\n 7.4 Amendment………………………………………………………………………………43
\n 7.5 Extension; Waiver……………………………………………………………………….43<\/p>\nARTICLE VIII ESCROW AND INDEMNIFICATION……………………………………………………………….43
\n 8.1 Survival of Representations, Warranties and Covenants……………………………………….43
\n 8.2 Indemnity………………………………………………………………………………44
\n 8.3 Escrow Fund…………………………………………………………………………….44
\n 8.4 Damage Threshold………………………………………………………………………..44
\n 8.5 Escrow Period…………………………………………………………………………..44
\n 8.6 Claims upon Escrow Fund………………………………………………………………….44
\n 8.7 Objections to Claims…………………………………………………………………….45
\n 8.8 Resolution of Conflicts; Arbitration………………………………………………………45
\n 8.9 Shareholders’ Agent……………………………………………………………………..46
\n 8.10 Distribution Upon Termination of Escrow Period…………………………………………….47
\n 8.11 Actions of the Shareholders’ Agent……………………………………………………….47
\n 8.12 Third-Party Claims……………………………………………………………………..47
\n 8.13 Maximum Liability and Remedies…………………………………………………………..48<\/p>\n
ARTICLE IX GENERAL PROVISIONS………………………………………………………………………..48
\n 9.1 Notices………………………………………………………………………………..48
\n 9.2 Interpretation………………………………………………………………………….49
\n 9.3 Counterparts……………………………………………………………………………50
\n 9.4 Entire Agreement; No Third Party Beneficiaries……………………………………………..50
\n 9.5 Severability……………………………………………………………………………50
\n 9.6 Remedies Cumulative……………………………………………………………………..50
\n 9.7 Governing Law…………………………………………………………………………..51
\n 9.8 Assignment……………………………………………………………………………..51
\n 9.9 Rules of Construction……………………………………………………………………51
\n<\/c><\/s><\/c><\/s><\/c><\/s><\/caption>\n<\/table>\n
iii<\/p>\n
SCHEDULES
\n———<\/p>\n
Target Disclosure Letter
\nAcquiror Disclosure Letter
\nOption Schedule<\/p>\n
Schedule 2.3 List of Target Subsidiaries
\nSchedule 2.11 Target Real Property
\nSchedule 2.12 Target Intellectual Property
\nSchedule 2.15 Target Employee Plans
\nSchedule 2.18 Target Insurance
\nSchedule 2.21 List of Principal Stockholders
\nSchedule 2.25 List of Material Contracts
\nSchedule 2.27 Third Party Consents
\nSchedule 6.3 Key Target Employees<\/p>\n
EXHIBITS
\n——–<\/p>\n
Exhibit A Intentionally Left Blank
\nExhibit B Intentionally Left Blank
\nExhibit C Stockholder Agreement
\nExhibit D Escrow Agreement
\nExhibit E Intentionally Left Blank
\nExhibit F Waiver Agreement
\nExhibit G Intentionally Left Blank
\nExhibit H FIRPTA Notice<\/p>\n
iv<\/p>\n
AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
This AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made and
\nentered into as of December 16, 1999, by and among Ariba, Inc., a Delaware
\ncorporation (“Acquiror”), Apache Merger Corporation, a Delaware corporation
\n(“Merger Sub”), and Tradex Technologies Inc., a Delaware corporation (“Target”).<\/p>\n
RECITALS<\/p>\n
A. The Boards of Directors of Target, Acquiror and Merger Sub
\nbelieve it is in the best interests of their respective companies and
\nstockholders of their respective companies that Target and Merger Sub combine
\ninto a single company through the statutory merger of Merger Sub with and into
\nTarget (the “Merger”) and, in furtherance thereof, have approved the Merger.<\/p>\n
B. Pursuant to the Merger, among other things, each outstanding
\nshare of capital stock of Target, $0.01 value (“Target Capital Stock”), shall be
\nconverted into shares of Common stock of Acquiror, $0.002 par value (“Acquiror
\nCommon Stock”), at the rate set forth herein. Acquiror will assume all
\noutstanding stock options of the Target and all outstanding warrants of the
\nTarget, whether or not exercisable prior to the Closing Date.<\/p>\n
C. Target, Acquiror and Merger Sub desire to make certain
\nrepresentations and warranties and other agreements in connection with the
\nMerger.<\/p>\n
D. The parties intend, by executing this Agreement, to adopt a
\nplan of reorganization within the meaning of Section 368 of the Internal Revenue
\nCode of 1986, as amended (the “Code”), and to cause the Merger to qualify as a
\nreorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
\nthe Code.<\/p>\n
E. Concurrent with the execution of this Agreement and as an
\ninducement to Acquiror to enter into this Agreement, selected insiders and other
\nprincipal Stockholders of Target (the “Principal Stockholders”), representing
\nthe majority of outstanding common shares and common share equivalents, are
\nentering into an agreement (the “Stockholders Agreement”), which provides, among
\nother things, that such Principal Stockholders shall vote the shares of Target’s
\nCommon Stock owned by such person to approve the Merger and against any
\ncompeting proposals.<\/p>\n
F. In addition, as an inducement to Acquiror to enter into this
\nAgreement certain key employees of Target (listed on SCHEDULE 6.3) (“Key Target
\nEmployeees”) have agreed to enter into a new Waiver Agreement.<\/p>\n
NOW, THEREFORE, in consideration of the covenants and representations
\nset forth herein, and for other good and valuable consideration, the parties
\nagree as follows:<\/p>\n
ARTICLE I<\/p>\n
THE MERGER
\n ———-<\/p>\n
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2)
\nand subject to and upon the terms and conditions of this Agreement, the
\nCertificate of Merger attached hereto as EXHIBIT A (the “Certificate of Merger”)
\nand the applicable provisions of the Delaware General Corporation Law (“Delaware
\nLaw”), Merger Sub shall be merged with and into Target, the separate corporate
\nexistence of Merger Sub shall cease and Target shall continue as the surviving
\ncorporation and as a wholly owned subsidiary of the Acquiror. Target as the
\nsurviving corporation after the Merger is hereinafter sometimes referred to as
\nthe “Surviving Corporation.”<\/p>\n
1.2 CLOSING; EFFECTIVE TIME. Unless the Agreement is earlier
\nterminated pursuant to Article VII, the closing of the transactions contemplated
\nhereby (the “Closing”) will take place as soon as practicable after the
\nsatisfaction or waiver of each of the conditions set forth in Article VI hereof,
\nbut in any event no later than April 30, 2000 (the date on which the Closing
\nshall occur, the “Closing Date”). The Closing shall take place at the offices of
\nGunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, 155 Constitution
\nDrive, Menlo Park, California 94025. On the Closing Date, the parties hereto
\nshall cause the Merger to be consummated by filing the Certificate of Merger
\nwith the Secretary of State of the State of Delaware, in accordance with the
\nrelevant provisions of Delaware Law (the time and date of such filing being the
\n“Effective Time” and the “Effective Date,” respectively).<\/p>\n
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
\nMerger shall be as provided in this Agreement, the Certificate of Merger and the
\napplicable provisions of Delaware Law. Without limiting the generality of the
\nforegoing, and subject thereto, at the Effective Time, all the property, rights,
\nprivileges, powers and franchises of Target shall vest in the Surviving
\nCorporation, and all debts, liabilities and duties of Target shall become the
\ndebts, liabilities and duties of the Surviving Corporation.<\/p>\n
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.<\/p>\n
(a) At the Effective Time, the Certificate of
\nIncorporation of Merger Sub, as in effect immediately prior to the Effective
\nTime, shall be the Certificate of Incorporation of the Surviving Corporation
\nuntil thereafter amended as provided by Delaware Law and such Certificate of
\nIncorporation; provided, however, that Article I of the Certificate of
\nIncorporation shall be amended to read as follows: “The name of the corporation
\nis Apache Merger Corporation.”<\/p>\n
(b) The Bylaws of Merger Sub, as in effect immediately
\nprior to the Effective Time, shall be the Bylaws of the Surviving Corporation
\nuntil thereafter amended.<\/p>\n
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the directors
\nof Merger Sub immediately prior to the Effective Time shall be the directors of
\nthe Surviving Corporation, to hold office until such time as such directors
\nresign, are removed or their respective successors are duly elected or appointed
\nand qualified. The officers of Merger Sub immediately prior to the Effective
\nTime shall be the officers of the Surviving Corporation, to hold office until
\nsuch time<\/p>\n
2<\/p>\n
as such officers resign, are removed or their respective successors are duly
\nelected or appointed and qualified.<\/p>\n
1.6 EFFECT ON CAPITAL STOCK. The total number of shares of
\nAcquiror Common Stock to be issued pursuant to this Agreement (“Total Acquiror
\nShares”) shall be determined pursuant to Section 1.6(b) below. Except as
\nprovided herein, no adjustment shall be made in the number of shares of Acquiror
\nCommon Stock issued in the Merger, including, without limitation, as a result of
\n(x) any increase or decrease in the market price of Acquiror Common Stock prior
\nto the Effective Time, or (y) any cash proceeds received by Target from the date
\nhereof to the Closing Date pursuant to the exercise of currently outstanding
\nTarget Options. By virtue of the Merger and without any action on the part of
\nAcquiror, Merger Sub, at the Effective Time, Target or the holders of any of
\nTarget’s securities:<\/p>\n
(a) CONVERSION OF TARGET PREFERRED STOCK. Pursuant to the
\nTarget’s Certificate of Incorporation, all outstanding shares of Target
\nPreferred Stock (as defined below) shall convert into shares of Target Common
\nStock prior to the Effective Time;<\/p>\n
(b) ACQUIROR COMMON STOCK ISSUABLE. The Total Acquiror
\nShares to be issued pursuant to this Agreement shall include the following:<\/p>\n
(A) 8,300,000 shares of Acquiror Common Stock
\nshall be issued in respect of Currently Outstanding Target Shares (as defined
\nbelow); plus<\/p>\n
(B) a number of shares of Acquiror Common Stock
\nshall be issued in respect of Subsequently Issued Shares (as defined below)
\nequal to<\/p>\n
the number of Subsequently Issued Shares x 8,300,000
\n —————————————-
\n Currently Outstanding Target Shares.<\/p>\n
; plus<\/p>\n
(C) a number of shares of Acquiror Common Stock
\nshall be issued in respect of the Strategic Investment equal to<\/p>\n
$ amount of the aggregate Strategic Investment x 8,300,000
\n ———————————————-
\n $650 million<\/p>\n
(c) “CURRENTLY OUTSTANDING TARGET SHARES” shall be equal
\nto the sum of (i) the aggregate number of shares of Target Common Stock
\noutstanding as of immediately prior to the execution of this Agreement, (ii) the
\naggregate number of shares of Target Common Stock issuable, immediately prior to
\nthe execution of this Agreement, upon conversion of all of the shares of Target
\nPreferred Stock then outstanding pursuant to the terms of the Target Certificate
\nof Incorporation, (iii) the aggregate number of shares of Target Common Stock
\nissuable upon the exercise of any option, warrant, subscription or right to
\npurchase shares of Target Common Stock, whether or not contingent or earned,
\noutstanding immediately prior to the execution of this Agreement and (iv) the
\naggregate number of shares of Target Common Stock issuable pursuant to any other
\nagreement of Target to issue or grant any such shares, options, warrants,
\nsubscriptions or rights to purchase shares of Target Common Stock, whether or
\nnot contingent or earned, in effect immediately prior to the execution of this
\nAgreement;<\/p>\n
3<\/p>\n
(d) “SUBSEQUENTLY ISSUED SHARES” shall be equal to (A)
\nthe sum of (i) the aggregate number of shares of Target Common Stock outstanding
\nimmediately prior to the Effective Time, (ii) the aggregate number of shares of
\nTarget Common Stock issuable, immediately prior to the Effective Time, upon
\nconversion of all of the shares of Target Preferred Stock then outstanding
\npursuant to the terms of the Target Certificate of Incorporation, (iii) the
\naggregate number of shares of Target Common Stock issuable upon the exercise of
\nany option, warrant, subscription or right to purchase shares of Target Common
\nStock, whether or not contingent or earned, outstanding immediately prior to the
\nEffective Time and (iv) the aggregate number of shares of Target Common Stock
\nissuable pursuant to any other agreement of Target to issue or grant any such
\nshares, options, warrants, subscriptions or rights to purchase shares of Target
\nCommon Stock, whether or not contingent or earned, in effect immediately prior
\nto the Effective Time; minus (B) the sum of (i) the number of Currently
\nOutstanding Target Shares and (ii) the number of shares of Target Common Stock
\nto be issued in the Strategic Investment;<\/p>\n
(e) CONVERSION OF TARGET COMMON STOCK\/EXCHANGE RATIO. At
\nthe Effective Time, each Currently Outstanding Target Share, each Subsequently
\nIssued Share and each Target Share issued in respect of the Strategic Investment
\nshall be exchanged into the number of shares of Acquiror Common Stock determined
\nby dividing (i) the Total Acquiror Shares BY (ii) the number of Currently
\nOutstanding Target Shares, Subsequently Issued Shares and Target Shares issued
\nin respect of the Strategic Investment (the “Exchange Ratio”).<\/p>\n
(f) DISSENTING SHARES.<\/p>\n
(A) Notwithstanding any provision of this
\nAgreement to the contrary, any shares of Target Capital Stock held by a holder
\nwho has demanded and perfected appraisal or dissenters’ rights for such shares
\nin accordance with Delaware Law and who, as of the Effective Time, has not
\neffectively withdrawn or lost such appraisal or dissenters’ rights (“DISSENTING
\nSHARES”) shall not be converted into or represent a right to receive Acquiror
\nCommon Stock pursuant to Section 1.6, but the holder thereof shall only be
\nentitled to such rights as are granted by Delaware Law.<\/p>\n
(B) Notwithstanding the provisions of subsection
\n(a), if any holder of shares of Target Stock who demands appraisal of such
\nshares under Delaware Law shall effectively withdraw or lose (through failure to
\nperfect or otherwise) the right to appraisal, then, as of the later of the
\nEffective Time and the occurrence of such event, such holder’s shares shall
\nautomatically be converted into and represent only the right to receive the
\nAcquiror Common Stock and cash in lieu of fractional shares as provided in
\nSection 1.6, without interest thereon, upon surrender of the certificate
\nrepresenting such shares.<\/p>\n
(C) The Target shall give Acquiror (i) prompt
\nnotice of any written demands for appraisal of any shares of Target Stock,
\nwithdrawals of such demands, and any other instruments served pursuant to
\nDelaware Law and received by the Target and (ii) Target agrees that, except with
\nthe prior written consent of Acquiror, or as required under Delaware Law, it
\nwill not make any payment with respect to, or settle or offer to settle any
\nclaim, demand, or other liability with respect to any Dissenting Shares.<\/p>\n
4<\/p>\n
(g) CANCELLATION OF TARGET CAPITAL STOCK OWNED BY
\nACQUIROR OR TARGET. At the Effective Time, all shares of Target Capital Stock
\nthat are owned by Target as treasury stock, each share of Target Capital Stock
\nowned by Acquiror or any direct or indirect wholly owned subsidiary of Acquiror
\nor of Target immediately prior to the Effective Time shall be canceled and
\nextinguished without any conversion thereof.<\/p>\n
(h) TARGET STOCK OPTION PLANS. At the Effective Time, the
\nTarget Stock Option Plans (as defined below) and all options to purchase Target
\nCommon Stock then outstanding under the Target Stock Option Plans, whether or
\nnot exercisable, shall be assumed by Acquiror in accordance with Section 5.13.<\/p>\n
(i) TARGET WARRANTS. At the Effective Time, all
\noutstanding Target Warrants, whether or not exercisable, which do not terminate
\nby their terms shall be converted into warrants to acquire Acquiror Common Stock
\nin accordance with their terms.<\/p>\n
(j) CAPITAL STOCK OF MERGER SUB. At the Effective Time,
\neach share of Common Stock, $.01 par value, of Merger Sub (“Merger Sub Common
\nStock”), issued and outstanding immediately prior to the Effective Time shall be
\nconverted into and exchanged for one validly issued, fully paid and
\nnonassessable share of Common Stock, $.01 par value, of the Surviving
\nCorporation. Each stock certificate of Merger Sub evidencing ownership of any
\nsuch shares shall continue to evidence ownership of such shares of capital stock
\nof the Surviving Corporation.<\/p>\n
(k) ADJUSTMENTS TO EXCHANGE RATIO. The number of shares
\nto be issued pursuant to Section 1.6 shall be adjusted to reflect fully the
\neffect of any stock split, reverse split, stock dividend (including any dividend
\nor distribution of securities convertible into Acquiror Common Stock or Target
\nCapital Stock), reorganization, recapitalization or other like change with
\nrespect to Acquiror Common Stock or Target Capital Stock occurring after the
\ndate hereof and prior to the Effective Time.<\/p>\n
(l) FRACTIONAL SHARES. No fraction of a share of Acquiror
\nCommon Stock will be issued, but in lieu thereof each holder of shares of Target
\nCapital Stock who would otherwise be entitled to a fraction of a share of
\nAcquiror Common Stock (after aggregating all fractional shares of Acquiror
\nCommon Stock to be received by such holder) shall receive from Acquiror an
\namount of cash (rounded to the nearest whole cent) equal to the product of (i)
\nsuch fraction, multiplied by (ii) the average of the closing price for a share
\nof Acquiror Common Stock as quoted on the Nasdaq National Market for the twenty
\n(20) trading days immediately preceding and ending on the day before the Closing
\nDate (the “Closing Price”).<\/p>\n
1.7 SURRENDER OF CERTIFICATES.<\/p>\n
(a) EXCHANGE AGENT. Bank Boston, N.A. shall act as
\nexchange agent (the “Exchange Agent”) in the Merger.<\/p>\n
(b) ACQUIROR TO PROVIDE COMMON STOCK AND CASH. Promptly
\nafter the Effective Time, but in any event within three (3) business days,
\nAcquiror shall make available to the Exchange Agent for exchange in accordance
\nwith this Article I, through such reasonable procedures as Acquiror may adopt,
\n(i) the shares of Acquiror Common Stock issuable pursuant<\/p>\n
5<\/p>\n
to Section 1.6(a) in exchange for shares of Target Capital Stock outstanding
\nimmediately prior to the Effective Time less the number of shares of Acquiror
\nCommon Stock to be deposited into an escrow fund (the “Escrow Fund”) pursuant to
\nthe requirements of Article VIII hereof and (ii) cash in an amount sufficient to
\npermit payment of cash in lieu of fractional shares pursuant to Section 1.6(h).<\/p>\n
(c) EXCHANGE PROCEDURES. Promptly after the Effective
\nTime in any event no later than ten (10) business days after the Closing Date,
\nAcquiror shall cause to be mailed to each holder of record of a certificate or
\ncertificates (the “Certificates”) which immediately prior to the Effective Time
\nrepresented outstanding shares of Target Capital Stock, whose shares were
\nconverted into the right to receive shares of Acquiror Common Stock (and cash in
\nlieu of fractional shares) pursuant to Section 1.6, (i) a letter of transmittal
\n(which shall specify that delivery shall be effected, and risk of loss and title
\nto the Certificates shall pass, only upon receipt of the Certificates by the
\nExchange Agent, and shall be in such form and have such other customary
\nprovisions as Acquiror may reasonably specify) and (ii) instructions for use in
\neffecting the surrender of the Certificates in exchange for certificates
\nrepresenting shares of Acquiror Common Stock (and cash in lieu of fractional
\nshares). Upon surrender of a Certificate for cancellation to the Exchange Agent
\nor to such other agent or agents as may be appointed by Acquiror, together with
\nsuch letter of transmittal, duly completed and validly executed in accordance
\nwith the instructions thereto, the holder of such Certificate shall be entitled
\nto receive in exchange therefor a certificate representing the number of whole
\nshares of Acquiror Common Stock less the number of shares of Acquiror Common
\nStock to be deposited in the Escrow Fund on such holder’s behalf pursuant to
\nArticle VIII hereof and payment in lieu of fractional shares which such holder
\nhas the right to receive pursuant to Section 1.6, and the Certificate so
\nsurrendered shall forthwith be canceled. Until so surrendered, each outstanding
\nCertificate that, prior to the Effective Time, represented shares of Target
\nCapital Stock will be deemed from and after the Effective Time, for all
\ncorporate purposes, other than the payment of dividends, to evidence the
\nownership of the number of full shares of Acquiror Common Stock into which such
\nshares of Target Capital Stock shall have been so converted and the right to
\nreceive an amount in cash in lieu of the issuance of any fractional shares in
\naccordance with Section 1.6. As soon as practicable after the Effective Time,
\nand subject to and in accordance with the provisions of Section 8.3 hereof,
\nAcquiror shall cause to be delivered to the Escrow Agent (as defined in Section
\n8.3 hereof) a certificate or certificates representing ten percent (10%) of
\nAcquiror Common Stock to be issued pursuant to Sections 1.6 (b)(A) and (B)
\n(“Escrow Shares”) which shall be registered in the name of the Escrow Agent as
\nnominee for the holders of Certificates cancelled pursuant to this Section 1.7.
