●
Earnings Feed
Filings
Companies
Insiders
Pricing
Blog
⌘
K
Login
Start Free
IGN ENTERTAINMENT INC
·
S-1
Jul 13, 4:17 PM ET
Share
Compare
IGN ENTERTAINMENT INC S-1
Loading document...
Share
More
Contents
165
ARTICLE 1 - THE MERGER
ARTICLE 2 - CHARTER AND BYLAWS OF THE SURVIVING ENTITY
ARTICLE 3 - DIRECTORS AND OFFICERS OF THE SURVIVING ENTITY
ARTICLE 4 - EFFECTS OF THE MERGER; EXCHANGE OF CERTIFICATES
(b) As a result of the Merger and without any action on the part of the holder thereof, at the Effective Time, all Seller Common Shares converted pursuant to Section 4.1(a) shall cease to be outstanding, shall be canceled and retired and shall cease to exist and each holder of a certificate representing any Seller Common Shares (a “Certificate”) shall thereafter cease to have any rights with respect to such Seller Common Shares, except the right to receive the Merger Consideration upon the surrender of such Certificate.
(c) At the Effective Time, each Seller Common Share issued and held in Seller’s treasury, if any, and each Seller Common Share held by Buyer, if any, by virtue of the Merger and without any action on the part of Seller, Buyer or the holders of any of the securities of any of these entities, shall cease to be outstanding, shall be canceled and retired and shall cease to exist and no payment of any consideration shall be paid with respect thereto.
(a) Pursuant to Section 11(c) of Seller’s 1999 Stock Plan (the “1999 Plan”), if the Buyer does not assume the outstanding Seller Options (as defined below) thereunder at the Effective Time, all Seller Options thereunder shall become immediately vested as of, and expire if not exercised at or prior to, the Effective Time. Pursuant to Section 10 of Seller’s 2000 Equity Incentive Plan (the “2000 Plan”), if the Buyer does not assume the outstanding Seller Options thereunder at the Effective Time, then the Seller Options shall expire at such time and on such conditions as the Seller Board may determine. At the Effective Time, Buyer shall not assume any outstanding option (collectively, the “Seller Options”) to purchase Seller Common Shares granted under the 1999 Plan and 2000 Plan (collectively, the “Seller Option Plans”) and shall not substitute any equivalent option or right for any such Seller Option and the Seller Board has determined that all outstanding Seller Options issued under the 2000 Plan shall be canceled,
without any acceleration of vesting, if unexercised as of the Effective Time. Accordingly, subject to the following sentence, (a) each outstanding Seller Option issued under the 1999 Plan shall vest completely as of the Effective Time and, if not thereafter exercised, shall be canceled, and (b) each outstanding Seller Option issued under the 2000 Plan that is not exercised as of the Effective Time shall, at the Effective Time, be canceled and no outstanding Seller Option under the 2000 Plan shall be subject to accelerated vesting other than as described in Section 5.3 of the Seller Disclosure Letter. In accordance with Section 4.5(c), the portion of each Seller Option outstanding immediately prior to the Effective Time that is vested and exercisable for Seller Common Shares (including, without limitation, Seller Options whose terms provide for accelerated vesting contingent upon the Closing (which are described in Section 5.3 of the Seller Disclosure Letter) and all outstanding Seller Options issued under the 1999 Plan that are not exercised at or prior to the Effective Time), will by virtue of the Merger and at the Effective Time, and without further action on the part of any holder thereof, be converted into the right to receive, as consideration for cancellation of each such Seller Option, cash (without interest) in an amount equal to the product of (i) the number of Seller Common Shares receivable upon exercise of such Seller Option and (ii) the Merger Consideration less the exercise price per share attributable to such Seller Option; provided, however, that pursuant to Section 4.7, the Surviving Entity and the Buyer shall be entitled to deduct and withhold from such payment made to the holder of a Seller Option any federal and state income and employment-related Taxes (as defined in Section 5.11 hereof) that would have been imposed on such holder if such holder had exercised its Seller Options immediately prior to the Effective Time (whether or not such Seller Options were exercisable immediately prior to the Effective Time). Notwithstanding the foregoing, if the exercise price per share provided for in any such canceled Seller Option equals or exceeds the Merger Consideration, no cash shall be paid with regard to such canceled Seller Option to the holder of such canceled Seller Option. Subject to Section 7.2, Seller shall take all commercially reasonable actions necessary to ensure that (i) all Seller Options, to the extent not exercised prior to the Effective Time, shall terminate and be canceled as of the Effective Time and thereafter shall be of no further force or effect, (ii) no Seller Options are granted after the date hereof, and (iii) the Seller Option Plans and any and all other outstanding option arrangements or plans of Seller shall terminate as of the Effective Time.
(b) Seller has suspended the Offering Period that would have commenced May 1, 2003 under its Employee Stock Purchase Plan (the “ESPP”) and will not permit this Offering Period nor any other Offering Period from commencing following April 30, 2003. Capitalized terms in this Section, if not otherwise defined in this Agreement, have the meanings ascribed to them in the ESPP.
(c) In connection with the Merger, each outstanding warrant (collectively, the “Seller Warrants”) to purchase Seller Common Shares and option to purchase Seller Common Shares not under any Seller Option Plan (“Non-Plan Options”), which has not been exercised by the Effective Time, shall, at the Effective Time, be canceled to the extent such securities allow the Seller to unilaterally terminate them in connection with the Merger or to the extent that such securities do not allow Seller to unilaterally terminate them, Seller shall use all commercially reasonable efforts to cause such holders to agree to cancel or exercise their Seller Warrants or Non-Plan Options, as the case may be, at or prior to the Effective Time. Subject to the next sentence of this Section 4.4(c), each Seller Warrant and Non-Plan Option (other than Seller Warrants and Non-Plan Options whose terms do not provide that they can be canceled and
5
whose holders have not agreed to cancel such Seller Warrants or Non-Plan Options) (each, a “Cancelable Warrant or Option”) that has not been exercised as of the Effective Time, shall, at the Effective Time, be canceled; provided, however, in accordance with Section 4.5(c), the holders thereof shall be entitled to receive, as consideration for cancellation of each such Cancelable Warrant or Option, cash (without interest) in an amount equal to the product of (i) the number of vested and exercisable Seller Common Shares receivable upon exercise of such Cancelable Warrant or Option and (ii) the Merger Consideration less the exercise price per share attributable to such Seller Warrant or Non-Plan Option; provided, further, that pursuant to Section 4.7, the Surviving Entity and the Buyer shall be entitled to deduct and withhold from such payment made to the holder of a Cancelable Warrant or Option any federal and state income and employment-related Taxes (as defined in Section 5.11 hereof) that would have been imposed on such holder if such holder had exercised its Cancelable Warrants or Options immediately prior to the Effective Time (whether or not such Cancelable Warrants or Options were exercisable immediately prior to the Effective Time). Notwithstanding the foregoing, if the exercise price per share provided for in any Cancelable Warrant or Option equals or exceeds the Merger Consideration, no cash shall be paid with regard to such Cancelable Warrant or Option to the holder of such Cancelable Warrants or Option. At and following the Effective Time, subject to the limitations set forth in the first sentence of this Section 4.4(c), all outstanding Cancelable Warrants and Options shall automatically be canceled and terminated. Subject to Section 7.2, Seller shall take all reasonable actions necessary to ensure that (i) all Seller Warrants and Non-Plan Options, to the extent not exercised prior to the Effective Time, shall terminate and be canceled as of the Effective Time and thereafter shall be of no further force or effect and (ii) no Seller Warrants and Non-Plan Options are granted after the date hereof. Seller acknowledges and agrees that any Seller Warrants or Non-Plan Options that are not Cancelable Warrants or Options will, automatically in accordance with their terms, adjust as of the Effective Time to represent solely the right to receive, upon exercise and payment of the applicable exercise price, cash (without interest) in an amount equal to the product of (i) the number of Seller Common Shares receivable upon exercise of such Seller Warrant or Non-Plan Option and (ii) the Merger Consideration (the “Payment”). If exercised after the Effective Time, each Seller Warrant or Non-Plan Option that is not a Cancelable Warrant or Option will be paid in accordance with its terms by the Exchange Agent or the Surviving Entity.
(a) Promptly following the Closing and no later than immediately prior to the Effective Time), Buyer shall deposit, or shall cause to be deposited, with an exchange agent selected by Buyer on or prior to the Effective Time (the “Exchange Agent”), for the benefit of the holders of Seller Common Shares and for exchange in accordance with this Article 4, cash in an amount sufficient to pay the Merger Consideration (such cash being hereinafter referred to as the “Exchange Fund”) payable pursuant to Section 4.1 and this Section 4.5 in exchange for outstanding Seller Common Shares.
(b) Promptly following the Effective Time, Buyer shall cause the Exchange Agent to mail to each holder of record of a Certificate or Certificates (i) a letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Buyer may reasonably specify and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Exchange Agent together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration, pursuant to Section 4.1(a) hereof, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Seller Common Shares which is not registered in the transfer records of Seller, the Merger Consideration may be paid to such a transferee if the Certificate representing such Seller Common Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.
