\nARTICLE I THE MERGER…………………………………………………………………………………1
\n 1.1 The Merger………………………………………………………………………………1
\n 1.2 Closing; Effective Time…………………………………………………………………..2
\n 1.3 Effect of the Merger……………………………………………………………………..2
\n 1.4 Certificate of Incorporation; Bylaws……………………………………………………….2
\n 1.5 Directors and Officers……………………………………………………………………2
\n 1.6 Effect on Capital Stock…………………………………………………………………..2
\n 1.7 Adjustments to Exchange Ratio……………………………………………………………..4
\n 1.8 Fractional Shares………………………………………………………………………..4
\n 1.9 Outstanding Company Shares………………………………………………………………..5
\n 1.10 Dissenting Shares……………………………………………………………………….5
\n 1.11 Surrender of Certificates………………………………………………………………..6
\n 1.12 No Further Ownership Rights in Company Capital Stock………………………………………..8
\n 1.10 Lost, Stolen or Destroyed Certificates…………………………………………………….8
\n 1.11 Tax and Accounting Consequences…………………………………………………………..8
\n 1.12 Taking of Necessary Action; Further Action…………………………………………………8
\n 1.13 Stock Restriction Agreements……………………………………………………………..8<\/p>\nARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY…………………………………………………….8
\n 2.1 Organization, Standing and Power…………………………………………………………..9
\n 2.2 Capital Structure………………………………………………………………………..9
\n 2.3 Authority………………………………………………………………………………10
\n 2.4 Financial Statements…………………………………………………………………….11
\n 2.5 Absence of Certain Changes……………………………………………………………….11
\n 2.6 Absence of Undisclosed Liabilities………………………………………………………..12
\n 2.7 Accounts Receivable……………………………………………………………………..12
\n 2.8 Litigation……………………………………………………………………………..12
\n 2.9 Restrictions on Business Activities……………………………………………………….13
\n 2.10 Governmental Authorization………………………………………………………………13
\n 2.11 Title to Property………………………………………………………………………13
\n 2.12 Intellectual Property…………………………………………………………………..13
\n 2.13 Environmental Matters…………………………………………………………………..15
\n 2.14 Taxes…………………………………………………………………………………15
\n 2.15 Employee Benefit Plans………………………………………………………………….17
\n 2.16 Employees and Consultants……………………………………………………………….19
\n 2.17 Related-Party Transactions………………………………………………………………20
\n 2.18 Insurance……………………………………………………………………………..20
\n 2.19 Compliance with Laws……………………………………………………………………21
\n 2.20 Brokers’ and Finders’ Fees………………………………………………………………21
\n 2.21 Vote Required………………………………………………………………………….21
\n 2.22 Trade Relations………………………………………………………………………..21
\n 2.23 Customers and Suppliers…………………………………………………………………21
\n 2.24 Material Contracts……………………………………………………………………..21<\/p>\n
i<\/p>\n
2.25 No Breach of Material Contracts………………………………………………………….23
\n 2.26 Third-Party Consents……………………………………………………………………23
\n 2.27 Minute Books…………………………………………………………………………..23
\n 2.28 Complete Copies of Materials…………………………………………………………….23
\n 2.29 Expenses………………………………………………………………………………23
\n 2.30 Stockholder Agreement…………………………………………………………………..24<\/p>\n
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB………………………………………24
\n 3.1 Organization, Standing and Power………………………………………………………….24
\n 3.2 Capital Structure……………………………………………………………………….24
\n 3.3 Authority………………………………………………………………………………25
\n 3.4 SEC Documents; Financial Statements……………………………………………………….26
\n 3.5 Litigation……………………………………………………………………………..26
\n 3.6 Compliance with Laws…………………………………………………………………….26
\n 3.7 Certificate of Incorporation and By-Laws…………………………………………………..26
\n 3.8 Absence of Certain Changes or Events………………………………………………………27
\n 3.9 Operations of Merger Sub…………………………………………………………………27<\/p>\n
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME…………………………………………………………27
\n 4.1 Conduct of Business of Company and Parent………………………………………………….27
\n 4.2 Notices………………………………………………………………………………..30<\/p>\n
ARTICLE V ADDITIONAL AGREEMENTS………………………………………………………………………30
\n 5.1 No Solicitation…………………………………………………………………………30
\n 5.2 Securities Issuances…………………………………………………………………….31
\n 5.3 Stockholders Meeting or Consent Solicitation……………………………………………….34
\n 5.4 Access to Information……………………………………………………………………34
\n 5.5 Confidentiality…………………………………………………………………………35
\n 5.6 Public Disclosure……………………………………………………………………….35
\n 5.7 Consents; Cooperation……………………………………………………………………35
\n 5.8 Update Disclosure; Breaches………………………………………………………………36
\n 5.9 Non-competition Agreements……………………………………………………………….36
\n 5.10 Legal Requirements……………………………………………………………………..36
\n 5.11 Blue Sky Laws………………………………………………………………………….37
\n 5.12 Stock Options………………………………………………………………………….37
\n 5.13 Escrow Agreement……………………………………………………………………….38
\n 5.14 Listing of Additional Shares…………………………………………………………….38
\n 5.15 Additional Agreements; Reasonable Best Efforts…………………………………………….38
\n 5.16 Employee Benefits………………………………………………………………………38
\n 5.17 Parachute Payments……………………………………………………………………..38
\n 5.18 Necessary Actions………………………………………………………………………39
\n 5.19 Proprietary Information Agreement………………………………………………………..39
\n 5.20 HSR Filing…………………………………………………………………………….39
\n 5.21 Non-Solicitation……………………………………………………………………….39
\n 5.22 Stockholder Agreements………………………………………………………………….39
\n 5.23 Directors’and Officers’ Indemnification…………………………………………………..40<\/p>\n
ii<\/p>\n
5.24 Tax-Free Reorganization Covenant…………………………………………………………40
\n 5.25 Intentionally Omitted…………………………………………………………………..40
\n 5.26 Acceleration of Vesting; Lapse of Repurchase Right…………………………………………40
\n 5.27 Existing Employee Options……………………………………………………………….41
\n 5.28 Option Grants to New Employees…………………………………………………………..41
\n 5.29 Employee Status………………………………………………………………………..41<\/p>\n
ARTICLE VI CONDITIONS TO THE MERGER…………………………………………………………………..41
\n 6.1 Conditions to Obligations of Each Party to Effect the Merger…………………………………41
\n 6.2 Additional Conditions to Obligations of Company…………………………………………….42
\n 6.3 Additional Conditions to Obligations of Parent……………………………………………..43<\/p>\n
ARTICLE VII TERMINATION, EXPENSES, AMENDMENT AND WAIVER…………………………………………………45
\n 7.1 Termination…………………………………………………………………………….45
\n 7.2 Effect of Termination……………………………………………………………………46
\n 7.3 Expenses……………………………………………………………………………….46
\n 7.4 Amendment………………………………………………………………………………46
\n 7.5 Extension; Waiver……………………………………………………………………….46<\/p>\n
ARTICLE VIII ESCROW AND INDEMNIFICATION……………………………………………………………….47
\n 8.1 Survival of Representations, Warranties and Covenants……………………………………….47
\n 8.2 Indemnity………………………………………………………………………………47
\n 8.3 Escrow Fund…………………………………………………………………………….48
\n 8.4 Damage Threshold………………………………………………………………………..48
\n 8.5 Escrow Period…………………………………………………………………………..48
\n 8.6 Claims upon Escrow Fund………………………………………………………………….49
\n 8.7 Objections to Claims…………………………………………………………………….49
\n 8.8 Resolution of Conflicts; Arbitration………………………………………………………50
\n 8.9 Shareholders’ Agent……………………………………………………………………..50
\n 8.10 Distribution Upon Termination of Escrow Period…………………………………………….51
\n 8.11 Actions of the Shareholders’ Agent……………………………………………………….51
\n 8.12 Third-Party Claims……………………………………………………………………..52
\n 8.13 Maximum Liability and Remedies…………………………………………………………..53<\/p>\n
ARTICLE IX GENERAL PROVISIONS………………………………………………………………………..53
\n 9.1 Notices………………………………………………………………………………..53
\n 9.2 Interpretation………………………………………………………………………….54
\n 9.3 Counterparts……………………………………………………………………………55
\n 9.4 Entire Agreement; No Third Party Beneficiaries……………………………………………..55
\n 9.5 Severability……………………………………………………………………………55
\n 9.6 Remedies Cumulative……………………………………………………………………..56
\n 9.7 Governing Law…………………………………………………………………………..56
\n 9.8 Assignment……………………………………………………………………………..56
\n 9.9 Rules of Construction……………………………………………………………………56<\/p>\n
iii
\n<\/c><\/s><\/caption>\n<\/table>\n
SCHEDULES
\n———<\/p>\n
Company Disclosure Letter
\nParent Disclosure Letter
\nOption Schedule<\/p>\n
Schedule 2.12 Company Intellectual Property
\nSchedule 2.15 Company Employee Plans
\nSchedule 2.16 Company Employees
\nSchedule 2.18 Company Insurance
\nSchedule 2.24 List of Material Contracts
\nSchedule 2.26 Company’s Third Party Consents
\nSchedule 2.29(a) Company Professional Fees
\nSchedule 2.29(b) Company Financial Advisory Fees
\nSchedule 2.30 Principal Stockholders
\nSchedule 4.1 Conduct of Business
\nSchedule 5.9 Key Company Employees
\nSchedule 6.2(d) Material Parent Third Party Consents
\nSchedule 6.3(d) Material Company Third Party Consents<\/p>\n
EXHIBITS
\n——–<\/p>\n
Exhibit A Certificate of Merger
\nExhibit B Stock Restriction Agreement
\nExhibit C-1 Level 1 Non-Competition Agreement
\nExhibit C-2 Level 2 Non-Competition Agreement
\nExhibit D Escrow Agreement
\nExhibit E Form of Legal Opinion of Parent’s Legal Counsel
\nExhibit F Form of Legal Opinion of Company’s Legal Counsel
\nExhibit G FIRPTA Notice
\nExhibit H Stockholders Agreement<\/p>\n
Appendix I Glossary<\/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 June 21, 2000, by and among Ariba, Inc., a Delaware
\ncorporation (“Parent”), Eli Merger Corporation, a Delaware corporation (“Merger
\nSub”) and SupplierMarket.com Inc., a Delaware corporation (“Company”).<\/p>\n
RECITALS<\/p>\n
A. The Boards of Directors of Company, Parent and Merger Sub believe it
\nis in the best interests of their respective companies and stockholders of their
\nrespective companies that Company and Merger Sub combine into a single company
\nthrough the statutory merger of Merger Sub with and into Company (the “Merger”)
\nand, in furtherance thereof, have approved the Merger.<\/p>\n
B. Pursuant to the Merger, among other things, each outstanding share
\nof capital stock of Company, par value $.001 per share (“Company Capital
\nStock”), shall be converted into shares of common stock of Parent, $0.002 par
\nvalue per share (“Parent Common Stock”), as provided below. Parent will assume
\nall outstanding options to purchase Company Capital Stock, all outstanding
\nwarrants to purchase Company Capital Stock, and all other outstanding rights to
\nacquire Company Capital Stock, in each case whether or not contingent or earned,
\nas provided below.<\/p>\n
C. Company, Parent 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 plan of
\nreorganization within the meaning of Section 368 of the Internal Revenue Code of
\n1986, 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. In addition, as an inducement to Parent to enter into this
\nAgreement, Jonathan Burgstone and Asif Satchu (each a “Founder” and
\ncollectively, the “Founders”) each have entered into Stock Restriction
\nAgreements with Parent and each Key Company Employee (as defined in Section 5.9)
\nhave entered into a Non-Competition Agreement with Parent.<\/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) and
\nsubject to and upon the terms and conditions of this Agreement, the Certificate
\nof Merger attached hereto as EXHIBIT A (the “Certificate of Merger”) and the
\napplicable provisions of the Delaware General Corporation Law (“Delaware Law”),
\nMerger Sub shall be merged with and into <\/p>\n
Company, the separate corporate existence of Merger Sub shall cease and Company
\nshall continue as the surviving corporation and as a wholly owned subsidiary of
\nthe Parent. Company as the surviving corporation after the Merger is hereinafter
\nsometimes referred to as the “Surviving Corporation.”<\/p>\n
1.2 CLOSING; EFFECTIVE TIME. Unless the Agreement is earlier terminated
\npursuant to Article VII, the closing of the transactions contemplated hereby
\n(the “Closing”) will take place as soon as practicable after the satisfaction or
\nwaiver of each of the conditions set forth in Article VI hereof but in any event
\nno later than September 30, 2000 (the date on which the Closing shall occur, the
\n“Closing Date”). The Closing shall take place at the offices of Gunderson
\nDettmer Stough Villeneuve Franklin & Hachigian, LLP, 155 Constitution Drive,
\nMenlo Park, California 94025. On the Closing Date, the parties hereto shall
\ncause the Merger to be consummated by filing the Certificate of Merger with the
\nSecretary of State of the State of Delaware, in accordance with the relevant
\nprovisions 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 Company shall vest in the Surviving
\nCorporation, and all debts, liabilities and duties of Company 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 Incorporation of
\nMerger Sub, as in effect immediately prior to the Effective Time, shall be the
\nCertificate of Incorporation of the Surviving Corporation until thereafter
\namended as provided by Delaware Law and such Certificate of Incorporation;
\nprovided, however, that Article I of such Certificate of Incorporation shall be
\namended to read as follows: “The name of the corporation is SupplierMarket.com,
\nInc.”<\/p>\n
(b) The Bylaws of Merger Sub, as in effect immediately prior
\nto the Effective Time, shall be the Bylaws of the Surviving Corporation until
\nthereafter amended.<\/p>\n
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the directors of
\nMerger Sub immediately prior to the Effective Time shall be the directors of the
\nSurviving Corporation, to hold office until such time as such directors resign,
\nare removed or their respective successors are duly elected or appointed and
\nqualified. The officers of Merger Sub immediately prior to the Effective Time
\nshall be the officers of the Surviving Corporation, to hold office until such
\ntime as such officers resign, are removed or their respective successors are
\nduly elected or appointed and qualified.<\/p>\n
1.6 EFFECT ON CAPITAL STOCK. The total number of shares of Parent
\nCommon Stock to be issued (“Total Parent Shares”) in exchange for the
\nacquisition by Parent of (i) all shares of Company Capital Stock outstanding
\nimmediately prior to the Effective Time, (ii) all unexpired and unexercised
\noptions to purchase common stock of Company outstanding <\/p>\n
2<\/p>\n
immediately prior to the Effective Time (“Company Options”), (iii) all
\nunexpired and unexercised warrants to Purchase capital stock of Company
\noutstanding immediately prior to the Effective Time (“Company Warrants”) and
\n(iv) all other subscriptions, rights to purchase or commitments to issue
\nCompany Capital Stock outstanding immediately prior to the Effective Time
\n(“Other Company Stock Rights”) shall be equal to the sum of (w) 6,230,764 and
\n(x) the Additional Parent Shares (as defined in Section 1.9 hereof) less (y)
\nan amount of shares of Parent Common Stock equal to (A) Expense Deductions
\n(as defined below) divided by (B) $68.20993 and less (z) the Company
\nFinancial Advisory Fee Shares (as defined in Section 2.29) (the number of
\nshares of Parent Common Stock referred to in clauses (w),(x), and (y) and the
\nShare price referred to in clause (B) as appropriately adjusted for stock
\nsplits, stock dividends, combinations, recapitalizations, reorganizations,
\nreclassifications and the like of such Parent Common Stock subsequent to the
\ndate hereof and prior to the Effective Time). The “Expense Deductions” shall
\nequal the sum of (i) the Company Financial Advisory Cash Fees (as defined in
\nSection 2.29), (ii) fifty percent (50%) of Company Professional Fees (as
\ndefined in Section 2.29) under $500,000, and (iii) all Company Professional
\nFees over $500,000, in each case as determined or estimated as of the Closing
\nupon receipt of an itemized invoice releasing Parent and the Surviving
\nCorporation from any further liability therefor from each service provider.
\nThe Total Parent Shares shall be issuable in respect of Outstanding Company
\nShares (as defined below) and, except as provided herein, no adjustment shall
\nbe made in the number of shares of Parent Common Stock issued in the Merger,
\nincluding, without limitation, as a result of (x) any increase or decrease in
\nthe market price of Parent Common Stock prior to the Effective Time, or (y)
\nany cash proceeds received by Company from the date hereof to the Closing
\nDate pursuant to the exercise of currently outstanding Company Options or
\nCompany Warrants or pursuant to any Other Company Stock Rights.<\/p>\n
By virtue of the Merger, at the Effective Time, and without any action
\non the part of Parent, Merger Sub, Company or the holders of any of Company’s
\nsecurities:<\/p>\n
(a) CONVERSION OF COMPANY COMMON STOCK\/EXCHANGE RATIO. Each
\nshare of Company Common Stock outstanding immediately prior to the Effective
\nTime shall be exchanged into the number of shares of Parent Common Stock
\ndetermined by dividing (i) the Total Parent Shares by (ii) the Outstanding
\nCompany Shares, rounded to eight decimal points (the “Exchange Ratio”).<\/p>\n
(b) CANCELLATION OF COMPANY CAPITAL STOCK OWNED BY PARENT OR
\nCOMPANY. All shares of Company Capital Stock that are owned by Company as
\ntreasury stock, immediately prior to the Effective Time shall be canceled and
\nextinguished without any conversion thereof.<\/p>\n
(c) COMPANY STOCK OPTION PLAN. Company’s 1999 Stock Option
\nPlan (the “Company Stock Option Plan”) and all Company Options then outstanding
\nunder the Company Stock Option Plan, whether or not exercisable, shall be
\nassumed by Parent in accordance with Section 5.12.<\/p>\n
(d) COMPANY WARRANTS. Each Company Warrant outstanding
\nimmediately prior to the Effective Time, whether or not contingent or earned,
\nwhich does not terminate by its terms at the Effective Time shall be converted
\ninto warrants to acquire Parent <\/p>\n
3<\/p>\n
Common Stock in accordance with its terms. Each warrant so converted shall
\ncontinue to have, and be subject to, the same terms and conditions set forth in
\nsuch warrant immediately prior to the Effective Time, except that (i) such
\nwarrant shall be exercisable for that number of whole shares of Parent Common
\nStock equal to the product of the number of shares Company Common Stock that
\nwere issuable upon exercise of such warrant immediately prior to the Effective
\nTime (without regard to vesting restrictions) multiplied by the Exchange Ratio
\nand rounded down to the nearest whole number of shares of Parent Common Stock,
\nand (ii) the per share exercise price for the shares of Parent Common Stock
\nissuable upon exercise of such assumed warrant shall be equal to the quotient
\ndetermined by dividing the exercise price per share of Company Common Stock at
\nwhich such warrant was exercisable immediately prior to the Effective Time by
\nthe Exchange Ratio, rounded up to the nearest whole cent.<\/p>\n
(e) OTHER COMPANY STOCK RIGHTS. Each Other Company Stock Right
\noutstanding immediately prior to the Effective Time, whether or not or
\ncontingent or earned, shall be assumed by Parent. Each such right so assumed by
\nParent under this Agreement shall continue to have, and be subject to, the same
\nterms and conditions set forth in such right immediately prior to the Effective
\nTime, except that (i) such right shall represent that number of whole shares of
\nParent Common Stock equal to the product of the number of shares of Company
\nCommon Stock that were issuable pursuant to such right immediately prior to the
\nEffective Time multiplied by the Exchange Ratio and rounded down to the nearest
\nwhole number of shares of Parent Common Stock, and (ii) the per share exercise
\nprice for the shares of Parent Common Stock issuable upon exercise of such
\nassumed option shall be equal to the quotient determined by dividing the
\nexercise price per share of Company Common Stock at which such option was
\nexercisable immediately prior to the Effective Time by the Exchange Ratio,
\nrounded up to the nearest whole cent.<\/p>\n
(f) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock,
\n$.01 par value, of Merger Sub (“Merger Sub Common Stock”), issued and
\noutstanding immediately prior to the Effective Time shall be converted into and
\nexchanged for one validly issued, fully paid and nonassessable share of Common
\nStock, $.01 par value, of the Surviving Corporation. Each stock certificate of
\nMerger Sub evidencing ownership of any such shares shall continue to evidence
\nownership of such shares of capital stock of the Surviving Corporation.<\/p>\n
1.7 ADJUSTMENTS TO EXCHANGE RATIO. The number of shares to be issued
\npursuant to Section 1.6 shall be adjusted to reflect fully the effect of any
\nstock split, reverse split, stock dividend, reorganization, recapitalization or
\nother like change with respect to Parent Common Stock or Company Capital Stock
\noccurring after the date hereof and prior to the Effective Time.<\/p>\n
1.8 FRACTIONAL SHARES. No fraction of a share of Parent Common Stock
\nwill be issued, but in lieu thereof each holder of shares of Company Capital
\nStock who would otherwise be entitled to a fraction of a share of Parent Common
\nStock (after aggregating all fractional shares of Parent Common Stock to be
\nreceived by such holder) shall receive from Parent for such fraction of a share
\none (1) full share of Parent Common Stock.<\/p>\n
4<\/p>\n
1.9 OUTSTANDING COMPANY SHARES. The term “Outstanding Company Shares”
\nshall be equal to the sum of (i) the aggregate number of shares of Company
\nCommon Stock (as defined in Section 2.2 below) outstanding immediately prior to
\nthe Effective Time, including shares of Company Common Stock issuable upon
\nconversion of Company Preferred Stock (as defined in Section 2.2 below) prior to
\nthe Effective Time, (ii) the aggregate number of shares of Company Common Stock
\nissuable upon the exercise of any Company Options outstanding immediately prior
\nto the Effective Time, whether or not contingent or earned, provided, however,
\nthat (A) shares of Company Common Stock issuable upon the exercise of any
\nCompany Options granted by the Company pursuant to Section 5.27 hereof in excess
\nof the sum of (I) an aggregate of 50% of the shares of Company Common Stock
\nissuable upon the exercise of any Company Options granted by the Company
\npursuant to Section 5.27 hereof and (II) any Company Options cancelled or shares
\nof Company Common Stock repurchased by Company subsequent to the date hereof and
\nprior to the Effective Time, and (B) shares of Company Common Stock issuable
\nupon the exercise of any Company Options granted by the Company pursuant to
\nSection 5.28 hereof shall not be considered Outstanding Company Shares, (iii)
\nthe aggregate number of shares of Company Common Stock issuable upon the
\nexercise of any Company Warrants outstanding immediately prior to the Effective
\nTime, whether or not contingent or earned, and (iv) the aggregate number of
\nshares of Company Common Stock issuable pursuant to any Other Company Stock
\nRights outstanding immediately prior to the Effective Time, whether or not
\ncontingent or earned, in the case of clauses (ii), (iii) and (iv) after giving
\neffect to the conversion of any securities convertible into Company Common
\nStock. The number of shares of Parent Common Stock issuable upon the assumption
\nof Company Options by Parent pursuant to this Agreement of the Company Options
\nreferred to in clauses (A) (as modified by subclauses I and II) and (B) of the
\nimmediately preceding sentence are referred to as the “Additional Parent
\nShares.”<\/p>\n
1.10 DISSENTING SHARES.<\/p>\n
(a) Notwithstanding any provision of this Agreement to the
\ncontrary, any shares of Company Capital Stock held by a holder who has demanded
\nand perfected appraisal or dissenters’ rights for such shares in accordance with
\nDelaware Law and who, as of the Effective Time, has not effectively withdrawn or
\nlost such appraisal or dissenters’ rights (“Dissenting Shares”) shall not be
\nconverted into or represent a right to receive Parent Common Stock pursuant to
\nSection 1.6, but the holder thereof shall only be entitled to such rights as are
\ngranted by Delaware Law. Any Dissenting Shares shall be included for purposes of
\ndetermining the number of Outstanding Company Shares.<\/p>\n
(b) Notwithstanding the provisions of subsection (a), if any
\nholder of Company Capital Stock who demands appraisal of such shares under
\nDelaware Law shall effectively withdraw or lose (through failure to perfect or
\notherwise) the right to appraisal, then, as of the later of the Effective Time
\nand the occurrence of such event, such holder’s shares shall automatically be
\nconverted into and represent only the right to receive the Parent Common Stock,
\nwithout interest thereon, upon surrender of the certificate representing such
\nshares.<\/p>\n
(c) Company shall give Parent (i) prompt notice of any written
\ndemands for appraisal of any shares of Company Stock, withdrawals of such
\ndemands, and any other instruments served pursuant to Delaware Law and received
\nby Company and (ii) Company <\/p>\n
5<\/p>\n
agrees that, except with the prior written consent of Parent, or as required
\nunder Delaware Law, it will not make any payment with respect to, or settle or
\noffer to settle any claim, demand, or other liability with respect to any
\nDissenting Shares.<\/p>\n
1.11 SURRENDER OF CERTIFICATES.<\/p>\n
(a) EXCHANGE AGENT. Bank Boston, N.A. (or its successor) shall
\nact as exchange agent (the “Exchange Agent”) in the Merger.<\/p>\n
(b) PARENT TO PROVIDE COMMON STOCK. Promptly after the
\nEffective Time, but in any event within ten (10) business days, Parent shall
\nmake available to the Exchange Agent for exchange in accordance with this
\nArticle I, through such reasonable procedures as Parent may adopt, the shares of
\nParent Common Stock issuable pursuant to Section 1.6(a) in exchange for shares
\nof Company Capital Stock outstanding immediately prior to the Effective Time
\nless the number of shares of Parent Common Stock to be deposited into the Escrow
\nFund (as defined in Section 8.3 hereof) pursuant to the requirements of Article
\nVIII hereof.<\/p>\n
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time,
\nParent 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 Company Capital Stock, whose shares were
\nconverted into the right to receive shares of Parent Common Stock pursuant to
\nSection 1.6, (i) a letter of transmittal (which shall specify that delivery
\nshall be effected, and risk of loss and title to the Certificates shall pass,
\nonly upon receipt of the Certificates by the Exchange Agent, and shall be in
\nsuch form and have such other customary provisions as Parent may reasonably
\nspecify) and (ii) instructions for use in effecting the surrender of the
\nCertificates in exchange for certificates representing shares of Parent Common
\nStock. In addition Parent shall cause to be mailed to Broadview International