\nSuch shares shall be beneficially owned by such holders and shall be held in
\nescrow and shall be available to compensate Acquiror for certain damages as
\nprovided in Article VIII. To the extent not used for such purposes, such shares
\nshall be released, all as provided in Article VIII hereof.<\/p>\n
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
\ndividends or other distributions with respect to Acquiror Common Stock with a
\nrecord date after the Effective Time shall be paid to the holder of any
\nunsurrendered Certificate with respect to the shares of Acquiror Common Stock
\nrepresented thereby until the holder of record of such Certificate surrenders
\nsuch Certificate. Subject to applicable law, following surrender of any such
\nCertificate, there shall be paid to the record holder of the certificates
\nrepresenting whole shares of Acquiror Common Stock issued in exchange therefor,
\nwithout interest, at the time of such surrender, the amount of<\/p>\n
6<\/p>\n
any such dividends or other distributions with a record date after the Effective
\nTime which would have been previously payable (but for the provisions of this
\nSection 1.7(d)) with respect to such shares of Acquiror Common Stock.<\/p>\n
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares
\nof Acquiror Common Stock is to be issued in a name other than that in which the
\nCertificate surrendered in exchange therefor is registered, it shall be a
\ncondition of the issuance thereof that the Certificate so surrendered is
\nproperly endorsed and otherwise in proper form for transfer and that the person
\nrequesting such exchange will have paid to Acquiror or any agent designated by
\nit any transfer or other taxes required by reason of the issuance of a
\ncertificate for shares of Acquiror Common Stock in any name other than that of
\nthe registered holder of the Certificate surrendered, or established to the
\nsatisfaction of Acquiror or any agent designated by it that such tax has been
\npaid or is not payable.<\/p>\n
(f) NO LIABILITY. Notwithstanding anything to the
\ncontrary in this Section 1.7, none of the Exchange Agent, the Surviving
\nCorporation or any party hereto shall be liable to any person for any amount
\nproperly paid to a public official pursuant to any applicable abandoned
\nproperty, escheat or similar law.<\/p>\n
(g) DISSENTING SHARES. The provisions of this Section 1.7
\nshall also apply to Dissenting Shares that lose their status as such, except
\nthat the obligations of Acquiror under this Section 1.7 shall commence on the
\ndate of loss of such status and the holder of such shares shall be entitled to
\nreceive in exchange for such shares the number of shares of Acquiror Common
\nStock to which such holder is entitled pursuant to Section 1.6 hereof.<\/p>\n
1.8 NO FURTHER OWNERSHIP RIGHTS IN TARGET CAPITAL STOCK. All
\nshares of Acquiror Common Stock issued upon the surrender for exchange of shares
\nof Target Capital Stock in accordance with the terms hereof (including any cash
\npaid in lieu of fractional shares) shall be deemed to have been issued in full
\nsatisfaction of all rights pertaining to such shares of Target Capital Stock,
\nand there shall be no further registration of transfers on the records of the
\nSurviving Corporation of shares of Target Capital Stock which were outstanding
\nimmediately prior to the Effective Time. If, after the Effective Time,
\nCertificates are presented to the Surviving Corporation for any reason, they
\nshall be canceled and exchanged as provided in this Article I.<\/p>\n
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
\nCertificates shall have been lost, stolen or destroyed, the Exchange Agent shall
\nissue in exchange for such lost, stolen or destroyed Certificates, upon the
\nmaking of an affidavit of that fact by the holder thereof, such shares of
\nAcquiror Common Stock (and cash in lieu of fractional shares) as may be required
\npursuant to Section 1.6; provided, however, that Acquiror may, in its discretion
\nand as a condition precedent to the issuance thereof, require the owner of such
\nlost, stolen or destroyed Certificates to deliver a bond in such sum as it may
\nreasonably direct as indemnity against any claim that may be made against
\nAcquiror, the Surviving Corporation or the Exchange Agent with respect to the
\nCertificates alleged to have been lost, stolen or destroyed.<\/p>\n
1.10 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
\nhereto that the Merger shall constitute a reorganization within the meaning of
\nSection 368 of the Code. No<\/p>\n
7<\/p>\n
party shall take any action which would, to such party’s knowledge, cause the
\nMerger to fail to qualify as a reorganization within the meaning of Section 368
\nof the Code.<\/p>\n
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time
\nafter the Effective Time, any further action is necessary or desirable to carry
\nout the purposes of this Agreement and to vest the Surviving Corporation with
\nfull right, title and possession to all assets, property, rights, privileges,
\npowers and franchises of Target, the officers and directors of Target and Merger
\nSub are fully authorized in the name of their respective corporations or
\notherwise to take, and shall take, all such lawful and necessary action, so long
\nas such action is not inconsistent with this Agreement.<\/p>\n
1.12 WAIVER AGREEMENTS. As of the date hereof, the Key Target
\nEmployees identified on Schedule 6.3 shall have entered into waiver agreements
\nsubstantially in the form of EXHIBIT F attached hereto.<\/p>\n
ARTICLE II<\/p>\n
REPRESENTATIONS AND WARRANTIES OF TARGET<\/p>\n
Target represents and warrants to Acquiror and Merger Sub that the
\nstatements contained in this Article II are true and correct, except as set
\nforth in the disclosure letter delivered by Target to Acquiror prior to the
\nexecution and delivery of this Agreement (the “Target Disclosure Letter”). The
\nTarget Disclosure Letter shall be arranged in paragraphs corresponding to the
\nnumbered and lettered paragraphs contained in this Article II. Any reference in
\nthis Article II to an agreement being “enforceable” shall be deemed to be
\nqualified to the extent such enforceability is subject to (i) laws of general
\napplication relating to bankruptcy, insolvency, moratorium and the relief of
\ndebtors, and (ii) the availability of specific performance, injunctive relief
\nand other equitable remedies. In the remainder of this Article II, “Target” will
\nbe deemed to include (and each representation and warranty will apply separately
\nand collectively to) Target and each of Target’s subsidiaries, unless the
\ncontext otherwise requires.<\/p>\n
2.1 ORGANIZATION, STANDING AND POWER. Target is a corporation duly
\norganized, validly existing and in good standing under the laws of its
\njurisdiction of organization. Target has the corporate power to own its
\nproperties and to carry on its business as now being conducted and as proposed
\nto be conducted and is duly qualified to do business and is in good standing in
\neach jurisdiction in which the failure to be so qualified and in good standing
\nwould have a Material Adverse Effect (as defined in Section 9.2) on Target.
\nTarget has delivered to Acquiror a true and correct copy of the Certificate of
\nIncorporation and Bylaws of Target, each as amended to date. Target is not in
\nviolation of any of the provisions of its Certificate of Incorporation or
\nBylaws. Target is the owner of all outstanding shares of capital stock of each
\nof its subsidiaries and all such shares are duly authorized, validly issued,
\nfully paid and nonassessable. All of the outstanding shares of capital stock of
\neach such subsidiary are owned by Target free and clear of any liens, charges,
\nclaims or encumbrances or rights of others. There are no outstanding
\nsubscriptions, options, warrants, puts, calls, rights, exchangeable or
\nconvertible securities or other commitments or agreements of any character
\nrelating to the issued or unissued capital stock or other securities of any such
\nsubsidiary, or otherwise obligating Target or any such subsidiary to issue,
\ntransfer, sell, purchase, redeem or otherwise acquire any<\/p>\n
8<\/p>\n
such securities. Target does not directly or indirectly own any equity or
\nsimilar interest in, or any interest convertible or exchangeable or exercisable
\nfor, any equity or similar interest in, any corporation, partnership, joint
\nventure or other business association or entity.<\/p>\n
2.2 CAPITAL STRUCTURE. The authorized capital stock of Target
\nconsists of 30,000,000 shares of Common Stock and 10,000,000 shares of Preferred
\nStock, of which there were issued and outstanding as of the date of this
\nAgreement, 5,342,713 shares of Common Stock, 119,965 shares of Series A-1
\nPreferred Stock (the “Series A-1 Preferred”), 92,500 shares of Series A-2
\nPreferred Stock (the “Series A-2 Preferred”) and 45,000 shares of Series A-3
\nPreferred Stock (the “Series A-3 Preferred” and together with the Series A-1
\nPreferred and Series A-2 Preferred, the “Series A Preferred”), 566,658 shares of
\nSeries B Preferred Stock (the “Series B Preferred”) and 8,284,651 shares of
\nSeries C Preferred Stock (the “Series C Preferred,” together with the Series A
\nPreferred and Series B Preferred, the “Target Preferred Stock”). There are no
\nother outstanding shares of capital stock or voting securities and no
\noutstanding commitments to (i) issue any shares of capital stock or voting
\nsecurities after the date of this Agreement other than pursuant to the exercise
\nof options outstanding as of the date of this Agreement under the Target Stock
\nOption Plan, (ii) Target Warrants or (iii) pursuant to the Strategic Investment
\n(as defined below). All outstanding shares of Target Capital Stock are duly
\nauthorized, validly issued, fully paid and non-assessable and are free of any
\nliens or encumbrances other than any liens or encumbrances created by or imposed
\nupon the holders thereof, and except as set forth in that certain Fourth Amended
\nand Restated Stockholders’ Agreement dated as of July 19, 1999 by and among
\nTarget and the other parties thereto (“Target Stockholders Agreement”) are not
\nsubject to preemptive rights, rights of first refusal, rights of first offer or
\nsimilar rights created by statute, the Certificate of Incorporation or Bylaws of
\nTarget or any agreement to which Target is a party or by which it is bound. As
\nof the date of this Agreement, Target has reserved (i) 2,059,720 shares of
\nCommon Stock for issuance upon conversion of the Series A Preferred, (ii)
\n4,533,265 shares of Common Stock for issuance upon conversion of the Series B
\nPreferred, (iii) 8,450,322 shares of Common Stock for issuance upon conversion
\nof the Series C Preferred, (iv) 4,568,250 shares of Common Stock for issuance to
\nemployees, directors and consultants pursuant to the Target’s 1997 Employee
\nStock Option Plan, Target’s 1997 Non-Employee Stock Option Plan and the Target’s
\n1999 Employee Stock Option\/Issuance Plan (together, “Target Stock Option
\nPlans”), (of which 423,500 shares have been issued pursuant to option exercises
\nor direct stock purchases, and 3,217,450 shares are subject to outstanding,
\nunexercised options), (v) 91,248 shares issuable upon exercise of the Target
\nWarrants, (vi) 409,127 shares of Common Stock for issuance under stock option
\nagreements and warrants (in addition to those set forth in the preceding
\nsentence) and (vii) 165,671 shares of Series C Preferred for issuance under
\ncertain bridge warrants issued on February 26, 1999. Except for (i) the rights
\ncreated pursuant to this Agreement, (ii) Target’s right to repurchase any
\nunvested shares under each of the Target Stock Option Plans, and (iii) the
\nrights under Target Warrants, there are no other options, warrants, calls,
\nrights, commitments or agreements of any character to which Target is a party or
\nby which it is bound obligating Target to issue, deliver, sell, repurchase or
\nredeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
\nshares of Target Capital Stock or obligating Target to grant, extend, accelerate
\nthe vesting of, change the price of, or otherwise amend or enter into any such
\noption, warrant, call, right, commitment or agreement. There are no contracts,
\ncommitments or agreements relating to the voting, purchase or sale of Target
\nCapital Stock (i) between or among Target and any of its stockholders and (ii)
\nto the best of Target’s knowledge, among any of Target’s stockholders or between
\nany of Target’s stockholders and any<\/p>\n
9<\/p>\n
third party, except for the stockholders delivering the Stockholder Agreement
\nand those stockholders of Target who are parties to the Target Stockholders
\nAgreement. The terms of the Target Stock Option Plans permit the assumption of
\nsuch Target Stock Option Plans by Acquiror provided in this Agreement, without
\nthe consent or approval of the holders of the outstanding options, the Target
\nstockholders, or otherwise and without any acceleration of the exercise schedule
\nor vesting provisions in effect for such options. True and complete copies of
\nall agreements and instruments relating to or issued under the Target Stock
\nOption Plans have been made available to Acquiror, and such agreements and
\ninstruments have not been amended, modified or supplemented, and there are no
\nagreements to amend, modify or supplement such agreements or instruments from
\nthe form made available to Acquiror. All outstanding shares of Target Capital
\nStock and options to purchase shares of Target Capital Stock were issued in
\ncompliance with all applicable federal and state securities laws.<\/p>\n
2.3 AUTHORITY.<\/p>\n
(a) Target has all requisite corporate power and
\nauthority to enter into this Agreement and the Escrow Agreement (collectively,
\nthe “Transaction Documents”) and to consummate the transactions contemplated
\nhereby and thereby. The execution and delivery this Agreement and the other
\nTransaction Documents and the consummation of the transactions contemplated
\nhereby and thereby have been duly authorized by all necessary corporate action
\non the part of Target, subject only to the approval of the Merger by Target’s
\nstockholders as contemplated by Section 6.1(a). This Agreement and the other
\nTransaction Documents have been duly executed and delivered by Target, assuming
\nthe due authorization, execution and delivery by the other parties hereto and
\nthereto, and constitute the valid and binding obligations of Target enforceable
\nagainst Target in accordance with their terms.<\/p>\n
(b) Each subsidiary of Target has been duly incorporated,
\nis validly existing as a corporation in good standing under the laws of the
\njurisdiction of its incorporation, has the corporate power and authority to own
\nits property and to conduct its business and is duly qualified to transact
\nbusiness and is in good standing in each jurisdiction in which the failure to be
\nso qualified and in good standing would have a Material Adverse Effect on such
\nsubsidiary of the Target. Attached hereto as SCHEDULE 2.3 is a list of each
\nsubsidiary of Target.<\/p>\n
(c) The execution and delivery of this Agreement and the
\nother Transaction Documents by Target do not, and the consummation of the
\ntransactions contemplated hereby and thereby will not, conflict with, or result
\nin any violation of, or default under (with or without notice or lapse of time,
\nor both), or give rise to a right of termination, cancellation or acceleration
\nof any obligation or loss of any benefit under (i) any provision of the
\nCertificate of Incorporation or Bylaws of Target, as amended, (ii) any Material
\nContract (as defined in Section 2.25), permit, concession, franchise, license,
\njudgment, orders or decree, or (iii) to Target’s knowledge, any statute, law,
\nordinance, rule or regulation applicable to Target or any of its properties or
\nassets subject to obtaining the approval and adoption of the Agreement and the
\nMerger by the stockholders of Target and compliance with the requirements of
\nsubsection (d) below.<\/p>\n
(d) No consent, approval, order or authorization of, or
\nregistration, declaration or filing with, any court, administrative agency or
\ncommission or other governmental authority or instrumentality (“Governmental
\nEntity”) is required to be obtained or made by or with respect<\/p>\n
10<\/p>\n
to Target in connection with the execution and delivery of this Agreement and
\nthe other Transaction Documents or the consummation of the transactions by
\nTarget contemplated hereby or thereby, except for (i) the filing of the
\nCertificate of Merger, as provided in Section 1.2; (ii) such consents,
\napprovals, orders, authorizations, registrations, declarations and filings as
\nmay be required under applicable federal or state securities laws and the
\nsecurities laws of any foreign country; (iii) such filings as may be required
\nunder the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
\n(“HSR”); (iv) the filing of an application for qualification by permit with the
\nCalifornia Department of Corporations pursuant to Section 5.2 hereof or a
\nRegistration Statement to the extent such permit is not issued, and (iv) such
\nother consents, authorizations, filings, approvals and registrations which, if
\nnot obtained or made, would not have a Material Adverse Effect on Target and
\nwould not prevent, materially alter or delay any of the transactions
\ncontemplated by this Agreement or the other Transaction Documents.<\/p>\n
2.4 FINANCIAL STATEMENTS. Target has delivered to Acquiror its
\naudited financial statements (balance sheet, statement of operations, statement
\nof stockholders’ equity and statement of cash flows) for the fiscal year ended
\nMarch 31, 1999 and its unaudited financial statements (balance sheet, statement
\nof operations, statement of stockholders’ equity and statement of cash flows) on
\na consolidated basis as at, and for the seven (7) month period ended October 31,
\n1999 (collectively, the “Financial Statements”). The Financial Statements have
\nbeen prepared in accordance with generally accepted accounting principles as in
\neffect on the date hereof (“GAAP”) (except that the unaudited financial
\nstatements do not have notes thereto) applied on a consistent basis throughout
\nthe periods indicated and with each other including without limitation
\ncompliance with the revenue recognition standards contained in SOP 97-02. The
\nFinancial Statements fairly present the financial condition and operating
\nresults of Target as of the dates, and for the periods, indicated therein,
\nsubject, in the case of the unaudited financial statements, to normal year-end
\naudit adjustments which are not material in the aggregate. Target maintains a
\nstandard system of accounting established and administered in accordance with
\nGAAP.<\/p>\n
2.5 ABSENCE OF CERTAIN CHANGES. Since October 31, 1999, (the
\n“Target Balance Sheet Date”), Target has conducted its business in the ordinary
\ncourse consistent with past practice and there has not occurred: (i) any change,
\nevent or condition (whether or not covered by insurance) that has resulted in,
\nor might reasonably be expected to result in, a Material Adverse Effect on
\nTarget; (ii) any acquisition, sale or transfer of any material asset of Target;
\n(iii) any change in accounting methods or practices (including any change in
\ndepreciation or amortization policies or rates) by Target or any revaluation by
\nTarget of any of its assets; (iv) any declaration, setting aside, or payment of
\na dividend or other distribution with respect to the shares of Target, or any
\ndirect or indirect redemption, purchase or other acquisition by Target of any of
\nits shares of capital stock; (v) any Material Contract entered into by Target,
\nother than as set forth in Schedule 2.27 or any material amendment or
\ntermination of, or default under, any Material Contract to which Target is a
\nparty or by which it is bound; (vi) any amendment or change to the Certificate
\nof Incorporation or Bylaws of Target; (vii) any increase in or modification of
\nthe compensation or benefits payable or to become payable by Target to any of
\nits directors, employees or consultants other than stock options granted to
\nTarget employees in the ordinary course of business consistent with past
\npractices; or (viii) any negotiation or agreement by Target to do any of the
\nthings described in the preceding clauses (i) through (vii) (other than<\/p>\n
11<\/p>\n
negotiations with Acquiror and its representatives regarding the transactions
\ncontemplated by this Agreement).<\/p>\n
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Target has no material
\nobligations or liabilities of any nature (matured or unmatured, fixed or
\ncontingent) other than (i) those set forth or adequately provided for in the
\nBalance Sheet as of the Target Balance Sheet Date (the “Target Balance Sheet”),
\n(ii) those incurred in the ordinary course of business prior to the Target
\nBalance Sheet Date and not required to be set forth in the Target Balance Sheet
\nunder GAAP, (iii) those incurred in the ordinary course of business since the
\nTarget Balance Sheet Date in amounts consistent with prior periods, and (iv)
\nthose incurred in connection with the execution of this Agreement.<\/p>\n
2.7 ACCOUNTS RECEIVABLE. The accounts receivable shown on the
\nTarget Balance Sheet arose in the ordinary course of business and have been
\ncollected or are collectible in the book amounts thereof, less the allowance for
\ndoubtful accounts and returns provided for in such balance sheet. Allowances for
\ndoubtful accounts and returns are adequate and have been prepared in accordance
\nwith GAAP and consistent with past practices. The accounts receivable of Target
\narising after the date of the Target Balance Sheet and prior to the date hereof
\narose, and the accounts receivable arising prior to the Effective Time will
\narise, in the ordinary course of business and have been collected or are
\ncollectible in the book amounts thereof, less allowances for doubtful accounts
\nand returns determined in accordance with GAAP and consistent with past
\npractices. None of the accounts receivable are subject to any material claim of
\noffset or recoupment, or counterclaim and Target has no knowledge of any
\nspecific facts that would be reasonably likely to give rise to any such claim.