(c) Promptly after the Effective Time, Buyer shall cause the Exchange Agent to mail to each holder of record of a Seller Option, Seller Warrant or Non-Plan Option as of immediately prior to the Effective Time an acknowledgement and release form which shall notify the holder that payment of the amounts payable in cancellation of such security pursuant to Section 4.4(a) or (c), as applicable, will be made only upon delivery of such form to Surviving Entity and which document shall be in such form and have such other provisions as Surviving Entity may reasonably specify. Upon delivery of such form to the Surviving Entity, duly executed and completed in accordance with the instructions thereto, the holder of such Seller Option, Seller Warrant or Non-Plan Option shall be entitled to receive the amounts payable in cancellation of such security pursuant to Section 4.4(a) or (c), as applicable, and such form shall forthwith become the property of the Surviving Entity. In the event of a transfer of ownership of such canceled securities which is not registered in the transfer records of Seller, the Surviving Entity may condition delivery of its payment to the Exchange Agent related to such transferee’s canceled security upon its receipt of the canceled security, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable security transfer taxes have been paid.
(d) At and after the Effective Time, there shall be no transfers on the stock transfer books of Seller of the Seller Common Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Entity, they shall be canceled and exchanged for the Merger Consideration in accordance with this Section 4.5.
(a) Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Seller is duly licensed or qualified to do business as a foreign entity and is in good standing under the laws of any other state of the United States in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary (which states are listed in Section 5.1 of the Seller Disclosure Letter) other than in such jurisdictions where the failure to so qualify has not had or would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, results of operations, properties, assets, liabilities (contingent or otherwise) or financial condition of Seller and the Seller Subsidiaries taken as a whole, excluding from the foregoing any effect resulting directly from (i) general changes in the economy or financial markets of the United States or in the video-gaming industry in which Seller operates other than those that would have a disproportionate effect, relative to other industry participants, on the Seller, or (ii) any acts of terrorism or war (whether or not declared) other than those that would have a disproportionate effect, relative to other industry participants, on the Seller, or (iii) continued financial losses incurred by Seller consistent with the projections attached in Section 5.1 of the Seller Disclosure Letter, or (iv) any action or inaction required of Seller under Article 7 hereof, (a “Seller Material Adverse Effect”). Seller has all requisite corporate power and authority to own, operate, lease and encumber its assets and properties and
carry on its business as now conducted and to own and use the properties and assets owned and used by it. The Seller has furnished to the Buyer complete and accurate copies of its Certificate of Incorporation and Bylaws each as amended to date. The Seller is not in violation of any provision of its Certificate of Incorporation or Bylaws, and such Certificate and Bylaws are in full force and effect.
(b) Neither Seller nor any of the Seller Subsidiaries is in violation of any order of any court, governmental authority or arbitration board or tribunal, or any law, ordinance, governmental rule or regulation to which Seller or any Seller Subsidiary or any of their respective properties or assets is subject, except where such violation has not had or would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. Seller and the Seller Subsidiaries have obtained all licenses, permits and other authorizations and have taken all actions required by applicable law or governmental regulations in connection with their business as now conducted (“Permits”), except where the failure to obtain any such license, permit or authorization or to take any such action, individually or in the aggregate, has not had or could not reasonably be expected to have a Seller Material Adverse Effect. Seller has at all times conducted its business in compliance with the Permits except as, individually or in the aggregate, could not reasonably be expected to have a Seller Material Adverse Effect.
(a) The authorized capital shares of Seller consists of (a) 100,000,000 Seller Common Shares, of which 2,270,750 shares are issued and outstanding and 270,501 shares are held in treasury, 437,965 shares are reserved for issuance under outstanding Seller Options, 45,836 shares are reserved for issuance under outstanding Non-Plan Options and 92,215 shares are reserved for issuance under the Seller Warrants and (b) 5,000,000 shares of preferred stock, par value $0.001 per share (the “Seller Preferred Shares” and together with the Seller Common Shares, the “Seller Shares”), of which no shares are issued and outstanding. All such issued and outstanding Seller Common Shares are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and were issued in compliance with applicable federal and state securities laws. Except for the Seller Options, the Non-Plan Options and the Seller Warrants (all of which are listed in Section 5.3 of the Seller Disclosure Letter), there are not any existing or authorized options, warrants, calls, subscriptions, convertible securities, or other rights, agreements or commitments which obligate Seller to issue, transfer or sell any shares of its capital stock. Section 5.3 of the Seller Disclosure Letter sets forth a complete and accurate list of all outstanding Seller Options, Non-Plan Options and Seller Warrants, indicating (A) the holder thereof, (B) the number of Seller Shares subject to each Seller Option, Non-Plan Options and Seller Warrants, (C) the exercise price, date of grant, vesting schedule and expiration date for each Seller Option, Non-Plan Option and Seller Warrant, and (D) any terms regarding the acceleration of vesting, and (iii) all stock option plans and other stock or equity-related plans of the Seller. Section 5.3 of the Seller Disclosure Letter includes a summary of the aggregate Seller Options (and Non-Plan Options) vested as of certain dates specified therein. All Seller Shares that may be issued upon exercise of Seller Options, Non-Plan Options or Seller Warrants, will be (upon issuance in accordance with their terms), duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Seller. There are no agreements or understandings to which Seller or any Seller Subsidiary is a party or by which they are bound with respect to the voting (including without limitation voting trusts or proxies) of any Seller Common Shares or the sale or transfer (including without limitation agreements relating to pre-emptive rights, rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Seller, nor does Seller have knowledge of any other agreements or understandings with respect to the voting of any such shares or transfer of any such securities. Seller has no outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of Seller on any matter. Except as set forth on Section 5.3(a) of the Seller Disclosure Letter, there are no outstanding contractual obligations of Seller or any Seller Subsidiary to repurchase, redeem or otherwise acquire any capital shares, partnership interests or any other securities of Seller or any Seller Subsidiary. No dividends have been declared with respect to Seller Common Shares. Except as set forth on Section 5.3(a) of the Seller Disclosure Letter, neither Seller nor any Seller Subsidiary is under any obligation, contingent or otherwise, by reason of any agreement to register any of their securities under the Securities Act of 1933, as
amended (the “Securities Act”). After the Effective Time, the Surviving Entity will have no obligation to issue, transfer or sell any capital shares or other interests of Seller or the Surviving Entity pursuant to any Seller Option Plan or any other Seller Benefit Plan (as defined in Section 5.17 hereof).
(b) Except as set forth in Section 5.3(b) of the Seller Disclosure Letter, all participants in the ESPP have executed and delivered to Seller a waiver of all rights to purchase Seller Common Shares pursuant to the ESPP following the date hereof and no other individual has any right to purchase any Seller Common Shares pursuant to the ESPP.
(a) Section 5.4 of the Seller Disclosure Letter sets forth the following information for each corporation, partnership, joint venture or other entity in which Seller has, directly or indirectly, an equity interest representing 50% or more of the capital stock thereof or other equity interests therein (individually, a “Seller Subsidiary” and, collectively, the “Seller Subsidiaries”): (i) its name and jurisdiction of incorporation or organization; (ii) the jurisdictions in which such entity is qualified to conduct business; (iii) its authorized capital stock; and (iv) the number of issued and outstanding shares of capital stock.
(b) Each of the Seller Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, has the corporate power and authority to own its properties and to carry on its business as it is now being conducted, and is duly qualified to do business and is in good standing in each jurisdiction in which the ownership of its property or the conduct of its business requires such qualification other than in such jurisdictions where the failure to so qualify has not had or would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. Seller owns directly all of the outstanding shares of capital stock or other equity interests of each of the Seller Subsidiaries. Each of the outstanding shares of capital stock in each of the Seller Subsidiaries is duly authorized, validly issued, fully paid and nonassessable. Except as set forth in Section 5.4 of the Seller Disclosure Letter, all of the outstanding shares of capital stock of each of the Seller Subsidiaries is owned, directly or indirectly, by Seller free and clear of all liens, pledges, security interests, claims, options or other encumbrances (other than liens for taxes, assessments and other governmental charges not yet due and payable) and neither Seller nor any Seller Subsidiary has any agreement or commitment to sell or transfer any of such stock or interests. The Seller has delivered to the Buyer complete and accurate copies of the charter, bylaws or other organizational documents of each Subsidiary. No Subsidiary is in default under or in violation of any provision of its charter, bylaws or other organizational documents. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which Seller or any Seller Subsidiary is a party or which are binding on any of them providing for the issuance, disposition, transfer or acquisition of any capital stock of any Subsidiary. There are no outstanding stock appreciation, phantom stock or similar rights with respect to any Subsidiary. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of any Subsidiary.
(a) Seller and each Seller Subsidiary has paid or caused to be paid or reserved for, or adequate provision will be made therefore as of the Closing Date and disclosed to Buyer within five (5) business days prior to the Effective Time, all material federal, state, provincial, local and foreign taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to another’s Tax liability) imposed by any government or taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, gross assets, property, sales, use, capital stock, payroll, employment, social security, worker’s compensation, disability, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added or gains taxes; license, registration and documentation fees; and duties, tariffs and similar charges (collectively, “Taxes”), required to be paid by it whether or not shown on any Tax Return (as defined in Section 5.11(c)).
(b) Except as set forth in Section 5.11(b) of the Seller Disclosure Letter, Seller and each of the Seller Subsidiaries has withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.
(c) Seller and each Seller Subsidiary has in accordance with applicable law and regulations timely filed (taking into account any extensions of time to file before the date hereof) all material reports, returns, declarations, claims for refund, statements or other information required to be supplied to any taxing authority in connection with Taxes (collectively, “Tax Returns”), and all such Tax Returns correctly and accurately set forth the
amount of any Taxes relating to the applicable period. A complete and accurate list of all Tax Returns filed with respect to Seller and the Seller Subsidiaries for taxable periods ended on or after May 31, 2000, is set forth in Section 5.11(c) of the Seller Disclosure Letter. Seller has delivered to Buyer true, complete and accurate copies of all Tax Returns filed by Seller and any Seller Subsidiary within the last 2 years, and of all examination reports and statements of deficiencies assessed against or agreed to by Seller or any Seller Subsidiary with respect to such Tax Returns.
