such decision and make or withhold payments out of the
\nEscrow Fund in accordance with such decision.<\/p>\n
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(c) Judgment upon any award rendered by the arbitrators may be
\nentered in any court having jurisdiction. Any such arbitration shall be held in
\nSanta Clara or San Mateo County, California under the commercial rules then in
\neffect of the American Arbitration Association. The non-prevailing party to an
\narbitration shall pay its own expenses, the fees of each arbitrator, the
\nadministrative fee of the American Arbitration Association, and the expenses,
\nincluding, without limitation, the reasonable attorneys’ fees and costs,
\nincurred by the prevailing party to the arbitration.<\/p>\n
Section 10.9 SHAREHOLDERS’ AGENTS.<\/p>\n
(a) Bruce W. Dunlevie and John D. Willcutts shall be constituted
\nand appointed as agents (the “SHAREHOLDERS’ AGENTS”) for and on behalf of the
\nFormer Target Shareholders to give and receive notices and communications, to
\nauthorize delivery to Acquiror of the Escrow Shares or other property from the
\nEscrow Fund in satisfaction of claims by Acquiror, to object to such deliveries,
\nto agree to, negotiate, enter into settlements and compromises of, and demand
\narbitration and comply with orders of courts and awards of arbitrators with
\nrespect to such claims, and to take all actions necessary or appropriate in the
\njudgment of the Shareholders’ Agents for the accomplishment of the foregoing.
\nAll actions of the Shareholders’ Agents shall be taken jointly, not
\nindividually. Such agency may be changed by the holders of a majority in
\ninterest of the Escrow Shares from time to time upon not less than ten (10)
\ndays’ prior written notice to Acquiror. No bond shall be required of the
\nShareholders’ Agents, and the Shareholders’ Agents shall receive no compensation
\nfor services. Notices or communications to or from the Shareholders’ Agents
\nshall constitute notice to or from each of the Former Target Shareholders.<\/p>\n
(b) The Shareholders’ Agents shall not be liable for any act
\ndone or omitted hereunder as Shareholders’ Agent while acting in good faith, and
\nany act done or omitted pursuant to the advice of counsel shall be conclusive
\nevidence of such good faith. The Former Target Shareholders shall severally and
\npro rata, in accordance with their Pro Rata Portion, indemnify the Shareholders’
\nAgents and hold them harmless against any loss, liability or expense incurred
\nwithout gross negligence or bad faith on the part of the Shareholders’ Agents
\nand arising out of or in connection with the acceptance or administration of
\ntheir duties hereunder under this Agreement or the Escrow Agreement.<\/p>\n
(c) The Shareholders’ Agents shall have reasonable access to
\ninformation about Target and Acquiror and the reasonable assistance of Target’s
\nand Acquiror’s officers and employees for purposes of performing their duties
\nand exercising their rights under this Article X, PROVIDED that the
\nShareholders’ Agents shall treat confidentially and not disclose any nonpublic
\ninformation from or about Target or Acquiror to anyone (except on a need to know
\nbasis to individuals who agree to treat such information confidentially).<\/p>\n
Section 10.10 ACTIONS OF THE SHAREHOLDERS’ AGENTS. A decision, act,
\nconsent or instruction of the Shareholders’ Agents shall constitute a decision
\nof all of the Former Target Shareholders for whom shares of Acquiror Common
\nStock otherwise issuable to them are deposited in the Escrow Fund and shall be
\nfinal, binding and conclusive upon each such Former<\/p>\n
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Target Shareholder, and the Escrow Agent and Acquiror may rely upon any