\nNo material amount of accounts receivable are contingent upon the performance by
\nTarget of any obligation. No agreement for deduction or discount has been made
\nwith respect to any accounts receivable.<\/p>\n
2.8 LITIGATION. There is no private or governmental action, suit,
\nproceeding, claim, arbitration or investigation pending before any agency, court
\nor tribunal, foreign or domestic, or, to the knowledge of Target, threatened
\n(including allegations that could form the basis for future action) against
\nTarget or any of its properties or officers or directors (in their capacities as
\nsuch), nor does Target have any reason to expect that any such activity, threat
\nor allegation will be forthcoming. There is no judgment, decree or order against
\nTarget, or, to the knowledge of Target, any of its directors or officers (in
\ntheir capacities as such), that could prevent, enjoin, or materially alter or
\ndelay any of the transactions contemplated by this Agreement, or that could
\nreasonably be expected to have a Material Adverse Effect on Target. All
\nlitigation to which Target is a party (or, to the knowledge of Target,
\nthreatened to become a party) is disclosed in the Target Disclosure Letter.
\nTarget does not have any plans to initiate any litigation, arbitration or other
\nproceeding against any third party.<\/p>\n
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
\njudgment, injunction, order or decree binding upon Target that has or could
\nreasonably be expected to have the effect of prohibiting or impairing any
\ncurrent or future business practice of Target, any acquisition of property by
\nTarget or the conduct of business by Target as currently conducted or as
\nproposed to be conducted by Target.<\/p>\n
12<\/p>\n
2.10 GOVERNMENTAL AUTHORIZATION. Target has obtained each federal,
\nstate, county, local or foreign governmental consent, license, permit, grant, or
\nother authorization of a Governmental Entity that is required for the operation
\nof Target’s business or the holding of any such interest in any of its
\nproperties (“Target Authorizations”), and all of such Target Authorizations are
\nin full force and effect, except where the failure to obtain or have any such
\nTarget Authorizations could not reasonably be expected to have a Material
\nAdverse Effect on Target.<\/p>\n
2.11 TITLE TO PROPERTY. Target has good and marketable title to all
\nof its properties, interests in properties and assets, real and personal,
\nnecessary for the conduct of its business as presently conducted or which are
\nreflected in the Target Balance Sheet or acquired after the Target Balance Sheet
\nDate (except properties, interests in properties and assets sold or otherwise
\ndisposed of in the ordinary course of business since the Target Balance Sheet
\nDate), or with respect to leased properties and assets, valid leasehold
\ninterests therein, in each case free and clear of all mortgages, liens, pledges,
\ncharges or encumbrances of any kind or character, except (i) the lien of current
\ntaxes not yet due and payable, (ii) liens securing debt that are reflected on
\nthe Target Balance Sheet and (iii) imperfections of title and encumbrances, if
\nany, which are not material in character or amount. The plants, property and
\nequipment of Target that are used in the operations of its business are in good
\noperating condition and repair, reasonable wear and tear excepted. All
\nproperties used in the operations of Target are reflected in the Target Balance
\nSheet to the extent GAAP require the same to be reflected. SCHEDULE 2.11
\nidentifies each interest of real property owned by Target.<\/p>\n
2.12 INTELLECTUAL PROPERTY.<\/p>\n
(a) Target owns or is licensed for, and in any event
\npossesses sufficient and legally enforceable rights with respect to, all
\nIntellectual Property (defined below) that is (or is proposed to be) used,
\nexercised, or exploited (“Used”) in, or that may be necessary for, its business
\nas currently conducted or as proposed to be conducted (“Target Intellectual
\nProperty,” which term will also include all other Intellectual Property owned by
\nor licensed to Target now or in the past) without any conflict with or
\ninfringement or misappropriation of any rights or property of others
\n(“Infringement”). Such ownership, licenses and rights are exclusive (A) except
\nwith respect to Inventions (defined below) in the public domain that are not
\nimportant differentiators of Target’s business or proposed business and (B)
\nexcept with respect to standard, generally commercially available,
\n“off-the-shelf” third party products that are not part of any current or
\nproposed product, service or Intellectual Property offering of Target. No Target
\nIntellectual Property (excluding Intellectual Property licensed to Target only
\non a nonexclusive basis) was conceived or developed directly or indirectly with
\nor pursuant to government funding or a government contract. “Intellectual
\nProperty” means (i) inventions (whether or not patentable); trade names, trade
\nmarks, service marks, logos and other designations (“Marks”); works of
\nauthorship; mask works; data; technology, know-how, trade secrets, ideas and
\ninformation; designs; formulas; algorithms; processes; schematics; computer
\nsoftware (in source code and\/or object code form); and all other intellectual
\nand industrial property of any sort (“Inventions”) and (ii) patent rights; Mark
\nrights; copyrights; mask work rights; SUI GENERIS database rights; trade secret
\nrights; moral rights; and all other intellectual and industrial property rights
\nof any sort throughout the world, and all applications, registrations, issuances
\nand the like with respect thereto (“IP Rights”). All copyrightable matter within
\nTarget Intellectual Property<\/p>\n
13<\/p>\n
has been created by persons who were employees of Target at the time of creation
\nand no third party has or will have “moral rights” or rights to terminate any
\nassignment or license with respect THERETO. Target has not received any
\ncommunication alleging or suggesting that or questioning whether Target has been
\nor may be (whether in its current or proposed business or otherwise) engaged in,
\nliable for or contributing to any Infringement, nor does Target have any reason
\nto expect that any such communication will be forthcoming.<\/p>\n
(b) To the extent included in Target Intellectual
\nProperty, SCHEDULE 2.12 lists (by name, number, jurisdiction, owner and, where
\napplicable, the name and address of each inventor) all patents and patent
\napplications; all registered and unregistered Marks; and all registered and, if
\nmaterial, unregistered copyrights and mask works; and all other issuances,
\nregistrations, applications and the like with respect to those or any other IP
\nRights. No cancellation, termination, expiration or abandonment of any of the
\nforegoing (except natural expiration or termination at the end of the full
\npossible term, including extensions and renewals) is anticipated by Target.
\nTarget is not aware of any questions or challenges (or any specific basis
\ntherefor) with respect to the validity of any of the foregoing issued or
\nregistered IP Rights (or any part or claim thereof) or with respect to the
\npatentability of any claim of any of the foregoing patent applications.<\/p>\n
(c) There is, to the knowledge of Target, no unauthorized
\nUse, disclosure, infringement or misappropriation of any Target Intellectual
\nProperty by any third party, including, without limitation, any employee or
\nformer employee of Target.<\/p>\n
(d) Target has taken all necessary and appropriate steps
\nto protect and preserve the confidentiality of all Target Intellectual Property
\nthat is not otherwise disclosed in published patents or patent applications or
\nregistered copyrights (“Target Confidential Information”). All use by and
\ndisclosure to employees or others of Target Confidential Information has been
\npursuant to the terms of valid and binding written confidentiality and
\nnonuse\/restricted-use agreements. Except as set forth in SCHEDULE 2.12, Target
\nhas not disclosed or delivered to any third party, or permitted the disclosure
\nor delivery to any escrow holder or other person any part of any Source
\nMaterials (defined in Section 2.25(m)).<\/p>\n
(e) Each current and former employee and contractor of
\nTarget has executed and delivered (and to the knowledge of Target is in
\ncompliance with) an enforceable agreement in substantially the form of Target’s
\nstandard Proprietary Information and Inventions Agreement (in the case of an
\nemployee) or Target’s standard Consulting Agreement (in the case of a
\ncontractor) which agreement provides valid written assignments of all title and
\nrights to any Target Intellectual Property conceived or developed thereunder, or
\notherwise in connection with his or her consulting or employment, but not
\nalready owned by Target by operation of law.<\/p>\n
(f) To Target’s knowledge, Target is not Using, and it
\nwill not be necessary to Use, (i) any Inventions of any of its past or present
\nemployees or contractors (or people currently intended to be hired) made prior
\nto or outside the scope of their employment by Target or (ii) any confidential
\ninformation or trade secrets of any former employer of any such person.<\/p>\n
(g) Target represents and warrants that the following are
\nYear 2000 Compliant (as defined below): (1) Target’s internal software,
\nfirmware, hardware, systems and<\/p>\n
14<\/p>\n
similar technology, whether created by Target or acquired from third parties,
\n(2) all products currently offered by Target for sale, license, sublicense,
\ndistribution, sub-distribution, resale or use by third parties, whether created
\nby Target or acquired from third parties, and (3) all products sold,
\nsublicensed, distributed or otherwise delivered by Target to a third party prior
\nto the Effective Date. “Year 2000 Compliant” means the ability of software,
\nfirmware, hardware, systems and similar technology to provide all of the
\nfollowing functions: (i) handle date information before, during and after
\nJanuary 1, 2000, including but not limited to properly accounting for leap
\nyears, accepting date input, providing date output, and performing calculations
\non dates or portions of dates; (ii) function accurately and without interruption
\nbefore, during and after January 1, 2000, without any change in operations
\nassociated with the advent of the new century; (iii) respond to two-digit
\nyear-date input in a way that resolves the ambiguity as to century in a
\ndisclosed, defined and predetermined manner; and (iv) store and provide output
\nof date information in ways that are unambiguous as to century.<\/p>\n
2.13 ENVIRONMENTAL MATTERS. Target is and has at all times operated
\nits business in material compliance with all Environmental Laws and to the best
\nof Target’s knowledge, no material expenditures are or will be required in order
\nto comply with such Environmental Laws. “Environmental Laws” means all
\napplicable statutes, rules, regulations, ordinances, orders, decrees, judgments,
\npermits, licenses, consents, approvals, authorizations, and governmental
\nrequirements or directives or other obligations lawfully imposed by governmental
\nauthority under federal, state or local law pertaining to the protection of the
\nenvironment, protection of public health, protection of worker health and
\nsafety, the treatment, emission and\/or discharge of gaseous, particulate and\/or
\neffluent pollutants, and\/or the handling of hazardous materials, including
\nwithout limitation, the Clean Air Act, 42 U.S.C. Section 7401, et seq., the
\nComprehensive Environmental Response, Compensation and Liability Act of 1980
\n(“CERCLA”), 42 U.S.C. Section 9601, et seq., the Federal Water Pollution Control
\nAct, 33 U.S.C. Section 1321, et seq., the Hazardous Materials Transportation
\nAct, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery
\nAct, 42 U.S.C. Section 6901, et seq. (“RCRA”), and the Toxic Substances Control
\nAct, 15 U.S.C. Section 2601, et seq.<\/p>\n
2.14 TAXES.<\/p>\n
(a) All Tax returns, statements, reports, declarations
\nand other forms and documents (including without limitation estimated Tax
\nreturns and reports and material information statements, returns and reports)
\nrequired to be filed with any Tax authority with respect to any Taxable period
\nending on or before the Effective Time, by or on behalf of Target (collectively,
\n“Tax Returns” and individually a “Tax Return”), have been or will be completed
\nand filed when due (including any extensions of such due date) and all amounts
\nshown due on such Tax Returns on or before the Effective Time have been or will
\nbe paid on or before such date. The Target Balance Sheet (i) fully accrues all
\nactual and contingent liabilities for Taxes with respect to all periods through
\nthe Target Balance Sheet Date, and Target has not and will not incur any Tax
\nliability in excess of the amount reflected on such Target Balance Sheet with
\nrespect to such periods (excluding any amount thereof that reflects timing
\ndifferences between the recognition of income for purposes of GAAP and for Tax
\npurposes), and (ii) properly accrues in accordance with GAAP all material
\nliabilities for Taxes payable after the Target Balance Sheet Date with respect
\nto all transactions and events occurring on or prior to such date. All
\ninformation set forth in the notes to the Target Financial Statements relating
\nto Tax matters is<\/p>\n
15<\/p>\n
true, complete and accurate in all material respects. No material Tax liability
\nsince the Target Balance Sheet Date has been or will be incurred by Target other
\nthan in the ordinary course of business, and adequate provision has been made by
\nTarget for all Taxes since that date in accordance with GAAP on at least a
\nquarterly basis.<\/p>\n
(b) Target has previously provided or made available to
\nAcquiror true and correct copies of all Tax Returns. Target has withheld and
\npaid to the applicable financial institution or Tax authority all amounts
\nrequired to be withheld. To the best knowledge of Target, Tax Returns filed with
\nrespect to Taxable years of Target through the Taxable year ended March 31, 1998
\nin the case of the United States, have been examined and closed. Target (or any
\nmember of any affiliated or combined group of which Target has been a member)
\nhas not granted any extension or waiver of the limitation period applicable to
\nany Tax Returns that is still in effect. There is no material claim, audit,
\naction, suit, proceeding, or (to the knowledge of Target) investigation now
\npending or (to the knowledge of Target) threatened against or with respect to
\nTarget in respect of any Tax or assessment. No notice of deficiency or similar
\ndocument of any Tax authority has been received by Target, and there are no
\nliabilities for Taxes (including liabilities for interest, additions to Tax and
\npenalties thereon and related expenses) with respect to the issues that have
\nbeen raised (and are currently pending) by any Tax authority that could, if
\ndetermined adversely to Target, materially and adversely affect the liability of
\nTarget for Taxes. There are no liens for Taxes (other than for current Taxes not
\nyet due and payable) upon the assets of Target. Target has never been a member
\nof an affiliated group of corporations, within the meaning of Section 1504 of
\nthe Code. Target is in compliance in all material respects with all the terms
\nand conditions of any Tax exemptions or other Tax-sharing agreement or order of
\na foreign government and the consummation of the Merger will not have any
\nadverse effect on the continued validity and effectiveness of any such Tax
\nexemption or other Tax-sharing agreement or order. Neither Target nor any person
\non behalf of Target has entered into or will enter into any agreement or consent
\npursuant to the collapsible corporation provisions of Section 341(f) of the Code
\n(or any corresponding provision of state, local or foreign income tax law) or
\nagreed to have Section 341(f)(2) of the Code (or any corresponding provision of
\nstate, local or foreign income tax law) apply to any disposition of any asset
\nowned by Target. None of the assets of Target directly or indirectly secures any
\ndebt the interest on which is tax-exempt under Section 103(a) of the Code. None
\nof the assets of Target is “tax-exempt use property” within the meaning of
\nSection 168(h) of the Code. Target has not made and will not make a deemed
\ndividend election under Treas. Reg. Section1.1502-32(f)(2) or a consent dividend
\nelection under Section 565 of the Code. Target has never been a party (either as
\na distributing corporation or as a corporation that has been distributed) to any
\ntransaction intended to qualify under Section 355 of the Code or any
\ncorresponding provision of state law. Target has not participated in (and will
\nnot participate in) an international boycott within the meaning of Section 999
\nof the Code. No Target stockholder is other than a United States person within
\nthe meaning of the Code. Target does not have and has not had a permanent
\nestablishment in any foreign country, as defined in any applicable tax treaty or
\nconvention between the United States of America and such foreign country and
\nTarget has not engaged in a trade or business within any foreign country. Target
\nhas never elected to be treated as an S-corporation under Section 1362 of the
\nCode or any corresponding provision of federal or state law. All material
\nelections with respect to Target’s Taxes made during the fiscal years ending,
\nMarch 31, 1996, 1997 and 1998 are reflected on the Target Tax Returns for such
\nperiods the extent required to be reflected, copies of which have been provided
\nor made available to<\/p>\n
16<\/p>\n
Acquiror. After the date of this Agreement, no material election with respect to
\nTaxes will be made without the prior written consent of Acquiror, which consent
\nwill not be unreasonably withheld or delayed. Target is not party to any joint
\nventure, partnership, or other arrangement or contract which could be treated as
\na partnership for federal income tax purposes. Target is not currently and never
\nhas been subject to the reporting requirements of Section 6038A of the Code.