(d) Except as set forth in Section 5.11(d) of the Seller Disclosure Letter, to the knowledge of Seller and each Seller Subsidiary, neither the Internal Revenue Service (“IRS”) nor any other governmental authority is now asserting in writing or, asserting or threatening to assert against Seller or any Seller Subsidiary any deficiency or claim for additional Taxes. No material claim has ever been made by an authority in a jurisdiction where Seller or a Seller Subsidiary does not file reports and returns that Seller or such Seller Subsidiary is or may be subject to taxation by that jurisdiction. There are no publicly filed or recorded security interests on any of the assets of Seller and Seller Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Taxes that are due and payable.
(e) Except as set forth in Section 5.11(e) of the Seller Disclosure Letter there has not been any audit of any Tax Return filed by Seller or any Seller Subsidiary, no audit of any Tax Return of Seller or any Seller Subsidiary is in progress, and neither Seller nor any Seller Subsidiary has been notified by any tax authority that any such audit is contemplated or pending. Except as set forth in Section 5.11(e) of the Seller Disclosure Letter, no extension of time with respect to any date on which a Tax Return was or is to be filed by Seller or any Seller Subsidiary is in force, and no waiver or agreement by Seller or any Seller Subsidiary is in force for the extension of time for the assessment or payment of any Taxes.
(f) Except as set forth in Section 5.11(f) of the Seller Disclosure Letter, the most recent audited financial statements contained in Seller SEC Reports (i) reflect an adequate reserve for all Taxes payable by Seller and Seller Subsidiaries for all taxable periods and portions thereof through the date of such financial statements in accordance with GAAP, whether or not shown as being due on any Tax Returns and (ii) the Taxes payable do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past practice of Seller and Seller Subsidiaries in filing their Tax Returns. Since the date of the most recent audited financial statements, neither Seller nor any Seller Subsidiary has incurred any material liability for Taxes arising from extraordinary gains or losses, as the term is used in GAAP, outside the ordinary course of business consistent with past custom and practice.
(g) Neither Seller nor any Seller Subsidiary is a party to any agreement providing for the allocation, indemnification or sharing of Taxes with any person other than Seller or Seller Subsidiaries. Seller has provided Buyer with true, complete and accurate copies of any such agreements. There are no outstanding rulings or ruling requests with any taxing authority that would be binding on Seller.
(h) Neither Seller nor any Seller Subsidiary has any material liability for unpaid Taxes under Treasury Regulations Section 1.1502-6 (or comparable provisions of federal, state or local law) because it once was) a member of an “affiliated group” (as defined in Section 1504(a)
of the Code), except for any group of which Seller and Seller Subsidiaries are the only members.
(i) Except as set forth in Section 5.11(i) of the Seller Disclosure Letter, none of the Seller and the Seller Subsidiaries (i) has made any payments, is obligated to make any payments or is a party to any agreement that under certain circumstances (including the consummation of the Transactions) could give rise directly or indirectly to the payment of any amount, or obligate it to make any payments that, individually or considered collectively with such other agreements, will not be deductible under Section 280G or 162(m) of the Code (or any similar provision of state, local or foreign law), (ii) has filed a consent under Section 341(f) of the Code concerning collapsible corporations or (iii) was, at any time during the period specified in Section 897(c)(1)(A)(ii) of the Code, a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.
(j) Neither the Seller nor any Seller Subsidiary will be required to include any material item of income in, or exclude any material deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) intercompany transactions or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) completed on or prior to the Closing Date; (iv) installment sale or open transaction disposition made on or prior to the Closing Date; or (v) prepaid amount received on or prior to the Closing Date.
(k) To the Seller’s knowledge, neither Seller nor any Seller Subsidiary has been required to file a disclosure statement related to any reportable transaction within the meaning of Treasury Regulations Sections 1.6011-4 or any predecessor regulations thereunder. To the Seller’s knowledge, neither Seller nor any Seller Subsidiary has ever participated in any confidential corporate tax shelter after February 28, 2000 within the meaning of temporary Treasury Regulations Section 301.6111-2(a)(2) or any predecessor regulations thereunder.
(l) Neither Seller nor any Seller Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying or intended to qualify for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement.
(a) The books of account and other financial records of Seller and each of the Seller Subsidiaries are true, complete and correct in all material respects, have been maintained in accordance with good business practices.
(b) The minute books and other records of Seller and each of the Seller Subsidiaries have been made available to Buyer, contain in all material respects accurate records of all meetings and accurately reflect in all material respects all other corporate action of the
stockholders, and directors and any committees of the Seller Board and each of the Seller Subsidiaries and all actions of the partners, if any, of each of the Seller Subsidiaries.
(a) the lease or sublease is legal, valid, binding, enforceable against Seller and in full force and effect;
(b) the consummation of the Merger and the transactions contemplated hereby will not result in any lease or sublease no longer continuing to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing;
(c) neither Seller nor any Seller Subsidiary nor, to the knowledge of Seller, any other party, is in material breach or violation of, or material default under, any such lease or sublease, and no event has occurred, is pending or, to the knowledge of Seller, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a material breach or default by Seller or any Seller Subsidiary or, to the knowledge of Seller, any other party under such lease or sublease;
(d) neither Seller nor any Seller Subsidiary has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any material interest in the leasehold or subleasehold, except with respect to subleases the Seller has entered into in connection with its restructuring activities set forth in Section 5.14(d) of the Seller Disclosure Letter; and
(e) Seller is not aware of any Security Interest, easement, covenant or other restriction applicable to the real property subject to such lease, except for recorded easements, covenants and other restrictions which do not materially impair the current uses or the occupancy by Seller or any Seller Subsidiary of the property subject thereto.
(a) Section 5.16 of the Seller Disclosure Letter contains a complete and accurate list of all Patents owned by Seller or used or held for use by Seller in the Business (“Seller Patents”), registered Marks and material unregistered Marks owned by Seller or used or held for use by Seller in the Business (“Seller Marks”) and registered Copyrights and material unregistered Copyrights owned by Seller or used or held for use by Seller in the Business (“Seller Copyrights”). Except as set forth in Section 5.16 of the Seller Disclosure Letter:
(i) Seller exclusively owns or possesses adequate and enforceable rights to use, without payment to a third party, all of the Intellectual Property Assets necessary for the operation of the Business, free and clear of all mortgages, pledges, charges, liens, equities, security interests, or other encumbrances or similar agreements; provided, however, that the foregoing representation and warranty is made to the knowledge of Seller with respect to the Patents contained in the Intellectual Property Assets;
(ii) all Seller Patents, Seller Marks and Seller Copyrights which are issued by, or registered or the subject of an application filed with, as applicable, the U.S. Patent and Trademark Office, the U.S. Copyright Office or in any similar office or agency anywhere in the world are currently in material compliance with formal legal requirements (including without limitation, as applicable, payment of filing, examination and maintenance fees, proofs of working or use, timely post-registration filing of affidavits of use and incontestability and renewal applications) and are valid and enforceable;
(iii) there are no pending, or, to the knowledge of Seller, threatened claims against any of Seller or its employees alleging that any of the Seller Intellectual Property Assets or the Business, infringes or conflicts with the rights of others under any Intellectual Property Assets (“Third Party Rights”);
(iv) neither the operation of the Business nor any Seller Intellectual Property Asset infringes or conflicts with any Third Party Right other than Patents and, to the knowledge of Seller, neither the operations of the Business nor any Seller Intellectual Property Asset infringes or conflicts with any Patent;
(v) Seller has not received any communications alleging that Seller has violated or, by conducting the Business, would violate any Third Party Rights or that any of the Seller Intellectual Property Assets is invalid or unenforceable;
(vi) no current or former employee or consultant of Seller owns any rights in or to any of the Seller Intellectual Property Assets;
(vii) to the knowledge of Seller, there is no violation or infringement by a third party of any of the Seller Intellectual Property Assets;
(viii) Seller has taken all reasonable security measures to protect the secrecy, confidentiality and value of all Seller Intellectual Property Assets that have
Trade Secrets owned by Seller or used or held for use by Seller in the Business (the “Seller Trade Secrets”), including, without limitation, requiring each Seller employee and consultant and any other person with access to Seller Trade Secrets to execute a binding confidentiality agreement, copies or forms of which have been provided to Buyer and, to the Seller’s knowledge, there has not been any breach by any party to such confidentiality agreements;
(ix) Seller has (A) not collected any personally identifiable information from any third parties, and (B) in connection with any collection of personally identifiable information described in Section 5.16 of the Seller Disclosure Letter, complied with all applicable regulations and its publicly available privacy policy (if any) relating to the collection, storage and onward transfer of all personally identifiable information collected by Seller or by third parties having authorized access to Seller’s databases or other records.
(b) For purposes of this Agreement,
(i) “Business” means the business of Seller as currently conducted and proposed to be conducted.
(ii) “Seller Intellectual Property Assets” means all Intellectual Property Assets owned by Seller or used or held for use by Seller in the Business. “Seller Intellectual Property Assets” includes, without limitation, the Products, Seller Patents, Seller Marks, Seller Copyrights and Seller Trade Secrets.