\ndecision, act, consent or instruction of the Shareholders’ Agents as being the
\ndecision, act, consent or instruction of each and every such Former Target
\nShareholder. The Escrow Agent and Acquiror are hereby relieved from any
\nliability to any person for any acts done by them in accordance with such
\ndecision, act, consent or instruction of the Shareholders’ Agents.<\/p>\n
Section 10.11 CLAIMS. In the event Acquiror becomes aware of a
\nthird-party claim which Acquiror believes may result in a demand against the
\nEscrow Fund, Acquiror shall promptly notify the Shareholders’ Agents of such
\nclaim, and the Shareholders’ Agents and the Former Target Shareholders for whom
\nshares of Acquiror Common Stock otherwise issuable to them are deposited in the
\nEscrow Fund shall be entitled, at their expense, to participate in any defense
\nof such claim. Acquiror shall have the right in its sole discretion to settle
\nany such claim; PROVIDED, HOWEVER, that Acquiror may not effect the settlement
\nof any such claim without the consent of the Shareholders’ Agents, which consent
\nshall not be unreasonably withheld. In the event that the Shareholders’ Agents
\nhave consented to any such settlement, the Shareholders’ Agents shall have no
\npower or authority to object to the amount of any claim by Acquiror against the
\nEscrow Fund for indemnity with respect to such settlement in the amount agreed
\nto.<\/p>\n
ARTICLE XI<\/p>\n
MISCELLANEOUS<\/p>\n
Section 11.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS. All
\nrepresentations, warranties, covenants and agreements of Target contained in
\nthis Agreement shall survive the Closing and any investigation at any time made
\nby or on behalf of Acquiror until the end of the Escrow Period. If Escrow
\nShares or other assets are retained in the Escrow Fund beyond expiration of the
\nperiod specified in the Escrow Agreement, then (notwithstanding the expiration
\nof such time period) the representation, warranty, covenant or agreement
\napplicable to such claim shall survive until, but only for purposes of, the
\nresolution of the claim to which such retained Escrow Shares or other assets
\nrelate. All representations, warranties, covenants and agreements of Acquiror
\ncontained in this Agreement shall terminate as of the Effective Time, PROVIDED
\nthat the covenants and agreements contained in Sections 6.5, 6.6, 6.7, 6.8 and
\n9.3 shall survive the Closing and shall continue in full force and effect. <\/p>\n
Section 11.2 NOTICES. All notices and other communications hereunder
\nshall be in writing and shall be deemed given if delivered personally,
\ntelecopied (which is confirmed) or two business days after being mailed by
\nregistered or certified mail (return receipt requested) to the parties at the
\nfollowing addresses (or at such other address for a party as shall be specified
\nby like notice):<\/p>\n
(a) if to Acquiror or Sub:<\/p>\n
Yahoo! Inc.
\n 3420 Central Expressway
\n Santa Clara, CA 95051
\n Attention: Chief Executive Officer<\/p>\n
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Fax No: (408) 731-3510
\n Telephone No: (408) 731-3300<\/p>\n
with a copy at the same address to the attention of the
\n General Counsel and Secretary and with a copy to:<\/p>\n
Venture Law Group
\n A Professional Corporation
\n 2775 Sand Hill Road
\n Menlo Park, California 94025
\n Attention: Steven J. Tonsfeldt
\n Fax No: (650) 233-8386
\n Telephone No: (650) 854-4488<\/p>\n
(b) if to Target, to:<\/p>\n
Encompass, Inc.
\n 1100 Circle 75, Suite 1530
\n Atlanta, Georgia 30339
\n Attention: President
\n Fax No: (770) 984-9098, ext. 228
\n Telephone No: (770) 984-9098, ext. 120<\/p>\n
with a copy to:<\/p>\n
Morris, Manning & Martin, L.L.P.
\n 1600 Atlanta Financial Center
\n 3343 Peachtree Road, N.E.