\nLLC (“Broadview”) a Certificate for the Company Financial Advisory Fee Shares in
\naccordance with instructions provided to Parent by Broadview which are
\nreasonably acceptable to Parent. Upon surrender of a Certificate for
\ncancellation to the Exchange Agent or to such other agent or agents as may be
\nappointed by Parent, together with such letter of transmittal, duly completed
\nand validly executed in accordance with the instructions thereto, the holder of
\nsuch Certificate shall be entitled to receive in exchange therefor a certificate
\nrepresenting the number of whole shares of Parent Common Stock which such holder
\nhas the right to receive pursuant to Section 1.6, less the number of shares of
\nParent Common Stock to be deposited in the Escrow Fund on such holder’s behalf
\npursuant to Article VIII hereof, and the Certificate so surrendered shall
\nforthwith be canceled. Until so surrendered, each outstanding Certificate that,
\nprior to the Effective Time, represented shares of Company Capital Stock will be
\ndeemed from and after the Effective Time, for all corporate purposes, other than
\nthe payment of dividends, to evidence the ownership of the number of full shares
\nof Parent Common Stock into which such shares of Company Capital Stock shall
\nhave been so converted. As soon as practicable after the Effective Time, and
\nsubject to and in accordance with the provisions of Section 8.3 hereof, Parent
\nshall cause to be delivered to the Escrow Agent (as defined in Section 8.3
\nhereof) a certificate or certificates representing ten percent (10%) of the
\nTotal Parent Shares (“Escrow Shares”) which shall be registered in the name of
\nthe Escrow Agent as nominee for the holders of Certificates cancelled pursuant
\nto this Section 1.11. The Escrow Shares shall be comprised entirely of Shares of
\nParent Common Stock <\/p>\n
6<\/p>\n
that are not subject to any vesting restriction or repurchase right. The entire
\nportion of Escrow Shares shall be contributed in respect of Total Parent Shares
\nissuable to Former Company Stockholders pursuant to Section 1.6(a) other than
\n(A) such stockholders who acquired all of his or her shares of Company Capital
\nStock via exercise of employee stock options issued by Company and (B) the
\nstockholder other than the Founders, who is an employee of the Company and
\nacquired all of his shares of Company Capital stock via a restricted stock grant
\nby the Company. Such shares shall be beneficially owned by such holders and
\nshall be held in escrow and shall be available to compensate Parent for certain
\ndamages as provided in Article VIII. The Escrow Shares will appear as issued and
\noutstanding on Parent’s balance sheet and will be legally outstanding under
\napplicable state law. All dividends paid on Escrow Shares (excluding any shares
\nof Parent Capital Stock paid in connection with a stock split or stock dividend)
\nwill be distributed currently to each of the exchanging Former Company
\nStockholders, and all voting rights of the Escrow Shares will be exercisable by
\nor on behalf of each such Former Company Stockholder. To the extent not used for
\nsuch purposes, such shares shall be released, all as provided in Article VIII
\nhereof.<\/p>\n
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
\ndividends or other distributions with respect to Parent 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 Parent 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 Parent Common Stock issued in exchange therefor,
\nwithout interest, at the time of such surrender, the amount of any such
\ndividends or other distributions with a record date after the Effective Time
\nwhich would have been previously payable (but for the provisions of this Section
\n1.11(d)) with respect to such shares of Parent Common Stock.<\/p>\n
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of
\nParent 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 Parent or any agent designated by it
\nany transfer or other taxes required by reason of the issuance of a certificate
\nfor shares of Parent Common Stock in any name other than that of the registered
\nholder of the Certificate surrendered, or established to the satisfaction of
\nParent or any agent designated by it that such tax has been paid or is not
\npayable.<\/p>\n
(f) NO LIABILITY. Notwithstanding anything to the contrary in
\nthis Section 1.11, none of the Exchange Agent, the Surviving Corporation or any
\nparty hereto shall be liable to any person for any amount properly paid to a
\npublic official pursuant to any applicable abandoned property, escheat or
\nsimilar law.<\/p>\n
(g) DISSENTING SHARES. The provisions of this Section 1.11
\nshall also apply to Dissenting Shares that lose their status as such, except
\nthat the obligations of Parent under this Section 1.11 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 Parent Common Stock
\nto which such holder is entitled pursuant to Section 1.6 hereof.<\/p>\n
7<\/p>\n
1.12 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. All shares
\nof Parent Common Stock issued upon the surrender for exchange of shares of
\nCompany Capital Stock in accordance with the terms hereof shall be deemed to
\nhave been issued in full satisfaction of all rights pertaining to such shares of
\nCompany Capital Stock, and there shall be no further registration of transfers
\non the records of the Surviving Corporation of shares of Company Capital Stock
\nwhich were outstanding immediately prior to the Effective Time. If, after the
\nEffective Time, Certificates are presented to the Surviving Corporation for any
\nreason, they shall be canceled and exchanged as provided in this Article I.<\/p>\n
1.13 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 Parent
\nCommon Stock as may be required pursuant to Section 1.6; provided, however, that
\nParent may, in its discretion and as a condition precedent to the issuance
\nthereof, require the owner of such lost, stolen or destroyed Certificates to
\ndeliver a bond in such sum as it may reasonably direct as indemnity against any
\nclaim that may be made against Parent, the Surviving Corporation or the Exchange
\nAgent with respect to the Certificates alleged to have been lost, stolen or
\ndestroyed.<\/p>\n
1.14 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.<\/p>\n
1.15 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
\nthe Effective Time, any further action is necessary or desirable to carry out
\nthe purposes of this Agreement and to vest the Surviving Corporation with full
\nright, title and possession to all assets, property, rights, privileges, powers
\nand franchises of Company, the officers and directors of Company and Merger Sub
\nare fully authorized in the name of their respective corporations or otherwise
\nto take, and shall take, all such lawful and necessary action, so long as such
\naction is not inconsistent with this Agreement.<\/p>\n
1.16 STOCK RESTRICTION AGREEMENTS. As of the date hereof, each of the
\nFounders shall have entered into a Stock Restriction Agreement substantially in
\nthe form of attached hereto as EXHIBIT B.<\/p>\n
ARTICLE II<\/p>\n
REPRESENTATIONS AND WARRANTIES OF COMPANY
\n —————————————–<\/p>\n
The Company represents and warrants to Parent 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 Company to Parent prior to the
\nexecution and delivery of this Agreement (the “Company Disclosure Letter”). The
\nCompany Disclosure Letter shall be arranged in paragraphs corresponding to the
\nnumbered and lettered paragraphs contained in this Article II, and the
\ndisclosure in any paragraph shall qualify only the corresponding paragraph in
\nthis Article II. Any reference in this Article II 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 <\/p>\n
8<\/p>\n
bankruptcy, insolvency, moratorium and the relief of debtors, and (ii) the
\navailability of specific performance, injunctive relief and other equitable
\nremedies.<\/p>\n
2.1 ORGANIZATION, STANDING AND POWER. Company is a corporation duly
\norganized, validly existing and in good standing under the laws of its
\njurisdiction of organization. Company has the corporate power to own its
\nproperties and to carry on its business as currently 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 Company.
\nCompany has delivered to Parent a true and correct copy of the Certificate of
\nIncorporation and Bylaws of Company including any amendments thereto. Company is
\nnot in violation of any of the provisions of its Certificate of Incorporation or
\nBylaws. Company does not directly or indirectly own any capital stock or similar
\nequity interest in, or any interest convertible or, exchangeable or exercisable
\nfor, any capital stock or similar equity interest in, any corporation,
\npartnership, limited liability company, or other business association or entity.<\/p>\n
2.2 CAPITAL STRUCTURE. As of the date hereof, the authorized capital
\nstock of Company consists of 85,000,000 shares of Common Stock, par value $0.001
\nper share (“Company Common Stock”), and 22,652,913 shares of Preferred Stock,
\npar value $0.001 per share, of which there were issued and outstanding,
\n10,150,863.5 shares of Common Stock disregarding any option exercises following
\nJune 14, 2000, 6,562,873 shares of Series A Preferred Stock (the “Series A
\nPreferred”), and 16,040,039 shares of Series B Preferred Stock (the “Series B
\nPreferred,” together with the Series A Preferred, the “Company Preferred
\nStock”). As of the date hereof, there are no other outstanding shares of Company
\nCapital Stock disregarding any option exercises following June 14, 2000. All
\noutstanding shares of Company Capital Stock are duly authorized, validly issued,
\nfully paid and non-assessable and are free of any liens or encumbrances (other
\nthan any liens or encumbrances created by or imposed upon the holders thereof),
\nand except as set forth on Section 2.2 of the Company Disclosure Letter 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
\nCompany or any agreement to which Company is a party or by which it is bound. As
\nof the date hereof, Company has reserved (i) 13,225,746 shares of Company Common
\nStock for issuance upon conversion of the Series A Preferred, (ii) 8,020,020
\nshares of Company Common Stock for issuance upon conversion of the Series B
\nPreferred, (iii) 6,551,924 shares of Company Common Stock for issuance to
\nemployees, directors, consultants and other persons pursuant to the Company
\nStock Option Plan (of which 291,618 shares have been issued pursuant to option
\nexercises or direct stock purchases through June 14, 2000, and 4,355,315 shares
\nare subject to outstanding, unexercised options as of June 14, 2000), (iv)
\n818,030 shares of Company Common Stock for issuance upon exercise of the Company
\nWarrants, of which none are subject to outstanding Company Warrants, and (v) no
\nshares of Company Common Stock issuable pursuant to Other Company Stock Rights,
\nof which none are subject to outstanding Other Company Stock Rights. Section 2.2
\nof the Company Disclosure Letter contains a complete list of all Company Options
\ngranted to non-employees that are subject to vesting and any shares of Company
\nCapital Stock held by non-employees that are subject to a right of repurchase in
\nfavor of the Company. As of the date hereof, except for (i) the rights
\ncontemplated by this Agreement and the Stock Restriction Agreements, (ii)
\nCompany’s right to repurchase any unvested shares under the Company Stock Option
\nPlan, (iii) shares of Company Common Stock issuable upon exercise of outstanding
\nCompany Options and <\/p>\n
9<\/p>\n
Company Warrants, as specified in clauses (iii) and (iv) of the immediately
\npreceding sentence, and (iv) 50,000 shares of Series A Preferred Stock issuable
\npursuant to outstanding warrants to purchase Series A Preferred Stock, there are
\nno other options, warrants, calls, rights, commitments or agreements of any
\ncharacter (whether or not contingent or earned) to which Company is a party or
\nby which it is bound obligating Company to issue, deliver, sell, repurchase or
\nredeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
\nshares of Company Capital Stock or obligating Company to grant, extend,
\naccelerate the vesting or lapse of a repurchase right of, change the price of,
\nor otherwise amend or enter into any such option, warrant, call, right,
\ncommitment or agreement. As of the date hereof, except as contemplated by this
\nAgreement, there are no currently effective contracts, commitments or agreements
\nrelating to the voting, purchase or sale of Company Capital Stock (i) between or
\namong Company and any of its stockholders and (ii) to Company’s knowledge, among
\nany of Company’s stockholders or between any of Company’s stockholders and any
\nthird party except for the stockholders delivering the Stockholders Agreement
\nattached hereto as EXHIBIT H. The terms of the Company Stock Option Plan permit
\nthe assumption of the Company Stock Option Plan by Parent as provided in this
\nAgreement, without the consent or approval of the holders of the outstanding
\noptions, the Company stockholders, or otherwise and without any acceleration of
\nthe exercise schedule or vesting provisions or lapse of repurchase rights (or
\neligibility for such acceleration or lapse by virtue of the Merger) in effect
\nfor such options. True and complete copies of all agreements and instruments
\nevidencing all outstanding Company Options issued under the Company Stock Option
\nPlan have been furnished to Parent, and such agreements and instruments have not
\nbeen amended, modified or supplemented, except where any such modification has
\nbeen supplied to Parent, and there are no agreements to amend, modify or
\nsupplement such agreements or instruments from the form made available to
\nParent. All outstanding shares of Company Capital Stock and outstanding Company
\nOptions, Company Warrants and Other Company Stock Rights were issued in
\ncompliance with all applicable federal and state securities laws.<\/p>\n
2.3 AUTHORITY.<\/p>\n
(a) Company has all requisite corporate power and authority to
\nexecute and deliver this Agreement and the Escrow Agreement (collectively, the
\n“Transaction Documents”) and to perform its obligations hereunder and
\nthereunder, subject to obtaining necessary approvals of the Company’s
\nstockholders. The execution and delivery of the Transaction Documents and the
\nconsummation of the transactions contemplated hereby and thereby have been duly
\nauthorized by all necessary corporate action on the part of Company, subject
\nonly to the approval of the Merger by Company’s stockholders as contemplated by
\nSection 6.1(a). The Transaction Documents have been duly executed and delivered
\nby Company and, assuming the due authorization, execution and delivery by the
\nother parties hereto and thereto, constitute the valid and binding obligations
\nof Company enforceable against Company in accordance with their terms.<\/p>\n
(b) The execution and delivery of the Transaction Documents by
\nCompany do not, and the consummation of the transactions contemplated hereby and
\nthereby will not, conflict with, or result in any violation of, or default under
\n(with or without notice or lapse of time, or both), or give rise to a right of
\ntermination, cancellation or acceleration of any material obligation or loss of
\nany material benefit under (i) any provision of the Certificate of<\/p>\n
10<\/p>\n
Incorporation, as amended (the “Company Certificate”), or Bylaws of Company, as
\namended (the “Company Bylaws”), (ii) any Material Contract (as defined in
\nSection 2.24), permit, concession, franchise, license, judgment, orders or
\ndecree, or (iii) any statute, law, ordinance, rule or regulation applicable to
\nCompany or any of its properties or assets subject to obtaining the approval and
\nadoption of the Agreement and the Merger by the stockholders of Company and
\ncompliance with the requirements of subsection (c) below.<\/p>\n
(c) 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 to Company in
\nconnection with the execution and delivery of the Transaction Documents or the
\nconsummation of the transactions by Company contemplated hereby or thereby,
\nexcept for (i) the filing of the Certificate of Merger, as provided in Section
\n1.2; (ii) such consents, approvals, orders, authorizations, registrations,
\ndeclarations and filings as may be required under applicable federal or state
\nsecurities laws and the securities laws of any foreign country; (iii) such
\nfilings as may be required under the Hart-Scott-Rodino Antitrust Improvements
\nAct of 1976, as amended (“HSR”); (iv) the filing of an application for
\nqualification by permit with the California Department of Corporations pursuant
\nto Section 5.2 hereof or the filing of a Registration Statement to the extent
\nsuch permit is not issued; and (v) any such other consent, approval, order or
\nauthorization where any failure to obtain the same would not have a Material
\nAdverse Effect on Company and would not prevent, materially alter or delay by
\nmore than five (5) business days any of the transactions contemplated by the
\nTransaction Documents.<\/p>\n
2.4 FINANCIAL STATEMENTS. Company has delivered to Parent its audited
\nfinancial statements (balance sheet, statement of operations, statement of
\nstockholders’ equity and statement of cash flows) for the fiscal year ended
\nDecember 31, 1999 and its unaudited financial statements (balance sheet,
\nstatement of operations, statement of stockholders’ equity and statement of cash
\nflows) as of, and for the five (5) month period ended May 31, 2000
\n(collectively, the “Financial Statements”). The Financial Statements have been
\nprepared in accordance with generally accepted accounting principles as in
\neffect in the United States on the date hereof (“GAAP”) (except that the
\nunaudited financial statements do not have notes thereto) applied on a
\nconsistent basis throughout the periods indicated and with each other. Company
\nbelieves that its current revenue recognition policy complies with the
\nguidelines contained in SAB 101 (Revenue Recognition in Financial Statements).
\nThe Financial Statements fairly present in all material respects the financial
\ncondition and operating results of Company as of the dates, and for the periods,
\nindicated therein, subject, in the case of the unaudited financial statements,
\nto normal year-end audit adjustments. Company maintains a standard system of
\naccounting established and administered in accordance with GAAP.<\/p>\n
2.5 ABSENCE OF CERTAIN CHANGES. Except as permitted under Section 4.1
\nof this Agreement for changes occurring after the date hereof, since May 31,
\n2000, (the “Company Balance Sheet Date”), Company has conducted its business in
\nthe ordinary course and there has not occurred: (i) any change, event or
\ncondition (whether or not covered by insurance) that has had, or might
\nreasonably be expected to have, a Material Adverse Effect on Company; (ii) any
\nacquisition, sale or transfer of any material asset of Company; (iii) any change
\nin accounting methods or practices (including any change in depreciation or
\namortization policies or rates) by <\/p>\n
11<\/p>\n
Company or any revaluation by Company of any of its assets; (iv) any
\ndeclaration, setting aside, or payment of a dividend or other distribution with
\nrespect to the shares of Company, or any direct or indirect redemption, purchase
\nor other acquisition by Company of any of its shares of capital stock; (v) any
\nMaterial Contract entered into by Company, or any material amendment or
\ntermination of, or default under, any Material Contract to which Company is a
\nparty or by which it is bound in each case other than as set forth in Schedule
\n2.24; (vi) any amendment or change to the Certificate of Incorporation or Bylaws
\nof Company; (vii) any increase in or modification of the compensation or
\nbenefits payable or to become payable by Company to any of its directors,
\nemployees or consultants other than compensation adjustments and stock options
\ngranted to Company employees pursuant to Section 4.1; or (viii) any negotiation
\nor agreement by Company to do any of the things described in the preceding
\nclauses (i) through (vii) (other than negotiations with Parent and its
\nrepresentatives regarding the transactions contemplated by this Agreement).<\/p>\n
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Company 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 Company Balance Sheet Date (the “Company Balance
\nSheet”), (ii) those incurred in the ordinary course of business prior to the
\nCompany Balance Sheet Date and not required to be set forth in the Company
\nBalance Sheet under GAAP, (iii) those incurred in the ordinary course of
\nbusiness since the Company Balance Sheet Date, and (iv) those incurred in
\nconnection with the execution of this Agreement.<\/p>\n
2.7 ACCOUNTS RECEIVABLE. The accounts receivable shown on the Company
\nBalance Sheet arose in the ordinary course of business. Allowances for doubtful
\naccounts have been prepared in accordance with GAAP, and to the Company’s
\nknowledge are adequate. The accounts receivable of the Company arising after the
\nCompany Balance Sheet Date and prior to the date hereof arose, and the accounts
\nreceivable arising prior to the Effective Time will arise, in the ordinary
\ncourse of business. None of the accounts receivable of the Company are subject
\nto any material claim of offset or recoupment, or counterclaim, and Company has
\nno knowledge of any specific facts that would be reasonably likely give rise to
\nany such claim. No material amount of accounts receivable of the Company are
\ncontingent upon the performance by Company of any obligation. No material
\nagreement for deduction or discount has been made with respect to any accounts
\nreceivable of the Company.<\/p>\n
2.8 LITIGATION. There is no private or governmental action, suit,
\nproceeding, claim, arbitration or investigation pending before any agency,
\ncourt, tribunal or other entity, foreign or domestic, or, to the knowledge of
\nCompany, threatened (or, to the knowledge of the Company, any reasonable basis
\nfor any such action, suit, proceeding, claim, arbitration or investigation,
\nincluding allegations that could form the basis for future action) against
\nCompany or any of its properties or officers or directors (in their capacities
\nas such), nor does Company have any reason to expect that any such activity,
\nthreat or allegation will be forthcoming. There is no judgment, decree or order
\nagainst Company, or, to the knowledge of Company, any of its directors or
\nofficers (in their capacities as such), that could prevent, enjoin, or
\nmaterially alter or delay by more than five (5) business days any of the
\ntransactions contemplated by this Agreement, or that could reasonably be
\nexpected to have a Material Adverse Effect on Company. All litigation to which
\nCompany is a party (or, to the knowledge of Company, threatened to <\/p>\n
12<\/p>\n
become a party) is disclosed in the Company Disclosure Letter. Company does not
\nhave any plans to initiate any litigation, arbitration or other proceeding
\nagainst any third party.<\/p>\n
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
\njudgment, injunction, order or decree, including any exclusive or non-exclusive
\narrangement, binding upon Company that has or could reasonably be expected to
\nhave the effect of prohibiting or impairing any current or proposed business
\npractice of Company, any acquisition of property by Company or the conduct of
\nbusiness by Company as currently conducted or as proposed to be conducted by
\nCompany.<\/p>\n
2.10 GOVERNMENTAL AUTHORIZATION. Company 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 Company’s business or the holding of any such interest in any of its
\nproperties (“Company Authorizations”), and all of such Company Authorizations
\nare in full force and effect, except where the failure to obtain or have any
\nsuch Company Authorizations could not reasonably be expected to have a Material
\nAdverse Effect on Company.<\/p>\n
2.11 TITLE TO PROPERTY. Company has (a) good and marketable title to
\nall of 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 Company Balance Sheet or acquired after the Company Balance
\nSheet Date (except properties, interests in properties and assets sold or
\notherwise disposed of in the ordinary course of business since the Company
\nBalance Sheet Date), or (b) with respect to leased properties and assets, valid
\nleasehold interests therein, in each case free and clear of all mortgages,
\nliens, pledges, charges or encumbrances of any kind or character, except (as to
\nboth (a) and (b)) (i) the lien of current taxes not yet due and payable, (ii)
\nliens securing debt that are reflected on the Company Balance Sheet and (iii)
\nimperfections of title and encumbrances, if any, which are not material in
\ncharacter or amount. The property and equipment of Company that are used in the
\noperations of its business are in good operating condition and repair,
\nreasonable wear and tear excepted. All properties used in the operations of
\nCompany are reflected in the Company Balance Sheet to the extent GAAP require
\nthe same to be reflected. The Company does not own any real property.<\/p>\n
2.12 INTELLECTUAL PROPERTY.<\/p>\n
(a) Company owns or is licensed for, or in any event possesses
\nsufficient and legally enforceable rights with respect to, all Intellectual
\nProperty (defined below) that is used, exercised, or exploited (“Used”) in, or
\nthat may be necessary for, its business as currently conducted (“Company
\nIntellectual Property,” which term will also include all other Intellectual
\nProperty owned by or licensed to Company now or in the past) without to
\nCompany’s knowledge any conflict with or infringement or misappropriation of any
\nrights or property of others (“Infringement”). Such ownership, licenses and
\nrights are exclusive (A) except with respect to Inventions (defined below) in
\nthe public domain that are not important differentiators of Company’s business
\nor proposed business and (B) except with respect to standard, generally
\ncommercially available, “off-the-shelf” third party products that are not part
\nof any current or product, service or Intellectual Property offering of Company.