(iii) “Intellectual Property Assets” means:
(A) patents, patent applications, patent rights, and inventions and discoveries and invention disclosures (whether or not patented) (collectively, “Patents”);
(B) trade names, trade dress, logos, packaging design, slogans, Internet domain names, registered and unregistered trademarks and service marks and related registrations and applications for registration (collectively, “Marks”);
(C) copyrights in both published and unpublished works, including without limitation all compilations, databases and computer programs, manuals and other documentation and all copyright registrations and applications, and all derivatives, translations, adaptations and combinations of the above (collectively, “Copyrights”);
(D) know-how, trade secrets, confidential or proprietary information, research in progress, algorithms, data, designs, processes, formulae, drawings, schematics, blueprints, flow charts, models, strategies, prototypes, techniques, Beta testing procedures and Beta testing results (collectively, “Trade Secrets”); and
(E) goodwill, franchises, licenses, permits, consents, approvals, and claims of infringement against third parties.
(a) Section 5.17 of the Seller Disclosure Letter sets forth a list of every Employee Program that has been maintained by Seller or any Seller Subsidiary at any time during the three-year period ending on the Closing Date.
(b) Each Employee Program which has ever been maintained by Seller or any Seller Subsidiary and which has been intended to qualify under Section 401(a) or 501(c)(9) of the Code has received a favorable determination or approval letter from the IRS regarding its qualification under such section and has, in fact, been qualified under the applicable section of the Code from the effective date of such Employee Program through and including the Closing Date (or, if earlier, the date that all of such Employee Program’s assets were distributed) or, as indicated in Section 5.17 of the Seller Disclosure Letter, has a remaining period of time to apply for such determination or letter under IRS rules or regulations. No event or omission has occurred which would cause any Employee Program to lose its qualification or otherwise materially fail to satisfy the relevant requirements to provide tax-favored benefits under the applicable Code Section (including without limitation Code Sections 105, 125, 401(a) and 501(c)(9)). Each asset held under any such Employee Program may be liquidated or terminated without the imposition of any redemption fee, surrender charge or comparable liability. No partial termination (within the meaning of Section 411(d)(3) of the Code) has occurred with respect to any Employee Program.
(c) Neither Seller nor any Seller Subsidiary knows, nor should any of them reasonably know, of any material failure of any party to comply with any laws applicable with respect to the Employee Programs that have ever been maintained by Seller or any Seller Subsidiary. With respect to any Employee Program ever maintained by Seller or any Seller Subsidiary, there has been no (i) “prohibited transaction,” as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or Code Section 4975, (ii) material failure to comply with any provision of ERISA, other applicable law, or any agreement, or (iii) non-deductible contribution, which, in the case of any of (i), (ii), or (iii), could subject Seller or any Seller Subsidiary to material liability either directly or indirectly (including, without limitation, through any obligation of indemnification or contribution) for any damages, penalties, or taxes, or any other loss or expense. No litigation or governmental administrative proceeding (or investigation) or other proceeding (other than those relating to routine claims for benefits) is pending or threatened with respect to any such Employee Program. All payments and/or contributions required to have been made (under the provisions of any agreements or other governing documents or applicable law) with respect to all Employee Programs ever maintained by Seller or any Seller Subsidiary, for all periods prior to the Closing Date, either have been made or have been accrued (and all such unpaid but accrued amounts are described on Section 5.17 of the Seller Disclosure Letter).
(d) Neither Seller nor any Seller Subsidiary (i) has ever maintained any Employee Program which has been subject to title IV of ERISA or Code Section 412 or ERISA Section 302, including, but not limited to, any Multiemployer Plan or (ii) has ever provided
health care or any other non-pension benefits to any employees after their employment is terminated (other than as required by part 6 of subtitle B of title I of ERISA) or has ever promised to provide such post-termination benefits.
(e) With respect to each Employee Program maintained by Seller or any Seller Subsidiary within the three years preceding the Closing Date, complete and correct copies of the following documents (if applicable to such Employee Program) have previously been delivered to Buyer: (i) all documents embodying or governing such Employee Program, and any funding medium for the Employee Program (including, without limitation, trust agreements) as they may have been amended to the date hereof; (ii) the most recent IRS determination or approval letter with respect to such Employee Program under Code Section 401(a) or 501(c)(9), and any applications for determination or approval subsequently filed with the IRS; (iii) the most recently filed IRS Forms 5500, with all applicable schedules and accountants’ opinions attached thereto; (iv) the most recent actuarial valuation reports completed with respect to such Employee Program; (v) the summary plan description for such Employee Program (or other descriptions of such Employee Program provided to employees) and all modifications thereto; (vi) any insurance policy (including any fiduciary liability insurance policy or fidelity bond) related to such Employee Program; (vii) any registration statement or other filing made pursuant to any federal or state securities law and (viii) all material correspondence to and from any state or federal agency within the last three years with respect to such Employee Program.
(f) Each Employee Program required to be listed on Section 5.17 of the Seller Disclosure Letter may be amended, terminated, or otherwise modified by Seller to the greatest extent permitted by applicable law, including the elimination of any and all future benefit accruals under any Employee Program and no written employee communications (including email) relating to any Employee Program or provision of any Employee Program document has failed to effectively reserve the right of Seller or any Seller Subsidiary to so amend, terminate or otherwise modify such Employee Program.
(g) Each Employee Program ever maintained by Seller or any Seller Subsidiary (including each non-qualified deferred compensation arrangement) has been maintained in material compliance with all applicable requirements of federal and state securities laws including (without limitation, if applicable) the requirements that the offering of interests in such Employee Program be registered under the Securities Act of 1933 and/or state “Blue Sky” laws.
(h) Each Employee Program ever maintained by Seller or any Seller Subsidiary has complied with the applicable notification and other applicable requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, Health Insurance Portability and Accountability Act of 1996, the Newborns’ and Mothers’ Health Protection Act of 1996, the Mental Health Parity Act of 1996, and the Women’s Health and Cancer Rights Act of 1998.
(i) For purposes of this section:
(i) “Employee Program” means (A) all employee benefit plans within the meaning of ERISA Section 3(3), including, but not limited to, multiple employer welfare arrangements (within the meaning of ERISA Section 3(40)), plans to which more
than one unaffiliated employer contributes and employee benefit plans (such as foreign or excess benefit plans) which are not subject to ERISA; (B) all stock option plans, stock purchase plans, bonus or incentive award plans, severance pay policies or agreements, deferred compensation agreements, supplemental income arrangements, vacation plans, and all other employee benefit plans, agreements, and arrangements (including any informal arrangements) not described in (A) above, including without limitation, any arrangement intended to comply with Code Section 120, 125, 127, 129 or 137; and (C) all plans or arrangements providing compensation to employee and non-employee directors. In the case of an Employee Program funded through a trust described in Code Section 401(a) or an organization described in Code Section 501(c)(9), or any other funding vehicle, each reference to such Employee Program shall include a reference to such trust, organization or other vehicle.
(ii) An entity “maintains” an Employee Program if such entity sponsors, contributes to, or provides benefits under or through such Employee Program, or has any obligation (by agreement or under applicable law) to contribute to or provide benefits under or through such Employee Program, or if such Employee Program provides benefits to or otherwise covers employees of such entity (or their spouses, dependents, or beneficiaries).
(iii) “Multiemployer Plan” means an employee pension or welfare benefit plan to which more than one unaffiliated employer contributes and which is maintained pursuant to one or more collective bargaining agreements.
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF BUYER
ARTICLE 7 - COVENANTS
(a) Unless and until this Agreement shall have been terminated in accordance with Article 9 hereof, Seller agrees and covenants that, except as otherwise authorized or permitted in this Section 7.1, neither it nor any Seller Subsidiary shall, nor shall they permit any of their respective officers, directors, affiliates, employees, agents, investment bankers, financial advisors, attorneys, accountants, brokers, finders, consultants or other representatives (each, a “Representative”) to, directly or indirectly, invite, initiate, solicit, encourage or facilitate (including by way of furnishing nonpublic information or assistance) any inquiries, proposals,
discussions or negotiations or the making or implementation of any proposal or offer (including, without limitation, any proposal or offer to its stockholders) with respect to, or that may reasonably be expected to lead to, any direct or indirect (i) merger, consolidation, business combination, reorganization, recapitalization, liquidation, dissolution or similar transaction involving Seller (other than the Merger), (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (“Transfer”) of any of its assets in one or a series of transactions (other than in connection with a commercial debt financing arrangement entered into in compliance with Section 7.2(xix)) that, if consummated, would result in a Transfer of 15% or more of the assets of Seller and the Seller Subsidiaries taken as a whole, or (iii) any tender offer, share exchange or exchange offer or other similar transaction or series of transactions that, if consummated, would relate to 15% or more of the outstanding Seller Common Shares (each, an “Acquisition Proposal”) or engage in any discussions or negotiations with any Third Party (as defined in Section 7.1(f)) with respect to, or that may reasonably be expected to lead to, an Acquisition Proposal, or enter into any letter of intent, agreement in principle or agreement relating to an Acquisition Proposal, or propose publicly to do any of the foregoing; provided, however, that, subject to Seller’s compliance with this Section 7.1 in its entirety, nothing contained in this Agreement shall prohibit the Seller Board or the Special Committee from, prior to the Stockholders Meeting (as defined in Section 7.3(c) hereof), furnishing information to, or entering into or participating in discussions or negotiations with, any Third Party that has made, after the date of this Agreement, an unsolicited bona fide written Acquisition Proposal, if, and only to the extent that, prior to furnishing such information or entering into or participating in such discussions or negotiations: (A) the Seller Board or the Special Committee, after consultation with its outside counsel, determines in good faith that such action is required for the Seller Board to comply with its fiduciary duties to stockholders under applicable law, (B) the Seller Board determines in good faith, after consultation with its independent financial advisor, that such Acquisition Proposal would, if consummated, constitute a Superior Proposal (as defined in Section 7.1(f) hereof), (C) Seller provides written notice to Buyer to the effect that it is furnishing information to, or entering into or participating in discussions or negotiations with, such Person (including, without limitation, the identity of such Person), (D) Seller keeps Buyer informed of the status of any such discussions or negotiations, and promptly informs Buyer (but in any event, within 24 hours) of all material developments relating thereto, including the material terms of any such proposal made by any such Third Party and its responses thereto, and (E) Seller enters into a customary confidentiality agreement with such Third Party on terms that are not materially less favorable to the Third Party as the confidentiality agreement, dated as of September 23, 2002, by and between Seller and Buyer. Without limiting the foregoing, it is agreed that any violation of any of the restrictions set forth in this Section 7.1(a) by any Representative of Seller or of a Seller Subsidiary, whether or not such Person is purporting to act on behalf of Seller or otherwise, shall be deemed to be a violation of this Section 7.1(a). In addition, notwithstanding anything in this Agreement to the contrary, Seller may refer any Third Party to this Section 7.1. For purposes of this Agreement, Buyer agrees that the term “independent financial advisor” shall include, without limitation, Alliant Partners as well as any other investment banker or financial advisor that has not done a material amount of business with Seller during the six-month period preceding the date hereof.