\n Atlanta, Georgia 30326
\n Attention: Oby T. Brewer III
\n Fax No: (404) 365-9532
\n Telephone No: (404) 504-7771<\/p>\n
Section 11.3 INTERPRETATION. When a reference is made in this Agreement
\nto Sections, such reference shall be to a Section of this Agreement unless
\notherwise indicated. The table of contents and headings contained in this
\nAgreement are for reference purposes only and shall not affect in any way the
\nmeaning or interpretation of this Agreement. Whenever the words “INCLUDE,”
\n“INCLUDES” or “INCLUDING” are used in this Agreement they shall be deemed to be
\nfollowed by the words “WITHOUT LIMITATION.” Whenever the words “TO THE
\nKNOWLEDGE OF TARGET” or “KNOWN TO TARGET” or similar phrases are used in this
\nAgreement, they mean to the actual knowledge, after reasonable inquiry, of
\nJohn D. Willcutts and all other executive officers of Target.<\/p>\n
Section 11.4 COUNTERPARTS. This Agreement may be executed in two or more
\ncounterparts, all of which shall be considered one and the same agreement and
\nshall become<\/p>\n
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effective when two or more counterparts have been signed by each of the parties
\nand delivered to the other parties, it being understood that all parties need
\nnot sign the same counterpart.<\/p>\n
Section 11.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
\nAgreement (including the documents and the instruments referred to herein), the
\nConfidentiality Agreement, and the Transaction Documents (a) constitute the
\nentire agreement and supersedes all prior agreements and understandings, both
\nwritten and oral, among the parties with respect to the subject matter hereof,
\nand (b) are not intended to confer upon any person other than the parties hereto
\n(including without limitation any Target employees) any rights or remedies
\nhereunder.<\/p>\n
Section 11.6 GOVERNING LAW. This Agreement shall be governed and
\nconstrued in accordance with the laws of the State of California without regard
\nto any applicable conflicts of law.<\/p>\n
Section 11.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
\ninterests or obligations hereunder shall be assigned by any of the parties
\nhereto (whether by operation of law or otherwise) without the prior written
\nconsent of the other parties. Subject to the preceding sentence, this Agreement
\nwill be binding upon, inure to the benefit of and be enforceable by the parties
\nand their respective successors and assigns.<\/p>\n
Section 11.8 AMENDMENT. This Agreement may be amended by the parties
\nhereto, at any time before or after approval of matters presented in connection
\nwith the Merger by the shareholders of Target, but after any such shareholder
\napproval, no amendment shall be made which by law requires the further approval
\nof shareholders without obtaining such further approval. This Agreement may not
\nbe amended except by an instrument in writing signed on behalf of each of the
\nparties hereto.<\/p>\n
Section 11.9 EXTENSION; WAIVER. At any time prior to the Effective Time,
\nthe parties hereto may, to the extent legally allowed, (i) extend the time for
\nthe performance of any of the obligations or the other acts of the other parties
\nhereto, (ii) waive any inaccuracies in the representations or warranties
\ncontained herein or in any document delivered pursuant hereto and (iii) waive
\ncompliance with any of the agreements or conditions contained herein. Any
\nagreement on the part of a party hereto to any such extension or waiver shall be
\nvalid only if set forth in a written instrument signed on behalf of such party.<\/p>\n
Section 11.10 SPECIFIC PERFORMANCE. The parties hereto agree that
\nirreparable damage would occur in the event that any of the provisions of this
\nAgreement were not performed in accordance with their specific terms or were
\notherwise breached. It is accordingly agreed that the parties shall be entitled
\nto injunctive relief to prevent breaches of this Agreement and to enforce
\nspecifically the terms and provisions hereof in any court of the United States
\nor any state having jurisdiction, this being in addition to any other remedy to
\nwhich they are entitled at law or in equity.<\/p>\n
[SIGNATURE PAGE FOLLOWS]<\/p>\n
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IN WITNESS WHEREOF, Acquiror, Sub and Target have caused this
\nAgreement and Plan of Merger to be signed by their respective officers thereunto
\nduly authorized as of the date first written above.<\/p>\n
YAHOO! INC.<\/p>\n
By: \/s\/ Timothy Koogle
\n —————————-<\/p>\n
Title: CEO
\n ————————-<\/p>\n
SCARLETT ACQUISITION CORPORATION<\/p>\n
By: \/s\/ Timothy Koogle
\n —————————-<\/p>\n
Title: CEO
\n ————————-<\/p>\n
ENCOMPASS, INC.<\/p>\n
By: \/s\/ John Willcutts
\n —————————-<\/p>\n
Title: CEO
\n ————————-<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[9377],"corporate_contracts_industries":[9510],"corporate_contracts_types":[9622,9626],"class_list":["post-43161","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-yahoo-inc","corporate_contracts_industries-technology__programming","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43161","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43161"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43161"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43161"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43161"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}