\nThere is no agreement, contract or arrangement to which Target is a party that
\ncould, individually or collectively, result in the payment of any amount that
\nwould not be deductible by reason of Sections 280G (as determined without regard
\nto Section 280G(b)(4)), 162(a) (by reason of being unreasonable in amount), 162
\n(b) through (p) or 404 of the Code. Target is not a party to or bound by any Tax
\nindemnity, Tax sharing or Tax allocation agreement (whether written or unwritten
\nor arising under operation of federal law as a result of being a member of a
\ngroup filing consolidated Tax returns, under operation of certain state laws as
\na result of being a member of a unitary group, or under comparable laws of other
\nstates or foreign jurisdictions) which includes a party other than Target, nor
\ndoes Target owe any amount under any such Agreement. Target is not, and has not
\nbeen, a United States real property holding corporation (as defined in Section
\n897(c)(2) of the Code) during the applicable period specified in Section
\n897(c)(1)(A)(ii) of the Code. Other than by reason of the Merger, Target has not
\nbeen and will not be required to include any material adjustment in Taxable
\nincome for any Tax period (or portion thereof) pursuant to Section 481 or 263A
\nof the Code or any comparable provision under state or foreign Tax laws as a
\nresult of transactions, events or accounting methods employed prior to the
\nMerger.<\/p>\n
(c) For purposes of this Agreement, the following terms
\nhave the following meanings: “Tax” (and, with correlative meaning, “Taxes” and
\n“Taxable”) means any and all taxes including, without limitation, (i) any net
\nincome, alternative or add-on minimum tax, gross income, gross receipts, sales,
\nuse, ad valorem, transfer, franchise, profits, value added, net worth, license,
\nwithholding, payroll, employment, excise, severance, stamp, occupation, premium,
\nproperty, environmental or windfall profit tax, custom, duty or other tax
\ngovernmental fee or other like assessment or charge of any kind whatsoever,
\ntogether with any interest or any penalty, addition to tax or additional amount
\nimposed by any Governmental Entity (a “Tax authority”) responsible for the
\nimposition of any such tax (domestic or foreign), (ii) any liability for the
\npayment of any amounts of the type described in (i) as a result of being a
\nmember of an affiliated, consolidated, combined or unitary group for any Taxable
\nperiod or as the result of being a transferee or successor thereof and (iii) any
\nliability for the payment of any amounts of the type described in (i) or (ii) as
\na result of any express or implied obligation to indemnify any other person. As
\nused in this Section 2.14, the term “Target” means Target and any entity
\nincluded in, or required under GAAP to be included in, any of the Target
\nFinancial Statements.<\/p>\n
2.15 EMPLOYEE BENEFIT PLANS.<\/p>\n
(a) For all purposes under this Section 2.15, “ERISA
\nAffiliate” shall mean each person (as defined in Section 3(9) of ERISA) that,
\ntogether with Target, is treated as a single employer under Section 4001(b) of
\nERISA or Section 414 of the Code. Except for the plans and agreements listed in
\nSCHEDULE 2.15 (collectively, the “Plans”), Target and its ERISA Affiliates do
\nnot maintain, are not a party to, do not contribute to and are not obligated to
\ncontribute to, and employees or former employees of Target and its ERISA
\nAffiliates and their<\/p>\n
17<\/p>\n
dependents or survivors do not receive benefits under, any of the following
\n(whether or not set forth in a written document):<\/p>\n
(A) Any employee benefit plan, as defined in
\nsection 3(3) of the Employee Retirement Income Security Act of 1974, as amended
\n(“ERISA”);<\/p>\n
(B) Any bonus, deferred compensation, incentive,
\nrestricted stock, stock purchase, stock option, stock appreciation right,
\nphantom stock, supplemental pension, executive compensation, cafeteria benefit,
\ndependent care, director or employee loan, fringe benefit, sabbatical,
\nseverance, termination pay or similar plan, program, policy, agreement or
\narrangement; or<\/p>\n
(C) Any plan, program, agreement, policy,
\ncommitment or other arrangement relating to the provision of any benefit
\ndescribed in section 3(1) of ERISA to former employees or directors or to their
\nsurvivors, other than procedures intended to comply with the Consolidated
\nOmnibus Budget Reconciliation Act of 1985 (“COBRA”).<\/p>\n
(b) Neither Target nor any ERISA Affiliate has, since
\nJanuary 1, 1996, terminated, suspended, discontinued contributions to or
\nwithdrawn from any employee pension benefit plan, as defined in section 3(2) of
\nERISA, including (without limitation) any multiemployer plan, as defined in
\nsection 3(37) of ERISA.<\/p>\n
(c) Target has provided to Acquiror complete, accurate
\nand current copies of each of the following:<\/p>\n
(A) The text (including amendments) of each of
\nthe Plans, to the extent reduced to writing;<\/p>\n
(B) A summary of each of the Plans, to the
\nextent not previously reduced to writing;<\/p>\n
(C) With respect to each Plan that is an
\nemployee benefit plan (as defined in section 3(3) of ERISA), the following:<\/p>\n
(i) The most recent summary plan
\ndescription, as described in section 102 of ERISA;<\/p>\n
(ii) Any summary of material
\nmodifications that has been distributed to participants but has not been
\nincorporated in an updated summary plan description furnished under Subparagraph
\n(i) above; and<\/p>\n
(iii) The annual report, as described in
\nsection 103 of ERISA, and (where applicable) actuarial reports, for the three
\nmost recent plan years for which an annual report or actuarial report has been
\nprepared.<\/p>\n
(D) With respect to each Plan that is intended
\nto qualify under section 401(a) of the Code the most recent determination,
\nopinion, notification or advisory letter,<\/p>\n
18<\/p>\n
as applicable, concerning the Plan’s qualification under section 401(a) of the
\nCode, as issued by the Internal Revenue Service, and any subsequent
\ndetermination letter application.<\/p>\n
(d) With respect to each Plan that is an employee benefit
\nplan (as defined in section 3(3) of ERISA), the requirements of ERISA applicable
\nto such Plan have been satisfied.<\/p>\n
(e) With respect to each Plan that is subject to COBRA,
\nthe requirements of COBRA applicable to such Plan have been satisfied.<\/p>\n
(f) With respect to each Plan that is subject to the
\nFamily Medical Leave Act of 1993, as amended, the requirements of such Act
\napplicable to such Plan have been satisfied.<\/p>\n
(g) Each Plan that is intended to qualify under section
\n401(a) of the Code meets the requirements for qualification under section 401(a)
\nof the Code and the regulations thereunder, except to the extent that such
\nrequirements may be satisfied by adopting retroactive amendments under section
\n401(b) of the Code and the regulations thereunder. Each such Plan has been
\nadministered in accordance with its terms (or, if applicable, such terms as will
\nbe adopted pursuant to a retroactive amendment under section 401(b) of the Code)
\nand the applicable provisions of ERISA and the Code and the regulations
\nthereunder.<\/p>\n
(h) Neither Target nor any ERISA Affiliate has any
\naccumulated funding deficiency under section 412 of the Code or any termination
\nor withdrawal liability under Title IV of ERISA.<\/p>\n
(i) All contributions, premiums or other payments due
\nfrom the Target to (or under) any Plan have been fully paid or adequately
\nprovided for on the books and financial statements of Target. All accruals
\n(including, where appropriate, proportional accruals for partial periods) have
\nbeen made in accordance with prior practices.<\/p>\n
2.16 EMPLOYEES AND CONSULTANTS.<\/p>\n
(a) Target has provided Acquiror with a true and complete
\nlist of all individuals employed by the Target as of the date hereof and the
\nposition and base compensation payable to each such individual. The Target
\nDisclosure Letter contains a description of any written or oral employment
\nagreements, consulting agreements or termination or severance agreements to
\nwhich Target is a party. Except as set forth on the Target Disclosure Letter, no
\nemployee has entered into any employment agreement which varies in any material
\nterms from the Target’s standard form agreement as provided to Acquiror.<\/p>\n
(b) Target is not a party to or subject to a labor union
\nor a collective bargaining agreement or arrangement and is not a party to any
\nlabor or employment dispute.<\/p>\n
(c) The consummation of the transactions contemplated
\nherein will not result in (i) any amount becoming payable to any employee,
\ndirector or independent contractor of Target, (ii) the acceleration of payment
\nor vesting of any benefit, option or right to which any employee, director or
\nindependent contractor of Target may be entitled, (iii) the forgiveness of any
\nindebtedness of any employee, director or independent contractor of Target or
\n(iv) any cost<\/p>\n
19<\/p>\n
becoming due or accruing to Target or the Acquiror with respect to any employee,
\ndirector or independent contractor of Target.<\/p>\n
(d) Target is not obligated and upon consummation of the
\nMerger will not be obligated to make any payment or transfer any property that
\nwould be considered a “parachute payment” under section 280G(b)(2) of the Code.<\/p>\n
(e) No employee of Target has been injured in the work
\nplace or in the course of his or her employment except for injuries which are
\ncovered by insurance or for which a claim has been made under workers’
\ncompensation or similar laws.<\/p>\n
(f) Target has complied in all material respects with the
\nverification requirements and the record-keeping requirements of the Immigration
\nReform and Control Act of 1986 (“IRCA”); to the best knowledge of Target, the
\ninformation and documents on which Target relied to comply with IRCA are true
\nand correct; and there have not been any discrimination complaints filed against
\nTarget pursuant to IRCA, and to the knowledge of Target, there is no basis for
\nthe filing of such a complaint. Target has provided Acquiror with a true and
\ncomplete list of all employees who are not U.S. citizens, along with a
\ndescription of the legal status under which each such individual is permitted to
\nwork in the United States.<\/p>\n
(g) Target has not received or been notified of any
\ncomplaint by any employee, applicant, union or other party of any discrimination
\nor other conduct forbidden by law or contract, nor to the knowledge of Target,
\nis there a basis for any complaint.<\/p>\n
(h) Target’s action in complying with the terms of this
\nAgreement will not violate any agreements with any of Target’s employees.<\/p>\n
(i) Target has filed all required reports and information
\nwith respect to its employees that are due prior to the Closing Date and
\notherwise has complied in its hiring, employment, promotion, termination and
\nother labor practices with all applicable federal and state law and regulations,
\nincluding without limitation those within the jurisdiction of the United States
\nEqual Employment Opportunity Commission, United States Department of Labor and
\nstate and local human rights or civil rights agencies. Target has filed and
\nshall file any such reports and information that are required to be filed prior
\nto the Closing Date.<\/p>\n
(j) To the knowledge of Target, after reasonable
\ninvestigation, none of Target’s employees or contractors is obligated under any
\nagreement, commitments, judgment, decree, order or otherwise (an “Employee
\nObligation”) that could reasonably be expected to interfere with the use of his
\nor her best efforts to promote the interests of Target or that could reasonably
\nbe expected to conflict with any of Target’s business as conducted or proposed
\nto be conducted. Neither the execution nor delivery of this Agreement nor the
\nconduct of Target’s business as conducted or proposed, will, to Target’s
\nknowledge, conflict with or result in a breach of the terms, conditions or
\nprovisions of, or constitute a default under, any Employee Obligation.<\/p>\n
2.17 RELATED-PARTY TRANSACTIONS. No employee, officer, or director
\nof Target or member of his or her immediate family is indebted to Target, nor is
\nTarget indebted (or committed to make loans or extend or guarantee credit) to
\nany of them. To the best of Target’s<\/p>\n
20<\/p>\n
knowledge, none of such persons has any direct or indirect ownership interest in
\nany firm or corporation with which Target is affiliated or with which Target has
\na business relationship, or any firm or corporation that competes with Target,
\nexcept to the extent that employees, officers, or directors of Target and
\nmembers of their immediate families (i) own stock in publicly traded companies,
\n(ii) own less than 1% of the stock of a private company that will compete with
\nTarget or (iii) investments of members of the Board of Directors of Target in
\nsuch person’s capacity as principals of venture capital funds that may compete
\nwith the Company. No member of the immediate family of any officer or director
\nof Target is directly or indirectly interested in any material contract with
\nTarget.<\/p>\n
2.18 INSURANCE. Attached hereto as SCHEDULE 2.18 is a list of
\npolicies of insurance and bonds of Target. There is no material claim pending
\nunder any of such policies or bonds as to which coverage has been questioned,
\ndenied or disputed by the underwriters of such policies or bonds. All premiums
\ndue and payable under all such policies and bonds have been paid and Target is
\notherwise in compliance with the terms of such policies and bonds. Target has no
\nknowledge of any threatened termination of, or material premium increase with
\nrespect to, any of such policies.<\/p>\n
2.19 COMPLIANCE WITH LAWS. Target has complied with, is not in
\nviolation of, and has not received any notices of violation with respect to, any
\nfederal, state, local or foreign statute, law or regulation with respect to the
\nconduct of its business, or the ownership or operation of its business, except
\nfor such violations or failures to comply as will not have a Material Adverse
\nEffect on Target.<\/p>\n
2.20 BROKERS’ AND FINDERS’ FEES. Target has not incurred, nor will
\nit incur, directly or indirectly, any liability for brokerage or finders’ fees
\nor agents’ commissions or investment bankers’ fees or any similar charges in
\nconnection with this Agreement or any transaction contemplated hereby.<\/p>\n
2.21 STOCKHOLDER AGREEMENT. Principal Stockholders of Target (as
\nset forth in Schedule 2.21), representing the majority of outstanding common
\nshares and common share equivalents have agreed in writing to vote for approval
\nof the Merger pursuant to voting agreements attached hereto as EXHIBIT C
\n(“Stockholder Agreement”).<\/p>\n
2.22 VOTE REQUIRED. The affirmative vote of the holders of a
\nmajority of each class of the shares of Target Capital Stock outstanding on the
\nrecord date set for the Target Stockholders Meeting or Target Stockholder
\nConsent is the only vote of the holders of any of Target’s Capital Stock
\nnecessary to approve this Agreement and the transactions contemplated hereby.<\/p>\n
2.23 TRADE RELATIONS. Target has not within the past two years
\nterminated its relationship with or refused to ship products to any dealer,
\ndistributor, OEM, third party marketing entity or customer which had theretofore
\npaid or been obligated to pay Target in excess of One Hundred Thousand Dollars
\n($100,000) over any consecutive twelve month period. All of the prices charged
\nby Target in connection with the marketing or sale of any products or services
\nhave been in compliance with all applicable laws and regulations. No claims have
\nbeen communicated or, to Target’s knowledge, threatened against Target with
\nrespect to wrongful termination of any dealer, distributor or any other
\nmarketing entity, discriminatory pricing, price<\/p>\n
21<\/p>\n
fixing, unfair competition, false advertising, or any other material violation
\nof any laws or regulations relating to anti-competitive practices or unfair
\ntrade practices of any kind, and, to Target’s knowledge, no specific situation,
\nset of facts, or occurrence provides any valid basis for any such claim.<\/p>\n
2.24 CUSTOMERS AND SUPPLIERS. As of the date hereof, no customer
\nwhich individually accounted for more than one percent (1%) of Target’s gross
\nrevenues during the twelve month period preceding the date hereof, and no
\nsupplier of Target, has canceled or otherwise terminated, or provided any
\nwritten notice threatening Target to cancel or otherwise terminate its
\nrelationship with Target for any reason including, without limitation the
\nconsummation of the transactions contemplated hereby, or has at any time on or
\nafter the Target Balance Sheet Date decreased materially its services or
\nsupplies to Target in the case of any such supplier, or its usage of the
\nservices 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 relationship with Target or to decrease materially its services or supplies
\nto Target or its usage of the services or products of Target, as the case may
\nbe. Target has not knowingly breached, so as to provide a benefit to Target that
\nwas not intended by the parties, any agreement with, or engaged in any
\nfraudulent conduct with respect to, any customer or supplier of Target.<\/p>\n
2.25 MATERIAL CONTRACTS. Except for the material contracts
\ndescribed in Schedule 2.25 (collectively, the “Material Contracts”), Target is
\nnot a party to or bound by any material contract, including without limitation:<\/p>\n
(a) any distributor, sales, advertising, agency or
\nmanufacturer’s representative contract;<\/p>\n
(b) any continuing contract for the purchase of
\nmaterials, supplies, equipment or services involving in the case of any such
\ncontract more than $25,000 over the life of the contract;<\/p>\n
(c) any trust indenture, mortgage, promissory note, loan
\nagreement or other contract for the borrowing of money, any currency exchange,
\ncommodities or other hedging arrangement or any leasing transaction of the type
\nrequired to be capitalized in accordance with GAAP;<\/p>\n
(d) any contract for capital expenditures in excess of
\n$50,000 in the aggregate;<\/p>\n
(e) any contract limiting the freedom of the Target to
\nengage in any line of business or to compete with any other Person as that term
\nis defined in the Securities Exchange Act of 1934, as amended (the “Exchange
\nAct”) ;<\/p>\n
(f) any contract pursuant to which Target leases any real
\nproperty;<\/p>\n
(g) any contract pursuant to which the Target is a lessor
\nof any machinery, equipment, motor vehicles, office furniture, fixtures or other
\npersonal property;<\/p>\n
(h) any contract with any person who is an Affiliate of
\nthe Target;<\/p>\n
22<\/p>\n
(i) any agreement of guarantee, support, indemnification,
\nassumption or endorsement of, or any similar commitment with respect to, the
\nobligations, liabilities (whether accrued, absolute, contingent or otherwise) or
\nindebtedness of any other Person other than (i) software licensees or
\nprofessional services contracts entered in the ordinary course of business and
\n(ii) agreements with employees providing certain indemnification obligations in
\nconnection with relocation;<\/p>\n
(j) any license, sublicense or other agreement to which
\nTarget is a party (or by which it or any Target Intellectual Property is bound
\nor subject) and pursuant to which any person has been or may be assigned,
\nauthorized to Use, or given access to any Target Intellectual Property;<\/p>\n
(k) any license, sublicense or other agreement pursuant
\nto which Target has been or may be assigned or authorized to Use, or has or may
\nincurred any obligation in connection with, (A) any third party Intellectual
\nProperty that is incorporated in or form a part of any current or proposed
\nproduct, service or Intellectual Property offering of Target or (B) any Target
\nIntellectual Property;<\/p>\n
(l) any agreement pursuant to which Target has deposited
\nor is required to deposit with an escrow holder or any other person or entity,
\nall or part of the source code (or any algorithm or documentation contained in
\nor relating to any source code) of any Target Intellectual Property (“Source
\nMaterials”); and<\/p>\n
(m) any agreement to indemnify, hold harmless or defend
\nany other person with respect to any assertion of personal injury, damage to
\nproperty or Intellectual Property infringement, misappropriation or violation or
\nwarranting the lack thereof.<\/p>\n
2.26 NO BREACH OF MATERIAL CONTRACTS. The Target has performed all
\nof the obligations required to be performed by it and is entitled to all
\nbenefits under, and is not alleged to be in default in respect of any Material
\nContract. Each of the Material Contracts is in full force and effect, unamended,
\nand there exists no default or event of default or event, occurrence, condition
\nor act, with respect to Target or to Target’s knowledge with respect to the
\nother contracting party, or otherwise that, with or without the giving of
\nnotice, the lapse of the time or the happening of any other event or conditions,
\ncould reasonably be expected to (A) become a default or event of default under
\nany Material Contract or (B) result in the loss or expiration of any right or
\noption by Target (or the gain thereof by any third party) under any Material
\nContract or (C) the release, disclosure or delivery to any third party of any
\npart of the Source Materials (as defined in Section 2.25(m)). True, correct and
\ncomplete copies of all Material Contracts have been delivered to the Acquiror.<\/p>\n
2.27 THIRD-PARTY CONSENTS. Schedule 2.27 lists all contracts that
\nrequire (a) a novation or consent to assignment, as the case may be, prior to
\nthe Effective Time so that the Surviving Corporation shall be made a party in
\nplace of Target or as assignee or (b) a consent of any third party to the Merger
\nor any change of control of Target. Such list is complete and accurate.<\/p>\n
2.28 MINUTE BOOKS. The minutes and consents of Target made
\navailable to Acquiror contain a complete and accurate summary in all material
\nrespects of all meetings of directors and<\/p>\n
23<\/p>\n
stockholders or actions by written consent since the time of incorporation of
\nTarget through the date of this Agreement, and reflect all transactions referred
\nto in such minutes accurately in all material respects.<\/p>\n
2.29 COMPLETE COPIES OF MATERIALS. Target has delivered or made
\navailable true and complete copies of each document, which has been requested by
\nAcquiror or its counsel in connection with their legal and accounting review of
\nTarget.<\/p>\n
2.30 REPRESENTATIONS COMPLETE. None of the representations or
\nwarranties made by Target herein (as modified by the Target Disclosure Letter)
\nor in any Schedule hereto, including the Target Disclosure Schedule, or
\ncertificate furnished by Target pursuant to this Agreement, when all such
\ndocuments are read together in their entirety, contains or will contain at the
\nEffective Time any untrue statement of a material fact, or omits or will omit at
\nthe Effective Time to state any material fact necessary in order to make the
\nstatements contained herein or therein, in the light of the circumstances under
\nwhich made, not misleading.<\/p>\n
ARTICLE III<\/p>\n
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
\n ———————————————————<\/p>\n
Acquiror and Merger Sub represent and warrant to Target that the
\nstatements contained in this Article III are true and correct, except as set
\nforth in the disclosure schedule delivered by Acquiror to Target prior to the
\nexecution and delivery of this Agreement (the “Acquiror Disclosure Schedule”).