(b) Seller will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Persons conducted heretofore with respect to, or that may reasonably be expected to lead to, an Acquisition Proposal and will take the necessary
steps to inform each of its Representatives of the obligations undertaken in this Section 7.1 and cause each of its Representatives to comply with such obligations. Seller shall use all commercially reasonable efforts to have all confidential materials furnished to such Persons returned to its possession as soon as practicable. Seller will notify Buyer immediately (but in any event within 24 hours) orally and in writing, if it or any of its Representatives receive (i) any inquiries, proposals, or expressions of interest with respect to, or that may reasonably be expected to lead to, an Acquisition Proposal, or (ii) any request for confidential information, which notice to Buyer pursuant to either clause (i) or (ii) shall include, without limitation, the identity of the parties, price and other material terms thereof and copies of any proposals, expressions of interest or other related documentation.
(c) Nothing contained in this Section 7.1 shall prohibit the Seller Board (or any committee thereof), from, prior to the Stockholders Meeting, withdrawing, modifying, amending or qualifying in a manner adverse to Buyer its recommendation of this Agreement or any of the transactions contemplated hereby in response to an unsolicited bona fide written Acquisition Proposal: (A) if, but only if: (1) Seller complies with this Section 7.1 in its entirety, (2) the Seller Board, after consultation with its outside counsel, determines in good faith that such action is required for the Seller Board to comply with its fiduciary duties to stockholders under applicable law, (3) Seller provides Buyer with at least five business days’ prior written notice of its intent to withdraw, modify, amend or qualify in a manner adverse to Buyer its recommendation of this Agreement or any of the transactions contemplated hereby, and (4) after considering in good faith any changes to this Agreement proposed in writing by Buyer within five business days of such notification of intent, the Seller Board determines in good faith, after consultation with its independent financial advisor and outside counsel, that such Acquisition Proposal would, if consummated, still constitute a Superior Proposal. Any such withdrawal, modification, amendment or qualification shall not change the approval of the Seller Board for purposes of causing any state takeover statute or other state law to be inapplicable to the Merger or other transactions contemplated by this Agreement. For the avoidance of doubt, the parties hereto acknowledge and agree that any amendment to the financial terms or any other material term of an Acquisition Proposal subject to the procedures in this Section 7.1(c) shall be treated as a new Acquisition Proposal for the purposes of this Section 7.1(c) (for example, a new written notice by Buyer and a new five business day period is required).
(d) Nothing in this Section 7.1 shall prohibit Seller from complying with (a) Rule 14e-2 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act with regard to an Acquisition Proposal and (b) Section 1203 of the California Corporations Code.
(e) For purposes of this Agreement, (i) the term “Third Party” shall mean any Person (other than Buyer and each of the Continuing Stockholders), or any group (as defined in Section 13(d)(3) of the Exchange Act) of which Buyer is not a part; and (ii) the term “Superior Proposal” shall mean a bona fide written Acquisition Proposal that the Seller Board determines in good faith, after consultation with its independent financial advisor, to be more favorable to Seller’s stockholders (other than the Continuing Stockholders) than the Merger from a financial point of view and to have a likelihood of successful completion on the terms proposed that is at least as likely as the transactions contemplated hereby, after taking into account all financial, regulatory, legal and other aspects of such transaction.
28
(i) Shall, and shall cause each of the Seller Subsidiaries to, conduct its business in the ordinary course consistent with past practices and in compliance in all material respects with all applicable laws and regulations and to use its reasonable best efforts to (i) preserve intact its business organizations and goodwill, (ii) keep available the services of its officers and employees, and (iii) preserve the relationships with those Persons having business dealing with Seller to the end that Seller’s goodwill and ongoing business shall be unimpaired at the Effective Time;
(ii) Shall consult in good faith, cooperate and confer on a regular basis with one or more Representatives of Buyer designated by Buyer to report operational matters of materiality, in order to allow for an orderly transition, and, subject to Section 7.1, any proposals to engage in material transactions, whether or not in the ordinary course of business;
(iii) Shall, and shall cause each of the Seller Subsidiaries to, promptly notify Buyer of any material change in the condition (financial or otherwise), business, properties, assets, liabilities, prospects or the normal course of its business or in the operation of its properties, any material governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the breach or inaccuracy of any representation or warranty contained herein, which would reasonably be expected to cause the condition to closing in Section 8.3(a) to be unable to be satisfied;
(iv) Shall not amend its Charter or Bylaws, and shall cause each Seller Subsidiary not to amend its charter or bylaws, except in connection with the dissolution of any Seller Subsidiary;
(v) Shall not (A) except pursuant to the exercise of the Seller Options, the Non-Plan Options or the Seller Warrants existing on the date hereof and disclosed in the Seller Disclosure Letter, issue any of its shares of capital stock, effect any share split, share combination, reverse share split, share dividend, recapitalization or other similar transaction, (B) grant, confer or award any option, right, warrant, deferred stock unit, conversion right or other right not existing on the date hereof to acquire any of its shares of capital stock (whether or not pursuant to existing Seller Option Plans), (C) increase any compensation or enter into or amend any employment or severance agreement with any of its executive officers or directors, (D) grant any bonuses (x) other than in the ordinary course of business and consistent with past practice, to any of its employees (other than executives, officers and directors), or (y) to any of its executive officers or directors, or (E) adopt any new employee benefit plan (including any stock option, stock benefit or stock purchase plan) or amend any existing employee benefit plan in any material respect, except for changes which are less favorable to participants in such plans;
(vi) Shall not (A) declare, set aside or pay any dividend or make any other distribution or payment (whether in cash, stock or other property) with respect to any of the Seller Common Shares or allow any of the Seller Subsidiaries to pay or make any such dividend, distribution or payment (other than dividends or distributions from a wholly-owned Seller Subsidiary to another Seller Subsidiary or to the Seller) except in connection with the dissolution of any Seller Subsidiary or (B) directly or indirectly redeem, purchase or otherwise acquire any of its shares of capital stock or any equity interest of any of the Seller Subsidiaries, or make any commitment for any such action; provided; however, this covenant shall not apply to the repurchase of Seller Common Shares held by Seller employees, officers, directors, consultants, independent contractors, advisors, or other persons performing services for the Seller that are subject to existing restricted stock purchase agreements or stock option exercise agreements disclosed in Section 5.3 of the Seller Disclosure Letter under which Seller has the right to repurchase such shares at cost, upon the occurrence of certain events, such as termination of employment or services;
(vii) Shall not, and shall not permit any of the Seller Subsidiaries to (A) sell, lease, license or otherwise dispose of any assets or properties or any portion thereof or any of the capital stock of or other interests in any of the Seller Subsidiaries in each case other than customer agreements entered into in the course of ordinary business consistent with past practice or (B) mortgage or pledge any of its property or assets or subject any such property or assets to any security interest, except for (x) any liens for taxes, assessments and other governmental charges not yet due and payable, (y) statutory, mechanics’, laborers’ and materialmen’s liens arising in the ordinary course of business for sums not yet due, and (z) statutory and contractual landlord’s liens under leases pursuant to which Seller is a lessee not in default;
(viii) Shall not, and shall not permit any of the Seller Subsidiaries to, forgive any existing indebtedness to Seller or any Seller Subsidiaries or discharge any security interest in favor of Seller, or make any loans, advances (other than to customers of Seller in an aggregate amount not in excess of $10,000) or capital contributions to, or investments in, any other Person other than reasonable and normal loans or advances to employees for bona fide expenses that are not material in amount and are incurred in the ordinary course of business consistent with past practice;
(ix) Shall not, and shall not permit any of the Seller Subsidiaries to, pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of material liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of Seller included in the Seller Reports or incurred in the ordinary course of business consistent with past practice;
(x) Shall not, and shall not permit any of the Seller Subsidiaries to, enter into any Commitment which may result in total payments or liability by or to it in
excess of $25,000 other than customer or vendor agreements entered into in the ordinary course of business consistent with past practice;
(xi) Shall not enter into, amend, terminate, take or omit to take any action that would constitute a violation of or default under any Commitment, except where such action would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect;
(xii) Shall not make or commit to make capital expenditures in excess of $300,000 in the aggregate;
(xiii) Shall not take any action or fail to take any action permitted by this Agreement with the knowledge that such action or failure to take action would reasonably be expected to result in any of the representations and warranties of Seller set forth in this Agreement becoming untrue such that any of the conditions to the Merger set forth in Article 8 would not be satisfied;
(xiv) Shall not license or transfer to any person or entity any rights to Seller Intellectual Property other than customer subscription agreements, licenses, distribution agreements or Commitments or transfers necessary to conduct development or perform services in the ordinary course of business consistent with past practice;
(xv) Shall not merge with, enter into a consolidation with or acquire an interest of 5% or more in any Person or acquire a substantial portion of the assets or business of any Person or any division or line of business thereof, or otherwise acquire any assets other than in the ordinary course of business;
(xvi) Shall not materially write down or write up (or fail to write down or write up in accordance with consistent past practice) the value of any receivables or revalue any assets of Seller other than in the ordinary course of business and in accordance with GAAP;
(xvii) Shall not, without prior notification and consultation with Buyer, terminate any employee under circumstances which would result in severance payments to such employee or pay any severance benefits to any employee on account of such employee’s termination;
(xviii) Shall maintain in full force and effect in all material respects the insurance policies listed in Section 5.24 of the Seller Disclosure Letter;
(xix) Shall not, and shall not permit any of the Seller Subsidiaries to, create, incur or assume any indebtedness (including, without limitation, refinancing or modifying any existing indebtedness), assume, guarantee, endorse or otherwise become liable or responsible (whether, directly, contingently or otherwise) for the indebtedness of another Person, enter into any agreement to maintain any financial statement condition of another Person or enter into any arrangement having the economic effect of any of the foregoing (other than indebtedness or liabilities created, incurred, assumed, guaranteed,
endorsed or entered into in the ordinary course of business consistent with past practice within the last twelve months of operations or as required by this Agreement).