\nNo Company Intellectual Property (excluding Intellectual Property licensed to
\nCompany only on a<\/p>\n
13<\/p>\n
nonexclusive basis) was conceived or developed directly or indirectly with or
\npursuant to government funding or a government contract. “Intellectual Property”
\nmeans (i) inventions; trade names, trade marks, service marks, URLs (“Marks”);
\nworks of authorship; mask works; technology; know-how; trade secrets, 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
\nCompany Intellectual Property has been created by persons who were employees of
\nCompany at the time of creation and no third party has or will have “moral
\nrights” or rights to terminate any assignment or license with respect thereto.
\nCompany has not received any written communication alleging or suggesting that
\nor questioning whether Company has been or may be (whether in its business as
\ncurrently conducted or proposed to be conducted or otherwise) engaged in, liable
\nfor or contributing to any Infringement, nor does Company have any reason to
\nexpect that any such communication will be forthcoming.<\/p>\n
(b) To the extent included in Company Intellectual Property,
\nSCHEDULE 2.12 lists (by name, number, jurisdiction, owner and, where applicable,
\nthe name and address of each inventor) all patents and patent applications; all
\nregistered and material unregistered Marks; and all registered and, if material,
\nunregistered copyrights and mask works; and all other issuances, registrations,
\napplications and the like with respect to those or any other IP Rights. No
\ncancellation, termination, expiration or abandonment of any of the foregoing
\n(except natural expiration or termination at the end of the full possible term,
\nincluding extensions and renewals) is anticipated by Company. To Company’s
\nknowledge, there are no questions or challenges (or any specific basis therefor)
\nwith respect to the validity of any of the foregoing issued or registered IP
\nRights (or any part or claim thereof) or with respect to the patentability of
\nany claim of any of the foregoing patent applications.<\/p>\n
(c) There is, to the knowledge of Company, no unauthorized Use,
\ndisclosure, infringement or misappropriation of any Company Intellectual
\nProperty by any third party, including, without limitation, any current or
\nformer employee or consultant of Company.<\/p>\n
(d) Company has taken all reasonable steps that are necessary and
\nappropriate to protect and preserve the confidentiality of all Company
\nIntellectual Property trade secrets that is not otherwise disclosed in published
\npatents or patent applications or registered copyrights (“Company Confidential
\nInformation”). All use by and disclosure to employees, consultants or others of
\nCompany Confidential Information has been pursuant to the terms of valid and
\nbinding written confidentiality and nonuse\/restricted-use agreements. Except as
\nset forth in SCHEDULE 2.12, Company has not disclosed or delivered to any third
\nparty, or permitted the disclosure or delivery to any escrow holder or other
\nperson any part of any Source Materials (defined in Section 2.24(m)).<\/p>\n
(e) Each current and former employee and consultant of Company has
\nexecuted and delivered (and to the knowledge of Company is in compliance with)
\nan agreement in substantially the form of Company’s standard Proprietary
\nInformation and Inventions Agreement (in the case of an employee) or other
\ndisclosed agreements (in the case of a<\/p>\n
14<\/p>\n
contractor) other agreements which agreement provides valid written assignments
\nof all title and rights to any Company Intellectual Property conceived or
\ndeveloped thereunder, or otherwise in connection with his or her consulting or
\nemployment, but not already owned by Company by operation of law and to the
\nknowledge of the Company each such agreement is enforceable in accordance with
\nits terms.<\/p>\n
(f) To Company’s knowledge, Company is not Using, and it will not
\nbe necessary to Use, (i) any Inventions of any of its past or present employees
\nor contractors (or people currently intended to be hired) made prior to or
\noutside the scope of their employment by Company or (ii) any confidential
\ninformation or trade secrets of any former employer of any such person.<\/p>\n
2.13 ENVIRONMENTAL MATTERS. Company is and has at all times operated
\nits business in material compliance with all Environmetnal Laws and to
\nCompany’s knowledge, no material expenditures are or will be required in
\norder to comply with such Environmental Laws. “Environmental Laws” means all
\napplicable statutes, rules, regulations, ordinances, orders, decrees,
\njudgments, permits, licenses, consents, approvals, authorizations, and
\ngovernmental requirements or directives or other obligations lawfully imposed
\nby governmental authority under federal, state or local law pertaining to the
\nprotection of the environment, protection of public health, protection of
\nworker health and safety, the treatment, emission and\/or discharge of
\ngaseous, particulate and\/or effluent pollutants, and\/or the handling of
\nhazardous materials, including without limitation, the Clean Air Act, 42
\nU.S.C. Section 7401, et seq., the Comprehensive Environmental Response,
\nCompensation and Liability Act of 1980 (“CERCLA”), 42 U.S.C. Section 9601, et
\nseq., the Federal Water Pollution Control Act, 33 U.S.C. Section 1321, et
\nseq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
\nseq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
\nseq. (“RCRA”), and the Toxic Substances Control Act, 15 U.S.C. Section 2601,
\net seq.<\/p>\n
2.14 TAXES.<\/p>\n
(a) All Tax returns, statements, reports, declarations and other
\nforms and documents (including without limitation estimated Tax returns and
\nreports and material information statements, returns and reports) required to be
\nfiled with any Tax authority with respect to any Taxable period ending on or
\nbefore the Effective Time, by or on behalf of Company (collectively, “Tax
\nReturns” and individually a “Tax Return”), have been or will be completed and
\nfiled when due (including any extensions of such due date) and all amounts shown
\ndue on such Tax Returns and, to the knowledge of the Company, any other Taxes
\ndue on or before the Effective Time have been or will be paid on or before such
\ndate. The Company Balance Sheet (i) fully accrues in accordance with GAAP all
\nactual and contingent liabilities for Taxes with respect to all periods through
\nthe Company Balance Sheet Date, and Company has not and will not incur any Tax
\nliability (determined in accordance with GAAP) in excess of the amount reflected
\non such Company Balance Sheet with respect to such periods (excluding any amount
\nthereof that reflects timing differences between the recognition of income for
\npurposes of GAAP and for Tax purposes), and (ii) properly accrues in accordance
\nwith GAAP all material liabilities for Taxes with respect to periods after the
\nCompany Balance Sheet Date. No material Tax liability since the Company Balance
\nSheet Date has been or will be incurred by Company<\/p>\n
15<\/p>\n
other than in the ordinary course of business, and adequate provision has been
\nmade by Company for all Taxes since that date in accordance with GAAP on at
\nleast a quarterly basis.<\/p>\n
(b) Company has previously provided or made available to Parent
\ntrue and correct copies of all Tax Returns. Company has withheld and paid to the
\napplicable financial institution or Tax authority all amounts required to be
\nwithheld. To the best knowledge of Company, none of its Tax Returns have been
\nexamined and closed. Company (or any member of any affiliated or combined group
\nof which Company has been a member) has not granted any extension or waiver of
\nthe limitation period applicable to any Tax Returns that is still in effect.
\nThere is no material claim, audit, action, suit, proceeding, or investigation
\nnow pending to the knowledge of Company with respect to Company in respect of
\nany Tax or assessment of the Company. No notice of deficiency or similar
\ndocument of any Tax authority has been received by Company, and to the knowledge
\nof the Company there are no material liabilities for Taxes (including
\nliabilities for interest, additions to Tax and penalties thereon and related
\nexpenses) with respect to the issues that have been raised (and are currently
\npending) by any Tax authority that could, if determined adversely to Company,
\nmaterially and adversely affect the liability of Company for Taxes. There are no
\nliens for Taxes (other than for current Taxes not yet due and payable) upon the
\nassets of Company. Company has never been a member of an affiliated group of
\ncorporations, within the meaning of Section 1504 of the Code. Company is in
\ncompliance in all material respects with all the terms and conditions of any Tax
\nexemptions or other Tax-sharing agreement or order of a foreign government and
\nthe consummation of the Merger will not have any adverse effect on the continued
\nvalidity and effectiveness of any such Tax exemption or other Tax-sharing
\nagreement or order. Neither Company nor any person on behalf of Company has
\nentered into or will enter into any agreement or consent pursuant to the
\ncollapsible corporation provisions of Section 341(f) of the Code (or any
\ncorresponding provision of state, local or foreign income tax law) or agreed to
\nhave Section 341(f)(2) of the Code (or any corresponding provision of state,
\nlocal or foreign income tax law) apply to any disposition of any asset owned by
\nCompany. None of the assets of Company directly or indirectly secures any debt
\nthe interest on which is tax-exempt under Section 103(a) of the Code. Company
\nhas never been a party (either as a distributing corporation or as a corporation
\nthat has been distributed) to any transaction intended to qualify under Section
\n355 of the Code or any corresponding provision of state law. To the Company’s
\nknowledge, no Company stockholder is other than a United States person within
\nthe meaning of the Code. Company 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.
\nCompany has never elected to be treated as an S-corporation under Section 1362
\nof the Code or any corresponding provision of federal or state law. There is no
\nagreement, contract or arrangement to which Company is a party that could,
\nindividually or collectively, result in the payment of any amount that would not
\nbe deductible by reason of Sections 162(a) (by reason of being unreasonable in
\namount), 162 (b) through (p) or 404 of the Code, except where the failure of
\nsuch payment to be deductible would not have a Material Adverse Effect with
\nrespect to the Company. Except as may arise pursuant to leases or licensing
\narrangements, Company is not a party to or bound by any Tax indemnity, Tax
\nsharing or Tax allocation agreement (whether written or unwritten or arising
\nunder operation of federal law as a result of being a member of a group filing
\nconsolidated Tax returns, under operation of certain state laws as a result of
\nbeing a member of a unitary group, or under comparable laws of other states or
\nforeign jurisdictions) which includes a party other than Company, nor does
\nCompany<\/p>\n
16<\/p>\n
owe any amount under any such Agreement. Other than by reason of the Merger,
\nCompany has not been and will not be required to include any adjustment in
\nTaxable income for any Tax period (or portion thereof) pursuant to Section 481
\nor 263A of the Code or any comparable provision under state or foreign Tax laws
\nas a result of transactions, events or accounting methods employed prior to the
\nMerger, except where such adjustment would not have a Material Adverse Effect
\nwith respect to the Company.<\/p>\n
(c) For purposes of this Agreement, the following terms have the
\nfollowing meanings: “Tax” (and, with correlative meaning, “Taxes” and “Taxable”)
\nmeans any and all taxes including, without limitation, (i) any net income,
\nalternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
\nvalorem, transfer, franchise, profits, value added, net worth, withholding,
\npayroll, employment, excise, severance, stamp, occupation, premium, property,
\nwindfall profit tax, custom, duty or other like assessment, together with any
\ninterest or any penalty, addition to tax or additional amount imposed by any
\nGovernmental Entity (a “Tax authority”) responsible for the imposition of any
\nsuch tax (domestic or foreign), (ii) any liability for the payment of any
\namounts of the type described in (i) as a result of being a member of an
\naffiliated, consolidated, combined or unitary group for any Taxable period or as
\nthe result of being a transferee or successor thereof and (iii) any liability
\nfor the payment of any amounts of the type described in (i) or (ii) as a result
\nof any express or implied obligation to indemnify any other person. As used in
\nthis Section 2.14, the term “Company” means Company and any entity included in,
\nor required under GAAP to be included in, any of the Company Financial
\nStatements.<\/p>\n
2.15 EMPLOYEE BENEFIT PLANS.<\/p>\n
(a) For all purposes under this Section 2.15, “ERISA Affiliate”
\nshall mean each person (as defined in Section 3(9) of ERISA), that, together
\nwith Company, is treated as a single employer under Section 4001(b) of ERISA or
\nSection 414 of the Code. Except for the plans and agreements listed in SCHEDULE
\n2.15 (collectively, the “Plans”), Company and its ERISA Affiliates do not
\nmaintain, are not a party to, do not contribute to and are not obligated to
\ncontribute to any of the following for the benefit of employees or former
\nemployees of Company and its ERISA Affiliates and their dependents or survivors
\n(whether or not set forth in a written document):<\/p>\n
(A) Any employee benefit plan, as defined in section 3(3) of
\nthe Employee Retirement Income Security Act of 1974, as amended (“ERISA”);<\/p>\n
(B) Any bonus, deferred compensation, incentive, restricted
\nstock, stock purchase, stock option, stock appreciation right, phantom stock,
\nsupplemental pension, executive compensation, cafeteria benefit, dependent care,
\ndirector or employee loan, fringe benefit, sabbatical, severance, termination
\npay or similar plan, program, policy, agreement or arrangement; or<\/p>\n
(C) Any plan, program, agreement, policy, commitment or other
\narrangement relating to the provision of any benefit described in section 3(1)
\nof ERISA to former employees or directors or to their survivors, other than
\nprocedures intended to comply with the Consolidated Omnibus Budget
\nReconciliation Act of 1985 (“COBRA”).<\/p>\n
17<\/p>\n
(b) Neither Company nor any ERISA Affiliate has, since January 1,
\n1996, terminated, suspended, discontinued contributions to or withdrawn from any
\nemployee pension benefit plan, as defined in section 3(2) of ERISA, including
\n(without limitation) any multiemployer plan, as defined in section 3(37) of
\nERISA.<\/p>\n
(c) Company has provided to Parent complete, accurate and current
\ncopies of each of the following:<\/p>\n
(A) The text (including amendments) of each of the Plans, to
\nthe extent reduced to writing;<\/p>\n
(B) A summary of each of the Plans, to the extent not
\npreviously reduced to writing;<\/p>\n
(C) With respect to each Plan that is an employee benefit plan
\n(as defined in section 3(3) of ERISA), the following:<\/p>\n
(i) The most recent summary plan description, as described
\nin section 102 of ERISA;<\/p>\n
(ii) Any summary of material modifications that has been
\ndistributed to participants but has not been incorporated in an updated summary
\nplan description furnished under Subparagraph (i) above; and<\/p>\n
(iii) The annual report, as described in section 103 of
\nERISA, and (where applicable) actuarial reports, for the three most recent plan
\nyears for which an annual report or actuarial report has been prepared.<\/p>\n
(d) With respect to each Plan that is an employee benefit plan
\n(as defined in section 3(3) of ERISA), the requirements of ERISA applicable to
\nsuch Plan have been materially satisfied.<\/p>\n
(e) With respect to each Plan that is subject to COBRA, the
\nrequirements of COBRA applicable to such Plan have been materially satisfied.<\/p>\n
(f) With respect to each Plan that is subject to the Family
\nMedical Leave Act of 1993, as amended, the requirements of such Act applicable
\nto such Plan have been materially satisfied.<\/p>\n
(g) None of the Plans is intended to be a tax-qualified Plan
\ndescribed in Section 401(a) of the Code.<\/p>\n
(h) Neither Company 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 from
\nCompany to (or under) any Plan have been fully paid or adequately provided for
\non the books and financial <\/p>\n
18<\/p>\n
statements of Company. All accruals (including, where appropriate, proportional
\naccruals for partial periods) have been made in accordance with prior practices.<\/p>\n
(j) All Company Options vest over a four year period and are
\nsubject to a six month minimum service requirement.<\/p>\n
2.16 EMPLOYEES AND CONSULTANTS.<\/p>\n
(a) SECTION 2.16 of the Company Disclosure Letter contains a true
\nand complete list of all individuals employed by the Company as of the date
\nhereof and the position and base compensation payable to each such individual.
\nThe Company Disclosure Letter contains a description of any written or oral
\nemployment agreements, consulting agreements or termination or severance
\nagreements to which Company is a party, including any provisions providing for
\nacceleration of payment or vesting of any benefit or lapse of repurchase rights
\n(or eligibility for such acceleration or lapse by virtue of the Merger).<\/p>\n
(b) Company is not a party to or subject to a labor union or a
\ncollective bargaining agreement or arrangement and is not a party to any labor
\nor employment dispute.<\/p>\n
(c) The consummation of the transactions contemplated herein will
\nnot result in (i) any amount becoming payable to any employee, director or
\nindependent contractor of Company, (ii) the acceleration of payment or vesting
\nof any benefit or lapse of repurchase rights (or eligibility for such
\nacceleration or lapse by virtue of the Merger), option or right to which any
\nemployee, director or independent contractor of Company may be entitled, (iii)
\nthe forgiveness of any indebtedness of any employee, director or independent
\ncontractor of Company or (iv) any cost becoming due or accruing to Company or
\nthe Parent with respect to any employee, director or independent contractor of
\nCompany.<\/p>\n
(d) Except as set forth on SECTION 2.16 of the Company Disclosure
\nLetter, Company is not obligated and upon consummation of the Merger will not be
\nobligated to make any payment or transfer any property that would be considered
\na “parachute payment” under section 280G(b)(2) of the Code.<\/p>\n
(e) As of the date of this Agreement, to Company’s knowledge, no
\nemployee of Company has been injured in the work place or in the course of his
\nor her employment except for injuries which are covered by insurance or for
\nwhich a claim has been made under workers’ compensation or similar laws.<\/p>\n
(f) Company 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 knowledge of Company, the
\ninformation and documents on which Company relied to comply with IRCA are true
\nand correct; and there have not been any discrimination complaints filed against
\nCompany pursuant to IRCA, and to the knowledge of Company, there is no basis for
\nthe filing of such a complaint. Attached to SECTION 2.16 of the Company
\nDisclosure Letter is a true and complete list of all employees who, to the
\nCompany’s knowledge, are not U.S. citizens, along with a description of the
\nlegal status under which each such individual is permitted to work in the United
\nStates.<\/p>\n
19<\/p>\n
(g) Company has not received or been notified of any complaint by
\nany employee, applicant, union or other party of any discrimination or other
\nconduct forbidden by law or contract, nor to the knowledge of Company, is there
\na reasonable basis for any complaint.<\/p>\n
(h) Company’s action in complying with the terms of this Agreement
\nwill not violate any agreements with any of Company’s employees.<\/p>\n
(i) Company has filed all required reports and information with
\nrespect to its employees that are due prior to the date of this Agreement and
\nthe Closing Date and otherwise has complied in its hiring, employment,
\npromotion, termination and other labor practices with all applicable federal and
\nstate law and regulations, including without limitation those within the
\njurisdiction of the United States Equal Employment Opportunity Commission,
\nUnited States Department of Labor and state and local human rights or civil
\nrights agencies. Company has filed and shall file any such reports and
\ninformation that are required to be filed prior to the Closing Date.<\/p>\n
(j) To the knowledge of Company none of Company’s employees or
\ncontractors is obligated under any agreement, commitments, judgment, decree,
\norder or otherwise (an “Employee Obligation”) that could reasonably be expected
\nto interfere with the use of his or her best efforts to promote the interests of
\nCompany or that could reasonably be expected to conflict with any of Company’s
\nbusiness as currently conducted or proposed to be conducted. Neither the
\nexecution nor delivery of this Agreement nor the conduct of Company’s business
\nas currently conducted or proposed, will, to Company’s knowledge, conflict with
\nor result in a breach of the terms, conditions or provisions of, or constitute a
\ndefault under, any Employee Obligation.<\/p>\n
2.17 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
\nCompany or member of his or her immediate family is indebted to Company, nor is
\nCompany indebted (or committed to make loans or extend or guarantee credit) to
\nany of them except for any advances in the ordinary course of business not
\nexceeding $5,000 per individual. To the knowledge of the Company, none of such
\npersons has any direct or indirect ownership interest in any firm or corporation
\nwith which Company is affiliated or with which Company has a business
\nrelationship, or any firm or corporation that competes with Company, except to
\nthe extent that employees, officers, or directors of Company and members of
\ntheir immediate families own stock in a publicly traded company representing
\nless than one percent (1%) of the outstanding stock of such company. No member
\nof the immediate family of any officer or director of Company is directly or
\nindirectly interested in any Material Contract.<\/p>\n
2.18 INSURANCE. Attached hereto as SCHEDULE 2.18 is a list of policies
\nof insurance and bonds of Company. There is no material claim pending under any
\nof such policies or bonds as to which coverage has been questioned, denied or
\ndisputed by the underwriters of such policies or bonds. All premiums due and
\npayable under all such policies and bonds have been paid and Company is
\notherwise in compliance with the terms of such policies and bonds. Company has
\nno knowledge of any threatened termination of, or material premium increase with
\nrespect to, any of such policies.<\/p>\n
20<\/p>\n
2.19 COMPLIANCE WITH LAWS. Company 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 Company.<\/p>\n
2.20 BROKERS’ AND FINDERS’ FEES. Company has not incurred, nor will it
\nincur, directly or indirectly, any liability for brokerage or finders’ fees or
\nagents’ commissions or investment bankers’ fees or any similar charges in
\nconnection with this Agreement or any transaction contemplated hereby.<\/p>\n
2.21 VOTE REQUIRED. The affirmative vote of the holders of a majority
\nof each class and each series of the shares of Company Capital Stock outstanding
\non the record date set for the Company Stockholders Consent (as defined in
\nSection 5.3(a)) is the only vote of the holders of any of Company’s Capital
\nStock necessary to approve this Agreement and the transactions contemplated
\nhereby.<\/p>\n
2.22 TRADE RELATIONS. Company has not since inception terminated its
\nrelationship with any supplier participating in its Internet-based marketplace
\n(the “Marketplace”) which had theretofore paid or been obligated to pay Company
\nin excess of $10,000 or any buyer participating in the Marketplace that has
\nsubmitted requests for quotes resulting in revenue to the Company in excess of
\n$2,500. All of the prices charged by Company in connection with the marketing or
\nsale of any products or services have been in compliance with all applicable
\nlaws and regulations. No claims have been communicated or, to Company’s
\nknowledge, threatened against Company with respect to wrongful termination of
\nany dealer, distributor or any other marketing entity, discriminatory pricing,
\nprice fixing, unfair competition, false advertising, or any other material
\nviolation of any laws or regulations relating to anti-competitive practices or
\nunfair trade practices of any kind, and, to Company’s knowledge, no specific
\nsituation, set of facts, or occurrence provides any reasonable basis for any
\nsuch claim.<\/p>\n
2.23 BUYERS AND SUPPLIERS. As of the date hereof, no buyer that has
\nsubmitted requests for quotes resulting in revenue to the Company in excess of
\n$2,500 in the Marketplace and no supplier in the Marketplace which individually
\naccounted for more than $5,000 of Company’s gross revenues during any quarter
\npreceding the date hereof, has to the knowledge of the Company canceled or
\notherwise terminated, or to the knowledge of the Company made any threat to
\nCompany to cancel or otherwise terminate its relationship with Company or the
\nMarketplace for any reason including, without limitation the consummation of the
\ntransactions contemplated hereby, and to Company’s knowledge, no such buyer or
\nsupplier intends to cancel or otherwise terminate its relationship with Company
\nor the Marketplace, as the case may be. Company has not knowingly breached, so
\nas to provide a benefit to Company that was not intended by the parties, any
\nagreement with, or engaged in any fraudulent conduct with respect to, any buyer
\nor supplier participating in the Marketplace.<\/p>\n
2.24 MATERIAL CONTRACTS. Except for the material contracts described in
\nSCHEDULE 2.24 (collectively, the “Material Contracts”), Company is not a party
\nto or bound by any material contract, including without limitation:<\/p>\n
21<\/p>\n
(a) any distributor, sales, advertising, agency or manufacturer’s
\nrepresentative contract;<\/p>\n
(b) any continuing contract for the purchase of materials,
\nsupplies, equipment or services involving in the case of any such contract more
\nthan $50,000 over the life of the contract;<\/p>\n
(c) any contract that Company may not terminate without material
\npenalty within one year from the date of this Agreement (including any period of
\ntime during which such contract may be renewed by any person other than the
\nCompany) and that expires more than one year from the date of this Agreement
\n(including any period of time during which such contract may be renewed by any
\nperson other than the Company);<\/p>\n
(d) any trust indenture, mortgage, promissory note, loan agreement
\nor other contract for the borrowing of money, any currency exchange, commodities
\nor other hedging arrangement or any leasing transaction of the type required to
\nbe capitalized in accordance with GAAP;<\/p>\n
(e) any contract for capital expenditures in excess of $100,000 in
\nthe aggregate;<\/p>\n
(f) any contract limiting the freedom of the Company to engage in
\nany line of business or to compete with any other Person as that term is defined
\nin the Securities Exchange Act of 1934, as amended (the “Exchange Act”);<\/p>\n
(g) any contract pursuant to which Company leases any real
\nproperty;<\/p>\n
(h) any contract pursuant to which the Company is a lessor of any
\nmachinery, equipment, motor vehicles, office furniture, fixtures or other
\npersonal property;<\/p>\n
(i) any contract with any person who is an Affiliate of the
\nCompany (as defined below);<\/p>\n
(j) any agreement of guarantee, assumption or endorsement of, or
\nany similar commitment with respect to, the obligations, liabilities (whether
\naccrued, absolute, contingent or otherwise) or indebtedness of any other Person
\nother than software licensees or professional services contracts entered in the
\nordinary course of business;<\/p>\n
(k) any license, sublicense or other agreement to which Company is
\na party (or by which it or any Company Intellectual Property is bound or
\nsubject) and pursuant to which any person has been or may be assigned,
\nauthorized to Use, or given access to any Company Intellectual Property;<\/p>\n
(l) any license, sublicense or other agreement pursuant to which
\nCompany has been or may be assigned or authorized to Use, or has or may have
\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 Company or (B) any Company
\nIntellectual Property;<\/p>\n
22<\/p>\n
(m) any agreement pursuant to which Company has deposited or is
\nrequired to deposit with an escrow holder or any other person or entity, all or
\npart of the source code (or any algorithm or documentation contained in or
\nrelating to any source code) of any Company Intellectual Property (“Source
\nMaterials”); and<\/p>\n
(n) any agreement (other than an agreement to license
\n“off-the-shelf” software that is readily available at established commercial
\nrates) to indemnify, hold harmless or defend any other person with respect to
\nany assertion of personal injury, damage to property or Intellectual Property
\ninfringement, misappropriation or violation or warranting the lack thereof.<\/p>\n
2.25 NO BREACH OF MATERIAL CONTRACTS. The Company has performed all
\nmaterial obligations required to be performed by it and is entitled to all
\nmaterial benefits under, and is not alleged to be in default in respect of any
\nMaterial Contract. Each of the Material Contracts is in full force and effect,
\nand there exists no default or event of default or event, occurrence, condition
\nor act, with respect to Company or to Company’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 Company (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 2.24(m)). True, correct and
\ncomplete copies of all Material Contracts have been delivered to the Parent.<\/p>\n
2.26 THIRD-PARTY CONSENTS. SCHEDULE 2.26 lists all Material Contracts
\nthat require (a) a novation or consent to assignment, as the case may be, prior
\nto the Effective Time so that the Surviving Corporation shall be made a party in
\nplace of Company or as assignee or (b) a consent of any third party to the
\nMerger or any change of control of Company.<\/p>\n
2.27 MINUTE BOOKS. The minutes and consents of Company made available
\nto Parent contain a complete and accurate summary in all material respects of
\nall meetings of directors and stockholders or actions by written consent since
\nthe time of incorporation of Company through the date of this Agreement, and
\nreflect all transactions referred to in such minutes accurately in all material
\nrespects.<\/p>\n
2.28 COMPLETE COPIES OF MATERIALS. Company has delivered or made
\navailable true and complete copies of each document, which has been requested by
\nParent or its counsel in connection with their legal and accounting review of
\nCompany.<\/p>\n
2.29 EXPENSES. All financial advisory and investment banking fees and
\nexpenses that have been or may be incurred by Company in connection with the
\nnegotiation and effectuation of the terms and conditions of this Agreement (the
\n“Company Financial Advisory Fees”) are set forth on SCHEDULE 2.29(a), consisting
\nof fees payable in Parent Shares (“Company Financial Advisory Fee Shares”) and
\nfees payable in cash (“Company Financial Advisory Cash Fees”). All legal,
\naccounting, consulting and other professional fees and expenses (other than
\nCompany Financial Advisory Fees) that have been or may be incurred by Company in
\nconnection with the negotiation and effectuation of the terms and conditions of
\nthis Agreement (the “Company Professional Fees”) are set forth on SCHEDULE
\n2.29(b).<\/p>\n
23<\/p>\n
2.30 STOCKHOLDER AGREEMENT. Principal Stockholders of Company (as set
\nforth in Schedule 2.30), representing the majority of each class and each series
\nof outstanding shares of Company Capital Stock have agreed in writing to vote
\nfor approval of the Merger pursuant to voting agreements attached hereto as
\nEXHIBIT H (“Stockholder Agreement”).<\/p>\n
ARTICLE III<\/p>\n
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
\n ——————————————————-<\/p>\n
Parent and Merger Sub represent and warrant to Company that the
\nstatements contained in this Article III are true and correct, except as set
\nforth in the Disclosure Letter delivered by Parent to Company prior to the
\nexecution and delivery of this Agreement (the “Parent Disclosure Letter”). The
\nParent Disclosure Letter shall be arranged in paragraphs corresponding to the
\nnumbered 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 Parent and each of its
\nsubsidiaries which is a significant subsidiary within the meaning of Rule
\n1-02(w) of Regulation S-X under the Securities Act (an “Parent Significant
\nSubsidiary”) is a corporation duly organized, validly existing and in good
\nstanding under the laws of its jurisdiction of organization. Each of Parent and
\nits Parent Significant Subsidiaries 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 on Parent. Parent has made available a true
\nand correct copy of the Certificate of Incorporation and Bylaws of Parent and
\nMerger Sub, each as amended to date, to Company. Neither Parent nor Merger Sub
\n(or any other subsidiary) is in violation of any of the provisions of its
\nCertificate of Incorporation or Bylaws. Parent is the owner of all outstanding
\nshares of capital stock of each of its Parent Significant Subsidiaries and all
\nsuch shares are duly authorized, validly issued, fully paid and nonassessable.