\nThe Acquiror Disclosure Schedule shall be arranged in paragraphs corresponding
\nto the numbered and lettered paragraphs contained in this Article III, and the
\ndisclosure in any paragraph shall qualify only the corresponding paragraph in
\nthis Article III. Any reference in this Article III to an agreement being
\n“enforceable” shall be deemed to be qualified to the extent such enforceability
\nis subject to (i) laws of general application relating to bankruptcy,
\ninsolvency, moratorium and the relief of debtors, and (ii) the availability of
\nspecific performance, injunctive relief and other equitable remedies.<\/p>\n
3.1 ORGANIZATION, STANDING AND POWER. Each of Acquiror and its
\nsubsidiaries is a corporation duly organized, validly existing and in good
\nstanding under the laws of its jurisdiction of organization. Each of Acquiror
\nand its subsidiaries has the corporate power to own its properties and to carry
\non its business as now being conducted and as proposed to be conducted and is
\nduly qualified to do business and is in good standing in each jurisdiction in
\nwhich the failure to be so qualified and in good standing would have a Material
\nAdverse Effect on Acquiror. Acquiror has delivered a true and correct copy of
\nthe Certificate of Incorporation and Bylaws of Acquiror and Merger Sub, each as
\namended to date, to Target. Neither Acquiror nor Merger Sub (or any other
\nsubsidiary) is in violation of any of the provisions of its Certificate of
\nIncorporation or Bylaws. Acquiror is the owner of all outstanding shares of
\ncapital stock of each of its subsidiaries and all such shares are duly
\nauthorized, validly issued, fully paid and nonassessable. All of the outstanding
\nshares of capital stock of each such subsidiary are owned by Acquiror free and
\nclear of all liens, charges, claims or encumbrances or rights of others. There
\nare no outstanding subscriptions, options, warrants, puts, calls, rights,
\nexchangeable or convertible securities or other commitments or agreements of any
\ncharacter relating to the issued or unissued capital stock or other securities
\nof any such subsidiary, or otherwise obligating<\/p>\n
24<\/p>\n
Acquiror or any such subsidiary to issue, transfer, sell, purchase, redeem or
\notherwise acquire any such securities.<\/p>\n
3.2 CAPITAL STRUCTURE. The authorized capital stock of Acquiror
\nconsists of (a) 200,000,000 shares of Acquiror Common Stock and (b) 20,000,000
\nshares of preferred stock, par value $0.002 per share (“Acquiror Preferred
\nStock”). As of October 31, 1999, (i) 45,805,129 shares of Acquiror Common Stock
\nare issued and outstanding, all of which are validly issued, fully paid and
\nnon-assessable, (ii) no shares of Acquiror Common Stock are held in the treasury
\nof Acquiror or by Acquiror Subsidiaries and (iii) 2,548,342 shares are reserved
\nfor future issuance pursuant to stock options. As of the date of this Agreement,
\nno shares of Acquiror Preferred Stock were issued and outstanding. Except for
\nstock options granted pursuant to the stock option plans of Acquiror (the
\n“ACQUIROR STOCK OPTION PLANS”) and for warrants to purchase 14,544 shares of
\nAcquiror Common Stock, there are no options, warrants or other rights,
\nagreements, arrangements or commitments of any character relating to the issued
\nor unissued capital stock of Acquiror or any Acquiror Subsidiary or obligating
\nAcquiror or any Acquiror Subsidiary or obligating Acquiror or any Acquiror
\nSubsidiary to issue or sell any shares of capital stock of, or other equity
\ninterests in, Acquiror or any Acquiror Subsidiary. All shares of Acquiror Common
\nStock subject to issuance as aforesaid, upon issuance on the terms and
\nconditions specified in the instruments pursuant to which they are issuable,
\nwill be duly authorized, validly issued, full paid and non-assessable. Except
\nfor 6,907,820 shares acquired prior to Acquiror’s initial public offering which
\nare subject to repurchase by Acquiror, there are no outstanding contractual
\nobligations of Acquiror or any Acquiror Subsidiary to repurchase, redeem or
\notherwise acquire any shares of Acquiror Common Stock or any capital stock of
\nany Acquiror Subsidiary. Other than as set forth above and the commitment to
\nissue shares of Common Stock pursuant to this Agreement; there are no other
\noptions, warrants, calls, rights, commitments or agreements of any character to
\nwhich Acquiror or Merger Sub is a party or by which either of them is bound
\nobligating Acquiror or Merger Sub to issue, deliver, sell, repurchase or redeem,
\nor cause to be issued, delivered, sold, repurchased or redeemed, any shares of
\nthe capital stock of Acquiror or Merger Sub or obligating Acquiror or Merger Sub
\nto grant, extend or enter into any such option, warrant, call, right, commitment
\nor agreement. The shares of Common Stock to be issued pursuant to the Merger
\nwill be duly authorized, validly issued, fully paid, and non-assessable, will
\nnot be subject to any preemptive or other statutory right of stockholders, will
\nbe issued in compliance with applicable U.S. Federal and state securities laws
\nand will be free of any liens or encumbrances other than any liens or
\nencumbrances created by or imposed upon the holders thereof. There are no
\ncontracts, commitments or agreements relating to voting, registration, purchase
\nor sale of Acquiror’s capital stock (i) between or among Acquiror and any of its
\nstockholders or (ii) to the best of Acquiror’s knowledge, between or among any
\nof Acquiror’s stockholders or between any of Acquiror’s stockholders and any
\nthird party.<\/p>\n
3.3 AUTHORITY.<\/p>\n
(a) Each of Acquiror and Merger Sub has all requisite
\ncorporate power and authority to enter into this Agreement and the other
\nTransaction Documents and to consummate the transactions contemplated hereby and
\nthereby. The execution and delivery of this Agreement and the other Transaction
\nDocuments and the consummation of the transactions contemplated hereby and
\nthereby have been duly authorized by all necessary corporate action on the part
\nof<\/p>\n
25<\/p>\n
each of Acquiror and Merger Sub. This Agreement and the other Transaction
\nDocuments have been duly executed and delivered by each of Acquiror and Merger
\nSub and constitute the valid and binding obligations of each of Acquiror and
\nMerger Sub.<\/p>\n
(b) The execution and delivery of this Agreement and the
\nother Transaction Documents do not, and the consummation of the transactions
\ncontemplated hereby and thereby will not, conflict with, or result in any
\nviolation of, or default under (with or without notice or lapse of time, or
\nboth), or give rise to a right of termination, cancellation or acceleration of
\nany obligation or loss of a benefit under (i) any provision of the Certificate
\nof Incorporation or Bylaws of Acquiror or any of its subsidiaries, as amended,
\nor (ii) any material mortgage, indenture, lease, contract or other agreement or
\ninstrument, permit, concession, franchise, license, judgment, order, decree,
\nstatute, law, ordinance, rule or regulation applicable to Acquiror or any of its
\nsubsidiaries or their properties or assets.<\/p>\n
(c) No consent, approval, order or authorization of, or
\nregistration, declaration or filing with, any Governmental Entity, is required
\nby or with respect to Acquiror or any of its subsidiaries in connection with the
\nexecution and delivery of this Agreement or the other Transaction Documents by
\nAcquiror or the consummation by Acquiror of the transactions contemplated hereby
\nor thereby, except for (i) the filing of the Certificate of Merger as provided
\nin Section 1.2, (ii) any filings as may be required under applicable state
\nsecurities laws and the securities laws of any foreign country, (iii) the filing
\nwith the Nasdaq National Market of a Notification Form for Listing of Additional
\nShares with respect to the shares of Acquiror Common Stock issuable upon
\nconversion of the Target Capital Stock in the Merger and upon exercise of the
\noptions under the Target Stock Option Plans assumed by Acquiror and the filing
\nof a registration statement on Form S-8 covering shares issued upon exercise of
\nsuch assumed options, (iv) such filings as may be required under HSR; and (v)
\nsuch other consents, authorizations, filings, approvals and registrations which,
\nif not obtained or made, would not have a Material Adverse Effect on Acquiror
\nand would not prevent, materially alter or delay any of the transactions
\ncontemplated by this Agreement or the other Transaction Documents.<\/p>\n
3.4 SEC DOCUMENTS. Acquiror has furnished to Target a true and
\ncomplete copy of each statement, report, registration statement (with the
\nprospectus in the form filed pursuant to Rule 424(b) of the Securities Act),
\ndefinitive proxy statement, and other filing filed with the SEC by Acquiror
\nsince June 23, 1999, and, prior to the Effective Time, Acquiror will have
\nfurnished Target with true and complete copies of any additional documents filed
\nwith the SEC by Acquiror prior to the Effective Time (collectively, the
\n“Acquiror SEC Documents”). All documents required to be filed as exhibits to the
\nTarget SEC Documents have been so filed, and all material contracts so filed as
\nexhibits are in full force and effect, except those which have expired in
\naccordance with their terms, and neither Acquiror nor any of its subsidiaries is
\nin default thereunder where default would not reasonably be expected to have a
\nmaterial adverse effect on Acquiror. As of their respective filing dates, the
\nAcquiror SEC Documents complied in all material respects with the requirements
\nof the Exchange Act and the Securities Act, and none of the Acquiror SEC
\nDocuments contained any untrue statement of a material fact or omitted to state
\na material fact required to be stated therein or necessary to make the
\nstatements made therein, in light of the circumstances in which they were made,
\nnot misleading, except to the extent corrected by a subsequently filed Acquiror
\nSEC Document. The financial statements of Acquiror, including the notes thereto,
\nincluded in the Acquiror SEC Documents (the “Acquiror<\/p>\n
26<\/p>\n
Financial Statements”) were complete and correct in all material respects as of
\ntheir respective dates, complied as to form in all material respects with
\napplicable accounting requirements and with the published rules and regulations
\nof the SEC with respect thereto as of their respective dates, and have been
\nprepared in accordance with GAAP applied on a basis consistent throughout the
\nperiods indicated and consistent with each other (except as may be indicated in
\nthe notes thereto or, in the case of unaudited statements included in Quarterly
\nReports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Acquiror
\nFinancial Statements fairly present the consolidated financial condition and
\noperating results of Acquiror and its subsidiaries at the dates and during the
\nperiods indicated therein (subject, in the case of unaudited statements, to
\nnormal, recurring year-end adjustments). Since the date of the most recent
\nbalance sheet included in an Acquiror SEC Document to the date hereof, there has
\nbeen no Material Adverse Effect on Acquiror.<\/p>\n
3.5 LITIGATION. There is no private or governmental action, suit,
\nproceeding, claim, arbitration or investigation pending before any agency, court
\nor tribunal, foreign or domestic, or, to the knowledge of Acquiror, threatened
\nagainst Acquiror or any of its respective properties or any of its respective
\nofficers or directors (in their capacities as such) that, individually or in the
\naggregate, could reasonably be expected to have a Material Adverse Effect on
\nAcquiror. There is no judgment, decree or order against Acquiror or, to the
\nknowledge of Acquiror, any of its respective directors or officers (in their
\ncapacities as such) that could prevent, enjoin, or materially alter or delay any
\nof the transactions contemplated by this Agreement, or that could reasonably be
\nexpected to have a Material Adverse Effect on Acquiror.<\/p>\n
3.6 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, local or foreign statute, law or regulation with respect to the
\nconduct of its business, or the ownership or operation of its business, except
\nfor such violations or failures to comply as could not be reasonably expected to
\nhave a Material Adverse Effect on Acquiror.<\/p>\n
ARTICLE IV<\/p>\n
CONDUCT PRIOR TO THE EFFECTIVE TIME
\n ———————————–<\/p>\n
4.1 CONDUCT OF BUSINESS OF TARGET AND ACQUIROR. During the period
\nfrom the date of this Agreement and continuing until the earlier of the
\ntermination of this Agreement or the Effective Time, Target agrees (except to
\nthe extent expressly contemplated by this Agreement or as consented to in
\nwriting by the other), to carry on its and its subsidiaries’ business in the
\nusual, regular and ordinary course in substantially the same manner as
\nheretofore conducted. Target further agrees to (i) pay and to cause its
\nsubsidiaries to pay debts and Taxes when due subject to good faith disputes over
\nsuch debts or Taxes, (ii) pay and to cause its subsidiaries to pay all amounts
\ndue or other outstanding obligations owed to suppliers and vendors when due
\nsubject to good faith disputes over such amounts or obligations, (iii) subject
\nto Acquiror’s consent to the filing of material Tax Returns if applicable, to
\npay or perform other obligations when due, and (iv) to use all reasonable
\nefforts consistent with past practice and policies to preserve intact its and
\nits subsidiaries’ present business organizations, keep available the services of
\nits and its subsidiaries’ present officers and key employees and preserve its
\nand its subsidiaries’ relationships with customers, suppliers, distributors,
\nlicensors, licensees, and others having<\/p>\n
27<\/p>\n
business dealings with it or its subsidiaries, to the end that its and its
\nsubsidiaries’ goodwill and ongoing businesses shall be unimpaired at the
\nEffective Time. Target agrees to promptly notify Acquiror of any event or
\noccurrence not in the ordinary course of its or its subsidiaries’ business, and
\nof any event which could have a Material Adverse Effect on Target. Without
\nlimiting the foregoing, except as expressly contemplated by this Agreement,
\nTarget shall not do, cause or permit any of the following, or allow, cause or
\npermit any of its subsidiaries to do, cause or permit any of the following,
\nwithout the prior written consent of Acquiror:<\/p>\n
(a) CHARTER DOCUMENTS. Cause or permit any amendments to
\nits Certificate or Certificate of Incorporation or Bylaws except as required
\nwithin the Strategic Investment;<\/p>\n
(b) DIVIDENDS; CHANGES IN CAPITAL STOCK. Other than
\ncumulative dividends to be paid on the Series C Preferred, declare or pay any
\ndividends on or make any other distributions (whether in cash, stock or
\nproperty) in respect of any of its capital stock, or split, combine or
\nreclassify any of its capital stock or issue or authorize the issuance of any
\nother securities in respect of, in lieu of or in substitution for shares of its
\ncapital stock, or repurchase or otherwise acquire, directly or indirectly, any
\nshares of its capital stock except from former employees, directors and
\nconsultants in accordance with agreements providing for the repurchase of shares
\nin connection with any termination of service to it or its subsidiaries;<\/p>\n
(c) MATERIAL CONTRACTS. Enter into any material contract,
\nagreement, license or commitment, or violate, amend or otherwise modify or waive
\nany of the terms of any of its material contracts, agreements or licenses other
\nthan in the ordinary course of business consistent with past practice;<\/p>\n
(d) STOCK OPTION PLANS, ETC. Accelerate, amend or change
\nthe period of exercisability or vesting of options or other rights granted under
\nits stock plans or authorize cash payments in exchange for any options or other
\nrights granted under any of such plans (except to amend any option to permit the
\nimmediate exercise of that option, provided that the shares of Target Capital
\nStock issued upon exercise of such option shall be subject to a right of
\nrepurchase that is equivalent to any vesting schedule for such option);<\/p>\n
(e) ISSUANCE OF SECURITIES. Issue, deliver or sell or
\nauthorize or propose the issuance, delivery or sale of, or purchase or propose
\nthe purchase of, any shares of its capital stock or securities convertible into,
\nor subscriptions, 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 shares of its Common
\nStock pursuant to the exercise of stock options, warrants or other rights
\ntherefor outstanding as of the date of this Agreement, (ii) the issuance of
\nshares of Target Common Stock issuable upon exercise of Target Warrants, (iii)
\nthe issuance of shares of Target Common Stock issuable upon conversion of Target
\nPreferred Stock, and (iv) the issuance of securities in the Strategic Investment
\n(as defined herein).<\/p>\n
(f) GRANTS OF STOCK OPTIONS. Grant any options,
\nsubscriptions, rights or warrants to purchase any shares of its capital stock or
\nsecurities convertible into its capital stock; provided that Acquiror shall not
\nunreasonably withhold its consent to any such consent;<\/p>\n
28<\/p>\n
(g) INTELLECTUAL PROPERTY. Transfer to or license any
\nperson or entity or otherwise extend, amend or modify any rights to its
\nIntellectual Property other than the grant of non-exclusive licenses in the
\nordinary course of business consistent with past practice;<\/p>\n
(h) EXCLUSIVE RIGHTS. Enter into or amend any material
\nagreements pursuant to which any other party is granted exclusive marketing,
\nmanufacturing or other exclusive rights of any type or scope with respect to any
\nof its products or technology;<\/p>\n
(i) DISPOSITIONS. Sell, lease, license or otherwise
\ndispose of or encumber any of its properties or assets which are material,
\nindividually or in the aggregate, to its and its subsidiaries’ business, taken
\nas a whole;<\/p>\n
(j) INDEBTEDNESS. Incur or commit to incur any
\nindebtedness for borrowed money or guarantee any such indebtedness or issue or
\nsell any debt securities or guarantee any debt securities of others (other than
\n(i) in connection with the financing of ordinary course trade payables or (ii)
\nin connection with leasing activities in the ordinary course);<\/p>\n
(k) LEASES. Enter into any operating lease requiring
\npayments in excess of $25,000;<\/p>\n
(l) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in
\nan amount in excess of $25,000 in any one case or $100,000 in the aggregate, any
\nclaim, liability or obligation (absolute, accrued, asserted or unasserted,
\ncontingent or otherwise) arising other than in the ordinary course of business,
\nother than the payment, discharge or satisfaction of liabilities reflected or
\nreserved against in the Target Financial Statements;<\/p>\n
(m) CAPITAL EXPENDITURES. Incur or commit to incur any
\ncapital expenditures in any time period in excess of the amount of capital
\nexpenditures for such period in the Target’s budget attached as Schedule 4.1(m);<\/p>\n
(n) INSURANCE. Materially reduce the amount of any
\nmaterial insurance coverage provided by existing insurance policies;<\/p>\n
(o) EMPLOYEE BENEFITS; SEVERANCE. Take any of the
\nfollowing actions: (i) increase or agree to increase the compensation payable or
\nto become payable to its officers or employees, except for increases in salary
\nor wages of non-officer employees in the ordinary course of business and in
\naccordance with past practices, (ii) grant any additional severance or
\ntermination pay to, or enter into any employment or severance agreements with,
\nany officer or employee other than employment agreements in the ordinary course
\nof business consistent with past practices, (iii) enter into any collective
\nbargaining agreement, or (iv) establish, adopt, enter into or amend in any
\nmaterial respect any bonus, profit sharing, thrift, compensation, stock option,
\nrestricted stock, pension, retirement, deferred compensation, employment,
\ntermination, severance or other plan, trust, fund, policy or arrangement for the
\nbenefit of any directors, officers or employees;<\/p>\n
(p) LAWSUITS. Commence a lawsuit or arbitration
\nproceeding other than (i) for the routine collection of bills or (ii) for a
\nbreach of this Agreement;<\/p>\n
29<\/p>\n
(q) ACQUISITIONS. Acquire or agree to acquire by merging
\nor consolidating with, or by purchasing a substantial portion of the assets of,
\nor by any other manner, any business or any corporation, partnership,
\nassociation or other business organization or division thereof, or otherwise
\nacquire or agree to acquire any assets which are material, individually or in
\nthe aggregate, to its and its subsidiaries’ business, taken as a whole;<\/p>\n
(r) TAXES. Make any material tax election other than in
\nthe ordinary course of business and consistent with past practice, change any
\nmaterial tax election, adopt any tax accounting method other than in the
\nordinary course of business and consistent with past practice, change any tax
\naccounting method, file any tax return (other than any estimated tax returns,
\nimmaterial information returns, payroll tax returns or sales tax returns) or any
\namendment to a tax return, enter into any closing agreement, settle any Tax
\nclaim or assessment or consent to any Tax claim or assessment provided that
\nAcquiror shall not unreasonably withhold or delay approval of any of the
\nforegoing actions;<\/p>\n
(s) REVALUATION. Revalue any of its assets, including
\nwithout limitation writing down the value of inventory or writing off notes or
\naccounts receivable other than in the ordinary course of business; or<\/p>\n
(t) OTHER. Take or agree in writing or otherwise to take,
\nany of the actions described in Sections 4.1(a) through (s) above, or any action
\nwhich would make any of its representations or warranties contained in this
\nAgreement untrue or incorrect or prevent it from performing or cause it not to
\nperform its covenants hereunder.<\/p>\n
4.2 NOTICES. Target shall give all notices and other information
\nrequired to be given to the employees of Target, any collective bargaining unit
\nrepresenting any group of employees of Target, and any applicable government
\nauthority under the National Labor Relations Act, the Internal Revenue Code, the
\nConsolidated Omnibus Budget Reconciliation Act, and other applicable law in
\nconnection with the transactions provided for in this Agreement;<\/p>\n
ARTICLE V<\/p>\n
ADDITIONAL AGREEMENTS
\n ———————<\/p>\n
5.1 NO SOLICITATION.<\/p>\n
(a) From and after the date of this Agreement until the
\nearlier of the Effective Time or the termination of this Agreement in accordance
\nwith Section 7, except a termination pursuant to Section 7.1(C) hereof, Target
\nshall not, directly or indirectly, through any officer, director, employee,
\nrepresentative or agent, (i) solicit, initiate, or knowingly encourage any
\ninquiries or proposals that constitute, or could reasonably be expected to lead
\nto, a proposal or offer for a merger, consolidation, business combination, sale
\nof all or substantially all of the assets, sale of shares of capital stock
\n(including without limitation by way of a tender offer) or similar transactions
\ninvolving Target, other than the transactions contemplated by this Agreement
\n(any of the foregoing inquiries or proposals being referred to in this Agreement
\nas a “Takeover Proposal”), (ii) engage in negotiations or discussions
\nconcerning, or provide any non-<\/p>\n
30<\/p>\n
public information to any person or entity relating to, any Takeover Proposal,
\nor (iii) agree to, approve or recommend any Takeover Proposal.<\/p>\n
(b) Target shall notify Acquiror immediately (and no
\nlater than 24 hours) after receipt by Target (or its advisors or agents) of any
\nTakeover Proposal or any request for information in connection with a Takeover
\nProposal or for access to the properties, books or records of Target by any
\nperson or entity that informs Target that it is considering making, or has made,
\na Takeover Proposal. Such notice shall be made orally and in writing and shall
\nindicate in reasonable detail the identity of the offeror and the terms and
\nconditions of such proposal, inquiry or contact.<\/p>\n
5.2 SECURITIES ISSUANCES.<\/p>\n
(a) The shares of Acquiror Common Stock to be issued in
\nconnection with the Merger are expected to be issued in a transaction exempt
\nfrom registration under the Securities Act by reason of Section 3(a)(10) thereof
\npursuant to a fairness hearing (the “Hearing”) under Section 25142 of the
\nCalifornia Corporate Securities Laws of 1968, as amended (the “California Law”)
\nand under applicable state blue sky laws. Promptly following the execution of
\nthis Agreement, but in no event later than 15 business days Target and Acquiror
\nshall prepare, and Acquiror shall file with the California Department of
\nCorporations (the “Department”), an Application for Qualification of Securities
\n(“Application”) and a request for the Hearing to be held by the Department to
\nconsider the terms, conditions and fairness of the transactions contemplated by
\nthis Agreement and the Merger pursuant to Section 25142 of the California Law.
\nTarget and Acquiror will notify each other promptly of the receipt of any
\ncomments from the Department or its staff and of any request by the Department
\nor any other government officials for amendments or supplements to any of the
\ndocuments filed therewith or any other filing or for additional information and
\nwill supply each other with copies of all correspondence between such party or
\nany of its representatives, on the one hand, and the Department, or its staff or
\nany other government officials, on the other hand, with respect to the filing.