(xx) Shall not, and shall not permit any of the Seller Subsidiaries to, make or rescind any election relating to Taxes (unless Seller reasonably determines, after prior consultation with Buyer, that such action is required by applicable law);
(xxi) Shall not: (A) change any of its methods, principles or practices of accounting currently in effect other than as required by GAAP or (B) settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, except in the case of settlements or compromises the amount of which does not to exceed, individually or in the aggregate, $10,000, or materially change (or make a request to any taxing authority to change) any of its methods of reporting income or deductions for federal income tax purposes from those employed in the preparation of its federal income Tax Return for the taxable year ended December 31, 2002, except as may be required by the SEC, applicable law or GAAP;
(xxii) Shall not enter into or amend or otherwise modify any agreement or arrangement with Persons that are affiliates or, as of the date of this Agreement, are officers or directors of Seller or any Seller;
(xxiii) Shall not, authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution of Seller; provided, however, that Seller may dissolve each Seller Subsidiary prior to Closing; and
(xxiv) Shall not, and shall not permit any of the Seller Subsidiaries to, agree in writing or otherwise to take any action inconsistent with any of the foregoing.
(a) As soon as reasonably practicable following the date of this Agreement (but in no event later than thirty days following the date of this Agreement), Seller shall prepare and file with the SEC a preliminary Proxy Statement, in form and substance reasonably satisfactory to Buyer, with indication of such satisfaction not to be unreasonably withheld or delayed; provided, however, if Buyer has not indicated to Seller whether it is satisfied with such preliminary Proxy Statement within five business days of Buyer’s receipt of a materially complete draft of such preliminary Proxy Statement, Buyer shall be deemed to have indicated such satisfaction. Buyer agrees to provide reasonably promptly such information concerning its business and financial statements and affairs as, in the reasonable judgment of Seller, Buyer and their respective counsel, may be required or appropriate for inclusion in the preliminary or definitive Proxy Statement, or in any amendments or supplements thereto, and to use all commercially reasonable efforts to cause its counsel and auditors to cooperate with Seller’s counsel and auditors in the preparation of the preliminary or definitive Proxy Statement, or in any amendments or supplements thereto. Each of Seller and Buyer shall use its reasonable best efforts to have the Proxy Statement cleared by the SEC for mailing to the Seller stockholders as promptly as practicable after such filing. Seller will notify Buyer promptly following the receipt by Seller of any comments from the SEC and of any request by the SEC for amendments or
supplements to the Proxy Statement or for additional information and will supply Buyer with copies of all correspondence between Seller or any of its Representatives and the SEC with respect to the Proxy Statement. Seller will provide Buyer with the opportunity to review and provide comments on drafts of any letters, memoranda or other correspondence to the SEC prepared by Seller in connection with the Proxy Statement a reasonable time prior to such letters, memoranda or other correspondence are submitted to the SEC, and will in good faith consider such comments, and Seller will provide Buyer with the opportunity to participate in any telephone calls between Seller, or any of its Representatives, and the SEC concerning the Proxy Statement. Seller agrees that the Proxy Statement will comply in all material respects with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder. Seller shall agree to date the Proxy Statement as of the approximate date of mailing to its stockholders and shall use its reasonable best efforts to cause the Proxy Statement to be mailed to its stockholders at the earliest practicable date (but in any event no later than seven business days following clearance by the SEC). Whenever any event occurs which is required to be set forth in an amendment or supplement to the Proxy Statement, (i) Buyer or Seller, as the case may be, shall promptly inform the other of such occurrences, (ii) Seller shall prepare and file with the SEC any such amendment or supplement to the Proxy Statement, in a form reasonably satisfactory to Buyer, with indication of such satisfaction not to be unreasonably withheld or delayed; provided, however, if Buyer has not indicated to Seller whether it is satisfied with any such amendment or supplement to the Proxy Statement within five business days of Buyer’s receipt of a materially complete draft of such amendment or supplement, Buyer shall be deemed to have indicated its satisfaction with such amendment or supplement, (iii) each of Seller and Buyer shall use its reasonable best efforts to have any such amendment or supplement cleared for mailing, to the extent necessary, to Seller stockholders as promptly as practicable after such filing and (iv) Seller shall use its reasonable best efforts to have any such amendment or supplement mailed to its stockholders at the earliest practicable date.
(b) Seller agrees that the Proxy Statement and each amendment or supplement thereto at the time of mailing thereof and at the time of the Stockholders Meeting (as defined in Section 7.3(c) hereof), will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the foregoing shall not apply to the extent that any such untrue statement of a material fact or omission to state a material fact was made by Seller in reliance upon and in conformity with information concerning Buyer furnished to Seller by Buyer for use in the Proxy Statement. Buyer agrees that the information concerning it and provided by it for inclusion in the Proxy Statement and each amendment or supplement thereto, at the time of mailing thereof and at the time of the Stockholders Meeting, will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(c) Seller will take all action necessary in accordance with applicable law and its Charter and Bylaws to convene a meeting of its stockholders (the “Stockholders Meeting”) as promptly as practicable to consider and vote upon the approval of this Agreement and the transactions contemplated hereby (and no other Acquisition Proposal will be considered at such Stockholders Meeting). The Seller Board has recommended and declared advisable that its stockholders approve and adopt this Agreement and the transactions contemplated hereby and,
unless withdrawn in accordance with the provisions of Section 7.1(c), Seller shall include such recommendation in the Proxy Statement. Prior to the Effective Time, neither the Seller Board nor any committee thereof shall, except in compliance with Section 7.1 hereof, withdraw or modify the approval or recommendation by such Board of Directors. Seller shall use its reasonable best efforts to take all such other actions necessary or desirable to obtain such approval. Except to the extent required by law, Seller shall not (i) change or otherwise take any action after the mailing of the Proxy Statement that would result in a change of the date specified in the Proxy Statement for the Stockholders Meeting or (ii) otherwise take any action that would postpone or delay the Stockholders Meeting, except (x) to the extent necessary to ensure that any amendment or supplement to the Proxy Statement required by applicable law is provided to the stockholders of Seller in advance of the Stockholders Meeting or (y) if there are an insufficient number of Seller Common Shares represented in person or by proxy at the Stockholders Meeting to constitute a quorum or to approve and adopt this Agreement and the Merger, so long as during such postponement or delay Seller shall use its reasonable best efforts to obtain a quorum and the requisite vote to approve and adopt this Agreement and the Merger. Without limiting the generality of the foregoing and except for the 10-day notice requirement in Section 1203(b) of the California Corporations Code, Seller’s obligations pursuant to the first sentence of this Section 7.3(c) shall not be affected by (i) the commencement, public proposal, public disclosure or communication to Seller of any Acquisition Proposal or (ii) the withdrawal or modification by the Seller Board or any committee thereof of such Board of Directors’ or such committee’s approval or recommendation of the Merger or this Agreement, other than delays caused by such actions.