\nAll of the outstanding shares of capital stock of each such subsidiary are owned
\nby Parent free and clear of all liens, charges, claims or encumbrances or rights
\nof others. There are no outstanding subscriptions, options, warrants, puts,
\ncalls, rights, exchangeable or convertible securities or other commitments or
\nagreements of any character relating to the issued or unissued capital stock or
\nother securities of any such subsidiary, or otherwise obligating Parent or any
\nsuch subsidiary to issue, transfer, sell, purchase, redeem or otherwise acquire
\nany such securities.<\/p>\n
3.2 CAPITAL STRUCTURE. As of the date hereof, the authorized capital
\nstock of Parent consists of (i) 600,000,000 shares of Parent Common Stock and
\n(ii) 20,000,000 shares of preferred stock, par value $0.002 per share (“Parent
\nPreferred Stock”). As of June 16, 2000, (i) 237,803,651 shares of Parent Common
\nStock were issued and outstanding, all of which are validly issued, fully paid
\nand non-assessable, (ii) 44,863,904 shares of Parent Common Stock were reserved
\nfor future issuance pursuant to outstanding options to purchase Parent Common<\/p>\n
24<\/p>\n
Stock and (iii) shares of Parent Common Stock were reserved for issuance
\npursuant to outstanding warrants to purchase Parent Common Stock, as
\ndescribed in the Parent SEC Documents (as defined in Section 3.4). As of the
\ndate hereof, no shares of Parent Preferred Stock were issued and outstanding.
\nAs of June 16, 2000, except for outstanding options and warrants referred to
\nin clauses (ii) and (iii) of the first sentence of this Section 3.2, there
\nare no outstanding options or warrants, or agreements relating to the
\nissuance of capital stock of Parent or obligating Parent to issue or sell any
\nshares of its capital stock. The shares of Common Stock to be issued pursuant
\nto the Merger will be duly authorized, validly issued, fully paid, and
\nnon-assessable, will not be subject to any preemptive or other statutory
\nright of stockholders and, will be free of any liens or encumbrances other
\nthan any liens or encumbrances created by or imposed upon the holders
\nthereof. There are no contracts, commitments or agreements relating to
\nvoting, registration, purchase or sale of Parent’s capital stock (i) between
\nor among Parent and any of its stockholders or (ii) to Parent’s knowledge,
\nbetween or among any of Parent’s stockholders or between any of Parent’s
\nstockholders and any third party. <\/p>\n
3.3 AUTHORITY.<\/p>\n
(a) Each of Parent and Merger Sub has all requisite corporate
\npower and authority to execute and deliver this Agreement and the other
\nTransaction Documents and to perform its obligations hereunder and thereunder.
\nThe execution and delivery of this Agreement and the other Transaction Documents
\nand the consummation of the transactions contemplated hereby and thereby have
\nbeen duly authorized by all necessary corporate action on the part of each of
\nParent and Merger Sub. This Agreement and the other Transaction Documents have
\nbeen duly executed and delivered by each of Parent and Merger Sub and constitute
\nthe valid and binding obligations of each of Parent and Merger Sub.<\/p>\n
(b) The execution and delivery of this Agreement and the other
\nTransaction 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 Parent or any Parent Significant Subsidiaries, as
\namended, or (ii) any material mortgage, indenture, lease, contract or other
\nagreement or instrument, permit, concession, franchise, license, judgment,
\norder, decree, statute, law, ordinance, rule or regulation applicable to Parent
\nor any Parent Significant Subsidiaries 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 Parent or any Parent Significant Subsidiaries in
\nconnection with the execution and delivery of this Agreement or the other
\nTransaction Documents by Parent or the consummation by Parent of the
\ntransactions contemplated hereby or thereby, except for (i) the filing of the
\nCertificate of Merger as provided in Section 1.2, (ii) any filings as may be
\nrequired under applicable federal and state securities laws, including, but not
\nlimited to, qualification pursuant to Section 25121 of the California Law (as
\ndefined in Section 5.2 below) and the securities laws of any foreign country,
\n(iii) the filing with the Nasdaq National Market of a Notification Form for
\nListing of Additional Shares with respect to the Parent Total Shares, (iv) such
\nfilings as may be required under HSR; and (v) such other consents,
\nauthorizations, filings, approvals and registrations which, if not <\/p>\n
25<\/p>\n
obtained or made, would not have a Material Adverse Effect on Parent and would
\nnot prevent, materially alter or delay any of the transactions contemplated by
\nthis Agreement or the other Transaction Documents.<\/p>\n
3.4 SEC DOCUMENTS. Parent has made available to Company 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 Parent since
\nJune 23, 1999, and, prior to the Effective Time, Parent will have made available
\nCompany with true and complete copies of any additional documents filed with the
\nSEC by Parent prior to the Effective Time (collectively, the “Parent SEC
\nDocuments”). All documents required to be filed as exhibits to the Parent SEC
\nDocuments have been so filed, and all material contracts so filed as exhibits
\nare in full force and effect, except those which have expired in accordance with
\ntheir terms, and neither Parent nor any of its subsidiaries is in default
\nthereunder where default would not reasonably be expected to have a Material
\nAdverse Effect on Parent. As of their respective filing dates, the Parent SEC
\nDocuments complied in all material respects with the requirements of the
\nExchange Act and the Securities Act, and none of the Parent SEC Documents
\ncontained any untrue statement of a material fact or omitted to state a material
\nfact required to be stated therein or necessary to make the statements made
\ntherein, in light of the circumstances in which they were made, not misleading,
\nexcept to the extent corrected by a subsequently filed Parent SEC Document. The
\nfinancial statements of Parent, including the notes thereto, included in the
\nParent SEC Documents (the “Parent Financial Statements”) were complete and
\ncorrect in all material respects as of their respective dates, complied as to
\nform in all material respects with applicable accounting requirements and with
\nthe published rules and regulations of the SEC with respect thereto as of their
\nrespective dates, and have been prepared in accordance with GAAP applied on a
\nbasis consistent throughout the periods indicated and consistent with each other
\n(except as may be indicated in the notes thereto or, in the case of unaudited
\nstatements included in Quarterly Reports on Form 10-Qs, as permitted by Form
\n10-Q of the SEC). The Parent Financial Statements fairly present the
\nconsolidated financial condition and operating results of Parent and its
\nsubsidiaries at the dates and during the periods indicated therein (subject, in
\nthe case of unaudited statements, to normal, recurring year-end adjustments).<\/p>\n
3.5 LITIGATION. Except as may be set forth in the Parent SEC Documents,
\nthere is no private or governmental action, suit, proceeding, claim, arbitration
\nor investigation pending before any agency, court, tribunal or other entity,
\nforeign or domestic, or to the knowledge of Parent, threatened against Parent or
\nany of its respective properties or any of its respective officers or directors
\n(in their capacities as such) required to be disclosed pursuant to Item 103
\nRegulation S-K under the Security Act that is not so disclosed.<\/p>\n
3.6 COMPLIANCE WITH LAWS. Parent has complied with, is not in violation
\nof, and has not received any notices of violation with respect to, any federal,
\nstate, local or foreign statute, law or regulation with respect to the conduct
\nof its business, or the ownership or operation of its business, except for such
\nviolations or failures to comply as could not be reasonably expected to have a
\nMaterial Adverse Effect on Parent.<\/p>\n
3.7 CERTIFICATE OF INCORPORATION AND BY-LAWS. Parent has heretofore
\nmade available to the Company a complete and correct copy of the Certificate of
\nIncorporation and the <\/p>\n
26<\/p>\n
By-Laws of Parent and the Certificate of Incorporation and By-Laws of Merger
\nSub. Such Certificates of Incorporation and By-Laws are in full force and
\neffect. Neither Parent nor Merger Sub is in violation of any of the provisions
\nof its Certificate of Incorporation or By-Laws.<\/p>\n
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1, 1999, except
\nas contemplated by or as disclosed in this Agreement, or as disclosed in any
\nParent SEC Report filed since June 23, 1999, there has not occurred any material
\nadverse change in the condition (financial or otherwise but excluding
\nprospects), properties, assets (including intangible assets), liabilities,
\nbusiness, operations or results of operations of Parent and its subsidiaries,
\ntaken as a whole; other than (i) a material adverse change generally affecting
\nthe industry in which the Parent operates, (ii) a material adverse change in
\ncapital markets, (iii) any changes resulting from or arising in connection with
\nchanges in the market price or trading volume of Parent Common Stock or the
\nfailure of Parent to meet or exceed research analysts’ projections of operating
\nresults, (iv) stockholder class action or other stockholder litigation alleging
\nbreach of fiduciary or other duty or violation of securities or other laws or
\n(v) changes in, or in the Parent application of, GAAP.<\/p>\n
3.9 OPERATIONS OF MERGER SUB. Merger Sub is a wholly owned subsidiary
\nof Parent, was formed solely for the purpose of engaging in the transactions
\ncontemplated by this Agreement, has engaged in no other business activities and
\nhas conducted its operations solely as contemplated by this Agreement.<\/p>\n
ARTICLE IV<\/p>\n
CONDUCT PRIOR TO THE EFFECTIVE TIME
\n ———————————–<\/p>\n
4.1 CONDUCT OF BUSINESS OF COMPANY AND PARENT. During the period from
\nthe date of this Agreement and continuing until the earlier of the termination
\nof this Agreement or the Effective Time, Company agrees (except to the extent
\nexpressly contemplated by this Agreement or as consented to in writing by
\nParent), to carry on its business in the usual, regular and ordinary course in
\nsubstantially the same manner as heretofore conducted. Company further agrees to
\n(i) pay Taxes when due subject to good faith disputes over such debts or Taxes,
\n(ii) pay all debts and amounts due or other outstanding obligations, except for
\nthose owed to vendors of the Company in the ordinary course of business, when
\ndue subject to good faith disputes over such amounts or obligations, (iii)
\nsubject to Parent’s consent which cannot be unreasonably withheld and must be
\ntimely given the filing of material Tax Returns if applicable, to pay or perform
\nother obligations when due, and (iv) to use commercially reasonable efforts to
\npreserve intact its present business organizations, keep available the services
\nof its present officers and key employees and preserve its relationships with
\ncustomers, suppliers, distributors, licensors, licensees, and others having
\nbusiness dealings with it, to the end that its goodwill and ongoing businesses
\nshall be unimpaired at the Effective Time. Company agrees to promptly notify
\nParent of any event or occurrence not in the ordinary course of its business,
\nand of any event which could have a Material Adverse Effect on Company. Without
\nlimiting the foregoing, except as expressly contemplated by the provisions of
\nthis Agreement other than Sections 5.26, 5.27 and 5.28 and except for those
\nitems set forth on SCHEDULE 4.1, Company shall not do, cause or permit any of
\nthe following, without the prior written consent of Parent:<\/p>\n
27<\/p>\n
(a) CHARTER DOCUMENTS. Cause or permit any amendments to its
\nCertificate of Incorporation or Bylaws;<\/p>\n
(b) DIVIDENDS; CHANGES IN CAPITAL STOCK. 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;<\/p>\n
(c) MATERIAL CONTRACTS. Enter into any material contract,
\nagreement, license or commitment, or violate, amend or otherwise modify or waive
\nany material terms of any of its material contracts, agreements or licenses
\nother than in the ordinary course of business;<\/p>\n
(d) STOCK OPTION PLAN. Except as disclosed in the Company
\nDisclosure Letter, accelerate, amend or change the period of exercisability or
\nvesting of options or other rights granted under the Company Stock Option Plan,
\nauthorize cash payments in exchange for any options or other rights granted
\nunder such plan or otherwise amend such plan;<\/p>\n
(e) ISSUANCE OF SECURITIES. Except as allowed pursuant to Section
\n4.1(f), issue, deliver or sell or authorize or propose the issuance, delivery or
\nsale of, or purchase or propose the purchase of, any shares of its capital stock
\nor securities convertible into, or subscriptions, rights, warrants or options to
\nacquire, or other agreements or commitments of any character obligating it to
\nissue any such shares or other convertible securities, other than (i) the
\nissuance of shares of its Common Stock pursuant to the exercise of stock
\noptions, warrants or other rights therefor outstanding as of the date of this
\nAgreement and (ii) the issuance of shares of Company Common Stock issuable upon
\nconversion of Company Preferred Stock. Without limiting the forgoing, take any
\nactions to effect an initial public offering of Company Common Stock.<\/p>\n
(f) GRANTS OF STOCK OPTIONS. Grant any options, subscriptions,
\nrights or warrants to purchase any shares of its capital stock or securities
\nconvertible into its capital stock, including, but not limited to, options
\ngranted pursuant to Sections 5.27 and 5.28;<\/p>\n
(g) INTELLECTUAL PROPERTY. Transfer to or license any person or
\nentity or otherwise extend, amend or modify any rights to its Intellectual
\nProperty other than the grant of non-exclusive licenses in the ordinary course
\nof business;<\/p>\n
(h) EXCLUSIVE RIGHTS. Enter into or amend any material agreements
\npursuant to which any other party is granted exclusive marketing, manufacturing,
\ndistribution 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 dispose of or
\nencumber any of its properties or assets which are material, individually or in
\nthe aggregate, to its business, taken as a whole;<\/p>\n
28<\/p>\n
(j) INDEBTEDNESS. Incur or commit to incur any indebtedness for
\nborrowed money or guarantee any such indebtedness or issue or sell any debt
\nsecurities or guarantee any debt securities of others;<\/p>\n
(k) LEASES. Enter into any operating lease requiring payments in
\nexcess of $50,000;<\/p>\n
(l) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in an amount
\nin excess of $50,000 in any one case or $200,000 in the aggregate, any claim,
\nliability or obligation (absolute, accrued, asserted or unasserted, contingent
\nor otherwise) arising other than in the ordinary course of business, other than
\nthe payment, discharge or satisfaction of liabilities reflected or reserved
\nagainst in the Company Financial Statements;<\/p>\n
(m) CAPITAL EXPENDITURES. Incur or commit to incur any capital
\nexpenditures in any time period in excess of $50,000;<\/p>\n
(n) TERMINATION OR WAIVER. Terminate or waive any right of
\nsubstantial value other than in the ordinary course of business;<\/p>\n
(o) INSURANCE. Materially reduce the amount of any material
\ninsurance coverage provided by existing insurance policies;<\/p>\n
(p) EMPLOYEE BENEFITS; SEVERANCE. Take any of the following
\nactions: (i) increase or agree to increase the compensation payable or to become
\npayable to its officers or employees, except for increases in salary or wages of
\nnon-officer employees in the ordinary course of business (but not to exceed five
\npercent (5%) of such employees existing salary or wages), (ii) grant any
\nadditional severance or termination pay to, or enter into any employment or
\nseverance agreements with, any officer or employee, (iii) enter into any
\ncollective bargaining agreement, (iv) establish, adopt, enter into or amend in
\nany material respect any bonus, profit sharing, thrift, compensation, stock
\noption, restricted stock, pension, retirement, deferred compensation,
\nemployment, termination, severance or other similar plan, trust, fund, policy or
\narrangement for the benefit of any directors, officers or employees except with
\nrespect to matters set forth in Section 4.1(p) of the Disclosure Letter, or (v)
\npay any bonus in excess of $500 per person;<\/p>\n
(q) LAWSUITS. Commence a lawsuit or arbitration proceeding other
\nthan (i) for the routine collection of bills or (ii) for a breach of this
\nAgreement or (iii) where the failure to commence such lawsuit or arbitration
\nproceeding would immediately result in the permanent impairment or loss of any
\nmaterial benefit or right of the Company or incurrence of any material liability
\nto the Company (provided that whenever possible the Company shall consult with
\nParent at least five (5) business days before commencing such lawsuit or
\nproceeding);<\/p>\n
(r) ACQUISITIONS. Acquire or agree to acquire by merging or
\nconsolidating with, or by purchasing a substantial portion of the assets of, or
\nby any other manner, any business or any corporation, partnership, association
\nor other business organization or division thereof, or otherwise acquire or
\nagree to acquire any assets which are material, individually or in the
\naggregate, to its business, taken as a whole;<\/p>\n
29<\/p>\n
(s) TAXES. Make any material tax election other than in the
\nordinary course of business, change any material tax election, adopt any tax
\naccounting method other than in the ordinary course of business, 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
\nParent shall not unreasonably withhold or delay approval of any of the foregoing
\nactions; or<\/p>\n
(t) OTHER. Voluntarily or intentionally take or agree in writing
\nor otherwise to take, any of the actions described in Sections 4.1(a) through
\n(s) above, or any action which would make any of its representations or
\nwarranties contained in this Agreement untrue or incorrect or prevent it from
\nperforming or cause it not to perform its covenants hereunder.<\/p>\n
4.2 NOTICES. Company shall give all notices and other information
\nrequired to be given to the employees of Company, any collective bargaining unit
\nrepresenting any group of employees of Company, 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 earlier of
\nthe Effective Time or the termination of this Agreement in accordance with
\nSection 7, except a termination pursuant to Section 7.1(c) hereof, Company shall
\nnot, directly or indirectly, through any officer, director, employee,
\nrepresentative, affiliate or agent, (i) solicit, initiate, seek, entertain,
\nencourage or support any inquiry, proposal or offer that constitute, or could
\nreasonably be expected to lead to, a proposal or offer for a merger,
\nconsolidation, business combination, sale or license of all or substantially all
\nof the assets, sale of shares of capital stock (including without limitation by
\nway of a tender offer) or similar transactions involving Company, other than the
\ntransactions contemplated by this Agreement (any of the foregoing inquiries or
\nproposals being referred to in this Agreement as a “Takeover Proposal”), (ii)
\nengage in negotiations or discussions concerning, or provide any non-public
\ninformation to any person or entity relating to, any Takeover Proposal, or (iii)
\nagree to approve or recommend any Takeover Proposal.<\/p>\n
(b) Company shall notify Parent immediately (and no later than 24
\nhours) after receipt by Company (or its advisors or agents) of any Takeover
\nProposal or any request for information in connection with a Takeover Proposal
\nor for access to the employees, properties, books or records of Company by any
\nperson or entity that informs Company that it is considering making, or has
\nmade, a Takeover Proposal. Such notice shall be made orally and in writing and
\nshall indicate in reasonable detail the identity of the offeror and the terms
\nand conditions of such proposal, inquiry or contact.<\/p>\n
30<\/p>\n
5.2 SECURITIES ISSUANCES.<\/p>\n
(a) The shares of Parent Common Stock to be issued in connection
\nwith the Merger are expected to be securities exempt from registration under the
\nSecurities Act by reason of Section 3(a)(10) thereof and are intended to be
\nissued pursuant to a fairness hearing (the “Hearing”) conducted pursuant to
\nSection 25142 of the California Corporate Securities Laws of 1968, as amended
\n(the “California Law”) and under applicable state blue sky laws. Subject to this
\nSection 5.2, Parent shall use commercially reasonable efforts to file with the
\nCalifornia Department of Corporations (the “Department”), as promptly as
\npractical after the execution of this Agreement (and in no event later than 14
\ndays following the date hereof) an Application for Qualification of Securities
\nunder Section 25121 of the California Law, a proposed Notice of the Hearing and
\na request for the Hearing to be held by the Department to consider the terms,
\nconditions and fairness of the transactions contemplated by this Agreement and
\nthe Merger pursuant to Section 25142 of the California Law including all
\nrequired exhibits thereto (the “Application”). Parent and Company shall use
\ncommercially reasonable efforts to obtain a permit pursuant to Section 25121 of
\nthe California Law and the Application to issue such shares (the “Permit”) as
\npromptly as practicable (and in no event later than 51 days following the date
\nhereof).<\/p>\n
(b) Parent shall use commercially reasonable efforts to prepare,
\nwith the cooperation of the Company, as promptly as practicable after the
\nexecution of this Agreement (and in no event later than 14 days following the
\ndate hereof) the Application. Parent and the Company shall each use commercially
\nreasonable efforts to cause the Permit Application to comply with the
\nrequirements of applicable federal and state laws. Each of Parent and the
\nCompany agrees to provide promptly to the other such information concerning its
\nbusiness and financial statements and affairs as, in the reasonable judgment of
\nthe providing party or its counsel, may be required or appropriate for inclusion
\nin the Application, or in any amendments or supplements or exhibits thereto, and
\nto cause its counsel and auditors to cooperate with the other’s counsel and
\nauditors in the preparation of the Application. The Company will promptly advise
\nParent, and Parent will promptly advise the Company, in writing if at any time
\nprior to the Effective Time either the Company or Parent shall obtain knowledge
\nof any facts that might make it necessary or appropriate to amend or supplement
\nthe Application in order to make the statements contained or incorporated by
\nreference therein not misleading or to comply with applicable law. Anything to
\nthe contrary contained herein notwithstanding, Parent shall not include in the
\nApplication any information with respect to the Company or its affiliates or
\nassociates, the form and content of which information shall not have been
\napproved by the Company prior to such inclusion. Each party shall cause an
\nofficer of such party who has been substantively involved with the negotiations
\nof the Merger to attend and participate in the Hearing.<\/p>\n
(c) The Company shall use commercially reasonable efforts to
\nprepare, with the cooperation of Parent, as promptly as practicable (but in no
\nevent later than 14 days following the date hereof) an information statement to
\nbe sent to stockholders of Company in connection with their consideration of
\napproval of the Merger and this Agreement (as amended or supplemented, the
\n“Information Statement”). The Information Statement shall constitute a
\ndisclosure document for the offer and issuance of the shares of Parent Common
\nStock to be received by the holders of Company Capital Stock in the Merger.