\nThe information relating to Target and Acquiror included in the notice sent to
\nthe Stockholders of Target pursuant to, and meeting the requirements of Article
\n2 of Subchapter 1 of the California Administrative Code, Title 10, Chapter 3,
\nSubchapter 2, as amended (the “Hearing Notice”), concerning the Hearing held by
\nthe California Commissioner of Corporations (the “Commissioner”) to consider the
\nterms, conditions and fairness of the transactions contemplated hereby pursuant
\nto Section 25142 of the California Law and the application for permit filed with
\nthe Commissioner in connection with the Hearing, shall not, at the time the
\nHearing Notice is mailed to Stockholders of Target, at the time the Information
\nStatement is mailed to Stockholders of Target and at all times subsequent hereto
\n(through and including the Effective Date), contain any untrue statement of a
\nmaterial fact or omit to state any material fact required to be stated therein
\nor necessary in order to make the statements therein, in light of the
\ncircumstances under which they were made, not misleading. If at any time prior
\nto the Effective Time any event or information should be discovered by Target or
\nAcquiror which should be set forth in an amendment to the Hearing Notice or the
\nPermit (as defined below) application, such party shall promptly inform the
\nother. The parties shall use their respective commercially reasonable efforts to
\nhave a permit (the “Permit”) issued under the California Law as promptly as
\npracticable after the filing of the Application and shall fully cooperate with
\neach other in good faith to assist in such efforts.<\/p>\n
31<\/p>\n
(b) If despite Target’s and Acquiror’s commercially
\nreasonable efforts to obtain a permit, Acquiror and Target are unable to obtain
\na date for the Hearing (“Hearing Date”) within 15 days after the filing of the
\nApplication with the Department or the Application is denied; or the Department
\nrefuses to set a Hearing Date or issue the permit; or the Permit is otherwise
\ndetermined to be unavailable in the judgment of counsel to Target and Acquiror,
\nthen Acquiror shall use all commercially reasonable efforts to effect as soon as
\npracticable but in no event later than 15 business days after events stated in
\nthis Section 5.2(b) a Registration Statement (the “Registration Statement”) on
\nForm S-4 (or such other or successor form as shall be appropriate) with respect
\nto the shares of Acquiror Common Stock to be issued in the, Merger, which
\ncomplies in form with applicable SEC requirements and shall use all reasonable
\nefforts to cause the Registration Statement to become effective as soon
\nthereafter as practicable. The Acquiror agrees to request the immediate
\nacceleration of the effectiveness of the Registration Statement as soon as
\npracticable but no less than within three (3) business days of any notification
\nby the SEC of its decision not to review the Registration Statement or its
\ndetermination that it has completed its review of the Registration Statement and
\nhas no further comments for the Acquiror.<\/p>\n
5.3 STOCKHOLDERS MEETING OR CONSENT SOLICITATION.<\/p>\n
(a) As soon as legally practicable based on Section 5.2
\nabove, Target shall promptly after the date hereof take all actions necessary to
\neither (i) call a meeting of its stockholders to be held for the purpose of
\nvoting upon this Agreement and the Merger (the “Target Stockholders Meeting”) or
\n(ii) commence a consent solicitation to obtain such approvals (the “Target
\nStockholders Consent”). Target will, through its Board of Directors, recommend
\nto its stockholders approval of such matters as soon as practicable after the
\ndate hereof. Target shall use its best efforts to solicit from its stockholders
\nproxies or consents in favor of such matters.<\/p>\n
(b) Immediately after the execution of this Agreement,
\nTarget shall prepare, with the cooperation of Acquiror, an Information\/Proxy
\nStatement for the stockholders of Target to approve this Agreement, the Merger
\nand the transactions contemplated hereby and thereby. The Information\/Proxy
\nStatement shall constitute a disclosure document for the offer and issuance of
\nthe shares of Acquiror Common Stock to be received by the holders of Target
\nCapital Stock in the Merger. Acquiror and Target shall each use its best efforts
\nto cause the Information\/Proxy Statement to comply with applicable federal and
\nstate securities laws requirements. Each of Acquiror and Target agrees to
\nprovide promptly to the other such information concerning its business and
\nfinancial statements and affairs as, in the reasonable judgment of the providing
\nparty or its counsel, may be required or appropriate for inclusion in the
\nInformation\/Proxy Statement, or in any amendments or supplements thereto, and to
\ncause its counsel and auditors to cooperate with the other’s counsel and
\nauditors in the preparation of the Information\/Proxy Statement. Target will
\npromptly advise Acquiror, and Acquiror will promptly advise Target, in writing
\nif at any time prior to the Effective Time either Target or Acquiror shall
\nobtain knowledge of any facts that might make it necessary or appropriate to
\namend or supplement the Information\/Proxy Statement in order to make the
\nstatements contained or incorporated by reference therein not misleading or to
\ncomply with applicable law. The Information\/Proxy Statement shall contain the
\nrecommendation of the Board of Directors of Target that the Target stockholders
\napprove the Merger and this Agreement and the conclusion<\/p>\n
32<\/p>\n
of the Board of Directors that the terms and conditions of the Merger are fair
\nand reasonable to the stockholders of Target. Anything to the contrary contained
\nherein notwithstanding, Target shall not include in the Information\/Proxy
\nStatement any information with respect to Acquiror or its affiliates or
\nassociates, the form and content of which information shall not have been
\napproved by Acquiror prior to such inclusion.<\/p>\n
5.4 ACCESS TO INFORMATION.<\/p>\n
(a) Target shall afford Acquiror and its accountants,
\ncounsel and other representatives, reasonable access during normal business
\nhours during the period prior to the Effective Time to (i) all of Target’s and
\nits subsidiaries’ properties, books, contracts, commitments and records, and
\n(ii) all other information concerning the business, properties and personnel of
\nTarget and its subsidiaries as Acquiror may reasonably request. Target agrees to
\nprovide to Acquiror and its accountants, counsel and other representatives
\ncopies of internal financial statements promptly upon request.<\/p>\n
(b) Subject to compliance with applicable law, from the
\ndate hereof until the Effective Time, each of Acquiror and Target shall confer
\non a regular and frequent basis with one or more representatives of the other
\nparty to report operational matters of materiality and the general status of
\nongoing operations.<\/p>\n
(c) No information or knowledge obtained in any
\ninvestigation pursuant to this Section 5.4 shall affect or be deemed to modify
\nany representation or warranty contained herein or the conditions to the
\nobligations of the parties to consummate the Merger.<\/p>\n
5.5 CONFIDENTIALITY. The parties acknowledge that Acquiror and
\nTarget have previously executed a non-disclosure agreement dated November 22,
\n1999 (as amended, the “Confidentiality Agreement”), which Confidentiality
\nAgreement shall continue in full force and effect in accordance with its terms.<\/p>\n
5.6 PUBLIC DISCLOSURE. Unless otherwise permitted by this
\nAgreement, Acquiror and Target shall consult with each other before issuing any
\npress release or otherwise making any public statement or making any other
\npublic (or non-confidential) disclosure (whether or not in response to an
\ninquiry) regarding the terms of this Agreement and the transactions contemplated
\nhereby, and neither shall issue any such press release or make any such
\nstatement or disclosure without the prior approval of the other (which approval
\nshall not be unreasonably withheld), except as may be required by Acquiror to
\ncomply with the rules and regulations of the SEC or any obligations pursuant to
\nany listing agreement with any national securities exchange or with the NASD.<\/p>\n
5.7 CONSENTS; COOPERATION.<\/p>\n
(a) Each of Acquiror and Target shall promptly apply for
\nor otherwise seek, and use all reasonable efforts to obtain, all consents and
\napprovals required to be obtained by it for the consummation of the Merger,
\nincluding those required under HSR, and shall use all commercially reasonable
\nefforts to obtain all necessary consents, waivers and approvals under any of its
\nmaterial contracts in connection with the Merger for the assignment thereof or
\notherwise. The parties hereto will consult and cooperate with one another, and
\nconsider in good<\/p>\n
33<\/p>\n
faith the views of one another, in connection with any analyses, appearances,
\npresentations, memoranda, briefs, arguments, opinions and proposals made or
\nsubmitted by or on behalf of any party hereto in connection with proceedings
\nunder or relating to HSR or any other federal or state antitrust or fair trade
\nlaw.<\/p>\n
(b) Each of Acquiror and Target shall use all
\ncommercially reasonable efforts to resolve such objections, if any, as may be
\nasserted by any Governmental Entity with respect to the transactions
\ncontemplated by this Agreement under the HSR, the Sherman Act, as amended, the
\nClayton Act, as amended, the Federal Trade Commission Act, as amended, and any
\nother Federal, state or foreign statutes, rules, regulations, orders or decrees
\nthat are designed to prohibit, restrict or regulate actions having the purpose
\nor effect of monopolization or restraint of trade (collectively, “Antitrust
\nLaws”). In connection therewith, if any administrative or judicial action or
\nproceeding is instituted (or threatened to be instituted) challenging any
\ntransaction contemplated by this Agreement as violative of any Antitrust Law,
\neach of Acquiror and Target shall cooperate and use all commercially reasonable
\nefforts vigorously to contest and resist any such action or proceeding and to
\nhave vacated, lifted, reversed, or overturned any decree, judgment, injunction
\nor other order, whether temporary, preliminary or permanent (each an “Order”),
\nthat is in effect and that prohibits, prevents, or restricts consummation of the
\nMerger or any such other transactions, unless by mutual agreement Acquiror and
\nTarget decide that litigation is not in their respective best interests.
\nNotwithstanding the provisions of the immediately preceding sentence, it is
\nexpressly understood and agreed that Acquiror shall have no obligation to
\nlitigate or contest any administrative or judicial action or proceeding or any
\nOrder beyond the earlier of (i) March 31, 2000 or (ii) the date of a ruling
\npreliminarily enjoining the Merger issued by a court of competent jurisdiction.
\nEach of Acquiror and Target shall use all commercially reasonable efforts to
\ntake such action as may be required to cause the expiration of the notice
\nperiods under the HSR or other Antitrust Laws with respect to such transactions
\nas promptly as possible after the execution of this Agreement.<\/p>\n
(c) Notwithstanding the foregoing, neither Acquiror nor
\nTarget shall be required to agree, as a condition to any Approval, to divest
\nitself of or hold separate any subsidiary, division or business unit which is
\nmaterial to the business of such party and its subsidiaries, taken as a whole,
\nor the divestiture or holding separate of which would be reasonably likely to
\nhave a Material Adverse Effect on (A) the business, properties, assets,
\nliabilities, financial condition or results of operations of such party and its
\nsubsidiaries, taken as a whole or (B) the benefits intended to be derived as a
\nresult of the Merger.<\/p>\n
5.8 UPDATE DISCLOSURE; BREACHES. From and after the date of this
\nAgreement until the Effective Time, each party hereto shall promptly notify the
\nother party, by written update to its Disclosure Schedule, of (i) the occurrence
\nor non-occurrence of any event which would be likely to cause any condition to
\nthe obligations of any party to effect the Merger and the other transactions
\ncontemplated by this Agreement not to be satisfied, or (ii) the failure of
\nTarget or Acquiror, as the case may be, to comply with or satisfy any covenant,
\ncondition or agreement to be complied with or satisfied by it pursuant to this
\nAgreement which would be likely to result in any condition to the obligations of
\nany party to effect the Merger and the other transactions contemplated by this
\nAgreement not to be satisfied. The delivery of any notice pursuant to this
\nSection 5.8 shall not cure any breach of any representation or warranty
\nrequiring disclosure of<\/p>\n
34<\/p>\n
such matter prior to the date of this Agreement or otherwise limit or affect the
\nremedies available hereunder to the party receiving such notice.<\/p>\n
5.9 STOCKHOLDER AGREEMENTS. Upon execution of this Agreement,
\nTarget shall deliver or cause to be delivered to Acquiror from each of the
\nPrincipal Stockholders of Target, an executed agreement, in the form attached
\nhereto as EXHIBIT C (“Stockholder Agreement”). SCHEDULE 2.21 sets forth a list
\nof the Principal Stockholders and each such Principal Stockholder’s holdings of
\nTarget Capital Stock.<\/p>\n
5.10 LEGAL REQUIREMENTS. Each of Acquiror and Target will, and will
\ncause their respective subsidiaries to, take all reasonable actions necessary to
\ncomply promptly with all legal requirements which may be imposed on them with
\nrespect to the consummation of the transactions contemplated by this Agreement
\nand will promptly cooperate with and furnish information to any party hereto
\nnecessary in connection with any such requirements imposed upon such other party
\nin connection with the consummation of the transactions contemplated by this
\nAgreement and will take all reasonable actions necessary to obtain (and will
\ncooperate with the other parties hereto in obtaining) any consent, approval,
\norder or authorization of, or any registration, declaration or filing with, any
\nGovernmental Entity or other person, required to be obtained or made in
\nconnection with the taking of any action contemplated by this Agreement.<\/p>\n
5.11 TAX-DEFERRED REORGANIZATION. Neither Target, Acquiror nor
\nMerger Sub will, either before or after consummation of the Merger, take any
\naction which, to the knowledge of such party, would cause the Merger to fail to
\nconstitute a “reorganization” within the meaning of Code Section 368. No party
\nto this Agreement shall take a position on any return, report or filing
\ninconsistent with this treatment.<\/p>\n
5.12 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 best efforts to assist Acquiror as may be
\nnecessary to comply with the securities and blue sky laws of all jurisdictions
\nwhich are applicable in connection with the issuance of Acquiror Common Stock in
\nconnection with the Merger.<\/p>\n
5.13 STOCK OPTIONS. At the Effective Time, the Target Stock Option
\nPlan and each outstanding option to purchase shares of Target Common Stock under
\nthe Target Stock Option Plan, whether vested or unvested, shall be assumed by
\nAcquiror. In addition, Target’s rights to repurchase shares of Target Common
\nStock under the Target Stock Option Plan shall be assigned to, and assumed by,
\nAcquiror. Target has delivered to Acquiror a schedule (the “Option Schedule”)
\nwhich sets forth a true and complete list as of the date hereof of all holders
\nof outstanding options under the Target Stock Option Plan including the number
\nof shares of Target Capital Stock subject to each such option, the exercise or
\nvesting schedule, the exercise price per share and the term of each such option.
\nOn the Closing Date, Target shall deliver to Acquiror an updated Option Schedule
\ncurrent as of such date. Each such option so assumed by Acquiror under this
\nAgreement shall continue to have, and be subject to, the same terms and
\nconditions set forth in the Target Stock Option Plan immediately prior to the
\nEffective Time, except that (i) such option shall be exercisable for that number
\nof whole shares of Acquiror Common Stock equal to the product of the number of
\nshares of Target Common Stock that were issuable upon<\/p>\n
35<\/p>\n
exercise of such option immediately prior to the Effective Time multiplied by
\nthe Exchange Ratio and rounded down to the nearest whole number of shares of
\nAcquiror Common Stock, (ii) the per share exercise price for the shares of
\nAcquiror Common Stock issuable upon exercise of such assumed option shall be
\nequal to the quotient determined by dividing the exercise price per share of
\nTarget Common Stock at which such option was exercisable immediately prior to
\nthe Effective Time by the Exchange Ratio, rounded up to the nearest whole cent,
\nand (iii) each assumed option which provided for acceleration of vesting upon a
\nchange in control of Target shall not accelerate in accordance with the terms of
\nthe plan or agreement currently evidencing the assumed option but shall be
\neligible for acceleration in accordance with the terms of the assumption
\nagreement entered into between Acquiror and the optionee.<\/p>\n
(a) It is the intention of the parties that the options
\nso assumed by Acquiror qualify following the Effective Time as incentive stock
\noptions as defined in Section 422 of the Code to the extent such options
\nqualified as incentive stock options prior to the Effective Time. Within 20
\nbusiness days after the Effective Time, Acquiror will issue to each person who,
\nimmediately prior to the Effective Time was a holder of an outstanding option
\nunder the Target Stock Option Plan a document evidencing the foregoing
\nassumption of such option by Acquiror.<\/p>\n
(b) Within fifteen (15) business days after the Effective
\nTime, Acquiror shall file a registration statement on Form S-8 (or any successor
\nor other appropriate forms) which will register the shares of Acquiror Common
\nStock subject to assumed options to the extent permitted by Federal securities
\nlaws and shall use its commercially reasonable efforts to maintain the
\neffectiveness of such registration statement or registration statements (and
\nmaintain the current status of the prospectus or prospectuses contained therein)
\nfor so long as such options remain outstanding.<\/p>\n
5.14 ESCROW AGREEMENT. On or before the Effective Time, the Escrow
\nAgent and the Stockholders’ Agent (as defined in Article VIII hereto) will
\nexecute the Escrow Agreement contemplated by Article VIII in the form attached
\nhereto as EXHIBIT D (“Escrow Agreement”).<\/p>\n
5.15 LISTING OF ADDITIONAL SHARES. Prior to issuance, Acquiror
\nshall file with Nasdaq a Notification Form for Listing of Additional Shares
\ncovering the shares of Acquiror Common Stock issuable upon conversion of the
\nTarget Common Stock in the Merger and upon exercise of the options under the
\nTarget Stock Option Plans assumed by Acquiror.<\/p>\n
5.16 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Each of the parties
\nagrees to use all reasonable efforts to take, or cause to be taken, all action
\nand to do, or cause to be done, all things necessary, proper or advisable under
\napplicable laws and regulations to consummate and make effective the
\ntransactions contemplated by this Agreement, subject to the appropriate vote of
\nstockholders of Target described in Section 5.3, including cooperating fully
\nwith the other party, including by provision of information. In case at any time
\nafter the Effective Time any further action is necessary or desirable to carry
\nout the purposes of this Agreement the Surviving Corporation with full title to
\nall properties, assets, rights, approvals, immunities and franchises of Target,
\nthe proper officers and directors of each party to this Agreement shall take all
\nsuch necessary action.<\/p>\n
36<\/p>\n
5.17 EMPLOYEE BENEFITS. Acquiror shall take such reasonable
\nactions, to the extent permitted by Acquiror’s benefit programs, as are
\nnecessary to allow eligible employees of Target to participate in the benefit
\nprograms of Acquiror, or alternative benefit programs in the aggregate
\nsubstantially comparable to those applicable to employees of Acquiror on similar
\nterms, as soon as practicable after the Effective Time of the Merger. For
\npurposes of satisfying the terms and conditions of such programs, to the extent
\npermitted by Acquiror’s benefit programs, Acquiror shall use reasonable efforts
\nto give full credit for eligibility, or vesting for each participant’s period of
\nservice with Target.<\/p>\n
5.18 PARACHUTE PAYMENTS. Target shall use its best efforts to have
\nany agreements or arrangements that may result in the payment of any amount that
\nwould not be deductible by reason of Section 280G of the Code approved by such
\npercentage of Target’s outstanding voting securities as is required by the terms
\nof Section 280G(b)(5)(B) of the Code and the proposed Treasury Regulations
\nthereunder, including, without limitation, Q-7 of Section 1.280G-1 of such
\nproposed regulations.<\/p>\n
5.19 NECESSARY ACTIONS. Acquiror and Target shall execute and
\ndeliver at the Closing all agreements and documents contemplated by this
\nAgreement to be executed and delivered by them at the Closing.<\/p>\n
5.20 DIRECTOR AND OFFICER INDEMNIFICATION. From and after the
\nEffective Time, Acquiror will, or will cause, the Surviving Corporation to,
\nfulfill and honor in all respects the obligations of Target pursuant to its
\nCertificate of Incorporation and Bylaws and any indemnification agreements
\nbetween Target and each of its directors and officers existing prior to the
\nEffective Time. The Certificate of Incorporation and Bylaws of the Surviving
\nCorporation will contain the provisions with respect to indemnification set
\nforth in the Certificate of Incorporation and Bylaws of Target prior to the
\nEffective Time, which provisions will not be amended, repealed or otherwise
\nmodified for a period of six years from the Effective Time in any manner that
\nwould adversely affect the rights thereunder of individuals who, immediately
\nprior to the Effective Time, were directors, officers, employees or agents of
\nTarget, unless such modification is required by law. This Section 5.20 shall
\nsurvive any termination of this Agreement following the consummation of the
\nMerger and is intended to benefit Target, Acquiror, the Surviving Corporation
\nand the indemnified parties, and will be binding on all successors and assigns
\nof Target, Acquirer and the Surviving Corporation. For a period of one year
\nafter the Effective Time, Acquiror will, and will cause Surviving Corporation
\nto, use its commercially reasonable efforts to obtain, and maintain in effect,
\ndirectors and officers liability insurance covering those persons who are
\ncurrently directors and officers of the Target on customary terms and
\nconditions; provided, however, that the Acquiror and Surviving Corporation
\ncollectively shall not be obligated to pay in excess of an aggregate $300,000
\nfor such insurance.<\/p>\n
5.21 SETTLEMENT OF LAWSUITS. Target shall use commercially
\nreasonable best efforts to settle (i) the lawsuit filed against Target in
\nCincinnati, Ohio on December 8, 1999 by GE Aircraft Engines Division of General
\nElectric Company (the “GE Lawsuit”); (ii) the lawsuit filed against Target
\nDecember 1999 by American Software (the “American Software Lawsuit” and
\ncollectively with the GE Lawsuit, the “Lawsuits”) and (iii) the claim by Norwest
\nServices, Inc. identified in Section 2.5 of the Targets Disclosure Letter (the
\n“Claim”) and have fully-executed<\/p>\n
37<\/p>\n
and binding settlement agreements and releases (all in a form and substance
\nreasonably satisfactory to Acquiror) with respect to the Lawsuits and the Claim
\non or before December 17, 1999. The GE Lawsuit shall be settled for no more than
\n$900,000, the American Software Lawsuit shall be settled for no more than
\n$70,000 and the Claim shall be settled for a discount of no more than twenty
\npercent. The settlement terms in the Lawsuits and the Claim shall contain
\nconfidentiality provisions and the agreement of the plaintiffs to not disparage
\nTarget or its business in any way.<\/p>\n
5.22 STRATEGIC INVESTMENT. Target shall use its best efforts to
\nclose prior to the Effective Time a total of at least fifty million dollars of
\nadditional investment in equity securities by certain institutional accredited
\ninvestors previously identified to Acquiror at a pre-money valuation of $650
\nmillion (the “Strategic Investment”).<\/p>\n
5.23 PROPRIETARY INFORMATION AGREEMENT. Target shall use its best
\ncommercially reasonable efforts to cause all employees of Target to sign
\nAcquiror’s form of proprietary information agreement prior to the Closing.<\/p>\n
5.24 HSR FILING. As soon as may be reasonably practicable, the
\nAcquiror and Target each shall file with the United States Federal Trade
\nCommission (the “FTC”) and the Antitrust Division of the United States
\nDepartment of Justice (“DOJ”) Notification and Report Forms relating to the
\ntransactions contemplated herein as required by the HSR Act, as well as
\ncomparable pre-merger notification forms required by the merger notification or
\ncontrol laws and regulations of any applicable jurisdiction, as agreed to by the
\nparties. Acquiror and Target each shall promptly (a) supply the other with any
\ninformation which may be required in order to effectuate such filings and (b)
\nsupply any additional information which reasonably may be required by the FTC,
\nthe DOJ or the competition or merger control authorities of any other
\njurisdiction and which the parties may reasonably deem appropriate.<\/p>\n
ARTICLE VI<\/p>\n
CONDITIONS TO THE MERGER
\n ————————<\/p>\n
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
\nThe respective obligations of each party to this Agreement to consummate and
\neffect this Agreement and the transactions contemplated hereby shall be subject
\nto the satisfaction at or prior to the Effective Time of each of the following
\nconditions, any of which may be waived, in writing, by agreement of all the
\nparties hereto:<\/p>\n
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger
\nshall have been approved and adopted by the holders of at least fifty-five
\npercent (55%) of the shares of Target Capital Stock outstanding as of the record
\ndate set for the Target Stockholders Meeting or solicitation of stockholder
\nconsents, and any agreements or arrangements that may result in the payment of
\nany amount that would not be deductible by reason of Section 280G of the Code
\nshall have been approved by such number of stockholders of Target as is required
\nby the terms of Section 280G(b)(5)(B).<\/p>\n
38<\/p>\n
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No
\ntemporary restraining order, preliminary or permanent injunction or other order
\nissued by any court of competent jurisdiction or other legal or regulatory
\nrestraint or prohibition preventing the consummation of the Merger shall be in
\neffect, nor shall any proceeding brought by an administrative agency or
\ncommission or other governmental authority or instrumentality, domestic or
\nforeign, seeking any of the foregoing be pending; nor shall there be any action
\ntaken, or any statute, rule, regulation or order enacted, entered, enforced or
\ndeemed applicable to the Merger, which makes the consummation of the Merger
\nillegal. In the event an injunction or other order shall have been issued, each
\nparty agrees to use its reasonable diligent efforts to have such injunction or
\nother order lifted.<\/p>\n
(c) GOVERNMENTAL APPROVAL. Acquiror and Target and their
\nrespective subsidiaries shall have timely obtained from each Governmental Entity
\nall approvals, waivers and consents, if any, necessary for consummation of or in
\nconnection with the Merger and the several transactions contemplated hereby,
\nincluding such approvals, waivers and consents as may be required under the
\nSecurities Act, under state Blue Sky laws, and under HSR.<\/p>\n
(d) LISTING OF ADDITIONAL SHARES. The shares of Acquiror
\nCommon Stock issuable upon conversion of the Target Common Stock in the Merger
\nand upon exercise of the options under the Target Stock Option Plan assumed by
\nAcquiror shall have been approved for quotation on the Nasdaq National Market
\nSystem, subject only to official notice of issuance.<\/p>\n
(e) ESCROW AGREEMENT. Acquiror, Target, Escrow Agent and
\nthe Stockholder’s Agent (as defined in Article VIII hereto) shall have entered
\ninto an Escrow Agreement substantially in the form attached hereto as EXHIBIT D.<\/p>\n
(f) TAX OPINION. Each of Target and Acquiror shall have
\nreceived a written opinion from their respective counsel to the effect that the
\nMerger will constitute a reorganization within the meaning of Section 368 of the
\nCode, which opinions shall be substantially identical in substance; provided,
\nhowever, that if the counsel to either Target or Acquiror does not render such
\nopinion, this condition shall nonetheless be deemed satisfied with respect to
\nsuch party if counsel to the other party renders such opinion to such party. In
\npreparing the Target and the Acquiror tax opinions, counsel may rely on
\nreasonable assumptions and may also rely on (and to the extent reasonably
\nrequired, the parties and Target’s shareholders shall make) reasonable
\nrepresentations related thereto.<\/p>\n
(g) TRANSACTION EXEMPTION OR REGISTRATION EFFECTIVE.