(d) As soon as reasonably practicable following the date of this Agreement (but in no event later than thirty days following the date of this Agreement), Seller and Buyer shall together prepare and file with the SEC a Rule 13E-3 Transaction Statement on Schedule 13E-3 (the “Schedule 13E-3”). Buyer agrees to provide reasonably promptly such information concerning its business and financial statements and affairs as, in the reasonable judgment of Seller, Buyer and their respective counsel, may be required or appropriate for inclusion in the Schedule 13E-3, or in any amendments or supplements thereto, and to use all commercially reasonable efforts to cause its counsel and auditors to cooperate with Seller’s counsel and auditors in the preparation of the Schedule 13E-3, or in any amendments or supplements thereto. Seller agrees to provide reasonably promptly such information concerning its business and financial statements and affairs as, in the reasonable judgment of Buyer, Seller and their respective counsel, may be required or appropriate for inclusion in the Schedule 13E-3, or in any amendments or supplements thereto, and to use all commercially reasonable efforts to cause its counsel and auditors to cooperate with Buyer’s counsel and auditors in the preparation of the Schedule 13E-3, or in any amendments or supplements thereto. Each of Seller and Buyer shall use all reasonable best efforts to have the Schedule 13E-3 cleared by the SEC as promptly as practicable after such filing. Each of Seller and Buyer will notify the other party promptly (but in no event later than 24 hours) following the receipt by it of any comments from the SEC and of any request by the SEC for amendments or supplements to the Schedule 13E-3 or for additional information and will supply the other party with copies of all correspondence between it or any of its Representatives and the SEC with respect to the Schedule 13E-3. Each of Seller and Buyer will provide the other party with the opportunity to review and provide comments on drafts of any letters, memoranda or other correspondence to the SEC prepared by it in connection with the Schedule 13E-3 a reasonable time prior to such letters, memoranda or other correspondence are
submitted to the SEC, and will in good faith consider such comments, and each of Seller and Buyer will provide the other party with the opportunity to participate in any telephone calls between it, or any of its Representatives, and the SEC concerning the Schedule 13E-3. Seller agrees that the Schedule 13E-3 will comply in all material respects with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder. Whenever any event occurs which is required to be set forth in an amendment or supplement to the Schedule 13E-3, (i) Buyer or Seller, as the case may be, shall promptly (but in no event later than 24 hours) inform the other of such occurrences, (ii) Seller and Buyer shall together prepare and file with the SEC any such amendment to the Schedule 13E-3, and (iii) each of Seller and Buyer shall use all reasonable best efforts to respond to any comments of the SEC related to the Schedule 13E-3 as reasonably promptly as practicable after receipt of such comments such amendment as promptly as practicable after such filing and (iv) if mailing of such amendment is required by the rules and regulations of the Exchange Act, Seller and Buyer shall use all reasonable best efforts to have any such amendment mailed to its stockholders at the earliest practicable date.
(e) Seller agrees that the information concerning it and provided by it for inclusion in the Schedule 13E-3 and each amendment thereto, at the time of filing thereof and at the time of the Stockholders Meeting, will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the foregoing shall not apply to the extent that any such untrue statement of a material fact or omission to state a material fact was made by Seller in reliance upon and in conformity with information concerning Buyer furnished to Seller by Buyer for use in the Schedule 13E-3. Buyer agrees that the information concerning it and provided by it for inclusion in the Schedule 13E-3 and each amendment thereto, at the time of filing thereof and at the time of the Stockholders Meeting, will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the foregoing shall not apply to the extent that any such untrue statement of a material fact was made by Buyer in reliance upon and in conformity with information concerning Seller furnished to Buyer for use in the Schedule 13E-3.
(a) Buyer agrees that all rights to indemnification now existing in favor of the directors and officers of Seller as provided in its Certificate of Incorporation and Bylaws and under any indemnification agreement listed in Section 7.9 of the Seller Disclosure Letter, as in effect as of the date hereof, with respect to matters occurring at or prior to the Effective Time shall survive the Merger and shall continue in full force and effect for a period of six years after the Effective Time. During such period, Buyer shall not amend, repeal or otherwise modify such provisions for indemnification in any manner that would materially and adversely affect the rights thereunder of individuals who at any time prior to the Effective Time were directors or officers, of Seller or any Seller Subsidiary in respect of actions or omissions occurring at or prior to the Effective Time (including, without limitation, the transactions contemplated by this Agreement), without the written consent of each member of the Seller Board on the date hereof, which consent shall not be unreasonably withheld or delayed, unless such modification is required by law; provided, however, that in the event any claim or claims are asserted or made either prior to the Effective Time or within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until disposition of any and all such claims.
(b) At or prior to the Effective Time, Buyer and Seller, together shall purchase directors’ and executive officers’ “tail” liability insurance policy coverage for Seller’s directors and executive officers for the longest period following the Effective Time obtainable using the consideration described in the following sentences, which will provide the directors and executive officers with coverage on, subject to the following sentences, terms no less favorable to such directors and executive officers as currently provided by Seller. In fulfilling its obligations under the preceding sentence, Seller or the Surviving Entity shall apply any unused portion of the premium already paid for its directors’ and executive officers’ liability insurance that is refunded to it to such “tail” liability insurance policy. In fulfilling its obligations under the first sentence of this Section 7.9(b), Buyer shall pay the premium for one year of such “tail” liability insurance policy, which premium shall not exceed 100% of the amount paid by Seller with respect to the period from March 2003 to March 2004 (which premiums are hereby represented and warranted by Seller to be $239,292), provided that if the premium of such coverage exceeds such amount, Buyer shall be obligated to obtain a policy with the greatest dollar amount of coverage available for costs not exceeding such amount. Seller shall have the right to reasonably review and approve any such policy, which approval shall not be unreasonably withheld.
(c) This Section 7.9 is intended for the irrevocable benefit of, and to grant third party rights to, the indemnified parties and their respective heirs and shall be binding on all successors of Buyer. Each of the indemnified parties shall be entitled to enforce the covenants contained in this Section 7.9.
(a) Following the Effective Time, Buyer shall honor in accordance with their terms all written employment, change in control, and other compensation agreements; provided such agreements are disclosed in Section 5.17(a) of the Seller Disclosure Letter.
(b) No provision of this Section 7.12 shall create any third party beneficiary rights in any employee or former employee (including any beneficiary or dependent thereof) of Seller or any Seller Subsidiary in respect of continued employment (or resumed employment) with Buyer and no provision of this Section 7.12 shall create such rights in any such persons in respect of any benefits that may be provided, directly or indirectly, under any employee program or any plan or arrangement which may be established by Buyer. No provision of this Agreement shall constitute a limitation on the rights to amend, modify or terminate after the Effective Time any such plans or arrangements of Seller or any Seller Subsidiary.
(c) As soon as practicable after the execution of this Agreement, Buyer and Seller shall confer and work together in good faith to agree upon mutually acceptable employee benefit and compensation arrangements for employees of Seller and any Seller Subsidiary following the Merger. The Seller and Seller Subsidiaries shall take such actions as are necessary to terminate any Seller Employee Programs and any leased employee arrangement immediately prior to the Closing Date, unless otherwise agreed to by Buyer and Seller; provided that those employees of Seller and any Seller Subsidiary who are eligible to participate in such Seller Employee Programs shall be provided the opportunity to participate in employee benefit plans, if any, maintained by Buyer under the same terms as those applicable to similarly situated Buyer employees.
(d) Employees of Seller and any Seller Subsidiary will be granted credit for all service with Seller and any Seller Subsidiary under each Buyer employee benefit plan, program or arrangement of Buyer or its affiliates in which such employees are eligible to participate for all purposes, except for purposes of benefit accrual under a defined benefit pension plan and will be eligible for participation in any equity compensation plan maintained by Buyer or its affiliates. To the extent that employees of Seller and any Seller Subsidiary become eligible to participate in a medical, dental or health plan of Buyer or its affiliates in lieu of the Seller’s Employee Program, Buyer will cause such plan to (i) waive any preexisting condition exclusions and waiting period limitations for conditions covered under the applicable medical, dental or health plans maintained or contributed to by Seller (but only to the extent corresponding exclusions and limitations were satisfied by such employees under the applicable
medical, dental or health plans maintained or contributed to by Seller); and (ii) credit any deductible or out of pocket expenses incurred by the employees and their beneficiaries under such plans during the portion of the calendar year prior to such participation.
(e) With respect to matters described in this Section 7.12, Seller and Seller Subsidiaries will use all reasonable efforts to consult with Buyer (and consider in good faith the advice of Buyer) prior to sending any notices or other communication materials to employees of Seller and any Seller Subsidiary.
ARTICLE 8 - CONDITIONS
(a) This Agreement and the transactions contemplated hereby shall have been approved and adopted by the requisite vote of stockholders of Seller.
(b) None of the parties hereto shall be subject to any temporary restraining order, ruling or preliminary or permanent injunction or other order of a court of competent jurisdiction or other Governmental Entity or other legal restraint or prohibition which prohibits, prevents, materially delays or impairs the consummation of the transactions contemplated by this Agreement.
(c) All Governmental Approvals, if any, required for the consummation of the transactions contemplated by this Agreement shall have been obtained and shall be in effect at the Effective Time.
(d) As of immediately prior to the Effective Time, holders of no more than 5% of the outstanding Seller Common Shares shall have taken actions to assert dissenter’s rights under applicable law.
(e) Buyer shall have consummated the transactions contemplated by the Securities Purchase Agreement.
(a) The representations and warranties of Buyer contained in this Agreement qualified as to materiality or Buyer Material Adverse Effect shall be true and correct in all respects and the representations and warranties of Buyer contained in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date except to the extent any such representation or warranty is expressly limited by its terms to another date or time (in which case such representation or warranty need only be true and correct as of such date or time), and Seller shall have received a certificate, dated the Closing Date, signed on behalf of Buyer by the Chairman of the Board of Directors and Chief Executive Officer of Buyer to the foregoing effect.
(b) Buyer shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date, and Seller shall have received a certificate, dated the Closing Date, signed on behalf of Buyer by the Chairman of the Board of Directors and Chief Executive Officer of Buyer to the foregoing effect.