\nParent and the <\/p>\n
31<\/p>\n
Company shall each use commercially reasonable efforts to cause the Information
\nStatement to comply with applicable federal and state securities laws
\nrequirements. Each of Parent and the Company agrees to provide promptly to the
\nother such information concerning its business and financial statements and
\naffairs as, in the reasonable judgment of the providing party or its counsel,
\nmay be required or appropriate for inclusion in the Information Statement, or in
\nany amendments or supplements thereto, and to cause its counsel and auditors to
\ncooperate with the other’s counsel and auditors in the preparation of the
\nInformation Statement. The Company will promptly advise Parent, and Parent will
\npromptly advise the Company, in writing if at any time prior to the Effective
\nTime either the Company or Parent shall obtain knowledge of any facts that might
\nmake it necessary or appropriate to amend or supplement the Information
\nStatement in order to make the statements contained or incorporated by reference
\ntherein not misleading or to comply with applicable law. The Information
\nStatement shall contain the recommendation of the Board of Directors of the
\nCompany that the Company stockholders approve the Merger and this Agreement and
\nthe conclusion on the Board of Directors that the terms and conditions of the
\nMerger are advisable and fair and reasonable to the shareholders of the Company.
\nAnything to the contrary contained herein notwithstanding, the Company shall not
\ninclude in the Information Statement any information with respect to Parent or
\nits affiliates or associates, the form and content of which information shall
\nnot have been approved by Parent prior to such inclusion.<\/p>\n
(d) Company and Parent will notify each other promptly of the
\nreceipt of any comments from the Department or its staff and of any request by
\nthe Department or any other government officials for amendments or supplements
\nto any of the documents filed therewith or any other filing or for additional
\ninformation and will supply each other with copies of all correspondence between
\nsuch party or any of its representatives, on the one hand, and the Department,
\nor its staff or any other government officials, on the other hand, with respect
\nto the filing.<\/p>\n
(e) The information supplied by the Company for inclusion in the
\nApplication shall not at the time the Hearing is held and the time the
\nqualification of such securities is effective under Section 25122 of the
\nCalifornia Law contain any untrue statement of a material fact or omit to state
\nany material fact required to be stated therein or necessary in order to make
\nthe statements therein, in light of the circumstances under which they were
\nmade, not misleading. The information supplied by the Company for inclusion in
\nthe Information Statement shall not, on the date the Information Statement is
\nfirst mailed to the Company’s stockholders, at the time of the Company
\nStockholders Consent and at the Effective Time, contain any statement which, at
\nsuch time, is false or misleading with respect to any material fact, or omit to
\nstate any material fact necessary in order to make the statements made therein,
\nin light of the circumstances under which they are made, not false or
\nmisleading; or omit to state any material fact necessary to correct any
\nstatement in any earlier communication with respect to the solicitation of
\nproxies for the Company Stockholders Consent which has become false or
\nmisleading. Notwithstanding the foregoing, the Company makes no representation,
\nwarranty or covenant with respect to any information supplied by Parent or
\nMerger Sub which is contained in the Application or the Information Statement.<\/p>\n
(f) The information supplied by Parent and Merger Sub for
\ninclusion in the Application shall not, at the time the Hearing is held and the
\ntime the qualification of such securities is effective under Section 25122 of
\nthe California Law, contain any untrue statement of <\/p>\n
32<\/p>\n
a material fact or omit to state any material fact necessary in order to make
\nthe statements therein, in light of the circumstances under which they were
\nmade, not misleading. The information supplied by Parent for inclusion in the
\nInformation Statement shall not, on the date the Information Statement is first
\nmailed to the Company’s stockholders, at the time of the Consent Company
\nStockholders and at the Effective Time, contain any statement which, at such
\ntime, is false or misleading with respect to any material fact, or omit to state
\nany material fact necessary in order to make the statements therein, in light of
\nthe circumstances under which it is made, not false or misleading; or omit to
\nstate any material fact necessary to correct any statement in any earlier
\ncommunication with respect to the Consent Solicitation which has become false or
\nmisleading. Notwithstanding the foregoing, Parent and Merger Sub make no
\nrepresentation, warranty or covenant with respect to any information supplied by
\nthe Company which is contained in any of the foregoing documents.<\/p>\n
(g) In the event that, (i) within thirty-five (35) days after the
\ndate hereof the Department has not scheduled a date for the Hearing or (ii) the
\nHearing has not been held and concluded and the Permit has not been issued by
\nthe Department on or within fifty-one (51) days after the date hereof, then, in
\neach case at the Company’s election, Parent shall immediately commence efforts
\nto prepare with the cooperation of Company, and file, with the SEC a
\nregistration statement of Form S-4 (as amended and supplemented, the
\n“Registration Statement”) in which the Information Statement shall be included
\nas part of a prospectus, in connection with the registration under the
\nSecurities Act of the shares of Parent Common Stock to be issued to the
\nstockholders of the Company pursuant to the Merger. The Parent shall (i) file
\nthe Registration Statement as promptly as reasonable practicable, and in any
\nevent no later than twenty-one (21) days after the date Parent is requested in
\nwriting to commence preparation of the Registration Statement pursuant to this
\nSection 5.2(g), and (ii) shall use commercially reasonable efforts to have or
\ncause the Registration Statement to become effective as promptly as practicable,
\nand shall take any action required under any applicable federal or state
\nsecurities laws in connection with the issuance of shares of Parent Common Stock
\npursuant to the Merger. The Company shall furnish all information concerning the
\nCompany as Parent may reasonably request in connection with such actions and the
\npreparation of the Registration Statement. Parent shall furnish all information
\nconcerning Parent and Merger Sub as the Company may reasonably request in
\nconnection with such actions and the preparation of the Information Statement.
\nAs promptly as practicable after the Registration Statement shall have become
\neffective, the Company shall mail the Information Statement to its stockholders.<\/p>\n
(h) The Registration Statement and the information supplied by
\nParent for inclusion in the Information Statement shall not, at (i) the time the
\nRegistration Statement is declared effective by the SEC; (ii) the time the
\nInformation Statement is first mailed to the stockholders of the Company; (iii)
\nthe time of the Company Stockholders Consent; and (iv) the Effective Time,
\ncontain any untrue statement of a material fact or omit to state any material
\nfact required to be stated therein or necessary in order to make the statements
\ntherein not misleading. If at any time prior to the Effective Time any event or
\ncircumstance relating to Parent or any of its subsidiaries, or their respective
\nofficers or directors, should be discovered by Parent which should be set forth
\nin amendment or a supplement to the Registration Statement or Information
\nStatement, Parent shall promptly inform the Company. The Registration Statement
\nand Information Statement shall comply in all material respects as to form and
\nsubstance with the requirements of the Securities Act, the Exchange Act and the
\nrules and regulations thereunder. <\/p>\n
33<\/p>\n
Notwithstanding the foregoing, Parent and Merger Sub make no representation or
\nwarranty with respect to any information supplied by the Company which is
\ncontained, or furnished in connection with the preparation of, any of the
\nforegoing documents.<\/p>\n
(i) The Information Statement and the information supplied by the
\nCompany for inclusion in the Registration Statement shall not, at (i) the time
\nthe Registration Statement is declared effective by the SEC; (ii) the time the
\nInformation Statement (or any amendment thereof or supplement thereto) is first
\nmailed to the stockholders the Company; (iii) the time of the Consent
\nSolicitation; and (iv) the Effective Time, 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 not misleading. If at any
\ntime prior to the Effective Time any event or circumstance relating to the
\nCompany, or its officers or directors, should be discovered by the Company which
\nshould be set forth in an amendment or supplement to the Registration Statement
\nor Information Statement, the Company shall promptly inform Parent. The
\nInformation Statement shall comply in all material respects as to form and
\nsubstance with the requirements of the Securities Act, the Exchange Act and the
\nrules and regulations thereunder. The Information Statement shall contain the
\nrecommendation of the Board of Directors of the Company that the Company
\nstockholders approve the Merger and this Agreement and the conclusion on the
\nBoard of Directors that the terms and conditions of the Merger are advisable and
\nfair and reasonable to the shareholders of the Company. Notwithstanding the
\nforegoing, the Company makes no representations or warranty with respect to any
\ninformation supplied by Parent or Merger Sub which is contained in, or furnished
\nin connection with the preparation of, any of the foregoing documents.<\/p>\n
5.3 STOCKHOLDERS MEETING OR CONSENT SOLICITATION. As soon as legally
\npracticable based on Section 5.2 above, Company shall promptly after the date
\nhereof take all actions necessary to either (i) call a meeting of its
\nstockholders to be held for the purpose of voting upon this Agreement and the
\nMerger (the “Company Stockholders Meeting”) or (ii) commence a consent
\nsolicitation to obtain such approvals (the “Company Stockholders Consent”).
\nCompany will, through its Board of Directors, recommend to its stockholders
\napproval of such matters as soon as practicable after the date hereof. Company
\nshall use its commercially reasonable efforts to solicit from its stockholders
\nproxies or consents in favor of such matters.<\/p>\n
5.4 ACCESS TO INFORMATION.<\/p>\n
(a) Company shall afford Parent and its accountants, counsel and
\nother representatives, reasonable access during normal business hours during the
\nperiod prior to the Effective Time to (i) all of Company’s employees,
\nproperties, books, contracts, commitments and records provided, however, Parent
\nshall not contact any employee of Company holding an office lower than vice
\npresident of Company without providing 24 hours advance notice to a vice
\npresident of Company unless there exists a pre-existing relationship between
\nParent and such employee, and (ii) all other information concerning the
\nbusiness, properties and personnel of Company as Parent may reasonably request.
\nCompany agrees to provide to Parent and its accountants, counsel and other
\nrepresentatives copies of internal financial statements promptly upon request.<\/p>\n
34<\/p>\n
(b) Subject to compliance with applicable law, from the date
\nhereof until the Effective Time, each of Parent and Company shall confer on a
\nregular and frequent basis with one or more representatives of the other party
\nto report operational matters of materiality and the general status of ongoing
\noperations.<\/p>\n
(c) No information or knowledge obtained in any investigation
\npursuant to this Section 5.4 shall affect or be deemed to modify any
\nrepresentation or warranty contained herein or the conditions to the obligations
\nof the parties to consummate the Merger.<\/p>\n
5.5 CONFIDENTIALITY. The parties acknowledge that Parent and Company
\nhave previously executed a non-disclosure agreement dated May 18, 2000 (as
\namended, the “Confidentiality Agreement”), which Confidentiality Agreement shall
\ncontinue in full force and effect in accordance with its terms.<\/p>\n
5.6 PUBLIC DISCLOSURE. Unless otherwise permitted by this Agreement,
\nParent and Company shall consult with each other before issuing any press
\nrelease or otherwise making any public statement or making any other public (or
\nnon-confidential) disclosure (whether or not in response to an inquiry)
\nregarding the terms of this Agreement and the transactions contemplated hereby,
\nand neither shall issue any such press release or make any such statement or
\ndisclosure without the prior written approval of the other (which approval shall
\nnot be unreasonably withheld), except as may be required by Parent to comply
\nwith the rules and regulations of the SEC or any obligations pursuant to any
\nlisting agreement with any national securities exchange or with the NASD.<\/p>\n
5.7 CONSENTS; COOPERATION.<\/p>\n
(a) Each of Parent and Company shall promptly apply for or
\notherwise 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 faith the views of one another, in connection with any
\nanalyses, appearances, presentations, memoranda, briefs, arguments, opinions and
\nproposals made or submitted by or on behalf of any party hereto in connection
\nwith proceedings under or relating to HSR or any other federal or state
\nantitrust or fair trade law.<\/p>\n
(b) Each of Parent and Company shall use all commercially
\nreasonable efforts to resolve such objections, if any, as may be asserted by any
\nGovernmental Entity with respect to the transactions contemplated by this
\nAgreement under the HSR, the Sherman Act, as amended, the Clayton Act, as
\namended, the Federal Trade Commission Act, as amended, and any other Federal,
\nstate or foreign statutes, rules, regulations, orders or decrees that are
\ndesigned to prohibit, restrict or regulate actions having the purpose or effect
\nof monopolization or restraint of trade (collectively, “Antitrust Laws”). In
\nconnection therewith, if any administrative or judicial action or proceeding is
\ninstituted (or threatened to be instituted) challenging any transaction
\ncontemplated by this Agreement as violative of any Antitrust Law, each of Parent
\nand Company shall cooperate and use all commercially reasonable efforts
\nvigorously to contest <\/p>\n
35<\/p>\n
and resist any such action or proceeding and to have vacated, lifted, reversed,
\nor overturned any decree, judgment, injunction or other order, whether
\ntemporary, preliminary or permanent (each an “Order”), that is in effect and
\nthat prohibits, prevents, or restricts consummation of the Merger or any such
\nother transactions, unless by mutual agreement Parent and Company decide that
\nlitigation is not in their respective best interests. Notwithstanding the
\nprovisions of the immediately preceding sentence, it is expressly understood and
\nagreed that Parent shall have no obligation to litigate or contest any
\nadministrative or judicial action or proceeding or any Order beyond the earlier
\nof (i) September 30, 2000 or (ii) the date of a ruling preliminarily enjoining
\nthe Merger issued by a court of competent jurisdiction. Each of Parent and
\nCompany shall use all commercially reasonable efforts to take such action as may
\nbe required to cause the expiration of the notice periods under the HSR or other
\nAntitrust Laws with respect to such transactions as promptly as possible after
\nthe execution of this Agreement.<\/p>\n
(c) Notwithstanding the foregoing, neither Parent nor Company
\nshall be required to agree, as a condition to any Approval, to divest itself of
\nor hold separate any subsidiary, division or business unit which is material to
\nthe business of such party and its subsidiaries, taken as a whole, or the
\ndivestiture or holding separate of which would be reasonably likely to have a
\nMaterial Adverse Effect on (A) the business, properties, assets, liabilities,
\nfinancial condition or results of operations of such party and its subsidiaries,
\ntaken as a whole or (B) significantly impair the benefits intended to be derived
\nas a result 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 Letter, 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
\nCompany or Parent, as the case may be, to comply with or satisfy any
\nrepresentation, warranty, covenant, condition or agreement to be complied with
\nor satisfied by it pursuant to this Agreement which would be likely to result in
\nany condition to the obligations of any party to effect the Merger and the other
\ntransactions contemplated by this Agreement not to be satisfied. The delivery of
\nany notice pursuant to this Section 5.8 shall not cure any breach of any
\nrepresentation, warranty or covenant requiring disclosure of such matter prior
\nto the date of this Agreement or otherwise limit or affect the remedies
\navailable hereunder to the party receiving such notice.<\/p>\n
5.9 NON-COMPETITION AGREEMENTS. As of the date hereof, each of the
\nemployee of Company listed on SCHEDULE 5.9 (each a “Key Company Employee” and
\ncollectively, the “Key Company Employees”), shall have entered into a
\nNon-Competition Agreement substantially, in the form attached hereto as EXHIBIT
\nC-1 or EXHIBIT C-2 (the “Level 1 Non-Competition Agreement” and “Level 2
\nNon-Competition Agreement” respectively, each a “Non-Competition Agreement”) as
\nset forth on SCHEDULE 5.9.<\/p>\n
5.10 LEGAL REQUIREMENTS. Each of Parent and Company will, and will
\ncause their respective subsidiaries to, take all reasonable actions necessary
\nto comply promptly with all legal requirements which may be imposed on them
\nwith respect to the consummation of the transactions contemplated by this
\nAgreement and will promptly cooperate with and furnish information to any
\nparty hereto necessary in connection with any such requirements imposed upon
\nsuch other party in connection with the consummation of the transactions
\ncontemplated by <\/p>\n
36<\/p>\n
this Agreement and will take all reasonable actions necessary to
\nobtain (and will cooperate with the other parties hereto in obtaining) any
\nconsent, approval, order or authorization of, or any registration, declaration
\nor filing with, any Governmental Entity or other person, required to be obtained
\nor made in connection with the taking of any action contemplated by this
\nAgreement.<\/p>\n
5.11 BLUE SKY LAWS. Parent shall take such steps as may be necessary to
\ncomply with the securities and blue sky laws of all jurisdictions which are
\napplicable to the issuance of the Parent Common Stock in connection with the
\nMerger. Company shall use its reasonable efforts to assist Parent 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 Parent Common Stock in
\nconnection with the Merger.<\/p>\n
5.12 STOCK OPTIONS. At the Effective Time, the Company Stock Option
\nPlan and each outstanding option to purchase shares of Company Common Stock
\nunder the Company Stock Option Plan, whether vested or unvested, shall be
\nassumed by Parent. In addition, Company’s rights to repurchase shares of Company
\nCommon Stock under the Company Stock Option Plan or otherwise shall be assigned
\nto, and assumed by, Parent. Company has delivered to Parent a schedule (the
\n“Option Schedule”) which sets forth a true and complete list as of the date
\nhereof of all holders of outstanding options under the Company Stock Option Plan
\nincluding the number of shares of Company Capital Stock subject to each such
\noption, the exercise or vesting schedule, the exercise price per share and the
\nterm of each such option. On the Closing Date, Company shall deliver to Parent
\nan updated Option Schedule current as of such date. Each such option so assumed
\nby Parent under this Agreement shall continue to have, and be subject to, the
\nsame terms and conditions set forth in the Company Stock Option Plan and the
\nStock Option Grant Agreement applicable to each grant immediately without regard
\nto vesting restrictions prior to the Effective Time, except that (i) such option
\nshall be exercisable for that number of whole shares of Parent Common Stock
\nequal to the product of the number of shares of Company Common Stock that were
\nissuable upon exercise of such option immediately prior to the Effective Time
\nmultiplied by the Exchange Ratio and rounded down to the nearest whole number of
\nshares of Parent Common Stock, and (ii) the per share exercise price for the
\nshares of Parent Common Stock issuable upon exercise of such assumed option
\nshall be equal to the quotient determined by dividing the exercise price per
\nshare of Company Common Stock at which such option was exercisable immediately
\nprior to the Effective Time by the Exchange Ratio, rounded up to the nearest
\nwhole cent.<\/p>\n
(a) It is the intention of the parties that the options so assumed
\nby Parent qualify following the Effective Time as incentive stock options as
\ndefined in Section 422 of the Code to the extent such options qualified as
\nincentive stock options prior to the Effective Time. Within 30 business days
\nafter the Effective Time, Parent will issue to each person who, immediately
\nprior to the Effective Time was a holder of an outstanding option under the
\nCompany Stock Option Plan a document evidencing the foregoing assumption of such
\noption by Parent.<\/p>\n
(b) Within 30 business days after the Effective Time, Parent shall
\nfile a registration statement on Form S-8 (or any successor or other appropriate
\nforms) which will register the shares of Parent Common Stock subject to assumed
\noptions to the extent permitted by Federal securities laws and shall use its
\ncommercially reasonable efforts to maintain the <\/p>\n
37<\/p>\n
effectiveness 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
5.13 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 substantially the
\nform attached hereto as EXHIBIT D (the “Escrow Agreement”).<\/p>\n
5.14 LISTING OF ADDITIONAL SHARES. Prior to issuance, Parent shall file
\nwith Nasdaq a Notification Form for Listing of Additional Shares covering the
\nshares of Parent Common Stock issuable upon conversion of the Company Common
\nStock in the Merger and upon exercise of the options under the Company Stock
\nOption Plans assumed by Parent.<\/p>\n
5.15 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 Company described in Section 5.3, including cooperating fully
\nwith the other party, including by provision of information.<\/p>\n
5.16 EMPLOYEE BENEFITS. Parent shall take such reasonable actions as
\nare necessary to allow eligible employees of Company to participate in the
\nbenefit programs of Parent, or alternative benefit programs in the aggregate
\nsubstantially comparable to those applicable to employees of Parent on similar
\nterms, from and after the Effective Time of the Merger without any pre-existing
\ncondition, actively-at-work or similar limitation or condition except to the
\nextent the affected eligible employee had been subject to and as of the
\nEffective Time had not yet satisfied a comparable limitation or condition under
\nthe comparable Company plan. For purposes of satisfying any deductibles under
\nsuch programs, Parent shall give all credit for deductible amounts and similar
\namounts paid during the current plan year by each participant under the
\ncomparable Company plan. For purposes of satisfying the terms and conditions of
\nsuch programs, to the extent permitted by Parent’s benefit programs, Parent
\nshall use reasonable efforts to give full credit for eligibility or vesting for
\neach participant’s period of service with Company.<\/p>\n
5.17 PARACHUTE PAYMENTS. Company shall use commercially reasonable