\nEither (i) the shares of Acquiror Common Stock to be issued hereunder shall be
\n“exempt securities” under Section 3(a)(10) of the Securities Act or (ii) the SEC
\nshall have declared the Registration Statement effective, no stop order
\nsuspending the effectiveness of the Registration Statement or any part thereof
\nshall have been issued and no proceeding for that purpose, and no similar
\nproceeding in respect of the Proxy Statement, shall have been initiated or
\nthreatened in writing by the SEC.<\/p>\n
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET. The
\nobligations of Target to consummate and effect this Agreement and the
\ntransactions contemplated hereby shall be subject to the satisfaction at or
\nprior to the Effective Time of each of the following conditions, any of which
\nmay be waived, in writing, by Target:<\/p>\n
39<\/p>\n
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Except
\nas disclosed in the Acquiror Disclosure Schedule, the representations and
\nwarranties of Acquiror in this Agreement shall be true and correct in all
\nrespects on and as of the Effective Time as though such representations and
\nwarranties were made on and as of such time (without regard to materiality or
\nknowledge qualifiers contained in such representations or warranties) except
\nwhere any inaccuracies or breaches of such representations or warranties shall
\nnot, individually or in the aggregate, have a Material Adverse Effect on
\nAcquiror and (ii) Acquiror shall have performed and complied in all material
\nrespects with all covenants, obligations and conditions of this Agreement
\nrequired to be performed and complied with by them as of the Effective Time.<\/p>\n
(b) CERTIFICATE OF ACQUIROR. Target shall have been
\nprovided with a certificate executed on behalf of Acquiror by its President and
\nits Chief Financial Officer to the effect that, as of the Effective Time:<\/p>\n
(A) all representations and warranties of
\nAcquiror in this Agreement shall be true and correct in all respects on and as
\nof the Effective Time as though such representations and warranties were made on
\nand as of such time (without regard to materiality or knowledge qualifiers
\ncontained in such representations or warranties) except where any inaccuracies
\nor breaches of such representations or warranties shall not, individually or in
\nthe aggregate, have a Material Adverse Effect on Acquiror ; and<\/p>\n
(B) all covenants, obligations and conditions of this
\nAgreement to be performed by Acquiror on or before such date have been so
\nperformed in all material respects.<\/p>\n
(c) LEGAL OPINION. Target shall have received a legal
\nopinion from Acquiror’s legal counsel in a form reasonably acceptable to both
\nTarget’s legal counsel and Acquiror’s legal counsel.<\/p>\n
(d) NO MATERIAL ADVERSE CHANGES. There shall not have
\noccurred any material adverse change in the condition (financial or otherwise),
\nproperties, assets (including intangible assets), liabilities, business,
\noperations, results of operations or prospects of Acquiror and its subsidiaries,
\ntaken as a whole; other than a change that is directly caused by the public
\nannouncement of, and the response or reaction of customers, vendors, licensors,
\ninvestors or employees of Acquiror to this Agreement, the Merger or any of the
\ntransactions contemplated by this Agreement.<\/p>\n
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR. The
\nobligations of Acquiror to consummate and effect this Agreement and the
\ntransactions contemplated hereby shall be subject to the satisfaction at or
\nprior to the Effective Time of each of the following conditions, any of which
\nmay be waived, in writing, by Acquiror:<\/p>\n
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as
\ndisclosed in the Target Disclosure Schedule (i) the representations and
\nwarranties of Target in this Agreement shall be true and correct in all respects
\non and as of the Effective Time as though such representations and warranties
\nwere made on and as of such time (without regard to materiality or knowledge
\nqualifiers contained in such representations or warranties) except where any
\ninaccuracies or breaches of such representations or warranties shall not,
\nindividually or in the<\/p>\n
40<\/p>\n
aggregate, have a Material Adverse Effect on Target and (ii) Target shall have
\nperformed and complied in all material respects with all covenants, obligations
\nand conditions of this Agreement required to be performed and complied with by
\nit as of the Effective Time.<\/p>\n
(b) CERTIFICATE OF TARGET. Acquiror shall have been
\nprovided with a certificate executed on behalf of Target by its President and
\nChief Financial Officer to the effect that, as of the Effective Time:<\/p>\n
(A) all representations and warranties of Target
\nin this Agreement shall be true and correct in all respects on and as of the
\nEffective Time as though such representations and warranties were made on and as
\nof such time (without regard to materiality or knowledge qualifiers contained in
\nsuch representations or warranties) except where any inaccuracies or breaches of
\nsuch representations or warranties shall not, individually or in the aggregate,
\nhave a Material Adverse Effect on Target; and<\/p>\n
(B) all covenants, obligations and conditions of
\nthis Agreement to be performed by Target on or before such date have been so
\nperformed in all respects.<\/p>\n
(c) THIRD PARTY CONSENTS. Acquiror shall have been
\nfurnished with evidence satisfactory to it of the consent or approval of those
\npersons whose consent or approval shall be required in connection with the
\nMerger under the contracts of Target set forth on SCHEDULE 2.27 hereto.<\/p>\n
(d) LEGAL OPINION. Acquiror shall have received a legal
\nopinion from Target’s legal counsel in a form reasonably acceptable to both
\nTarget’s legal counsel and Acquiror’s legal counsel.<\/p>\n
(e) NO MATERIAL ADVERSE CHANGES. There shall not have
\noccurred any material adverse change in the condition (financial or otherwise),
\nproperties, assets (including intangible assets), liabilities, business,
\noperations, results of operations or prospects of Target and its subsidiaries,
\ntaken as a whole; other than a change that is directly caused by the public
\nannouncement of, and the response or reaction of customers, vendors, licensors,
\ninvestors or employees of Acquiror to this Agreement, the Merger or any of the
\ntransactions contemplated by this Agreement.<\/p>\n
(f) FIRPTA CERTIFICATE. Target shall, prior to the
\nClosing Date, provide Acquiror with a properly executed FIRPTA Notification
\nLetter, substantially in the form of EXHIBIT H attached hereto, which states
\nthat shares of capital stock of Target do not constitute “United States real
\nproperty interests” 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 Notification Letter, Target shall
\nhave provided to Acquiror, as agent for Target, a form of notice to the Internal
\nRevenue Service in accordance with the requirements of Treasury Regulation
\nSection 1.897-2(h)(2) and substantially in the form of EXHIBIT H attached hereto
\nalong with written authorization for Acquiror to deliver such notice form to the
\nInternal Revenue Service on behalf of Target upon the Closing of the Merger.<\/p>\n
41<\/p>\n
(g) RESIGNATION OF DIRECTORS. The directors of Target in
\noffice immediately prior to the Effective Time shall have resigned as directors
\nof Target effective as of the Effective Time.<\/p>\n
(h) DISSENTING SHARES. The number of Dissenting Shares
\nshall not exceed the Designated Percentage (as defined below) of the shares of
\nTarget Capital Stock outstanding immediately prior to the Effective Time. The
\n“Designated Percentage” shall be 5%, provided that if (i) any Designated
\nDissenting Stockholder and Affiliates thereof shall hold Dissenting Shares and
\n(ii) the aggregate Dissenting Shares held by Target stockholders other than any
\nDesignated Dissenting Stockholder and Affiliates thereof are less than 5% of the
\nshares of Target Capital Stock outstanding immediately prior to the Effective
\nTime, then the Designated Percentage shall equal 15%. A “Designated Dissenting
\nStockholder” shall mean any stockholder of Target designated by mutual agreement
\nof Target and Acquiror.<\/p>\n
ARTICLE VII<\/p>\n
TERMINATION, EXPENSES, AMENDMENT AND WAIVER
\n ——————————————-<\/p>\n
7.1 TERMINATION. At any time prior to the Effective Time, whether
\nbefore or after approval of the matters presented in connection with the Merger
\nby the stockholders of Target, this Agreement may be terminated:<\/p>\n
(a) by mutual consent duly authorized by the Board of
\nDirectors of Acquiror and Target;<\/p>\n
(b) by either Acquiror or Target, if, without fault of
\nthe terminating party, the Closing shall not have occurred on or before April
\n30, 2000 (provided, a later date may be agreed upon in writing by the parties
\nhereto, and provided further that the right to terminate this Agreement under
\nthis Section 7.1(b) shall not be available to any party whose action or failure
\nto act has been the cause or resulted in the failure of the Merger to occur on
\nor before such date and such action or failure to act constitutes a breach of
\nthis Agreement);<\/p>\n
(c) by Acquiror, if (i) Target shall breach any
\nrepresentation, warranty, obligation or agreement hereunder and such breach
\nshall not have been cured within twenty (20) days of receipt by Target of
\nwritten notice of such breach, provided that the right to terminate this
\nAgreement by Acquiror under this Section 7.1(c)(i) shall not be available to
\nAcquiror where Acquiror is at that time in willful breach of this Agreement,
\n(ii) the Board of Directors of Target shall have withdrawn or modified its
\nrecommendation of this Agreement or the Merger in a manner adverse to Acquiror
\nor shall have resolved to do any of the foregoing, provided that the right to
\nterminate this Agreement by Acquiror under this Section 7.1(c)(ii) shall not be
\navailable to Acquiror where Acquiror is at that time in willful breach of this
\nAgreement, or (iii) for any reason Target fails to call and hold the Target
\nStockholders Meeting by March 15, 2000 or commence solicitation of stockholder
\nconsents by March 1, 2000, provided that the right to terminate this Agreement
\nby Acquiror under this Section 7.1(c)(iii) shall not be available to Acquiror
\nwhere Acquiror is at that time in willful breach of this Agreement;<\/p>\n
42<\/p>\n
(d) by Target, if Acquiror shall breach any
\nrepresentation, warranty, obligation or agreement hereunder and such breach
\nshall not have been cured within twenty (20) days following receipt by Acquiror
\nof written notice of such breach, provided that the right to terminate this
\nAgreement by Target under this Section 7.1(d) shall not be available to Target
\nwhere Target is at that time in material breach of this Agreement; or<\/p>\n
(e) by (i) either Target or Acquiror if any permanent
\ninjunction or other order of a court or other competent authority preventing the
\nconsummation of the Merger shall have become final and nonappealable or (ii) by
\nAcquiror if any required approval of the stockholders of Target shall not have
\nbeen obtained by reason of the failure to obtain the required stockholder
\nconsents within fifteen (15) days of the commencement of a stockholder consent
\nsolicitation or vote upon a vote held at a duly held meeting of stockholders or
\nat any adjournment thereof.<\/p>\n
7.2 EFFECT OF TERMINATION. In the event of termination of this
\nAgreement as provided in Section 7.1, this Agreement shall forthwith become void
\nand there shall be no liability or obligation on the part of Acquiror or Target
\nor their respective officers, directors, stockholders or affiliates, except to
\nthe extent that such termination results from the breach by a party hereto of
\nany of its representations, warranties or covenants set forth in this Agreement;
\nprovided that, the provisions of Section 5.3 (Confidentiality), and this Section
\n7.2 shall remain in full force and effect and survive any termination of this
\nAgreement.<\/p>\n
7.3 EXPENSES. Whether or not the Merger is consummated, all costs
\nand expenses incurred in connection with this Agreement and the transactions
\ncontemplated hereby (including, without limitation, the fees and expenses of its
\nadvisers, accountants and legal counsel) shall be paid by the party incurring
\nsuch expense.<\/p>\n
7.4 AMENDMENT. The boards of directors of the parties hereto may
\ncause this Agreement to be amended at any time by execution of an instrument in
\nwriting signed on behalf of each of the parties hereto; provided that an
\namendment made subsequent to adoption of the Agreement by the stockholders of
\nTarget shall not (i) alter or change the amount or kind of consideration to be
\nreceived on conversion of the Target Capital Stock, (ii) alter or change any
\nterm of the Certificate of Incorporation of the Surviving Corporation to be
\neffected by the Merger, or (iii) alter or change any of the terms and conditions
\nof the Agreement if such alteration or change would adversely affect the holders
\nof Target Capital Stock.<\/p>\n
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time any
\nparty hereto may, to the extent legally allowed, (i) extend the time for the
\nperformance of any of the obligations or other acts of the other parties hereto,
\n(ii) waive any inaccuracies in the representations and warranties made to such
\nparty contained herein or in any document delivered pursuant hereto and (iii)
\nwaive compliance with any of the agreements or conditions for the benefit of
\nsuch party contained herein. Any agreement on the part of a party hereto to any
\nsuch extension or waiver shall be valid only if set forth in an instrument in
\nwriting signed on behalf of such party.<\/p>\n
43<\/p>\n
ARTICLE VIII<\/p>\n
ESCROW AND INDEMNIFICATION
\n ————————–<\/p>\n
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
\nNotwithstanding any investigation conducted before or after the Closing Date,
\nand notwithstanding any actual or implied knowledge or notice of any facts or
\ncircumstances which Acquiror or Target may have as a result of such
\ninvestigation or otherwise, Acquiror and Target will be entitled to rely upon
\nthe other party’s representations, warranties and covenants set forth in this
\nAgreement. The representations and warranties of Acquiror will terminate upon
\nthe Closing. The obligations of Target with respect to its representations,
\nwarranties, agreements and covenants will survive the Closing and continue in
\nfull force and effect until the date twelve (12) months following the Closing
\nDate, at which time the representations, warranties and covenants of Target set
\nforth in this Agreement and any liability of the holders of Target Capital Stock
\n(collectively, the “Former Target Stockholders”) with respect to those
\nrepresentations, warranties and covenants will terminate.<\/p>\n
8.2 INDEMNITY. From and after the Effective Time of the Merger,
\nand subject to the provisions of Section 8.1, Acquiror and the Surviving
\nCorporation (on or after the Closing Date) shall be indemnified and held
\nharmless by the Former Target Stockholders against, and reimbursed for, any
\nactual liability, damage, loss, obligation, demand, judgment, fine, penalty,
\ncost or expense, including reasonable attorneys’ fees and expenses, and the
\ncosts of investigation incurred in defending against or settling such liability,
\ndamage, loss, cost or expense or claim therefor and any amounts paid in
\nsettlement thereof imposed on or reasonably incurred by Acquiror or the
\nSurviving Corporation as a result of any breach of any representation, warranty,
\nagreement or covenant on the part of Target under this Agreement (collectively
\nthe “Damages”). “Damages” as used herein is not limited to matters asserted by
\nthird parties, but includes Damages incurred or sustained by Acquiror in the
\nabsence of claims by a third party.<\/p>\n
8.3 ESCROW FUND. As security for the indemnity provided for in
\nSection 8.2 hereof, the Escrow Shares shall be deposited by Acquiror in an
\nescrow account with a mutually acceptable financial institution as Escrow Agent
\n(the “Escrow Agent”), as of the Closing Date, such deposit to constitute an
\nescrow fund (the “Escrow Fund”) to be governed by the terms set forth in this
\nAgreement and the provisions of an Escrow Agreement to be executed and delivered
\npursuant to Section 5.14. The Escrow Fund shall be allocated in equal
\nproportions of Shares among the Former Target Stockholders on a pro-rata basis
\nin accordance with the number of shares of Target Capital Stock held by the
\nFormer Target Stockholders at the Effective Time (excluding for purposes of this
\ncalculation any Dissenting Shares). Upon compliance with the terms hereof and
\nsubject to the provisions of this Article VIII, Acquiror and the Surviving
\nCorporation shall be entitled to obtain indemnity from the Escrow Fund for
\nDamages covered by the indemnity provided for in Section 8.2 of this Agreement.<\/p>\n
8.4 DAMAGE THRESHOLD. Notwithstanding the foregoing, Acquiror may
\nnot receive any shares from the Escrow Fund unless and until an Officer’s
\nCertificate (as defined in Section 8.6 below) identifying Damages the aggregate
\namount of which exceeds $1,000,000 has been delivered to the Escrow Agent as
\nprovided in Section 8.5 below and such amount is determined pursuant to this
\nArticle VIII to be payable, in which case Acquiror shall receive<\/p>\n
44<\/p>\n
shares equal in value to the full amount of Damages in excess of $1,000,000. In
\ndetermining the amount of any Damage attributable to a breach, any materiality
\nstandard or knowledge qualifier contained in a representation, warranty or
\ncovenant of Target shall be disregarded.<\/p>\n
8.5 ESCROW PERIOD. Except as contemplated by Section 8.6 hereof,
\nthe escrow period shall end, and all Escrow Shares in the Escrow Fund shall be
\nreleased, on the 12-month anniversary of the Closing Date (the “Termination
\nDate”).<\/p>\n
8.6 CLAIMS UPON ESCROW FUND.<\/p>\n
(a) Upon receipt by the Escrow Agent on or before the end
\nof the Termination Date of a certificate signed by the chief financial or chief
\nexecutive officer of Acquiror (an “Officer’s Certificate”):<\/p>\n
(A) stating that Acquiror or the Surviving
\nCorporation has incurred, paid or properly accrued (in accordance with GAAP) or
\nknows of facts giving rise to a reasonable probability that it will have to
\nincur, pay or accrue (in accordance with GAAP) Damages in an aggregate stated
\namount with respect to which Acquiror or the Surviving Corporation is entitled
\nto payment from the Escrow Fund pursuant to this Agreement; and<\/p>\n
(B) specifying in reasonable detail the
\nindividual items of Damages included in the amount so stated, the date each such
\nitem was incurred, paid or properly accrued (in accordance with GAAP), or the
\nbasis for such anticipated liability, the specific nature of the breach to which
\nsuch item is related, the Escrow Agent shall, subject to the provisions of
\nSection 8.7 of this Agreement, deliver to Acquiror shares of Acquiror Common
\nStock in an amount necessary to indemnify Acquiror for the Damages claimed. All
\nshares of Acquiror Common Stock subject to such claims shall remain in the
\nEscrow Fund until Damages are actually incurred or paid or the Acquiror
\ndetermines in its reasonably good faith judgment that no Damages will be
\nrequired to be incurred or paid (in which event such shares shall be distributed
\nto the Former Target Stockholders in accordance with Section 8.10 below).<\/p>\n
(b) For the purpose of compensating Acquiror for its
\nDamages pursuant to this Agreement, the Acquiror Common Stock in the Escrow Fund
\nshall be valued at the Closing Price.<\/p>\n
8.7 OBJECTIONS TO CLAIMS. At the time of delivery of any Officer’s
\nCertificate to the Escrow Agent, a duplicate copy of such Officer’s Certificate
\nshall be delivered to the Stockholders’ Agent (defined in Section 8.9 below) and
\nfor a period of thirty (30) days after such delivery to the Escrow Agent, the
\nEscrow Agent shall make no delivery of Acquiror Common Stock, cash, or other
\nproperty pursuant to Section 8.6 hereof unless the Escrow Agent shall have
\nreceived written authorization from the Stockholders’ Agent to make such
\ndelivery. After the expiration of such thirty (30) day period, the Escrow Agent
\nshall make delivery of the Acquiror Common Stock or other property in the Escrow
\nFund in accordance with Section 8.6 hereof, provided that no such payment or
\ndelivery may be made if the Stockholders’ Agent 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
45<\/p>\n
8.8 RESOLUTION OF CONFLICTS; ARBITRATION.<\/p>\n
(a) In case the Stockholders’ Agent shall so object in
\nwriting to any claim or claims by Acquiror made in any Officer’s Certificate,
\nthe Stockholders’ Agent and Acquiror shall attempt in good faith to agree upon
\nthe rights of the respective parties with respect to each of such claims. If the
\nStockholders’ Agent and Acquiror should so agree, a memorandum setting forth
\nsuch agreement shall be prepared and signed by both parties and shall be
\nfurnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
\nsuch memorandum and shall distribute the Acquiror Common Stock or other property
\nfrom the Escrow Fund in accordance with the terms thereof.<\/p>\n
(b) If no such agreement can be reached after good faith
\nnegotiation, either Acquiror or the Stockholders’ Agent may, by written notice
\nto the other, demand arbitration of the matter unless the amount of the Damage
\nis at issue in pending litigation with a third party, in which event arbitration
\nshall not be commenced until such amount is ascertained or both parties agree to
\narbitration; and in either such event the matter shall be settled by arbitration
\nconducted by three arbitrators. Within fifteen (15) days after such written
\nnotice is sent, Acquiror and the Stockholders’ Agent shall each select one
\narbitrator, and the two arbitrators so selected shall select a third arbitrator.