(a) Each of the representations and warranties of Seller contained in this Agreement qualified as to materiality or Seller Material Adverse Effect and the representations and warranties contained in Section 5.3 shall be true and correct in all respects (except, with respect to the representations and warranties in Section 5.3, for (x) variations in the aggregate number of Seller Common Shares outstanding on a fully-diluted basis not in excess of 6,000 shares or such other variations as would result in changes in the aggregate amounts paid by Buyer under Article 4 not in excess of $72,000 and (y) the effect of actions taken in compliance with Section 7.2) and each of the representations and warranties of Seller contained in this Agreement that are not so qualified (excluding any representations and warranties contained in Section 5.3) shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date except to the extent any such representation or warranty is expressly limited by its terms to another date or time (in which case such representation or warranty need only be true and correct as of such date or time), and Buyer shall have received a certificate, dated the Closing Date, signed on behalf of Seller by a member of the Special Committee and the Chief Accounting Officer of Seller to the foregoing effect.
(b) Seller shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on
or prior to the Closing Date, and Buyer shall have received a certificate, dated the Closing Date, signed on behalf of Seller by a member of the Special Committee and the Chief Accounting Officer of Seller to the foregoing effect.
(c) There shall not have occurred any change concerning, or other event affecting, Seller, that, individually or in the aggregate, has had or could reasonably be expected to have, a Seller Material Adverse Effect and Buyer shall have received a certificate, dated the Closing Date, signed on behalf of Seller by the Chairman of the Board and Chief Executive Officer of Seller to the foregoing effect.
(d) All other consents, authorizations, orders and approvals of (or filings or registrations with) any governmental commission, board, other regulatory body or third parties required to be made or obtained by Seller in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby shall have been obtained or made, in form and substance reasonably satisfactory to the Buyer, except where the failure to have obtained or made any such consent, authorization, order, approval, filing or registration could not individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect.
ARTICLE 9 - TERMINATION
(a) by mutual written consent duly authorized by the Board of Directors of Buyer and the Seller Board or Special Committee;
(b) by either Buyer or Seller, if any United States federal or state court of competent jurisdiction or other Governmental Entity shall have issued a judgment, permanent injunction, order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such judgment, permanent injunction, order, decree, ruling or other action shall have become final and non-appealable;
(c) by Buyer, upon a breach of any representation, warranty, covenant or agreement on the part of Seller set forth in this Agreement, or if any representation or warranty of Seller shall have become untrue, in either case such that the conditions set forth in Section 8.3(a) or Section 8.3(b), as the case may be, would be incapable of being satisfied or cured by the Outside Date after the giving of written notice to Buyer of such breach; provided, however, that the existence of stockholder litigation arising out of the transactions contemplated hereby shall not be deemed to cause such conditions to be incapable of being satisfied unless such stockholder litigation has resulted in a permanent injunction or a final and non-appealable judgment; provided, further, that, in any case, a willful breach of this Agreement shall be deemed to cause such conditions to be incapable of being satisfied for purposes of this Section 9.1(c); excluding, however, any such breach or failure to perform by Seller that is principally caused by Buyer or any affiliate of Buyer;
(d) by Seller, upon a breach of any representation, warranty, covenant or agreement on the part of Buyer set forth in this Agreement, or if any representation or warranty of Buyer shall have become untrue, in either case such that the conditions set forth in Section 8.2(a) or Section 8.2(b), as the case may be, would be incapable of being satisfied or cured by the Outside Date after the giving of written notice to Buyer of such breach; provided, however, that, in any case, a willful breach shall be deemed to cause such conditions to be incapable of being satisfied for purposes of this Section 9.1(d); excluding, however, any such breach or failure to perform by Buyer that is principally caused by Seller or any affiliate of Seller;
(e) by Buyer, if (i) the Seller Board (or any committee thereof) shall have failed to make in the Proxy Statement, or shall have withdrawn, modified, amended or qualified in a manner adverse to Buyer, its approval or recommendation of this Agreement or any of the transactions contemplated hereby (including, without limitation, a failure to include in the Proxy Statement the recommendation of its Board of Directors that the stockholders of Seller approve and adopt this Agreement and the transactions contemplated hereby); (ii) Seller shall have failed to mail the Proxy Statement in accordance with Section 7.3(a) hereof or to convene the Stockholders Meeting in accordance with Section 7.3(a) hereof; or (iii) the Seller Board shall have (x) recommended that the stockholders of Seller accept or approve an Acquisition Proposal, or (y) failed to recommend that the stockholders of Seller reject or not accept an Acquisition Proposal (or the Seller Board shall have resolved to do such);
(f) by either Buyer or Seller, if this Agreement and the transactions contemplated hereby shall have failed to receive the requisite vote for approval and adoption by the stockholders of Seller upon the holding of a duly convened Stockholders Meeting or adjournment thereof; or
(g) by either Buyer or Seller, if the Merger shall not have been consummated on or before October 15, 2003 (the “Outside Date”); provided, however, that a party may not terminate this Agreement pursuant to this Section 9.1(g) if such party’s failure to fulfill any obligation under this Agreement constitutes a breach of this Agreement and has been the principal cause of or resulted in the failure of the Merger to occur on or before such date.
(a) In the event of the termination of this Agreement pursuant to Section 9.1 hereof, this Agreement shall immediately become void and have no effect, all rights and obligations of any party hereto shall cease except for agreements contained in Section 10.5 and neither party shall have any liability to the other party or any of its affiliates, directors, officers or stockholders with respect to or for any damage, claim, loss, cost, liability or expense (including interest, penalties, professional and attorneys’ fees, court costs and expenses of investigation, consequential damages, response action, removal action or remedial action) (collectively
“Damages”) incurred or accrued by other party arising out of this Agreement, the transactions contemplated hereby or Acquisition Proposal and neither party shall have any other recourse against the other party, its affiliates, directors, officers and stockholders for such Damages; provided, however, that (i) nothing in this Article 9 shall relieve any party from liability for any willful breach of this Agreement, and (ii) Seller in any event shall be required to make any payments to Buyer as are required pursuant to this Article 9.
(b) If Buyer terminates this Agreement pursuant to (x) Section 9.1(e), or (y) Section 9.1(f) in circumstances in which the Seller Board (or any committee thereof) failed to make, or withdrew, amended, modified or qualified in a manner adverse to Buyer its approval or recommendation of this Agreement or any of the transactions contemplated hereby, then Seller shall pay to Buyer an amount in cash equal to the sum of (i) $1,200,000, plus (ii) Buyer’s reasonable out-of-pocket costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including, without limitation, fees and disbursements of accountants, attorneys and investment bankers (all such expenses, “Break-Up Expenses” and, clauses (i) and (ii) collectively, the “Termination Amount”) in accordance with the provisions of Section 9.3.
(c) If this Agreement is terminated (x) by either party pursuant to Section 9.1(c) or Section 9.1(f) (except for a termination to which Section 9.2(b) applies) or (y) by Seller pursuant to Section 9.1(g) at a time at which Buyer could terminate pursuant to Section 9.1(c) due to stockholder litigation arising out of the transactions contemplated hereby, Seller shall pay all of Buyer’s Break-Up Expenses in accordance with the provisions of Section 9.3.
(d) If (A) prior to the termination of this agreement pursuant to Section 9.1(c), 9.1(f) or 9.1(g), an Acquisition Proposal (the percentages in this definition shall be deemed adjusted to 51% in each case for purposes of this Section 9.2(e) has been received by Seller or a Person has publicly disclosed an Acquisition Proposal or an intent or desire to make an Acquisition Proposal and (B) at any time prior to the twelve month anniversary of such termination of this Agreement by either party, Seller enters into a letter of intent, agreement in principle or other agreement or commitment relating to an Acquisition Proposal with a Person other than Buyer or the Seller Board (or any committee thereof) recommends or resolves to recommend that Seller’s stockholders approve an Acquisition Proposal with a Person other than Buyer, then, upon the consummation of the transaction contemplated by such letter of intent, agreement in principle or other agreement or commitment, Seller shall pay to Buyer the Termination Amount in accordance with the provisions of Section 9.3, which amount shall be reduced by any monies previously paid by Seller to Buyer pursuant to Section 9.2(c). Any such letter of intent, agreement in principle or other agreement or commitment relating to an Acquisition Proposal with a Person other than Buyer described in clause (B) of the preceding sentence, shall provide that such Person shall, upon consummation of the transaction contemplated therein, pay any Termination Amount due Buyer under this Section 9.2(d) in accordance with the provisions of this Article 9.
(e) If required under this Section 9.2, the Termination Amount and/or the Break-Up Expenses shall be paid in immediately available funds within five (5) business days after the date of the event giving rise to the obligation to make such payment; provided, however, that any Termination Amount payable under Section 9.2(d) shall be paid in immediately
available funds within one (1) business day after the date of the consummation of the applicable transaction. The parties acknowledge and agree that the provisions for payment of the Termination Amount and/or the Break-Up Expenses are an integral part of the transactions contemplated by this Agreement and are included herein in order to induce Buyer to enter into this Agreement and to reimburse Buyer for incurring the costs and expenses related to entering into this Agreement and consummating the transactions contemplated by this Agreement. Notwithstanding anything to the contrary set forth in this Agreement, if Seller fails to pay promptly to Buyer the Termination Amount or Break-Up Expenses due under this Section 9.2, Seller shall reimburse Buyer on demand for all costs and expenses (including legal fees and expenses) incurred in connection with any action, including any legal action, taken to collect payment of such amounts.
ARTICLE 10 - GENERAL PROVISIONS
(b) As used in this Agreement, the word “Person” means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, a limited liability company, any unincorporated organization or any other entity.
47
Contents
Share
More
Download PDF