\nefforts to have those provisions in the agreements or arrangements specified in
\nSCHEDULE 5.17 that may result in the payment of any amount that would not be
\ndeductible by reason of Section 280G of the Code approved by such percentage of
\nCompany’s outstanding voting securities as is required by the terms of Section
\n280G(b)(5)(B) of the Code and the proposed Treasury Regulations thereunder,
\nincluding, without limitation, Q-7 of Section 1.280G-1 of such proposed
\nregulations. In the event that Company does not obtain the requisite stockholder
\napprovals for such provisions of any of the agreements or arrangements specified
\nin SCHEDULE 5.17 prior to the Effective Time, Parent may immediately thereafter
\nmake a claim against the Escrow Fund for any Damages, whether contingent or
\notherwise, arising out of such provisions not being so approved (the “Parachute
\nDamages”), including, without limitation, Damages consisting of the loss of
\nfuture tax deductions arising from such parachute payments. Parent’s computation
\nas to <\/p>\n
38<\/p>\n
the amount of any Parachute Damages shall be binding in the absence of manifest
\nerror, but Company may dispute whether any such damages exist with respect to
\nany such provision. Parachute Damages shall not be subject to either the Basket
\nAmount (as defined in Section 8.4 hereof) or the Deductible Amount (as defined
\nin Section 8.4 hereof).<\/p>\n
5.18 NECESSARY ACTIONS. Parent and Company shall execute and deliver at
\nthe Closing all agreements and documents contemplated by this Agreement to be
\nexecuted and delivered by them at the Closing.<\/p>\n
5.19 PROPRIETARY INFORMATION AGREEMENT. Company shall use commercially
\nreasonable efforts to cause all employees of Company to sign Parent’s form of
\nproprietary information agreement prior to the Closing.<\/p>\n
5.20 HSR FILING. As soon as may be reasonably practicable and no later
\nthan fifteen (15) days following the date hereof, the Parent and Company each
\nshall file with the United States Federal Trade Commission (the “FTC”) and the
\nAntitrust Division of the United States Department of Justice (“DOJ”)
\nNotification and Report Forms relating to the transactions contemplated herein
\nas required by the HSR Act, as well as comparable pre-merger notification forms
\nrequired by the merger notification or control laws and regulations of any
\napplicable jurisdiction, as agreed to by the parties. Parent and Company will
\neach pay fifty percent (50%) of the applicable HSR filing fees. Parent and
\nCompany each shall promptly (a) supply the other with any information which may
\nbe required in order to effectuate such filings and (b) supply any additional
\ninformation which reasonably may be required by the FTC, the DOJ or the
\ncompetition or merger control authorities of any other jurisdiction and which
\nthe parties may reasonably deem appropriate.<\/p>\n
5.21 NON-SOLICITATION. From the date of this Agreement until the
\nearlier of the Effective Time or one (1) year from the date of this Agreement:
\nParent shall not, and shall ensure that its representatives soliciting employees
\nor consultants for Parent shall not, directly or indirectly, solicit, encourage,
\ninduce or attempt to induce any employee or consultant of Company that has been
\ncontacted, introduced or made known to Parent in connection with activities
\nrelating to this Agreement, to terminate his or her employment with Company; and
\nCompany shall not, and shall ensure that its representatives soliciting
\nemployees or consultants for Company shall not, directly or indirectly, solicit,
\nencourage, induce or attempt to induce any employee or consultant of Parent that
\nhas been contacted, introduced or made known to Company in connection with
\nactivities relating to this Agreement, to terminate his or her employment with
\nParent. Notwithstanding the foregoing, the restrictions set forth in this
\nSection 5.21 shall not apply to (i) the unsolicited inquiries made by an
\nemployee of one party to the other party; (ii) the inquiries received from an
\nemployee of one party as the result of a general notice or advertisement placed
\nby the other party; or (iii) the inquiries resulting from an employee’s
\nutilization of an employment search firm.<\/p>\n
5.22 STOCKHOLDER AGREEMENTS. Upon execution of this Agreement, Company
\nshall deliver or cause to be delivered to Parent from each of the Principal
\nStockholders of Company, an executed Stockholder Agreement. SCHEDULE 2.30 sets
\nforth a list of the Principal Stockholders and each such Principal Stockholder’s
\nholdings of Company Capital Stock. Parent shall be entitled to place appropriate
\nlegends on the certificates evidencing any Parent Common <\/p>\n
39<\/p>\n
Stock to be received by Principal Stockholders of Company pursuant to the terms
\nof this Agreement, and to issue appropriate stock transfer instructions to the
\ntransfer agent for the Parent Common Stock, consistent with the terms of the
\nStockholder Agreement.<\/p>\n
5.23 DIRECTORS’ AND OFFICERS’ INDEMNIFICATION.<\/p>\n
(a) From and after the Effective Time, Parent will cause the
\nSurviving Corporation to fulfill and honor in all respects the obligations of
\nthe Company pursuant to any indemnification agreements between the Company and
\nits directors and officers in a form approved by the Company’s board of
\ndirectors and furnished to Parent prior to the date hereof (copies of which have
\nbeen provided to Parent).<\/p>\n
(b) Parent shall (i) assume, as of the Effective Time, and shall
\nperform, for a period of three (3) years from and after the Effective Time, all
\nobligations of the Company under Article Seven of the Company Certificate and
\nArticle Five of the Company Bylaws, in each case as such instruments were in
\neffect on the date hereof and whether or not such instruments have thereafter
\nbeen amended or repealed, and (ii) shall pay all amounts that become due and
\npayable under such provisions (or would become due under such provisions if such
\nprovisions had remained in force during such three-year period).<\/p>\n
(c) This Section 5.23 shall survive the consummation of the
\nMerger, is intended to benefit the Company, the Surviving Company and each
\nindemnified party, shall be binding, jointly and severally, on all successors
\nand assigns of the Surviving Corporation and Parent, and shall be enforceable by
\nthe indemnified persons.<\/p>\n
(d) Notwithstanding anything to the contrary in this Section 5.23,
\nParent and the Surviving Corporation shall not be liable to any officer or
\ndirector of Company for any amounts payable resulting from any claim or action
\nbrought against Parent, Surviving Corporation or any of Parent’s Affiliates by
\nsuch officer or director or the Company or any of their Affiliates.<\/p>\n
(e) The Company hereby represents and warrants to Parent that no
\nclaim for indemnification has been made by any director or officer of the
\nCompany and, to the knowledge of the Company, no basis exists for any such claim
\nfor indemnification.<\/p>\n
5.24 TAX-FREE REORGANIZATION COVENANT. Parent and the Company shall
\n(and Parent shall cause its subsidiaries to) use commercially reasonable efforts
\nto qualify the Merger as a reorganization within the meaning of Section 368 of
\nthe Code and not take any action that could reasonably be expected to cause the
\nMerger to fail to qualify as a reorganization within the meaning of Section 368
\nof the Code.<\/p>\n
5.25 INTENTIONALLY OMITTED.<\/p>\n
5.26 ACCELERATION OF VESTING; LAPSE OF REPURCHASE RIGHT. Company shall
\ncause each Company Option subject to vesting granted to any individual listed on
\nSCHEDULE 5.26 of the Company Disclosure Letter to fully vest on or before the
\nEffective Time and any right to repurchase shares of Company Common Stock held
\nby any individual listed on such SCHEDULE 5.26 to lapse on or before the
\nEffective Time. Company shall not grant any Company Warrants <\/p>\n
40<\/p>\n
subject to vesting after the date hereof unless such vesting fully accelerates
\nimmediately prior to the Effective Time.<\/p>\n
5.27 EXISTING EMPLOYEE OPTIONS. Company Options to purchase up to an
\naggregate 2,450,120 shares of Company Common Stock shall be granted to existing
\nemployees of the Company in compliance with applicable laws. Each Company Option
\ngranted pursuant to this Section 5.27 shall vest and become exercisable with
\nrespect to 25% of the Company Common Stock issuable pursuant to such option
\nafter one year of service measured from the date of grant and shall vest and
\nbecome exercisable ratably over the following thirty six months of service
\nthereafter. Each option grant made by Company pursuant to this Section 5.27
\nshall be specifically identified in a letter from Company to Parent referencing
\nthis Section 5.27. Such options shall not be considered issued pursuant to this
\nSection 5.27 until such letter is acknowledged in writing by Parent.<\/p>\n
5.28 OPTION GRANTS TO NEW EMPLOYEES. Company Options shall be granted
\nto certain new employees of Company (“Additional Employees”) in compliance with
\napplicable laws. Each such Additional Employee and each option grant made by
\nCompany pursuant to this Section 5.28 shall be specifically identified in a
\nletter from Company to Parent referencing this Section 5.28. Such new employees
\nand such options shall not be considered Additional Employees or options issued
\npursuant to this Section 5.28, respectively, until such letter is acknowledged
\nin writing by Parent.<\/p>\n
5.29 EMPLOYEE STATUS. If Reza Satchu is eligible to become an employee
\nof Company in compliance with applicable laws, Company shall use its
\ncommercially reasonable efforts to cause him to become an employee of Company
\nprior the Effective Time.<\/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. The
\nrespective obligations of Parent and Company to consummate and effect this
\nAgreement and the transactions contemplated hereby shall be subject to the
\nsatisfaction at or prior to the Effective Time of each of the following
\nconditions, any of which may be waived, in writing, by agreement of Parent and
\nCompany:<\/p>\n
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
\nbeen approved and adopted by the requisite vote of stockholders of Company under
\nDelaware Law and the Certificate of Incorporation of Company and any other
\napplicable agreement or other instrument.<\/p>\n
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
\nrestraining order, preliminary or permanent injunction or other order issued by
\nany court of competent jurisdiction or other legal or regulatory restraint or
\nprohibition preventing the consummation of the Merger shall be in effect, nor
\nshall any proceeding brought by an administrative agency or commission or other
\ngovernmental authority or instrumentality, domestic or foreign, seeking any of
\nthe foregoing be pending; nor shall there be any action taken, or any statute,
\nrule, regulation or <\/p>\n
41<\/p>\n
order enacted, entered, enforced or deemed applicable to the Merger, which makes
\nthe consummation of the Merger illegal.<\/p>\n
(c) GOVERNMENTAL APPROVAL. Parent and Company and their respective
\nsubsidiaries shall have timely obtained from each Governmental Entity all
\napprovals, 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) ESCROW AGREEMENT. Parent, Company, Escrow Agent and the
\nStockholders’ Agent (as defined in Article VIII hereto) shall have entered into
\nthe Escrow Agreement.<\/p>\n
(e) TAX OPINION. Each of Company and Parent shall have received a
\nwritten opinion from their respective counsel to the effect that the Merger will
\nconstitute a reorganization within the meaning of Section 368 of the Code, which
\nopinions shall be substantially identical in substance and reasonably acceptable
\nto the recipient. In preparing the Company and the Parent tax opinions, counsel
\nmay rely on reasonable assumptions and may also rely on (and to the extent
\nreasonably required, the parties and Company’s stockholders shall make)
\nreasonable representations related thereto.<\/p>\n
(f) TRANSACTION EXEMPTION OR REGISTRATION EFFECTIVE. Either (i)
\nthe Department shall have issued the Permit with respect to the Merger pursuant
\nto the Application after holding the Hearing and the shares of Parent Common
\nStock to be issued hereunder shall be “exempt securities” under Section 3(a)(10)
\nof the Securities Act or (ii) the SEC shall have declared the Registration
\nStatement effective, no stop order suspending the effectiveness of the
\nRegistration Statement or any part thereof shall have been issued and no
\nproceeding for that purpose, and no similar proceeding in respect of the Proxy
\nStatement, shall have been initiated or threatened in writing by the SEC.<\/p>\n
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The
\nobligations of Company 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 Company:<\/p>\n
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Except as
\ndisclosed in the Parent Disclosure Letter, the representations and warranties of
\nParent in this Agreement shall be true and correct in all material respects (if
\nnot qualified by materiality) and in all respects (if qualified by materiality)
\nwhen made and (other than representations and warranties which by their express
\nterms are made solely as of a specified earlier date) on and as of the Effective
\nTime as though such representations and warranties were made on and as of such
\ntime and (ii) Parent shall have performed and complied in all material respects
\nwith all covenants, obligations and conditions of this Agreement required to be
\nperformed and complied with by them as of the Effective Time.<\/p>\n
(b) LEGAL OPINION. Company shall have received a legal opinion
\nfrom Parent’s legal counsel in substantially the form attached hereto as EXHIBIT
\nE.<\/p>\n
42<\/p>\n
(c) LISTING OF ADDITIONAL SHARES. The shares of Parent Common
\nStock issuable upon conversion of the Company Common Stock in the Merger and
\nupon exercise of the options under the Company Stock Option Plan assumed by
\nParent shall have been approved for quotation on the Nasdaq National Market
\nSystem, subject only to official notice of issuance.<\/p>\n
(d) THIRD PARTY CONSENTS. Company shall have been furnished with
\nevidence satisfactory to it of the consent or approval of those persons whose
\nconsent or approval shall be required in connection with the Merger under the
\ncontracts of Purchaser set forth on SCHEDULE 6.2(d).<\/p>\n
(e) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
\nmaterial adverse change in the condition (financial or otherwise but excluding
\nprospects), properties, assets (including intangible assets), liabilities,
\nbusiness, operations or results of operations of Parent and its subsidiaries,
\ntaken as a whole; other than (i) a material adverse change generally affecting
\nthe industry in which the Parent operates, (ii) a material adverse change in
\ncapital markets, (iii) changes in, or in the Parent’s application of, GAAP, (iv)
\nstockholder class action or other stockholder litigation alleging breach of
\nfiduciary or other duty or violation of securities or other laws, (v) any
\nchanges resulting from or arising in connection with changes in the market price
\nor trading volume of Parent Common Stock or the failure of Parent to meet or
\nexceed research analysts’ projections of operating results, or (vi) a material
\nadverse change in the Parent’s condition (financial or otherwise but excluding
\nprospects), properties, assets (including intangible assets), liabilities,
\nbusiness operations or results of operations which are primarily and directly
\ncaused by the execution and delivery of and performance of obligations under
\nSections 5.27 and 5.28 of this Agreement or the announcement and consummation of
\nthe transactions contemplated hereby (it being understood that in any
\ncontroversy concerning the applicability of this clause (vi) the party claiming
\nthe benefit of this clause (vi) shall have the burden of proof with respect to
\nthe elements of such clause).<\/p>\n
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT. The obligations of
\nParent to consummate and effect this Agreement and the transactions contemplated
\nhereby shall be subject to the satisfaction at or prior to the Effective Time of
\neach of the following conditions, any of which may be waived, in writing, by
\nParent:<\/p>\n
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as disclosed
\nin the Company Disclosure Letter and except as to the representation and
\nwarranty contained in Section 2.5(ii), (i) the representations and warranties of
\nCompany in this Agreement shall be true and correct in all material respects (if
\nnot qualified by materiality) and in all respects (if qualified by materiality)
\nwhen made (other than representations and warranties which by their express
\nterms are made solely as of a specified earlier date) on and as of the Effective
\nTime as though such representations and warranties were made on and as of such
\ntime and (ii) Company shall have performed and complied in all material respects
\nwith all covenants, obligations and conditions of this Agreement required to be
\nperformed and complied with by it as of the Effective Time.<\/p>\n
(b) THIRD PARTY CONSENTS. Parent shall have been furnished with
\nevidence satisfactory to it of the consent or approval of those persons whose
\nconsent or approval<\/p>\n
43<\/p>\n
shall be required in connection with the Merger under the contracts of Company
\nset forth on SCHEDULE 6.3(b) hereto.<\/p>\n
(c) LEGAL OPINION. Parent shall have received a legal opinion from
\nCompany’s legal counsel in substantially the form attached hereto as EXHIBIT F.<\/p>\n
(d) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
\nmaterial adverse change in the condition (financial or otherwise but excluding
\nprospects), properties, assets (including intangible assets), liabilities,
\nbusiness, operations or results of operations of Company; other than (i) a
\nmaterial adverse change generally affecting the industry in which the Company
\noperates, (ii) a material adverse change in capital markets and (iii) changes
\nin, or in the Company’s applications of, GAAP, (iv) Stockholder class action or
\nother stockholder litigation alleging breach of fiduciary or other duty or
\nviolation of applicable laws and (v) a material adverse change in the Company’s
\ncondition (financial or otherwise but excluding prospects), properties, assets
\n(including intangible assets), liabilities, business operations or results of
\noperations which are primarily and directly caused by the execution and delivery
\nof and performance of obligations under Sections 5.27 and 5.28 of this Agreement
\nor the announcement and consummation of the transactions contemplated hereby (it
\nbeing understood that in any controversy concerning the applicability of this
\nclause (v) the party claiming the benefit of this clause (v) shall have the
\nburden of proof with respect to the elements of such clause).<\/p>\n
(e) FIRPTA CERTIFICATE. Company shall, prior to the Closing Date,
\nprovide Parent with a properly executed FIRPTA Notification Letter,
\nsubstantially in the form of EXHIBIT G attached hereto, which states that shares
\nof capital stock of Company do not constitute “United States real property
\ninterests” under Section 897(c) of the Code, for purposes of satisfying Parent’s
\nobligations under Treasury Regulation Section 1.1445-2(c)(3). In addition,
\nsimultaneously with delivery of such Notification Letter, Company shall have
\nprovided to Parent, as agent for Company, 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 G attached hereto
\nalong with written authorization for Parent to deliver such notice form to the
\nInternal Revenue Service on behalf of Company upon the Closing of the Merger.<\/p>\n
(f) RESIGNATION OF DIRECTORS. The directors of Company in office
\nimmediately prior to the Effective Time shall have resigned as directors of
\nCompany effective as of the Effective Time.<\/p>\n
(g) NON-COMPETITION AGREEMENT. The Non-Competition Agreements
\nbetween Parent and each of the Key Company Employees shall be effective and
\nshall not have been breached.<\/p>\n
(h) STOCK RESTRICTION AGREEMENTS. The Stock Restriction Agreements
\nbetween the Company and each of the Founders shall be effective and shall not
\nhave been breached.<\/p>\n
(i) CONVERSION OF PREFERRED STOCK. Each share of Company Preferred
\nStock shall have been converted into Company Common Stock prior to the Effective
\nTime.<\/p>\n
44<\/p>\n
(j) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
\nbeen approved and adopted by the holders of at least ninety-five percent (95%)
\nof the shares of Company Capital Stock outstanding as of the record date set for
\nthe Company Stockholders Meeting or the solicitation of stockholder consents to
\napprove the Merger.<\/p>\n
(k) REGISTRATION RIGHTS. Except as provided in Sections 5.2 and
\n5.12 hereof, Parent shall not be obligated to register any shares of Parent
\nCommon Stock issued or issuable pursuant to this Agreement, including but not
\nlimited to any shares of Parent Common Stock issued upon exercise of Company
\nWarrants assumed by Parent pursuant to this Agreement.<\/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 Company, this Agreement may be terminated:<\/p>\n
(a) by mutual consent duly authorized by the Board of Directors of
\nParent and Company;<\/p>\n
(b) by either Parent or Company, if the Closing shall not have
\noccurred on or before September 30, 2000 (provided, (i) this Agreement may not
\nbe terminated prior to October 31, 2000 if the Registration Statement has been
\nfiled with the SEC prior to September 30, 2000 and it has yet to be declared
\neffective, (ii) a later date may be agreed upon in writing by Parent and
\nCompany, and (iii) the right to terminate this Agreement under this Section
\n7.1(b) shall not be available to any party whose action or failure to act has
\nbeen the cause or resulted in the failure of the Merger to occur on or before
\nsuch date and such action or failure to act constitutes a breach of this
\nAgreement);<\/p>\n
(c) by Parent, if (i) Company shall materially breach any
\nrepresentation, warranty, obligation or agreement hereunder and such material
\nbreach shall not have been cured within twenty (20) days of receipt by Company
\nof written notice of such breach, provided that the right to terminate this
\nAgreement by Parent under this Section 7.1(c)(i) shall not be available to
\nParent where Parent is at that time in breach of this Agreement, (ii) the Board
\nof Directors of Company shall have withdrawn or modified its recommendation of
\nthis Agreement or the Merger in a manner adverse to Parent or shall have
\nresolved to do any of the foregoing, provided that the right to terminate this
\nAgreement by Parent under this Section 7.1(c)(ii) shall not be available to
\nParent where Parent is at that time in material breach of this Agreement, or
\n(iii) provided that the Hearing has been completed and the Permit has been
\nissued by the Department, for any reason Company fails to call and hold the
\nCompany Stockholders Meeting within ten (10) days after the Permit is granted or
\nthe Registration Statement is declared effective by the SEC or to commence
\nsolicitation of stockholder consents within five (5) days after the Permit is
\ngranted or the Registration Statement is declared effective by the SEC, provided
\nthat the right to terminate this Agreement by Parent under this<\/p>\n
45<\/p>\n
Section 7.1(c)(iii) shall not be available to Parent where Parent is at that
\ntime in material breach of this Agreement;<\/p>\n
(d) by Company, if Parent shall materially breach any
\nrepresentation, warranty, obligation or agreement hereunder and such breach
\nshall not have been cured within twenty (20) days following receipt by Parent of
\nwritten notice of such breach, provided that the right to terminate this
\nAgreement by Company under this Section 7.1(d) shall not be available to Company
\nwhere Company is at that time in material breach of this Agreement; or<\/p>\n
(e) by (i) either Company or Parent, if any permanent injunction