\nThe decision of the arbitrators as to the validity and amount of any claim in
\nsuch Officer’s Certificate shall be binding and conclusive upon the parties to
\nthis Agreement, and notwithstanding anything in Section 8.6 hereof, the Escrow
\nAgent shall be entitled to act in accordance with such decision and make or
\nwithhold payments out of the Escrow Fund in accordance therewith.<\/p>\n
(c) Judgment upon any award rendered by the arbitrators
\nmay be entered in any court having jurisdiction. Any such arbitration shall be
\nheld in Mountain View, California under the commercial rules then in effect of
\nthe American Arbitration Association. For purposes of this Section 8.8, in any
\narbitration hereunder in which any claim or the amount thereof stated in the
\nOfficer’s Certificate is at issue, Acquiror shall be deemed to be the
\nNon-Prevailing Party unless the arbitrators award Acquiror more than one-half
\n(1\/2) of the amount in dispute, plus any amounts not in dispute; otherwise, the
\nFormer Target Stockholders for whom shares of Target Common Stock otherwise
\nissuable to them have been deposited in the Escrow Fund shall be deemed to be
\nthe Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay
\nits own expenses, the fees of each arbitrator, the administrative fee of the
\nAmerican Arbitration Association, and the expenses, including without
\nlimitation, attorneys’ fees and costs, reasonably incurred by the other party to
\nthe arbitration.<\/p>\n
8.9 STOCKHOLDERS’ AGENT.<\/p>\n
(a) The parties will mutually agree on the identity of a
\nStockholder who will agree to be constituted and appointed as agent
\n(“Stockholders’ Agent”) for and on behalf of the Target stockholders to give and
\nreceive notices and communications, to authorize delivery to Acquiror of the
\nAcquiror Common Stock or other property from the Escrow Fund in satisfaction of
\nclaims by Acquiror, to object to such deliveries, to agree to, negotiate, enter
\ninto settlements and compromises of, and demand arbitration and comply with
\norders of courts and awards of arbitrators with respect to such claims, and to
\ntake all actions necessary or appropriate in the judgment of the Stockholders’
\nAgent for the accomplishment of the foregoing. Such agency<\/p>\n
46<\/p>\n
may be changed by the holders of a majority in interest of the Escrow Fund from
\ntime to time upon not less than 10 days’ prior written notice to Acquiror. The
\nStockholder’s Agent may resign upon thirty (30) days notice to the parties to
\nthis Agreement and the Former Target Stockholders. No bond shall be required of
\nthe Stockholders’ Agent, and the Stockholders’ Agent shall receive no
\ncompensation for his services. Notices or communications to or from the
\nStockholders’ Agent shall constitute notice to or from each of the Former Target
\nStockholders.<\/p>\n
(b) The Stockholders’ Agent shall not be liable for any
\nact done or omitted hereunder as Stockholders’ Agent while acting in good faith
\nand in the exercise of reasonable judgment, and any act done or omitted pursuant
\nto the advice of counsel shall be conclusive evidence of such good faith. The
\nFormer Target Stockholders shall severally indemnify the Stockholders’ Agent and
\nhold him harmless against any loss, liability or expense incurred without gross
\nnegligence or bad faith on the part of the Stockholders’ Agent and arising out
\nof or in connection with the acceptance or administration of his duties
\nhereunder.<\/p>\n
(c) The Stockholders’ Agent shall have reasonable access
\nto information about Target and the reasonable assistance of Target’s former
\nofficers and employees for purposes of performing its duties and exercising its
\nrights hereunder, provided that the Stockholders’ Agent shall treat
\nconfidentially and not disclose any nonpublic information from or about Target
\nto anyone (except on a need to know basis to individuals who agree to treat such
\ninformation confidentially).<\/p>\n
(d) The Stockholders’ Agent shall be entitled to a
\ndistribution from the Escrow Fund equal to any such indemnity claim which has
\nnot been satisfied; provided, however, that no such distribution shall be made
\nuntil all claims of Acquiror set forth in any Officer’s Certificate delivered to
\nthe Escrow Agent on or prior to the Termination Date have been resolved.<\/p>\n
8.10 DISTRIBUTION UPON TERMINATION OF ESCROW PERIOD. Within five
\n(5) business days following the Termination Date, the Escrow Agent shall deliver
\nto the Former Target Stockholders all of the Escrow Shares in the Escrow Fund in
\nexcess of any amount of such Escrow Shares reasonably necessary to satisfy any
\nunsatisfied or disputed claims for Damages specified in any Officer’s
\nCertificate delivered to the Escrow Agent on or before the Termination Date and
\nany unsatisfied or disputed claims by the Stockholder’s Agent under Section 8.9.
\nAs soon as all such claims have been resolved, the Escrow Agent shall deliver to
\nthe Former Target Stockholders all Escrow Shares remaining in the Escrow Fund
\nand not required to satisfy such claims. Deliveries of Escrow Shares to the
\nFormer Target Stockholders pursuant to this section shall be made in proportion
\nto the allocation set forth in Section 8.3.<\/p>\n
8.11 ACTIONS OF THE STOCKHOLDERS’ AGENT. A decision, act, consent
\nor instruction of the Stockholders’ Agent shall constitute a decision of all
\nFormer Target Stockholders for whom shares of Acquiror Common Stock otherwise
\nissuable to them are deposited in the Escrow Fund and shall be final, binding
\nand conclusive upon each such Former Target Stockholder, and the Escrow Agent
\nand Acquiror may rely upon any decision, act, consent or instruction of the
\nStockholders’ Agent as being the decision, act, consent or instruction of each
\nand every such Former Target Stockholder. The Escrow Agent and Acquiror are
\nhereby relieved from any<\/p>\n
47<\/p>\n
liability to any person for any acts done by them in accordance with such
\ndecision, act, consent or instruction of the Stockholders’ Agent.<\/p>\n
8.12 THIRD-PARTY 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 Stockholders’ Agent of such
\nclaim. Acquiror shall have the right to settle any such claim with the written
\nconsent of the Stockholders’ Agent, which consent shall not be unreasonably
\nwithheld; provided, however, that the Stockholders’ Agent may, at his option,
\ndirect the settlement negotiations other than for claims related to (i) the
\nintellectual property of Target or (ii) disputes or disagreements with customers
\nof Acquiror or Target. In the event that the Stockholders’ Agent has consented
\nto any such settlement, neither the Former Target Stockholders nor the
\nStockholders’ Agent shall have any power or authority to object under Section
\n8.7 or any other provision of this Agreement to the amount of any claim by
\nAcquiror against the Escrow Fund for indemnity with respect to such settlement.
\nIf any proceeding is commenced, or if any claim, demand or assessment is
\nasserted, in respect of which a claim for indemnification is or might be made
\nagainst the Escrow Fund based on matters other than (i) the intellectual
\nproperty of Target or (ii) claims made by customers of Acquiror or Target, the
\nStockholders’ Agent may, at his option, contest or defend any such action,
\nproceeding, claim, demand or assessment, with counsel selected by the
\nStockholder Agent who is reasonably acceptable to Acquiror; provided, however,
\nthat if Acquiror shall reasonably object to such control, then the Stockholders’
\nAgent and Acquiror shall cooperate in the defense of such matter; provided
\nfurther, that the Stockholders’ Agent shall not admit any liability with respect
\nthereto or settle, compromise, pay or discharge the same without the prior
\nwritten consent of Acquiror, which consent shall not be unreasonably withheld.
\nWith respect to any claim for indemnification based on matters relating to the
\nintellectual property of Target, or customers of Target or Acquiror, Acquiror
\nshall have the option to defend any such proceeding with counsel reasonably
\nsatisfactory to the Stockholders’ Agent; provided, however, that Acquiror shall
\nnot admit any liability with respect thereto or settle, compromise, pay or
\ndischarge the same without the prior written consent of the Stockholders’ Agent,
\nwhich consent shall not be unreasonably withheld. The Stockholder Agent or
\nAcquiror, whichever is not controlling the defense of any matter, shall be
\nentitled to participate in such defense, at Acquiror’s or the Former Target
\nStockholders’ expense.<\/p>\n
8.13 MAXIMUM LIABILITY AND REMEDIES. The rights of the Acquiror to
\nmake claims upon the Escrow Fund in accordance with this Article VIII shall be
\nthe sole and exclusive remedy of Acquiror and the Surviving Corporation after
\nthe Closing with respect to any representation, warranty, covenant or agreement
\nmade by Target under this Agreement and no former stockholder, optionholder,
\nwarrantholder, director, officer, employee or agent of Target shall have any
\npersonal liability to Acquiror or the Surviving Corporation after the Closing in
\nconnection with the Merger; provided, however, that nothing herein limits any
\npotential remedies and liabilities of Acquiror or the Surviving Corporation,
\narising under applicable state and federal laws with respect to any intentional
\nor fraudulent breaches of the representations, warranties or covenants of Target
\nmade in or pursuant to this Agreement. Nothing in this Agreement shall limit the
\nliability (i) of Target for any breach of any representation, warranty or
\ncovenant if the Merger does not close, or (ii) of any Target stockholder in
\nconnection with any breach by such stockholder of the Stockholder Agreement.<\/p>\n
48<\/p>\n
ARTICLE IX<\/p>\n
GENERAL PROVISIONS
\n ——————<\/p>\n
9.1 NOTICES. All notices and other communications hereunder shall
\nbe in writing and shall be deemed given if delivered personally or by commercial
\ndelivery service, or mailed by registered or certified mail (return receipt
\nrequested) or sent via facsimile (with confirmation of receipt) to the parties
\nat the following address (or at such other address for a party as shall be
\nspecified by like notice):<\/p>\n
(a) if to Acquiror or Merger Sub, to:<\/p>\n
Ariba, Inc.
\n 1565 Charleston Road
\n Mountain View, California 94043
\n Attention: President and CEO
\n Telephone No.: (650) 930-6200
\n Facsimile No.: (650) 930-6300<\/p>\n
with a copy to:<\/p>\n
Gunderson Dettmer Stough Villeneuve
\n Franklin & Hachigian, LLP
\n 155 Constitution Drive
\n Menlo Park, CA 94025
\n Attention: Brooks Stough
\n Telephone No.: (650) 321-2400
\n Facsimile No.: (650) 321-2800<\/p>\n
(b) if to Target, to:<\/p>\n
Tradex Technologies, Inc.
\n 11625 Rainwater Drive, Building 500
\n Atlanta, Georgia 30004
\n Attention: President
\n Telephone No.: (888) 487-2339
\n Facsimile No.: (678) 336-2920<\/p>\n
with a copy to:<\/p>\n
Wilson Sonsini Goodrich & Rosati P.C.
\n 650 Page Mill Road
\n Palo Alto, CA 94304
\n Attention: Elizabeth Flint
\n Telephone No.: (650) 493-9300
\n Facsimile No.: (650) 493-6811<\/p>\n
49<\/p>\n
9.2 INTERPRETATION. When a reference is made in this Agreement to
\nExhibits, such reference shall be to an Exhibit to this Agreement unless
\notherwise indicated. The words “include,” “includes” and “including” when used
\nherein shall be deemed in each case to be followed by the words “without
\nlimitation.” In this Agreement, any reference to any event, change, condition or
\neffect being “material” with respect to any entity or group of entities means
\nany material event, change, condition or effect related to the condition
\n(financial or otherwise), properties, assets (including intangible assets),
\nliabilities, business, operations or results of operations of such entity or
\ngroup of entities. In this Agreement, any reference to a “Material Adverse
\nEffect” with respect to any entity or group of entities means any event, change
\nor effect that is materially adverse to the condition (financial or otherwise),
\nproperties, assets (including intangible assets), liabilities, business,
\noperations or results of operations of such entity and its subsidiaries, taken
\nas a whole, including any event that is materially adverse to such business by
\nharming the reputation of such entity or group of entities. In this Agreement,
\nany reference to a party’s “knowledge” means such party’s actual knowledge of
\nthe Target’s Chief Executive Officer, Chief Financial Officer, Chief Operating
\nOfficer and Stewart T. Bertron, Mike Murray, Keith Staddon, Jim Modak and
\nJennifer Noel. The phrase “made available” in this Agreement shall mean that the
\ninformation referred to has been made available if requested by the party to
\nwhom such information is to be made available. The phrases “the date of this
\nAgreement”, “the date hereof”, and terms of similar import, unless the context
\notherwise requires, shall be deemed to refer to the Agreement Date. The term
\n“Affiliate” of a specified person means a person who directly or indirectly
\nthrough one or more intermediaries controls, is controlled by, or is under
\ncommon control with such specified person. The term “control” (including the
\nterms “controlled by” and “under common control with”) means the possession,
\ndirectly or indirectly or as trustee or executor, of the power to direct or
\ncause the direction of the management and policies of a person, whether through
\nthe ownership of voting securities, as trustee or executor, by contract or
\ncredit arrangement or otherwise. The table of contents and headings contained in
\nthis Agreement are for reference purposes only and shall not affect in any way
\nthe meaning or interpretation of this Agreement.<\/p>\n
9.3 COUNTERPARTS. This Agreement may be executed in one or more
\ncounterparts, all of which shall be considered one and the same agreement and
\nshall become effective when one or more counterparts have been signed by each of
\nthe parties and delivered to the other parties, it being understood that all
\nparties need not sign the same counterpart.<\/p>\n
9.4 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
\nAgreement, the other Transaction Documents and the documents and instruments and
\nother agreements specifically referred to herein or delivered pursuant hereto,
\nincluding the Exhibits, the Schedules, including the Target Disclosure Schedule
\nand the Acquiror Disclosure Schedule (a) constitute the entire agreement among
\nthe parties with respect to the subject matter hereof and supersede all prior
\nagreements and understandings, both written and oral, among the parties with
\nrespect to the subject matter hereof, except for the Confidentiality Agreement,
\nwhich shall continue in full force and effect, and shall survive any termination
\nof this Agreement or the Closing, in accordance with its terms and (b) are not
\nintended to confer upon any other person any rights or remedies hereunder,
\nexcept for the rights of the Target stockholders and optionholders to receive
\nthe consideration set forth in Article I of this Agreement.<\/p>\n
50<\/p>\n
9.5 SEVERABILITY. In the event that any provision of this
\nAgreement, or the application thereof, becomes or is declared by a court of
\ncompetent jurisdiction to be illegal, void or unenforceable, the remainder of
\nthis Agreement will continue in full force and effect and the application of
\nsuch provision to other persons or circumstances will be interpreted so as
\nreasonably to effect the intent of the parties hereto. The parties further agree
\nto replace such void or unenforceable provision of this Agreement with a valid
\nand enforceable provision that will achieve, to the extent possible, the
\neconomic, business and other purposes of such void or unenforceable provision.<\/p>\n
9.6 REMEDIES CUMULATIVE. Except that the Escrow is sole remedy for
\nbreaches of representations, warranties and covenants, any and all remedies
\nherein expressly conferred upon a party will be deemed cumulative with and not
\nexclusive of any other remedy conferred hereby, or by law or equity upon such
\nparty, and the exercise by a party of any one remedy will not preclude the
\nexercise of any other remedy.<\/p>\n
9.7 GOVERNING LAW. This Agreement shall be governed by and
\nconstrued in accordance with the laws of the State of California without regard
\nto applicable principles of conflicts of law. Except as provided in Article
\nVIII, each of the parties hereto irrevocably consents to the exclusive
\njurisdiction of any court located within the State of California, in connection
\nwith any matter based upon or arising out of this Agreement or the matters
\ncontemplated herein, agrees that process may be served upon them in any manner
\nauthorized by the laws of the State of California for such persons and waives
\nand covenants not to assert or plead any objection which they might otherwise
\nhave to such jurisdiction and such process.<\/p>\n
9.8 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 permitted assigns.<\/p>\n
9.9 RULES OF CONSTRUCTION. The parties hereto agree that they have
\nbeen represented by counsel during the negotiation, preparation and execution of
\nthis Agreement and, therefore, waive the application of any law, regulation,
\nholding or rule of construction providing that ambiguities in an agreement or
\nother document will be construed against the party drafting such agreement or
\ndocument.<\/p>\n
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY.]<\/p>\n
51<\/p>\n
IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have caused this
\nAgreement to be executed and delivered by their respective officers thereunto
\nduly authorized, all as of the date first written above.<\/p>\n
ARIBA, INC.<\/p>\n
By:
\n ————————————–
\n Keith Krach
\n Chief Executive Officer<\/p>\n
TRADEX TECHNOLOGIES, INC.<\/p>\n
By:
\n ————————————–
\n Daniel Aegerter
\n President and Chief Executive Officer<\/p>\n
APACHE MERGER CORPORATION<\/p>\n
By:
\n ————————————–
\n Print Name:
\n ——————————
\n Title:
\n ———————————–<\/p>\n
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6749],"corporate_contracts_industries":[9513],"corporate_contracts_types":[9622,9626],"class_list":["post-43170","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-ariba-inc","corporate_contracts_industries-technology__software","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\/43170","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=43170"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43170"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43170"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43170"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}