\nor other order of a court or other competent authority preventing the
\nconsummation of the Merger shall have become final and nonappealable or (ii) by
\nParent, if any required approval of the stockholders of Company shall not have
\nbeen obtained by reason of the failure to obtain the required stockholder
\nconsents within fifteen (15) days of the commencement of the Consent
\nSolicitation or voted upon at a duly held meeting of the stockholders or any
\nadjournment 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 Parent or Company
\nor their respective officers, directors, stockholders or affiliates, except that
\nParent and Company shall be liable to the extent that such termination results
\nfrom the breach by such party hereto of any of its representations, warranties
\nor covenants set forth in this Agreement; provided that, the provisions of
\nSection 5.5 (Confidentiality), Section 5.6 (Public Disclosure), Section 7.2
\n(Effect of Termination), and Section 7.3 (Expenses) shall remain in full force
\nand effect and survive any termination of this Agreement.<\/p>\n
7.3 EXPENSES. Subject to Section 1.6(b), whether or not the Merger is
\nconsummated, all costs, fees and expenses incurred in connection with the Merger
\nincluding, without limitation, all legal, accounting, financial advisory,
\nconsulting and all other fees and expenses of third parties incurred by a party
\nin connection with the negotiation and effectuation of the terms and conditions
\nof this Agreement and the transactions contemplated hereby, shall be the
\nobligation of the respective party incurring such fees and expenses.<\/p>\n
7.4 AMENDMENT. The boards of directors of Parent and Company may cause
\nthis Agreement to be amended at any time prior to the Effective Time, by
\nexecution of an instrument in writing signed on behalf of Parent and Company;
\nprovided that an amendment made subsequent to adoption of the Agreement by the
\nstockholders of Company shall not (i) alter or change the amount or kind of
\nconsideration to be received on conversion of the Company Capital Stock, (ii)
\nalter or change any term of the Certificate of Incorporation of the Surviving
\nCorporation to be effected by the Merger, or (iii) alter or change any of the
\nterms and conditions of the Agreement if such alteration or change would
\nadversely affect the holders of Company Capital Stock. Any amendments to this
\nAgreement after the Effective Time must be approved in writing by holders of a
\nmajority of the Parent Stock issued in connection with the Merger measured as of
\nimmediately after the Effective Time.<\/p>\n
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time Parent
\nor Company, to the extent legally allowed, may (i) extend the time for the
\nperformance of any of <\/p>\n
46<\/p>\n
the obligations or other acts of Company or Parent, respectively, (ii) waive any
\ninaccuracies in the representations and warranties made to such party contained
\nherein or in any document delivered pursuant hereto and (iii) waive compliance
\nwith any of the agreements or conditions for the benefit of such party contained
\nherein. Any agreement on the part of a party hereto to any such extension or
\nwaiver shall be valid only if set forth in an instrument in writing signed on
\nbehalf of such party.<\/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 any party hereto may have as a result of such investigation
\nor otherwise, such party will be entitled to rely upon the other Parties,
\nrepresentations, warranties and covenants as provided in this Agreement. The
\nrepresentations, warranties, agreements and covenants of Parent will survive the
\nClosing and continue in full force and effect until the date twelve (12) months
\nfollowing the Closing Date at which time the representations, warranties,
\nagreements and covenants of Parent set forth in this Agreement will terminate;
\nprovided, however that the covenant contained in Section 5.24 shall remain in
\nfull force and effect for purposes of this Article VIII for the applicable tax
\nstatute of limitations (and any extensions or waivers thereof) for each Former
\nCompany Stockholder. Subject to the provisions of this Article VIII, the
\nobligations of Company with respect to its representations, warranties,
\npre-Closing 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 pre-Closing agreements
\nand covenants of Company set forth in this Agreement and any liability of the
\nholders of Company Capital Stock immediately prior to the Effective Time
\n(collectively, the “Former Company Stockholders”) with respect to those
\nrepresentations, warranties and pre-Closing agreements and covenants will
\nterminate.<\/p>\n
8.2 INDEMNITY. From and after the Effective Time and subject to the
\nprovisions of this Article VIII,<\/p>\n
(a) Parent and the Surviving Corporation (on or after the
\nEffective Time) shall be indemnified and held harmless by the Former Company
\nStockholders against, and reimbursed for, any actual liability, damage, loss,
\nobligation, demand, judgment, fine, penalty, cost or expense, including
\nreasonable attorneys’ fees and expenses, and the costs of investigation incurred
\nin defending against or settling such liability, damage, loss, cost or expense
\nor claim therefor and any amounts paid in settlement thereof imposed on or
\nreasonably incurred (collectively, “Damages”) as a result of any breach of any
\nrepresentation, warranty, agreement or covenant on the part of Company under
\nthis Agreement (collectively the “Parent Damages”). Parent Damages shall be
\nreduced by the amount of any insurance proceeds, if and when actually received
\nby Parent or Company; provided, however (i) Parent shall have the sole
\ndiscretion as to whether to seek reimbursement under any applicable insurance
\npolicy and (ii) Parent’s failure to seek reimbursement from applicable insurance
\npolicies shall not reduce the amount of such Damages.<\/p>\n
47<\/p>\n
(b) Former Company Stockholders shall be indemnified and held
\nharmless by the Parent and Surviving Corporation against, and reimbursed for,
\nany Damages as a result of any breach of any representation, warranty,
\npre-Closing agreement or covenant on the part of Parent or the Surviving
\nCorporation (on or after the Effective Time) under this Agreement.<\/p>\n
“Damages” as used herein is not limited to matters asserted by third
\nparties, but includes Damages incurred or sustained by Parent, the Surviving
\nCorporation or Former Company Stockholders in the absence of claims by a third
\nparty.<\/p>\n
8.3 ESCROW FUND. As security for the indemnity provided for in Section
\n8.2(a) hereof, the Escrow Shares shall be deposited by Parent in an escrow
\naccount with a mutually acceptable financial institution as Escrow Agent (the
\n“Escrow Agent”), as of the Closing Date, such deposit to constitute an escrow
\nfund (the “Escrow Fund”) to be governed by the terms set forth in this Agreement
\nand the provisions of an Escrow Agreement to be executed and delivered pursuant
\nto Section 5.13. The Escrow Fund shall be allocated in whole numbers of Escrow
\nShares among the Former Company Stockholders other than such stockholders who
\nacquired all of his or her shares of Company Capital Stock via exercise of
\nemployee stock options issued by Company on a pro-rata basis in accordance with
\nthe number of shares of Company Capital Stock held by the Former Company
\nStockholders immediately prior to the Effective Time (excluding for purposes of
\nthis calculation any Dissenting Shares). Upon compliance with the terms hereof
\nand subject to the provisions of this Article VIII, Parent and the Surviving
\nCorporation shall be entitled to obtain indemnity from the Escrow Fund for
\nParent Damages covered by the indemnity provided for in Section 8.2 of this
\nAgreement.<\/p>\n
8.4 DAMAGE THRESHOLD. Notwithstanding the foregoing, Parent may not
\nreceive any shares from the Escrow Fund unless and until an Officer’s
\nCertificate (as defined in Section 8.6 below) identifying Parent Damages the
\naggregate amount of which exceeds $500,000 (the “Basket Amount”) has been
\ndelivered to the Escrow Agent as provided in Section 8.5 below and such amount
\nis determined pursuant to this Article VIII to be payable, in which case Parent
\nshall receive shares equal in value to the full amount of Parent Damages in
\nexcess of $100,000 (the “Deductible Amount”); provided, however, that Parachute
\nDamages shall be paid out of the Escrow Fund without regard to the Basket Amount
\nand the Deductible Amount and provided further that the amount of Parachute
\nDamages shall count as Parent Damages in calculating the Basket Amount and the
\nDeductible Amount. In determining the amount of any Parent Damages attributable
\nto a breach, any materiality standard or knowledge qualifier contained in a
\nrepresentation, warranty or covenant of Company shall be disregarded.<\/p>\n
8.5 ESCROW PERIOD. Except as contemplated by Section 8.6 hereof, the
\nescrow 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”). No claim for indemnification under this Article VIII may be made after
\nthe Termination Date except for claims based on fraud.<\/p>\n
48<\/p>\n
8.6 CLAIMS UPON ESCROW FUND.<\/p>\n
(a) Upon receipt by the Escrow Agent on or before the end of the
\nTermination Date of a certificate signed by an officer of Parent (an “Officer’s
\nCertificate”) and in accordance with the Escrow Agreement:<\/p>\n
(A) stating that Parent or the Surviving Corporation has
\nincurred, paid or properly accrued (in accordance with GAAP) or knows of facts
\ngiving rise to a reasonable probability that it will have to incur, pay or
\naccrue (in accordance with GAAP) Parent Damages in an aggregate stated amount
\nwith respect to which Parent or the Surviving Corporation is entitled to payment
\nfrom the Escrow Fund pursuant to this Agreement; and<\/p>\n
(B) specifying in reasonable detail the individual items of
\nParent Damages included in the amount so stated, the date each such item was
\nincurred, paid or properly accrued (in accordance with GAAP), or the basis for
\nsuch anticipated liability, the specific nature of the breach to which such item
\nis related, the Escrow Agent shall, subject to the provisions of Section 8.7 of
\nthis Agreement, deliver to Parent shares of Parent Common Stock in an amount
\nnecessary to indemnify Parent for the Damages claimed. All shares of Parent
\nCommon Stock subject to such claims shall remain in the Escrow Fund until Parent
\nDamages are actually incurred or paid or the Parent determines in its reasonably
\ngood faith judgment that no Parent Damages will be required to be incurred or
\npaid (in which event such shares shall be distributed to the Former Company
\nStockholders in accordance with Section 8.10 below).<\/p>\n
(b) For the purpose of compensating Parent for Parent Damages
\npursuant to this Agreement, the Parent Common Stock in the Escrow Fund shall be
\nvalued at the average of the closing prices as reported in the edition of The
\nWall Street Journal distributed in New York, NY of Parent Common Stock for the
\nthirty (30) trading days prior to the date of the final determination of the
\namount of Parent Damages to which Parent or Surviving Corporation is entitled
\npursuant to this Article VIII (the “Determination Price”).<\/p>\n
(c) The Stockholders’ Agent shall have the option to compensate
\nParent for any Parent Damages, or any portion of such Parent Damages, with cash
\nrather than Escrow Shares. Upon satisfaction of any claim with cash, a number of
\nEscrow Shares shall be released by the Escrow Agent to the Stockholders’ Agent
\nequal to the total dollar amount of such cash compensated claim divided by the
\nDetermination 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 Parent 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 Parent 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 <\/p>\n
49<\/p>\n
have been delivered to the Escrow Agent and to Parent prior to the expiration of
\nsuch thirty (30) day period.<\/p>\n
8.8 RESOLUTION OF CONFLICTS; ARBITRATION.<\/p>\n
(a) In case the Stockholders’ Agent shall so object in writing to
\nany claim or claims by Parent made in any Officer’s Certificate, the
\nStockholders’ Agent and Parent shall attempt in good faith to agree upon the
\nrights of the respective parties with respect to each of such claims. If the
\nStockholders’ Agent and Parent should so agree, a memorandum setting forth such
\nagreement shall be prepared and signed by both parties and shall be furnished to
\nthe Escrow Agent. The Escrow Agent shall be entitled to rely on any such
\nmemorandum and shall distribute the Parent Common Stock or other property from
\nthe Escrow Fund in accordance with the terms thereof.<\/p>\n
(b) If no such agreement can be reached after good faith
\nnegotiation, either Parent or the Stockholders’ Agent may, by written notice to
\nthe other, demand arbitration of the matter unless the amount of the Damage is
\nat 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 the Arbitrator (as defined below) under the Commercial Arbitration
\nRules of the American Arbitration Association. Within fifteen (15) days after
\nsuch written notice is sent, Parent and the Stockholders’ Agent shall each
\nselect one arbitrator, and the two arbitrators so selected shall select a third
\narbitrator (the “Arbitrator”).<\/p>\n
(c) Judgment upon any award rendered by the arbitrators may be
\nentered in any court having jurisdiction. Any such arbitration shall be held in
\nMountain View, California under the commercial rules then in effect of the
\nAmerican 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, Parent shall be deemed to be the
\nNon-Prevailing Party unless the arbitrators award Parent more than one-half
\n(1\/2) of the amount in dispute, plus any amounts not in dispute; otherwise, the
\nFormer Company Stockholders for whom shares of Company 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) By virtue of Company stockholders’ approval of the Merger,
\nPeter Lamm shall be constituted and appointed as agent (“Stockholders’ Agent”)
\nand attorney-in-fact for and on behalf of the Former Company Stockholders to
\ngive and receive notices and communications, to execute the Escrow Agreement to
\nauthorize delivery to Parent of the Parent Common Stock or other property from
\nthe Escrow Fund in satisfaction of claims by Parent or satisfy claims by Parent
\nwith cash, to object to such deliveries, to agree to, negotiate, enter into
\nsettlements and compromises of, and demand arbitration and comply with orders of
\ncourts and awards of arbitrators with respect to such claims, and to take all
\nactions necessary or appropriate <\/p>\n
50<\/p>\n
in the judgment of the Stockholders’ Agent for the accomplishment of the
\nforegoing. Such agency may be changed by the holders of a majority in interest
\nof the Escrow Fund from time to time upon not less than 10 days’ prior written
\nnotice to Parent. The Stockholders’ Agent may resign upon thirty (30) days
\nnotice to the parties to this Agreement and the Former Company Stockholders. No
\nbond shall be required of the Stockholders’ Agent, and the Stockholders’ Agent
\nshall receive no compensation for his services. Notices or communications to or
\nfrom the Stockholders’ Agent shall constitute notice to or from each of the
\nFormer Company Stockholders.<\/p>\n
(b) The Stockholders’ Agent shall not be liable for any act done
\nor omitted hereunder as Stockholders’ Agent while acting in good faith and in
\nthe exercise of reasonable judgment, and any act done or omitted pursuant to the
\nadvice of counsel shall be conclusive evidence of such good faith. The Former
\nCompany Stockholders shall severally indemnify the Stockholders’ Agent and hold
\nhim 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 to
\ninformation about the Surviving Corporation and the reasonable assistance of
\nCompany’s former officers and employees for purposes of performing its duties
\nand exercising its rights hereunder, provided that the Stockholders’ Agent shall
\ntreat confidentially and not disclose any nonpublic information from or about
\nSurviving Corporation to anyone (except on a need to know basis to individuals
\nwho agree to treat such information confidentially).<\/p>\n
(d) The Stockholders’ Agent shall be entitled to a distribution
\nfrom the Escrow Fund equal to any such indemnity claim which has not been
\nsatisfied; provided, however, that no such distribution shall be made until all
\nclaims of Parent set forth in any Officer’s Certificate delivered to the Escrow
\nAgent on or prior to the Termination Date have been resolved.<\/p>\n
8.10 DISTRIBUTION UPON TERMINATION OF ESCROW PERIOD. Within five (5)
\nbusiness days following the Termination Date, the Escrow Agent shall deliver to
\nthe Former Company 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 Parent 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 Stockholders’ Agent under Section 8.9.
\nAs soon as all such claims have been resolved, the Escrow Agent shall deliver to
\nthe Former Company Stockholders all Escrow Shares remaining in the Escrow Fund
\nand not required to satisfy such claims. Deliveries of Escrow Shares to the
\nFormer Company 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 or
\ninstruction of the Stockholders’ Agent shall constitute a decision of all Former
\nCompany Stockholders for whom shares of Parent Common Stock otherwise issuable
\nto them are deposited in the Escrow Fund and shall be final, binding and
\nconclusive upon each such Former Company Stockholder, and the Escrow Agent and
\nParent may rely upon any decision, act, consent or <\/p>\n
51<\/p>\n
instruction of the Stockholders’ Agent as being the decision, act, consent or
\ninstruction of each and every such Former Company Stockholder. The Escrow Agent
\nand Parent are hereby relieved from any liability to any person for any acts
\ndone by them in accordance with such decision, act, consent or instruction of
\nthe Stockholders’ Agent.<\/p>\n
8.12 THIRD-PARTY CLAIMS. In the event Parent becomes aware of a
\nthird-party claim which Parent believes may result in a demand against the
\nEscrow Fund, Parent shall promptly notify the Stockholders’ Agent of such claim.
\nParent shall have the right to settle any such claim with the written consent of
\nthe Stockholders’ Agent, which consent shall not be unreasonably withheld;
\nprovided, however, that the Stockholders’ Agent may, at his or her option,
\ndirect the settlement negotiations other than for claims related to (i) the
\nCompany Intellectual Property or (ii) disputes or disagreements with customers
\nof Parent or Company. In the event that the Stockholders’ Agent consents to any
\nsuch settlement, neither the Former Company Stockholders nor the Stockholders’
\nAgent shall have any power or authority to object under Section 8.7 or any other
\nprovision of this Agreement to the amount of any claim by Parent against the
\nEscrow Fund for indemnity with respect to such settlement (provided that the
\nFormer Company Stockholders and the Stockholders’ Agent shall not be precluded
\nfrom objecting that the claim is not the type of claim (but without objections
\nto the amount of the claim) for which Parent is entitled to indemnification from
\nthe Escrow Fund). If any proceeding is commenced, or if any claim, demand or
\nassessment is asserted, in respect of which a claim for indemnification is or
\nmight be made against the Escrow Fund based on matters other than (i) the
\nCompany Intellectual Property or (ii) claims made by customers of Parent or
\nCompany, the Stockholders’ Agent may, at his or her option, contest or defend
\nany such action, proceeding, claim, demand or assessment, with counsel selected
\nby the Stockholders’ Agent who is reasonably acceptable to Parent; provided,
\nhowever, that if Parent shall reasonably object to such control, then the
\nStockholders’ Agent and Parent shall cooperate in the defense of such matter;
\nprovided further, that the Stockholders’ Agent shall not admit any liability
\nwith respect thereto or settle, compromise, pay or discharge the same without
\nthe prior written consent of Parent, which consent shall not be unreasonably
\nwithheld. With respect to any claim for indemnification based on matters
\nrelating to the Company Intellectual Property, or customers of Company or
\nParent, Parent shall have the option to defend any such proceeding with counsel
\nreasonably satisfactory to the Stockholders’ Agent; provided, however, that
\nParent shall not admit any liability with respect thereto or settle, compromise,
\npay or discharge the same without the prior written consent of the Stockholders’
\nAgent, which consent shall not be unreasonably withheld. In the event that the
\nStockholders’ Agent consents to any such settlement, neither the Former Company
\nStockholders nor the Stockholders’ Agent shall have any power or authority to
\nobject under Section 8.7 or any other provision of this Agreement to the amount
\nof any claim by Parent against the Escrow Fund for indemnity with respect to
\nsuch settlement (provided that the Former Company Stockholders and the
\nStockholders’ Agent shall not be precluded from objecting that the claim is not
\nthe type of claim (but without objections to the amount of the claim) for which
\nParent is entitled to indemnification from the Escrow Fund). The Stockholders’
\nAgent or Parent, whichever is not controlling the defense of any matter, shall
\nbe entitled to participate in such defense, at Parent’s or the Former Company
\nStockholders’ expense. Any costs of defense of third party claims up to $250,000
\nand fifty percent (50%) of the costs thereafter (including attorneys’ fees),
\nincurred on behalf of the Stockholders’ Agent or Former Company Stockholders
\n(calculated on a cumulative basis for all third party claims to which this
\nSection 8.12 applies) shall be submitted to the Escrow Agent and reimbursed with
\nshares from the Escrow Fund. For <\/p>\n
52<\/p>\n
the purpose of reimbursing such costs, the Parent Common Stock in the Escrow
\nFund shall be valued at the average of the closing prices of Parent Common Stock
\nfor the thirty (30) trading days prior to the date that an invoice for such
\ncosts is sent to the Escrow Agent.<\/p>\n
8.13 MAXIMUM LIABILITY AND REMEDIES. The rights of the Parent to make
\nclaims upon the Escrow Fund in accordance with this Article VIII shall be the
\nsole and exclusive remedy of Parent and the Surviving Corporation after the
\nEffective Time with respect to any breach by Company of any representation,
\nwarranty or pre-Closing covenant or agreement made by Company under this
\nAgreement and no current or former stockholder, optionholder, warrantholder,
\ndirector, officer, employee or agent of Company shall have any personal
\nliability to Parent or the Surviving Corporation after the Effective Time as a
\nresult of such breach; provided, however, that nothing herein limits any
\npotential remedies of Parent or the Surviving Corporation, arising under
\napplicable state and federal laws with respect to any fraudulent breaches of the
\nrepresentations, warranties or covenants of Company made in or pursuant to this
\nAgreement. Nothing in this Agreement shall limit the liability of any Principal
\nStockholder in connection with any breach by such stockholder of the Stockholder
\nAgreement.<\/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
\ncommercial delivery service, or three (3) days after being mailed by
\nregistered or certified mail (return receipt requested) or one (1) day after
\nbeing sent via facsimile (with confirmation of receipt) to the parties at the
\nfollowing address (or at such other address for a party as shall be specified
\nby like notice):<\/p>\n
(a) if to Parent or Merger Sub, to:<\/p>\n
Ariba, Inc.
\n 1565 Charleston Road
\n Mountain View, California 94043
\n Attention: Chief Executive Officer and Chief Financial Officer
\n Facsimile No.: (650) 930-6851<\/p>\n
with a copy to:<\/p>\n
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
\n 155 Constitution Drive
\n Menlo Park, CA 94025
\n Attention: Brooks Stough
\n Facsimile No.: (650) 321-2800<\/p>\n
53<\/p>\n
(b) if to Company, to:<\/p>\n
SupplierMarket.com, Inc.
\n 10 Mall Road
\n Burlington, MA 01803
\n Attention: President
\n Facsimile No.: (781) 273-6800<\/p>\n
with a copy to:<\/p>\n
Ropes & Gray
\n One International Place
\n Boston, MA 02110
\n Attention: David B. Walek
\n Facsimile No.: (617) 951-7050<\/p>\n
(c) if to Stockholders’ Agent, to:<\/p>\n
Peter Lamm
\n Fenway Partners
\n 152 West 57th Street, 39th Floor
\n New York, NY
\n Facsimile No.: (212) 581-1205<\/p>\n
with a copy to:<\/p>\n
Ropes & Gray
\n One International Place
\n Boston, MA 02110
\n Attention: Lauren Norton
\n Facsimile No.: (617) 951-7050<\/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
\nused herein shall be deemed in each case to be followed by the words “without
\nlimitation.” In this Agreement, any reference to any event, change, condition
\nor effect being “material” with respect to any entity or group of entities
\nmeans any material event, change, condition or effect related to the
\ncondition (financial or otherwise), properties, assets (including intangible
\nassets), liabilities, business, operations or results of operations of such
\nentity or group of entities. In this Agreement, any reference to a “Material
\nAdverse Effect” with respect to any entity or group of entities means any
\nevent, change or effect that is materially adverse to the condition
\n(financial or otherwise but excluding prospects), properties, assets
\n(including intangible assets), liabilities, business, operations or results
\nof operations of such entity and its subsidiaries, taken as a whole,
\nincluding any event that is materially adverse to such business by harming
\nthe reputation of such entity or group of entities.<\/p>\n
54<\/p>\n
In this Agreement, any reference to a party’s “knowledge” means (i) if such
\nparty is an individual, the actual knowledge of such party, (ii) if such party
\nis a corporation, the actual knowledge of the directors, officers and other
\nindividuals that have a similar position or have similar powers and duties as
\nthe officers, and directors of such party (but excluding, in the case of
\nCompany, Marco Iansiti, Robert Lanigan and Daniel Heaney) and (iii) if such
\nparty is another entity, the actual knowledge of the individuals that have
\nsimilar positions, powers or responsibilities as officers and\/or directors of a
\ncorporation. 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 June __, 2000. The term “Affiliate”
\nof a specified person means a person who directly or indirectly through one or
\nmore intermediaries controls, is controlled by, or is under common control with
\nsuch specified person. The term “control” (including the terms “controlled by”
\nand “under common control with”) means the possession, directly or indirectly or
\nas trustee or executor, of the power to direct or cause the direction of the
\nmanagement and policies of a person, whether through the ownership of voting
\nsecurities, as trustee or executor, by contract or credit arrangement or
\notherwise. The table of contents and headings contained in this Agreement are
\nfor reference purposes only and shall not affect in any way the meaning or
\ninterpretation 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
\nof the parties and delivered to the other parties, it being understood that
\nall parties need not sign the same counterpart.<\/p>\n
9.4 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
\nthe other Transaction Documents and the documents and instruments and other
\nagreements specifically referred to herein or delivered pursuant hereto,
\nincluding the Exhibits, the Schedules, including the Company Disclosure
\nLetter and the Parent Disclosure Letter (a) constitute the entire agreement
\namong the parties with respect to the subject matter hereof and supersede all
\nprior agreements and understandings, both written and oral, among the parties
\nwith respect to the subject matter hereof, except for the Confidentiality
\nAgreement, which shall continue in full force and effect, and shall survive
\nany termination of this Agreement or the Closing, in accordance with its
\nterms and (b) are not intended to confer upon any other person any rights or
\nremedies hereunder, except for the rights of the holders of Company Capital
\nStock, Company Options, Company Warrants and Other Company Stock Rights to
\nreceive (a) the consideration set forth in Article I of this Agreement and
\n(b) indemnification as set forth in Article VIII of this Agreement.<\/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
\nagree to replace such void or unenforceable provision of this Agreement with
\na valid and enforceable provision that will achieve, to the extent possible,
\nthe economic, business and other purposes of such void or unenforceable
\nprovision.<\/p>\n
55<\/p>\n
9.6 REMEDIES CUMULATIVE. Except to the extent that the Escrow is sole
\nremedy a Parent and the Surviving Corporation for breaches of representations,
\nwarranties, agreements and covenants of the Company (subject to an in accordance
\nwith Article VIII), any and all remedies herein expressly conferred upon a party
\nwill be deemed cumulative with and not exclusive of any other remedy conferred
\nhereby, or by law or equity upon such party, and the exercise by a party of any
\none remedy will not preclude the exercise of any other remedy.<\/p>\n
9.7 GOVERNING LAW. This Agreement shall be governed by and construed
\nin accordance with the laws of the State of California without regard to
\napplicable principles of conflicts of law. Except as provided in Article VIII,
\neach of the parties hereto irrevocably consents to the exclusive jurisdiction of
\nany court located within the State of California, in connection with any matter
\nbased upon or arising out of this Agreement or the matters contemplated herein,
\nagrees that process may be served upon them in any manner authorized by the laws
\nof the State of California for such persons and waives and covenants not to
\nassert or plead any objection which they might otherwise have to such
\njurisdiction 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
56<\/p>\n
IN WITNESS WHEREOF, Company, Parent 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: \/s\/ Edward P. Kinsey
\n —————————————–<\/p>\n
Print Name: Edward P. Kinsey
\n ———————————<\/p>\n
Title: Chief Financial Officer, Executive
\n Vice-President-Finance, and
\n Administration and Secretary
\n (Principal Financial and Accounting
\n Officer)
\n ————————————–<\/p>\n
SUPPLIERMARKET.COM, INC.<\/p>\n
By: \/s\/ Jonathan Burgstone
\n ——————————————
\n Jonathan Burgstone
\n Chief Executive Officer<\/p>\n
ELI MERGER CORPORATION<\/p>\n
By: \/s\/ Edward P. Kinsey
\n ——————————————<\/p>\n
Print Name: Edward P. Kinsey
\n ———————————-<\/p>\n
Title: President
\n —————————————<\/p>\n
SIGNATURE PAGE
\n AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
Appendix I<\/p>\n
Glossary<\/p>\n
\n
\nAdditional Employees………………………………………. 5.28
\nAdditional Parent Shares…………………………………… 1.9
\nAgreement………………………………………………… Preamble
\nAntitrust Laws……………………………………………. 5.7(b)
\nApplication………………………………………………. 5.2(a)
\nArbitrator……………………………………………….. 8.8(b)
\nBasket Amount…………………………………………….. 8.4
\nCalifornia Law……………………………………………. 5.2(a)
\nCERCLA…………………………………………………… 2.13
\nCertificate of Merger……………………………………… 1.1
\nCertificates……………………………………………… 1.8(c)
\nClosing………………………………………………….. 1.2
\nClosing Date……………………………………………… 1.2
\nCOBRA……………………………………………………. 2.15(a)(C)
\nCode…………………………………………………….. Recital
\nCompany………………………………………………….. Preamble
\nCompany Authorizations…………………………………….. 2.10
\nCompany Balance Sheet……………………………………… 2.6
\nCompany Balance Sheet Date…………………………………. 2.5
\nCompany Bylaws……………………………………………. 2.3(b)
\nCompany Capital Stock……………………………………… Recital
\nCompany Certificate……………………………………….. 2.3(b)
\nCompany Common Stock………………………………………. 2.2
\nCompany Confidential Information……………………………. 2.12(d)
\nCompany Disclosure Letter………………………………….. Article II
\nCompany Financial Advisory Cash Fees 2.29
\nCompany Financial Advisory Fee Shares……………………….. 2.29
\nCompany Financial Advisory Fees…………………………….. 2.29
\nCompany Intellectual Property………………………………. 2.12(a)
\nCompany Options…………………………………………… 1.6
\nCompany Preferred Stock……………………………………. 2.2
\nCompany Professional Fees………………………………….. 2.29
\nCompany Stock Option Plan………………………………….. 1.6(c)
\nCompany Stockholders Consent……………………………….. 5.3
\nCompany Stockholders Meeting……………………………….. 5.3
\nCompany Warrants………………………………………….. 1.6
\nConfidentiality Agreement………………………………….. 5.5
\nDamages………………………………………………….. 8.2(a)
\nDeductible Amount…………………………………………. 8.4
\nDelaware Law……………………………………………… 1.1
\nDepartment……………………………………………….. 5.2(a)<\/p>\n A-1<\/p>\n
Determination Price……………………………………….. 8.6(b)
\nDissenting Shares…………………………………………. 1.10
\nDOJ……………………………………………………… 5.20
\nEffective Date……………………………………………. 1.2
\nEffective Time……………………………………………. 1.2
\nEmployee Obligation……………………………………….. 2.16(j)
\nEnvironmental Laws………………………………………… 2.13
\nERISA……………………………………………………. 2.15(a)(A)
\nERISA Affiliate…………………………………………… 2.15(a)
\nEscrow Agent……………………………………………… 8.3
\nEscrow Agreement………………………………………….. 5.13
\nEscrow Fund………………………………………………. 8.3
\nEscrow Shares…………………………………………….. 1.11(c)
\nExchange Act……………………………………………… 2.24(f)
\nExchange Agent……………………………………………. 1.11(a)
\nExchange Ratio……………………………………………. 1.6(a)
\nExpense Deductions………………………………………… 1.6
\nFinancial Statements………………………………………. 2.4
\nFormer Company Stockholders………………………………… 8.1
\nFounder………………………………………………….. Recital
\nFounders…………………………………………………. Recital
\nFTC……………………………………………………… 5.20
\nGAAP…………………………………………………….. 2.4
\nGovernmental Entity……………………………………….. 2.3(c)
\nHearing………………………………………………….. 5.2(a)
\nHSR……………………………………………………… 2.3(c)
\nInformation Statement……………………………………… 5.2(c)
\nInfringement……………………………………………… 2.12(a)
\nIntellectual Property……………………………………… 2.12(a)
\nInventions……………………………………………….. 2.12(a)
\nIP Rights………………………………………………… 2.12(a)
\nIRCA…………………………………………………….. 2.16(f)
\nKey Company Employee………………………………………. 5.9
\nMarketplace………………………………………………. 2.22
\nMarks……………………………………………………. 2.12(a)
\nMaterial Contracts………………………………………… 2.24
\nMerger…………………………………………………… Recital
\nMerger Sub……………………………………………….. Preamble
\nMerger Sub Common Stock……………………………………. 1.6(f)
\nNonCompetition Agreement…………………………………… 5.9
\nOfficer’s Certificate……………………………………… 8.6(a)
\nOption Schedule…………………………………………… 5.12
\nOrder……………………………………………………. 5.7(b)
\nOther Company Stock Rights…………………………………. 1.6
\nOutstanding Company Shares…………………………………. 1.9
\nParachute Damages…………………………………………. 5.17<\/p>\n
A-2<\/p>\n
Parent…………………………………………………… Preamble
\nParent Common Stock……………………………………….. Recital
\nParent Damages……………………………………………. 8.2(a)
\nParent Disclosure Letter…………………………………… Article III
\nParent Financial Statements………………………………… 3.4
\nParent Preferred Stock…………………………………….. 3.2
\nParent SEC Documents………………………………………. 3.4
\nParent Significant Subsidiary………………………………. 3.1
\nPermit…………………………………………………… 5.2(a)
\nPlans……………………………………………………. 2.15(a)
\nRegistration Statement…………………………………….. 5.2(g)
\nRCRA…………………………………………………….. 2.13
\nSeries A Preferred………………………………………… 2.2
\nSeries B Preferred………………………………………… 2.2
\nSource Materials………………………………………….. 2.24(m)
\nStockholder Agreement……………………………………… 2.30
\nStockholders Agent………………………………………… 8.9
\nSurviving Corporation……………………………………… 1.1
\nTakeover Proposal…………………………………………. 5.1(a)
\nTax……………………………………………………… 2.14(c)
\nTax Authority…………………………………………….. 2.14(c)
\nTax Returns………………………………………………. 2.14(a)
\nTermination Date………………………………………….. 8.5
\nTotal Parent Shares……………………………………….. 1.6
\nTransaction Documents……………………………………… 2.3(a)
\nUsed…………………………………………………….. 2.12(a)
\n<\/c><\/s><\/table>\n
A-3<\/p>\n
AMENDMENT NO. 1 OF THE
\n AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
THIS AMENDMENT NO. 1 OF THE AGREEMENT AND PLAN OF REORGANIZATION
\n(“Amendment”) is entered into as of June 29th, 2000, by and among Ariba, Inc., a
\nDelaware corporation (“Parent”), Eli Merger Corporation, a Delaware corporation
\n(“Merger Sub”), and SupplierMarket.com, Inc., a Delaware corporation
\n(“Company”). Capitalized terms not otherwise defined in this Amendment have the
\nmeaning given them in the Agreement and Plan of Reorganization, dated June 21,
\n2000, by and among Parent, Merger Sub and Company (the “Agreement”).<\/p>\n
RECITALS<\/p>\n
A. Pursuant to Section 7.4 of the Agreement, the Agreement may be
\namended at any time prior adoption of the Agreement by the stockholders of
\nCompany by execution of an instrument in writing signed by Parent and Company.<\/p>\n
B. Parent, Merger Sub and Company desire to amend certain provisions of
\nthe Agreement.<\/p>\n
NOW, THEREFORE, in consideration of the mutual promises and covenants
\nhereinafter set forth, Parent, Merger Sub and Company hereby agree as follows:<\/p>\n
1. Pursuant to Section 7.4 of the Agreement, the first paragraph of
\nSection 5.12 of the Agreement is hereby amended and restated in its entirety to
\nread as follows:<\/p>\n
STOCK OPTIONS. At the Effective Time, the Company Stock Option Plan and
\n each outstanding option to purchase shares of Company Common Stock under
\n the Company Stock Option Plan, whether vested or unvested, shall be assumed
\n by Parent. In addition, Company’s rights to repurchase shares of Company
\n Common Stock under the Company Stock Option Plan or otherwise shall be
\n assigned to, and assumed by, Parent. Company has delivered to Parent a
\n schedule (the “Option Schedule”) which sets forth a true and complete list
\n as of the date hereof of all holders of outstanding options under the
\n Company Stock Option Plan including the number of shares of Company Capital
\n Stock subject to each such option, the exercise or vesting schedule, the
\n exercise price per share and the term of each such option. On the Closing
\n Date, Company shall deliver to Parent an updated Option Schedule current as
\n of such date. Each such option so assumed by Parent under this Agreement
\n shall continue to have, and be subject to, the same terms and conditions
\n set forth in the Company Stock Option Plan and the Stock Option Grant
\n Agreement applicable to each grant immediately prior to the Effective Time,
\n except that (i) such option shall be exercisable for that number of whole
\n shares of Parent Common Stock equal to the product of the number of shares
\n of Company Common Stock that were issuable upon exercise of such option
\n without regard to vesting restrictions immediately prior to the Effective
\n Time multiplied by the Exchange Ratio and rounded down to the nearest whole<\/p>\n
number of shares of Parent Common Stock, and (ii) the per share exercise
\n price for the shares of Parent Common Stock issuable upon exercise of such
\n assumed option shall be equal to the quotient determined by dividing the
\n exercise price per share of Company Common Stock at which such option was
\n exercisable immediately prior to the Effective Time by the Exchange Ratio,
\n rounded up to the nearest whole cent.<\/p>\n
2. Pursuant to Section 7.4 of the Agreement, Section 1.6(a) of the
\nAgreement is hereby amended and restated in its entirety to read as follows:<\/p>\n
(a) CONVERSION OF COMPANY COMMON STOCK\/EXCHANGE RATIO. Each share of
\n Company Common Stock outstanding immediately prior to the Effective
\n Time shall be exchanged into the number of shares of Parent Common
\n Stock determined by dividing (i) the Total Parent Shares less the
\n Additional Parent Shares by (ii) the Outstanding Company Shares,
\n rounded to eight decimal points (the “Exchange Ratio”).<\/p>\n
3. Pursuant to Section 7.4 of the Agreement, Section 1.11(c) of the
\nAgreement is hereby amended and restated in its entirety to read as follows:<\/p>\n
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, Parent shall
\n cause to be mailed to each holder of record of a certificate or
\n certificates (the “Certificates”) which immediately prior to the
\n Effective Time represented outstanding shares of Company Capital Stock,
\n whose shares were converted into the right to receive shares of Parent
\n Common Stock pursuant to Section 1.6, (i) a letter of transmittal
\n (which shall specify that delivery shall be effected, and risk of loss
\n and title to the Certificates shall pass, only upon receipt of the
\n Certificates by the Exchange Agent, and shall be in such form and have
\n such other customary provisions as Parent may reasonably specify) and
\n (ii) instructions for use in effecting the surrender of the
\n Certificates in exchange for certificates representing shares of Parent
\n Common Stock. In addition Parent shall cause to be mailed to Broadview
\n International LLC (“Broadview”) a Certificate for the Company Financial
\n Advisory Fee Shares in accordance with instructions provided to Parent
\n by Broadview which are reasonably acceptable to Parent. Upon surrender
\n of a Certificate for cancellation to the Exchange Agent or to such
\n other agent or agents as may be appointed by Parent, together with such
\n letter of transmittal, duly completed and validly executed in
\n accordance with the instructions thereto, the holder of such
\n Certificate shall be entitled to receive in exchange therefor a
\n certificate representing the number of whole shares of Parent Common
\n Stock which such holder has the right to receive pursuant to Section
\n 1.6, less the number of shares of Parent Common Stock to be deposited
\n in the Escrow Fund on such holder’s behalf pursuant to Article VIII
\n hereof, and the Certificate so surrendered shall forthwith be canceled.
\n Until so surrendered, each outstanding Certificate that, prior to the
\n Effective Time, <\/p>\n
2<\/p>\n
represented shares of Company Capital Stock will be deemed from and
\n after the Effective Time, for all corporate purposes, other than the
\n payment of dividends, to evidence the ownership of the number of full
\n shares of Parent Common Stock into which such shares of Company Capital
\n Stock shall have been so converted. As soon as practicable after the
\n Effective Time, and subject to and in accordance with the provisions of
\n Section 8.3 hereof, Parent shall cause to be delivered to the Escrow
\n Agent (as defined in Section 8.3 hereof) a certificate or certificates
\n representing ten percent (10%) of the amount equal to (i) Total Parent
\n Shares less (ii) the Additional Parent Shares (“Escrow Shares”) which
\n shall be registered in the name of the Escrow Agent as nominee for the
\n holders of Certificates cancelled pursuant to this Section 1.11. The
\n Escrow Shares shall be comprised entirely of Shares of Parent Common
\n Stock that are not subject to any vesting restriction or repurchase
\n right. The entire portion of Escrow Shares shall be contributed in
\n respect of Total Parent Shares less the Additional Parent Shares
\n issuable to Former Company Stockholders pursuant to Section 1.6(a)
\n other than (A) such stockholders who acquired all of his or her shares
\n of Company Capital Stock via exercise of employee stock options issued
\n by Company and (B) the stockholder other than the Founders, who is an
\n employee of the Company and acquired all of his shares of Company
\n Capital stock via a restricted stock grant by the Company. Such shares
\n shall be beneficially owned by such holders and shall be held in escrow
\n and shall be available to compensate Parent for certain damages as
\n provided in Article VIII. The Escrow Shares will appear as issued and
\n outstanding on Parent’s balance sheet and will be legally outstanding
\n under applicable state law. All dividends paid on Escrow Shares
\n (excluding any shares of Parent Capital Stock paid in connection with a
\n stock split or stock dividend) will be distributed currently to each of
\n the exchanging Former Company Stockholders, and all voting rights of
\n the Escrow Shares will be exercisable by or on behalf of each such
\n Former Company Stockholder. To the extent not used for such purposes,
\n such shares shall be released, all as provided in Article VIII hereof.<\/p>\n
4. This Amendment may be executed in two or more counterparts, each of
\nwhich shall be deemed an original, but all of which together shall constitute
\none and the same instrument.<\/p>\n
5. This Amendment when executed by Parent, Merger Sub and Company as of
\nthe date hereof shall have been effected in accordance with Section 7.4 of the
\nAgreement and accordingly shall be binding upon each such party.<\/p>\n
6. This Amendment shall be governed by and construed in accordance with
\nthe laws of the State of California without regard to applicable principles of
\nconflicts of law.<\/p>\n
3<\/p>\n
7. The Agreement and this Amendment and the documents referred to
\ntherein and herein constitute the entire agreement between the parties hereto
\npertaining to the subject matter thereof and hereof.<\/p>\n
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]<\/p>\n
4<\/p>\n
IN WITNESS WHEREOF, Parent, Merger Sub and Company 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: \/s\/ Edward P. Kinsey
\n —————————————–<\/p>\n
Print Name: Edward P. Kinsey
\n ———————————<\/p>\n
Title: Chief Financial Officer, Executive
\n Vice-President–Finance, and
\n Administration and Secretary
\n (Principal Financial and Accounting
\n Officer)
\n ————————————–<\/p>\n
SUPPLIERMARKET.COM, INC.<\/p>\n
By: \/s\/ Jonathan Burgstone
\n ——————————————
\n Jonathan Burgstone
\n Chief Executive Officer<\/p>\n
ELI MERGER CORPORATION<\/p>\n
By: \/s\/ Edward P. Kinsey
\n —————————————–
\n Edward P. Kinsey
\n President<\/p>\n
SIGNATURE PAGE TO AMENDMENT NO. 1 OF THE
\n AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
AMENDMENT NO. 2 OF THE
\n AGREEMENT AND PLAN OF REORGANIZATION
\n AND WAIVER<\/p>\n
THIS AMENDMENT NO. 2 OF THE AGREEMENT AND PLAN OF REORGANIZATION
\nAND WAIVER (this “Amendment”) is entered into as of July 28, 2000, by and among
\nAriba, Inc., a Delaware corporation (“Parent”), Eli Merger Corporation, a
\nDelaware corporation (“Merger Sub”), and SupplierMarket.com, Inc., a Delaware
\ncorporation (“Company”). Capitalized terms not otherwise defined in this
\nAmendment have the meaning given them in the Agreement and Plan of
\nReorganization, dated June 21, 2000, as amended and in effect by and among
\nParent, Merger Sub and Company (the “Agreement”).<\/p>\n
RECITALS<\/p>\n
A. Pursuant to Section 7.4 of the Agreement, the Agreement may be
\namended at any time prior adoption of the Agreement by the stockholders of
\nCompany by execution of an instrument in writing signed by Parent and Company.<\/p>\n
B. Parent, Merger Sub and Company desire to amend certain
\nprovisions of the Agreement.<\/p>\n
NOW, THEREFORE, in consideration of the mutual promises and
\ncovenants hereinafter set forth, Parent, Merger Sub and Company hereby agree as
\nfollows:<\/p>\n
1. Pursuant to Section 7.4 of the Agreement, Section 1.4(a) of the
\nAgreement is hereby amended and restated in its entirety to read as follows:<\/p>\n
“At the Effective Time, the Certificate of Incorporation of the
\n Surviving Corporation, as in effect immediately prior to the Effective
\n Time, shall be amended and restated in the form attached hereto as
\n Exhibit I to this Agreement until thereafter amended as provided by
\n Delaware Law and such certificate.”<\/p>\n
2. Pursuant to Section 7.4 of the Agreement, the second sentence
\nof Section 1.11(c) of the Agreement is hereby amended and restated in its
\nentirety to read as follows:<\/p>\n
“In addition Parent shall cause to be mailed to (i) Broadview
\n International LLC (“Broadview”) a Certificate for its share of the
\n Company Financial Advisory Fee Shares (as described in Amended Schedule
\n 2.29(a)) in accordance with instructions provided to Parent by
\n Broadview which are reasonably acceptable to Parent, and (ii) Credit
\n Suisse First Boston Corporation (“CSFB”) a Certificate for its share of
\n the Company Financial Advisory Fee Shares (as described in Amended
\n Schedule 2.29(a)) in accordance with instructions provided to Parent by
\n CSFB which are reasonably acceptable to Parent. ”<\/p>\n
3. Pursuant to Section 7.4 of the Agreement, the first sentence of
\nSection 2.29 of the Agreement is hereby amended and restated in its entirety to
\nread as follows:<\/p>\n
“All financial advisory and investment banking fees and expenses that
\n have been or may be incurred by Company in connection with the
\n negotiation and effectuation of the terms and conditions of this
\n Agreement (the “Company Financial Advisory Fees”) are set forth on
\n Amended SCHEDULE 2.29(a), consisting of fees payable to Broadview in
\n Parent Shares and fees payable to CSFB in Parent Shares (collectively,
\n the “Company Financial Advisory Fee Shares”) and fees payable to
\n Broadview in cash (“Company Financial Advisory Cash Fees”).”<\/p>\n
4. Section 2.20 of the Company Disclosure Letter is hereby amended
\nand restated in its entirety to read as follows:<\/p>\n
“Company owes fees in connection with this agreement to Broadview.com,
\n Inc. for investment banking services. Company has agreed to pay a
\n financial advisory fee to Credit Suisse First Boston Corporation in
\n connection with the transaction contemplated by this agreement. See
\n Amended Schedule 2.29(a) for the amount of these fees.”<\/p>\n
5. Pursuant to Section 7.4 of the Agreement, the first sentence of
\nSection 5.2(g) of the Agreement is hereby amended and restated in its entirety
\nto read as follows:<\/p>\n
“In the event that, (i) within forty (40) days after the date hereof
\n the Department has not scheduled a date for the Hearing or (ii) the
\n Hearing has not been held and concluded and the Permit has not been
\n issued by the Department on or within sixty-one (61) days after the
\n date hereof, then, in each case at the Company’s election, Parent shall
\n immediately commence efforts to prepare with the cooperation of
\n Company, and file, with the SEC a registration statement of Form S-4
\n (as amended and supplemented, the “Registration Statement”) in which
\n the Information Statement shall be included as part of a prospectus, in
\n connection with the registration under the Securities Act of the shares
\n of Parent Common Stock to be issued to the stockholders of the Company
\n pursuant to the Merger.”<\/p>\n
6. Pursuant to Section 7.4 of the Agreement, the fourth sentence
\nof Section 5.2(i) of the Agreement is hereby amended and restated in its
\nentirety to read as follows:<\/p>\n
“The Information Statement or other written materials sent to the
\n Company stockholders for soliciting their approval of the Merger and
\n this Agreement shall contain the recommendation of the Board of
\n Directors of the Company that the Company stockholders approve the
\n Merger and this Agreement and the conclusion on the Board of Directors
\n that the terms and conditions of the Merger are advisable and fair and
\n reasonable to the shareholders of the Company.”<\/p>\n
7. Pursuant to Section 7.4 of the Agreement, the second sentence
\nof Section 8.3 of the Agreement is hereby amended and restated in its entirety
\nto read as follows:<\/p>\n
“The Escrow Fund shall be allocated in whole numbers of Escrow Shares
\n among the Former Company Stockholders pursuant to Section 1.6(a), other
\n than (A) such stockholders who acquired all of his or her shares of
\n Company Capital Stock via exercise of employee stock options issued by
\n Company and (B) the stockholder other than the<\/p>\n
2<\/p>\n
Founders, who is an employee of the Company and acquired all of his
\n shares of Company Capital stock via a restricted stock grant by the
\n Company, on a pro-rata basis in accordance with the number of shares of
\n Company Capital Stock held by such Former Company Stockholders
\n immediately prior to the Effective Time (excluding for purposes of this
\n calculation any Dissenting Shares).”<\/p>\n
8. WAIVER AND ACKNOWLEDGMENT. Section 4.1(c) of the Agreement
\nprovides that prior to the Closing, the Company may not enter into any material
\nagreements. In return for advisory services rendered to the Company, the Company
\nproposes to enter into a letter of engagement (the “CSFB ENGAGEMENT LETTER”)
\nwith Credit Suisse First Boston in the Form of EXHIBIT A for the payment of a
\ntransaction upon the consummation of the Merger. Parent hereby waives the
\nfollowing in connection with or as a result of the entering into the CSFB
\nEngagement Letter by Company:<\/p>\n
a) Any failure of any condition outlined in Section 6.3 of the
\n Agreement;<\/p>\n
b) Any right of Parent to terminate the Agreement prior to the
\n Effective Time pursuant to Section 7.1 of the Agreement; and<\/p>\n
c) Any Parent Damages or right to indemnification pursuant to Article
\n VIII of the Merger Agreement, PROVIDED, HOWEVER, the Company
\n hereby acknowledges that the fee payable under the CSFB Engagement
\n Letter shall be considered part of the Company Financial Advisory
\n Fee Shares.<\/p>\n
Each of Parent and Merger Sub agree and acknowledge that it has
\nreceived adequate written notice of the entering into the CSFB Engagement Letter
\nto the extent the Company is required to provide such notice under the
\nAgreement.<\/p>\n
9. This Amendment may be executed in two or more counterparts,
\neach of which shall be deemed an original, but all of which together shall
\nconstitute one and the same instrument.<\/p>\n
10. This Amendment when executed by Parent, Merger Sub and Company
\nas of the date hereof shall have been effected in accordance with Section 7.4 of
\nthe Agreement and accordingly shall be binding upon each such party.<\/p>\n
11. This Amendment shall be governed by and construed in
\naccordance with the laws of the State of California without regard to applicable
\nprinciples of conflicts of law.<\/p>\n
12. The Agreement and this Amendment and the documents referred to
\ntherein and herein constitute the entire agreement between the parties hereto
\npertaining to the subject matter thereof and hereof.<\/p>\n
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]<\/p>\n
3<\/p>\n
[Signature Page to Amendment No. 2 to Merger Agreement]<\/p>\n
IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this
\nAmendment 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: \/s\/ Edward P. Kinsey
\n —————————————–<\/p>\n
Print Name: Edward P. Kinsey
\n ———————————<\/p>\n
Title: Chief Financial Officer, Executive
\n Vice-President–Finance, and
\n Administration and Secretary
\n (Principal Financial and Accounting
\n Officer)
\n ————————————–<\/p>\n
SUPPLIERMARKET.COM, INC.<\/p>\n
By: \/s\/ Asif Satchu
\n ——————————————
\n Asif Satchu
\n Chairman, President, Secretary
\n and Director<\/p>\n
ELI MERGER CORPORATION<\/p>\n
By: \/s\/ Edward P. Kinsey
\n ——————————————
\n Print Name: Edward P. Kinsey
\n Title: President<\/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-43171","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\/43171","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=43171"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43171"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43171"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43171"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}